Trade Adjustment Act Health Tax Credit Hardship Exemption Announced by IRS

The special health care tax credit for individuals and their families receiving trade adjustment assistance (TAA) or receiving payments from the Pension Benefit Guaranty Corporation was reinstated in 2015, retroactive to 2014. It had previously expired in 2013.

The Trade Preferences Extension Act of 2015 extended and modified the expired tax credit. This credit provided advanced payments for health insurance coverage for eligible individuals and families. The health care tax credit (HCTC) will now be available for coverage through 2019. General information including who can claim the tax credit is provided by the IRS here.

The previous process to claim the tax credit was also expected to be reinstated and be in operation by July 2016. Guidance released on August 12, 2016 asserts that reinstatement of the credit process is not yet operational. The guidance describes a “limited interim process” for the remainder of 2016 with the expectation that the full process will be implemented by January 2017.

As a result of this delay, individuals will be required to pay the full amount of any qualifying health coverage. Since payment of the full premium may be a hardship, the IRS has allowed that any eligible individual who is not enrolled in HCTC-qualified coverage for one or more months between July and December 2016 will be entitled to claim a hardship exemption from the individual shared responsibility requirement for months for which they were eligible for the HCTC. Further guidance detailing how to claim this exemption on individual tax returns will be forthcoming.

The full IRS announcement can be read here.

“To Fee or Not to Fee” — Considerations and Concerns

Brokers have been buffeted by the myriad changes occurring at record pace over these past few years. The Affordable Care Act (ACA) has had a dramatic impact on the types of health insurance products available, the scope of benefits offered and how brokers are compensated for the valuable services they provide.

Many brokers have transformed their practices with an emphasis on becoming a consultant to their clients – individual and group. As a consultant, brokers are expanding the scope of the traditional sales-related assistance.

Recent guidance from CMS clarified that brokers can charge fees in the Federal marketplace for the extra value that they are providing to clients. The guidance, in the form of a Q& A, establishes that brokers must clearly disclose the amount and reason for a fee while also informing consumers that they can apply for coverage on their own without a fee through Here is the full-text of the guidance.

A broker wishing to establish a fee-based practice must consider a number of other factors before implementing this change. Chief among these is whether state law allows a broker to charge a fee, the rules surrounding the charging of fees and whether a separate consulting license is required. NAHU has compiled a chart that provides some information on a state-by-state basis regarding relevant state laws. It is recommended that a broker verify whether fees may be charged and any related requirements through their insurance commissioner before taking steps.

Why are some brokers considering fee-based practices? Some are adding valuable services that exceed the selection and placement of insurance coverage. Others see a fee-based business as a reaction to changing commission structures, providing more predictability to revenue streams.

Determining how much to charge and what the scope of services the fee will purchase isn’t easy. For many consultants, fee setting is one of the more difficult decisions to make. Then, becoming accustomed to discussing fees and services with clients is another hurdle. Some considerations for fee setting, if allowed by law, include:

  • Fees plus commission on commissionable products
  • Fees only on non-commissionable products
  • Reflection of hours worked
  • Past revenue basis
  • Increased revenue basis
  • Loss leader
    • Nominal fee
    • Profits made in follow-on sales of products or services.

“To fee or not to fee” is a decision that can’t be made lightly and it must be made after reflection and planning. For products where commissions have been the practice, one must be able to make the case to the consumer that the services provided exceed those of the other brokers who have maintained a traditional commission-based practice.

Business Associates Beware – A Fine May Find You

HIPAA’s privacy and security requirements have been a part of the health insurance and insurance broker lexicon for many years. Most health insurance brokers have signed at least one – and often multiple – BAAs (Business Associate Agreements) over the course of the years. HIPAA HITECH, enacted into law in 2009 increased the responsibilities for business associates and statutorily obligated a business associate with HIPAA privacy and security provisions. Business associates have been required to comply with these provisions since September 2013 when rules implementing the law became final.

 For the first time a business associate has settled a HIPAA case with the HHS Office of Civil Rights (OCR). Catholic Health Care Services of the Archdiocese of Philadelphia has this dubious distinction and has  agreed to pay $650,000 to settle a case with OCR that resulted from the theft of a cellphone.

A cellphone that was neither password protected nor encrypted was stolen. This phone contained PHI including social security numbers, names of family members and information regarding diagnosis, treatment, medical procedures and medication information.

 As a part of the settlement of the case, the business associate had to agree to a corrective action plan. This plan can serve as a good checklist for all business associates to measure their HIPAA compliance efforts.

The corrective action plan includes:

  • Risk analysis and risk management to assess potential risks and vulnerabilities to the confidentiality, integrity and availability of e-PHI
  • Documentation of security measures that are implemented to reduce the identified risks
  • Revision and maintenance of written policies and procedures necessary to keep PHI secure
  • Communication of the updated policies and procedures to all employees on a timely basis
  • Written or electronic compliance certification from all employees stating that they have read, understand and will abide by the policies and procedures
  • Barring employees who have not signed or certified that they will comply with the procedures from having access to ePHI.

Among the more prescriptive aspects of the correction action plan is a lengthy list of the “minimum content” of the policies and procedures. These include:

  1. Policies regarding encryption of ePHI.
  2. Policies regarding password management.
  3. Policies regarding security incident response.
  4. Policies regarding mobile device controls.
  5. Policies regarding information system review.
  6. Policies regarding security reminders.
  7. Policies regarding log-in monitoring.
  8. Policies regarding a data backup plan.
  9. Policies regarding a disaster recovery plan.
  10. Policies regarding an emergency mode operation plan.
  11. Policies regarding testing and revising of contingency plans.
  12. Policies regarding applications and data criticality analysis.
  13. Policies regarding automatic log off.
  14. Policies regarding audit controls.
  15. Policies regarding integrity controls.

Brokers have taken important steps that recognize their responsibilities when handling personal health information (PHI) as HIPAA requires. This includes physical changes to offices to secure information, adoption of encrypted email and other measures.

However, now may be a good time to review the steps taken with an eye to what may have been overlooked or where more robust action is necessary. The steps of this corrective action plan are a good start to a thorough review. After all, the last few years have seen significant changes in the use of electronic mobile devices, including an explosion of employees using their own devices for work-related purposes.

For more information on HIPAA requirements click here.








IRS Publishes 2016 Draft Forms for ACA Reporting

With the first ACA reporting deadlines for employers in the rearview mirror, the IRS has released draft forms for 2016. These drafts, if finalized, will be used when employers file in 2017.

The deadlines for reporting of 2016 health coverage are expected to return to the original dates:

  • Deadline to distribute forms to employees and covered individuals will be January 31, 2017
  • Deadline to file paper forms with the IRS will be February 28, 2017
  • Deadline to file electronically with the IRS will be March, 31, 2017.

The draft forms offer few changes from the 2015 forms. Of note, the line 14 code series reflects wording changes in a few codes and new codes 1J and 1K. These new codes discuss conditional offers of coverage to spouses.

Also, the “Plan Start Month” box on Form 1095-C will continue to be optional for 2016.

Draft instructions for employers to complete the forms have not been issued at this time.

Filing for 2016 will reflect several differences that we will expect to see reflected in the instructions to complete the forms. Chief among these is that employers will be required to offer minimum essential coverage to at least 95% of full-time and full-time equivalent employees to avoid the A “no offer” penalty. Transition relief was available for the 2015 coverage year that required an offer to 70% of employees to meet the requirement to offer coverage.

Here are the links to review the draft forms:

Form 1094-C  —–dft.pdf

Form 1095-C —–dft.pdf.

Early releases of all draft forms are at



CMS Acts on Documentation for Special Enrollment Periods (SEPs)

In an effort to stabilize the individual insurance marketplaces and improve the risk pool CMS has rolled out a new Special Enrollment Verification process. Individuals who assert that they have qualified for one of five Special Enrollment Periods (SEPs) will be sent a Marketplace Eligibility Determination Notice requesting documentation to support their eligibility for the SEP.

The five SEPs that will trigger the Marketplace Eligibility Determination Notice are:

  1. Loss of minimum essential coverage
  2. Change in primary place of living
  3. Birth
  4. Adoption, placement for adoption, placement for foster care, or child support or other court order
  5. Marriage.

The Marketplace Eligibility Determination Notice will be tailored to the specific circumstances of each individual applying for coverage. The notice will provide the list of acceptable documents to prove an individual’s eligibility for the SEP.

After the person has enrolled in coverage and sent in the proof for the SEP, no further action is required. Coverage will be considered confirmed unless there is an additional contact from the exchange.

The fastest method to provide documents to prove eligibility is by uploading them. The notice includes instructions on how to upload a document. Alternatively, documents can be mailed to the processing center with a bar code page that is included with the notice.

Examples of documents that support eligibility for an SEP include:

Loss of minimum essential coverage

  • Letter from an employer stating that the employer dropped coverage for the employee, including the date coverage ended or will end
  • Letter or other document from an employer stating that the employer stopped or will stop contributing to the cost of coverage
  • Letter showing an employer’s offer of COBRA coverage

Place of Living

  • Lease or rental agreement
  • Mortgage or rental payment receipt
  • Utility bill


  • Marriage certificate showing the date of the marriage
  • An official public record of the marriage, including a foreign record of marriage
  • A religious document that recognizes the marriage


  •  Birth certificate or application for a birth certificate for the child
  • Application for a Social Security Number (SSN) for the child
  • Medical record from a medical provider showing the date of birth


  • Court order showing effective date of the order
  • Adoption letter or record showing the date of adoption dated and signed by a court official
  • Government-issued or legal document showing the date legal guardianship was established.

Depending on the SEP reason, the types of documents that can be used for verification purposes are more expansive than the few listed in this article.  More information is available on the CMS notices webpage. Click here to go to the notices page. Then scroll down to “Eligibility Notice” and click on the “English” link that appears below “Special Enrollment Periods (2016 coverage) (June 2016).”

Data Match Letter Demands Action

NAHU members report that employers are seeing a recent flurry of data match letters. Exactly what is causing this renewed and reinvigorated activity isn’t clear, but employers need to be on the watch for these letters and understand their responsibility to respond to them.

What is data match?

Data match is a program coordinated by the IRS, CMS and SSA that seeks to identify Medicare beneficiaries who received Medicare benefits with Medicare as the primary payer when Medicare should have been secondary. The program has saved the Medicare funds more than 3.5 billion dollars since its inception in 1989.

The data match program reflects the rules that surround Medicare Secondary Payer (MSP). By way of review, Medicare is the secondary payer to some group health plans for services provided to:

  • The working aged
  • People with permanent kidney failure, and
  • Certain disabled people.

“Working aged” refers to persons who are employed at age 65 and over and people with employed spouses of any age who have group health plan coverage because of their or their spouse’s employment status.

Medicare is the secondary payer to a group health plan for the working aged where a single employer of 20 or more employees sponsors or contributes to a group health plan or two (2) or more employers sponsors or contributes to a group health plan and at least one of the sponsors or contributors has 20 or more employees.

Counting to 20 is a bit more complicated than it sounds. Most importantly, determining whether an employer has 20 employees and is subject to MSP, has nothing to do with how many employees are enrolled in the health plan. Also, it is not a count of full-time employees. Instead, the measure is “whenever an employer has 20 or more employees for 20 or more calendar weeks in the current calendar year or preceding calendar year.” This means the number of employees on the payroll on any given workweek.

 Employers are required to complete a data match report within 30 days of receipt of the Data Match notice. In some cases an extension of time may be requested. Failure to respond to this letter can result in penalties of as much as $1,000 per person who is part of the inquiry, as well as IRS excise taxes.

The notice contains an employer’s “Data Match Personal Identification Number (PIN).” The letter directs an employer to the Data Match Secure Website. Upon entering the employer identification number and PIN, the employer can access their questionnaire.

This questionnaire asks for information on specific workers or their spouses during a specific period of time. It will also ask if the employee or spouse had employer-provided group health coverage.

 Among the questions that employers must complete, if applicable, in response to the Data Match letters are:

  • Did you offer a health plan to any employee at any time since (date)?
  • Did your organization make contributions on behalf of any employee who was covered under a collectively bargained Health and Welfare Fund (e.g. a union plan) since (date)?
  • In the following years, did you have 20 or more employees for 20 or more calendar weeks (this includes full-time, part-time, intermittent and/or seasonal employees)?
  • In the following years, did you have 100 or more employees during 50% of your business days (full or part-time)?
  • Was this individual employed by your organization during (time period)?
  • Was this individual covered under a Group Health Plan at any time after (date)?

The employer is required to certify that the information provided is complete and correct.

Depending on the responses, an employer may receive a follow-up letter with instructions to provide additional information for listed individuals regarding medical expenses paid on behalf of these individuals.

 Completing this information may not be as simple as the questions would seem to indicate. The data match inquiry may be made years after the medical services were rendered.

Employers may enter into an Employer Voluntary Data Sharing Agreement with CMS as an alternative to data match. This sharing agreement allows an employer to share coverage information with CMS.

More information on the data match program is available here.

Correcting Employer Reporting Errors Needed to Meet Good Faith Compliance Standard

As employers were struggling to complete Forms 1095-C to get them in their employees’ hands by March 31, they had the small comfort that the IRS had announced that employers needed to meet a “good faith compliance” standard to avoid penalties. The expectation was that employers would do their best to comply with this new obligation and the steep learning curve accompanying the obligation.

The IRS is now providing more details of what may – or may not – meet the “good faith compliance” standard. In a new video on correcting errors, an IRS spokesman notes that:

“If a filer transmits a batch of returns with no health coverage information but just names and addresses, then the good-faith relief would not be available for the failure to file accurate and complete returns.”

The video titled Affordable Care Act Information Returns Corrections Process can be found here. It provides a detailed review of the corrections process for both paper and electronic returns.

The video notes that there are three (3) ways that errors can be identified:

  1. By the IRS as an error message reported by the IRS as a part of the information return submission process
  2. By the employer as a result of internal review
  3. By the employee who reports an error to the employer.

Employers should take the time between now and the deadline for filing with the IRS to review their records. It is easier to correct errors before returns have been filed with the IRS. Paper filing reporting is due at the end of May. Those filing 250 or more returns must file electronically with a due date of June 30, 2016.

Once returns have been filed with the IRS, the IRS will review the returns to validate whether the information was accurate and complete. Filers will be advised regarding errors or missing information.

The types of errors and steps needed to correct them are detailed in the instructions for the Forms 1094-C and 1095-C. Among the more common errors are:

  • Mismatches between names and social security numbers
  • Safe harbor or relief codes
  • Premium amounts.

When correcting a return, the employer will need to refile the correction along with the information that was on the original form. It is unacceptable to file the return showing only the corrected information. In essence, the corrected return will totally replace the one previously filed. It’s also important to note that a corrected return must also be provided to the employee.

In the case of an error in the social security number, employers cannot simply default to the date of birth. A filer may have to prove to the IRS that they followed the “TIN solicitation process.” This process requires:

  • The initial solicitation is made at an individual´s first enrollment or, if already enrolled on September 17, 2015, the next open season
  • The second solicitation is a reasonable time thereafter
  • And the third solicitation is made by December 31st of the year following the initial solicitation.

Employers should not disregard any error notices from the IRS. Failure to make corrections – or to make them timely – can result in the assessment of sizable penalties.


Open Up the Silos for Optimum Compliance

With implementation of the ACA, many brokers and employers have had a laser focus on understanding the requirements necessary to comply with the law. And, rightly so! As such, employers have adopted lookback measurement periods, identified variable hour employees, not to mention a myriad of terms and constructs.

 Employers who have filed their 1094-C and 1095-C forms with the IRS are now receiving error codes as a result of their filings. Here’s what one employer reported as an IRS error message:

Filing accepted notice of ACA reporting with error: AIRTN name/SS did not match IRS database.

This “ IRS-speak” meant that there was no match in the IRS database for the social security number that the employer used for an employee. As a result, the employer must correct the record or somehow take action to satisfy the error message.

In this specific example, as a first step, the employer should investigate whether there was a transposed number or some other typographical-type of error in reporting the information. Then, the employer can take the necessary steps to address the reporting error.

 The next step that employers may not take – but should – can occur if the employer treats ACA compliance separate from other HR functions – as if ACA compliance was in its own “silo.” That step is to consider other uses of the information outside of the “ACA silo.”

In the case of social security numbers, a review of whether the W-2 was accurate or whether the I-9 form was accurate would be advised. Reviewing and correcting this social security number must be done within the restrictions employers face regarding documentation of this kind.

Actions could include instructing the employee to contact the Social Security Administration to correct the number error. Correcting the error throughout the employer’s entire environment may help avoid other errors in information that rely on this number or negative findings should the record by reviewed as a part of another audit or investigation.

The “ACA silo” effect is also seen with the definition and identification of variable hour employees. As a recap, a variable hour employee as defined in Notice 2012-58 is:

“An employee is a variable hour employee if, based on the facts and circumstances at the date the employee begins providing services to the employer (the start date), it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week.”

If employers are considering employees to be variable hour employees, then this status should be reflected in job descriptions, employment applications, employee handbooks and Summary Plan Descriptions – any where that employment or eligibility is addressed.

The list of agencies enforcing the ACA covers the gamut of employer-facing agencies and includes IRS, HHS, DOL, CMS and EEOC, to “alphabetically name” a few. Notably, the DOL and the IRS have a formal agreement to share information.

In preparation for the audits that will surely arise out of the ACA and the newly completed reporting, employers can expect that other aspects of compliance will surely surface. By breaking down internal barriers – getting rid of the silos – any audits or compliance reviews may be more readily dispatched.

Will a HIPAA Audit be in Your Future?

It seems a day doesn’t pass without a news item regarding a data breach of some kind. To that end, HHS’ Office of Civil Rights (OCR) recently announced a new phase in its efforts to audit and assess compliance with the HIPAA Privacy, Security and Breach Notification Rules.

Phase 1 of the audit program was a pilot program to assess how covered entities implemented controls and processes to protect health information. OCR measured 115 covered entities against a set of protocols. Business associates were not audited in the Phase 1 program.

Covered entities include health care providers, health plans including insurers and company health plans and health care clearinghouses. A “business associate” is “a person or entity that performs certain functions or activities that involve the use or disclosure of protected health information on behalf of, or provides services to, a covered entity.” Health insurance brokers are typically business associates under HIPAA.

Phase 2 of the HIPAA audit program is launching this year. OCR will focus on desk audits of covered entities and their business associates. In some cases, on-site audits will also be conducted. In auditing business associates, OCR will consider risk analysis, risk management and timeliness and content of breach notification to covered entities.

 The audit process begins with an email that is sent to covered entities and business associates to gather contact information. This email is followed by a pre-audit questionnaire. The questionnaire asks about the size, type and operations of potential audit targets. Pre-audit surveys should be responded to within 10 days.

If an entity doesn’t respond, then OCR will use publically available information to identify information about the audit target. So, merely not replying to an OCR email is insufficient to avoid a compliance review. OCR’s phase 2 audit announcement instructs covered entities and business associates to check their spam folders for OCR communications.

 The audit pre-screening questionnaire can be reviewed here.

Employers Get Your ERISA House in Order

ERISA, the Employer Retirement Income Security Act, was enacted into law in 1974. While the focus of ERISA was retirement plans, the law also imposed requirements on health and welfare plans, including employer-sponsored group health plans.

An overview of ERISA’s provisions and requirements is available through the US Department of Labor’s Employment Law Guide. This information can be found here.

ERISA establishes reporting and disclosure obligations for most employer health plans. Plans are required to describe the rights, benefits and responsibilities of participants and beneficiaries in ERISA covered plans. The more common disclosure documents for health plans are Plan Documents and Summary Plan Descriptions (SPDs).

Many employers, especially smaller employers have been remiss in meeting all of these reporting and disclosure requirements. These lapses may become more apparent with the implementation of the ACA and the attention the ACA has brought to regulatory agencies and employees, among others.

Employers with insured plans, especially smaller employers, may have been lax in meeting the requirements to have a plan document and a summary plan description (SPD) for their plans. These employers have mistakenly assumed that their plan booklets or insurance contracts met the requirements for plan documents or SPDs.

For many employers, these lapses may have been rationalized as harmless ones. The rationale being that an employee is receiving sufficient information about a plan or that the employer was too small to be the target of a Department of Labor (DOL) audit. But, the reality is that failure to provide an SPD or plan document within 30 days of receiving a request from a plan participant carries a penalty of up to $110 per day per participant.

So, then, what is the likelihood that an employer will receive such a request?  As labor law attorneys will say, getting a specific request for any of these documents may mean a lawsuit is brewing. Now, the stakes may be even higher due to a new ploy.

Beware this new ploy!

The ploy involves canny medical providers who resort to what some have described as almost an ERISA-blackmail scheme. After providing services such as sleep studies or vein treatments, these providers bill an excessive fee. After the plan pays the allowable charge, a law firm representing the medical provider contacts the employer demanding the plan documents as a prelude to appealing the carrier’s reimbursement.

Generally speaking, the plan documents are available to plan participants. The patient in this scenario has signed a document that allows the medical clinic to act on the patient’s behalf in requesting the plan documents. Often, the patient has no idea that they’ve signed a release for this information.

The danger for the employer in this scheme is that the requirement to provide the plan documents in 30 days starts when the demand is sent to the employer. Thirty days are not a long time for an employer to:

  1. Recognize the demand
  2. Get the demand to the right person who can act on it
  3. Draft the plan documents and respond to the demand.

In some cases, after the initial demand, the clinic’s legal representatives cease further communication. As such, the employer may consider the issue resolved and not respond.

The surprise comes months or a year later when the clinic’s legal representatives re-initiate contact advising that the 30 days to provide the requested documents has elapsed and that the DOL penalty of $110 per day would now total some great amount. The clinic asserts that they will not contact the DOL regarding the employer’s failure to provide the requested documents, thereby triggering the penalty if the employer pays the full fee originally billed to the plan.

Understanding and complying with the rules of ERISA is not as complicated as one might think. And, for many employers, once the documents have been executed for the first time, keeping them up to date requires minimal effort. Properly executed documents can also prove beneficial for the employer by establishing the ground rules for the plan, in addition to the informational benefit to the plan participants.