Author Archives | Christopher Johnson

About Christopher Johnson

Christopher manages the consulting services department of J.W.Terrill providing regulatory, analytical, technical and wellness support to clients.

Employers Dropping Birth Control Must Notify Employees

July 30, 2014


In the wake of the U.S. Supreme Court’s Hobby Lobby decision the DOL, IRS and HHS have jointly issued guidance addressing preventive health services.

According to the guidance closely held companies that drop insurance coverage of birth control for religious reasons have 60 days to inform their employees.

The guidance indicates that, for ERISA plans, long-standing DOL regulations require that SPDs (Summary Plan Document) include a description of the extent to which preventive services are covered under the plan. As a result, if an ERISA plan excludes some or all of contraceptives, the plans SPD must reflect the extent of the exclusion. This in turn per ERISA would necessitate a SMM (Summary of Material Modification) or updated SPD.

The July 17,2014 guidance is as follows:

Disclosure with respect to Preventive Services

Q: My closely held for-profit corporation’s health plan will cease providing coverage for some or all contraceptive services mid-plan year. Does this reduction in coverage trigger any notice requirements to plan participants and beneficiaries?

Yes. For plans subject to the Employee Retirement Income Security Act (ERISA), ERISA requires disclosure of information relevant to coverage of preventive services, including contraceptive coverage. Specifically, the Department of Labor’s longstanding regulations at 29 CFR 2520.102-3(j)(3) provide that, the summary plan description (SPD) shall include a description of the extent to which preventive services (which includes contraceptive services) are covered under the plan. Accordingly, if an ERISA plan excludes all or a subset of contraceptive services from coverage under its group health plan, the plan’s SPD must describe the extent of the limitation or exclusion of coverage. For plans that reduce or eliminate coverage of contraceptive services after having provided such coverage, expedited disclosure requirements for material reductions in covered services or benefits apply. See ERISA section 104(b)(1) and 29 CFR 2520.104b-3(d)(1), which generally require disclosure not later than 60 days after the date of adoption of a modification or change to the plan that is a material reduction in covered services or benefits. Other disclosure requirements may apply, for example, under State insurance law applicable to health insurance issuers.

Prior FAQ’s and ACA information can be located at the DOL’s Affordable Care Act page here.

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PCORI Fee Due July 31st – Final Reminder

July 8, 2014


One final reminder that PCORI fee payments are due no later than July 31, 2014. This fee was implemented as part of the Affordable Care Act and will be used to fund the Patient-Centered Outcomes Research Institute (PCORI) to provide research and information to assist patients and health care providers.

Major medical, retiree plans, COBRA and HRAs are all generally required to pay the fee, but not HSAs, stop-loss coverage, specified illness benefits and EAPs that do not provide significant benefits in the nature of medical care or treatment.  Please note that a self-funded HRA (e.g., deductible reimbursement) plan is subject to a separate fee assessment even if it is provided under a fully insured medical plan.  A comprehensive chart of plans to which the fee applies can found here.

Fees & Reporting

The fee amount is calculated based upon the average number of covered lives under the plan during the policy or plan year:

  • Multiplied by $1 for the first year (February 1—October 1 plan or policy years)
  • Multiplied by $2 the second year (November 1—January 1 plan or policy years)

Fee amounts should be reported and paid using IRS Form 720 (Part II on page 2), the Quarterly Federal Excise Tax Return.  Detailed instructions for completing the form are available on the IRS website.

More information can be found here.

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2015 HSA Limits

April 28, 2014


The IRS has issued inflation-adjusted Health Savings Account figures for 2015. Revenue procedure 2014-30 provides as follows:

Annual contribution limitation for 2015.

For calendar year 2015, the limit on deductions, for an individual with self-only coverage under a high deductible health plan, is $3,350. For calendar year 2015, the limitation on deductions, for an individual with family coverage under a high deductible health plan, is $6,650.

High deductible health plan for 2015.

For calendar year 2015, a HSA qualified high deductible health plan (HDHP) is defined, as a health plan with an annual deductible that is not less than $1,300 for self-only coverage, or $2,600 for family coverage, and the annual out-of-pocket (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,450 for self-only coverage, or $12,900 for family coverage.

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Laptop Thefts Result in $1.9 Million in HIPAA Settlements

April 22, 2014


The U.S. Department of Health and Human Services (HHS) Announced that two organizations have paid the HHS Office for Civil Rights (OCR) $1,9 million to address potential violations of the Health Insurance Portability and Accountability Act (HIPAA) Privacy and Security Rules.  These enforcement actions highlight the significant risk by unencrypted laptops and other mobile devices.

Covered entities and business associates must understand that mobile device security is their obligation,” said Susan McAndrew, OCR’s deputy director of health information privacy. “Our message to these organizations is simple: encryption is your best defense against these incidents.”

OCR opened a compliance review of Concentra Health Services (Concentra) upon receiving a breach report that an unencrypted laptop was stolen from one of its facilities, the Springfield Missouri Physical Therapy Center.  OCR’s investigation revealed that Concentra had previously recognized in multiple risk analyses that a lack of encryption on its laptops, desktop computers, medical equipment, tablets and other devices containing electronic protected health information (ePHI) was a critical risk.  While steps were taken to begin encryption, Concentra’s efforts were incomplete and inconsistent over time leaving patient PHI vulnerable throughout the organization. OCR’s investigation further found Concentra had insufficient security management processes in place to safeguard patient information. Concentra has agreed to pay OCR $1,725,220 to settle potential violations and will adopt a corrective action plan to evidence their remediation of these findings.

OCR received a breach notice in February 2012 from QCA Health Plan, Inc. of Arkansas reporting that an unencrypted laptop computer containing the ePHI of 148 individuals was stolen from a workforce member’s car.  While QCA encrypted their devices following discovery of the breach, OCR’s investigation revealed that QCA failed to comply with multiple requirements of the HIPAA Privacy and Security Rules, beginning from the compliance date of the Security Rule in April 2005 and ending in June 2012.  QCA agreed to a $250,000 monetary settlement and is required to provide HHS with an updated risk analysis and corresponding risk management plan that includes specific security measures to reduce the risks to and vulnerabilities of its ePHI.  QCA is also required to retrain its workforce and document its ongoing compliance efforts.

OCR has six educational programs for health care providers on compliance with various aspects of the HIPAA Privacy and Security Rules.  Each of these programs is available with free Continuing Medical Education credits for physicians and Continuing Education credits for health care professionals, with one module focusing specifically on mobile device security:

The Resolution Agreements can be found on the OCR website at

To learn more about non-discrimination and health information privacy laws, your civil rights and privacy rights in health care and human service settings, and to find information on filing a complaint, visit us at

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ACA’s Deductible Cap Repealed

April 18, 2014


On April 1st the President signed into law the “Protecting Access to Medicare Act of 2014” otherwise known as the “Doc Fix.” The bill prevents a double-digit cut in Medicare reimbursements to doctors from taking effect this year. Additionally the bill included a significant modification to the Affordable Care Act eliminating a mandated deductible limit that was to be imposed on the small employer market.

Prior to the “Doc Fix” legislation the Affordable Care Act established limits on the deductible amounts of non-grandfathered health plans in the small group market for 2014 of $2,000 (single) or $4,000 (Family) annually. The elimination of the limits means that all plan deductibles will only be subjected to the mandated out-of-pocket maximum limitations for all subscriber cost-sharing regardless of group size.

The “Doc Fix” legislation went into effect April 1st, 2014.

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90-Day Waiting Period: Final & Proposed Regulations

March 13, 2014


On February 20, 2014 the Federal regulators issued final regulations governing the Affordable Care Act’s 90-day waiting limitation period. The agencies also separately issued a proposed rule on “employment-based orientation periods” to address concerns raised by some regarding the effect of the waiting-period requirements and bona find orientation periods.

The final rule generally limits the time an employee or dependent must wait before coverage can begin to no more than 90 days once he or she has satisfied the plan’s terms for eligibility for coverage. Coverage must become effective by the 91st day from the date of eligibility

The final rule confirms the following specifics:

  • Calendar days, including weekends and holidays are counted in the 90-day period;
  • Rehired former employees may be treated as newly eligible for coverage and required to satisfy the waiting period;
  • If a person enrolls as a late or special enrollee, any time period before the enrollment date is not counted as part of the 90-day limit.

Newly Proposed Regulations “Orientation Period”

The preamble to the final rules notes that some commenters urged that the final rule provide flexibility so that the 90-day waiting period could accommodate common administrative systems that currently extend coverage at the start of a month or to allow for three full calendar months.

In response regulators noted that the final rule permits employers to impose a “reasonable and bona fide orientation period” that employees must satisfy before the 90-day waiting period begins. However, the rule does not define what a reasonable or bona fide orientation period is.

The proposed rule, which employers may rely on at least through 2014 and until a final rule is issued, would limit a reasonable and bona fide orientation period to no more than one month. This would be determined by adding one calendar month and subtracting one calendar day, measured from an employee’s start date.

HIPAA Certificates of Creditable Coverage

The final regulations addressed the issuance of HIPAA Certificates of Creditable coverage in light of the ACA prohibition on pre-existing conditions starting in 2014. Because the ACA’s prohibition on pre-existing conditions is based on plan years (post 1/1/14), terminating individuals may still have a need for HIPAA certificates to receive credit under other employers plans. Therefore, all plans must continue to provide certificates until 12/31/2014.

Collectively Bargained Multiemployer Plans

Collectively bargained multiemployer plans may continue to apply their unique eligibility provisions, and will be considered to be in compliance with these rules, provided they are not designed to avoid compliance with the 90-day waiting-period limitation.

Hours-of-Service Eligibility Requirements

Plans that have cumulative hours-of-service eligibility criteria must not require more than 1,200 hours before the 90-day waiting period and must not require employees to meet the threshold more than once;

Who Does This Apply To & What Should They Do?

The rule applies to:

  • All group health plans & health insurers
  • Large and small groups
  • Grandfathered and non-grandfathered plans

Employers that offer coverage should review the rules to ensure their existing waiting periods do not exceed the allowed amounts. Employers offering coverage 1st of month following a waiting period insure that the practice is consistent with the 90 day limitation and that coverage begins the 91st day. In an event where there is potential of longer than the 90-days employers need to review potential application of an appropriate orientation period. This will require plan documents to specify this as part of the eligibility requirements for the group health plan coverage.

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Keep Your Plan for Two More Years

March 6, 2014


Health and Human Services announced on Wednesday a two-year extension for health insurance policies that do not meet the standards of the Affordable Care Act.

“These policies implement the health care law in a common-sense way by continuing to smooth the transition for consumers and stakeholders and fixing problems wherever the law provides flexibility,” Kathleen Sebelius, the U.S. health secretary, said in a statement.

This follows the administrations prior extension on these plans as issued in November 2013, when the administration decided that some non-grandfathered health plans in the small group and individual markets would not be considered out of compliance for failing to meet ACA coverage requirements. Yesterday’s announcement extends this relief for two additional years. According to CMS “At the option of the States, health insurance issuers that have issued or will issue a policy under the transitional policy anytime in 2014 may renew such policies at any time through October 1, 2016, and affected individuals and small businesses may choose to re-enroll in such coverage through October 1, 2016.”

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Employer Mandate Delayed For Groups Under 100

February 10, 2014


Federal regulators announced this afternoon that they will be delaying part of the employer mandate prescribed in the Affordable Care Act for a second year, now exempting companies employing between 50 and 99 full-time workers from complying with the mandate to offer employees affordable health insurance by another year, until 2016.

Companies that have 100 or more full-time workers, defined as employees who work more than 30 hours per week, will have to begin complying with the mandate to offer such coverage in 2015 or face financial penalties. According to the regulations FTE’s (full-time equivalents will be counted for the purposes of larger employer determination).

Officials Thursday said that the delay in the ACA mandate will affect 50 percent of the businesses that were supposed to be complying by 2015. In addition, the IRS is generally extending all of the transition relief for non-calendar year plans that were laid out in the proposed rule.

The transitional relief was released in a 227 page document also includes numerous other provisions which J.W.Terrill will be reviewing and providing guidance on shortly.

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IRS Delays Non-Discrimination Rules Again!

January 29, 2014


The IRS has again delayed implementation of the ACA’s non-discrimination rules, as they apply to fully-insured plans, until 2015 citing difficulties in defining “highly compensated” and “discrimination.”

Under the Affordable Care Act, these new requirements were to apply to non-grandfathered insured plans for plan years beginning on or after September 23, 2010. However, the recent in December of 2010 the IRS delayed enforcement pending additional clarification. This most recent IRS announcement merely continues  the delay on a piece of the legislation that has been delayed for 4+ years.

When the rules begin to be enforced its important to denote that the rules are different for employer-provided coverage under a self-insured medical plan. Under Section 105(h)(2), benefits provided under a self-insured plan are subject to non-discrimination requirements. To be excluded from an employee’s gross income, uninsured benefits must be provided under an accident and health plan for employees that does not discriminate in favor of highly compensated individuals as to eligibility to participate or benefits.

Requirements Prior to ACA and Continued Afterwards

Self-insured plans may not discriminate in favor of highly compensated individuals either with respect to eligibility to participate or benefits.

A plan discriminates as to eligibility to participate unless the plan benefits

  1. 70% or more of all employees, or 80% or more of all the employees who are eligible to benefit under the plan if 70% or more of all employees are eligible to benefit under the plan; or
  2. Such employees qualify under a classification set up by the employer and found by the IRS not to be discriminatory in favor of highly compensated individuals.

In testing for nondiscrimination, certain employees are excluded from consideration, including

  1. employees who have not completed three years of service;
  2. employees under the age of 25;
  3. part-time or seasonal employees;
  4. employees covered by a collective bargaining agreement (if health benefits were the subject of good faith bargaining); and
  5. employees who are nonresident aliens and who receive no U.S. source income.

Highly compensated individuals. Highly compensated individuals are defined under Section 105(h)(5) as the five highest paid officers, any 10 percent owners (attribution rules apply), and the highest-paid 25 percent of all employees.

Taxation of excess reimbursements. ”Excess reimbursements” paid to a highly compensated individual under a discriminatory self-insured medical reimbursement plan are taxable to the individual.

Physical examinations. The regulations under Section 105(h) provide an exception from the nondiscrimination requirements for “medical diagnostic procedures.” Thus, for example, an employer with a self-insured plan may provide executives with an annual physical exam and it would not be considered discriminatory.

Requirements That Apply to Insured Plans

Effective for plan years beginning after the IRS releases clarified guidance, the Act amended the Public Health Service Act (PHSA) to impose rules similar to the nondiscrimination requirements of Section 105(h)(2) to insured group health plans. Plans in existence on March 23, 2010, the date of enactment of PPACA, are grandfathered.

An employer that purchases an individual or group health policy on or after the enforcement date will be subject to these nondiscrimination requirements.

Income Tax Inclusion Will Not Apply to Insured Plans

The nondiscrimination rules that apply to self-insured plans will apply to insured group health plans, however the income tax rules will not. This is because the Health Care Act added nondiscrimination requirements through an amendment to the PHSA and not by expanding Code. The plan administrator will be subject to penalties if the plan fails to comply with the nondiscrimination rules, but highly compensated employees will not be subject to income taxation on excess reimbursements.

Under the Health Care Act, the employer will be subject to a $100 per day/per affected participant excise tax under Section 4980D for a failure to satisfy the nondiscrimination requirements. The excise tax under Section 4980D applies to employers whose group health plans fail to satisfy the group health plan requirements described in Chapter 100 of the Code.

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Court Provides Temporary Exemption to Nuns on Contraception Coverage

January 27, 2014


On Friday, January 24th the U.S. Supreme Court issued an order barring enforcement of a part of the Affordable Care Act specifically against the Little Sisters of the Poor. The bar to enforcement of the contraceptive requirements will remain in effect while the Little Sisters challenge unfolds and reaches a final decision before the Tenth U.S. Circuit Court of Appeals in Denver. The Court has stressed that it was not ruling on the merits of that challenge.

While the order only applies to the parties that filed the lawsuit, experts are indicating that organizations that share the Little Sisters’ religious beliefs (i.e. Catholic not-for-profit organizations) will almost certainly get temporary exemptions from the federal rules requiring them to provide workers with insurance that covers contraception.

The contraceptive mandate has been challenged in a number of lawsuits across the country, by both religious organizations and by private business firms whose owners are opposed, on religious grounds, to providing the mandated benefits.

The U.S. Supreme Court is scheduled to review the contraceptive mandate as it applies to private business this term, but has yet to take on a case involving a religious entity.

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Top 5 TerrillConnect Articles of 2013

January 3, 2014


2013 was a particularly tumultuous year for compliance related items. As a result we decided to take a look back at the top five topics, based on readership statistics, over the last 12 months. Those topics/articles in reverse order are:

#5 Form W-2 Reporting of Employer Sponsored Health Coverage
The IRS provided us with additional guidance regarding the often misunderstood and often researched plan value reporting requirement. In general employers that provide “applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement. This requirement is strictly a reporting requirement and does not impact the tax status of reported employee benefits.

This article provided summary information on what to report, when to report and who had to report.

#4 FSA Discrimination Testing
During the 1970’s the IRS created Flexible Spending Accounts (FSAs) to help employees pay medical expenses with pre-tax dollars. Since that time regulations governing the plan have continued to be refined and revised. One of FSA regulation though that hasn’t seen significant revision are the Discrimination rules governing pre-tax contributions into FSA plans.

This article provided an over view of the Discrimination testing on FSA plans that is required annually to assure that the plan has been implemented to the benefit of all employees and not just a select few. To meet the qualifications for tax-favored status, an FSA plan cannot discriminate in favor of Key or Highly Compensated employees.

#3 Employer Share Responsibility for Health Coverage Under the Affordable Care Act
The often cited, often misunderstood and somewhat feared “employer mandate” was certainly one of the top stories of 2013 on TerrillConnect.

When the Treasury Department and IRS have recently issued proposed regulations and questions-and-answers on “Shared Responsibility for Employers Regarding Health Coverage.” If you are not fluent in government-speak, you’ve probably heard of this as the “employer mandate” or “pay or play” provision of the Affordable Care Act. Under this provision, beginning in 2014, employers with 50 or more full-time employees must offer affordable health coverage that provides minimum value to their full-time employees or pay a penalty.

#2 Exchange Notices
Federal regulators spastic and last minute modifications to promised notification regulations was one of the most cited sources of anxiety for benefit managers across the country. So it is no surprise that this topic garnered the number 2 spot during 2013.

Originally required to be provided by March 1, 2013, the notice requirement was delayed until October of 2013. The notice in short required that written notice be provided to all employees regarding the existence of government-run health care exchanges and including a description of services and possible subsidies that may be available.

#1 PPACA Employer Mandate Delayed until 2015
By far away the single most read and or cited article had to be the delay of the employer mandate until 2015. Quite possibly one of the shorter articles on TerrillConnect the surprise announcement by regulators in February in an obscure Treasury blog post caused a huge commotion.

The Treasury Departments announcement that it would delay its enforcement an entire year after having heard numerous concerns from employers about the challenges of its implementation.

“We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Mark Mazur, assistant secretary for tax policy at the Treasury Department, said in a blog post. “We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so.”


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Healthcare Reform Timeline 2014 – 2018

December 28, 2013


Another year has come and gone and the Affordable Care Act continues in its long and sometimes confusing implementation. Where we wish we could provide a complete prognostication of implementation deadlines and dates, but alas predicting the continual delays and modifications to the law is virtually impossible. However, we have provided key deadlines as they stand today. As with most aspects of this law, and as proven by recent history, many of these dates are subject to change.


  • Individual health care coverage mandate (January 2014)
  • Elimination of annual limits for “essential health benefits” (January 2014)
  • Limit on annual participant out-of-pocket maximum to the limit imposed on qualified high-deductible health plans (plan years after January 2014)
  • Qualified health plans offered through a state exchange and insurers in the small and individual markets must include “essential health benefits” and meet a specified actuarial value (January 2014)
  • Creation of health exchanges, marketplaces that allow individuals and eligible employers to purchase health insurance (January 2014)
  • Elimination of preexisting condition exclusions for all participants (January 2014)
  • Waiting period limitation, maximum of 90 days (January 2014)
  • Increases in maximum wellness incentives, from 20% to 30% of the cost of coverage (January 2014)
  • Transitional reinsurance fee (years 2014-2016)


  • Employer mandate for large employers with 50 or more employees must offer coverage to full-time employees (30 hours or more per week); coverage must be affordable and meet minimum standards (enforcement delayed until January 2015)


  • “Cadillac Tax” a tax on high-cost group health plans on the value of “excess” coverage (January 2018)

To Be Determined

  • Large plan auto enrollment requirement: plans must automatically enroll all new full-time employees and continue enrollment of current employees (Pending issuance of final regulations)
  • Nondiscrimination rules apply to insured plans (Pending issuance of final regulations)
  • Quality of care reporting requirement to Department of Health and Human Services and subscribers: annual report on whether plan fulfills quality requirements (Pending issuance of final regulations)

A complete timeline can be found here: Timeline.

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