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  • March 2019

The Vita Blog March 2019

  1. Brace for Impact: ACA Held Unconstitutional by Federal Court

    System Administrator – Fri, 29 Mar 2019 06:32:36 GMT – 0

    After broader attempts to repeal and replace the ACA stalled out in the summer of 2017, Congress passed the Tax Cuts and Jobs Act in December 2017 which included a provision to reduce the individual mandate penalty to $0.  The zero-penalty became effective on January 1, 2019. 

    Efforts to get the constitutionality of the ACA back in front of the Supreme Court for reconsideration have been widely expected, now that the Court has a more conservative tilt.  As anticipated, several states took action to challenge the constitutionality of the ACA individual mandate given the new zero-penalty.  A recent federal court ruling held that the Affordable Care Act is unconstitutional.

    The Court today finds the Individual Mandate is no longer fairly readable as an exercise of Congress's Tax Power and continues to be unsustainable under Congress's Interstate Commerce Power. The Court therefore finds the Individual Mandate, unmoored from a tax, is unconstitutional.” 


    Back up . . . How did this all start? 

    In the years directly after the ACA was passed, multiple challenges to the constitutionality of the individual mandate were waged.  Challenges were brought in numerous state courts, including New Jersey, Ohio, Tennessee, and two in Virginia.  These trial court rulings made their way up to the Supreme Court in 2012, which ruled on five different aspects of the constitutionality of the ACA, including the individual mandate. 

    The crux of the issue addressed by the Supreme Court was whether the individual mandate was a proper exercise of Congress' power to regulate interstate commerce under the Commerce Clause and/or to levy taxes.  Importantly, the language of the law refers to the individual mandate penalty as a fee, not a tax.  One key argument was that Congress doesn’t have the express right to levy fees . . . only taxes.  In this ruling, the Supreme Court considered the fee sufficiently “tax-like” to affirm the constitutionality of the individual mandate, under Congress’ authority to levy taxes.


    What is the basis of the new challenge? 

    The argument centers on the previous Supreme Court ruling which upheld the constitutionality of the individual mandate on the basis of Congress’ power to tax.  The challengers argued that because the mandate will no longer trigger a tax in 2019 (because the penalty is $0), the shared responsibility payment will produce no revenue, thus it can no longer be sustained by Congress’ taxing power.  In short, we now have a mandate with a zero tax, therefore, it would potentially no longer be defensible on the grounds of Congress’ power to tax (since there is no actual tax). 

    Challengers also argued that the mandate could not be severed from the rest of the ACA, so the entire ACA should be struck down.  

    As the legal challenge moved through the courts process, intervening states counter-argued that the individual mandate was still constitutional after the Tax Cuts and Jobs Act under Congress’s powers to tax and to regulate interstate commerce, and that it was severable from the remainder of the ACA.


    What exactly is Severability? 

    The concept of severability addresses the question of whether the individual mandate can be “severed” from the law and leave the rest of the ACA to stand or whether the individual mandate is so essential to the greater body of the ACA that removing the individual mandate would render the entire ACA null and void.  One perspective is that if the individual mandate was considered unconstitutional, only those provisions which were directly dependent on the mandate would be invalidated, leaving the remainder of the law intact.  A second perspective is that if the individual mandate is found to be unconstitutional, the entire law would be invalidated . . . because it could not be independently “severed” without nullifying the rest of the law. 


    Vita’s Take

    What do we expect will happen on the constitutionality of the individual mandate?  This will likely be a subject of heated and intense legal debate. 

    On the other hand, the issue of severability appears to have a clearer path.  Congress has confirmed the essential nature of the individual mandate (in legislative history).  The actual text of the law states multiple times that the mandate is not only essential, but the keystone of the law.  Lastly, the Supreme Court affirmed this as part of its prior decision, indicating that the upholding the ACA in the absence of its “signature provision” would change the effect of the law as a whole.  In fact, all nine Justices acknowledged this text and Congress' manifest intent to establish the individual mandate as the ACA's 'essential' provision.  We would suggest that these facts provide relative clarity on the issue of severability of the individual mandate. 


    What is the expected impact? 

    As a rule, employer plans will not be impacted by the sole fact of the individual mandate penalty being reduced to zero.  However, if the individual mandate is found to be not severable, and the entire ACA is rolled back, we can expect some mayhem at the national level, specifically in the individual marketplace. 

    The most significant overall impact of the law potentially being rolled back will be in the repeal of subsidies for coverage in the individual marketplace.  Millions of previously uninsured individuals secured insurance under the ACA, primarily because it became more affordable via the subsidies.  Once those subsidies go away, the ability for lower-income individuals to afford non-subsidized coverage will be challenged.  The impact of a mass exodus from the individual marketplace is of concern to many.  This would potentially impact group insurance plan premiums as costs for uninsured care will rise, and those costs are typically shifted to private-sector group plans. 


    How is this going to impact employers? 

    The employer marketplace is poised to experience less instability, simply because plans are inherently contractually arranged between insurance carriers and employers.  Many will be concerned about some of the “fan-favorite” provisions of the ACA being rolled back.  However, we would argue that plan elements such as no pre-existing condition exclusions, free preventive care, and mandatory dependent coverage to age 26 have already become part of the fabric of employee benefits as we know them, thus insurance carriers will not rush to strip these provisions out of their contracts.  Remember, these provisions were mandated to be included in health policies as part of the ACA . . . but it is not mandatory that they be removed if the ACA is repealed. 

    Two other important changes brought about by the ACA in the small group marketplace is member-level rating and metal-level coverage definitions.  While insurance carriers would certainly be able to change these if the law is repealed, the infrastructure investments made on the part of insurance carriers to comply with the law were monumental.  It is unlikely that, at least in the short term, insurance carriers will be racing to reinvest billions of dollars to change the chassis upon which small group plans currently run.  


    What about all the mandates and reporting requirements?

    A repeal of the full ACA would also take with it employer Pay or Play provisions as well as all the ACA-required reporting.  This would open the door for employers to reconsider coverage decisions in the following ways:

    • Pay or Play: With no penalties for not providing minimum essential coverage, will coverage for some employees be eliminated (interns, temporary employees, certain classes, etc.)?
    • Eligibility Tracking: No more look back eligibility rules or tracking of measurement periods, administrative periods, and stability periods.
    • 30 hour eligibility threshold: Will the 30-hour threshold for coverage be maintained (or will some employers change to sync with a more traditional 40 hour work week)?
    • Out of pocket maximums: Will OOP maximums stay in the vicinity of the current statutory limits?  Or will we see them creep higher in the name of potential cost savings? 
    • Essential Health Benefits: For small groups, will employers maintain plans with EHB coverage levels?  Or will some of the newer, cost-increasing provisions (such as pediatric dental and habilitative care) be eliminated?
    • FSA Max: Will employers maintain the old maximum election cap?  Or will some increase it to pre-ACA levels? 

    Other areas of impact for employers would be a reduction in the administrative responsibilities that came with the ACA.  Requirements such as: 

    • 1094/1095 reporting obligations
    • W-2 reporting


    …But don’t get too excited! 

    We should all expect that if the ACA does end up getting repealed, many of these employer-specific provisions will likely get re-implemented through new legislation.  The timing of any such re-implementations is obviously unknown, and we can expect it to be a very political process.  So, watch and wait will be the word of the day. 


    So, what do we do now?

    The constitutionality of the individual mandate in the wake of the $0 penalty is definitely working its way up the ladder to the Supreme Court.  Notably, the federal court did not issue an injunction halting enforcement of the ACA.  Additionally, the HHS has issued a news release cautioning that the decision is not a final judgement and that the HHS “will continue administering and enforcing all aspects of the ACA.”  The ACA continues to be the law of the land as we wait for this to work its way through the courts.

    • ACA
  2. San Francisco Health Care Security Ordinance Reporting Due April 30

    System Administrator – Wed, 13 Mar 2019 00:12:44 GMT – 0

    The San Francisco Health Care Security Ordinance (SF HCSO) requires covered employers to make a minimum health care expenditure on a quarterly basis on behalf of all covered employees. While the ordinance has been in place for many years (since 2008), many employers are still out-of-compliance or unsure how the rules apply.  With the annual reporting requirement being due next month (April 30), now is a good time to review your employer obligation under the SF HCSO.  

    Below is a brief overview of the HCSO. For more details, please visit the San Francisco Office of Labor Standards Enforcement (OLSE) page on HCSO, which includes training slides, new rules, an administrative guide and FAQ, as well as links to the required HCSO poster and waiver form. The OLSE page also contains a link and instructions for the online Annual Reporting Form due April 30. The reporting form should be available no later than April 1. 

    Covered Employers: Have 20+ employees (50+ for non-profits), with 1 or more working in the geographic boundary of San Francisco, and required to obtain a San Francisco business registration certificate. Small employers 0-19 (0-49 non-profit) are exempt. 

    Tip: The headcount for determining your company size under HCSO – both for determining applicability and expenditure rate – includes ALL employees, regardless of status, classification, or contract status. That means even temp or contract employees that are 1099 or through an agency still count! 

    Covered Employees: Works an average of 8 or more hours per week in San Francisco and entitled to be paid minimum wage. There is a waiting period of 90 days. 

    Tip: Look at the exemption criteria closely. The manager/supervisor exemption is coupled with the salary exemption amount, meaning the two are not separate. An employee needs to make more than the salary exemption (2019: $100,796 annually) AND be considered a manager/supervisor/confidential employee per HCSO. 

    Calculating Expenditure Rate (Updated for 2019): Rates are based on employer size and are calculated per hour payable to covered employees. A medium size employer is 20-99 employees (50-99 non-profit) with a rate of $1.95 per hour, while a large employer is 100+ employees with a rate of $2.93 per hour. 

    Tip: Hours worked include both paid and entitled, like PTO. Maximum hours for the calculation is capped at 172 a month. 

    Making Expenditures: For your full-time, benefit eligible employees, average costs for medical, dental, and vision can be used. For most employers, the minimum expenditure is easily reached. A large employer would need to spend approximately $507 a month on an exempt or 40-hour non-exempt employee. Most medical, dental, and vision premiums, when combined, would exceed that amount. Just be sure to factor out employee contribution amounts. For non-benefit eligible employees, the expenditure would be made quarterly. The simplest method for making an expenditure is via the San Francisco City Option. 

    Tip: Being benefit eligible does not immediately mean that HCSO requirements are met and expenditures do not need to be made. If a benefit-eligible employee waives the employer’s company sponsored health plan, the employer is still required to make a minimum expenditure on behalf of that employee. That means paying into the City Option, similar to non-benefit eligible employees. The exception is if the employee voluntarily signs the HCSO Waiver Form. You may NOT coerce an employee to sign the form and the form language dissuades one from signing it! Due diligence would mean sending the form to a waived employee and if the employee chooses not to sign, be sure to make the quarterly expenditure. 

    Due Dates: Quarterly expenditures are due 30 days following the end of the quarter. First quarter 2019 will be due April 30. Annual Reporting to HCSO of covered employees and expenditures made are also due April 30 and is completed online. The online form will be posted to the OLSE HCSO website no later than April 1, so mark your calendars. 

    Risk: There are penalties for non-compliance – up to $100 per employee per quarter for failure to make expenditures and up to $500 per quarter if the annual reporting is not submitted. There are other penalties as well for retaliation, failure to provide records to OLSE, and failure to post the required notice. However, while there’s no guarantee, the OLSE generally does not fine an employer that has been out-of-compliance that now comes into compliance. The bigger risk is if an employee complains as that is generally when the OLSE would take action and penalize for non-compliance. 

    More Information

    The 2018 Annual Reporting Form
    San Francisco Health Care Security Ordinance
    2019 HCSO Adjustments: Vita Blog

    • Compliance
  3. Shrinking Talent Pools Mean Shifting Hiring Strategies

    System Administrator – Thu, 07 Mar 2019 09:12:27 GMT – 0

    With the labor market is tighter than ever, HR professionals and those tasked with hiring need to be ready to attract potential workers from competitors.

    According to Fast Company, organizations focused on hiring recent grads should be prepared to discuss strategies for work flexibility, collaboration, professional development, how success is measured, and opportunities for giving back. Shifting one's mindset from focusing on the challenges the tight market creates to instead emphasizing the opportunities it provides to attract the right talent can help organizations make needed innovations to their hiring practices and company culture.

    With full employment, staffing agencies have to get creative as the pool of qualified talent is limited. Add in changing visa and immigration laws and the pool shrinks even smaller. Companies seeking talent are frustrated, and staffing agencies are working harder to appeal to the remaining talent. Workforce magazine highlights one solution: investing in training programs. Helping candidates upskill can help fill hard-to-staff roles with the same pool. Called a “build-your-own-talent” approach, organizations can focus training on skills that are harder to source with a promise of commitment to working for the employer for a set amount of time.

    This helps explain why recruiting is a growing focus for the C-suite, according to HR Dive. For HR, this means ensuring everything from a positive, proactive hiring experience to showcasing a company as an employer of choice in recruitment, and also shifting strategies toward “total talent acquisition,” which means considering full-time employees as well as flexible, contingent, and project-based workers.

    Shifting hiring and recruiting strategies will continue to be hallmarks of the tight labor market, so finding ways to attract, train, or retain talent will be what makes the difference for many employers.

    • Recruiting
  4. Introducing Vita's New Look

    System Administrator – Tue, 05 Mar 2019 02:07:51 GMT – 0

    When Vita was founded in 1979, our mission was simple: provide our clients with a level of knowledge and service unsurpassed in the employee benefits industry. This year, we celebrate 40 years of not only making our mission a reality, but also helping to make the lives of our clients and their employees easier, healthier, and richer through thoughtful and diverse benefits programs.

    Today, we help thousands of employers grow their businesses and cultures their own way. With our new brand identity, we hope to inspire continued growth, a more human approach, and a celebration of life. 

    Growing with You 

    Vita-Logos

    Our namesake is Latin for “life.” Our new leaf design represents Vita’s growth over time and into the future, as well as how we influence the growth and lives of our clients and their employees.  

    Vita-Palette
    We’ve warmed up our Vita blues with some coral, teal, 
    and tan tones, because who said insurance and finance brands need to feel cold?  

    Vita-Cards

    Vita-Services

    Vita-Apps

    Going Forward 

    Ultimately, the foundation of Vita’s brand is not the logo or colors that are on our business cards and website. Rather, it’s our passion for partnering with you, our clients, to create benefits programs that delight your employees, make work easier for you, and strengthen your culture. 

    We have many more exciting updates coming soon and we can’t wait to share them with you. 

    • Employee Benefits
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