If a covered employee becomes eligible for Medicare, terminates employer-sponsored coverage and enrolls in Medicare, can that employee’s enrolled dependents stay enrolled in the employer plan?

Yes, if they elect COBRA. The termination by a subscriber is a qualifying COBRA event for the dependents who would become eligible to continue the plan through COBRA. For more information, download the FAQs on COBRA Continuation Health Coverage from the US Department of Labor.

Can an employer who is subject to Oakland’s Measure Z pay employees more and drop their health coverage?

Measure Z is an Oakland, California ballot measure which passed in November 2018 will take effect on July 1, 2019. It states that a hotel business with 50 or more rooms must pay employees $15 per hour and offer healthcare benefits or $20 per hour if it does not offer healthcare benefits. Healthcare benefits are not defined. For the purposes of this Q&A, we assume that healthcare benefits mean a standard group health plan.

An employer can always drop their health plan and pay employees more, however, there will be consequences depending on the employer’s status under the ACA. For example, Measure Z has no bearing on an employer’s obligations under the ACA. If an employer is required under the ACA to offer coverage, they must offer coverage. Paying employees more, unfortunately, is not an alternative under the ACA to offering coverage.

Here are the two most likely scenarios – both assume the employer is subject to Measure Z:

a) If the employer is a small employer under the ACA (fewer than 50 full-time, plus full-time equivalent employees), then the employer is under no obligation to offer health coverage under the ACA. For ACA small employers who are subject to Measure Z however, this could be a marketing opportunity for brokers. Small employers who are subject to Measure Z and don’t currently offer coverage will have to:

1. Pay $15/hour and offer health coverage, or
2. Pay $20/hour and not offer coverage
3. Comparing 1 and 2:
   • For a 40-hour per week employee, the difference between $15/hour and $20/hour is $800/month.
   • Certainly, an employer could put in place a cost-effective health plan for less than $800/month/employee.

This represents a sales opportunity for brokers.

b) If the employer is an Applicable Large Employer (ALE) under the ACA (50 or more full-time, plus full-time equivalent employees), they must offer qualified coverage to all full-time employees or risk costly penalties. There is no exception allowing ALEs to “pay employees more” in place of offering qualified health plans to full-time employees.

Of course, an ALE always has a choice to offer or not offer, but not offering comes with the potential to incur harsh ACA penalties. And If an ALE that is also subject to Measure Z doesn’t offer coverage and also doesn’t pay $20 per hour or more, then it looks like they would be subject to penalties under both the ACA and Measure Z.

Bottom line answer to the original question: assuming the employer is an ALE, it would not be wise to drop coverage and pay employees more because of the ACA penalty risk.

Can employers make self-adjustments to their invoice if they have added or terminated employees?

It is strongly advised that employers pay the exact amount invoiced even if an employee has terminated from or been added to the plan. Failure to submit payment in full could result in delinquency or cancellation of coverage. Conversely overpayment, while usually applied correctly to the next invoice, may sometimes lead to billing errors. If an employer pays the full premium even though an employee has terminated, the carrier will typically adjust future invoices within one or two billing cycles and issue a credit to the employer. And if an employee has been added, the carrier will add an amount to a future invoice for the time the employee was enrolled, but for which the employer was not billed.

Can an employer increase the lifetime maximum for orthodontia coverage during the plan year or at renewal?

During the plan year: Principal is the only carrier that Claremont represents that permits an employer to increase the orthodontia limit during the plan year.

At renewal: All other carriers that Claremont represents permit an increase in the limit at renewal. Those carriers are: Beam, Blue Shield of California, ChoiceBuilder, Delta Dental, Humana, MetLife, Reliance Standard, and UnitedHealthcare.

Note: final approval of limit increases is always subject to an underwriting review by the carrier.

Can employers reimburse employees for Medicare premiums?

There are two scenarios in which an employer can reimburse employees for Medicare premiums:

1) Small Employers (under 50 EEs) can reimburse employees for Medicare premiums (and other health insurance plan premiums or any IRC Section 213d medical expense) through the use of a Qualified Small Employer HRA (QSEHRA) provided that the reimbursements are not restricted only to Medicare premiums.

2) An employer with fewer than 20 employees, (i.e. not subject to Medicare as secondary payer rules) can pay for employees’ Medicare Part B or D premiums so long as the employer also had standard small group coverage that is subject to market reforms, such as the annual dollar limit prohibition and preventative services requirements.

Regarding the QSEHRA – Not every small employer is eligible to implement a QSEHRA and certain restrictions may make it an undesirable solution, but a QSEHRA may be the right fit for certain employers.

Regarding employers with fewer than 20 employees – See the answer to question #3 in this IRS publication for a more detailed explanation of the requirements for a Medicare reimbursement arrangement.

If you or your clients are interested in learning more about the QSEHRA or Medicare reimbursement, our HR compliance partners TASC and HR Service can assist brokers and employers in setting up and administering QSEHRA’s and maintaining compliance for reimbursement arrangements. Please visit the HR Compliance section on our partner page for company descriptions and contacts.

Can an individual, who is 65 years or older, contribute to a Health Savings Account?

Yes. So long as an individual, who is 65 or older, is not enrolled in any part of Medicare, that individual can contribute to a Health Savings Account (HSA) that is connected to a High Deductible Health Plan (HDHP). Deciding whether to delay enrollment in Medicare for those 65 or over is a complicated question and depends on the individual’s financial circumstances and the size of the company which offers the HDHP.

Medicare Interactive.org provides an excellent description of the factors to consider if an individual would like to delay Medicare enrollment in order to continue contributing to an HSA.

Can an employer contribute to an employee’s FSA?

Yes, but to maintain the tax-exempt status for both the employer’s and employee’s contributions, an employer’s contribution is limited. This answer applies to Health FSAs only.

Employers can match an employee’s pre-tax contribution to their FSA (Flexible Spending Arrangement) up to the maximum amount the employee is permitted to contribute. If the employee contributes less than $500, the employer is permitted to contribute more than the employee, but only up to $500. Examples best illustrate the rule. If an employee contributes these amounts to their Health FSA:

• $300. The employer is permitted to contribute any amount up to and including $500.
• $1,500. The employer is permitted to contribute any amount up to and including $1,500.
• $2,700 (the maximum allowable employee contribution for 2019). The employer is permitted to contribute any amount up to and including $2,700.

This article from the Society for Human Resource Managers is an excellent source of information regarding FSA’s. See the section “Employee and Employer Funding.”

Does Humana maintain their own network of dental and vision providers?

Dental – Humana maintains its own network of dental providers. Their network includes 46,000 providers in California and 250,000 providers nationwide.

Vision – Humana partners with Eyemed and offers members a choice of providers through Eyemed’s Insight Nationwide network which includes 15,700 providers in 3,500 locations across California and 70,000 providers in 24,000 locations nationwide. Retail locations include LensCrafters, Pearle Vision, Sears Optical, Target Optical, and JCPenney Optical. Online, members can also shop in-network at Glasses.com and Contactsdirect.com.

Is California the only state that defines Small Group as 1-100 employees?

No. California, along with Colorado, New York, and Vermont all define a small employer as having up to 100 employees. All other states define a small employer as having up to 50 employees.

Some history…prior to 2016, states defined a small group as having no more than 50 employees. The Affordable Care Act redefined small group as having up to 100 employees. This change was set to begin in 2016. As the deadline drew closer, many states objected and Congress responded by enacting the PACE Act which gave states the choice of leaving the small group definition at 50 or expanding it to 100. So far only California, Colorado, New York, and Vermont have chosen to expand the definition.

Can employers “wrap” or pair a Health Reimbursement Arrangement with a small group medical plan in California?

Yes, but it depends on the type of Health Reimbursement Arrangement (HRA).

Most carriers expressly forbid employers from pairing a small group medical plan with an HRA that reimburses employees for medical expenses. The exception is Kaiser, which permits employers to pair a medical HRA with this one plan: Gold HRA HMO 2250/35 + Child Dental.

However, employers are permitted to pair “excepted benefits” HRAs with small group medical plans. Examples of excepted benefits HRAs are those that reimburse for dental, vision, long-term care and Medicare supplemental coverage.