Now that we have all had some time to absorb the national election results, many are wondering how the Affordable Care Act will change during a Trump presidency.  While there is a great deal of uncertainty surrounding the future of the ACA, our recommendation to those currently covered by the Act is to continue to comply until any changes have been finalized.

Many believe that an immediate and complete repeal of the ACA is unlikely because the Republicans lack a congressional super-majority (e.g., control of the House of Representatives and a filibuster-proof Senate) and without a comprehensive alternative approach in place, 20 million Americans could lose health coverage in the event of a complete repeal.

Even though an immediate and complete repeal is unlikely, we do expect that there will be changes to specific sections of the Act through the budget reconciliation process, which reaches only the revenue components of the Act or by regulatory action, which modifies the official interpretation of certain aspects of the law.  Any modification or repeal of portions of the Act will require congressional action, which will not be filibuster-proof because the Republican-controlled Senate falls short of the 60 votes required to prevent filibuster.  On the other hand, changes brought by regulatory action would not involve Congress, but would require issuance of new regulations by the newly appointed Secretary of Health and Human Services.

While we can easily predict those sections of the Act that are likely to be targeted under the new administration (e.g., individual mandate, Cadillac tax, employer mandate, employer reporting), such changes are unlikely to be immediate.  However, as this election has shown us, anything is possible.  Nonetheless, we recommend that our clients stay the course with respect to ACA compliance and continue preparing for 2017 as though the Act will remain through the end of 2017.  We will continue to monitor developments in Washington in order to keep our clients up-to-date on changes to the Act and its regulations.

As the cost of providing health coverage increased over the past fifteen years, many employers began to offer employees cash payments if they “opted out” of coverage.  Some expected that the Affordable Care Act (ACA) would put an end to opt-out incentive programs.  The ACA does not prohibit opt-out payments; however, the IRS recently issued proposed regulations that highlight how the ACA impacts these payments.  The IRS’s proposed regulations recognize two types of opt-out arrangements: a) unconditional opt-out payments; and b) eligible opt-out arrangements. 

Unconditional Opt-Outs.  An “unconditional” opt-out payment offered to an employee for having declined health coverage will be viewed by the IRS as increasing the employee’s required contribution for purposes of determining the affordability of the health plan to which the opt-out payment relates.  This is true regardless of whether the employee enrolls in the plan or elects to opt-out and takes the payment.  Put another way, the cost of coverage to employees for purposes of determining affordability under the ACA must include not only monthly employee contributions, but also the amount of any opt-out payment that is offered to them.  If an opt-out payment incentive increases the total employee cost of coverage above applicable affordability thresholds (9.66% for 2016), the employer may face a pay or play penalty.

Eligible Opt-Out Arrangements.  Employers may avoid the potential affordability problem outlined above by offering an “eligible opt-out arrangement.”  An eligible opt-out arrangement conditions the payment of the incentive on  the employee’s declining coverage and providing, at least annually, reasonable evidence that the employee and his or her “tax family” (those for whom the employee expects to claim a personal exemption) will have minimum essential coverage (other than individual market coverage) during the period covered by the opt-out arrangement.  If the opt-out payment covers a full plan year and the employee’s “tax family” includes a spouse and one child, payment must be conditioned upon reasonable evidence that all three individuals will have coverage for the full year.  Requiring such evidence allows employers to exclude opt-out incentives from the cost of coverage they offer for purposes of calculating affordability.

Effective Dates and Transition  Relief.  The IRS proposed regulations will apply for plan years beginning on or after January 1, 2017.  Although the regulations are in proposed form, employers and plan administrators may rely on them immediately.  Unconditional opt-out arrangements that were adopted before December 16, 2015 may be exempted from the affordability calculation if certain conditions are met.  Similarly, unconditional opt out arrangements that are included in a current collective bargaining agreement (CBA) are exempt from the affordability calculation until the later of (1) the start of the first full plan year after the CBA expires (excluding any CBA extensions on or after December 16, 2015), or (2) the start of the first plan year beginning on or after January 1, 2017.

What To Do Now?  Employers that wish to continue offering opt-out incentive payments may certainly do so under the proposed regulations.  However, it is now important that opt-out payments be structured as an “eligible opt-out arrangement” which clearly conditions payment on sufficient proof of other coverage (other than individual market coverage).  Employers should also be aware that opt-out payments could impact the calculation of non-exempt employee overtime earnings under the Fair Labor Standards Act (regardless of whether the employee opts out and receives payment), unless properly structured. 

In sum, opt-out incentive programs have survived the ACA.  However, employers must be careful in designing these programs or they may run afoul of affordability requirements.  If you have any questions regarding the IRS regulations or this article, please don’t hesitate to contact any member of our Labor & Employment Practice Group.



This post was contributed by Erica Townes, a McNees Summer Associate. Ms. Townes is a rising third year law student at the Widener University Commonwealth Law School and is expected to earn her J.D. in May of 2017.

Recently you’ve noticed that an employee takes FMLA-covered leave the same week every year or always seems to have a medical emergency between Thanksgiving and January 1. Similarly, another employee regularly calls out of work requesting FMLA-covered, coincidentally on Fridays during football season. How can employers prevent this type of FMLA leave abuse? Several courts have addressed this issue.

Generally, employers are free to enforce company policies even with respect to employees on FMLA leave, provided that such policies are consistent with the FMLA.  Specifically, company policies cannot conflict with or diminish rights guaranteed under the FMLA.  Accordingly, the Third Circuit, the court of appeals that covers Pennsylvania, has routinely held that employers do not have to forego enforcement their call-in policies simply because an employee is FLMA eligible.

The Third Circuit has upheld an employer’s right to terminate employees for violating other policies while the employee was out on FMLA leave.  While employees may view these call-in policies as burdensome or intrusive, courts have expressly held that, despite the fact that employees have the right to take FMLA leave, employees do not have the right to be left alone when out on leave.

For example, one employer implemented a policy that required employees out on paid sick leave to stay home unless the employee was tending to a personal matter related to the reason they were on sick leave.  The employer further required employees to notify a hotline upon leaving and returning to their home, and if necessary, a sick leave investigator could call or visit the employee while he or she was out on leave.  In that case, the court held that the policy could be applied to an employee who was using FMLA-covered leave concurrently with paid sick leave, and that such application of the policy did not run afoul of the FMLA because nothing in the FMLA prevents employers from ensuring that employees are not abusing their leave.

In another case, an employee took FMLA and paid sick leave concurrently to have an operation done.  Only a few weeks after the operation, the employer learned that the employee had gone on a trip to Cancun, Mexico with friends, and as a result, the employee was terminated.  The employee brought a claim challenging her discharge under the FMLA.  Ultimately, the court held that the employee was bound by the employer’s sick leave and absenteeism policies, emphasizing that the FMLA, in no way, restricted the employer from preventing FMLA fraud.  As such, the discharge was upheld.

The Third Circuit has also held that an employer may enforce a written policy prohibiting moonlighting, or working part-time for a different employer, while the employee is out on FMLA leave.

The lesson learned from these cases is that employers have the right to safeguard against FMLA leave fraud and abuse.  To that end, employers may implement policies to reduce the fraudulent use of FMLA, so long as such policies do not abrogate rights guaranteed to the employee under the Act.

Practice Pointers

In addition to the policies mentioned above, consider the below practice pointers.

  • Consistency.  When handling FMLA leave, consistency is critical.  Providing an exception to the rule out of sympathy may hurt the employer in the long run as a disgruntled employee will use such exceptions against the employer in the future.  As the old adage goes, no good deed goes unpunished.
  • Records.  Maintain accurate records of FMLA leave so that (1) an employee’s FMLA eligibility can be accurately determined and (2) to identify suspicious patterns of absence.
  • Paid Leave.  Consider requiring employees to use paid leave concurrently with, or even before, FMLA leave. An employee will be less inclined to abuse FMLA leave if he or she has to exhaust their on time.
  • Abuse.  Immediately address employees who violate your policies.  Without doing so, employees may later argue that the employer excused the violation.
  • Seek Advice.  If you are still unsure whether you can enforce a particular policy, seek advice from legal counsel.


Just as the Commonwealth Court seemed to know we would be discussing the work-relatedness of injuries that occur on an employer’s premises, so too did the EEOC anticipate our presentation entitled “Your Leave is Giving Me a Migraine” by issuing guidance on May 9, 2016 addressing “Employer Provided Leave and the Americans with Disabilities Act.”

The guidance, which discusses the question of when and how leave is to be provided in cases of an employee’s disability under the Americans with Disabilities Act, makes several key points for employers that we also raised at the McNees Labor seminar:

  • If an employer has a leave policy, such as sick, vacation, extended, or otherwise, and whether paid or unpaid, a disabled individual must be permitted to use this existing leave in the same way any other employee would use it. Importantly, if an employee asks for leave under this policy and an employer would not normally request a doctor’s note for use by any other employee, the employer cannot require it of the disabled employee as a condition of the leave.
  • In the absence of a leave policy and/or where leave has been exhausted, additional leave can be a reasonable accommodation. As noted by the EEOC, the “purpose of the ADA’s reasonable accommodation obligation is to require employers to change the way things are customarily done to enable employees with disabilities to work.” An employer cannot assert that it does not provide leave or the leave provided has been exhausted as a defense to a leave request and/or the ultimate claim that the ADA has been violated.
  • Anytime leave is requested as an accommodation, an employer should consider whether or not or under what circumstances it could be granted; such leave does not have to be paid leave. However, leave should only be refused where the employer has determined that providing additional leave will constitute an undue hardship to the employer.
  • Because the employer should generally refuse leave only where it presents an undue hardship, policies that provide for a maximum amount of leave, after which an employee would be automatically terminated, do not satisfy an employer’s obligation to engage in the interactive process and undue hardship analysis. As much as we as employers and attorneys would prefer it, the EEOC has refused to set a bright line rule defining how much leave is too much.
  • Similarly, requiring that an employee be 100% healed before returning to work from a leave of absence could constitute an ADA violation because it fails to take into account whether the employer can perform the functions despite any ongoing limitation with or without a reasonable accommodation. Unless no accommodation exists or the employee poses a “direct threat” in the restricted capacity, the employer must consider reassignment and other alternatives to the application of the 100% healed policy that would allow the employee to return to work. Naturally, this will require the employer to consult with the employee prior to their return as a natural part of the ongoing interactive process mandated by the ADA, and employers can, within reason and considering the circumstances of the leave, engage with the employee during the course of the leave in order to plan for the return to work.
  • In assessing the reasonableness of the need for leave and whether or not it presents an undue hardship, employers can consider leave already taken, the amount of leave being requested, the frequency of the leave if not continuous, the flexibility of the leave in terms of when it is taken if intermittent in nature, whether intermittent leave is predictable or unpredictable, the impact on coworkers and/or the duties can still be performed in an appropriate and timely manner, and the impact on the employer’s operations and ability to serve its customers. No one factor is controlling, and each of these factors is wholly unique to each individual case.

The takeaway here is that communication is key. This includes communication with employees requesting leave about the nature of and need for the leave as well as expectations regarding the return to work, and it also includes communication with managers and supervisors about the effect of the leave, and communication with decision-makers about policy modifications. Policies must also allow for communication, employers must ensure that the communication occurs in each case, and employers also have to consider each request individually in order to avoid ADA concerns.

Pennsylvania’s Medical Marijuana Act (MMA) was signed into law on April 17, 2016 and officially took effect last week. One of the questions we’ve been asked since the passage of the Act is: how will employer provided insurance (both health and workers’ compensation) be affected by the legalization of medical marijuana in Pennsylvania? The simple answer is that there should be no immediate effect on either employer provided health insurance or the administration of workers’ compensation insurance.

Pursuant to Section 2102 of the MMA, insurers and health plans, whether paid for by Commonwealth funds or private funds, are not required to provide coverage for medical marijuana. The inclusion of Section 2102 in the MMA is consistent with a nationwide consensus that medicinal cannabis need not be covered under health insurance. That marijuana remains a Schedule I controlled substance, is illegal under federal law and is not an FDA approved medical treatment lend support to those employers and insurance companies objecting to coverage. Section 2102 recognizes these concerns and objections and gives clear guidance to insurers and health plans in Pennsylvania regarding their requirements – or rather the lack thereof – to provide health insurance coverage for medicinal marijuana.

With regard to workers’ compensation coverage, insurance carriers and self-insured employers may have similar objections to paying for medicinal cannabis prescribed for a work-related condition covered by the MMA (i.e. neuropathies or severe chronic pain). Section 2102 is broadly written and, thus, likely also supports the argument that medical marijuana need not be covered under workers’ compensation insurance.

While the MMA does not require employers and carriers to provide coverage for medicinal cannabis, we recognize that some employers may consider doing so. In the context of chronic pain for example, medicinal cannabis is seen as an alternative to opiate therapy, which can be costly, ineffective and, in some cases, deadly. If the treating physician of an injured worker suffering from chronic pain should suggest medical marijuana as an alternative to opiates, there is nothing in the Act prohibiting workers’ compensation insurance from covering such treatment. Before providing coverage, however, employers and carriers should ensure that there is compliance with all other aspects of the MMA. For example, the prescribing doctor must be a registered “Practitioner” as that term is defined by the Act, the requirements of “Continuing Care” must be met and the injured worker must be suffering from one of the “Serious Conditions” enumerated in the Act. Employers and carriers should further consider the impact of federal law on providing such coverage and should consult with counsel to address specific questions.

As with any new law, there are many unanswered questions. The Department of Health is required to publish temporary regulations by October 17th and full regulations must be published by the fall of 2017. These regulations should provide guidance on the implementation of the Act and interpretation of specific provisions. Note – medical providers may not begin prescribing medicinal marijuana until the regulatory framework is in place. Accordingly, until the regulations are published, we cannot know the full impact that the law will have on the workplace.

The McNees Labor and Employment Group will be closely monitoring developments to the law and, specifically, the implementation of the temporary and permanent MMA regulations. We will continue to keep you advised as things develop. In the meantime, should you have specific questions about the law, your policies and plans or your employees, please do not hesitate to contact any member of the McNees L&E Group.

A few weeks ago, we provided the most Frequently Asked Questions regarding the employer reporting requirements under The Patient Protection and Affordable Care Act (the “ACA”), which are generally effective beginning January 1, 2015, with the applicable reports filed in early 2016.  That post – Part 1 of 2 – focused on the FAQs regarding Form 1095-C (Employer-Provided Health Insurance Offer and Coverage), which generally must be filed on behalf of all full-time employees. This post – Part 2 of 2 – focuses on the FAQs regarding Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage), which is the transmittal accompanying the Form 1095-Cs an Applicable Large Employer is required to file with the IRS. In addition, on December 28, the IRS issued Notice 2016-4, which extends the filing deadline for both Form 1094-C and Form 1095-C.  This extension is discussed further below.  The FAQs related to Form 1094-C are listed below:

Q1:  Which employers are required to file Form 1094-C and when is the filing due?

A1:  Generally, all “Applicable Large Employers (“ALE”) are required to file with the Internal Revenue Service a Form 1094-C, which accompanies copies of each Form 1095-C prepared and filed on behalf of its full-time employees. An ALE is one with 50 or more full-time and full-time equivalent employees.  A small employer (i.e. under 50 FTEs) that self-insures its health benefits must file a different transmittal form – Form 1094-B.

Filing Deadline Delay:  Notice 2016-4 delays the Reporting Requirements under the Affordable Care Act.  The dates below apply for 2015 only. Notice 2016-4 extends the due dates:

  1. for furnishing to individuals the 2015 Form 1095-B, Health Coverage, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, from February 1, 2016, to March 31, 2016, and
  1. for filing with the IRS the 2015 Form 1094-B, Transmittal of Health Coverage Information Returns, the 2015 Form 1095-B, Health Coverage, the 2015 Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically. This notice also provides guidance to individuals who might not receive a Form 1095-B or Form 1095-C by the time they file their 2015 tax returns.

Q2: If we are a member of a controlled group of companies, do we have our own filing obligation?

A2:  Yes.  Each member of a controlled group must complete its own Form 1094-C (Transmittal) and Form 1095-Cs for its full-time employees. Employers filing more than one Form 1094-C will identify one Form 1094-C as the “Authoritative Transmittal”.

Q3:  How does an employer count its full-time and total number of employees for Part III of Form 1094-C?

A3:  Columns B and C of Part III of Form 1094-C ask for counts of full-time employees and total employees. Any one of the following methods may be used to count employees each month:

  • Employee count on the first day of the month;
  • Employee count on the last day of the month;
  • Employee count on the 12th day of each month;
  • Employee count as of the first day of the first payroll period that starts during each month; or
  • Employee count as of the last day of the first payroll period that starts during each month.

Regardless of the method selected, a consistent approach must be used for each month of the year.

Q4:  What are the Line 22 Certifications of Eligibility, and can an ALE check more than one option on Form 1094-C, line 22?

A4:  The Line 22 Certifications of Eligibility include:

  • Qualifying Offer Method – the ALE made a Qualifying Offer to one or more of its full-time employees for all months during the year in which the employee was a full-time employee. A “Qualifying Offer” is an offer of minimum essential coverage to the employee, spouse, and dependents that is affordable based upon the Federal Poverty Level safe harbor.
  • Transition Relief Qualifying Offer Method (95% Offer Method) – the ALE made a Qualifying Offer for one or more months of calendar year 2015 to at least 95% of its full-time employees.
  • Section 4980H Transition Relief – the ALE is eligible for section 4980H Transition Relief because: (1) the ALE had fewer than 100 full-time employees, including full-time equivalent employees (50-99 Transition Relief), or (2) the ALE had 100 or more full-time employees (and full-time equivalents) and qualifies for a reduced penalty in 2015.
  • 98% Offer – the ALE offered affordable health coverage (using any of the safe harbor standards) providing minimum value to at least 98% of its employees (and dependents) for whom it is filing a Form 1095-C employee statement. If the 95% Offer applies, the “Full-Time Employee Count” in Part III, column (b) of Form 1094-C is not required to be completed.

An ALE should check all options that apply as it is possible that an employer may be able to apply different options to different segments of its employee population.

Q5:  When is an ALE member eligible to use the alternative method of reporting for Qualifying Offers?

A5:  If an ALE has made a Qualifying Offer for all 12 months of the year to one or more full-time employees (and the employee did not enroll in self-insured coverage), the ALE may use an alternative reporting method for those employees who received a Qualifying Offer for all 12 months of the year.

Alternative Reporting:  As an alternative to furnishing the employee with a copy of Form 1095-C filed with the IRS, the employer may furnish a statement containing certain information and stating that because the employee received a Qualifying Offer for all 12 months of the year, the employee is not eligible for the premium tax credit. This alternative may not be used by an employer that sponsors a self-insured plan with respect to any employee who has enrolled in the coverage under the plan because the employer is required to report that coverage on Form 1095-C.

If you have any questions regarding the ACA or Form 1094-C, please contact any member the McNees Labor and Employment Law Practice Group.

Among the many requirements imposed by the Affordable Care Act, none are more controversial than the excise tax to be imposed on expensive health plans. This provision of the law, commonly known as the “Cadillac Tax,” would impose a 40% excise tax on group health plans to the extent their total annual premium costs exceed $10,200 for single coverage and $27,500 for family coverage (cost thresholds are indexed for inflation). In other words, a plan offering single coverage with a total annual premium of $11,200 (i.e. $1000 above the tax threshold) would owe an excise tax of $400 for each participant who elects that coverage option. The Cadillac Tax, originally scheduled to take effect in 2018, was expected to generate much of the funding necessary to finance the tax subsidies that are available to low-earning participants in the ACA health insurance exchanges. The Tax was also intended to motivate employers and carriers to find ways to reduce the cost of employee health coverage. However, carriers, employers, and unions alike have criticized the Cadillac Tax since the ACA was passed in 2010 – and that criticism intensified as the Tax’s 2018 effective date approached.

On December 18, 2015, President Obama approved a spending and tax package that includes a two-year delay of the Cadillac Tax effective date. The excise tax will now not take effect until 2020. The new law also makes the Cadillac Tax deductible for employers.

With a presidential election in 2016, the Cadillac Tax was sure to become a frequent speech topic for candidates pledging to “repeal or replace” the ACA. The two-year delay will likely reduce the degree to which candidates focus on the Cadillac Tax; however, the ACA is sure to draw attention from candidates in both parties. Interestingly, the new effective date also happens to fall in a presidential election year. Assuming the Cadillac Tax remains part of the ACA, it is possible that another delay may be proposed four years from now. In the meantime, it’s not entirely clear how the tax subsidies for participants in the ACA insurance exchange will be financed.

The following blog post is Part 1 of a 2 part series exploring frequently asked questions regarding the Affordable Care Act’s Employer Reporting Requirements. Part 2 will focus on frequently asked questions related to Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage) and will be posted in the near future.

The employer reporting requirements under The Patient Protection and Affordable Care Act (the “ACA”) are generally effective beginning January 1, 2015, with the applicable reports first filed in early 2016. The purpose of the reporting requirements – particularly those relating to employers – is to enforce the pay or play provisions of the ACA. Therefore, accurate and timely completion of the required Forms 1094-C and 1095-C is necessary to ensure penalties are not imposed. As the reporting deadline looms, many employers still have questions regarding the ACA’s reporting requirements and how best to comply with those requirements. The following is a list of the most frequently asked questions we are receiving from employers regarding the Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) under the ACA’s reporting requirements.


Q1:  Which employers are subject to the ACA’s reporting requirements?

A1:  Generally, all “Applicable Large Employers (“ALE”) are subject to the reporting requirements. An ALE is one with 50 or more full-time and full-time equivalent employees. A small employer (i.e. under 50 FTEs) that self-insures its health benefits is also subject to the reporting requirements.

Q2:  On whose behalf must we prepare and file a Form 1095-C?

A2: A Form 1095-C must be filed for each full-time employee who worked for at least one calendar month during the reporting year. A full-time employee is a common-law employee averaging at least 30 hours of service per week (or 130 hours per month). An employer is not required to prepare and file a Form 1095-C for variable hour employees who are in an initial measurement period for all months of employment during the relevant calendar year.

Q3:  If an employee was hired midway through the month with coverage effective immediately, which code would be used on Form 1095-C?

A3:  The indicator code used will depend on the type of coverage offered to the employee (even if he or she waived coverage) and will only be entered for the first full month that coverage was offered. Therefore, even though coverage is offered mid-month, the Code Series 1 indicator will be entered in the first month in which coverage is offered for each day of the month. Note that the codes specify the type of coverage offered to an employee, the employee’s spouse, and the employee’s dependents. Therefore, the specific code that is used will depend on the coverage offered.

Q4:  For line 14 of Form 1095-C, how do we report partial months of coverage due to termination of employment?

A4:  An employer is only considered to have offered health coverage for months during which coverage is offered for the full month. However, an exception applies to terminated employees. If an employee terminates before the end of a month, but the employee would have had coverage for the entire month if they had not terminated, the employer can treat them as having been offered coverage for the entire month.

Q5:  How is COBRA coverage reported?

A5:  Under recent IRS guidance, for the first full month of COBRA coverage, Code 1H applies (No Offer of Coverage) in Line 14 and Code 2A (Employee not employed during the month) applies in Line 16.  If the plan is self-insured, the same codes apply for the period of COBRA coverage, however, for the applicable months of coverage, Part III is completed showing the months the individuals are covered under the plan – either as employees or COBRA beneficiaries.

Q6:  When reporting the cost of coverage, what dollar amount is reported on Line 15?

A6:  For Line 15, which is completed only when Codes 1B, 1C, 1D or 1E are used in Line 14, only the monthly single-only premium amount is used for the base level plan meeting minimum value requirements.  Therefore, if an employer offers a PPO, HMO and a HDHP (high deductible health plan), with the HDHP as the base plan meeting minimum value requirements, the monthly premium for the HDHP is entered in Line 15 (regardless of whether the employee is enrolled in that plan).

Q7:  Are there circumstances under which an employer can provide a simplified statement to employees rather than a copy of Form 1095-C?

A7:  Yes. If the employer makes a “Qualifying Offer” to the employee for all 12 months of the calendar year, and the employee does not enroll in self-insured coverage, then the employer is permitted to send a simplified statement to the employee containing specific information in lieu of a Form 1095-C. A Qualifying Offer is one in which an ALE offers minimum essential coverage that provides minimum value to full-time employees, their spouse and dependents, and the coverage offered is affordable based upon the 9.5% of the Federal Poverty Level safe harbor.

If you have any questions regarding the ACA or Form 1095-C, please contact any member of our Labor and Employment Law Practice Group. Stay tuned for Part II!

One year ago, the U.S. Supreme Court ruled in the case of Burwell v. Hobby Lobby Stores, Inc. et al, that for-profit closely held corporations must be permitted to opt out of the Affordable Care Act’s contraception mandate on religious grounds. As discussed in our July 7, 2014 blog post, the Hobby Lobby ruling left many key questions unanswered. In final regulations published on July 14, 2015, the regulating agencies addressed many of those questions.

Which “closely held corporations” may opt out of the ACA’s contraception mandate? A closely held corporation which properly adopts a resolution under applicable state corporation laws establishing that it objects to covering some or all forms of contraception on account of the owner’s sincerely held religious beliefs may opt out of the contraception mandate. The new final regulations define “closely held corporation” to mean an entity that:

  1. Is not a nonprofit entity;
  2. Has no publicly traded ownership interests; and
  3. Has more than 50% of the value of its ownership interest owned directly or indirectly by 5 or fewer individuals.

Such corporations must also either “self-certify” their status in a form developed by the Department of Labor or via a notice to the Department of Health and Human Services.

Do any ownership attribution rules apply? Yes. Ownership interests owned by a corporation, partnership, estate or trust are considered owned proportionately by the entity’s shareholders, partners or beneficiaries. An individual is considered to own the ownership interests owned, directly or indirectly, by or for his or her family. Family includes only brothers and sisters (including half-brothers and half-sisters), a spouse, ancestors and lineal descendants. If a person holds an option to purchase ownership interests, he or she is considered to be the owner of those interests.

What if a corporation is not certain whether it qualifies?  In these instances, a corporation may send a letter describing its corporate structure to the Department of Health and Human Services (“HHS”) seeking a determination of eligibility.  Interestingly, the regulations state that if the corporation does not receive a response from HHS within 60 calendar days, it will be considered to be eligible for the opt-out for as long as the corporate structure is maintained.

How do closely held corporations opt out of the mandate? A corporation offering self-insured health coverage may provide either a copy of its self-certification to its plan’s third party administrators or a notice to HHS advising that it is an eligible closely held corporation and of its religious objection to coverage of some or all of the mandated contraceptive services. Corporations offering insured health benefits may provide their self-certification to their insurers or to HHS.

Does opting out prevent covered employees from obtaining contraception benefits? No. The regulations place the burden on insurance companies and third-party administrators to ensure that all covered employees have access to free contraceptive coverage, albeit not through the objecting corporation’s health plan. Third-party administrators (“TPAs”) that administer self-insured health plans for closely held corporations that opt out are expected to provide contraception benefits to plan participants without imposing any charge to the objecting corporation. TPAs may do this by reimbursing participants for contraceptive services directly or through an arrangement with another party. Similarly, insurers that provide group health insurance to closely held corporations that opt out bear the sole responsibility of providing contraception benefits to plan participants independent of the objecting corporation’s health plan. The regulations indicate that costs associated with providing this coverage may be reimbursed through an adjustment to the federally-facilitated Exchange user fee.

If you have any questions regarding the new regulations or any aspect of the ACA, please contact any member of our Labor and Employment Law Practice Group.