IRS Expands Preventive Care for HDHPs to Include Chronic Conditions
On July 17, 2019, the IRS released Notice 2019-45 to add care for a range of chronic conditions to the list of preventive care benefits that can be provided by a high deductible health plan (HDHP) without a deductible. This includes treatment and medication for asthma, diabetes, heart disease and depression, among others.
Individuals who are covered by an HDHP generally may establish and make contributions to a health savings account (HSA). To qualify as an HDHP, the plan cannot provide benefits for any year until a minimum deductible is satisfied. However, an HDHP may provide benefits for preventive care without imposing a deductible. This notice classifies certain medical care services and items, including prescription drugs, for chronic conditions as preventive care for individuals with those chronic conditions.
However, this notice provides a list of items/services that would not make one ineligible for an HSA. It is not an update for preventive care that is covered at 100 percent under the Affordable Care Act (ACA). This means that if a plan wants to offer these items at low cost, or reduced-cost (like with a co-pay), they will not violate the HSA rules (i.e. – the notice does not require plans to offer the items with no cost-sharing, as these are items that a plan may choose to cover as preventive care, but it is not required to cover). Because these are not part of the ACA’s mandated preventive coverage, this does not change what health plan options that are not HDHPs must cover.
This guidance makes it easier for HDHP participants to receive benefits for medications and other care to treat their chronic conditions. Employers with HDHPs should review their plan documents and consult with their carriers and benefit administrators, if necessary, to determine how their plans cover preventive care benefits.
Affordability Percentages Will Decrease for 2020
On July 23, 2019, the IRS issued Revenue Procedure 2019-29 to index the contribution percentages in 2020 for determining affordability of an employer’s plan under the Affordable Care Act (ACA). For plan years beginning in 2020, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed 9.78 percent of the employee’s household income for the year. This applies for purposes of both the pay or play rules and premium tax credit eligibility.
Employers may use an affordability safe harbor to measure affordability of their coverage. The three safe harbors measure affordability based on Form W-2 wages from that employer to each employee, the employee’s rate of pay or the federal poverty line (FPL) for a single individual..
The updated affordability percentages are effective for taxable years and plan years beginning Jan. 1, 2020. This is a decrease from the affordability contribution percentages for 2019. As a result, some employers may have to lower their employee contributions for 2020 to meet the adjusted percentage.
California Enacts State Individual Mandate
On June 28, 2019, California Governor Gavin Newsom signed into law a state budget for 2019-2020 that establishes a state individual mandate, effective Jan. 1, 2020. This state-based individual mandate will require California residents to maintain acceptable health coverage or pay a penalty beginning in 2020.
This new mandate was enacted in response to the effective elimination of the federal individual mandate penalty under the Affordable Care Act (ACA). The ACA’s individual mandate penalty was reduced to zero under the Tax Cuts and Jobs Act, beginning in 2019.
California is the fourth state to enact its own health insurance individual mandate, following Massachusetts, New Jersey and Vermont. The District of Columbia also implemented an individual mandate, effective in 2019. Employees in California should ensure that they are in compliance with the state individual mandate beginning in 2020.
Connecticut Increases Minimum Wage Rate
Connecticut has adopted a schedule to gradually increase the state’s minimum wage rate to $15 per hour by 2023. The minimum wage will increase to $11 per hour effective Oct. 1, 2019 and will increase by $1 every year until it reaches $15 per hour in 2023.
During this period of wage increases, the subminimum wage rate for bartenders and other tipped employees in the restaurant and hotel industries will remain unchanged.
In addition, subject to certain exceptions, the minimum wage for employees younger than 18 is $10.10 or 85 percent of the state rate (whichever is greater). The rate applies during the first 90 days of their employment. However, where federal and state law have different minimum wage rates, the higher standard applies.
Employers should make note of the wage rate schedule and make sure to implement any adjustments by the appointed dates. Employers should also monitor announcements by the State of Connecticut Department of Labor of changes to the rate schedule.
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