Shirazi Notice – October 2013

 open book


Legislative Alerts

COLA Increases for Dollar Limitations on Benefits and Contributions
What Consumers Need to Know About The Obama Plan for Canceled Health Policies

Health Care Reform

How the Affordable Care Act Affects You
How to Figure Out the Cost of a Medical Procedure Before it Happens
IRS Issues Final Rule on the Individual Mandate
3 Crucial Updates on the Affordable Healthcare Act
IRS Announces $500 Carry-Over Provision for Health FSA Plans
Division of Insurance Offers Facts on Health Insurance Cancellations

Carrier Updates

Cigna: Certain Individual and Small Group Health Plans Granted Extra Year to Comply with Reform Law



COLA Increases for Dollar Limitations on Benefits and Contributions

The Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. IRC Section 415 requires the limits to be adjusted annually for cost-of-living increases. The IRS announced on October 31, 2013 cost-of-living adjustments applicable to dollar limitations for pension plans and other items for tax year 2014.

Please see our COLA Increases Table for prior years’ dollar limitations and Internal Revenue Code references.

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What Consumers Need to Know About The Obama Plan for Canceled Health Policies

Originally posted by Jay Hancock with Kaiser Health News on

President Barack Obama’s pledge to Americans that they could keep their health plans if they liked them began to backfire last month.

Insurers sent cancellation letters to hundreds of thousands of customers holding individual and family policies, saying the plans didn’t comply with health law provisions effective Jan. 1.

Obama eventually apologized. On Thursday he offered what he called “an idea that will help” fix the problem, allowing insurers to renew existing plans even if they don’t include the full menu of health-law benefits.

But it’s far from clear that insurers will want to follow through. Some state regulators may not even let them. Consumers — many already confused — just got new information to process. And some in the industry say Obama’s solution may create new problems.

Q: What did Obama propose?

A: He’s allowing insurers to extend existing plans for one more year for current customers. Policies renewing before the end of this year would last until late 2014. Policies that expire in 2014 would be permitted to extend into 2015. In many cases the existing plans have been less expensive than policies with more benefits scheduled to take effect next year.

If carriers do renew, they must disclose the shortfall between the benefits of the existing plan and benefits required by the Affordable Care Act. It’s possible the insurers will charge more for these renewed policies.

Q: Who is affected?

A: The proposed change affects individuals and families who buy plans directly from insurers and received cancellation notices in recent weeks. The administration is also allowing extension of small-employer plans that didn’t meet ACA requirements.

If you aren’t already covered by a noncompliant plan you can’t buy in now. Consumers covered by Medicaid, Medicare or large employers are unaffected.

Q: How are consumers reacting? What should they do if they got a cancellation notice?

A: At least some canceled insurance customers applauded Obama’s announcement.

“That’s amazing. I look forward to hearing from Blue Cross about that,” said Paige Smith, 63, of Florence, Ala., who got a cancellation notice from BlueCross BlueShield of Alabama in October.

Advocates say consumers should check with their insurer to see if it will be renewing canceled policies. Even if it is, consumers, especially those with chronic illness, should review alternatives offered in the health law’s online marketplaces to see if they offer better coverage.

Insurance sold through the marketplaces also comes with substantial government subsidies for those who qualify. By contrast, the noncompliant plans Obama is allowing to be stretched into next year are not eligible for subsidies.

Q. Who decides whether I can renew a policy slated for cancellation?

A. Insurers and state regulators. Neither Obama nor the federal Department of Health and Human Services can force extension of the plans.

But the administration did set rules: If insurers renew policies – and their state allows it – they must notify consumers and point out that they may find other options and subsidies through the online marketplaces.

Q: How have insurers reacted?

A: Many wanted to learn more details about Obama’s offer. BlueCross BlueShield of North Carolina, which was canceling about 200,000 individual policies at end of the year, said it was interested in the option but not ready to commit.

Florida Blue says it will allow customers to renew 2013 policies, a decision that could affect as many as 300,000 people over the next year and immediately affects 40,000 people who were losing their existing plan at end of this year.

Some insurers are urging state regulators to disallow the extensions. In California, the state should “stay the course and transition people into more comprehensive policies,” said Patrick Johnston, CEO of the California Association of Health Plans.

The major insurance trade group warned that consumers renewing noncompliant plans will be predominantly younger and healthier, while older and sicker people will migrate to the subsidized marketplaces. That could drive up costs.

“Changing the rules after health plans have already met the requirements of the law could destabilize the market and result in higher premiums for consumers,” said Karen Ignagni, CEO of America’s Health Insurance Plans.

Q: The year is almost over. Insurers have already told consumers to buy plans by Dec. 15 if they want coverage for Jan. 1. Can the companies reverse course so quickly?

A: That’s unclear. Besides setting 2014 prices for the plans and dispatching hundreds of thousands of letters, insurers must gain approval from state regulators.

Q: Will state regulators allow this?

A: Some may not. Many objected to Obama’s suggestion. Extending subpar plans could “undermine the new market and may lead to higher premiums,” said Jim Donelon, president of the National Association of Insurance Commissioners.

Washington state Insurance Commissioner Mike Kreidler said he would not allow insurers to extend the policies “in the interest of keeping the consumer protections we have enacted.”

Regulators note that existing plans might not include health-law features such as caps on out-of-pocket costs and coverage of essential benefits such as prescription drugs, maternity care and hospitalization.

But in California, Insurance Commissioner Dave Jones said he supports Obama’s suggestion and will urge insurers to extend policies. Regulators in Florida and Kentucky also said they would allow the move.

Q: Given all the uncertainties, will many consumers seize the chance to renew?

That’ll depend on carriers, insurance commissioners and customers themselves. John Jaggi, a broker in Forsyth, Ill., knew of at least one client who would be interested.

Jaggi had just gotten off the phone with the customer, whose policy was due to be canceled and replaced by a more expensive one, when he heard about Obama’s idea.

The man is not eligible for health-law subsidies. Extending his existing coverage “will save him about $375 a month” in premiums, Jaggi said. “And his deductible was going to double.”



How the Affordable Care Act Affects You

With the implementation of the Affordable Care Act comes new paths to health insurance for consumers. Take a look at this flow chart created by the Chicago Tribune that takes a look at how Americans will access health coverage once the exchanges open, plus information about how implementation of the health care law varies across the states.


How To Figure Out the Cost of a Medical Procedure Before it Happens

With higher deductibles and higher out-of-pocket costs becoming more common, being prepared with information on how much a medical procedure is going to cost before the procedure takes place is a smart choice. This article, originally appearing on, is a great resource that helps consumers find out what things cost! Filled with some great tips, along with a lot of great online resources, this is important information for any kind of consumer.


IRS Issues Final Rule on the Individual Mandate

Originally posted by Cigna on 

On August 27, the Internal Revenue Service (IRS) issued a final rule for the individual mandate provision of the Patient Protection and Affordable Cart Act (PPACA).

As a reminder, the individual mandate requires most individuals to have minimum essential coverage in 2014 or pay a penalty. The penalty is called a shared responsibility payment. Some individuals may qualify for an exemption from the mandate so they will not be required to have coverage or pay a penalty. An individual seeking an exemption may do so in advance through an application submitted to the Exchange/Marketplace or after the fact with the IRS through the tax filing process. An applicant can apply for multiple exemptions simultaneously.

The final rule, which is largely consistent with the proposed regulations, confirms the following:

  1. What qualifies as minimum essential coverage
  2. What wasn’t addressed in regard to minimum essential coverage
  3. Who is exempt from paying the penalty
  4. How penalties will be determined and paid

1. What Qualifies as Minimum Essential Coverage

An individual is considered to have minimum essential coverage for any month in which he or she is enrolled in one of the following types of coverage for at least one day. Changes from the proposed rule are noted in italics.

  • An employer-sponsored group health plan offered in a state, which is defined as the 50 states plus the District of Columbia. This includes plans offered by, or on behalf of, an employer to an employee, e.g. multiemployer plans, single employer collectively bargained plans, plans sponsored by third parties such as professional employer organizations, temporary staffing agency, etc.
  • An individual health insurance policy offered in the individual market in a state or through an Exchange/Marketplace in a territory.
  • A government plan such as Medicare, Medicaid, Children’s Health Insurance Program (CHIP), TRICARE (a U.S. Department of Defense Military Health System) or veterans coverage
  • Insured student health coverage
  • Self-insured student health coverage*
  • Medicare Advantage plan
  • State high risk pool coverage*
  • Coverage for non-U.S. citizens provided by another country**
  • Refugee medical assistance provided by the Administration for Children and Families
  • Coverage for AmeriCorp volunteers**

*Designated as minimum essential coverage for plan/policy years beginning on or before December 31, 2014. For coverage beginning after December 31, 2014, sponsors of high risk pool or self-funded student health coverage may apply to be recognized as providing minimum essential coverage.

**Coverage provided by another country and coverage for AmeriCorps volunteers are no longer automatically deemed minimum essential coverage. However, individuals may apply to have their coverage recognized as minimum essential coverage.

2. What Wasn’t Addressed in Regard to Minimum Essential Coverage

The final rule does not specifically address arrangements in which an employer provides subsidies or funds a pre-tax arrangement (e.g., a stand-alone Health Reimbursement Account) for employees to purchase a plan in the individual market. The final rule also doesn’t address wellness incentives. These issues will be addressed in future guidance.

3. Who is Exempt from Paying the Penalty

The final rule confirmed the broad exemption categories, including a few changes in italics.

  • Individuals who cannot afford coverage
  • Taxpayers with income below the tax filing threshold. A taxpayer is not required to file a federal income tax return solely to claim the exemption, and may apply for exemption via the Exchange/Marketplace.
  • Individuals who qualify for a hardship exemption
  • Individuals who have a gap in minimum essential coverage of less than three consecutive months in a calendar year, with the continuous period beginning no earlier than January 1, 2014
  • Members of religious groups that object to coverage on religious principles
  • Members of health care sharing ministries
  • Individuals in prison
  • Individuals who are not U.S. citizens and not lawfully present in the United States as defined by Health and Human Services
  • U.S. citizens residing in a foreign country who meet certain IRS tests
  • Individuals who are not members of a federally recognized Native American tribe, but who are eligible for services from the federal Indian Health Service

4. How Penalties will be Determined and Paid

The first penalties will be due when individuals file their 2014 tax returns in 2015. A penalty is the greater of either a specified dollar amount or percentage of income. The annual penalties for 2014 through 2016 are noted below. Beginning in 2017, penalties will increase based on the cost of living.

  • 2014: Greater of $95 per adult and $47.50 per child under age 18, maximum of $285 per family, or 1% of income over the tax-filing threshold
  • 2015: Greater of $325 per adult and $162.50 per child under age 18, maximum of $975 per family, or 2% over the tax-filing threshold
  • 2016: Greater of $695 per adult and $347.50 per child under age 18, maximum of $2,085 per family, or 2.5% over the tax-filing threshold

If the penalty applies for less than a full calendar year, the penalty will be 1/12 of the annual amount per month without coverage.


3 Crucial Updates on the Affordable Healthcare Act

Originally posted by Jim Hayes of 24HourFlex on

The Internal Revenue Service (IRS) and the Department of Labor (DOL) recently issued guidance for a few outstanding issues related to the Affordable Care Act (ACA) and its impact on certain employer sponsored benefit plans. Notice 2013-54 (IRS versionDOL version) outlined three key changes employers need to be aware of as 2014 quickly approaches that impact FSAs, HRAs, and individual insurance premium reimbursement accounts.

1) Employers cannot contribute more than $500, or match more than 100% of employee contributions, to employee Flexible Spending Accounts (FSAs) and must offer other group health insurance in order keep their FSA in 2014. The IRS and DOL stated that FSAs must meet the definition of an excepted benefit in order to avoid the ACA provisions , such as the annual limit prohibition, that would disqualify them. To be an excepted benefit, employers cannot contribute more than $500, or an 100% match of employee contributions, to each employee’s FSA for the plan year.

Action Items

  • If your plan is currently contributing more than will be allowed in 2014 you can a) reduce the employer contribution to the lessor of $500 or an 100% match of what employees are contributing, or b) divert the employer contributions into an HRA, assuming the HRA meets the criteria to be considered integrated with a group health plan.

If your plan currently offers an FSA to employees who are not eligible for your other group health plan(s) (for example, part time employees), you will need to change the FSA eligibility to mimic the group health plan eligibility.

2) Health Reimbursement Accounts (HRAs) must be integrated with a group health plan but may have a different plan sponsor and/or plan document. Previous guidance was not clear if an HRA had to be integrated with a group health plan at the same employer. Some employers offered HRAs to employees who obtained group health coverage under another employer’s plan (spousal coverage). This latest guidance clarified that integration with a group health plan can occur even if one employer offers the HRA and another employer offers the group health plan. For example, Acme Company may offer an HRA to employees who maintain group health coverage at another employer (often times a spouse’s plan).

Action Item

  • Review eligibility conditions of your HRA

3) Individual insurance premium reimbursement accounts are no longer allowed under a Section 125 Plan. Prior to the ACA, employers were allowed to offer a reimbursement account to employees where individual insurance premiums could be paid for with pre-tax dollars through a section 125 plan. The guidance issued by the IRS and DOL makes it clear that employers cannot reimburse employees on a pre-tax basis for individual policies purchased from a state marketplace, the national marketplace, or any private insurance marketplace. Employers are still allowed to run employer sponsored group health benefits through their Section 125 plans on a pre-tax basis.

Action Item

  • If you currently offer an outside individual insurance premium reimbursement account talk with your benefits advisor about removing this plan provision in 2014.

This post is not an exhaustive explanation of 2013-54 and only highlights a portion of the guidance issued.


Division of Insurance Offers Facts on Health Insurance Cancellations

Denver – As health insurance changes for 2014 take shape, many Coloradoans have been mailed notices regarding the cancellation of health insurance policies.  The Colorado Division of Insurance (DOI) wants to address consumer confusion and alarm related to these cancellations. Since carriers must notify the DOI about these cancellations, the Division has been tracking this information.

“Consumers who have questions about these letters or any questions about their health insurance policy should contact the Division,” said Commissioner of Insurance Marguerite Salazar.  “While some plans are being cancelled, Coloradoans have many new options for 2014, due to the strength and competitiveness of our health insurance market.”

Cancellation letters must notify a consumer that the 2013 policy is cancelled, and must also highlight options for new coverage.  However, the DOI recognizes that Coloradoans may still have questions.

Here is what consumers need to know.

1. Insurance companies remaining in the market are required to give consumers 90 days’ notice before ending a plan, as well as the option to buy any other coverage being offered by the company to individuals.  Companies leaving the market must provide 180 days’ notice.

2. Insurance companies are cancelling plans for many reasons.  Some do not meet new federal requirements for benefits, coverage and premiums, as outlined in the Patient Protection & Affordable Care Act. Other carriers have made business decisions to discontinue plans, as part of normal business operations.

3. Consumers have options.  In cancellation letters, companies are required to provide information about all the health insurance options available to consumers-  plans from the existing company, other companies and from Connect for Health Colorado, the state’s new marketplace for health insurance.

4. Consumers should take the time to shop around. DOI approved 18 carriers and 541 plans for sale next year, many offered on Connect for Health Colorado. Colorado has a strong, competitive insurance market, and consumers have many choices.  For coverage beginning January 1, 2014, coverage must be purchased by December 15, 2013.

5. Consumers can call DOI for guidance.  Anyone with questions about any information provided by an insurance company can call the DOI.  The Division has trained experts ready to answer consumers’ health insurance questions and provide easy-to-understand information. Call 303-894-7490 in the Denver area, or 1-800-930-3745 outside the metro area.

Terminated Health Plans

As of November 1, a total of 23 health insurance carriers have terminated policies in Colorado; 18 carriers in the individual market; 10 carriers in the small group market. Some carriers offer insurance in both markets, which is why the total is 23 carriers.

Individual Market 

• In the individual market, the policies terminated by the 18 carriers represent 106,083 covered lives.

• Terminated plans from Kaiser Foundation Health Plan of Colorado and Anthem (through its affiliated company, HMO Colorado) represent 75% of the covered lives.  However, both of these carriers will offer a significant number of new individual plans in 2014.

      o Kaiser offers 54 plans for 2014 (27 through Connect for Health Colorado, 27 off of the exchange).

      o Anthem (HMO Colorado) offers 29 individual plans for 2014 (14 through Connect for Health Colorado, 15 off of the exchange).

Small Group Market 

• In the small group market, the policies terminated by the 10 carriers represent 143,116 covered lives.

• Similar to the individual market, terminated plans from Kaiser Foundation Health Plan of Colorado and Anthem (through HMO Colorado & Rocky Mountain Hospital & Medical Services) represent 76% of the covered lives.  Also like the individual market, both carriers will offer a number of small group plans in 2014.

      o Kaiser offers 66 plans for small groups in 2014 (24 through Connect for Health Colorado, 42 off of the exchange).

      o Anthem offers 74 small group plans (5 through Connect for Health Colorado, 69 off of the exchange).



Cigna: Certain Individual and Small Group Health Plans Granted Extra Year to Comply with Reform Law

Originally published by Cigna on

November 14, 2013

President Obama announced today that insurers may renew certain individual and small group health plans for 2014 without having to comply with new Affordable Care Act (ACA) requirements scheduled to take effect on January 1, 2014. Eligible policies include those with an effective date between January 1 and October 1, 2014 that would have otherwise been terminated.

According to the President, this change is “targeted” to those individuals who are in these policies today; it does not allow the sale of non-compliant plans to people not currently in plans.

With this decision, state governors and insurance commissioners may allow insurers to continue to offer plans that may have otherwise been cancelled until the end of 2014.

Insurers that elect to take advantage of the transitional policy are required to:

1. Notify enrollees about ACA requirements that are not met by the coverage they are renewing

2. Notify enrollees about the new health plan options and tax credits available on the public Marketplaces to those who qualify

Cigna’s Position

Cigna is already working with all of our comprehensive individual medical customers to give them the choice of keeping their present plans.

Cigna’s Starbridge and Fundamental Care limited-benefit programs are not eligible for extension under this guidance. We are continuing to sunset these programs on December 31, 2013, as previously communicated.

Cigna is not active in the Small Group market.