QSEHRA WEBINAR April 26, 2018

Webinar Availability This webinar is being recorded The slides and the audio will be available next week: On the Learning Management System (LMS) On the broker partner page

HBE Participants Joan Altman, Associate Director of Legislative & External Affairs Joanna Donbeck, Associate Director of Operations Christine Gibert, Associate Director of Policy Shaina Mittelstead, Training Development Manager Brian Peyton, Legal Director Randi Schaff, Associate Director, Call Center Operations Kelly Boston, Associate Director, Outreach Nelly Kinsella, Associate Director, Communications and Outreach Christine Brown, Training and Certification Manager, Navigator Program Libby Weisdepp, Access & Education Specialist Margaret Eby, Associate Director, Eligibility, Appeals & Review Shelby Ross, Policy Intern Kris Lattimore, Small Business Agent Manager Jeff Bailey, Program Manager

Agenda QSEHRA Overview Employer Responsibilities Customer Impacts Affordability Calculation Appendix

QSEHRA OVERVIEW

QSEHRA Overview A “qualified small employer health reimbursement arrangement” (QSEHRA) is a new type of tax-free benefit that some small employers (fewer than 50 employees) now have the option of offering to their employees This type of benefit can help cover the costs of medical expenses, including health insurance premiums Federal guidance requires that employees receiving tax credits through Washington Healthplanfinder have their tax credits reduced or eliminated if offered this benefit (even if they do not use it)

What is a QSEHRA? How is it different from an HSA or typical HRA? Health Savings Account (HSA) Tax-favored bank account that is set up in an employee’s name and collects pre-tax contributions from employer and the employee. Used to pay medical expenses of employees and their dependents Employees must also be enrolled in an IRS-defined High Deductible Health Plan (HDHP) to participate in the HSA Health Reimbursement Arrangement (HRA) Vehicle that allows employer to reimburse medical expenses of employees and dependents. Generally, funded 100% with employer contributions Employees must be enrolled in an insurance plan offered by their employer

What is a QSEHRA? How is it different from an HSA or typical HRA? Qualified Small Employer Health Reimbursement (QSEHRA) New type of HRA that can be offered by an employer with fewer than 50 employees as a stand-alone benefit Employer is not permitted to offer a group health plan to any of its employees if offering a QSEHRA Employer can set up a QSEHRA to reimburse medical expenses of employees who provide proof of having Minimum Essential Coverage (MEC) Can be used by individuals who purchase health coverage E.g., Exchange coverage, other individual coverage, plan offered by a second employer, a spouse’s employer-sponsored plan Employer contributions capped at certain amounts

How will consumers know if their employer offers a QSEHRA? Employers must provide a written notice to their employees if they offer a QSEHRA The notice will include information on the amount available to pay for medical expenses (called the “QSEHRA permitted benefit”) Information in this notice will be used to determine the impact on the consumer’s APTC (if applicable)

Sample Employer Notice

EMPLOYER RESPONSIBILITIES

Employer Responsibilities A QSEHRA must be funded solely by employer contributions and can only be used to reimburse an employee for medical expenses (as defined by the IRS) up to a certain dollar amount $5,050 for self-only in 2018 $10,250 per family for 2018 Must provide contributions on the same terms to all eligible employees (payments may vary as premiums vary based on age or number of family members) Must be offered to all full-time employees May offer to part-time, employed less than 90 days; under 25 y/o; part-time or seasonal workers, etc.)

Employer Responsibilities Employers offering a QSEHRA must provide a written notice at least 90 days before the beginning of the plan year Employers are required to report the amount of the benefit on their employees’ W-2s Employers should consider the financial impact a QSEHRA could have on employees’ premium costs

Employer Responsibilities Employees and families making less than 400% FPL who purchase individual market coverage through Washington Healthplanfinder are eligible for federal tax credits 2018 Annual Federal Poverty Levels

Employer Responsibilities For employees purchasing coverage through Washington Healthplanfinder, it may be more affordable without a QSEHRA if they are receiving federal tax credits, depending on the QSEHRA contribution amount Note – impact in #2 more pronounced at

Employer Responsibilities For employees purchasing family coverage through Washington Healthplanfinder, it may be much more affordable without a QSEHRA if they are receiving federal tax credits, depending on the QSEHRA contribution amount Note – impact in #2 more pronounced at

Employer Responsibilities For employees and families purchasing coverage through Washington Healthplanfinder, it may be more affordable with a QSEHRA for employees who are not receiving federal tax credits Must offer to all full-time if offer to any – can’t just offer to higher income

CUSTOMER IMPACTS

Overview Employees must be enrolled in health coverage that meets the minimum essential coverage (MEC) requirements to receive QSEHRA reimbursements tax-free, and must provide their employer with evidence of their MEC before receiving QSEHRA benefits For Washington Healthplanfinder customers, this means they first must come through Washington Healthplanfinder and enroll, and then provide proof of coverage to their employer State marketplaces are awaiting further federal guidance on integrating the affordability calculation on the front-end as part of the online application

QSEHRA & Premium Tax Credits The premium tax credit amount will be reduced or eliminated based on a federal formula when employees reconcile their tax credits on their federal tax return If a customer with tax credits is offered a QSEHRA benefit, they can minimize the amount they could owe to the IRS at the end of the year by lowering the amount of advanced premium tax credit taken each month Customers will need to contact the Exchange for help determining how much to lower that amount

QSEHRA & Premium Tax Credits In Washington Healthplanfinder, individuals can adjust the amount of tax credits they take in advance by selecting Update Your Tax Credit Options from their dashboard

QSEHRA & Premium Tax Credits If a subsidized consumer is offered a QSEHRA with a benefit amount that eliminates their tax credit The employee should consider reducing amount of tax credit taken in advance to $1 (maintains grace period) If a subsidized consumer is offered a QSEHRA with a benefit amount that reduces their tax credit The employee should consider reducing amount of tax credit taken in advance by the amount of the applicable QSEHRA benefit (self-only, or family)  

QSEHRA & Premium Tax Credits If an employer offers a QSEHRA benefit to an employee that receives tax credits through Washington Healthplanfinder, and the employee does not reduce the amount of their tax credit, they may have to pay back some, or all, of the tax credit they receive through the year when they reconcile their tax credit on their federal tax return

Customer QSEHRA Page on Corporate Website Also working on an employer page https://www.wahbexchange.org/health-reimbursement-account/

AFFORDABILITY CALCULATION

QSEHRA & Premium Tax Credits The premium tax credit amount will be reduced or eliminated based on a federal formula when consumers reconcile their tax credits on their federal tax return If coverage is determined to be ‘affordable’ (premium minus QSEHRA contribution is up to 9.56% of income) individuals who receive QSEHRA contributions are not eligible for premium tax credits If coverage is determined to be ‘not affordable’ (premium minus QSHERA contribution more than 9.56% of income) individuals who receive QSEHRA contributions are eligible for reduced premium tax credits (reduced by amount of QSEHRA contribution)

Affordability Calculation Step 1: Impact of QSEHRA Monthly premium amount for Second Lowest Cost Silver Plan (SLCSP) minus self-only, monthly permitted QSEHRA benefit amount Step 2: Affordability Threshold Monthly household income amount (MAGI) times 9.56% (household’s expected contribution percentage) Step 3: Impact on APTC Step 1 Answer < Step 2 Answer = lose APTC (QSEHRA benefit considered affordable) Step 1 Answer > Step 2 Answer = reduce monthly APTC amount by permitted QSEHRA amount (use family amount if applicable) Determine if QSEHRA is considered affordable

Affordability Calculation Example: Loss of Tax Credit The Jackson family should consider reducing the amount of tax credit taken in advance to $1 to avoid having to pay back some, or all, of the APTC they received through the year when they reconcile their APTC on their federal tax return.

Affordability Calculation Example: Reduced Tax Credit * Note: For purposes of determining affordability, the self-only QSEHRA contribution is used (see below). For purposes of determining the total cost the employee pays, family QSEHRA contribution is deducted from the premium cost The Martinez family should consider reducing the amount of tax credit taken in advance by the amount of the QSEHRA benefit (by $670) to avoid having to pay back some, or all, of the APTC they received through the year when they reconcile their APTC on their federal tax return.  

Affordability Calculation Getting Help Consumers & Assisters will have a difficult time completing these calculations without assistance from Exchange staff Requires monthly premium amount for SLCSP (for relevant plan year) Requires household income (MAGI) Requires expected contribution percentage Requires information from employer QSEHRA letter Call Center Staff and Lead Organizations can submit a help ticket Can also help customer upload employer QSEHRA letter (if available) Exchange staff will respond to the customer Our enhanced users have been provided instructions for submitting a ticket. Use the template provided and assign to L2 Review Team. Someone from the Exchange will contact the customer.

Questions? Navigator Contact Producer Contact Navigator Support | navigator@wahbexchange.org Producer Contact Producer Support | producer@wahbexchange.org Note small employer website in development

Appendix

Federal Guidance 21st Century Cures Act (December 2016) Bill text ACA Related FAQs IRS Guidance Notice 2017-67 (October 2017) Technical implementation guidance IRS Tax Credit Publication 974 (January 2018) Pages 14-18 – helpful tax filing information & sample forms Federal guidance included in appendix: Cures bill (2016, 362 pages)- Section 18001 of the Cures Act amends the Code, the Employee Retirement Income Security Act of 1974 (ERISA), and the Public Health Service Act (PHS Act), to permit an eligible employer to provide a QSEHRA to its eligible employees. Helpful summary: On December 20, 2016, the Department of Labor, the Department of the Treasury, and the Department of Health and Human Services (collectively, the Departments) issued FAQs About Affordable Care Act Implementation (Part 35), Q&A-3 concerning the Cures Act. IRS guidance (2017, 60 pages) – Provides helpful technical details about: eligible employers and employees; same terms requirements; dollar limits; written notice requirement; MEC and proof of MEC requirement; Reporting requirements; coordination with tax credits; etc. IRS Tax Credit Publication (2018, pages 14-18) – has relevant tax filing instructions and forms

IRS Publication 947 IRS directions – written notice of QSEHRA: If you were provided a QSEHRA during 2017, your employer should have provided written notice to you by February 19, 2018. The information in this notice is necessary to determine how the QSEHRA affects your PTC. The permitted benefit for self-only coverage as reported by the employer in the written notice is used to determine whether the QSEHRA is considered affordable coverage, regardless of whether the permitted benefit provided to you is for self-only or family coverage. If the notice provided to you does not include a permitted benefit amount for self-only coverage, you must contact your employer to get that information. Use Worksheet N, later, to determine whether your QSEHRA is considered affordable coverage for the months of the year that you were provided the QSEHRA. You will need the notice provided by your employer and the permitted benefit for self-only coverage to complete Worksheet N.

IRS Publication 947 IRS directions -Permitted benefit reported on Form W-2 : Your employer should have reported your annual permitted benefit (self-only or family amount, as applicable) in box 12 of your Form W-2 with code FF. Your permitted benefit amount, as reported to you by your employer on Form W-2, is used to calculate the amount by which you must reduce your PTC, if you are otherwise eligible for PTC. Use Worksheet Q, later, to figure your monthly PTC for months in which you were provided a QSEHRA.

Additional Common Questions Q: Who are eligible employees under a QSEHRA? A: All full-time employees are automatically eligible. Employers can choose to provide eligibility for dependents. Employers can also extend eligibility to part-time employees, though they must be offered the same monthly benefit that full-time employees receive. Q: If an employee has minimum essential coverage (MEC) through their spouse’s employer’s plan, can they use QSEHRA funds to pay expenses incurred under the health plan? A: Yes. The employee can use his/her employer’s QSEHRA contribution to pay medical expenses incurred under the other employer’s medical plan, including deductibles and co-pays. Q: What happens if an employee receiving a QSEHRA reimbursement does not have minimum essential coverage (MEC) at the time of the reimbursement? A: All reimbursements to all employees made through the QSEHRA become taxable income. Q: If an employee has access to QSEHRA funds from their employer, but can get a better discount on health insurance by signing up in the Exchange and receiving tax credits, can they forego the QSEHRA benefit? No. If an employer offers a QSEHRA, all full-time employees are eligible for it and cannot waive the benefit – even if it reduces or eliminates their eligibility for tax credits in the Exchange.