New Excise Tax Reporting Effective January 1, 2010 for Violations of COBRA, HIPAA and Other Health Plan Mandates

Effective January 1, 2010, employers who sponsor group health plans now will be required to report and pay excise taxes for failing to satisfy certain federal group health plan mandates, unless timely corrected. The Internal Revenue Service (IRS) issued final regulations regarding new reporting requirements. Starting in 2010, employers (and certain third parties) must self-report and pay excise taxes for failing to comply with the following:

  1. COBRA
  2. HIPAA portability, access, renewability and nondiscrimination rules
  3. The Genetic Information Nondiscrimination Act (GINA)
  4. Mental health parity rules
  5. Minimum hospital stays under the Newborns’ and Mothers’ Health Protection Act
  6. Continued group health plan coverage of postsecondary dependent children on a medically necessary leave of absence under Michelle’s Law
  7. Health savings account (HSA) comparable employer contributions rules, see IRS Regs
  8. Archer medical savings account (MSA) comparable employer contributions rules, see IRS Regs

Affected parties must report the excise taxes on Form 8928, “Return of Certain Excise Taxes under Chapter 43 of the Internal Revenue Code.” Failure to file Form 8928 and pay excise taxes may lead to the imposition of penalties and interest. Form 8928 is available on the IRS Web site.

Employer Practice Points

Dipa N. Sudra of Davis Wright and Tremaine, LLP suggests;

Employers should have procedures in place to identify potential excise tax issues; and relevant employees, such as human resources personnel, should be familiar with the excise taxes noted above. Employers should consider creating checklists of potential excise tax violations and periodically review the checklists.

For example, employers should work with their advisors or COBRA administrators to ensure that there are no COBRA violations.

Employers must also ensure that relevant employees are familiar with recent changes, such as:

  • The two new events under HIPAA permitting special enrollment in a group health plan for loss of eligibility for coverage, or entitlement to a state premium assistance subsidy, under Medicaid or a state child health plan. (Employers should watch out for model notices expected to be issued in 2010 regarding these new events, and should update the notice of special enrollment rights given to employees.)
  • Prohibitions under GINA against using genetic information for underwriting or certain other purposes. In particular, note that there may be violations of GINA if genetic information was obtained before, but used after, its effective date (such as information collected as part of a health risk assessment).
  • Parity requirements for medical benefits and mental health or substance use disorder benefits.
  • Michelle’s Law.

DOL creates website on COBRA coverage under the American Recovery and Reinvestment Act of 2009

All employers and employees now have a site that answers questions about the COBRA coverage under ARRA. Individuals who request treatment as an assistance eligible individual and are denied such treatment by their group health plan may have the right to appeal to the DOL. The DOL is currently developing a process and an official application form that will be required to be completed for appeals. According to the website, The DOL is actively working to issue additional guidance regarding the COBRA premium reductions.  I expect to see the DOL’s final notices regarding changes under ARRA next week.  Important IRS forms are also available in spanish and english at this site.  Stay tuned for more information.


Can Health Plan Enrollment be Contingent on Completion of Health Risk Assessment (HRA)?

An Employer can require that its employees complete a HRA or participate in a qualified wellness program as a condition to enroll in the employer’s group health plan.  These employer requirements do not violate HIPAA nondiscrimination provision because enrollment is not conditioned on the employee’s health status or on attaining specific health outcomes.


Programs that comply with HIPAA, such programs are those under which none of the conditions for obtaining a reward is based on an individual satisfying a standard related to a health factor or under which no reward is offered.  These are       

·    A program that encourages preventive care through the wavier of the copayment or deductible requirement under a group health plan

·    A diagnostic testing program that provides a reward for participation and does not base any part of the reward on outcomes

·    A program that reimburses all or part of the costs for membership in a fitness center

·    A program that reimburses employees for the costs of smoking cessation programs without regard to whether the employee quits

·    A program that provides a reward to employees for attending a monthly education seminar

·    a program that reimburses employees for the costs of smoking cessation programs without regard to whether the employee quits smoking; and

·    a program that provides a reward to employees for attending a monthly health education seminar.


IRS Reg. §54.9802-1(f)(1).


New DOL HIPAA Wellness Compliance

Corporate wellness programs must comply with the DOL final wellness program regulations.  Are you meeting the 20% rule? Is the wellness program part of the group health plan? How does a plan determine whether they are in compliance with the new Regs? 

Click here for more information.

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