All posts tagged Employee benefits

High-deductible Plans Gain Favor, but PPOs Still Tops

health plans

More employees than ever are opting for high-deductible health plans (HDHPs), but preferred provider organizations (PPOs) are still the most popular among group health plans, a new study has found.

Thirty-four percent of employees selected an HDHP for 2016 when it was offered alongside a traditional health plan, with millennial employees over age 26 the most likely to choose the option at 40%, according to a report by benefits management technology provider Benefitfocus Inc.

The company analyzed enrollment data from 2,400 midsize employers using its technology platform.

The study found that 87% of midsize employers offer traditional plans – health maintenance organizations (HMOs) and PPOs.

Forty-three percent of employees opted to enroll in a PPO plan, and 14% chose an HMO, the study showed.

And while HDHPs are popular since they have low up-front costs in terms of premiums but high out-of-pocket expenses, only 13% of midsize employers offer them.

For employees enrolled in HDHPs, the average deductible for individual coverage was $2,382 last year for individual coverage and $4,889 for family coverage, the study found.

The average deductible in PPOs was $1,415 for individual coverage and $3,403 for family coverage. Interestingly, that qualifies the average PPO as an HDHP since the IRS defines an HDHP as a plan that has a deductible of $1,300 for single coverage and $2,600 for families.

The study also found that health savings accounts (HSAs) and flexible spending accounts (FSAs) are quite underutilized, which means many employees are leaving thousands of tax-free dollars on the table.

With out-of-pocket responsibility so high across all health plans, many employees might not be able to pay for unexpected medical costs. If you are not already doing so, you should consider offering either an HSA or FSA to help your employees set aside pre-tax funds to pay for medical expenses.

When copays and coinsurance are considered, employees are actually paying out much more for their health care. Across HDHPs and PPOs, the average out-of-pocket maximum ranges from 1.8 to 2.7 times its corresponding deductible amount.


Cadillac tax surprise

One issue that has received plenty of attention is the concern of many employers that their plans will be subject to the excise tax on health plans known as the “Cadillac” tax.

Although under current regulations the tax will not take effect until 2020, the 40% levy will apply to any portion of a health plan premium that is more than the threshold amount: $10,200 for individual plans and $27,500 for family plans.

That said, most plans are currently well below those thresholds. Average total premiums (the combination of what the employer and employee pay together) across all plans this year was $6,016 for individual plans and $14,885 for family plans.

However, some midsize employers may still be at risk of triggering the tax. Health care costs are projected to increase anywhere from 6% to 8% over the next few years. This would far outpace the rate of inflation, to which the Cadillac tax thresholds will be indexed.

As such, the cost cushion could be much thinner by 2020.

Getting around the Question of Spousal Coverage

Valentine Couple. Portrait of Smiling Beauty Girl and her Handsome Boyfriend making shape of Heart by their Hands. Happy Joyful Family. Love Concept. Heart Sign. Laughing Happy Lovers. Valentines Day

While the Affordable Care Act requires employers to offer coverage for employees’ adult children until the age of 26, it does not require them to offer coverage to their workers’ spouses.

As employers try to balance the costs of offering health coverage, spousal coverage is often on the table for cutting when making cost decisions. Many employers view offering spousal coverage as a way to keep up morale and serve as a recruitment and retention tool, but others consider the option a burden.

Cutting it out completely though is often a bitter pill for many employees to swallow, particularly if their spouse’s employer doesn’t offer coverage or if they don’t work. And if they are forced to go to a public insurance exchange, their bitterness could deepen further. What’s required is a diplomatic solution.

Instead of cutting it out completely, employee benefits experts suggest one of two ways to deal with the spousal coverage dilemma and reduce costs at the same time: a spousal carve-out or a spousal surcharge.


  1. Spousal carve-out

With this approach, the employer defines plan eligibility so that spouses are ineligible to participate if they are eligible for coverage at their own employer. As an employer, you need to consider the following if this is the way you want to go:

  • Will eligibility for any type of employer-sponsored coverage make the spouse ineligible? What if the spouse is only eligible for an employer-sponsored “mini-med” plan or other limited plan coverage?
  • Is the cost of the other employer-sponsored coverage a factor in determining eligibility? One common approach is to make the spouse ineligible for the plan only if the spouse’s cost of the other employer-sponsored coverage is less than a certain dollar amount.


Creative approach: Create a spousal carve-out program with an escape hatch that allows the spouse to remain on your plan if the price the spouse would have to pay for coverage under his or her own employer’s plan exceeds a specified threshold.



  1. Spousal surcharge

Charging a surcharge for spouses who are eligible for coverage at their own employer provides an incentive for spouses to choose to enroll in the other coverage, while still allowing eligibility in the employer’s plan for those who need it.

That said, this approach is an extra level of complexity in the communication and administration of benefits and payroll.


Creative approach: You can use a carrot instead of a stick. That is, give a monetary award to employees whose spouses switch from your plan to the spouse’s employer’s plan.



There are three ways to verify if a spouse has coverage through their employer:

  • Employee affidavit. Your employee signs a statement certifying that his or her spouse is ineligible for other employer-sponsored coverage.
  • Certification from the spouse’s employer. Have the spouse’s employer provide a letter stating that they are ineligible for health coverage. This approach may be difficult if the employer is not cooperative.
  • Eligibility audits. You can do spot-checking of employee spouses’ lack of access to coverage by randomly picking staff members and contacting each spouse’s employer, rather than seeking verification in every case.

Diabetes Wellness Programs Can Boost Productivity, Reduce Expenses

Diabetic patient doing glucose level blood test using ultra mini glucometer and small drop of blood from finger and test strips isolated on a white background. Device shows 115  mg/dL which is normal

Physicians and employee health experts are increasingly recommending that employers include diabetes screening, prevention and management in their company-sponsored wellness programs.

Diabetes – known as the “silent killer” – afflicts more than 29 million Americans, or 9% of the population.

Type 2 diabetes – or “adult-onset diabetes” – accounts for about 90% to 95% of all diagnosed cases of diabetes. Type 2 diabetes is associated with older age, obesity, family history of diabetes, history of gestational diabetes, impaired glucose metabolism, physical inactivity, and race/ethnicity.

The fallout from the disease has a significant impact on businesses as it can lead to stress, depression, and a number of other health problems, including cancer, stroke and heart problems. That in turn leads to lost productivity for you as well as “presenteeism” – or the dilemma of a worker being at work but not being productive.

Medical costs and costs related to time away from work, disability and premature death that were attributable to diabetes totaled $245 billion in 2012, according to the U.S. Centers for Disease Control. Of that total, $69 billion was due to lost productivity.

With these statistics in mind, it’s imperative that employers help their workers manage their diabetes. Helping them get diabetes under control or helping them avoid developing diabetes can keep your productivity strong, reduce your workers’ comp claims and also chip away at your health insurance expenses thanks to lower premiums.


Diabetes means decreased productivity

Of the roughly $69 billion that U.S. employers lost in 2012 from decreased productivity due to diabetes:

  • $21.6 billion was from the inability to work as a result of diabetes.
  • $20.8 billion was from presenteeism.
  • $18.5 billion was from lost productive capacity due to early mortality.
  • $5 billion was from missed workdays.
  • $2.7 billion was from reduced productivity for those not in the labor force.


What you can do

The Integrated Benefits Institute during its Annual Forum in February held a session on managing diabetes in the workplace and highlighted what some employers are doing to educate their workers, including how to manage diabetes:

  • The San Francisco Municipal Transportation Agency has partnered with the American Diabetes Association to deliver educational seminars on diabetes to its workforce.
  • The agency also offers as part of its diabetes program health risk and orthopedic assessments, glucose and cholesterol screenings, nutritional counseling, exercise classes and a walking club. (Incidentally, since the transport agency’s wellness plan provider initiated the diabetes program, its workers’ comp claims have also fallen.)
  • Caterpillar, Inc., found diabetes to be one of its primary cost drivers, so it now provides incentives for employee risk assessments and care management. For example, half of the employees in its diabetes management program reduced their A1C levels (a measure of diabetes control), while 96% reported measuring these levels regularly and 72% reported meeting recommended activity levels.
  • The City of Asheville, NC, used local pharmacists to coach employees on how to manage diabetes. More than 50% of those in the program experienced improved A1C levels, and the number of employees with diabetes that achieved optimal levels had increased.
  • Vanderbilt University expanded a pilot program of intensive exercise and nutrition that helped employees with diabetes improve cholesterol and blood sugar. About 25% of the employees were able to stop taking all of their medications.
  • The Ohio Police and Fire Pension Fund works with United Healthcare to offer its employees access to diabetes prevention and control programs. Employees voluntarily participate in worksite health screenings. Those who have pre-diabetes can attend YMCA-led diabetes prevention programs either at work or in the community.
    Those with diabetes can participate in offsite programs to help them better control their diabetes. The fund has incorporated these programs into its overall wellness initiative. In the first year of the program, 68% of participants in the program lost 5% or more of their total body weight.


If you would like to know more about educating your employees about diabetes and helping those with pre-diabetes or diabetes manage their condition, call us.



ACA Auto-enroll Requirement Repealed


The Affordable Care Act requirement that large employers automatically enroll in a group health plan any employees that don’t respond when asked to choose a plan, has been repealed

The change came after the employer community had lobbied to have the provision repealed because of the lack of clarity in the law, particularly about how much discretion employers would have in choosing a plan for those workers.

Originally the ACA amended the Fair Labor Standards Act by adding a new section requiring employers with more than 200 full-time employees to automatically enroll new full-time employees in the employer’s health benefits plans and continue enrollment of current employees.

The enforcement of this section was pending regulations by the Department of Labor (DOL).

But, in November 2015, President Obama signed the Bipartisan Budget Act of 2015, which in small part repealed the auto-enrollment requirement.

The repeal does not bar employers from auto-enrollment. They may choose to voluntarily continue with automatic enrollment options, such as default or negative elections, but there is no obligation to do so.

Employers may still decide to use “default” or “negative” elections for enrolling employees into health plan coverage or certain other benefits. Under a default or negative enrollment arrangement, an otherwise eligible employee will be deemed to have elected a certain type and level of coverage, unless they timely return a written waiver of that coverage.

The Internal Revenue Service issued regulations in 2007 approving this approach. In fact, this same approach can also be used with health savings account contributions made under a cafeteria plan.

Under Section 125 of the Revenue Code, employers that implement default or negative elections must provide notice to employees about the coverage and cost, and provide the opportunity to opt out of the arrangement.

In many cases, negative or default elections will involve payroll deductions made without an affirmative election by employees to pay for the premiums with their wages.

Some state wage-withholding laws, however, have an express requirement that there be an affirmative election by the employee before any deductions may be made. But, the DOL has taken the position that in this context such wage-withholding laws are preempted by ERISA.

That said, if you do want to still use auto-enroll, you should tread carefully as the result could create a dispute with one of your staff. Fallout could include a run-in with the state labor commissioner, or in the worst-case scenario the threat of a lawsuit.

Before you go ahead with auto-enroll, please consult us or your legal counsel.





Federal Agencies Stepping up Audits. Here’s What They Are Looking at

As the Affordable Care Act takes hold further, government agencies are stepping up their audits of health plans across the country.

With many employers still unclear over exactly what they need to do to fully comply with all of the sections of the ACA – from providing affordable insurance to reporting on their plans – the risk is great that you may be found not in compliance at least in some area.

There are a number of government entities that are responsible for auditing employer health plans, and they all have different areas of responsibility:

Department of Labor (DOL)

  • ACA
  • Employee Retirement Security Act (ERISA)
  • Health Insurance Portability and Accountability Act (HIPPA)


Department of Health and Human Services

  • Summary of Benefit Coverage compliance
  • HIPPA privacy, security and breach notification rules
  • Medicare secondary payer


Internal Revenue Service

  • ACA (also including reporting)
  • Misclassification of workers as independent contractors
  • COBRA issues
  • Tax issues concerning employee benefits


Equal Employment Opportunity Commission

  • Americans with Disabilities Act issues
  • Age Discrimination in Employment Act
  • Genetic Information Nondiscrimination Act


While one entity may audit an employer, all four are now cooperating with each other and sharing information. Health benefits attorneys have noted that if an auditor finds an infraction that may not be part of their agency’s auditing purview, they are passing the information on to other agencies.

For the purposes of this article we will focus on the audits that are most likely to happen, and the main triggers for these audits:


DOL audits

  • Adult children – The ACA requires that group health plans allow their enrollees to keep their grown children up the age of 26 on their family coverage plans. The DOL requires a sample of the written notice describing enrollment rights for dependent children up to age 26 who have used the plan since September 23, 2010.
  • Rescission of coverage If the plan has rescinded coverage, the DOL requires a list of all affected individuals and a copy of the written notice 30 days in advance of each rescission.
  • Grandfather status Employers that are retaining grandfathered plan status must provide documentation to substantiate that status, as well as a copy of the required annual notice distributed to participants advising of the plan’s grandfather protections.
    It’s been reported that the DOL seems to have a general disregard for grandfathered plans and may give them extra scrutiny.
  • Waiting periods – The ACA bars employers from requiring that new hires wait more than 90 days before they are offered health insurance. Expect an audit if you are not complying with these rules.


IRS audits

  • ACA reporting – Employers are required to self-report about their efforts to offer full-time employees compliant health insurance coverage. Failure to comply with the reporting requirement may result in penalties of $100 per incident up to $1.5 million.

Employers need to make sure that they comply with these reporting requirements.

Also, there are assessments exceeding $3,000 a year per worker if the coverage you are offering your employees is not affordable.   Even if you are offering what you think is affordable coverage to all of your workers, because people are paid different wages, coverage may not be affordable to those who are paid the least.

  • Not tracking hours ­– The standard for discerning if an individual is a full-time employee is that they work more than 130 hours per month. If you have a number of part-time employees whose hours vary month to month, it’s going to be difficult to gauge who is full-timer.
    The IRS allows employers to use a few different methods for tracking employee hours for the purposes of the ACA, but the variable-hour tracking method is the most complex and may invite additional IRS scrutiny.



The takeaway

The key is preparation for any employer that wants to pass an audit without incurring penalties.

We can work with you to ensure that you have the proper supporting documentation in place in case you are contacted for an audit.




Five Tips for a Successful Open Enrollment

In light of today’s diverse and continuously evolving workforce, it’s more critical than ever that you have a targeted strategy for your open enrollment.

You should not just consider open enrollment as the period that your staff chooses benefits. The way you execute and your success in boosting participation can help attract, engage and retain top talent.

This makes open enrollment season – and all of your year-round benefits communications – an essential part of your overall human resources strategy. Open enrollment is your ticket to a more benefits-engaged workforce.

Open enrollment’s function is to get employees signed up for next year’s benefits. It’s a time to let your workforce in on any changes to your benefits and make sure they have the latest-and-greatest plan documents and any requisite health reform-related notices.

Guidespark Inc., a human resources communications provider, in a recent report recommended the following for a successful open enrollment:


Pre-planning to get it right

  • With only a few months away until open enrollment, you should meet with your benefits team and involved management to discuss what worked or didn’t during last year’s enrollment.
  • Compile all of last year’s materials, including all documents, brochures, e-mails and social media posts. You can use this trove to start formulating ideas on how to improve and revise them.
  • If you will be including a new health plan, introducing new benefits or if any of your plans have changed, collect all of this information and backup resources.
  • Ask your staff if there are any benefits they’d like to learn more about, and how they would prefer to receive that information.
  • Talk to us so that we can help you tailor the information specifically to your workers.


Review last year’s open enrollment

Evaluate your open enrollment results from last year. This can help you gain valuable insights into your benefits package and communications plan, making your next enrollment smoother and improving your employees’ satisfaction.

Pay special attention to the way your employees preferred to consume information on your benefits offerings.

This overall review can help you better allocate your resources and improve the way you are reaching and training your employees about your benefits and their choices.


Design a multi-pronged approach

Be prepared to use a variety of communication channels to reach your employees. If you haven’t already done so, ask your staff how they prefer to receive information about benefits.

  • You should be prepared to accommodate all of their preferences such as:
  • Face-to-face meetings.
  • Paper resources like brochures and booklets.
  • Web-based resources, including websites, pdfs and other digital content. E-mails are included in this category.


Don’t just use the method that the majority of your employees prefer. Try to accommodate all preference types. A successful communications plan can greatly increase your enrollment. And remember that if you have millennials on staff, they often prefer to consume information on their smart phones.

Also, make sure that all of your communications are clear, simple and to the point, so employees know what they’re supposed to do. You should:

  • Try to avoid jargon, and don’t cram in too much copy.
  • Include or embed links to tools and resources you want them to use.
  • Feed information in bite-sized chunks.


24-hour access

Don’t just limit your employees’ access to the information you provide to when they are at work. To have a successful open enrollment try to make sure they can access the information anytime, anywhere.

Web-based content and videos are easy to access around the clock, from home or the office. You can experiment with modern methods to communicate through video, mobile, social media and texting.


All-year access

Once you’ve refreshed your open enrollment strategy and updated resources, you can keep those resources available throughout the year and after open enrollment. Many of the resources will be relevant and accurate all year – and likely beyond the year.

Many of these resources can be part of a year-long benefits education program, providing employees with timeless, useful information.



Want to Reimburse Your Staff for Health Premiums? A $36,500 per-employee Fine Lurks

By now, most business owners know about the yearly $2,000 per-employee fine they would face for not securing health coverage for their employees under the Affordable Care Act.

But there is even a larger fine that threatens under recent regulations issued by the IRS – and it’s not for failing to secure coverage.

It’s for helping them secure coverage from a public exchange or open private market. And it applies to ALL employers, even those that are small enough to not be required to provide insurance for their full-time employees under the ACA’s employer mandate.

The fine? Up to $36,500 a year for each worker!

Under the new IRS regulations, issued July 1, employers who do not offer a group health plan, but give their workers additional pay to compensate for the purchase of health insurance or direct medical expenses, can be fined $100 per day, per employee. Over the course of a year, that’s $36,500 per employee – up to $500,000 in total.

The penalty applies whether the reimbursement is considered a before-tax or after-tax contribution.


Small businesses, beware!

Employers with fewer than 50 full-time employees are the ones that really need to watch out for this law, since the employer mandate does not apply to them.

The rule appears nowhere in the ACA, yet the IRS created the penalty while writing the regulations that implement that landmark health insurance reform law.

In essence, the National Federation of Independent Business has come out against the regulations, writing in a blog:

“The rule punishes small businesses for providing the only health insurance support many can afford – a contribution to help employees pay premiums for their individual or family health insurance policies or to help finance direct payment for medical services.

“Reimbursing employees for the cost of insurance or medical services is a way for small businesses to help their workers without the administrative headaches of setting up a costly group plan,” the blog quoted Kevin Kuhlman, policy director for the association, as saying.

“There’s no real justification for penalizing small businesses that do what the law’s strongest supporters claim to want, which is to help employees obtain coverage or pay medical bills,” he said.

Here are some things you need to know about the regulations:

  • The $100 per-employee per-day penalty cannot be assessed on employer payment arrangements that have only one participating employee. Therefore, your business can still use such an arrangement to reimburse one employee for his or her individual health insurance premiums without the penalty.
  • The IRS had been offered a temporary penalty exemption to small employers that reimburse or pay employee health premiums between Jan. 1, 2014 and June 30, 2015. A small employer is defined as one with fewer than 50 full-time employees (including full-time equivalent employees) during the prior year. That relief has now expired.
  • Many S corporations have set up employer payment arrangements to cover individual health policy premiums for employees who also own more than 2% of the company stock (more-than-2% shareholder-employees).

IRS Notice 2015-17 exempts such plans from the $100 per-employee per-day penalty for health premiums reimbursed or paid by S corporations between Jan. 1, 2014 and Dec. 31, 2015. The bottom line: through year-end, there is no risk of incurring the penalty for S corporation employer payment arrangements that benefit only more-than-2% shareholder-employees. However, S corporation employer payment arrangements that benefit other employees are still exposed to the penalty.


Is help on the way?

The business community has agitated and made its concerns heard by lobbying for a fix on Capitol Hill, and legislation to repeal the regulations has been introduced in both houses of Congress.

Rep. Charles Boustany has introduced legislation in the House, (H.R. 2911), and Sen. Charles Grassley in the Senate, (S. 1697), to remedy the problem. Both bills await congressional action.