All posts tagged health insurance

Companies Struggle with Benefits Compliance

More and more employers are being overwhelmed by all of the compliance requirements associated with managing employee benefits.

The Guardian Life Insurance Company of America’s “Benefits Balancing Act” study found that 60% of employers are feeling overwhelmed with the increased complexity of managing their benefits programs. One of the main reasons for the additional burden is the Affordable Care Act, with its myriad of compliance and reporting requirements.

The employer mandate and the documentation and new filing requirements with the IRS are high on the list of compliance issues, as are evolving Family Medical Leave Act (FMLA) and ERISA requirements.

Interestingly, larger firms with 100 or more employees are having the hardest time, with 70% saying they are especially challenged by installing new coverages, changing carriers and employee communications and enrollment.

The shackles of compliance are so great that it’s the number one benefits-related concern for nearly 30 % of employers, the study found. In fact, 70% said that their firms are not equipped to keep up with the steady changes in federal and state laws governing employee benefits.

The top areas of compliance concern are:

  • The ACA excise tax (“Cadillac tax”)
  • Changes to paid parental leave laws
  • ACA employer mandate
  • ERISA requirements
  • State and local FMLA requirements

 

In terms of administration the top concerns are:

  • Employee communications and education
  • Adding new benefits or changing plans and insurers
  • Establishing electronic data interchanges
  • Account management and service delivery
  • Claims and employee customer service
  • Enrolling employees

 

What companies are doing

As the regulatory landscape has shifted so dramatically over the last seven years, many employers have opted for outsourcing their benefits compliance.

This may be an especially smart move for smaller employers, which often do not have in-house benefits administration resources.

 

Among employers outsourcing at least some benefits activities, the study found that:

  • 50% use the services of a broker
  • 25% use an insurance company
  • 25% use a third-party vendor (enrollment firm, HR services firm or a private exchange)

Bill Would Make Collecting Health Information for Wellness Plans Easier

blue double helix models on background

Legislation has surfaced in Congress that would allow employers to collect biometric and genetic information from employees and their family members as a precondition for participation in a company wellness program.

The bill would essentially repeal a portion of the Genetic Information Non-discrimination Act (GINA), which in part bars employers from collecting genetic information on employees or members of their family for certain wellness programs.

The GINA bars health insurers and employers from discriminating against people based on information that their genes carry – say, a family history of heart disease or stroke.

The law contains an exception for employers that collect information from employees for a voluntary wellness program, the kind with no carrots or sticks for participation.

It is aimed at wellness programs that offer employees discounts on their health insurance in exchange for participation. Wellness plans may require participation in a health risk assessment or that the employee meet certain fitness or health goals.

Under the Affordable Care Act, employers can offer discounts of up to 30% on health insurance to employees that participate in wellness plans. In some cases, the employer can offer up to a 50% discount if the employees meet certain health targets.

HR 1313 would allow employers to collect biometric information from employees and their family members as a prerequisite for participation in wellness programs that provide discounts or other financial incentives.

Employer groups have decried the GINA’s strict rules, which they say inhibit their ability to help employees improve health metrics like high blood pressure and obesity, among others.

 

Bill’s key language

HR 1313’s key language states that:

The collection of information about the manifested disease or disorder of a family member shall not be considered an unlawful acquisition of genetic information with respect to another family member as part of a workplace wellness program.”

The bill passed along party lines in the House Education and the Workforce Committee, (22 Republicans for and 17 Democrats against). It still has other committees to clear before the full House votes on the legislation and sends it to the Senate.

Proponents of the bill, like the American Benefits Council, say that it would preserve wellness plans, which they say have suffered under the GINA.

GOP Releases Legislation to Gut and Replace ACA

House Republicans have filed legislation that would repeal most of the Affordable Care Act, including measures to eliminate the employer and individual mandates.

But from the get-go the legislation – backed by the House leadership – was panned by the GOP’s conservative wing, which said it doesn’t go far enough to completely get rid of the ACA, casting doubt on the prospects of it getting passed.

And Congressional Democrats immediately voiced their absolute opposition to the bill, vowing to vote ‘No’ on the legislation.

While passage in the House would be a bit easier, the slim 51-49 vote edge that Republicans hold in the Senate means it’s unclear whether the bill can pass in its present form.

But for now, this is the only piece of viable legislation that’s been floated to gut the ACA, and replace it with a scaled-down version.

The leadership is mindful that they cannot do an outright repeal, since it would affect some 20 million people who have been able to secure health insurance under the ACA.

The bill, called the American Health Care Act, would be phased in over time and would keep the ACA’s premium subsidies for policies purchased through insurance exchanges until 2020, as well as fund Medicaid expansion under the ACA for the same time.

This is just the first draft, and because of the opposition from conservatives in the Republican Party, the current version will not likely be the final one.

House Speaker Paul Ryan has said he wants to see the bill passed by Congress by the end of April. In other words, there will be a lot of work to do in very short order.

 

Here are some of the major provisions of the bill:

  • Eliminating the employer mandate that requires employers with 50 or more full-time or full-time equivalent workers to offer health insurance.
  • Eliminating the individual mandate requiring Americans to be covered either through their employment or by purchasing coverage on the open market or a health insurance exchange.
  • Ending the funding for Medicaid expansion as of 2020.
  • Converting the Medicaid to a program of capped per-capita federal grants to the states, starting in 2019.
  • Eliminating the subsidies available under the ACA and replacing them with age-based, refundable premium tax credits to help people buy insurance. Under the ACA subsidies are based on income, not age, and the proposed age-based tax credits generally would be smaller than the ACA’s.
    The tax credits proposed by House Republicans would start at $2,000 a year for a person under 30, rising to a maximum of $4,000 for a person 60 or older. A family could receive up to $14,000 in credits.
  • Removing ACA taxes and penalties (adding a premium incentive for continuous coverage and allowing insurers to tack on a 30% surcharge for people who let their policies lapse).
  • Protecting employer exclusion (tax write-off for employers and pre-tax for employees).
  • Retaining the “Cadillac tax” on high-value plans, but delaying its implementation to 2025 from 2020.
  • Eliminating the requirement that plans must offer minimum essential benefits.
  • Offering states $100 billion over nine years to establish high-risk pools or other mechanisms for stabilizing the individual insurance market.
  • Allowing insurers to charge older individuals five times higher premiums than they charge younger people. That’s compared with the 3 to 1 ratio under the ACA.
  • Expanding and promoting health savings accounts.

 

 

The fate of the legislation remains to be seen and under the proposal, it would surely not live up to President Trump’s promise that individual plans would be better and less expensive under the GOP’s ACA replacement.

 

We will keep you posted as the legislation develops.

 

 

 

Republicans Consider Axing Tax Exclusion on Employer-sponsored Plans

Money grinding in gears.

As work on trying to overhaul the Affordable Care Act continues, lawmakers are considering a bold and what would likely be a controversial move to eliminate the tax exclusion for employer-sponsored health benefits.

The amount of taxes that are not collected as a result of the exclusion amounts to about $216 billion a year according to the Tax Policy Center, and is therefore a significant pool of untapped funds.

The current exclusion has its roots dating back to World War II when the government ordered that wages be frozen and tax-free health insurance be available. The notion of now taxing the benefit would likely not go down well with anyone who currently receives employer-sponsored health insurance.

While economists have long hated the tax exclusion, workers and employers love it. Depending on how much you pay in taxes, the savings on the cost of expensive health benefits can be substantial. Most Americans under 65 benefit from tax savings associated with this policy.

The outline details how funds raised through the collection of these taxes would be spent on various aspects of the health insurance system like Medicaid, tax benefits for health savings account enrollees, and a universal tax credit-based system that would help individuals buy insurance on the open market.

The House committees are also struggling to deal with the tax credits established by the ACA to help individuals buy coverage on government-operated health insurance exchanges, and how to eliminate that system.

In place of the ACA subsidies, the House bill starting in 2020 would give tax credits – based on age instead of on income. For a person under age 30, the credit would be $2,000. That amount would double for beneficiaries over the age of 60, under the proposal.

Republicans are considering various proposals for the tax exclusion:

  • Cap the tax exclusion at a certain level, such as $10,000 in benefits.
  • Eliminate the tax exclusion altogether.
  • Phase out the exclusion over time.

 

The outline did not specifically state that any captured taxes would specifically be used to pay for tax credit, but analysts say that it would be funded this way.

 

Capped tax exclusion

If the capped method is implemented, it would likely set a maximum amount of benefits that would not be taxed – and any benefits over that amount would be taxed as salary.

 

Cap example

If Congress sets a cap of $8,000 for single coverage, a worker who receives $9,500 worth of health coverage paid for by his employer would not pay taxes on the first $8,000 in benefit. However, the remaining $1,500 would be treated as ordinary income and the full range of tax would be levied on the amount.

Both the employer and the employee would be exposed to the tax.

The danger is that the move could also spur states to adjust their laws to match federal law so that state income taxes are also captured on the benefit.

If talk of a cap sounds familiar, that’s because this is kind of how the ACA “Cadillac tax” was supposed to work. Under that measure, any health plan that is worth more than an established amount would be taxed at 40% for every dollar over the threshold.

The whole idea behind the Cadillac tax was that it would levy health plans that are deemed overly generous and hence do nothing to curtail the use of health services. But eliminating or capping the tax exemption would have no such effect, experts say.

We will keep you posted as the process develops.

 

What Does President Trump’s Executive Order on ACA Mean?

Worker repairing  an engine rotor winding of copper wire.

Donald Trump’s first act after assuming the presidency was to sign an executive order that authorizes federal agencies to scale back as many parts of the Affordable Care Act as possible within the confines of the law.

The executive order does not abolish the landmark legislation, but sets the stage for agencies to act immediately on regulations that are deemed overly burdensome. The agencies, particularly the Department of Treasury and the Department of Health and Human Services (HHS), will have wide latitude in making regulatory changes thanks to the broad scope of the order.

But don’t expect immediate changes in the law. Regulations cannot be rewritten, amended or replaced without going through the rule-making process, which includes notice and comment periods. That can take months, or sometimes years.

Another reason you should not expect immediate change is that the order specifically states that agencies can act only “to the maximum extent permitted by law.”

The order came on the heels of the House of Representatives approving a budget blueprint that will allow Republicans to repeal major provisions of the ACA without the threat of a Democratic filibuster in the Senate. But that action can only undo parts of the law that have an effect on the federal budget and they would need some cooperation from Democrats to repeal other parts and forge a replacement.

That means that most of the laws and regulations governing employer plans will likely stay in place for the moment, although it’s unclear for how long.

Trump has been on record saying that the repeal of the law should not take place until a replacement plan is also in place, in order to avoid creating disruptions in the market. He also said that everyone in the United States would be covered.

Here are some of the more relevant passages of the executive order:

“…it is imperative for the executive branch to ensure that the law is being efficiently implemented, take all actions consistent with law to minimize the unwarranted economic and regulatory burdens of the Act, and prepare to afford the States more flexibility and control to create a more free and open healthcare market.”

It also said the HHS secretary and other agency heads “shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision… that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”

As mentioned, the process for making regulations takes time. Proposed regulations have to be drawn up and they have to go out for public comment, including holding hearings so that all sides can argue for or against the changes or recommend adding more changes.

Adding more confusion and concern, Trump senior adviser Kellyanne Conway said that the president may stop enforcing the law’s tax penalty against people who don’t buy insurance. But that move alone could snowball into an ugly scenario where more healthy individuals bale out of their insurance policies, which in turn would likely lead to insurers abandoning the public insurance exchanges.

She said that he would consider repealing the employer mandate quickly, as well. But that may be not be legal as the individual and employer mandates are explicit provisions of the law passed by Congress, and they cannot be overridden by the executive branch.

Republicans Unveil Two Proposals to Replace/Augment the ACA

Government Shutdown with magnifying glass. ++All text written by photographer. Image in page was taken by photographer ++

Republicans in June introduced two sweeping proposals for replacing or augmenting the Affordable Care Act, as they seek to blaze a trail they say will be better for both employers and individual Americans.

Rep. Pete Sessions, (R-Texas) and Sen. Bill Cassidy, (R-Louisiana), introduced H.R. 5284, which they call an “alternative” health care bill which will not repeal the ACA, but work alongside it and modify various parts of the system.

The so-called “Health Empowerment Liberty Plan” (HELP) includes conditions for helping Americans purchase health insurance, but also keeps in place ACA provisions that bar health insurers from discriminating against people with pre-existing medical conditions.

And later in June, a Republican task force convened by House Speaker Paul Ryan introduced a proposal that was not in bill form that would completely eliminate the ACA.

 

HELP!

Here are the major provisions of the proposed HELP Act:

Individual mandate out – It would eliminate the individual mandate to be covered for insurance either through your job or by purchasing a health plan through a public insurance exchange.

Employer mandate out – It would eliminate the employer mandate, which is the requirement that employers with 50 or more full-time workers purchase affordable coverage for them.

Exchanges still okay – The bill would also allow states to decide if they want to opt in or out of the Affordable Care Act. States that elect to remain part of the ACA would be able to keep their marketplace exchanges and Medicaid expansion programs in place.

For states that decide to opt out, U.S. citizens, including Medicaid beneficiaries, would be eligible for a $2,500 per individual, $1,500 per child tax credit, to be used towards the cost of employer-sponsored health insurance, invested in a Roth Health Savings Account or received as an annual payment.

New tax – The HELP Act would limit the tax exclusion for employer health plans to $2,500 per employee, exposing companies and workers to taxes for insurance benefits above that threshold.

Oddly, Republicans have heavily criticized the ACA’s “Cadillac tax,” which seeks to tax at 40% the portion of any employer-provided health plan that costs more than $10,200 a year.

Small employer purchasing power – The measure would also allow small employers to band together to purchase health insurance. Small employers should be able to “offer health care coverage at lower prices through improved bargaining power at the negotiating table with insurers just as corporations and labor unions do,” according to the proposal.

Minimum essential benefits out – The bill would abolish federal minimum essential benefits – a hallmark of the ACA – though it would allow states to regulate coverage.

People could buy cheaper limited-benefit plans with an annual cap on benefits. Those who buy such plans would receive asset and wage protection if their medical bills exceeded certain thresholds.

Competition and transparency – It would also limit how much insurers could charge for out-of-network services, require providers and plans to disclose prices, and deregulate physician-owned facilities, freestanding surgery centers, and retail clinics.

 

The task force proposal

The health care reform proposal released by the House Republican task force convened by Speaker Ryan would entail a full repeal of the ACA.

The proposal, which is broad in scope and short on specifics, would include a transition period out of the ACA and into a new plan. It would eliminate the individual and employer mandate and instead encourage people to have insurance coverage with the help of refundable tax credits that would be adjusted for the recipient’s age.

It would encourage small group health plans and provide $25 billion in incentives to states to set up high-risk insurance pools.

In place of the ACA’s individual mandate, the plan would prohibit insurance companies from denying patients coverage or charging them more because of pre-existing conditions – but only if they keep continuous insurance coverage, although they could switch plans or carriers.

It would also allow young adults to stay on their parents’ health plans until age 26, which is one of the most popular pieces of the ACA.

Under the proposal, insurers would be allowed to sell across state lines and medical liability laws would be reformed.

 

Government Shutdown with magnifying glass. ++All text written by photographer. Image in page was taken by photographer ++

Government Shutdown with magnifying glass. ++All text written by photographer. Image in page was taken by photographer ++

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.

Accident Insurance Can Save Your Workers from Financial Ruin

Mountain Biker has a painful looking crash with his bike

Even if you are providing your staff with health benefits, they could be left under great financial pressure if one of them has a major accident off the job that leaves them debilitated and unable to work.

Millions of working Americans struggle with managing out-of-pocket expenses for non-medical and medical expenses after suffering an unexpected event such as an accident.

If you are already offering your employees health insurance coverage, you can help fill the gap by also offering voluntary accident insurance, which can pay for:

  • Lost wages,
  • Deductibles and other medical expenses not covered by their insurance plan,
  • Transportation to and from hospitals or physical rehabilitation sessions, and
  • Home modifications.

 

Why your workers need accident insurance

According to a survey by Prudential Insurance Co.:

  • Two-thirds of Americans say it would be very or somewhat difficult to meet their current financial obligations if their next paycheck were delayed for just one week.
  • Half of all households say they have less than $10,000 in liquid assets available for use in an emergency.

 

Why they need coverage:

  • Health insurance only covers a portion of expenses, but only after the employee has paid their deductible and copay.
  • Employees sometimes have to pay other out-of-pocket medical expenses for medicines, medical equipment, and visits to out-of-network physicians.
  • Employees have to pay out of pocket for travel to appointments, home accommodations, caregiving and housekeeping if they cannot do those things on their own after an accident.
  • Lost wages are a sometimes overlooked cost of illness or injury. Lost wages can be an issue not only for the employees directly impacted by illness or injury, but also for family members who are providing care for them.

 

Types of accident insurance

There are two types of accident insurance:

Traditional treatment-based plans. These pay benefits based on the occurrence of an accidental injury and the type of treatment or procedure required to treat an injury. The injured individual will often submit a separate claim for each service they receive related to the accident. For example, if the individual was in a car accident in which they broke both legs, they would file individual claims for:

  • The costs not covered by health insurance for each service to treat the injury.
  • The cost of paying for transportation to doctor’s visits and physical therapy sessions.
  • Each time a home caregiver visits them to provide care.

 

Incident-based plans. These pay benefits based upon the incident and type of injury. This can simplify the claims process by reducing the number of claims that must be submitted. In the case of the car accident victim with broken legs above, they would likely be required to submit evidence only for the fracture itself and for their hospital stay to be reimbursed.

 

Benefits to the employer

  • A more robust benefits package. Offering voluntary accident insurance paid for by employees allows you to provide a more robust benefits package that can improve employees’ satisfaction with their jobs.
  • A smoother transition to high-deductible health plans. Employers replacing traditional medical insurance with an HDHP may find the transition more readily accepted by employees if it is accompanied by an offer of a voluntary accident insurance plan.
  • Potential for improved productivity. Employees under financial pressure may be less productive than those who are not, and knowing they have accident insurance can put many of their fears to rest. This is important considering that 39% of employees surveyed by Prudential said they spend three hours or more each week thinking about or dealing with issues related to their personal finances.
  • Lost cost and administrative burden. Most employers offer voluntary accident insurance that is paid for by the employee, meaning there is little or no cost to the organization.

 

 

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.

 

Verification

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.