Tuesday, October 30, 2012

Find high quality Labs, Tests, and Meds for Cheap

Many people seem to think that when your doctor recommends a test, you need to get it done where they want you to get it done. Nothing can be further from the truth. You can research and choose a high quality facility who charges less than half the price of your doctor's facility and have the results sent directly to the doctor.

The same goes for prescription drugs, just by calling around you can find that certain pharmacies charge a lot less for a drug than another. There are even online options which could save you even more money.

As deductibles and prescription copays have steadily increased, it's a good thing to shop around.

Low Cost Labs and Tests

Most labs and tests vary by up to 300%, so why not go to a place that's less expensive. There are two sites to check out when looking for a lab or test (BTW, you will still need a prescription from your doctor for the test, so get that before you walk out the door).


This is a great site that is fed by you and I and includes rates for the most common tests and prescriptions. Here is one example in the Chicagoland area. If it includes the procedure you need, then it's a great resource.


In Chicago, the pricing goes from $700+ (probably under $1000) to $2500. Most hospitals actually charge around $2500 - $3500 for the same procedure.

BTW, a friend of mine has negotiated with a doctor to do a full colonoscopy with polop removal for a flat $800 in Hinsdale. You pay upfront and deal with your insurance company. If you want more info, let me know.

Simvestatin, 30 mg tablets for high cholesterol

Leslieslist includes pricing at various drug stores from Costo to Walmart. The range for this generic is $11 for 100 tablets to $42 for 30 tablets.


Yousaveonlabs is run by mdlabtests.com. You can put in your test and it will come up with the cost and allow you to pre-pay for the lab/test. You show up with your receipt and prescriptions, they perform the test and send it to your doctor. Many of these labs are the very same labs that process the tests done at your doctor's office anyway.

Low Cost Prescriptions


Yousaveonmeds allows you to purchase meds from around the world. It is run by a colleague of mine, Marty Portnoy. The key difference is that you need to talk to him before you can order. This means that if you require an FDIC approved manufacturer (from an outside country), he can help guide you to that manufacturer. He even provides a US receipt you can turn into your insurance company.


This is a nifty site based in the US. You put in your meds and pharmacies bid on them using a reverse auction format. As far as I understand, it is all United States based pharmacies and drugs.


If you use these sites, you'll be able be a better consumer and keep more of your money in your pocket.

Wednesday, September 26, 2012

Health Reform Questions - Premium Tax Credits & Cost-Sharing Subsidies

Health Reform Questions 

- Premium Tax Credits & Cost-Sharing Subsidies                 

By Larry Grudzien

 What premium tax credits and cost-sharing subsidies are available to individuals in 2014 and who is eligible for them?

To assist individuals and families who do not qualify for Medicare or Medicaid and are not offered affordable health coverage by their employers, a refundable tax credit (the "premium tax credit") and a cost sharing subsidy will be available beginning in 2014 to help pay for insurance purchased through an Exchange. Generally, taxpayers with income between 100% and 400% of the federal poverty line (FPL) who purchase insurance through an Exchange will qualify them, as provided in Code Section 36B. and Section 1402 of the Patient Protection and Affordable Care Act ("PPACA").

A premium assistance tax credit will be provided monthly to lower the amount of premium the individual or family must pay for their coverage. Cost sharing subsidies will limit the plan's maximum out-of-pocket costs, and for some individuals will also reduce other cost sharing amounts (i.e., deductibles, coinsurance or copayments) that would otherwise be charged to them by their coverage.

Both types of assistance will be tied in some way to the value of the coverage available in the Exchanges. Four levels of plans will be offered by insurers in the exchanges. All the plans must offer a set of essential health benefits. The four plan levels vary in the total value of coverage they must provide. This amount is sometimes called "actuarial value" and represents the proportion of health insurance expenditures for covered benefits that, for an average population, would be paid by the plan. Section 1302(d)(1) of PPACA requires that the actuarial value be 60% for "bronze" plans, 70% for "silver" plans, 80% for "gold" plans and 90% for "platinum" plans. In addition, the out-of-pocket maximum for any of these plans may not exceed a limit that is determined annually. For 2013, the limit is $6,250 for individual coverage and $12,500 for family coverage.  It will be adjusted higher for 2014.

Who is eligible for the premium tax credit and cost sharing subsidy?

Citizens and legal residents in families with incomes between 100% and 400% of poverty who purchase coverage through a health insurance exchange are eligible for a premium tax credit cost sharing subsidy to reduce the cost of coverage. individuals eligible for public coverage are not eligible for premium assistance in Exchanges. In states without expanded Medicaid coverage, individuals with incomes less than 100% of poverty will not be eligible for Exchange subsidies, while those with incomes at or above poverty will be.

Would an individual be eligible for premium tax credits and cost-sharing subsidies in the Exchange if he or she is offered "minimum essential coverage" by his or her employer in that it is both affordable and provides minimum value, but declines it and obtains coverage in the Exchange?

No. As a general rule, if an eligible employer-sponsored plan constitutes "minimum essential coverage" in that it is both affordable and provides minimum value merely being eligible for the plan will make an individual ineligible for the tax credit. In  Treasury Regulation Section 1.36B-2(c)(3)(iii)(A), the IRS indicates that an eligible employee who declines enrollment in such a plan remains ineligible for the tax credit for each month in the coverage period related to the enrollment period (e.g., for the full plan year in the case of an annual enrollment period).

Would an individual be eligible for premium tax credits and cost sharing subsidies in the Exchange if he or she is enrolled coverage offered by his or employer that is either unaffordable and does not provides minimum value?

If an employee actually enrolls in an eligible employer-sponsored plan, the tax credit is not available-even if the plan does not meet the affordability and minimum value conditions, as provided in Code Section 36B(c)(2)(C)(iii). Employees who are automatically enrolled in an eligible employer-sponsored plan have a grace period to unwind the enrollment to maintain their eligibility for the tax credit, as provided in Treasury Regulation Section 1.36B-2(c)(3)(vii)(B). An employee is not considered eligible for minimum essential coverage (i.e., may qualify for the tax credit) during any required waiting period before coverage becomes effective under an eligible employer-sponsored plan. The IRS is expected to provide a safe harbor under which an employer would not have to pay the shared responsibility tax penalty under Code § 4980H for failing to offer coverage for at least the first three months after an employee's hire date, as provided in Department of Labor Technical Release 2012-01, Q/A-3.

Individuals who meet these thresholds for unaffordable employer-sponsored insurance are eligible to enroll in a health insurance exchange and may receive tax credits to reduce the cost of coverage purchased through the exchange.

What are the amounts of the premium tax credit and cost- sharing subsidies to be provided?

Under Code Section 36B(b), the amount of the tax credit that a person can receive is based on the premium for the second lowest cost silver plan in the Exchange . A silver plan is a plan that provides the essential benefits and has an actuarial value of 70%. (A 70% actuarial value means that on average the plan pays 70% of the cost of covered benefits for a standard population of enrollees.)

Under Code Section 36B(b)(3), the amount of the tax credit varies with income such that the premium that the premium a person would have to pay for the second lowest cost silver plan would not exceed a specified percentage of their income (adjusted for family size), as follows:

Household Income (as percentage of  Federal Poverty Line (FPL) Premium as a Percent of Household Income

Up to133%           2%  of income
133-150%             3-4% of income
150-200%             4-6.3% of income
200-250%             6.3-8.05%  of income
250-300%             8.05-9.5% of income
300-400%             9.5% of income
In addition, Section 1402(b) of PPACA limits the total amount that people must pay out-of-pocket for cost sharing for essential benefits. Generally, the limits are based on the maximum out-of-pocket limits for Health Savings Account-qualified health plans ($6,250 for single coverage and $12,500 for family coverage in 2013), which will be indexed to the change in the Consumer Price Index until 2014 when the provision takes effect.

After 2014, the limits will be indexed to the change in the cost of health Coverage. Individuals with incomes at or below 400% of federal poverty line have their out-of-pocket liability capped at lower levels, as follows:
Household Income (as percentage of Federal Poverty Line (FPL) 

Reduction in Out-of-Pocket Liability
100-200%             Two-thirds of the maximum
200-300%             One-half of the maximum
300-400%             One-third of the maximum
The limits on out-of-pocket maximum amounts means that a person with income of 150% of poverty purchasing coverage in the exchange would have the limit on their out-of-pocket spending reduced to at least two-thirds of the generally applicable maximum value (for example, if the provision were in effect in 2013, the out-of-pocket maximum for single coverage for such a person would be about $2,083 for single coverage and $4,166 for family coverage).

In addition, Section 1402(c) of PPACA provides that federal payments will be made to health insurers to increase the actuarial value of the plan for individuals with household incomes under 250% of the federal poverty line. For example, for individuals with household incomes between 100% and 150% of federal poverty line, the actuarial value of the plan will be increased to 94%. That means that in addition to keeping within the lower out of pocket maximums established above, insurers must make other changes to increase the actuarial value of the coverage. Most likely this will mean reducing plan deductibles, coinsurance or copayments in order to meet the higher actuarial value requirements.

For individuals with household incomes over 250% of federal poverty line, the actuarial value of their plan may not exceed 70%, which is the basic value of the silver plan even for those who receive no financial assistance. This means that, for some individuals, some cost sharing amounts could increase. That would happen if their out of pocket maximum was decreased to keep within the required lower maximum, because the deductibles, copayments or coinsurance that would otherwise apply would have to be increased to keep the actuarial value at 70%.

The last cost sharing subsidy is summarized below:

Household Income (as percentage of Federal Poverty Line (FPL) Net Value of the Subsidy (% of Actuarial Value)
Out-of-Pocket Liability
100-150%                            94%
150-200%                         87%
200-250%                         73%
250-400%                         70%

Who determines an individual's eligibility for the premium tax credit and the cost-sharing subsidies?

Under 45 CFR Section 155.300, HHS is requiring the Exchanges to establish a system of coordinated eligibility and enrollment so that an individual can simultaneously apply for enrollment in a Qualified Health Plan ("QHP"), as well as Insurance Affordability Programs ("IAPs"), including the premium tax credit and cost-sharing reductions. Under Treasury Proposed Regulation Section 301.6103(l)(21). The IRS is permitted to disclose income and other specified information about an individual taxpayer to HHS for purposes of making eligibility determinations for advance payments of the premium tax credit or the cost-sharing reductions.

When an individual purchases a Qualified Health Plan how are any credits and subsidies applied?

Under the Actuarial Value and Cost-Sharing Reductions Bulletin (released by HHS), when an individual receives covered essential health benefits, the provider would collect from the individual only the amount of cost-sharing specified in the silver plan variation in which the individual is enrolled. The federal government would pay in advance to the insurer amounts estimated to cover the cost-sharing reductions associated with the specific silver plan variation. HHS intends to propose that this advance cost-sharing reduction payment to the insurer would occur monthly, and that after the end of the calendar year, the federal government would reconcile the advance payments to actual cost-sharing reduction amounts. 

The Exchange must report to the IRS and to each taxpayer required information for the Qualified Health Plan in which the employee (or a member of the employee's family) is enrolled through the Exchange, as provided in Treasury Regulation Section 1.36B-4. In turn, individuals who receive advance payments of the premium tax credit must file an income tax return for that taxable year, as provided in Treasury Regulation Section 1.36B-5.

For More Information:

If you have any comments or questions regarding any of above information, please do not hesitate to call (708) 717-9638 or e-mail at  larry[at]larrygrudzien[dot]com

Thursday, September 20, 2012

Look to the state of Washington to see what a health insurance death spiral looks like.

Here's an older article talking about what happened in the state of Washington. Focus on the pre-ex clause. Even with an individual mandate (which doesn't impact 47% of the population and the rest will be a very minor penalty). If we don't impose a pre-existing condition clause on a person who chooses NOT to take coverage during an "open enrollment period" then we will have the same issues as Washington did. It's not the individual mandate, it's also the pre-ex that can kill insurance.


Wednesday, September 12, 2012

Family Health Premiums reach $15,745 this year and how much you'll need to pay in 2014

I was reading USA Today this morning and an article listed two surveys stating that the average cost of coverage for a family is $15,745/year (http://usat.ly/PiBDpC) with employees paying $4,300/year of that cost. This translates into a 4% increase from last year, but with salary increases flat, the average family just lost buying power.

That said, let's see how the Affordable Care Act will impact the employee's portion of the cost of insurance in 2014. Here are the actual percent payouts based upon family income:

  • 150% - 200% of Federal Poverty Level (FPL) equals people paying up to 6.3% of their income on health insurance. 
  • 201% - 250% of FPL equals 8.05% of their income on health insurance. 
  • 250% - 400% FPL equals 9.5% of their income on health insurance.

Let's see how this stacks up with the $4,300/year the average family pays towards their health insurance (assuming a family of 4).
In 2012, the FPL is $23,050 for a family of four.
150% of FPL = $34,575/year of income with a maximum spent on health insurance being $2,178.23.
200% of FPL = $46,100/year of income with a maximum spent on health insurance being $3,711.05.
250% of FPL = $57,625/year of income with a maximum spent on health insurance being $5,474.38.

What this means, especially in the Chicagoland area, is that you won't notice a change in your premium when health reform occurs. What health reform gives you is an opportunity of purchasing your own coverage and NOT being depended upon your employer. It will be interesting to see how many employees leave to start their own businesses or become consultants.


Again, the Affordable Care Act is not what it is hyped to be. There will be no "free healthcare" for the majority of Americans. Most likely, they will be paying the same or a little bit more for their coverage than what they are paying now. The best part of health reform is that anyone can obtain a plan (guaranteed issue), with no pre-existing conditions (everything is covered from day one - as long as the insurance plan covers the conditions), and a person cannot be charged an extra premium other than if they are a smoker (community rating).

Thursday, August 23, 2012

Compliance Questions -HSAs and Health FSAs - Eligibility Issues

Compliance Questions -HSAs and Health FSAs - Eligibility Issues     

August 23, 2012

One of my employees just enrolled in a High Deductible Health Plan ("HDHP") and is now eligible to contribute to a Health Savings Account ("HSA").  A few months ago, his spouse enrolled in a general- purpose Health Flexible Spending Account ("Health FSA").  She enrolled the whole family, including her spouse. If the spouse never submits claims for her husband, is he still eligible to contribute to an HSA?


Individuals who are covered by traditional, general-purpose Health FSA are not eligible for HSA contributions. This rule applies whether the individual is the participant in the Health FSA or simply someone whose expenses can be reimbursed-both are considered "covered." Thus, an employee's spouse will not be eligible for HSA contributions if the spouse's qualified medical expenses can be paid or reimbursed under the general purpose Health FSA in which the employee participates, as provided in Revenue Ruling 2004-45 and IRS Notice 2005-86. Nothing in the guidance limits this principle to spouses, so adult children and other individuals (e.g., domestic partners) who have HDHP coverage-and thus might otherwise be able to make contributions to their own HSAs-will not be eligible to make HSA contributions if they are also covered by a family member's general-purpose Health FSA. 

A family member's eligibility may be preserved if the Health FSA excludes him or her from coverage. But at the present time, it is unusual for a Health FSA to restrict coverage, for example, solely to the covered employee or solely to the covered employee and children (but not the spouse). Most of these arrangements allow benefits for any eligible tax dependent. Plan documents and administrative procedures would need to be redesigned in order to facilitate such an "employee-only" or "employee-plus-children (but not spouse)" coverage option. It is not sufficient for an individual to simply promise not to request reimbursement (even if the promise is kept and no claims are ever submitted).

In general, an individual who is covered by a general-purpose Health FSA will be ineligible for HSA contributions for the individual's entire period of coverage under the Health FSA -even after the individual has completely exhausted his or her Health FSA.

Although an individual generally will not be eligible to contribute to an HSA for the entire period of coverage under a general-purpose Health FSA even if the Health FSA account balance has been exhausted, an individual with a $0 balance at plan year-end under a general-purpose Health FSA with a grace period can disregard that Health FSA coverage and be HSA-eligible during the grace period, as provided in IRS Notice 2007-22. This rule requires that the $0 balance be determined on a cash basis and taking into account the uniform coverage rule. Cash basis means the balance as of the relevant date, without taking into account expenses that have not been reimbursed as of that date. Thus, pending claims, claims submitted, claims received, or claims under review that have not been paid as of a date are not taken into account. 

Written by:
Larry Grudzien
Larry Grudzien, Attorney at Law | 708 South Kenilworth Ave. | Oak Park | IL | 60304

Thursday, August 16, 2012

IRS To Apply Tax Credits to All Health Insurance Exchanges

As stated in an Associated Press article, Republicans grilled the Internal Revenue Service on it's decision to apply tax credits to all exchanges, regardless of whether they are state run or federally run. The law itself is fuzzy in that many interpreted it to say that if the Federal Government ran the exchange, then there would be no tax credits for individuals.

Furthermore, one item which not enough people have realized is that the individual mandate has no teeth. The IRS cannot file criminal charges, seize bank accounts, or garner wages. All they can do is withhold a person's refund. As over 40% of the American population doesn't pay income tax, it really is a moot point.

Here's a link to the original article.


Tuesday, August 14, 2012

Coordination of Benefits for Medicare Eligible People

You will be turning 65 soon (become Medicare Eligible), but still plan on working for your employer for several more years. Do you need to take Medicare parts A and B? 

The answer is it depends. Below is a snippet from a Humana newsletter that tried to explain how it works (BTW, this is for almost all insurance companies/plans):

Coordinating Medicare and employer health plans isn't a complicated proposition if you know the facts. Active employees cannot be dropped from employer group health plans without violating the federal Age Discrimination Employment Act (ADEA) except in specific circumstances. Medicare secondary payer rules also prohibit employers from reducing health benefits to current employees because of their Medicare eligibility. Plus, the Equal Employment Opportunity Commission issued an informal letter late last year that advised the exemption for coordination with Medicare is only applicable to retirees, not current employees. As older workers delay retirement – or opt to forego retirement altogether, the need for clarity on how to navigate coordination of Medicare and employer-based insurance has become crucial.

Coordination requirements depend on the size of the employer-based healthcare plan.

Under a small group plan, defined as 20 or fewer employees, Medicare becomes the primary health coverage for eligible employees. The employee might not have health insurance if he or she declines Medicare Part B coverage, outpatient, and doctors benefits. Expenses of Part B-eligible employees who become injured and are covered by the group health plan can see the program stop payment – or attempt to recoup payments – creating a nightmarish scenario for employees. An employer who decides to remain the primary payer (an option currently allowed) must receive written confirmation from the employee and the health plan.

In large group plans of 20 or more employees, the amount of coverage employers must provide changes. The employee is not required to opt for Part B but can accept Part B as secondary coverage. When the employee stops working, Part B becomes the primary payer. In the case of a multiple-employer plan, the size of the largest employer dictates whether the group plan size is small or large and therefore, the category of coordination requirements and coverage to which all the employers in the group must adhere.

Additional guidance is available from several sources. National nonprofit consumer service group Medicare Rights Center, along with Cook County, Illinois-based AgeOptions, created a toolkit of educational materials on this subject. The toolkit, "How Medicare Works with Employer-Based Health Insurance: A Guide for Employers, Professionals and Consumers," is designed to help older workers knowledgeably make their way through the transition from employer-based health insurance to Medicare. 

Now in Illinois, if you are enrolled in an HMO plan for an employer with LESS THAN 20 employees, you actually do NOT need to get Part B as an HMO treats payments differently than other plans. That said, please check with your employer/health insurance agent FIRST to confirm that this is still the case in your situation.

Thursday, August 9, 2012

Transitional reinsurance program may add 3% - 4% to costs for individual and group health insurance according to United Healthcare

United Healthcare and Anthem Blue Cross Blue Shield both send out information on the transitional reinsurance program which is a part of the Affordable Care Act. According to United Healthcare, this program will increase cost 3% to 4% starting in 2014. The purpose of the reinsurance program is to stabilize the premiums of insurers who take on high cost people (think about your Aunt Edna who is 400 pounds, has high blood pressure, high cholesterol, diabetes, takes 8 medications/day and needs a double knee replacement) in the individual market due to it being guaranteed issue with no pre-existing conditions. This plan will compensate those insurance companies who insure those individuals. The reinsurance program fees will total $12 billion in 2014 and gradually decrease to $5 billion in 2016. States can actually increase these fees at their discretion.

What this means is that the average cost of a health insurance plan will be 3%-4% higher in 2014 due to this reinsurance program alone (fees are ultimately passed on to consumers).

Also starting September 30, 2012 there is a new fee assessed on health insurers (and self insured plans) of $1 per covered life and increasing to $2 per covered life in the second year. This fee helps to fund research on the effectiveness of medical treatments conducted by the new Patient-Centered Outcomes Research Institute (PCORI). The good news is that the most effective treatments will be found and recommended. The bad news is that I wouldn't be surprised if expensive and obscure treatments are "defunded" from health insurance plans (excluded from coverage). That second item is only speculation, but it seems to correlate with many single payer systems around the world.

By the way, if you offer an HRA, even if it is in conjunction with a fully insured plan, it is considered a self-funded plan and you will need to submit those fees to the government. Yes, this means you pay twice.

More updates will be coming.

Wednesday, August 1, 2012

New HSA Guidelines for 2013

New HSA Guidelines for 2013

Here are some highlights for 2013.

Minimum Individual Deductible
Minimum Family Deductible
Maximum Individual Out-of-Pocket (in network)
Maximum Family Out-of-Pocket (in network)
Maximum HSA Individual Contribution
Maximum HSA Family Contribution

  1. Maximum contributions are $3250 for an individual (up $150) and $6450 for a family (up $200). Person’s aged 55 years old and older can add an additional $1000/year as a catch up contribution (no change).

  2. Minimum Deductibles are the same. The minimum deductible for an individual plan is $1,250 and for a family it is $2,500.

  3. Catch up contributions for those 55 years old and older is still $1,000/year.

  4. Maximum out of pocket has changed. The maximum out of pocket (including deductible) on an individual plan is now $6250 (up $200) and for a family it is $12,500 (up $400).

Items that haven’t changed, but are beneficial to know.

  • You can put the full amount in immediately without waiting (This even applies to new hires or a person starting an HSA qualified health plan in the middle of a calendar year).

  • You can put the maximum contribution into your HSA account, regardless of your deductible.

  • A person can choose to accumulate HSA qualified expenses over the course of years (instead of taking the expenses out of the HSA account at the time of service). Every year they need to fill out a Form 8889 and carry the balances forward. At 65 years old, they can then take a distribution equal to the total amount of expenses incurred tax free.

  • An individual can take a one-time distribution from their IRA to fund their HSA account.

  • As always, you have until April 15th (or when you file your taxes) to contribute to your HSA savings account for last year.

Check with your accountant for more information on how this would specifically apply to you.

Here is a link to the original IRS announcement: http://www.irs.gov/pub/irs-drop/rp-12-26.pdf.

Copyright 2012 Robert C Slayton

Sunday, July 29, 2012

Health Reform Questions - Employer Mandate

Health Reform Questions 

- Employer Mandate     

 By Larry Grudzien

What employers are subject to the employer mandate in 2014?  When are they subject to any penalties?  What are these penalties?

In general:

Beginning in 2014, certain large employers may be subject to a penalty tax (also called an "assessable payment") for failing to offer health care coverage for all full-time employees (and their dependents), offering minimum essential coverage that is unaffordable, or offering minimum essential coverage under which the plan's share of the total allowed cost of benefits is not at least 60% (referred to as "minimum value"). The penalty tax is due if any full-time employee is certified to the employer as having purchased health insurance through an Exchange  with respect to which a tax credit or cost-sharing reduction is allowed or paid to the employee, as provided in Code section  4980H.

What is a large employer for purposes of the employer mandate?

The penalty tax (or assessable payment) applies to "applicable large employers." An applicable large employer for a calendar year is an employer who employed an average of at least 50 "full-time employees" on business days during the preceding calendar year, as provided in Code Section 4980H(c)(2)(A).

What factors are used to determine whether an employer is an "applicable large employer"?

For purposes of determining whether an employer is an applicable large employer, an employer must include not only its full-time employees but also a full-time equivalent for employees who work part-time. To do so, the employer must add up all the hours of service in a month for employees who are not full-time and divide that aggregate number by 120. The result of that calculation is then added to the number of full-time employees during that month. Then, if the average number of employees for the year is 50 or more, the employer is an applicable large employer, as provided in Code Section 4980H(c)(2)(E).
Under Code Section 4980H(c)(2)(C)(i), all entities treated as a single employer under the employer aggregation rules will be treated as one employer.

How are seasonal employees counted in determining whether an employer is an "applicable large employer?

Under Code Section  4980H(c)(2)(B)(i), a special rule enables an employer that has more than 50 full-time employees solely as a result of seasonal employment to avoid being treated as an applicable employer. Under this rule, an employer will not be considered to employ more than 50 full-time employees if (a) the employer's workforce only exceeds 50 full-time employees for 120 days, or fewer, during the calendar year; and (b) the employees in excess of 50 who were employed during that 120-day (or fewer) period were seasonal workers.*"Seasonal worker" means a worker who performs labor or services on a seasonal basis as defined by the DOL, including agricultural workers covered by 29 CFR § 500.20(s)(1) and retail workers employed exclusively during holiday seasons , as provided  in Code Section 4980H(c)(2)(B)(ii).

Which employees are considered "full-time" for the employer mandate?

Under Code Section 4980H(c)(4)(A), a "full-time employee" for any month is an employee who is employed for an average of at least 30 hours of service per week.

What is the penalty if an applicable large employer does not offer minimum essential coverage to its employees?

Beginning in 2014, Code Section 4980H(a) provides that an applicable large employer will pay a penalty tax (i.e. make an assessable payment) for any month that-

(1) the employer fails to offer its full-time employees (and their dependents) the opportunity to enroll in "minimum essential coverage" under an "eligible employer-sponsored plan" for that month; and

(2) at least one full-time employee has been certified to the employer as having enrolled for that month in a QHP for which health coverage assistance is allowed or paid.

What is the amount of assessable payment (penalty tax)?

Code Section 4980H(a) provides that the penalty tax (assessable payment) is equal to the product of the "applicable payment amount" and the number of individuals employed by the employer (less the 30-employee reduction) as full-time employees during the month. The "applicable payment amount" for 2014 is $166.67 with respect to any month (that is, 1/12 of $2,000). The amount will be adjusted for inflation after 2014.

What is "minimum essential coverage"?

Under Code Section 5000A(f)(1), the term "minimum essential coverage" means coverage under any of the following: (a) a government-sponsored program, including coverage under Medicare Part A, Medicaid, the CHIP program, and TRICARE; (b) an "eligible employer-sponsored plan;" (c) a health plan offered in the individual market; (d) a grandfathered health plan; or (e) other health benefits coverage (such as a State health benefits risk pool) as HHS recognizes.

What is an "eligible employer-sponsored plan"?

Under Code Section 5000A(f)(2), it means a group health plan or group health insurance coverage offered by an employer to an employee that is (a) a governmental plan, or (b) any other plan or coverage offered in a state's small or large group market

Under what circumstances will an applicable large employer be subject to the penalty tax if it offers its employees minimum essential coverage?

Beginning in 2014, Code Section 4980H(b)(1) provides that an applicable large employer will pay a penalty tax (i.e., make an assessable payment) for any month that-

(1) the employer offers to its full-time employees (and their dependents) the opportunity to enroll in "minimum essential coverage" under an eligible employer-sponsored plan for that month; and

(2) at least one full-time employee of the employer has been certified to the employer as having enrolled for that month in a QHP for which a premium tax credit or cost-sharing reduction is allowed or paid. 

If an employee is offered affordable minimum essential coverage under an employer-sponsored plan, then the individual generally is ineligible for a premium tax credit and cost-sharing reductions for health insurance purchased through an Exchange.

When would employees offered minimum essential coverage by an employer be eligible for a premium tax credit and cost-sharing reductions for health insurance purchased through the Exchange?

Under Code Section 36B(c)(2)(C), employees covered by an employer-sponsored plan will be eligible for the premium tax credit if the plan's share of the total allowed costs of benefits provided under the plan is less than 60% of those costs (that is, the plan does not provide "minimum value"), or the premium exceeds 9.5% of the employee's household income. The employee must seek an affordability waiver from the Exchange. The penalty tax applies for employees receiving an affordability waiver. In order to get the premium tax credit and cost-sharing reduction, however, an employee must decline to enroll in the coverage and purchase coverage through the Exchange instead, as provided under Code Section 36B(c)(2)(C).

When would the penalty tax be assessed?

To be considered minimum essential coverage, the coverage will need to meet an affordability requirement (which compares cost to income and provide minimum value (i.e., it will need to pay at least 60% of the total allowed cost of benefits. The penalty tax is due if any full-time employee is certified to the employer as having purchased health insurance through an Exchange with respect to which a premium tax credit or cost-sharing reduction is allowed or paid to the employee. Employers who provide coverage under an eligible employer-sponsored plan that does not meet the affordability and minimum value requirements may nevertheless avoid the tax to the extent employees actually participate in the plan, as provided under Code Section  36B(c)(2)(C)(iii).

What is the amount of the assessable payment (penalty tax?)

Code Section 4980H(b)(1) provides that the penalty tax (assessable payment) is equal to $250 (1/12 of $3,000, adjusted for inflation after 2014) times the number of full-time employees for any month who receive premium tax credits or cost-sharing assistance (this number is not reduced by 30).  This penalty tax (assessable payment) is capped at an overall limitation equal to the "applicable payment amount" (1/12 of $2,000, adjusted for inflation after 2014) times the employer's total number of full-time employees, reduced by 30, as provided in Code Section  4980H(b)(2).

How will the minimum value for an employer-sponsored plan be determined?

In IRS Notice 2012-31, the IRS requested comments on several approaches to the minimum value determination, including evaluating plan designs that will cover part or all of 2014 and suggestions for transitional relief for plan years that start before and end in 2014. This determination of minimum value for employer plans will be consistent with previous HHS guidance on "actuarial value," which is relevant for determining coverage levels for qualified health plans ("QHPs) offered through the Exchanges.

In IRS Notice 2012-31, the IRS described three potential approaches, for determining minimum value. They include:

- Minimum Value Calculator:  The IRS will develop a MV calculator for use by self-insured plans and insured large group plans. Under this approach, plans with certain standard cost-sharing features (e.g., deductibles, co-insurance, and maximum out-of-pocket costs) will be able to enter information about four core categories of benefits (physician and mid-level practitioner care, hospital and emergency room services, pharmacy benefits, and laboratory and imaging services) into the calculator based on claims data of typical self-insured employer plans. The calculator would also take into consideration the annual employer contributions to an HSA or amounts made available under an HRA, if applicable. Comments are specifically requested on how to adjust for other benefits (e.g., wellness benefits) provided under a plan using the calculator.

-Design-Based Safe Harbor Checklists:  As an alternative, an array of safe harbor checklists would be provided so plans may compare to their own coverage. The safe harbor checklists would be used to make minimum value determinations for plans that cover all of the four core categories of benefits and services (physician and mid-level practitioner care, hospital and emergency room services, pharmacy benefits, and laboratory and imaging services) and have specified cost-sharing amounts. Each safe harbor checklist would describe the cost-sharing attributes of a plan (e.g., deductibles, co-payments, co-insurance, and maximum out-of-pocket costs) that apply to the four core categories of benefits and services.

-Actuarial Certification:  The last approach  would be available for plans with "nonstandard" features (such as quantitative limits on any of the four categories of benefits, including, for example, a limit on the number of physician visits or covered days in a hospital) since these plans would not be able to use a calculator or the safe harbor checklists. Plans would be able to generate an initial value using a calculator and then engage a certified actuary to make appropriate adjustments that take into consideration the nonstandard features. Plans with nonstandard features of a certain type and magnitude would also have the option of engaging a certified actuary to determine the plan's actuarial value without the use of a calculator.
How can employer determine whether its coverage is affordable when it will not know the employee's household income?

In  finalized regulations to implement the premium tax credit through the Exchange, the IRS indicated that it was their intention to issue proposed regulations or other guidance that would allow employers to use an employee's Form W-2 earnings (instead of household income) in assessing affordability. 

Thursday, July 19, 2012

What Can an Employer Do with the Medical Loss Ratio Rebates

From Guest Contributor Larry Grudzien (larrygrudzien.com).

My client sponsors a group health plan for its employees. It recently received a medical loss rebate check from its insurer. The employer is asking what he should do with it.   Can he keep it? Or does he have to give a portion of the rebate to the participants?  

Allocating the Rebate

Technical Release 2011-04, the Department of Labor (DOL) outlined how employers should handle rebates for their ERISA group insured health plans. The DOL indicated that to the extent that all or a portion of the rebate constitutes a "plan asset," the employer may have a fiduciary duty to share the rebate with participants.

In the absence of specific plan or policy language, the determination of whether a rebate is considered to be a plan asset will depend, in part, on the identity of the group policyholder. If the plan or trust is the policyholder, the rebate will likely be considered a plan asset under ordinary notions of property rights. This means it stays with the plan and the employer cannot share in any part of it.

If the employer is the policyholder, the determination will hinge on the source of the premium payments and the percentage of premiums paid by the employer, as opposed to plan participants. If a portion of the premium is paid by participants, that portion will be considered a plan asset and must be used for their benefit. An employer cannot use the rebate generated by one plan to benefit participants in another plan. Such action would constitute a breach of fiduciary duty.

If all or a portion of a rebate does constitute a plan asset, then the plan sponsor will have to determine how and to whom to allocate the rebate. For example, must a portion of the rebate be allocated to former plan participants? The selection of an allocation method must be reasonable and it must be made solely in the interest of plan participants and beneficiaries.

In making the determination, the plan fiduciary may weigh the costs to the plan - and the ultimate plan benefit - when deciding on an allocation method. If the cost of calculating and distributing shares of a rebate to former participants approximates (or exceeds) the amount of the proceeds, a plan fiduciary is permitted to limit the allocation to current plan participants.

If it is not cost-effective to distribute cash payments to plan participants (because the amounts are de minimis, or they would produce negative tax consequences for the participants), the fiduciary may use the rebate for other permissible plan purposes. These might include a credit against future participant premium payments or benefit enhancements.

Notices to Subscribers

Insurers must send written notices to group policyholders - and their subscribers -informing them that a rebate will be issued. Employers should be prepared to respond to questions from participants who receive these notices, particularly if the sponsor does not intend to share any of the rebate with those participants.

The notice must include information regarding:

* The purpose of the MLR requirement imposed by the ACA;
* The applicable MLR standard;
* The issuer's actual MLR for the reporting year at issue and its adjusted aggregate premium revenue;
* The rebate being provided; and
* If applicable, an explanation that the rebate is being provided to the policyholder.

For ERISA plans, this explanation must state that policyholders may have obligations under ERISA with respect to the handling of the rebate amount, and the contact information for the ERISA covered plan. For other group health plans (such as non-federal governmental plans), the explanation must explain how the policyholders will use the rebate to benefit subscribers

Likewise, even if an insurer meets the Medical Loss Ratio requirements, it must notify subscribers that no rebate will be issued. This notice must be included with the first plan document provided to enrollees on or after July 1, 2012. Model notices are available on the Centers for Medicare & Medicaid Services website.

Tax Consequences

For participants in a group plan, the tax consequences will depend on factors such as the source of the premium payments (employer versus participant), whether participant premiums were paid on an after-tax or pre-tax basis.

If the rebate is distributed as a premium reduction for the employee, then the amount paid for the coverage is less, resulting in increased taxable wages. If the rebate is distributed in cash, then the rebate is treated as taxable wages, subject to income and employment taxes.

A link to Technical Release 2011-04 is provided below:

Tuesday, July 10, 2012

His and Hers FSAs? You bet!

Starting January of 2013, the maximum limit to fund a Health Flexible Spending Account (FSA) is $2500. Currently there is no preset limit (other than a maximum your employer chooses, if any). If you have been contributing more than $2500/year to a Health FSA, then the Affordable Care Act upheld by the Supreme Court just cut your contribution.

There is, however, an alternative if you and your spouse both work. The maximum INDIVIDUAL limit is $2500 in 2013 for a Health FSA. This means that if both you and your spouse work for companies that allow each to have a Health FSA, both can contribute up to $2500 each for a total of $5000/year.

This doesn't help everyone, but at least it's a tip for those who fall into this category.

Thursday, June 28, 2012

How the Supreme Court ruling on the Affodable Care Act impacts you

As you already know, the Supreme Court upheld the Affordable Care Act law this morning.

There are no major changes planned until January 1, 2014 when all health insurance becomes guaranteed issue with no pre-existing conditions. Details still need to be worked out as to how this will work. The changes as a result of the Act that have already been implemented will continue.

If you have been uninsured for 6 or more months and cannot qualify for individual or group health insurance, then you can go on the Federal Government’s “Pre-existing Condition Insurance Plan – PCIP.” If you have been uninsured for less than 6 months, then the Illinois CHIP plan is available to you (if you live in a different state, I can get you the details about your specific state).

In 2014, there will be tax credits to help offset the cost of the premiums. Furthermore, depending upon how the state you live in decides. There “may” be an expansion of Medicaid to help people get the care they need. The Supreme Court left it up to the States to decide whether they wanted to expand Medicaid or not.

There are changes coming in September about a Summary Benefit Coverage document that will need to be created. As far as I understand, if you are on a fully insured plan, the insurance carrier will provide this. If you are considered self insured, you will need to develop one. I have people and resources who can write an SBC.

Premiums will continue to rise, especially since most plans will be forced to cover more items (minimum essential benefits). This naturally leads to higher costs. Come 2014, there may be some relief for individuals and small businesses. The rules for each part of the Act still need to be written to spell out exactly who is eligible, how tax credits/subsidies will work, and where the money comes from.

The Act has about 2700 pages. Most of the Act needs to be defined further in order to be able to implement the law. It is expected that there will be around 200,000 to 300,000 pages of rules written. Until the rules are written for each part, we won’t know specifically how it impacts individuals and businesses.

I just finished an interview with Mike Tobin of Fox News which will most likely air tomorrow morning (if they don’t leave me on the cutting room floor). I will also be live on wbjc AM 1230 (wbjc.com) at 7:10 am talking about the Act. Feel free to listen in.

Wednesday, May 9, 2012

Essential Health Benefits, who needs to provide them starting in 2014.

Essential Health Benefits, who needs to provide them starting in 2014. 

This section also says that plans will continue to impose restrictions on services consistent with the plan option the state chooses for their essential health benefits (EHB) plan. For example, limiting the number of physical therapy visits.

#10 of the following guidance states:

Q: How would the intended EHB policy affect self-insured group health plans, grandfathered group health plans, and the large group market health plans?  How would employers sponsoring such plans determine which benefits are EHB when they offer coverage to employees residing in more than one State?

A:  Under the Affordable Care Act, self-insured group health plans, large group market health plans, and grandfathered health plans are not required to offer EHB.

However, the prohibition in PHS Act section 2711 on imposing annual and lifetime dollar limits on EHB does apply to self-insured group health plans, large group market health plans, and grandfathered group market health plans.  These plans are permitted to impose non-dollar limits, consistent with other guidance, on EHB as long as they comply with other applicable statutory provisions.  In addition, these plans can continue to impose annual and lifetime dollar limits on benefits that do not fall within the definition of EHB.

To determine which benefits are EHB for purposes of complying with PHS Act section 2711, the Departments of Labor, Treasury, and HHS will consider a selfinsured group health plan, a large group market health plan, or a grandfathered group health plan to have used a permissible definition of EHB under section 1302(b) of the Affordable Care Act if the definition is one that is authorized by the Secretary of HHS (including any available benchmark option, supplemented as needed to ensure coverage of all ten statutory categories).  Furthermore, the Departments intend to use their enforcement discretion and work with those plans that make a good faith effort to apply an authorized definition of EHB to ensure there are no annual or lifetime dollar limits on EHB.

For the full FAQ, go to the website listed below.


Monday, April 9, 2012

What We’re Reading
-This is from NAHU.org's weekly update. It's lighthearted with many great links. Enjoy.
Robert Slayton
From PPACA replacement plans to pregnant men, our reading list this past week has been very entertaining!
A popular current speculation topic among health wonks everywhere right now is what will happen to the private health insurance marketplace if the Supreme Court strikes down PPACA’s individual mandate provision but upholds the rest of the rest of the law. Even the political satire site The Onion has gotten in on it, predicting that the administration will simply replace Obamacare with “Ointmentcare.” For those who prefer a more serious take on the potential problem, the Washington Post’s Wonk Blogand Bloomberg News have got you covered. 

Guess what? Employer-provided private coverage is more robust than Medicare. This new study offers proof. 
In case you were wondering, the GOP is working on a PPACA replacement plan, and the word on the street is that it will focus on cost containment. The New York Times has the scoop.

Even if PPACA is completely struck down or eventually repealed, health insurance exchanges may live on in some states.

Did you know that there are 17,000 pregnant men in Great Britain? Or more accurately, 17,000 men and Britain’s National Health Service are dealing with provider coding errors. Good thing in the United States we have an ICD-10 implementation delay and health insurance agents to help resolve claims issues!

Sometimes the husband of a certain Washington Update author suggests that the words humor and health policy don’t really go together. But this week’s political cartoon from Kaiser Health News proves him wrong (again). While not exactly mainstream media, it does show that there are a few other people out there in the world who find jokes about risk pools, broccoli and the Supreme Court proceedings funny.

Monday, March 26, 2012

Supreme Court and PPACA Schedule

This is from the Galen Institute (galen.org). I love the last line about the website "will crash."

Liberty’s Landmark Week 

Grace-Marie Turner

National Review Online, March 26, 2012

The Supreme Court will hear six hours of arguments over three days about four questions involving the 26-state challenge to Obamacare. Here is a quick guide to what you need to know to follow the case, which former attorney general Ed Meese has called “the most important case to come before the court in 100 years.”

10 a.m. Monday: 90 minutes on whether the fine associated with the individual mandate is a penalty or a tax. If it’s a penalty, then the court can proceed with deciding whether the mandate is constitutional. If the justices decide it’s a tax, we’ll have to wait until someone who doesn’t buy health insurance in 2014 pays the “tax” in 2015, when the legal challenge must start all over again.
Best conjecture: The Court will decide it is a penalty and not a tax, telling the president and supporters of the law they can’t deny it is a tax all through the debate over the law then switch to saying it is a tax in court to try to pass constitutional muster.

10 a.m. Tuesday: Two hours of argument on the individual mandate. Is it constitutional for Congress to mandate that free citizens must purchase government-defined private health insurance with their own money, under penalty of federal law?

Obamacare supporters say this is just another step in the expansion of the Commerce Clause of the Constitution, that health care is definitely commerce, and the mandate is “necessary and proper” for the federal health-overhaul scheme to work. Opponents say the mandate compels people to engage in commerce, even against their will, and forces them to enter into a binding contract — police-state tactics unprecedented in our democracy.

Best conjecture: This is the court’s chance to put the brakes on the expansion of the Commerce Clause; if it fails to do so, there will be no limiting legal principle to keep Congress from mandating how we must spend our personal, after-tax dollars. If the mandate is declared unconstitutional, it will most likely be a 5–4 decision. If it is upheld, other justices may join the majority for a 6–3 or even a 7–2 decision.

10 a.m. Wednesday: Ninety minutes on severability. If the mandate is unconstitutional, is it severable from the rest of the law? Lower courts have implied severability, and the Supreme Court could, as well. It could 1) strike only the mandate; 2) strike the mandate as well as several of the associated insurance regulations requiring health insurers to sell policies to all comers, charging the sick and the previously uninsured the same price they charge the healthy and those who have maintained prior insurance coverage, and 3) strike all of Title I, as the American Enterprise Institute’s Tom Miller advised in an amicus brief that would rid the law of the individual mandate, the employer mandate, state health exchanges, most federal health insurance rules, and hundreds of billions in new spending for new entitlement subsidies; or 4) anything else the court chooses.

Best conjecture: U.S. District Court Judge Roger Vinson notes that the government has said more than a dozen times that the individual mandate is central to the workings of the health overhaul, so if the mandate is unconstitutional, then the whole law must go. Most likely, the court will imply severability, in which case, the best scenario would be striking all of Title I.

2 p.m. Wednesday: One hour on the mandatory Medicaid expansion. This is the main event that the states are waiting for: Can the federal government require the states to expand their Medicaid programs to a level many say will bankrupt them as a condition of receiving current Medicaid funding?
The states will argue that this is an unconstitutional infringement of the Tenth Amendment’s protection of their sovereignty. The government will argue that, if the states take Medicaid money, they must expand their Medicaid programs as part of the deal.

Best conjecture: The states have a tough battle here, since no lower courts have backed their position. Their recourse, if they were to lose, is the Paul Ryan budget, which disburses Medicaid funding to the states as block grants so states have control over how it is spent. The next Congress could then scale back the expansion.

What to watch:
The daily audio tapes and unofficial transcripts will be posted at www.supremecourt.gov as soon as they can be digitized (by 2 p.m. on Monday and Tuesday, and by 4 p.m. on Wednesday, because there’s a double session that day). The official website will crash, so follow our posts on NationalReview.com and galen.org, and our Twitter and Facebook posts.

It’s almost impossible to get tickets to get into the courtroom, and BlackBerries and cellphones are confiscated from all who enter. We’re not standing in line, so will be gathering information however we can to provide you with updates and insights.

The justices will meet, most likely on Friday, to vote on the four issues. Then they and their clerks will begin writing what will likely be a complex network of decisions, which will be handed down by the end of June.

Monday, March 19, 2012

FAQs About Affordable Care Act Implementation Part VIII

This is from the US Department of Labor. The original link will be at the end of the blog. If you have questions on this, please contact me.

FAQs About Affordable Care Act Implementation Part VIII

Set out below are additional Frequently Asked Questions (FAQs) regarding implementation of the summary of benefits and coverage (SBC) provisions of the Affordable Care Act. These FAQs have been prepared jointly by the Departments of Labor, Health and Human Services (HHS), and the Treasury (the Departments). Like previously issued FAQs (available at http://www.dol.gov/ebsa/healthreform/ and http://cciio.cms.gov/resources/factsheets/), these FAQs answer questions from stakeholders to help people understand the new law and benefit from it, as intended.

Summary of Benefits and Coverage (SBC)

On February 14, 2012, the Departments published the final rules regarding the SBC.(1) These FAQs aim to answer some of the questions that have been raised to date. We intend to release additional FAQs. The Administration is committed to promoting operational efficiencies and clarifying the final regulations to ensure successful implementation.

Q1: When must plans and issuers begin providing the SBC?

For group health plan coverage, the regulations provide that, for disclosures with respect to participants and beneficiaries who enroll or re-enroll through an open enrollment period (including late enrollees and re-enrollees), the SBC must be provided beginning on the first day of the first open enrollment period that begins on or after September 23, 2012. For disclosures with respect to participants and beneficiaries who enroll in coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees), the SBC must be provided beginning on the first day of the first plan year that begins on or after September 23, 2012.
For disclosures from issuers to group health plans, and with respect to individual market coverage, the SBC must be provided beginning September 23, 2012.

Q2: What is the Departments' basic approach to implementation of the SBC requirement during the first year of applicability?

The Departments' basic approach to ACA implementation, as stated in a previous FAQ (see http://www.dol.gov/ebsa/faqs/faq-aca.html), is: "[to work] together with employers, issuers, States, providers and other stakeholders to help them come into compliance with the new law and [to work] with families and individuals to help them understand the new law and benefit from it, as intended. Compliance assistance is a high priority for the Departments. Our approach to implementation is and will continue to be marked by an emphasis on assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the new law. This approach includes, where appropriate, transition provisions, grace periods, safe harbors, and other policies to ensure that the new provisions take effect smoothly, minimizing any disruption to existing plans and practices."
In addition to the general approach to implementation, in the instructions for completing the SBC, we stated: "To the extent a plan's terms do not reasonably correspond to these instructions, the template should be completed in a manner that is as consistent with the instructions as possible, while still accurately reflecting the plan's terms. This may occur, for example, if a plan provides a different structure for provider network tiers or drug tiers than is represented in the SBC template and these instructions, if a plan provides different benefits based on facility type (such as hospital inpatient versus non-hospital inpatient), in a case where a plan is denoting the effects of a related health flexible spending arrangement or a health reimbursement arrangement, or if a plan provides different cost sharing based on participation in a wellness program."
Consistent with this guidance, during this first year of applicability, the Departments will not impose penalties on plans and issuers that are working diligently and in good faith to provide the required SBC content in an appearance that is consistent with the final regulations. The Departments intend to work with stakeholders over time to achieve maximum uniformity for consumers and certainty for the regulated community.

Q3: Are plans and issuers required to provide a separate SBC for each coverage tier (e.g., self-only coverage, employee-plus-one coverage, family coverage) within a benefit package?

No, plans and issuers may combine information for different coverage tiers in one SBC, provided the appearance is understandable. In such circumstances, the coverage examples should be completed using the cost sharing (e.g., deductible and out-of-pocket limits) for the self-only coverage tier (also sometimes referred to as the individual coverage tier). In addition, the coverage examples should note this assumption.

Q4: If the participant is able to select the levels of deductible, copayments, and co-insurance for a particular benefit package, are plans and issuers required to provide a separate SBC for every possible combination that a participant may select under that benefit package?

No, as with the response to Q-3, plans and issuers may combine information for different cost-sharing selections (such as levels of deductibles, copayments, and co-insurance) in one SBC, provided the appearance is understandable. This information can be presented in the form of options, such as deductible options and out-of-pocket maximum options. In these circumstances, the coverage examples should note the assumptions used in creating them. An example of how to note assumptions used in creating coverage examples is provided in the Departments' sample completed SBC.(2)

Q5: If a group health plan is insured and utilizes "carve-out arrangements" (such as pharmacy benefit managers and managed behavioral health organizations) to help manage certain benefits, who is responsible for providing the SBC with respect to the plan?

The Departments recognize that different combinations of plans, issuers, and their service providers may have different information necessary to provide an SBC, including the coverage examples.
The Departments have determined that, until further guidance is issued, where a group health plan or group health insurance issuer has entered into a binding contractual arrangement under which another party has assumed responsibility (1) to complete the SBC, (2) to provide required information to complete a portion of the SBC, or (3) to deliver an SBC with respect to certain individuals in accordance with the final regulations, the plan or issuer generally will not be subject to any enforcement action by the Departments for failing to provide a timely or complete SBC, provided the following conditions are satisfied:
  • The plan or issuer monitors performance under the contract,
  • If a plan or issuer has knowledge of a violation of the final regulations and the plan or issuer has the information to correct it, it is corrected as soon as practicable, and
  • If a plan or issuer has knowledge of a violation of the final regulations and the plan or issuer does not have the information to correct it, the plan or issuer communicates with participants and beneficiaries regarding the lapse and begins taking significant steps as soon as practicable to avoid future violations.

Q6: If a plan offers participants add-ons to major medical coverage that could affect their cost sharing and other information in the SBC (such as a health flexible spending arrangement (health FSA), health reimbursement arrangement (HRA), health savings account (HSA), or wellness program), is the plan permitted to combine information for all of these add-ons and reflect them in a single SBC?

Yes. As stated in the preamble to the final regulations and the instructions for completing the SBC template,(3) plans and issuers are permitted to combine such information in one SBC, provided the appearance is understandable. That is, the effects of such add-ons can be denoted in the appropriate spaces on the SBC for deductibles, copayments, coinsurance, and benefits otherwise not covered by the major medical coverage. In such circumstances, the coverage examples should note the assumptions used in creating them. (The Departments' sample completed SBC(4) provides an example of how to denote the effects of a diabetes wellness program.)

Q7: The final regulations require the SBC to be provided in certain circumstances within 7 business days. Does that mean the plan or issuer has 7 business days to send the SBC, or that the SBC must be received within 7 business days?

In the context of the final regulations, the term "provided" means sent. Accordingly, the SBC is timely if sent out within 7 business days, even if it is not received until after that period.

Q8: Are plans and issuers required to provide SBCs to individuals who are COBRA qualified beneficiaries?

Yes. While a qualifying event does not, itself, trigger an SBC, during an open enrollment period, any COBRA qualified beneficiary who is receiving COBRA coverage must be given the same rights to elect different coverage as are provided to similarly situated non-COBRA beneficiaries. See 26 CFR 54.4980B-5, Q&A-4(c) (requirement to provide election) and 54.4980B-3, Q&A-3 (definition of similarly situated non-COBRA beneficiary). In this situation, a COBRA qualified beneficiary who has elected coverage has the same rights to receive an SBC as a similarly situated non-COBRA beneficiary. There are also limited situations in which a COBRA qualified beneficiary may need to be offered different coverage at the time of the qualifying event than the coverage he or she was receiving before the qualifying event and this may trigger the right to an SBC. See 26 CFR 54.4980B-5, Q&A-4(b).

Q9: What circumstances will trigger the requirement to provide an SBC to a participant or beneficiary in a group health plan? In particular, how do the terms "application" and "renewal" apply to a self-insured plan?

The final regulations require that the SBC be provided in several instances:
  • Upon application. If a plan (including a self-insured group health plan) or an issuer distributes written application materials for enrollment, the SBC must be provided as part of those materials. For this purpose, written application materials include any forms or requests for information, in paper form or through a website or email, that must be completed for enrollment. If the plan or issuer does not distribute written application materials for enrollment (in either paper or electronic form), the SBC must be provided no later than the first date on which the participant is eligible to enroll in coverage.
  • By first day of coverage (if there are any changes). If there is any change in the information required to be in the SBC that was provided upon application and before the first day of coverage, the plan or issuer must update and provide a current SBC no later than the first day of coverage.
  • Special enrollees. The SBC must be provided to special enrollees no later than the date on which a summary plan description is required to be provided (90 days from enrollment).
  • Upon renewal. If a plan or issuer requires participants and beneficiaries to actively elect to maintain coverage during an open season, or provides them with the opportunity to change coverage options in an open season, the plan or issuer must provide the SBC at the same time it distributes open season materials. If there is no requirement to renew (sometimes referred to as an "evergreen" election), and no opportunity to change coverage options, renewal is considered to be automatic and the SBC must be provided no later than 30 days prior to the first day of the new plan or policy year.(5)
  • Upon request. The SBC must be provided upon request for an SBC or summary information about the health coverage as soon as practicable but in no event later than seven business days following receipt of the request.

Q10: What are the circumstances in which an SBC may be provided electronically?

With respect to group health plan coverage, an SBC may be provided electronically: (1) by an issuer to a plan, and (2) by a plan or issuer to participants and beneficiaries who are eligible but not enrolled for coverage, if:
  • The format is readily accessible (such as in an html, MS Word, or pdf format);
  • The SBC is provided in paper form free of charge upon request; and
  • If the SBC is provided via an Internet posting (including on the HHS web portal), the issuer timely advises the plan (or the plan or issuer timely advises the participants and beneficiaries) that the SBC is available on the Internet and provides the Internet address. Plans and issuers may make this disclosure (sometimes referred to as the "e-card" or "postcard" requirement) by email.
An SBC may also be provided electronically by a plan or issuer to a participant or beneficiary who is covered under a plan in accordance with the Department of Labor's disclosure regulations at 29 CFR 2520.104b-1. Those regulations include a safe harbor for disclosure through electronic media to participants who have the ability to effectively access documents furnished in electronic form at any location where the participant is reasonably expected to perform duties as an employee and with respect to whom access to the employer's or plan sponsor's electronic information system is an integral part of those duties. Under the safe harbor, other individuals may also opt into electronic delivery.
With respect to individual market coverage, a health insurance issuer must provide the SBC, in either paper or electronic form, in a manner that can reasonably be expected to provide actual notice. The SBC may not be provided in electronic form unless:
  • The format is readily accessible;
  • If the SBC is provided via an Internet posting, it is placed in a location that is prominent and readily accessible;
  • The SBC is provided in an electronic form which can be retained and printed; and
  • The issuer notifies the individual that the SBC is available free of charge in paper form upon request.
In addition, a health insurance issuer offering individual market coverage, that provides HealthCare.gov with all the content required to be provided in the SBC, will be deemed compliant with the requirement to provide an SBC upon request prior to application. However, issuers must provide the SBC in paper form upon request for a paper copy, and at all other times as specified in the regulations.
In addition, as stated in the regulations, unless the plan or issuer has knowledge of a separate address for a beneficiary, the SBC may be provided to the participant on behalf of the beneficiary (including by furnishing the SBC to the participant in electronic form).

Q11: Are issuers who have provided individual market plan information to HealthCare.gov in compliance with PHS Act section 2715 and its implementing regulations already?

The deemed compliance provision in the regulation requires issuers in the individual market to provide all of the data elements that are needed to complete the SBC template to HealthCare.gov. If the issuer fails to provide all of the data elements, it would not be deemed to be in compliance with the regulation. Today, HealthCare.gov does not collect all of the elements of an SBC, such as information necessary to complete the coverage examples. However, HHS will collect this information and display it in the format of the SBC template by September 23, 2012, so that providing information to HealthCare.gov fulfills the deemed compliance provision.

Q12: Can the Departments provide model language to meet the requirement to provide an e-card or postcard in connection with evergreen website postings?

Yes. Plans and issuers have flexibility with respect to the postcard and may choose to tailor it in many ways. One example is:

Availability of Summary Health Information

As an employee, the health benefits available to you represent a significant component of your compensation package. They also provide important protection for you and your family in the case of illness or injury.
Your plan offers a series of health coverage options. Choosing a health coverage option is an important decision. To help you make an informed choice, your plan makes available a Summary of Benefits and Coverage (SBC), which summarizes important information about any health coverage option in a standard format, to help you compare across options.
The SBC is available on the web at: www.website.com/SBC. A paper copy is also available, free of charge, by calling 1-XXX-XXX-XXXX (a toll-free number).

Q13: The regulations state that in order to satisfy the requirement to provide the SBC in a culturally and linguistically appropriate manner, a plan or issuer follows the rules in the claims and appeals regulations under PHS Act section 2719. Does this mean that the SBC must include a sentence on the availability of language assistance services?

Yes, if the notice is sent to an address in a county in which ten percent or more of the population is literate only in a non-English language. The final SBC regulations provide that a plan or issuer is considered to provide the SBC in a culturally and linguistically appropriate manner if the thresholds and standards of the claims and appeals regulations are met.(6) The claims and appeals regulations outline three requirements that must be satisfied for notices sent to an address in a county in which ten percent or more of the population is literate only in a non-English language. In such cases, the plan or issuer is generally required to provide oral language services in the non-English language, provide notices upon request in the non-English language, and include in all English versions of the notices a statement in the non-English language clearly indicating how to access the language services provided by the plan or issuer.
Accordingly, plans and issuers must include, in the English versions of SBCs sent to an address in a county in which ten percent or more of the population is literate only in a non-English language, a statement prominently displayed in the applicable non-English language clearly indicating how to access the language services provided by the plan or issuer. In this circumstance, the plan or issuer should include this statement on the page of the SBC with the "Your Rights to Continue Coverage" and "Your Grievance and Appeals Rights" sections.
Sample language for this statement is available on the model notice of adverse benefit determination at http://www.dol.gov/ebsa/IABDModelNotice2.doc. Current county-by-county data can be accessed at http://www.cciio.cms.gov/resources/factsheets/clas-data.html.
Even in counties where no non-English language meets the ten percent threshold, a plan or issuer can voluntarily include such a statement in the SBC in any non-English language. Moreover, nothing in the SBC regulations limits an individual's rights to meaningful access protections under other applicable Federal or State law, including Title VI of the Civil Rights Act of 1964.

Q14: Where can plans and issuers find the written translations of the SBC template and the uniform glossary in the non-English languages?

Written translations in Spanish, Chinese, Tagalog and Navajo will be available at http://cciio.cms.gov/programs/consumer/summaryandglossary/index.html.

Q15: Is an SBC permitted to simply substitute a cross-reference to the summary plan description (SPD) or other documents for a content element of the SBC?

No, an SBC is not permitted to substitute a reference to the SPD or other document for any content element of the SBC. However, an SBC may include a reference to the SPD in the SBC footer. (For example, "Questions: Call 1-800-[insert] or visit us at www.[insert].com for more information, including a copy of your plan's summary plan description.") In addition, wherever an SBC provides information that fully satisfies a particular content element of the SBC, it may add to that information a reference to specified pages or portions of the SPD in order to supplement or elaborate on that information.

Q16: Can a plan or issuer add premium information to the SBC form voluntarily?

Yes. If a plan or issuer chooses to add premium information to the SBC, the information should be added at the end of the SBC form.

Q17: Must the header and footer be repeated on every page of the SBC?

No. If a plan or issuer chooses, it may include the header only on the first page of the SBC. In addition, a plan or issuer may include the footer only on the first and last page of the SBC, instead of on every page.
The OMB control numbers (which were displayed on the SBC template and the Departments' sample completed SBC to inform plans and issuers that the Departments had complied with the Paperwork Reduction Act) should not be displayed on SBCs provided by plans or issuers.

Q18: For group health plan coverage, may the coverage period in the SBC header reflect the coverage period for the group plan as a whole, or must the coverage period be the period applicable to each particular individual enrolled in the plan?

The SBC may reflect the coverage period for the group health plan as a whole. Therefore, if a plan is a calendar year plan and an individual enrolls on January 19, the coverage period is permitted to be the calendar year. Plans and issuers are not required to individualize the coverage period for each individual's enrollment.

Q19: Can issuers and plans make minor adjustments to the SBC format, such as changing row and column sizes? What about changes such as rolling over information from one page to another, which was not permitted by the instructions?

Minor adjustments are permitted to the row or column size in order to accommodate the plan's information, as long as the information is understandable. The deletion of columns or rows is not permitted.
Rolling over information from one page to another is permitted.

Q20: Can plan names be generic, such as "Standard Option" or "High Option"?

Yes, generic terms may be used.

Q21: Can the issuer's name and the plan name be interchangeable in order?


Q22: Can barcodes or control numbers be added to the SBC for quality control purposes?

Yes, they can be added.

Q23. Is the SBC required to include a statement about whether the plan is a grandfathered health plan?

No, although plans may voluntarily choose to add a statement to the end of the SBC about whether the plan is a grandfathered health plan.

Q24. My plan is moving forward to implement the SBC template for the first year of applicability. Are significant changes anticipated for 2014?

No. The Departments identified in the preamble to the final regulations certain discrete changes that would be necessary for plan years (or, in the individual market, policy years) beginning after the first year of applicability. These changes include the addition of a minimum value statement and a minimum essential coverage statement, changes to be consistent with the Affordable Care Act's requirement to eliminate all annual limits on essential health benefits, and the Departments' intent to add additional coverage examples. The Departments are also considering making some refinements consistent with these FAQs and other requests from plans and issuers for clarification and to promote operational efficiencies. No other changes are planned at this time.


  1. See 26 CFR 54.9815-2715, 29 CFR 2590.715-2715, and 45 CFR 147.200, published February 14, 2012 at 77 FR 8668.
  2. The Departments' sample completed SBC is available at: www.dol.gov/ebsa/pdf/SBCSampleCompleted.pdf orhttp://cciio.cms.gov/resources/files/Files2/02102012/sample-completed-sbcfinal.pdf.pdf.
  3. See 77 FR 8668, 8670-71 (February 14, 2012) and page 1 of Instruction Guide for Group Coverage at http://www.dol.gov/ebsa/pdf/SBCInstructionsGroup.pdf.
  4. See www.dol.gov/ebsa/pdf/SBCSampleCompleted.pdf or http://cciio.cms.gov/resources/files/Files2/02102012/sample-completed-sbcfinal.pdf.pdf.
  5. The final regulations provide an accommodation for insured coverage if the policy, certificate, or contract of insurance has not been renewed or reissued prior to the date that is 30 days prior to the first day of the new plan or policy year. In such cases, the SBC must be provided as soon as practicable but in no event later than seven business days after issuance of the new policy, certificate, or contract of insurance, or the receipt of written confirmation of intent to renew, whichever is earlier.
  6. See 26 CFR 54.9815-2719T(e), 29 CFR 2590.715-2719(e), and 45 CFR 147.136(e), originally published on July 23, 2010, at 75 FR 43330 and amended on June 24, 2011, at 76 FR 37208.

The original post may be found at: http://www.dol.gov/ebsa/faqs/faq-aca8.html