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.

New HSA Guidelines for 2013

Here are some highlights for 2013.

Annual:	2013	2012
Minimum Individual Deductible	$1,250	$1,200
Minimum Family Deductible	$2,500	$2,400
Maximum Individual Out-of-Pocket (in network)	$6,250	$6,050
Maximum Family Out-of-Pocket (in network)	$12,500	$12,100
Maximum HSA Individual Contribution	$3,250	$3,100
Maximum HSA Family Contribution	$6,450	$6,250

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 15^th (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

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. 

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:

http://www.dol.gov/ebsa/newsroom/tr11-04.htm

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.

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.

WHAT THIS MEANS TO PEOPLE CURRENTLY INSURED

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.

WHAT THIS MEANS TO PEOPLE WHO ARE CURRENTLY UNINSURED

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).

WHAT IF YOU CANNOT AFFORD TO PAY THE PREMIUMS

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.

WHAT THIS MEANS TO EMPLOYERS PROVIDING HEALTH INSURANCE

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.

WHAT THIS MEANS FOR PREMIUMS

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.

SUMMARY

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.

MEDIA

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.

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.

http://cciio.cms.gov/resources/files/Files2/02172012/ehb-faq-508.pdf