Category: Blog

Beginning in 2015, large employers must offer affordable, minimum value coverage to their full-time employees or potentially pay a penalty. Some companies have been marketing a plan that they state satisfies the minimum value requirement (an actuarial value of 60%), based upon a calculator provided by the Department of Health and Human Services (HHS), even though the plan does not cover inpatient hospital charges. In Notice 2014-69, HHS and the IRS state that plans that do not provide substantial coverage for physician and inpatient hospital services will not be considered minimum value plans, and that the result obtained through the HHS calculator should not be considered valid since that calculator was built on the assumption that a traditional plan design would be used. The agencies do recognize that some employers have already implemented these plans based on the calculator results, and the Notice states that a limited exception will be available to those employers. To be able to use the exception:

1. The employer must have had a binding written commitment (such as a signed agreement) in place before November 4, 2014, to adopt this type of a plan, or it must have begun to enroll employees in this type of a plan before that date.
2. The plan must have a plan year (generally, an effective date) that begins on or before March 1, 2015.
3. The employer must not state or imply in any employee communications that availability of the plan that does not provide coverage for inpatient hospital stays or physician services will prevent the employee from receiving a premium tax credit, and it must correct any previous communications to that effect (note that this may mean that a Summary of Benefits and Coverage may need to be reissued).

Employees who are offered coverage under one of these “non-hospital/non-physician services plans” will be eligible to receive a premium tax credit, as long as the other criteria to receive a tax credit are met. However, employers that can meet the limited exception will be considered to have offered minimum value coverage for the 2015 plan year and will not owe a penalty for the 2015 plan year even if the employee receives a premium tax credit. Beginning in 2016 non-hospital/non-physician services plans will not be considered minimum value for any employers, so employers that qualify for the limited exception will be subject to penalties on employees who receive a premium tax credit unless they offer more complete coverage.

This notice only applies to plans that claim to offer minimum value coverage even though they do not provide significant coverage for inpatient hospital and physician services. Although some have reported that “skinny” and “MEC” plans are no longer allowed, that is not correct. Plans that limit coverage to preventive care (often referred to as “skinny” or “MEC” plans) are permitted and appear to meet the criteria to be considered “minimum essential coverage.” Employers may continue to offer a non-hospital/non-physician services plan, and that plan likely will meet the requirement to offer minimum essential coverage, but it will not meet a requirement to offer minimum value coverage.

To get the latest information on other plan designs being disallowed—such as employer reimbursement of premiums for individual coverage, incentivizing employees in poor health to enroll in the marketplace, and more—download UBA’s PPACA Advisor, “Agencies Disallow Several Plan Designs; Other Federal Developments”.

The Centers for Medicare and Medicaid Services (CMS) extended the deadline for group health plans to provide their 2014 transitional reinsurance fee (TRF) submission. Filing is now due by 11:59 p.m. on December 5, 2014. The January 15, 2015, and Novemb…

By K. Michael Ward, MPH, SPHR, GPHR, Employee Benefits Advisor
The Wilson Agency
A UBA Partner Firm

As a business professional who is trying to classify a worker, it is important to remain compliant with the IRS regulations that determine whether an individual providing services to your organization should be classified as an independent contractor or an employee.

Furthermore, the “employer mandate” section of the Patient Protection and Affordable Care Act (PPACA) requires companies with 50 or more employees to either provide adequate and affordable coverage to their workers or pay tax penalties.  United Benefit Advisors (UBA) has developed a guide to help employers determine how many employees they have for several purposes under PPACA. Those who think they are exempt need to make sure they are counting employees correctly so they’re not surprised with penalties.

The guide provides the definitions of full-time employees, how to count part-time employees on a pro-rata basis, how to treat seasonal employees, who the law considers an “employee,” counting hours correctly, determining average hours worked, penalties that result if a “large employer” doesn’t offer coverage, applying the requirement to offer coverage, paying the penalty, and eligibility for the Small Business Health Options Program (SHOP).

Your UBA Partner Firm can help you find the compliance solutions specific to the issues your company is facing.  Visit the UBA website to learn more.

Why does it matter?

Not correctly classifying an individual as an employee can lead to an employer being required to pay taxes, such as unemployment tax, that would have been required of the employer if the individual had been correctly classified. The organization may also be held liable for overtime pay, resulting in a costly expense for the organization. In certain situations, the issue can escalate leading to civil lawsuits against the employer.

How do I know how to classify individuals?

Generally, an individual is an independent contractor if the employer controls only the final result of the work and not when, where and how it will be done. Therefore, employers cannot demand that independent contractors work a “9-5” schedule in their office. If the person is an independent contractor, they are free to perform the work on a beach at 4 a.m., as long as they produce the services for which they were hired.

An individual may also be classified as an employee if the company provides the majority of the equipment used to perform the services. Independent contractors will generally work with their own equipment and are unlikely to be reimbursed for any equipment purchases required to perform the job.

Some others factors to take into consideration are the time period of hire and whether the individual provides services that are integral to the business. If an individual has been hired on an indefinite basis, versus for a specific project or time period, and/or provides key services, then the employee may be classified as an employee.

There are a variety of other nuances that can determine whether an individual is an independent contractor or an employee. Therefore, it is advised that you speak with a professional before taking action that could have an adverse effect on your business. 

On November 6, 2014, the collective Departments of Health and Human Services (HHS), Labor (DOL) and the Treasury released three Frequently Asked Questions (FAQs) directed at employer payment plans for the purchase of individual insurance. While the departments had previously released several other pieces of guidance about these arrangements, this latest round exclaimed an emphatic no!

The other releases on the topic started well over a year ago. However, there are still agents and administrators that have insisted either Section 125 (Cafeteria Plans) or Section 105 (Reimbursement Arrangements) of the IRS code allowed employers to deduct premiums in a pretax manner or reimburse for individual premiums. Several of the administrators touting these plans even went as far as claiming they were so confident in their interpretation of the regulations, that they would pay any fines incurred because of their advice that these plans were compliant. This latest round of clarification was a resounding comply or pay fines.

Any employer payment that provides cash reimbursement for the purchase of an individual market policy is not compliant with the Patient Protection and Affordable Care Act (PPACA), whether the employer treats the money as pretax or post-tax to the employee. It is interesting to note that the latter provision has not been present in other regulatory releases, but is new with this round. While it is not clear at the moment how that would apply, a post-tax amount would put the insured in a precarious position, subject to fines and payback of subsidies on their own, since the additional income could lower the subsidy that they would otherwise qualify for, without the assistance from the employer.

Likewise, if a Section 105 reimbursement plan is set up for the purchase of individual policies, these plans are deemed noncompliant. The basis for this determination is the employer’s involvement of the plan, even though they may not have assisted the individual with their plan selection, they are still taking part by contributing cash for the policy purchase.

Another question delves into compensating employees that have a high claims risk to enroll in a Marketplace plan versus joining the group health plan offered by the employer. This scenario involves other factors that are prohibited, such as discriminating due to a health factor and eligibility rule discrimination. These plans also fail due to the employer-provided payment for purchase of an individual plan.

In all of these scenarios, since they would be deemed a group health plan, they would be subject to the market reforms such as unlimited lifetime maximum benefits, preventive care coverage at no cost share and other aspects of the law. This could also open the door for lawsuits against the employer if the individual policy failed to pay a claim for the insured.

The FAQs reference the fines that would apply in these instances under Section 4980D. In the May 2014 release from the IRS, they spelled out the excise fines as $100 per day, per employee or $36,500 annually. However, these fines are an excise tax in the amount of $100 per day with respect to each individual to whom such failure relates. So, if the employer were to contribute to dependents’ coverage, the fines would also be incurred for each dependent per day, in addition to the employee.

It is always best to get a plan into compliance as quickly as possible. With many of these having been put into place earlier this year, there is still time to correct at least part, but not all, of the issues. Speak with your tax counsel as quickly as possible to get your plans into compliance. Your local United Benefit Advisors office, with their vast compliance resources, can also assist you with these issues.

The Department of Labor (DOL), the IRS, and the Department of Health and Human Services (HHS) have jointly issued a FAQ that addresses how “reference-based pricing” works with the Patient Protection and Affordable Care Act’s (PPACA) restrictions on out-of-pocket maximums. PPACA limits the out-of-pocket maximum a non-grandfathered plan may impose, and generally requires that co-pays, coinsurance, and deductibles be counted toward this limit. However, premiums, balance billed amounts for non-network providers, and non-covered services do not need to be applied to the out-of-pocket limit. (For 2015, the limits are $6,600 per individual or $13,200 per family.) The new FAQ explains how the out-of-pocket limit applies to plans that use reference-based pricing–i.e., a design under which the plan pays a fixed amount for a particular procedure (such as a knee replacement), which certain providers have agreed to accept as full payment.

The FAQ states that the agencies will permit the reference price to be treated as the in-network price, as long as the plan uses a reasonable method to provide adequate access to quality providers who are willing to accept the reference price. The agencies will determine whether a plan that uses reference-based pricing (or a similar network design) is using a reasonable method to ensure adequate access to quality providers based on:

• The Type of Service. Plans may treat providers that accept the reference price as the sole network providers only for those services for which consumers have enough time to make an informed choice of provider. For example, this design is not appropriate for emergency services.
• Reasonable Access. Plans should ensure the availability of an adequate number of providers that accept the reference price. Considerations include network adequacy approaches developed by the states, geographic distance measures, and patient wait times.
• Quality Standards. Plans should ensure that an adequate number of providers accepting the reference price meet reasonable quality standards.
• Exceptions Process. Plans should offer an easily accessible exceptions process when access to a provider that accepts the reference price is unavailable or would compromise the quality of services for a particular individual because, for example, of the patient’s other medical issues.

Disclosure. Plans should provide, automatically and free of charge, information about the pricing structure, including the services to which it applies and the exceptions process. In addition, the plan should provide specified information, such as provider lists, upon request.

For more information to help you benchmark your health plan’s out of pocket limits with other employers of similar size, industry and geography, pre-order the 2014 UBA Health Plan Survey Executive Summary which will soon be available with the latest data from nearly 17,000 plans.

On Friday, October 31, 2014, the Department of Health and Human Services (HHS) quietly updated its Health Plan Identifier information page to delay the requirement that insurance carriers and self-funded health plans obtain a health plan identifier (HP…

The transitional reinsurance fee (TRF) applies to fully insured and self-funded major medical plans for 2014, 2015, and 2016. The purpose of the fee is to provide funds to help stabilize premiums in the individual insurance market in view of uncertaint…

By: Peter Freska, MPH, CEBS, Benefits Advisor
The LBL Group
A UBA Partner Firm

We field many call to review, speak, and comment on a variety of topics. Of course, these generally pertain to health care. In preparing for a coming presentation, I came across a recent article in Becker’s Hospital Review titled “100 Healthcare Statistics to Know”. While there are many topics that comprise health care, the article breaks them down into 10 categories:  Hospital and Physician Facts, Hospital and Health System Compensation, Health Coverage, Medicaid, Medicare, Hospital Construction, Accountable Care Organizations, Health IT, Patient Care and Quality, and Miscellaneous Health Care Statistics. While all these topics are important, of particular interest is the section on health coverage:

• Roughly 10.3 million adults in America gained health coverage between January 2012 and June 2014, according to a study published in The New England Journal of Medicine.
• In 2014, the number of uninsured Americans dropped by 3.8 million from January to March, which brought the average percentage of people without health insurance to 13.1%, according to a survey by the Centers for Disease Control and Prevention’s National Center for Health Statistics.
• On average, health care cost nearly $9,000 per person in 2012, according to the Bureau of Labor Statistics.
• On average, health care for a typical family of four covered by an employer-sponsored preferred provider organization plan currently costs roughly $23,215. That cost is nearly twice what it was a decade ago, but the year-over-year increase of 5.4% between 2013 and 2014 is the lowest growth rate recorded by the Milliman Medical Index since it was first calculated in 2002.
• National health care spending is projected by the Centers for Medicare & Medicaid Services to increase 4.7% from 2013 to 2015.

In reviewing these statistics against the United Benefit Advisors (UBA) 2014 Health Plan Survey* (which is the nation’s largest and most comprehensive benchmarking survey of plan design and cost), I came up with some interesting comparisons. First, it is important to note that the UBA 2014 Health Plan Survey database contains the validated responses of 16,467 health plans, sponsored by 9,950 employers, who cumulatively employ nearly one million employees and provide coverage for more than four million total lives. Individually validated responses from employers in more than 3,000 communities in all 50 states and the District of Columbia complete the database.

• To compare a few statistics, the outlined health care cost was “nearly $9,000 per person in 2012.” The 2014 UBA Health Plan Survey indicates an average plan cost of $9,504 with an average employee cost of $3,228 and an average employer cost per employee of $6,276.
• Premium increases are now an average of 5.6% for all plans – up from 5.5% in 2013.

Related to the premium increases are plans that have been able to hold out on making changes – “grandfathered,” and now so called “grandmothered” plans.

• Employers delaying their health plan renewal dates until December 1 increased 322% from 2013 to 2014. Approximately 32% of employers postponed their renewal date, 94% of which were small businesses in the fewer than 100 employee market. In the fewer than 50 employee group size, there was more than five times the number of renewals for December 1, 2013, over 2012.

Driving large employers (1,000+ employees), is their ability to more easily self-fund.

• 10.6% of all plans are self-funded, with more than three-fourths (80.0%) of all large employer plans self-funded.
• These measures continue to indicate that self-funding is moving down market, as smaller employers are working to avoid premium increase and the Health Insurer Transitional Tax (HIT Tax). A move to self-funding from a fully insured plan will allow an organization to recognize a 2% to 7% (nationally) HIT tax.

Knowing the numbers, and having the ability to benchmark employer plans, is paramount – especially with so many changes driven by health care reform. Current, validated data allows employer plans to make the best informed decisions to benefit the organization as well as the employees and families to which they provide benefits.

* Data in the 2014 UBA Health Plan Survey is based on responses from 9,950 employers sponsoring 16,967 health plans nationwide. The survey’s focus is intended to provide a current snapshot of the nation’s employers rather than covered employees. Results are applicable to the small to midsize market that makes up a majority of American businesses, as well as to larger employers, providing benchmarking data on a more detailed level than any other survey.

CLICK HERE to pre-order a copy of the 2014 UBA Health Plan Survey Executive Summary or CLICK HERE to request a customized benchmarking report.

“In the rapidly changing implementation of PPACA, it is critical for businesses to know their benchmark on medical plans,” says UBA CEO Les McPhearson. “This is not only for their industry, but in their state, region and nationally as well. I’d encourage employers to look at the UBA Health Plan Survey in a way that is most relevant to their business.”

The 2014 UBA Health Plan Survey offers more than national data and UBA recommends that employers benchmark with local data, which is more effective when adjusting plan design, negotiating rates, and communicating value to employees. 

By Carol Taylor, Employee Benefit Advisor
D&S Agency, a UBA Partner Firm 

The United Benefit Advisors (UBA) annual Health Plan Survey for 2014, which contains validated data on 16,467 plans for 9,950 employers, shows minor average change for plans in the last year. The survey contains information on plans that renewed predominantly between June 2013 and June 2014.

While the average in-network deductible rose a mere $49 to $1,901, the larger plan changes are only seen in the median results:

• In-network out-of-pocket maximums jumped $500 for single coverage and $1,000 for family coverage.
• The out-of-network out-of-pocket maximums rose by $1,000 for both single and family coverage.

The median numbers show the underlying shifts for trend purposes. With the median changes showing a large shift, it means employers are moving away from the lower or no deductible plans. Since there is also, by federal law, a maximum out-of-pocket cap, we will likely see these amounts continue to rise toward that cap.

Plan renewal rates, by employer size, showed the opposite of prior years’ increases:

• Employers with 100 to 200 employees saw an average increase in 2013-2014 of 4.3%. The 2012-2013 survey showed the increase was 1.3%
• Employers with 50 to 99 employees for 2013-2014, showed increases averaging 3.2%. In the prior year, the increases averaged 2%.
• Employers with fewer than 50 employees had the most minimal increases for 2013-2014 of just over 1%. In 2012-2013, the increase was almost 5%.

Small employers, those with fewer than 50 employees, were given the chance in most markets across the U.S., to renew their plans as of December 1, 2013. The net effect was a delay strategy for several changes required by law as of the first renewal on or after January 1, 2014. The one that is affecting the small group rates significantly is the rate compression to a 3:1 premium ratio, meaning the rate for those age 64 and older, cannot be more than three times the rate charged to someone that is age 20. Prior to that mandate, most states had a 7:1 premium ratio. While other requirements were part of the law, such as coverage for essential health benefits (EHBs) and no pre-existing condition exclusions, the driving factor to take advantage of the ‘early renewal’ strategy was to delay the rate compression.

From the 2013 UBA Health Plan Survey, in the fewer than 50 employee category, there were 507 employers that had a December 1, 2012, renewal. The latest survey data shows for a December 1, 2013, renewal date, in the same size category, there were 2,598 employers. More than five times the number of employers took advantage of delaying their renewal dates!

For most plans that renewed on December 1, 2013, this was their second renewal in one year. This would also account for the minimal rate increases as shown above.

When the small group market reforms expand to those employers with fewer than 100 employees in 2016, from the current definition of employers with fewer than 50 employees, we will likely see another round of early renewal strategies to delay the effects of the rate compression. These renewal delays will continue to have ripple effects in the insurance industry for many years to come.

Some states have taken advantage of the “if you like your plan, you can keep it” extension, others have not. In the states that did allow the extension, they are seeing minimal increases, most not more than 12%. In states where the extension was not allowed, such as Virginia, the majority of our clients are seeing increases ranging from 40% to more than 167%. 

Request a copy of the 2014 UBA Health Plan Survey here or contact a local UBA Partner for a customized benchmarking report.

By Linda Rowings

We field a lot of questions from employers about wellness programs and how they comply with PPACA.  Here are two of the most common ones from UBA’s “Frequently Asked Questions (FAQ) About Wellness Programs’ Legal Requirements”:

Q:      How does a wellness program affect affordability calculations?

A:      The proposed regulations provide that when deciding if the employee’s share of the premium is affordable (less than 9.5% of the employee’s safe harbor income), the employer may not consider wellness incentives or surcharges except for a non-smoking incentive. In other words, the premium for non-smokers will be used to determine affordability (even for smokers). Any other type of wellness incentive must be disregarded.

         Example: Acme has a wellness program that reduces premiums by $300 for employees who do not use tobacco products or who complete a smoking cessation course. Premiums are reduced by $200 if an employee completes cholesterol screening during the plan year. The annual employee premium is $4,000. Employee B does not use tobacco and completed the cholesterol screen, so the cost of his actual premium is $3,500 [$4,000 – 300 – 200]. Employee C uses tobacco and does not do the cholesterol screen, so the cost of her actual premiums is $4,000. For purposes of affordability, Acme will use $3,700 as the cost of coverage for both Employee B and Employee C [$4,000 less the available $300 non-smoker discount].

Q:      How does a wellness program affect minimum value calculations?

A:      When calculating minimum value, if incentives for nonuse of tobacco may be used to reduce cost-sharing (i.e., the deductible or out-of-pocket costs), those incentives may be taken into account when determining minimum value. Other types of wellness incentives that affect cost-sharing may not be considered.

For nearly 50 frequently asked questions and answers about wellness programs United Benefit Advisors (UBA) request UBA’s “Frequently Asked Questions (FAQ) About Wellness Programs’ Legal Requirements”. For general highlights about wellness programs, download “Highlights of the Wellness program Requirements”.