By: Carol TaylorEmployee Benefit AdvisorD&S Agency, a UBA Partner Firm
Tacked into the Medicare provider payment fix bill was a repeal provision that removed the $2,000 single deductible maximum. The bill passed the U.S. House of Representatives in…
In order for the Internal Revenue Service (IRS) to verify that individuals and employers are meeting their shared responsibility obligations and that individuals who request premium tax credits are entitled to them, employers and issuers will be requir…
With every day that goes by, the nation’s employers move a step closer to having to make “play or pay” decisions. Many employers have less than a year to prepare for the arrival of this core provision of the Patient Protection and Affordable Care Act (PPACA). Their decisions are far from easy… the ensuing financial, legal, and competitive implications are profound… and the clock is ticking.
Some employers believe that the play or pay mandate will raise their costs and force them to make workforce cutbacks. As a result, they’re considering the “pay” option—i.e., eliminating their health care coverage altogether and paying the penalty on their full-time employees. Other employers are leaning toward “play,” which means they’ll offer employees medical coverage that meets the requirements of PPACA. While employers should look carefully at both options and do their best to calculate the outcomes of each, the actual solutions implemented by many likely will be creative combinations of approaches (making some reductions to benefits while enhancing others). After all, as with many other workforce-related decisions employers make, their main objective will be to remain financially competitive while still being able to attract and retain the employees they require.
When considering the financial implications of play or pay decisions, keep in mind the fact that PPACA actually calls for two potential penalties for large employers: One penalty for not offering “minimum essential” coverage, and the other penalty for offering coverage that’s considered inadequate because it isn’t “affordable” and/or doesn’t provide “minimum value.” Which employers are considered “large” is different for 2015 and later years. Under the law, an employer is considered “large” if it has 50 or more full-time or full-time equivalent (FTE) employees in its controlled group. However, employers with 50 to 99 full-time and full-time equivalent employees in their controlled group will not need to comply until 2016 if they meet certain requirements.
The minimum essential coverage penalty is calculated monthly at the rate of $166.67 for each full-time employee, less a set number of “free employees.” (Although the penalty is calculated monthly, it will be paid annually.) EXAMPLE: In 2016, Dave’s Donuts does not offer medical coverage to its employees. Dave has 60 full-time employees and 12 part-time employees. Two employees purchase coverage through an exchange. Dave’s Donuts will owe a penalty of $5000.10/month: 60 full-time employees, minus “30 free employees,” multiplied by $166.67 (part-time employees are not counted for purposes of this penalty).
In 2015, employers that owe penalties may subtract 80 “free employees.” For later years, that number will reduce to 30 “free employees.”
The penalty for not offering affordable minimum coverage is $250 per month ($3,000 per year) for each full-time employee who:
EXAMPLE: In 2016, Jones, Inc. has 55 full-time employees and eight part-time employees. Jones offers coverage that is minimum value, but which is not affordable for 10 of the full-time employees (nine of whom buy coverage through an exchange) and all of the part-time employees (who all buy coverage through an exchange). Seven of the nine full-time employees and six of the eight part-time employees who buy through an exchange qualify for a premium tax credit.
Jones, Inc. owes a penalty on each full-time employee who enrolls in an exchange plan and receives a premium tax credit, so the company owes $1,750 (seven regular full-time employees who receive a premium credit multiplied by $250; the part-time employees are not counted). The first 30 (or 80) employees do count under this “inadequate coverage” penalty. Also, if the “no offer” penalty would be less expensive than the “inadequate coverage” penalty, the employer would pay the “no offer” penalty. the “no offer” penalty.
For a closer look at these penalties and other key issues impacting play or pay decisions, download UBA’s white paper, “The Employer’s Guide to ‘Play or Pay’” http://bit.ly/1chiLEQ.
Q: I know there are new out-of-pocket maximum rules beginning in 2014. Can you explain them?
A: Beginning with the 2014 plan year, plans may not have an out-of-pocket maximum greater than $6,350 for single coverage and $12,700 for family coverage. The …
Peter Freska, CEBS
Benefits Advisor
The LBL Group, A UBA Partner Firm
Waste in health care has been a discussion for many years. With the passing, and now implementation, of the Patient Protection and Affordable Care Act (PPACA), waste in health care is again at the forefront of health care delivery. According to reports, it is estimated that one-third of all health care spending in the United States is wasteful. The most prominent issue is how to reduce health care costs without compromising the quality of care received. Included in what most determine to be waste are services that are not evidenced to produce better health outcomes. Additionally, inefficiencies in how health care is provided, and costs for treatments, are included in the cycle of waste in health care.
The cost of health care waste in the United States is huge. According to McKinsey Global, the United States spends $650 billion more than other developing countries do on health care (Accounting for the cost of US Health Care – Mcinsey & Company). Generally, it is found that this spending is generated by providers’ capacity for outpatient services, innovations in technology, and demand responding to the increased availability of services. A more current study from 2012 found that up to $750 billion total United States health care spending – including Medicare and Medicaid, state and federal costs – was wasteful spending (The Committee on Energy and Commerce – Memorandum). Wasteful spending included unnecessary services, excessive administrative costs, fraud, and more. The cost of waste is outlined as part of Medicare and Medicaid costs as well as part of the total United States health care spending and at the highest, waste accounts for 37% of total United States health care spending. Working to reduce waste clearly has a compelling argument, at least from a cost savings perspective.
Based on the evidence presented and other studies, wastefulness does contribute to excess cost and at least a reduction in quality. Generally, with this comes a desire to engage in quality and performance improvements. In most situations that have waste, people and organizations tend to strive for more efficiency. Reasonably stated, people do not work out ways to add another unnecessary step to process or treatment. Reasonable people work toward more efficiency and effectiveness. Hence, they work to extract waste from the health care system.
From a quality improvement perspective, people and organizations will focus on processes that work to bring services to the next level. This likely includes the aim of improving the overall health of the community services. From the performance improvement perspective, people and organizations work to achieve strategic goals through improved effectiveness, empowerment, and leaning out the decision making process.
The desire to reduce waste is compelling to engage in these improvement strategies. The Centers for Disease Control and Prevention (CDC) have even dedicated a portion of their website to these topics (CDC – Performance Management and Quality Improvement). Waste in the health care system from failures of care delivery, coordination of care, overtreatment and administrative complexities, pricing issues, fraud, and abuse amounts to billions of dollars annually that could be saved or redirected to better causes. Ultimately, if the United States health care system is to increase performance and quality, then change is needed.
By Jennifer Kupper
In-House Counsel & Compliance Officer
iaConsulting, a UBA Partner Firm
The Employer-Shared Responsibility (“Play or Pay”) final regulations released February 2014 provide a little relief for Applicable Large Employers (ALEs) and their obligations surrounding dependent coverage. The final regulations provide, in part, that in order to avoid a potential penalty, ALEs must offer coverage to the full-time employees’ dependents. This article will address the Final Regulations’ definition of dependent, possible implications, and allowable transitional relief.
Who is a “dependent”? Well, as my mom would say, “Look it up.” One problem is that the dictionary, HIPAA, the Internal Revenue Code, the insurance certificates, and the Summary Plan Description all have different definitions. In addition, surprisingly, the Patient Protection and Affordable Care Act (PPACA) does not even define dependent. Still, ALEs must offer these dependents coverage by 2016 to avoid a potential penalty. So, we must piece together the definition of dependents along with the best solution for employers facing potential penalties.
Traditionally, people think of dependents as including spouses, children, stepchildren, adopted children, and, perhaps, even grandchildren and foster children. For some purposes, like taxes, this is true. For play or pay purposes, however, this is not the case.
The final regulations provided some parameters of who constitutes a dependent. First of all, regarding dependent children, coverage must be extended through the month in which the child attains 26 years of age. Second, stepchildren and foster children are excluded from dependent. Also, children who are not U.S. citizens or nationals are excluded from the definition of dependent, unless the child is a resident of Mexico, or Canada, or is within the adopted child exception under the Internal Revenue Code. Further, consistent with the proposed regulations, the final regulations exclude spouses from dependent.
Why does an ALE’s definition of dependent matter?
The final regulations did provide transitional relief. To provide ALEs time to expand coverage to dependents, ALEs will not be liable for this particular penalty solely for failure to offer dependent coverage for the 2014 and 2015 plan years, provided the following:
What should ALEs do? First, ALEs should refer to the plan documents and summary plan descriptions to determine who is a dependent under the plan. Second, ALEs might consider modifying the plan’s definition of dependent to remove spouses and/or stepchildren and/or foster children, keeping in mind the counter-arguments for expanded dependent coverage — mainly, retention and recruitment. Finally, ALEs trying to avoid the potential penalty should begin taking steps this year and next year to extend coverage to dependents currently not covered.
By: Carol Taylor
Employee Benefit Advisor
D&S Agency, a UBA Partner Firm
Another delay for non-compliant plans was released recently, to renew the plan into 2017. However, the process to remain on these plans relies on several items. First, the State Insurance Commissioner must allow or approve non-compliant plans to renew. Second, the insurance carrier decides to file the non-compliant plan rates, get approval from the respective State Insurance Commissioner in a timely manner, and send out all the required notices to the affected policyholders. Many in the industry are now calling these ‘grandmothered’ plans.
Not every state government allowed the first delay, and is, therefore, very unlikely to allow the second delay. The first delay was granted in November 2013. A list of states that granted the first delay can be found at: http://www.commonwealthfund.org/Blog/2013/Nov/State-Decisions-on-Policy-Cancellations-Fix.aspx. Given the level of confusion, cost of rate filings, and other factors, states allowing the non-compliant plan renewals are likely to shrink.
One thing that seems to be escaping the thought process in all of the delay announcements — are the delays really even necessary? In a nutshell, no. The bill passed by Congress and signed into law by the President, on March 23, 2010, merely states that a plan in place as of that date is considered a ‘grandfathered’ plan. The regulatory agencies, in this case the Department of Health & Human Services (HHS), issued regulations that made it extremely difficult to maintain grandfathered status. If a copay was raised by more than $5, if the coinsurance percentage was lowered at all (i.e., from 90% to 80%, even if the out-of-pocket maximum remained the same), if the deductible was raised by more than 15%, or if an employer lowered their contribution percentage by more than 5% — since March 23, 2010 — the plan lost grandfathered status and must move to a compliant plan as of the plan renewal in 2014.
Was it necessary for those regulations to be so restrictive? Absolutely not. Grandfathered policies still must comply with several protections enacted by the Patient Protection & Affordable Care Act (PPACA). A few of these items being no lifetime maximum benefit, covering children to age 26, and starting at the plan renewal in 2014 the plans cannot have more than a 90-day waiting period.
Very few plans can still claim grandfathered status, with most small groups and individual policy holders having no choice to remain in that status. Could the confusion of some states allowing, while others not allowing, been avoided? Absolutely. Had HHS issued regulations that allowed for changes in the plans according to budgetary needs of individuals and companies, we would not be dealing with the state-by-state basis we are seeing today. Likewise, the individual mandate penalty waivers for the non-compliant plan cancellations would not be needed, as those plans would not have been cancelled in the first place.
For more information about compliance with health care reform, download “The Employer’s Guide to ‘Play or Pay'” which covers PPACA penalties, and how to make “Play or Pay” decisions taking into account factors such as location, compensation, subsidies, Medicaid, family size and income.
On January 9, 2014, the Department of Health and Human Services (HHS), the Department of Labor (DOL) and the Department of the Treasury/IRS issued Frequently Asked Questions – Part XVIII that provides additional information about requirements in several areas. In this third of a three-part series, we will address some clarifications related to wellness programs.
Wellness programs that have an outcomes-based standard, such as a requirement that the employee achieve a certain body mass index (BMI) or certain blood pressure, glucose, or cholesterol levels, must automatically provide a reasonable alternative. The reasonable alternative may be another outcomes-based standard (with certain additional requirements) or an alternative activity. If the employee satisfies the reasonable alternative, the employee is entitled to the full incentive.
The wellness program regulations also state that the recommendation of the employee’s physician regarding a reasonable alternative must be considered. This raised questions about whether the employer had to completely accept all details of a physician’s recommendation, particularly since the employer generally must pay the cost of a reasonable alternative. The FAQ says that if an employee’s doctor states that an outcomes-based reasonable alternative is medically inappropriate for the employee, and the doctor suggests an activity-based alternative instead, the employer must accept the suggested alternative, but has leeway on how the alternative is implemented. For example, Rachel exceeds the plan’s body mass index (BMI) standard, and the plan’s usual reasonable alternative is a percentage reduction in BMI. If Rachel’s doctor advises that the reduction in BMI is medically inappropriate and suggests a weight reduction program instead, the plan must accommodate the weight loss program request, but it does have a say in which weight loss program Rachel must complete.
The FAQ also states that a plan that offers an annual opportunity to receive an incentive for non-use of tobacco is not required to offer a mid-year opportunity for an individual who was offered, but declined, the original opportunity. For example, as part of fall open enrollment, Jones Co. offers a non-smoker discount and an opportunity for smokers to enroll in a smoking cessation program for the next calendar year. Mary and John are both smokers. They decline to enroll in the smoking cessation program. John quits smoking in July and Mary asks to enroll in the non-smoker program in August. Jones Co. is not required to give John the non-smoker rate for the rest of the year (although it may if it wishes, on either a full or pro-rata basis). Jones Co. does not need to offer the non-smoker program, or the discount, to Mary (although it may if it wishes, on either a full or pro-rata basis).
To help employers understand all the wellness requirements under PPACA, UBA offers “Frequently Asked Questions about Wellness Program’s Legal Requirements”. To see what kind of wellness programs employers are implementing, download the UBA Health Plan Survey Executive Summary.
By Carol Taylor
Employee Benefits Advisor
D&S Agency, a United Benefit Advisors Partner Firm.
Several years ago, I went to the doctor for a sinus infection. While waiting for the doctor to return with a prescription, I happened to look over and notice that every jar, pen, notepad, etc. on the counter had the name of a recently released brand name antibiotic. Sure enough, when the doctor returned, it was for that particular drug. I asked the doctor what the cost of the drug was, since I was covered under a high-deductible health plan (HDHP) and would be paying the full cost. When he responded that it would run about $360 for six pills, I immediately demanded a generic prescription. The generic drug was less than $15 and took care of the infection. To add insult to injury, no one knew at the time, but the brand name later was found to have some unknown side effects — several people died, and the drug was “black-boxed” by the FDA shortly thereafter and removed from the market. I was quite glad that my frugal side had taken over when I read that in the news.
What’s my point? The newest drug on the market may not be the best thing for you!
At nearly every medical plan enrollment meeting, we hear the question: “Are generics really as effective as brand names?” What many don’t realize is that the active ingredients in a generic drug are the same as the brand name drug. The difference between brand name and generic lies in the non-active ingredients. Each manufacturer of a generic may use different inactive ingredients, so if one does not work, another manufacturer’s product might.
Will the generic work just like the brand name? Not necessarily. Everyone’s chemical make-up is different, so the inactive ingredients may cause an issue for you. At the same time, not every brand name will work for everyone either.
The most noticeable benefit to you for taking a generic drug over the brand name, however, is the COST! In my example above, the difference was $245, but on some more expensive drugs, say for heart disease or cancer, the difference can be thousands of dollars! Another way generics can save you money – in some cases significantly — is through your insurance coverage.
According to the 2013 UBA Health Plan Survey special Pharmacy Report, 27.9% of employers surveyed are now using a four-tier drug plan — up 11.5% since 2012. That fourth tier pays for biotech or the highest cost brand name drugs. This usually requires significantly higher copays, or costs are completely out-of-pocket until the major medical deductible has been met, and then you still face a copay or coinsurance. The survey data shows that the median pharmacy retail copays for fourth-tier drugs increased by 25% from $80 in 2012 to $100 in 2013, and many are charging between 10% and 30% of the cost of tier four drugs.
Another strategy employers and insurance carriers use to control pharmacy costs is to place generics before the deductible and brand names after – creating further incentive to give generics some serious consideration.
A lesser-known, but even more significant, benefit is that generics are rarely taken off the market due to side effects. The newest drug on the market has not had that test of time, and all side effects may not be known when the drug is released on the market. Since a generic, at minimum, has been around for at least seven years, the side effects are known.
The point that we like to drive home in those enrollment meetings is this: Don’t hesitate to ask your physician for a generic drug. It might very well save your life, and will certainly save you money. Generics have stood the test of time; it is a very rare occurrence when a generic is pulled from the market. Plus, you may have the added benefit of a significant cost difference.
If you really must take a brand name drug, at least do a quick search online about it. Read the known side effects from the manufacturer’s website and see if any headlines come up about it. Also, if you are taking any other medications, make sure the pharmacist knows about those and can ensure that a newly prescribed drug won’t cause adverse interactions.
Employers interested in finding out the latest trends in pharmacy benefits strategies should download a copy of the 2013 UBA Health Plan Pharmacy Report at http://bit.ly/1cA6PMW.
On January 9, 2014, the Department of Health and Human Services (HHS), the Department of Labor (DOL) and the Department of the Treasury/IRS issued Frequently Asked Questions – Part XVIII. This document provides additional information about requirements in several areas. In this second of a three-part series, we will break down the details related to out-of-pocket limits.
The FAQ clarifies that, for non-grandfathered plans, the out-of-pocket maximum:
-This option may be helpful for plans with multiple vendors.
-This technique may not be used to create a separate out-of-pocket maximum for mental health services because that would violate the Mental Health Parity Act (MHPA).
The FAQ also verifies that, to the extent a large group insured plan or a self-funded plan must consider EHBs, it may use any state’s EHB benchmark plan. A list of the state EHB benchmark plans for 2014 and 2015 is available from the Centers for Medicare & Medicaid Services. (Large group insured plans and self-funded plans do not have to offer coverage for the 10 EHBs, but they cannot impose lifetime or annual dollar limits on EHBs. It will be difficult for these plans to meet minimum value standards unless most EHBs are covered, however.)
For more information about compliance with health care reform, download “The Employer’s Guide to ‘Play or Pay'” which covers PPACA penalties, and how to make “Play or Pay” decisions taking into account factors such as location, compensation, subsidies, Medicaid, family size and income.
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