Category: Blog

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

Remember when you used to pay a $15 copay for prescription drugs and that was the end of the story? Those days are quickly disappearing and in their place is a complex four-tiered prescription drug plan, with copays becoming less of an option for many.

The fourth tier pays for biotechnology or the highest cost drugs. This plan design enables employers to pass along the cost of the most expensive drugs to employees by segmenting these drugs into another category with significantly higher copays.

With some of these drugs ranging from $1,200 to $20,000 per month (the cost of some cancer drugs), it is very costly for the plans, which in turn affects their premium rates. As a result, we are seeing more and more employers, small and large, raising copays substantially on fourth-tier drugs.

According to the 2013 UBA Health Plan Survey special pharmacy report, the number of employers offering four-tier drug plans increased 11.5% from 2012 to 2013, with 27.9% of employers now using this pharmacy plan design element. The median pharmacy retail copays for fourth-tier drugs increased by 25% from $80 in 2012 to $100 in 2013. Additionally, many are charging between 10% and 30% of the cost of tier four drugs.

We’ve seen this for quite some time with self-funded plans, but we expect it will become more popular among small and large employers with group health insurance. Employees of large employers in particular face significantly higher copay on tier-four drugs.

For example, the tier-four median copay for small employers (less than 100 employees) was $52, on average, between $45-$60 for mid-size employers (100-499), and between $80-$100 for large employers (500+).

There are a number of factors that would cause larger groups to have higher copays for brand/specialty prescription drugs: Small group markets are pooled by ratings areas, but larger groups are rated more independently. They have much more incentive, then,  to raise copays, especially for items that will cause rate increases.

Another strategy to control health care costs is to require that the major medical deductible be met before prescription copays kick in. It used to be that all drugs were applied to the deductible, then coinsurance on major medical. Now, quite a few carriers, particularly on high-deductible health plans (HDHPs), require deductible, then copays. We’re also seeing small group and mid-market employers place generic brands before the deductible, but brand names after.

In 2015, as employers are forced to come into compliance with health care reform, this might shift some since the prescription copays/deductibles, etc. must all track to the out-of-pocket maximum.

The ultimate goal of shifting more cost to employees is to drive behavior ­– to create better health care consumers. Employers want their employees to price shop prescription drugs the way they would a blender, or a car, and by making them face more cost up front, they’re providing plenty of incentive to do so. The truth is, there’s no reason to buy a sinus infection drug at CVS for $295 when you can get the same one at ”big-box” retailers like Costco and Wal-Mart for $100. If, however, you’re prescribed a brand new cancer drug, you certainly have fewer options and tougher decisions to make.

Download a copy of the special UBA Pharmacy Report, or the 2013 UBA Health Plan Survey Executive Summary. Customized benchmarking reports are available from a UBA Partner Firm.

If you are a mid-size employer (50-5,000 employees), you are likely considering a private exchange to affordably handle your benefits complexity (eligibility management, payroll deduction, billing and reconciliation, enrollment and claims issues, defined contribution automation, etc.) while reaping the benefits of cost certainty from a defined contribution model. Indeed, beyond the many advantages of private exchanges, they are particularly appealing to those who can’t afford high reliability organization (HRO), human resource information services (HRIS), Benefits Administration outsourcing and other similar services, since these services are all built in.  However, you may not know about three other advantages of private exchanges

1. “Leakage” control
2. Reduction in “Over Insured Syndrome”
3. Amazon-izing the user experience

“Leakage” is when overpaid premiums and under-deducted payroll deductions sap your bottom line. UBA has found that its private exchange program model has proven to decrease this traditional group insurance phenomenon. In fact, an audit discovered that before moving to the program, which included comprehensive benefit accounting services, one 3,000 life company was losing $50,000 per month in leakage!

UBA Partner Firm Hanna Global also studied their traditional group coverage claimants and found that 60-70% have claims under $1,000 and yet they bought plans that cost and cover a lot more—“Over Insured Syndrome!” Private exchanges more effectively provide decision support and, as a result, 80% of employees are migrating to lower cost plans! In fact, UBA recently weighed in on a CFO article detailing how employees are choosing more appropriate coverage levels on private exchanges.

Health care insurance shopping is the last paper dinosaur — forms to fill out… excel grids showing costs and benefits… a PowerPoint presentation to employees gathered in a conference room. Why is it that way? For the first time, private exchanges allow us to “Amazon-ize” the shopping experience, and employees LOVE it! Finally, HR can offer a “big company experience” without the big company cost!

On March 5, 2014, the Department of the Treasury and the Internal Revenue Service released the final employer-shared responsibility (“play or pay”) reporting rules. The Patient Protection and Affordable Care Act (PPACA) requires reporting in support of…

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…

We’re asking some really interesting questions on the UBA Benefit Opinions Survey. Some of the answers (being compiled from what is shaping up to be the most comprehensive set of employers across all sizes, industries, and geography) are likely to surprise us all. Of particular interest, given the tectonic shifts in health care, the Benefit Opinions Survey is exploring the overall mindset related to an employer’s obligation to provide health care. What is your organizational attitude on the following statements:

• Our organization should provide health care benefits to both our employees and their dependents
• Our organization should provide health care benefits to our employees, but employees should be largely responsible for dependent costs
• Employees should bear the bulk of future health care cost increases
• Our organization should provide health care benefits to retirees age 65 and older
• Good benefits help attract employees
• Good benefits increase employee retention
• Good benefits increase employee productivity
• Good benefits are less important now that health Marketplace coverage is available to employees
• Dependents who have coverage available to them through their own employer should not be on our plan

The answers to these critical questions are sure to shed light on the health care reform and cost-control strategies that will dominate the benefits world in the coming months. To add to this exploration of potentially shifting beliefs and attitudes, we are also asking employers just who should take responsibility for choosing health plans, benefit coverage levels, choosing physicians/hospitals, managing chronic conditions, establishing health care outcome requirements, and controlling costs. Should it be insurers? Employers? Employees? Physicians? Hospitals? Government? And given all the new stakes, employers are asked to give serious thought to what exactly government’s role should be when it comes to:

• State and federally-mandated coverage limits
• Requiring doctors and hospitals to publicly disclose prices
• Requiring insurers to publicly disclose actual discounted prices paid to providers
• Mandating quality reporting from hospitals and physicians
• Allowing U.S. consumers to purchase prescription drugs from foreign countries
• Restricting patent extensions for brand name drugs
• Making Medicare available to retirees age 55 to 64
• Developing a single payer health care system that is paid with taxes

To complete the picture, we are not only asking what the employer’s health care role is or what the government’s role is, but we are also taking a look at employers’ outlook when it comes to health care five years from now.  When employers look into their crystal ball, do they see more cost shifting to employees? Increased high deductible coverage? A surge in managed care plans? Smaller provider networks? Disappearing provider networks? A complete switch to a compensation only system? An end to employer-provided coverage altogether? An increase in voluntary benefits? A complete shift to private insurance exchanges?

The answers to all these questions will be indeed timely—and we encourage all employers to complete the survey before March 10, 2014, in order to get a copy of these landmark national findings. 

On February 20, 2014, the Department of Health and Human Services (HHS), the Department of Labor (DOL) and the Internal Revenue Service (IRS) released final regulations on the eligibility waiting period requirements. The Patient Protection and Affordable Care Act (PPACA) provides that plans may not require an employee who is eligible for coverage to complete a waiting period of more than 90 days before coverage is available. This requirement is effective on the first day of the 2014 plan year. This requirement applies to all plans, including grandfathered plans, fully insured and self-funded plans, and plans offered by small employers. It applies to both full-time and part-time employees if the employer has chosen to cover part-time employees. These final regulations are effective as of the beginning of the 2015 plan year, but they largely mirror the rules that are already in place for 2014. They do not in any way delay the requirement that plans meet the eligibility waiting period requirement by the start of the 2014 plan year.

The regulations state that an eligibility waiting period cannot be more than 90 days. This, literally, is 90 calendar days – a plan that begins coverage as of the first of the month after 90 days of employment, or after three months of employment, will be out of compliance. If the 91st day falls on a weekend or holiday, the plan may not wait to begin coverage until the following work day. In that situation, the plan will need to begin coverage as of the Friday before the end of the allowed waiting period.

The waiting period may be delayed until the employee meets the plan’s eligibility requirements. For example, if the plan does not cover employees who work fewer than 30 hours per week, or employees in certain job categories, and an employee moves from ineligible to eligible status, the waiting period may begin as of the date the employee first moves into the eligible class. Other acceptable eligibility requirements include earnings requirements for salespeople, cumulative service requirements of up to 1,200 hours for part-time employees, or employees covered under a multiemployer plan, and similar arrangements that are not designed to circumvent the waiting period.

Example: Fay begins working 25 hours per week for Acme Co. on January 6, 2014. Acme’s group health plan does not cover part-time employees until the employee has completed a cumulative 1,200 hours of service. Fay satisfies the plan’s cumulative hours of service condition on December 15, 2014. Acme must offer Fay coverage by March 15, 2015 (the 91st day after Fay meets the service requirement.).

The regulations recognize that multiemployer plans often have complicated eligibility rules, and that is permitted as long as the eligibility requirements are not designed to avoid the waiting period rules.

Example: A multiemployer plan has an eligibility provision that allows employees to become eligible for coverage by working a specified number of hours of covered employment for multiple contributing employers. The plan aggregates hours in a calendar quarter and then, if enough hours are earned, coverage begins the first day of the next calendar quarter. The plan also permits coverage to extend for the next full calendar quarter, regardless of whether an employee’s employment has terminated. This arrangement satisfies the regulation.

An employer may require that an orientation or probationary period be successfully completed before an employee is considered an eligible employee. However, in a proposed regulation issued with the new final regulation, the agencies state that because of concerns that orientation or probationary periods will be used to improperly delay coverage, they are considering limiting permissible orientation and probationary periods to one month.

The regulation allows a waiting period that is longer than 90 days for new variable hours employees. A variable hours employee is someone whose hours cannot be predicted when the person is hired. An employer may average the time worked by a variable hours employee over his or her initial measurement period to determine if the employee is eligible for coverage. The waiting period may be imposed after the initial measurement period is completed as long as both periods are completed by the first day of the month following completion of 13 months of employment.

Example: Ann is a variable hours employee because she is an on-call nurse. Ann’s employer uses a 12-month initial measurement period for variable hours employees and a 60-day waiting period. Ann is hired May 10, 2014. If Ann averages 30 or more hours per week during the initial measurement period, she must be offered coverage with an effective date of July 1, 2015, or sooner.

Individuals who are part way through a waiting period as of the start of the 2014 plan year must be credited with time prior to 2014, so that their total waiting period as of the start of the 2014 plan year is no more than 90 days.

Example: Ed is hired October 22, 2013. Ed’s employer has a calendar year plan and during 2013 it used a six-month waiting period. Ed must be offered coverage with an effective date on or before January 20, 2014, because that is Ed’s 91st day of employment.

Although not related to eligibility waiting periods, this regulation also confirms that certificates of creditable coverage need to be provided through December 31, 2014, (regardless of plan year). The certificates will not be required after that date because pre-existing condition limitations will not be permitted after the start of the 2014 plan year.

By Josie Martinez
Senior Partner and Legal Counsel 
EBS Capstone, A UBA Partner Firm

The goal of health care reform is health care for all… but at what cost? By 2015, businesses with 100 or more full-time or full-time equivalent (FTE) employees will be at risk for financial penalties (the so-called “employer shared responsibility assessments”) if they do not offer health coverage to full-time employees.  The same fate follows in 2016 for large employers with 50 to 99 FTEs.  We are all well aware of the “no offer” and “insufficient offer” assessments that could be applied to employers that do not offer affordable, minimum value coverage to full-time employees, and most of us have already been advising clients on penalty avoidance strategies for many months. Meanwhile, business owners nationwide struggle with weighing the financial aspects of providing such coverage or paying the penalties.  A recent survey suggests that only 28 percent of companies that employ a large number of low-income workers offer health benefits. 

There are other costs to consider as well. In addition to the employer shared responsibility assessments, various other fees are being felt by employers. These fees are expected to ultimately result in higher premiums and could undermine the core principle of affordability in the Patient Protection and Affordable Care Act (PPACA) that is meant to provide basic health protections for all Americans.  Over the next several years, group health plans may be required to absorb the costs of up to four new fees. These fees imposed by PPACA on insurers will inevitably trickle down to increase rates in the coming years.  In a recent meeting presented by a major national health insurance carrier, regarding “State and Federal Reform Impact,” it became clear that at least three new assessments/fees imposed on carriers will affect employers’ renewal rates in the future and ultimately their bottom line. 

1. Reinsurance Assessment – This per capita fee on medical plans will fund a three-year reinsurance program designed to reimburse companies that insure high-cost individuals in the individual health insurance market.  The total amounts to be assessed are $12 billion in 2014, $8 billion in 2015, and $5 billion in 2016.  The estimated fee is approximately $63 per year ($5.25 per month) per covered individual in the first year; however, fees are expected to decrease in subsequent years.  The assessment applies to both insured and self-funded plans. Insurance providers will pay the fee for insured plans while third-party administrators may pay the fee on behalf of self-funded plans. The fee is collected each year from 2014-2016 and the first payment is due January 15, 2015, for the 2014 benefit year. Membership counts for 2014 must be submitted to HHS by Nov. 15, 2014, based on the first nine months of the year. We expect this same schedule in 2015 and 2016.
2. Comparative Effectiveness Research Fee (CERF) – This is an annual fee imposed on all insured and self-insured plans.  The goal of the research is to determine which of two or more treatments works best when applied to patients, thereby comparing different types of therapy against each other.  CERF will be charged to health plans to help fund the research that will be conducted by the Patient Centered Outcomes Research Institute, a nonprofit organization established by PPACA. The initial annual fee is $1 per year per health plan member (includes dependents). The annual charge increases to $2 per member the following year and then increases annually with inflation after that until it ends in 2019.  Insurance providers will pay the fee on behalf of insured plans, while employers with self-funded plans will need to determine their liability and account for this fee in their own reporting.  For many plans, the first payments were due in July 2013.
3. Health Insurance Industry Fee – This annual fee impacts fully insured plans.  The estimated cost of this tax will be $8 billion for 2014 and eventually increase to $14.3 billion by 2018.  The tax is divided among health insurers and will likely be passed on to plan sponsors as an addition to premium.   The Health Insurance Industry Fee has a much greater potential financial impact than either of the other two taxes because it is intended to help fund the cost-generating provisions of the PPACA. The fee will be divided among health insurance carriers based on each carrier’s share of the overall premium base and will only be assessed relative to insured health plans, inclusive of medical, dental, and vision plans. Self-funded health plans and associated stop loss premium will not be included in the premium base. The cost impact of the fee is expected to be in the range of 2 percent to 2.5 percent of premium in 2014, increasing to 3 percent to 4 percent of premium in later years. Insurance companies will likely begin to reflect this additional cost in their premium rates in 2013 and/or 2014. Importantly, this fee does not sunset.
4. Cadillac Tax – A 40 percent excise tax will be assessed on the cost of coverage for health plans that exceed a certain annual limit ($10,200 for individual coverage and $27,500 for other than individual coverage) beginning in 2018. Under the current regulations, the cost of health coverage includes employer contributions to HRAs, as well as employer plus employee pre-tax contributions to FSAs and HSAs. Health insurance issuers and sponsors of self-funded group health plans must pay the tax on any dollar amount beyond the caps that is considered “excess” health spending. Note: There are certain adjustments built into the thresholds that may apply by 2018. Also, the thresholds may increase for certain plans pursuant to age and gender adjustments.

These new fees are supposedly intended to raise revenues that will support the individual insurance market, help fund the state exchanges, and assist with conducting research for more effective treatments. However, they will also dramatically impact group health plan premiums and could spur many employers to drop their group health plan sponsorship, pushing more employees into the individual market. In anticipation of what lies ahead, it behooves us to work proactively with employers well before the effective dates so they can plan their finances accordingly rather than be blindsided by unwelcome surprises.

There is a lot of talk about the many cost-control and health care reform tactics available to employers, but what are companies actually implementing? The latest UBA Benefit Opinions Survey aims to define just that. While clients and prospects of UBA’s Partner Firms have contributed thousands of responses to the survey, any employer can participate and get a complimentary findings report. This landmark benchmarking resource compiles information from employers representing all major industry classifications, employee size categories and regions of the country, and delineates employers’ opinions in five key areas:

• Health Plan Strategies
• Benefits Philosophy and Opinion
• Health Plan Management
• Personal Health Management
• Employee Communications

Health plan strategies, philosophy, management, and communications have become a critical focus for employers evaluating their options to comply with health care reform and remain competitive. Nearly 80% of all employers continue to be firmly committed to the value of providing health benefits to active employees and their dependents and more than 95% believe good benefits help attract and retain employees according to the previous survey results.

If your company is interested in comparing attitudes and strategies with your peers regarding employer-provided health care, we invite you to participate. The survey is open from February 14 through March 10, 2014. Some of the results will undoubtedly be surprising and will help employers see how they stack up when it comes to:

• How savvy employees are about health care costs
• Prevailing employee attitudes during open enrollment
• What programs are helping employees become better health care consumers
• Wellness and prevention programs that are actually in use
• Prescription cost-control strategies that are working
• What most employers think when it comes to dependent coverage, consequences for unmanaged chronic care, and more
• Health care reform strategies in place —from early renewals, Small Business Health Options Program (SHOP) enrollment, ensuring health care is “affordable” and/or moving to Administrative Services Only (ASO) or self-funded models—to skinny plans, paying penalties, and/or sending employees to public exchanges for subsidies

Participate in the UBA Benefit Opinions Survey today to make more informed decisions regarding compliance, employee retention and cost management strategies.

By Josie Martinez
Senior Partner and Legal Counsel 
EBS Capstone, A UBA Partner Firm

As the implications of health care reform become more apparent, large employers are increasingly grappling with coverage options to avoid the penalties. Over the past few months, there has been considerably more attention paid to the problems faced by the staffing industry and similar employers as these temporary and variable hour employees are generally common law employees of the organization, and ultimately such companies are on the hook as it relates to offering health coverage. 

One option some employers are looking at is the offer of a “no minimum value plan” – this is a group health plan that provides medical care, but may not satisfy the 60% minimum value threshold. Granted, if an employer offers such a plan that is not minimum value, an employee may apply for a tax credit at the exchange and this could trigger a $3,000 penalty ($3,000 for any full-time employee that receives a tax credit), but this penalty would be lower than the penalty associated with not offering any health plan at all (the $2,000 penalty/every full-time employee). 

These types of plans are starting to make their way into the market for just this reason – as a viable alternative to staffing companies and/or other companies that operate in a similar fashion. At the end of the day, it allows employers to satisfy the coverage requirement under the Patient Protection and Affordable Care Act (PPACA) and avoid the hefty penalty associated with that option. So, it minimizes the risk financially. Also, if employees accept the “skinny” plan, they will not be penalized with the individual tax penalty currently in effect for not having coverage – in some respects, a win-win for both parties. 

Some employers are using a modified version of this strategy. These employers offer employees two options: (1) a skinny plan, and (2) a richer option with a premium contribution cost that just barely meets the 9.5% wage threshold, which few low income employees are expected to take. This strategy enables employees to opt for the skinny plan that they can afford, while the offer of the richer option immunizes the employer from the play or pay penalties.

A third strategy is to simply offer the richer option and allow it to be unaffordable. For example, the plan could be offered on a fully contributory (i.e., employee pays all) or nearly fully contributory basis. This strategy avoids the “no offer” penalty, although the employer is still liable for the “unaffordable” penalty, but only with respect to those employees granted a premium tax credit.

Keep in mind, these strategies are aggressive. There are those who argue the skinny plans will not provide sufficient coverage to satisfy the “minimum essential” coverage criteria, but under the current regulations, it seems a possibility. Eventually, these plans may not pass muster, but for now there is nothing definitive against going this route so it is something to consider.

Employers interested in finding out what healthcare strategies other companies are using should complete the UBA Benefit Opinion Survey. Respondents will receive a complimentary copy of the full national report of survey findings which will provide valuable data on what employers are actually doing (vs. just talking about).

The Federal Poverty Level (FPL) is used to determine eligibility for many government programs, including Medicaid and the premium tax credit/subsidy available through the health marketplace/exchange. The Department of Health and Human Services (HHS) ha…