How Much Are Consumers Saving from the ACA’s Medical Loss Ratio Provision?
Originally published Jun 06, 2013 by Cynthia Cox, Gary Claxton and Larry Levitt
Source: https://kff.org/
Most of the conversation around the Affordable Care Act’s Medical Loss Ratio (MLR) provision has centered on the requirement that insurers issue consumer rebates when they fall short of spending a certain portion of premium dollars on health care and quality improvement expenses. This makes sense as rebates are one of the more tangible ways consumers have benefited from the law so far, and it likely contributes to the MLR provision being among the more popular aspects of the health reform law.
However, as we've written before, rebates represent only a portion, albeit the most concrete portion, of the MLR rule’s savings to consumers. The primary role of an MLR threshold is to encourage insurers to spend a certain percentage of premium dollars on health care and quality improvement expenses (80 percent in the individual and small group market and 85 percent in the large group market). The MLR rebate requirement operates as a backstop if insurers do not set premiums at a level where they would be paying out the minimally acceptable share of premiums back as benefits. Only if those thresholds are not met are insurers required to provide rebates to consumers or businesses. (You can read more about the MLR rule here).
Consumers and businesses, therefore, can realize savings in two ways as a result of the MLR requirement: by paying lower premiums than they would have been charged otherwise (as a result of lower administrative costs and profits), or by receiving rebates after the fact. So while insurers paid out considerable amounts for rebates – last year’s rebates totaled $1.1 billion – this is not the whole story for consumers.
Of course, it is hard to know with certainty what premiums would have been if the MLR rules were not in place: we cannot know for sure how insurers would have priced their products or what rates regulators would have allowed (to the extent that they reviewed rates prior to the ACA). It is also difficult to separate out the direct effects of the MLR provision from other aspects of the health reform law, particularly rate review, which works to moderate unreasonable premium increases and thus increase loss ratios. There are also data limitations. For example, prior to new reporting requirements put in place to enforce the MLR provision, there were not good data sources that break out premiums and claims on a consistent basis for major medical coverage by all types of carriers. In the initial years this data became available (2010 and 2011), there were some issues with the quality of the data, particularly regarding expenses for quality improvement and other new categories of administrative expenses that are reported on the exhibit.
Within these limitations, we constructed an analysis that looks at the basic proportion of premiums that health plans paid out as claims for medical care over the three years since the ACA was passed, both before and after the MLR requirement went into effect for coverage in 2011. These proportions do not include adjustments for quality improvement expenses, taxes or other factors that are used when determining whether or not rebates need to be paid; they simply represent the total payments for medical care as a proportion of premiums. This is the traditional way medical loss ratios have been calculated. Generally, if the proportion is rising, that means insurers are paying out more of each dollar they receive on enrollee health care, which in most cases would mean that enrollees are getting better value for the premiums they pay. We then quantify what the change in the traditional MLR means to enrollees by estimating how much they would have paid in premium if the observed MLR for 2010 (before the MLR requirement went into effect) were held constant for 2011 and 2012.1 This approach addresses the following question: If insurers had targeted the same claims to premium ratio for 2011 and 2012 as they achieved in 2010, would premiums have been higher or lower, and by how much? In other words, it addresses how much consumers may have saved in lower premiums as a result of the MLR threshold in addition to receiving rebates.
Our analysis uses insurer data filed to state regulators and compiled by Mark Farrah Associates. These data (filed on the Supplemental Health Care Exhibit) suggest that the main beneficiaries of the MLR rule’s upfront premium savings are people who purchase insurance on their own. The majority of plans sold to small and large businesses were already in compliance with their respective MLR thresholds before the law went into effect, and our analysis shows that traditional MLRs (claims divided by premiums) for group plans have stayed relatively flat over the past three years. In the individual market, by contrast, fewer than half of plans were in compliance with the ACA’s MLR thresholds in 2010, and the average traditional MLRs in this market have been steadily increasing since the requirement went into effect. This means that individual market insurers are devoting a greater portion of premium dollars to health care claims and less to administrative costs and profits compared to before the ACA’s MLR rule went into effect.
This pattern is consistent with the idea that some insurers needed to improve their MLRs to comply with the new rebate requirements. We know that the individual market MLR requirements in the ACA are higher than those that were in effect in many states, and there have been numerous reports that insurers worked to reduce their commissions and other administrative expenses to become more efficient.
So how might these changes have affected premiums? As noted above, one way to address this question is to compute what these consumers would have paid in premiums in 2011 and 2012 had traditional individual market MLRs stayed at 2010 levels (the year before the provision went into effect). Looked at this way, premiums would have been $856 million higher in 2011, and premiums would have been $1.9 billion higher in 2012.
Adding to the premium savings the amount individual market consumers received in rebates yields a total savings of $1.2 billion for 2011. This year, individual market insurers are expecting to issue $241 million in rebates (based on our analysis of early estimates from insurers filed with state insurance departments), bringing the total estimated savings for 2012 to $2.1 billion. While this savings was not distributed evenly (with more going to people enrolled in plans that had low MLRs prior to the law), when averaged across all individual market enrollees, this amounts to a savings of $204 per person ($181 in premium savings and $23 in rebates) in 2012. Taking into account both premium savings and estimated rebates, people purchasing insurance on their own in 2012 spent 7.5% less on average on insurance than they might otherwise have in the absence of the law.
There are some potential limitations to this approach. While the pattern of increasing MLRs over the three years makes sense given the incentives under the ACA and reports of insurer behavior, we do not have comparable data from earlier years to tell us whether or not the 2010 MLR was typical for the pre-ACA period (though the available evidence suggests that it was).2 Also, MLRs in 2011 and 2012 might be overstated because insurers simply underestimated how much health care expenses would rise following the recession, though increasing MLRs still means that consumers have been getting better value for their premium dollars. Finally, rebate amounts for 2012 are based on preliminary estimates filed on the Supplemental Health Care Exhibit to state insurance departments, and actual rebate amounts will be based on insurer filings with the Department of Health and Human Services, which were due June 1.
If insurers’ preliminary estimates hold true, this year’s rebates (at a total of $571 million across all markets) are expected to be about half the amount of last year’s $1.1 billion in insurer rebates. Smaller rebates, however, are not an indication that consumers are now saving less money as a result of the MLR provision, but rather that insurers are coming closer to meeting the ACA’s MLR requirements and that this provision is having its intended effect of consumers getting more value for the money they spend on premiums. In fact, in the individual market, the $241 million consumers are expected to receive in rebates for 2012 represents roughly one tenth of our estimate of the overall savings from the provision in that year. Perhaps ironically, when the MLR provision is working as intended and insurers set premiums to meet the thresholds, consumers save money but are less likely to get a check in the mail as tangible demonstration of those savings.
Footnotes
- See methodology attached
- Based on our analysis of the Accident and Health Experience Exhibit submitted to state regulators, which has been required of all insurance entities since 2006 but is not directly comparable to newer and more precise data, the weighted average traditional loss ratio in 2010 was slightly higher (80%) than the average of previous years (79%). Our premium savings estimates for 2012 and 2011 are thus likely conservative compared with estimates that used MLRs in prior years.
How the ACA affects annual enrollment
Originally published July 25, 2013 by Andrew Molloy on https://ebn.benefitnews.com
Despite the one-year delay of the pay-or-play mandate, there are still several provisions employees need to know about.
With annual benefit enrollments on the horizon, employers need to be prepared now for the changes that health care reform is bringing. Hopefully, employees already know that as of Jan. 1, 2014, they must have health insurance coverage. Beyond this mandate, however, what are some of the other issues of which employers should be aware?
The Affordable Care Act requires employers to tell their employees in writing by Oct. 1 about the new public health care exchanges and how these relate to their workplace benefits. This requirement applies to all employers subject to the Fair Labor Standards Act.
Under the law, employees need to know that they may be eligible for a tax credit and cost-sharing reduction if their employer's plan does not meet certain coverage and affordability requirements and the employee purchases a qualified health plan through a public exchange. Employers must also inform workers that if they choose to purchase their coverage through an exchange, they may not receive any employer contribution toward their premium, nor any related tax advantage.
Employees may still be confused about the exchanges by the time of enrollment. For the most part, those who work for large employers will see little impact since the subsidies offered for a qualified employer-sponsored medical plan will make the choice moot. However, employees of small- to medium-sized companies where health insurance is not available, or isn't affordable, will have to make a decision about whether to go to a public exchange for their coverage. For these employers, it means telling their workers what their options are and are not.
Despite the recently announced one-year delay in the employer shared responsibility requirement, employers still have obligations for 2014 and they'll have to review their medical plans carefully to ensure they meet the essential health benefits mandated by the law. In addition, the plan cannot have any annual coverage limits; cannot exclude people with pre-existing health conditions; must extend coverage to children up to age 26; and must comply with limits on deductibles and out-of-pocket expenses, among other requirements. It is also important to note that the requirement for essential health benefits applies only to individual and small group plans; the requirement does not exist for self-insured plans.
With the pay-or-play delay, employers will not be penalized if their plans do not cover at least 60%, on average, of an employee's health care costs in a given year, or if an employee's premium costs exceed 9.5% of his or her income. Those employees may still be eligible for tax credits on the public exchange, but for 2014 employers will not be subject to penalties if employees receive those tax credits.
Financial responsibility
It's clear that shifts in financial responsibility will continue to affect today's benefits picture. As employers feel the pressure of rising costs and enrollments in their health plans, they are likely to further fuel the already rapid growth of consumer-directed health plans. In fact, 52% of employers surveyed recently anticipated introducing high deductible/consumer-driven health plans in the next three to five years.
Employers should be aware that employees will see any loss of medical coverage or increase in cost sharing as a reduction in compensation. Consequently, employers will need to pay more attention to their company's total benefits package and consider ways to preserve or increase its value.
Above all, during this transitional period of health care reform, employers must clearly communicate benefits options and their value to employees. Employees need to understand that in most cases, their health benefits will remain the same and they won't have to go to the public exchanges for their coverage. They should also be educated about the need for disability coverage and its value.
Using multiple enrollment methods and a variety of learning tools will help ensure a successful benefits enrollment. In fact, research shows that participation is highest when employees have at least three weeks to absorb their benefits-education information, with at least three different ways to learn about their choices.
DOL changes timing of required employer 401(k) and 403(b) disclosures
Originally published by Brian M. Pinheiro and Robert S. Kaplan on https://ebn.benefitnews.com
The U.S. Department of Labor yesterday released Field Assistance Bulletin 2013-2 granting employers that sponsor participant-directed individual account plans (such as 401(k) and 403(b) plans) the ability to delay this year’s disclosure of annual investment-related information to plan participants and beneficiaries. Employers were required to provide the original notice by August 30, 2012. The DOL regulations require that the notice also be distributed “at least annually thereafter.” This means each annual notice would have to be distributed within 12 months of distribution of the prior year’s notice.
Critics of the annual notice requirement have complained that August does not correlate with any other annual participant disclosures for calendar-year retirement plans. Consequently, the DOL is permitting employers a one-time delay in distributing the annual notice. For 2013, the plan sponsor may wait up to 18 months from the date of distribution of the prior notice to distribute the new annual notice. This delay will allow employers to put the annual notice on the same schedule as other annual participant disclosures, such as notices for Qualified Default Investment Alternative or safe harbor status.
Recognizing that some employers have already prepared or mailed notices in anticipation of this August 2013 deadline, the DOL also permits employers who do not take advantage of this relief during 2013 the same 18-month period for 2014 annual notices.
Most third-party administrators and vendors prepare these annual notices for employers. Employers should keep in mind that the notice is an obligation of the plan sponsor and not the vendor. Plan sponsors should carefully review the notice to ensure that it is accurate and meets all legal requirements.
Delay of health reform mandate has employers making hard benefit choices
Originally posted July 14, 2013 by Jerry Geisel on https://www.businessinsurance.com
Some employers may offer health insurance despite mandate delay.
Affected employers face some tough decisions on what approach they will take in the wake of the Obama administration's unexpected decision to delay a key health care reform law provision.
Administration officials this month delayed by one year to 2015 the Patient Protection and Affordable Care Act requirement that employers with 50 or more employees offer qualified coverage to at least 95% of their full-time employees or pay a $2,000 penalty for each full-time employee.
U.S. Treasury Department officials said the delay was necessary to give the agency more time to simplify how employers are to file health care plan enrollment information with the government.
That delay is being welcomed by employers, especially those who have not decided whether they will offer coverage to those not currently eligible; or, if they have decided, the generosity of the coverage they will provide.
“This is a rare opportunity where an employer can make a smart and thoughtful decision,” said John McGowan, a partner with the law firm Baker & Hostetler L.L.P. in Cleveland.
Some employers, especially those that already have told affected employees that they will expand coverage, are less likely to reverse course and hold off that expansion for another year.
“If you already have figured out your strategy, you probably will implement it,” said J.D. Piro, a senior vice president with Aon Hewitt in Norwalk, Conn.
For example, Cumberland Gulf Group in June announced that, effective Oct. 1, employees working as few as 32 hours a week will be eligible for group coverage, down from the current 40-hour-a-week requirement.
Employees working 30 or 31 hours a week will be given the option of working 32 hours to become eligible for coverage in the company's self-insured plans. For employees who work less than 30 hours, the company will assist them in finding coverage through public insurance ex-changes.
Through that expansion of coverage, which will affect about 1,500 employees, Cumberland Gulf, a $15 billion Framingham, Mass.-based company that owns convenience stores and the Gulf Oil brand, will be shielded from the health care reform law's $2,000 per-employee penalty, which is triggered when coverage is not offered to full-time employees — those working at least 30 hours per week.
That expansion of coverage will remain on track, said John McMahon, Cumberland Gulf's senior vice president and chief of human resources.
“We are going to continue on the path we have laid out. Our strategy is to create a great place to work and to be an employer of choice,” Mr. McMahon said, adding that the company is getting very positive feedback from current and prospective employees.
Other employers who also have announced plans to expand coverage eligibility, though, may find themselves between a “rock and a hard place,” said Ed Fensholt, senior vice president and director of compliance services for Lockton Benefit Group in Kansas City, Mo.
Those employers “will have to weigh the cost savings by pulling the plug for a year with the confusion and damage to employee relations that would occur,” Mr. Fensholt said.
Employers that do not offer coverage to all eligible employees and have not made final decisions on whether they will expand coverage also face issues.
For example, if they wait until 2015 to offer coverage, they could be at a disadvantage if their competitors decide to extend coverage next year, said Steve Wojcik, vice president of public policy at the National Business Group on Health in Washington.
There are other issues for employers not currently offering coverage to consider. By not offering coverage, their lower- and middle-income employees will be eligible for premium subsidies to purchase policies from insurers offering coverage in public insurance exchanges.
Then, in 2015, when the coverage mandate kicks in, the employer could offer a plan that is just rich enough to pass the law's minimum value test, denying employees the government subsidies for exchange coverage they received in 2014.
“Then, you have an employee relations issue,” Mr. Fensholt said.
That issue will be less likely to develop, experts say, if the employees received employer coverage beginning in 2014 and never enrolled in exchanges.
“Some employees will be disappointed. It could be an awkward situation,” said Frank McArdle, an independent benefits consultant in Bethesda, Md.
Still, there are plenty of employers not providing coverage who will decide against offering coverage in 2014.
Employers “may not want to move forward until the dust settles. Some are wondering if the regulations and requirements will actually change during this interim period,” said Michael Thompson, a principal with PricewaterhouseCoopers L.L.P. in New York.
In addition, by waiting, employers will have a better sense of whether Congress will act in the coming months to change the employer mandate, experts say.
For example, prior to the Treasury Department delay, bills were introduced that would change the definition of a full-time employee to those working 40 hours a week — compared with the law's 30-hour threshold — while other measures would exempt more small employers from the requirement to either offer coverage or pay the $2,000 per-employee fine.
While it is difficult to imagine Congress reaching a bipartisan consensus, “anything is possible,” said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.
Five biggest mistakes when designing a supplemental disability plan
Originally published July 19, 2013 by Christopher R. Kristian on https://ebn.benefitnews.com
Supplemental disability income plans are so mainstream today they are thought of as plain vanilla. That’s all well and good until the other shoe falls. And it often does. When employers experience problems with existing voluntary disability plans, most of these issues can be traced back to when the plan was originally designed.
No one wants problems, particularly when they involve serious health or disability issues. As many an employer can attest, mistakes do occur and they often create unnecessary complications and unhappiness.
By avoiding the five most common mistakes, companies can increase the chances of having their plan run well and having it valued by employees.
Supplemental plans emerged from the need for increased disability protection from the income disparity between highly compensated employees and rank and file employees. This disparity can become particularly severe when employees are eligible for variable compensation such as bonuses. The industry calls this “reverse discrimination” since most employees are covered at 60% of gross compensation, while those with variable compensation are covered at a drastically lower replacement rate.
Most employers have made an effort to close this gap by offering a supplemental plan to cover this coverage gap. In effect, supplemental plans are individual disability products offered at deeply discounted rates. They usually are written on a guaranteed standard issue basis. Even so, when designing this coverage, employers should be aware of five common mistakes and how to avoid them.
1. Deciding not to offer a supplemental plan and opting to change the definition of earnings in the current plan, as well as raising the group plan’s long-term disability cap. This approach seems to make sense until one of two things occurs. By raising the cap to accommodate relatively few employees, the cost for that increase in insurance is spread over the entire population. When this occurs, it turns out to be anything but cost effective in the long run. In fact, it’s downright expensive.
If it happens to seem cost effective at the moment, just wait until there is a claim or two and your group rates go through the roof. That’s when most employers with this problem begin scrambling for a better solution. Typically, this particular scenario can be avoided by using a risk sharing or risk transfer approach with a supplemental plan.
2. Choosing a very good technology platform over a better guaranteed-issue offer.
Supplemental programs and the insurers that offer them are constantly improving technology so they’re able to deliver enhanced enrollment capabilities. Many companies opt for a lower guaranteed standard issue offer so they can obtain what they perceive as a state-of-the-art system. This has a strong appeal, but seems designed only to provide ready-made bragging rights at industry get-togethers.
If the guaranteed standard issue offers are close by perhaps a couple of hundred dollars, choose the technology. However, if there is a substantial cost differential, go with the larger guaranteed standard issue offer. If you do not, the covered employees will suffer during a claim.
3. Failing to develop a well thought out enrollment strategy. Enrollment strategies are critically important, particularly if a company is implementing a voluntary supplemental plan.
Ensure that the plan is well-communicated and that each participant is contacted not only through an enrollment packet, but also through a simple phone call so employees can have their questions answered. This is particularly important since most carriers usually expect 20% to 30% of the employee group to participate.
It is critical to reach the target to satisfy the guaranteed standard issue unlimited offer going forward. If this does not occur, it’s possible that new participants may be barred from obtaining coverage. Selecting a large firm doesn’t always mean it is competent. It’s almost always in your best interest to go with a firm with expertise in the supplemental disability coverage arena.
4. Settling for an inadequate guaranteed issue offer on an employer-sponsored program. The supplemental disability income market has changed with the addition of new products. Usually, if the company is paying for the coverage, carriers will issue guaranteed standard issue coverage. But it is possible to go a step further and layer an additional product, commonly referred to as high limit coverage, that will cover up to 60% of highly compensated employees’ total compensation and will cover an income up to $2,000,000.
5. Unnecessarily subjecting your employee group to underwriting. Companies continue to subject their employees to medical underwriting unnecessarily. Since disability income insurance is a complicated process, the risks of having an employee declined, rated or have coverage exclusion are almost assured. Subjecting employees to underwriting usually indicates a poor plan design or lack of innovation.
Supplemental disability income protection has a strong appeal today, particularly with the unpredictability of the economy. Offering a well-designed supplemental plan avoids unnecessary pitfalls and can help create employee satisfaction.
8 reasons for employers to keep their PPACA guard up
Originally published July 17, 2013 by Dan Cook on https://www.benefitspro.com
Now that the celebrations have died down over the one-year delay of penalties for employers who don’t meet the PPACA coverage requirements, it’s time to take a close look at what does remain in effect.
The very short answer to the question is that there’s still quite a bit on the books, and that, really, only the teeth have been (temporarily) removed.
Here’s what the national law firm Bryan Cave had to say about which PPACA provisions remain in effect for employers in the year ahead.
1. Summaries of Benefits and Coverage must be distributed during open enrollment for the 2014 coverage period and must indicate whether the plan provides minimum value, as defined under the PPACA.
2. Exchange Notices: Employers must distribute PPACA exchange notices to employees by Oct. 1, 2013, and thereafter to new employees upon hire.
3. Application for Advance Premium Credits: Employers are required to complete a 12-page form entitled, “Application for Health Coverage and Help Paying Costs” when requested by employees who are applying for PPACA advance premium tax credits when purchasing coverage via an exchange.
4. PPACA fees: Patient-Centered Outcome Research Institute Fees (“PCORI Fees”) must be paid in July 2013 (that’s now!). The first Transitional Reinsurance Fee must be paid on or before Jan. 15, 2015. PCORI is a private non-profit corporation that gathers research-based information to assist patients, practitioners and policy makers in making informed health care decision.
5. W-2 reporting: Employers must continue to report the aggregate value of health coverage on Forms W-2.
6. Counting Period for Employer Mandate: Employers that need to determine whether they will be subject to the employer mandate in 2015 (50 or more full-time or full-time equivalent employees in 2014) will need to record employee hours in 2014. It is not yet clear whether a short counting period will be available, which means that employers may be smartest to begin to track hours on a per-employee, monthly basis on Jan. 1.
7. Benefit Mandates For All Plans: Plan design requirements for all plans continue to apply (e.g., maximum 90-day waiting period, no limits on pre-existing conditions or essential health benefits, expansion of wellness incentives, dependent coverage to age 26).
8. Benefit Mandates for Non-Grandfathered Plans Only: Plan design requirements for non-grandfathered plans only continue to apply (e.g., preventive care coverage requirements, limits on out-of-pocket maximums, coverage for clinical trial-related services, and provider nondiscrimination, and for small group health plans, limits on annual deductibles).
Retirement across America: Lessons learned
Originally published July 19, 2013 by Chad Parks on https://ebn.benefitnews.com
For six weeks last spring, I traveled across the country filming interviews for an upcoming documentary called Broken Eggs: The Looming Retirement Crisis in America. I am executive producing the film, which is an honest, unfiltered look at the state of retirement in our country.
We set out to learn more about how Americans view retirement and whether or not the looming retirement crisis is as serious as we feared.
It was an eye-opening experience that discovered some bright spots, as well as some really life-altering and depressing stories.
After having had a year to reflect on the initial trip as we near the film’s completion, I wanted to share with you, my industry colleagues, the four lessons I learned on this journey.
Lesson 1: People are aware of the problem
One preconceived notion I had before going on the trip was that Americans were blissfully unaware of the retirement crisis. I figured few knew that Americans are $6.6 trillion short of what they need to retire. In fact, most are acutely aware of the hurdles they’re facing. Unfortunately, that doesn’t mean they’ve changed. Most are unsure of what to do and are overwhelmed, which leads to inaction being their only action. But this crisis is on their minds — and they want a solution.
I’m encouraged to see this issue hasn’t fallen by the wayside, but the challenge is to get Americans to take action.
Lesson 2: Our industry is in a bubble
Sure, we all know what the terms “401(k),” “intelligent design,” “automatic enrollment” and “model portfolios” mean. But after this trip, I can say that it’s a foreign language to everyone outside our retirement industry bubble. We’ve done a fantastic job of complicating things, and the fallout is that there is a severe disconnect.
What are we trying to accomplish by hiding behind jargon? In order to begin to solve this problem, we need to simplify retirement and humanize it. Perhaps there’s a universal way to gamify this problem in order to engage more people. Some have proposed a retirement scorecard, while others suggest the “set it and forget it” plan. Regardless, we need to get out of our bubble and understand that people are busy and not experts in retirement.
Lesson 3: Retirement income is grossly misunderstood
Though I found that Americans are aware of the retirement crisis, many believe that Social Security will bail them out. I encountered far too many people who are counting on Social Security as their primary or only retirement income vehicle.
As you well know, Social Security exists to make sure our seniors aren’t destitute – not so they can comfortably retire. With Social Security slated to be insolvent in about two decades, our industry needs to educate plan participants on what Social Security can do – and more importantly, what it can’t do.
We must stress that the three-legged stool of retirement no longer exists, and the one leg that is left is not Social Security (or a pension); personal savings is what will fuel retirement now and in the future.
Lesson 4: There is not a single, simple solution
If there was a solution to this problem, it would have already been implemented. In addition to interviewing everyday Americans, I spoke to industry thought leaders and influencers from across the spectrum, including Brian Graff of ASPPA and Teresa Ghilarducci from The New School.
In order to curb the looming retirement crisis, we can’t rely on a one-fix solution. My hope is that putting forth a blend of ideas will ultimately become a reliable solution.
We can never get to that point, however, unless we start discussing this problem. And I’m not referring to talking amongst ourselves. We need to engage our customers, the American people, and drill this problem into their heads.
As an industry, we need to do a better job of setting the pace for this discussion, which must be personalized. And instead of just talking at people, we must listen, and ultimately educate. Part of the solution is to use Americans’ first-hand experiences planning for retirement to help craft solutions.
My hope is that Broken Eggs ignites a conversation among all American to solve the problem. It’s raw. It’s honest. And these stories deserve to be heard.
First round of employers’ ‘PCORI fees’ due July 31
Originally published July 19, 2013 by Garrett Fenton and Fred Oliphant on https://ebn.benefitnews.com
Most employers that sponsor self-funded group health plans, and insurers of fully-insured group health plans, will need to file and pay by July 31 their first round of federal comparative effectiveness research fees imposed under the Affordable Care Act. ACA established the annual fee -- which is known as the “PCORI fee” -- in order to fund comparative clinical effectiveness research to be conducted by the newly-established, non-profit Patient-Centered Outcomes Research Institute.
The amount of the fee is $1 for each individual covered under the group health plan, for the first plan year ending on or after October 1, 2012 (i.e., 2012, for a calendar-year plan), and must be reported on IRS Form 720 and paid by no later than July 31 of the calendar year following the end of the relevant plan year (i.e., by July 31, 2013, for a calendar-year plan). The amount of the fee will increase to $2 per covered individual for the following plan year, and will be increased further for inflation in subsequent years.
The fee is scheduled to expire with the last plan year ending before October 1, 2019, meaning the last fee for a calendar-year plan will need to be filed and paid (for the 2018 plan year) by July 31, 2019. The IRS Office of Chief Counsel recently confirmed that PCORI fees paid by an employer or insurer are tax-deductible, as ordinary and necessary business expenses, under section 162 of the Internal Revenue Code.
The IRS issued final regulations implementing the PCORI fee last December. The regulations include detailed rules regarding the methods by which an employer or insurer may count enrollees under a group health plan for each year, and provide exemptions for certain types of plans and special rules for employers that sponsor multiple plan options. We understand that there has been some confusion among employers regarding the application of the PCORI fee to health flexible spending arrangements and health reimbursement arrangements.
As an initial matter, most employer-sponsored health FSAs (but not necessarily HRAs) qualify as “HIPAA-excepted,” and are therefore exempt from the PCORI fee. But in some instances -- generally, where the employer makes additional, substantial “non-elective” or “matching” contributions to its employees' health FSAs (or does not offer its employees a primary, major medical plan option in addition to the health FSA) -- the HIPAA-excepted exemption does not apply, meaning the fee will be imposed on the health FSA (perhaps subject to additional, special rules set forth below).
Where an employer offers a fully-insured primary group health plan along with an “integrated” HRA (or non-HIPAA-excepted health FSA), two separate PCORI fees will be imposed: the employer/plan sponsor will owe one fee for the HRA or health FSA, and the health insurer will owe a separate fee for the fully-insured primary plan. By contrast, where an employer offers a self-insured group health plan along with an integrated HRA (or non-HIPAA-excepted health FSA), a single fee will generally be imposed on the employer, for each employee covered under both the primary plan and the HRA (or health FSA), provided that the primary plan and HRA (or health FSA) have the same plan year.
The IRS recently updated the Form 720 (and related instructions) -- which some employers already file, on a quarterly basis, to report certain federal excise taxes -- to reflect the PCORI fee. Third party service providers, such as third party administrators, will not be allowed to file the Form 720 on behalf of a responsible entity. Therefore, employers sponsoring calendar year, self-funded group health plans (and insurers of calendar-year, fully-insured plans) must be prepared to complete and file the Form 720, and pay their first round of PCORI fees, by July 31.
Red-meat eaters increase risk of diabetes with more portions
Originally posted by Nicole Ostraw on https://ebn.benefitnews.com
(Bloomberg) -- Eating more red meat over time raises the risk of getting Type 2 diabetes, while cutting back reduces the danger, research shows.
Consuming an additional half-serving a day of red meat during a four-year period increased a person’s chance of developing diabetes by 48% in the subsequent four years, according to a study this month in JAMA Internal Medicine. Reducing red meat consumption lowered diabetes risk long term, says lead study author An Pan.
The study is the first to look at changes in red meat consumption over time and how that affects diabetes risk, Pan says. The results confirm previous research that had linked red meat intake to diabetes risk and suggests that limiting the amount of beef, pork and lamb people eat is beneficial, he says.
“If possible, try to reduce red meat and replace with other healthy choices like beans and legumes, nuts, fish, poultry, whole grains, etc.,” says Pan, an assistant professor at the National University of Singapore.
The meat contains high amounts of an iron that can cause insulin resistance, which may raise the risk of diabetes, he says. The food is also high in saturated fat and cholesterol and processed forms have nitrates and high levels of sodium that may also increase the danger of developing the disease, he says.
Researchers analyzed data and followed up with 26,357 men in the Health Professionals Follow-up Study, 48,709 women in the Nurses’ Health Study and 74,077 women in the Nurses’ Health Study 2. They assessed their diets through questionnaires every four years.
There were 7,540 cases of type 2 diabetes over the study.
The research showed that reducing red meat consumption by more than a half a serving per day from the start of the trial through the first four years of follow up resulted in a 14% lower risk of diabetes over the entire time period.
In an accompanying editorial, William Evans, vice president and head of the Muscle Metabolism Discovery Performance Unit at London-based GlaxoSmithKline Plc and an adjunct professor of geriatrics at Duke University Medical Center in Durham, N.C., writes that it may not be the type of meat but the fat that can raise diabetes risk.
“There’s no reason why the color of meat itself is the thing that results in an increased risk in diabetes,” he says. “The overwhelming data would tell us it’s the amount of saturated fat. A chunk of cheddar cheese has as much fat and saturated fat as a T-bone steak.”
He says another study looking to find similar links between dairy, which can be high in saturated fats, and diabetes is needed to determine if the fats are the culprits.
Saturated fats increase inflammation in the body, leading to heart disease and insulin resistance.
2013 MLR Rebate Process Follows Similar Path
Original article posted on https://broker.uhc.com/articleView-11448
The second year of reporting Medical Loss Ratio (MLR) is underway, as required by the Affordable Care Act. All health insurance companies are required to spend a certain percentage of premium dollars on health care claims and programs to improve health care quality.
Individual and small group markets must achieve an MLR of 80%. There are limited exceptions where states have set a higher MLR threshold (Massachusetts and New York). The large group market is required to reach an 85% MLR.
As happened in 2012 with the rebate calculation, fully insured policyholders are grouped in Aggregation Sets according to three criteria: group size, situs state and legal insurance entity.
Small group market size is generally up to 50 average total number of employees (ATNE), but 12 states have elected to follow the federal MLR standard of up to 100, with large group being those with an ATNE over 100. In 2016, all small group markets will follow the federal standard of up to 100.
The process and timetable is very similar to last year’s first Rebate Reporting Year. UnitedHealthcare has conducted its preliminary review and sent an April mailing to select customers seeking Written Assurance as to how they may use a potential premium rebate.
A critical date for brokers and customers is June 1, when the final MLR Rebate Report will be filed with the Department of Health and Human Services (HHS) detailing the states and Aggregation Sets eligible for premium rebate, along with the final total premium rebate payout.
After the June 1 filing with HHS, reports for sales and brokers listing the customers receiving rebates will be available in the mid-June time frame. Rebate checks will be issued in staggered mailings beginning the first week of July, with August 1 the deadline for all rebates to be paid to policyholders.
Policyholders receiving premium rebates will receive their checks with the rebate notification. Their subscribers also will receive a notification that their employer has received a premium rebate.
Rebates will be distributed in the following ways:
- For ERISA plans, in most cases, the rebate will be paid to the group policyholder. The exception to this are those groups for which coverage is terminated at the time of the rebate payment and cannot be located by the applicable issuer. Each group policyholder receiving a rebate will generally have an obligation to use a portion of the rebate to benefit the subscribers of the relevant plan consistent with Department of Labor requirements.
- For Federal government plans, the rebate will be paid directly to the group policyholder as well.
- Non-federal governmental plans, the rebate will be paid to the group policyholder, with the policyholder having an obligation to use the portion of the rebate attributable to the premium paid by subscribers in one of the following three ways:Non- ERISA and non- government plans, the rebate will be paid to the group policyholder provided the issuer received a Written Assurance that the group policyholder will use the rebate according to standards applicable to non-federal government plans (details above). Customers needing to provide Written Assurance were sent a form in April and have until the end of May to return it.
- To reduce the subscribers’ portion of the annual premium for the following policy year for all subscribers covered under any group health policy offered by the plan;
- To reduce the subscribers’ portion of the annual premium for the following plan year for only those subscribers covered by the policy on which the rebate was based;
- Provide a cash rebate to subscribers covered by the policy on which the rebate was based.
Written Assurance forms are “evergreen,” meaning that customers with a Written Assurance on file from a previous rebate reporting year are not asked to complete another one. If customers do not return a completed Written Assurance by the required deadline, we are required by the federal rules to divide any rebate equally among all applicable subscribers.
Unlike last year, there will be no notifications in 2013 to either the applicable policyholders or subscribers if the group was not included in an Aggregation Set that qualified for a rebate.
The insurer notice that will be sent when the rebate is paid to the employer is here: