Employers get sneak peek at health care exchanges
By Kathleen Koster
Source: https://ebn.benefitnews.com
Communicate early, say employers using retiree exchange
Before eligible individuals and small employers begin shopping in the public health care exchanges in 2014, private retiree Medicare exchanges provide a glimpse of what public and private health insurance exchanges could look like.
In two years, brokers and other benefit advisers will help people choose appropriate plans from an array of insurance carriers. In particular, platform providers of multi-carrier Medicare exchanges believe they are in a unique position to help employees navigate the public exchanges.
"We see our role as the air traffic controller helping to organize these exchanges and information, and on behalf of those organizations, helping enroll early retirees and part-time workers to the plan that's right for them," says Bryce A. Williams, president and CEO of Extend Health, Inc., which operates a large private exchange in the U.S.
Williams, who has been meeting with several states on health care exchange development, anticipates 15-to-20 states will have a fully functioning exchange ready to offer a broad diversity of plans starting Jan. 1, 2014. Those leading the pack are Maryland, Oregon and California. States not ready at that time will have access to the federal government exchange.
"There will be an array of new choices for employees, part-time workers and early retirees with some of America's biggest companies to access guaranteed-issue individual plans for the first time," explains Williams.
For many new entrants, the exchange will be new territory, so advisers like Extend Health hope to provide information and direction to help individuals find the right plan at the right price.
PPACA "allows for external agents and brokers to connect into the system ... and get ready to place individuals into the exchanges where it's the right fit," and alert them if they qualify for subsidies, Williams adds.
Each exchange must establish a navigator program to fund outreach and education efforts. Community-based organizations and professional associations will act as navigators to help consumers understand the new health insurance options available through the exchange. Navigators are also tasked with raising broad public awareness around the exchange and providing referrals to relevant consumer assistance programs. Agents and brokers may also serve as navigators, provided they meet required standards.
The Massachusetts experience
The Massachusetts exchange, enacted through state law in 2006 under former governor and Republican presidential nominee Mitt Romney, will continue to play a central role in delivering health care to the uninsured. The state plans to improve the usability of its current website interface with federal support, as well as link seamlessly to federal databases.
"We will be building Web functionality that links to federal databases so that we can, in real time, evaluate people's eligibility for coverage in the exchange, including their eligibility for subsidies, and quickly route them through a crystal clear, cutting-edge, simple and comprehensible shopping experience," says Glen Shor, executive director of Massachusetts's Commonwealth Health Insurance Connector Authority.
In addition to its website, the Massachusetts Exchange will continue to provide a call center with "top-notch customer assistance" for help with the benefit selection and billing process, as well as help picking the best value plan, says Shor.
"We're going to work extraordinarily closely with brokers ... We want to make it easier and more efficient for brokers to assess the landscape of health insurance options for the small businesses they serve," he adds. The state is also working with nonprofit organizations to help low-income people enroll for health care and receive any possible subsidies.
In addition, a new wellness track feature helps small business employees and individuals using the Health Connector tool make healthy behavior choices. By participating in the wellness program, a subset of small businesses can qualify for a 15% rebate on the employer share of a health insurance premium, which can then put toward covering their employees.
To qualify for a wellness rebate, employers need a certain percentage of employees to get an annual physical. Outreach to small employers has already begun, and public education will escalate as 2014 approaches. The state introduced the Health Connector through employer road shows.
"We've learned in Massachusetts that outreach and public education, including around opportunities to access affordable coverage through the Health Connector, is critical to bringing people into the ranks of the insured and keeping them [there]," says Shor, adding that "in general, the Affordable Care Act gives us an opportunity in Massachusetts to [expand] what has been a very successful model," he says.
Exchange transparency
When Extend Health first introduced retirees to its private Medicare exchange six years ago, many people simply chose the cheapest plan - no matter their health status and needs. Once they realized how high their out-of-pocket costs were in high-deductible health plans, they would call the support team asking to switch plans.
In order to prevent that buyers' remorse, Extend Health now has 1,000 benefit advisers in call centers ready to take retiree questions and advise them on plan choices based on their health needs and medications.
For the public exchanges, Extend Health believes that trained, licensed advisers who have access to federal databases can be helpful in determining eligibility for employees and early retirees.
Individuals will either shop in the public exchange or get coverage from one of the 80 carriers on Extend Health's exchange platform.
Bryce says the company will provide "private and public exchange products from one platform, one call, one place." In addition, employers will be able to monitor in real-time when their population makes an exchange election or connects with an adviser.
Expectation of paternalism
"People have an expectation if they've just come off of a group plan of open enrollment selection," Williams says. "Employers have an expectation of paternalism; they expect that everyone is going to get coverage."
Four employers have used the beta version of Extend Health's BenefitView tool, each successfully completing their pilot test. Extend Health is now rolling out the tool to all its employer-clients. The tool helps ensure that every retiree is contacted and advised on choosing the best plan that meets the individual's needs. BenefitView assures that the employer-client has full transparency on the status of the transition of its retirees' from group coverage to individual coverage.
Employers can monitor engagement of specific population segments and reach out more aggressively to groups not making appointments with advisers or benefit selections.
The Web platform also shows the HR department how many plans have been selected over how many carriers, and the average insurance premium. It can also give HR statistics about the anticipated or past wait times for the call center.
U.S. retirees and Medicare-eligibles at International Paper entered the Extend Health exchange in July 2012, and over 10,000 people have selected 806 different plans among 66 different carriers.
The company started communicating about the new process in February and has monitored retirees' progress.
"We wanted to make sure [participants] were getting the information they needed, because this is a very different animal for them as opposed to the one-size-fits-all methodology that we had in the past from our medical plan," explains Melissa (Missy) Hartfiel, benefits planner, International Paper.
Lessons learned
By watching what communication efforts retirees were responding to and what modes weren't engaging, the company was able to make adjustments and prod groups that weren't getting involved. The best part: HR could gather information itself and present it immediately to executives when needed.
"As an HR professional, it's nice when you can pull your own information. Through BenefitView, I could look at any population, day or night," says Hartfiel.
Reflecting on its marketing campaign, Hartfiel advises sponsors to start strategizing and communicating early about the public exchanges.
"Once you start parsing down [to communicate to different group populations], it takes time to really craft that message," she explains.
Another user of the exchange agrees: "You need to overcommunicate to make sure you reach the intended audience that you're trying to reach," says Scott McIntyre, manager of employee benefits, Oak Ridge National Labs.
McIntyre and the Extend Health advisers were able to contact 99% of the company's retirees, and 3,360 were enrolled in 68 different plans from 30 different carriers.
"If I'm an employer and I'm going to subsidize the health care cost [for employees or early retirees], I certainly would want a mechanism to ensure that employees enroll in plans that they are interested and comfortable in," McIntyre says.
Hartfiel explains that using Extend Health's model - even though it's a retiree Medicare exchange - has "given us an idea of how [the public and private] exchanges will work as we start planning our strategy for the 2014 exchanges."
International Paper plans to analyze its population health data later this year to decide whether it will engage any segment of employees in the future public or private exchanges.
Small-business owners say wellness has positive financial impact
Survey: 3 in 4 small business owners tout health and wellness programs
While most small businesses don’t offer health and wellness programs to their employees, three of four that offer such programs find the initiatives positively impact their bottom line.
That’s one of the key conclusions of a study of more than 1,000 small-business owners by Humana Inc. (NYSE: HUM), Louisville, Ky., and the National Small Business Administration (NSBA), Washington, D.C. Conducted by the research firm StrategyOne, New York, the study aims to uncover health and wellness needs and barriers facing small businesses in today’s post-recession business recovery.
The survey defines health and wellness programs as initiatives designed encouraging employees to make healthier choices such as getting preventative care, eating right and exercising.
More than 9 in 10 (93 percent) of the study’s respondents consider their employees’ physical and mental health to be important to their financial results, but only one-third express confidence in their ability to help employees manage their well-being.
More than half of the people surveyed maintain that insufficient information is available that pertains to small businesses introducing health and wellness programs. Among companies less than 10 years old, more than six in 10 (63 percent) having already adopted health and wellness programs.
A key factor in small business owners’ decision about whether or not to introduce a health and wellness program rests with employee interest, the study indicates, adding that:
● Startups find their employees, many of them younger, prefer and pursue such offerings.
● 85 percent of startups say wellness programs are worth the investment and 63 percent are already adopting such programs.
● Most startups say these programs aid in recruiting and retaining employees.
While often focused on physical health, well-being programs can impact mental health too, the study notes, adding that:
● High employee stress is the number one concern for small business decision-makers, especially those at smaller companies, with stress levels more than triple other employee well-being concerns.
● Understanding this issue and incorporating stress-management into wellness offerings will be an important consideration for small business owners moving forward.
● 67 percent of respondents say offering programs that help keep employees healthy would be the best health-related option received by employees, versus only 17 percent who say allocating more sick days.
Eight tips for employees during open enrollment
Source: https://www.benefitspro.com
It's open enrollment time again.
And with new regulations in place because of health reform, as well as ever increasing health costs, employees can use all the help they can get.
“Employers are making more changes than ever to their benefits plan designs and as a result employees need to take extra precautions to assure that they have the benefits coverage they expect, for a price they can afford, during this year’s open enrollment period,” says Cynthia Weidner, vice president H&W consulting, HighRoads.
HighRoads offers eight tips to employees so they can make the most of their benefits plans, while saving money.
Get your plan materials.
Pay attention to how your employer is making your SBCs and the traditional Summary Plan Descriptions available to you. Many are making them more accessible online, via mobile apps as well as on paper. It’s good to know how you can access this information during open enrollment and throughout the year, in case you want to review it again when you are in need of a particular medical service.
Do your homework.
Take the time during open enrollment to truly read through your plan materials, including the SBCs and SPDs, to make yourself familiar with each of your plan options. Reading each of these materials will give you the detailed plan descriptions you need to decide on the best plan for you and your family in the coming year.
Calculate your costs.
Many employers provide cost calculators to help project your total cost for the coming plan year. The total cost includes the premium you pay as well as your share of the deductible and coinsurance. Take the time during open enrollment to think through your potential medical needs and calculate your anticipated expenses before selecting a plan. It may save you hundreds in the long run.
Consider an account.
If your employer offers you the option of a health care account, whether it is a flexible spending account, a health reimbursement account or a health savings account, take a good look at it. These accounts can help you save money on qualified medical expenses that aren’t covered by your health care plan, such as deductibles and coinsurance. Each account has a different set of rules about how and when you can spend the money, but each are worth considering because the savings you’ll see can add up quickly.
Ask if you have a grandfathered plan.
One of the benefits of health care reform is an extended list of preventive care benefits that must be offered by new health care plans for free. Preventive services such as colonoscopy screenings for colon cancer, pap smears and mammograms for women, well-child visits and flu shots for all children and adults must be offered without out-of-pocket costs.
However, these benefits are only for new health plans and don’t apply to “grandfathered” plans that haven’t significantly changed in a few years. Find out if your plan is considered to be “grandfathered” and identify exactly what preventive services are covered for free.
Prepare for the unexpected.
Everyone needs to be prepared for the unexpected, including job loss, divorce or other life-changing events. Be sure you know what the benefits plan costs might be if you need to pay for it under COBRA.
COBRA requires that most employers with group health plans must offer employees the opportunity to continue temporarily their group health care coverage under their employer's plan if their coverage otherwise would cease due to termination, layoff, or other change in employment status (referred to as “qualifying events”). However, COBRA insurance must be paid entirely by the former employee. Be certain that if you need to continue your company’s health coverage that you are comfortable with the full premium cost should you need to pay for it on your own.
Use wellness incentives.
More employers than ever before are offering incentives to employees and their family members for health improvement. These incentives may come in the form of medical premium discounts, access to certain low deductible plans or even incentives and prizes. Some employers even offer to put money in an employee's medical account as an incentive. Take the time to learn everything your employer offers. You may find that you are already leaving money on the table because you have a gym membership or participate in a weight loss program that qualifies for an incentive from your employer.
Know your deadlines.
No matter what changes you may make, if any, during this year’s open enrollment period, don’t let your selection deadlines slip by without action. Doing nothing could end up costing you hundreds in 2013 in higher premium costs, lower coverage, or missed opportunities to optimize your health care dollars. Missing your open enrollment deadline will mean that you have to wait it out a full year before making changes that can help pad your bank account.
3 Open enrollment lessons
Source: ebn.benefitnews.com
By Ed Bray
- Develop and distribute a wallet-sized carrier contact card. There are many times when I’ve said (and been asked by employees), “what's the dental insurance or vision insurance or EAP or FSA Administrator’s phone number?” Providing a wallet-sized card to employees with all of your carrier’s contact information is an easy, low-cost way to provide the information they need at their fingertips, which will also reduce calls and emails to your desk.
- Provide a pre-open enrollment benefits confirmation statement to each employee. There are a number of opportunities for printing and distributing pre-open enrollment benefits confirmation statements to employees but two that I have found most useful are: 1) Providing an opportunity for employees to recognize and correct any missing or inaccurate data (e.g., home address, dependent social security numbers, etc.) and 2) Highlighting the value of any benefits the employee is not currently enrolled in (e.g., company match if not participating in 401(k), pre-tax flexible spending account benefits)
- Include any carrier discount opportunities in employee open enrollment packets. Outside of their core product offering, many carriers offer free and/or discounted services to employees that are not commonly advertised. Such offerings often include discounts on fitness, alternative medicine, weight management, LASIK, etc. Check with your carriers to determine if such services are available to your employees (there is a good chance your medical carrier will offer something) and then provide any brochures, etc., in the open enrollment packets.
IRS further delays interest rules on cash balance accounts
Source: ebn.benefitnews.com
By Mark Lofgren
We understand that the IRS and Treasury continue to work on developing final regulations to implement the market rate of return limitations that apply to interest credits made to cash balance accounts. This has proved to be a particularly difficult area for the government to address and one that has received significant comments from cash balance plan sponsors and practitioners.
As a result, we still do not have final rules in this area, despite the publication of proposed regulations (and partial final regulations) back in 2010. However, the IRS recently provided an update on the ultimate timing of the final market rate regulations and on how the “MAP-21” (the Moving Ahead for Progress in the 21st Century Act) pension funding relief rules may impact interest credits under some cash balance plans.
In Notice 2012-61, which addresses a number of issues related to pension funding stabilization rules enacted in MAP-21, the IRS has provided the following important guidance regarding cash balance plans:
- Final cash balance “market rate” regulations not effective prior to 1/1/14. The Notice indicates that the regulations governing the market rate of return limits that apply to cash balance plan interest credits will not become effective earlier than plan years that begin on or after January 1, 2014. This is welcome news since another year is nearing an end without final regulations in this area. If final regulations are issued later this fall (there is some chance of this, though we are not holding our breath), plan sponsors will not be forced to comply with the rules until after the 2013 plan year.
- Possible impact of MAP-21 changes for cash balance plans that use the segment rates to determine interest credits. As permitted under existing IRS guidance, some cash balance plans use one of the segment rates under Code section 430(h)(2)(C) to determine the interest credits to be added to participants' cash balance accounts under the plan. The Notice addresses how the smoothing of these rates for plan funding purposes may impact the interest credits to be made to cash balance accounts in these plans.
- MAP-21 smoothing impact is permissible (for now), but not required. If a cash balance plan defines its interest crediting rate with reference to one of the segment rates, the plan administrator can reasonably interpret plan terms to either apply or not apply the MAP-21 smoothing to the specified segment rate in determining interest credits.
Further, if such a plan is amended to specify which approach is being taken and the amendment is adopted by the deadline set by the IRS to meet the final cash balance market rate of return requirements (which will not be prior to 1/1/14), the amendment will not be considered an impermissible cut-back of benefits under Code section 411(d)(6) and will not trigger an advance participant notice under ERISA section 204(h) (this is the notice generally required when an amendment results in the significant reduction in future benefit accruals).
- Application of MAP-21 smoothing. If a plan is interpreted to apply the MAP-21 smoothing to determine interest credits, the plan must apply the new rate to determine interest credits beginning either (1) the first day of the first plan year for which the MAP-21 rates apply for funding purposes, or (2) the first day of the plan year beginning in 2012. Once a plan has been interpreted to use the smoothing in determining interest credits, the plan cannot be changed to stop using the smoothing for this purpose without triggering the 411(d)(6) anti-cutback protections (unless future guidance provides otherwise).
- MAP-21 smoothing may not meet final market rate rules. The Notice cautions that it is not a foregone conclusion that the MAP-21 adjusted segment rates will be approved as within the market rate limitations. If the final market rate regulations do not permit a cash balance plan to use the MAP-21 segment rates for interest crediting, then any plan using such rates must change to a permissible rate in accordance with applicable transition rules that will be set out by the IRS. Given this caution about whether the MAP-21 adjusted rates will be permissible in the long run, plan sponsors that currently use a segment rate for interest credits will want to carefully consider the potential implications of moving to the MAP-21 modifications for this purpose prior to the issuance of final IRS guidance on the market rate rules.
In our experience, it is unusual for the IRS to indicate that the plan administrator is permitted to make this sort of plan interpretation without a corresponding plan amendment. In any event, plan sponsors in this position will want to carefully consider with their counsel the pros and cons of both approaches.
The Power of the Daily Huddle
Source: openforum.com
By Wally Adamchik
Quarterbacks use it, with much success, all the time—and it can work for you, too. It is one of the most effective leadership and management tools at your disposal, and takes just a few minutes to execute. What is it? A daily huddle.
You need to tell your team things they need to know to do their jobs—and contrary to popular belief, there are employees at all levels and all ages who want to hear those things. Employees who are disengaged feel that way because the boss is not communicating with them. The daily huddle is a great solution, and it can work in any industry.
Dynamics of a Great Huddle
Before the workday starts, gather your team to deliver key information to align them for the day. Are there any special events/visitors/promotions? How about a key training tip? Perhaps you will talk about production or sales targets for the day? All this information gives them direction and helps them to be more productive. Remember, the goal of the huddle is short-term—what do you want to accomplish today, not two years from now.
You also might toss in some feedback about how things went yesterday. While this is not the time to single out poor performers, you may highlight some wins from the day before.
Make sure to ask for input and questions. If the huddle is a new concept for your team, people will be reluctant to share anything initially. But, over time they will see you are serious about the huddle and will work with you to make it better.
Why a Huddle Works
Let’s look at why it works. First, it is personal. No texting or e-mail is involved. This is direct, eye-to-eye contact—still the most compelling form of communication we have. When we look someone in the eye we know we have their attention and we can see them understand our message.
Also, engaging in eye contact shows people they are important, that you want to communicate with them. It conveys the message that you respect and trust them enough to share this information with them. When you ask for their input, you are saying, “I want to hear what you have to say. I am interested in you and the value you contribute to our team.”
When an employee speaks of his company in terms of “they do… they say,” that employee doesn't feel connected or even part of the company. The huddle helps change that "they" mentality, to a "we" way of thinking. The huddle helps educate and align your team on key business issues, while making them feel like they are part of the team.
Win-Win
What’s the payoff? You get employees who understand what is expected of them on a daily basis and who feel more connected to the team. In turn they will work harder and are more motivated to do their jobs the best way they know how.
Does it always work? No. But starting the day without a huddle insures a workforce that is uninformed and de-motivated. Communication is one of the keys to success. (In fact, over 85 percent of my surveys have indicated that communication from management is in need of drastic improvement.) The huddle is a quick, easy and inexpensive way to fix this major problem.
Rise of medical costs tops projections
Source: Bloomberg News Service
Medical prices accelerated faster than some projections last year and the number of uninsured is rising, according to data that show the U.S. goal of expanding health care is veering onto a more difficult road.
Costs for people with employer-sponsored insurance plans jumped 4.6% in 2011, more than the government’s 3.9% estimate for the entire health system, the Health Care Cost Institute, which analyzed claims from UnitedHealth Group Inc., Aetna Inc. and Humana Inc., said Tuesday. A study by the U.S. Centers for Disease Control and Prevention found the number of people without insurance climbed 1.7% in the first quarter of 2012.
The data pose a challenge for the Obama administration as it carries out the 2010 Patient Protection and Affordable Care Act, which promises to expand coverage to 30 million Americans starting in 2014 and trim health costs. The CDC reported that 47.3 million people lacked insurance, and the health institute said hospitals and doctors raised prices at a clip that outstripped demand.
“If you don’t bend the cost curve, ultimately insurance gets more expensive,” said Douglas Holtz-Eakin, the president of the American Action Forum, a Washington-based advocacy group that opposes the health law. “It’s a big problem for the Affordable Care Act.”
The overhaul law may be contributing to higher costs, said Martin Gaynor, an economics professor at Carnegie Mellon University and chairman of the Washington-based Health Care Cost Institute. The act tries to limit insurers’ administrative expenses and profits by requiring companies to spend at least 80% of their premium revenue on medical services. To meet that threshold, they may be letting prices rise, he said.
‘Unintended consequences’
“Like anything else, sometimes these things can have unintended consequences,” Gaynor said in a telephone interview.
Health care costs for 40 million workers covered by UnitedHealth, Aetna and Humana – three of the four largest U.S. health insurers by revenue – increased to $4,547 a person, from $4,349 a year earlier, according to the institute. The group, created last year to analyze claims data from major insurers, found that charges for hospital emergency rooms rose 9.1% in 2011, after adjusting for a reduction in the intensity of care they delivered.
That means emergency rooms “did less for more money,” said David Newman, executive director of the institute.
The law also has encouraged consolidation among hospitals and doctors, which may lead to greater pricing power, said Holtz-Eakin, who once who ran the nonpartisan Congressional Budget Office after leaving the Bush administration in 2003.
A White House spokesman, Nick Papas, referred questions to the Department of Health and Human Services.
Incomplete picture
Erin Shields, a spokeswoman for the department, said the institute’s report looked at a segment of the health care system. “In recent years, overall health care cost growth has reached record lows and the health care law drives costs down,” she said in an e-mail.
Rising costs in 2011 may have been a one-time phenomenon, said Charles Roehrig, director of the Altarum Institute’s Center for Sustainable Health Spending in Ann Arbor, Mich. His group calculates that spending for the health system increased 5.2% in 2011, and this year will rise about 4%, similar to the rates in 2010 and 2009.
“I might be dismayed if the data for 2012 showed it was going up even faster still,” Roehrig said by telephone.
More uninsured
The report from the Atlanta-based CDC showed the number of people without health insurance rose to 47.3 million in the first quarter, from 46.5 million a year earlier. The finding contrasts with a Sept. 12 Census Bureau report that said the number of uninsured Americans declined by more than 1 million in 2011 from 2010.
The CDC data, collected from a survey of about 35,000 households conducted throughout the year, is considered “preliminary” and the first-quarter sample has “larger variances” than full-year data, Karen Hunter, a CDC spokeswoman, said in an e-mail.
While the two federal agencies use different methodology to gather their data, both documented a decrease in the number of people ages 19 to 25 who lack insurance. The CDC said that 27.5% of people in that age group were uninsured in the first quarter.
How to Improve Communication Skills in the Workplace
By David Ingram
Source: https://smallbusiness.chron.com
Communication skills are an essential component of a productive workplace, allowing employees to work together cohesively and professionally. Small business owners can do well to hire employees with solid communication skills, and there are also ways to improve communications skills in the workplace to boost employee productivity. Improving employee communication skills through training exercises and behavior modeling can give your company a competitive edge.
Step 1
Include communication skills in employee training programs. Some people are inherently more social than others, but anyone can learn and practice effective communication skills to increase personal effectiveness on the job. Teach new employees the fundamentals of good communication, including listening skills, the concept of encoding and online communication challenges.
Step 2
Model excellent communication skills to leverage the social learning theory. The individual personalities of small business owners can have a large impact on the culture that develops in their companies. Employees who spend a lot of time working alongside company owners may begin to model the communication style of their bosses. Take an inventory of your personal communication habits to gain insight into any communication problems your employees are having. If you consistently provide a model of professional, respectful communication, your employees will take notice.
Step 3
Promote your most effective communicators into supervisory positions to set the tone in the company. Your managers set the bar for employee performance just as you do as the business owner. Make sure all your managers understand your commitment to modeling effective communication skills. Your managers should be confident and develop their own communication styles as they gain experience on the job.
Step 4
Include communication skills in performance appraisals. Tying company objectives into performance appraisals is a proven way to motivate employees to achieve organizational goals. If communication is a significant issue in your workplace, consider setting personal goals for improving communication skills for each employee, and giving incentive awards to employees who meet these goals.
Step 5
Develop team-building exercises to strengthen intra-office communication. High-performance teams become more cohesive over time as they gain experience working and communicating with each other. Exciting activities that require employees to work together can speed up the team-building process, allowing team members to learn the best ways to communicate with others in the team through experience.
Employer-Provided Health Coverage Informational Reporting Requirements: Questions and Answers
Source: https://www.irs.gov
The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. To allow employers more time to update their payroll systems, Notice 2010-69, issued in fall 2010, made this requirement optional for all employers in 2011. IRS Notice 2011-28 provided further relief by making this requirement optional for certain smaller employers for2012 Forms W-2 (meaning the Forms W-2 for calendar year 2012 generally furnished to employees in 2013). Notice 2012-9, issued in January 2012, restates and clarifies guidance in Notice 2011-28. It provides guidance for employers that are subject to this requirement for the 2012 Forms W-2 and those that choose to voluntarily comply with it for either 2011 or 2012.
The following questions and answers provide information for employers on reporting the cost of the health insurance coverage, including information on transition relief for 2012, how to report, which coverage to include, and how to determine the cost of the coverage. There are many more questions and answers included in Notice 2012-9 that cover a variety of issues.
Q1. Does the cost of an employee’s health care benefits shown on the Form W-2 mean that the benefits are taxable to the employee?
A. No. There is nothing about the reporting requirement that causes or will cause excludable employer-provided health coverage to become taxable. The purpose of the reporting requirement is to provide employees useful and comparable consumer information on the cost of their health care coverage.
Q2. When will employers have to start reporting the cost of health care coverage on the Form W‑2?
A. Reporting for the 2011 calendar year (meaning the Form W-2 generally required to be furnished to employees in January 2012) was optional. For years after 2011, employers generally are required to report the cost of health benefits provided on the Form W-2. Transition relief is available for certain employers and with respect to certain types of coverage, as explained in Q&A-4, below. Reporting for the employers covered by the transition relief, and with respect to the types of coverage covered by the transition relief, is not required until future guidance is provided, and in no event will reporting by these employers and with respect to these types of coverage be required on any 2012 Forms W-2 (generally required to be furnished to employees in January 2013).
Q3. Which employers are subject to this reporting requirement?
A. Except as provided in the transition relief described in the next Q&A, all employers that provide "applicable employer-sponsored coverage" (see Q&A-5 below) under a group health plan are subject to the reporting requirement. This includes federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families), churches and other religious organizations, and employers that are not subject to the COBRA continuation coverage requirements, but does not include federally recognized Indian tribal governments or, until further guidance, any tribally chartered corporation wholly owned by a federally recognized Indian tribal government.
Third-party sick-pay providers that provide the Forms W-2 to the employees of the employers with which they have contracted do not have to report the cost of coverage. However, a Form W-2 provided by the employer to the employee must report the cost of coverage regardless of whether that Form W-2 includes sick pay or whether a third-party sick pay provider is furnishing a separate Form W-2 reporting the sick pay.
Q4. What transition relief is being provided by Notice 2012-9? To which employers and types of coverage does it apply and how long does it last?
A. For certain employers and with respect to certain types of coverage listed below, the requirement to report the cost of coverage will not apply for the 2012 Forms W-2 (the forms required for the calendar year 2012 that employers generally are required to provide employees in January 2013) and will not apply for future calendar years until the IRS publishes guidance giving at least six months of advance notice of any change to the transition relief. However, reporting by these employers and for these types of coverages may be made on a voluntary basis.
The transition relief applies to the following:
- employers filing fewer than 250 Forms W-2 for the previous calendar year (for example, employers filing fewer than 250 2011 Forms W-2 (meaning Forms W-2 for the calendar year 2011, which generally are filed with the SSA in early 2012) will not be required to report the cost of coverage on the 2012 Forms W-2 (which generally are filed with the SSA in early 2013). For purposes of this relief, the number of Forms W-2 the employer files includes any forms it files itself and any filed on its behalf by an agent under § 3504 (see Q&A-3 of Notice 2012-9 for more information). In addition, for purposes of this relief, the employer is determined without the application of any aggregation rules
- multi-employer plans
- Health Reimbursement Arrangements
- dental and vision plans that either
- are not integrated into another group health plan or
- give participants the choice of declining the coverage or electing it and paying an additional premium (see Q&A-20 of Notice 2012-9 for more information)
- self-insured plans of employers not subject to COBRA continuation coverage or similar requirements
- employee assistance programs, on-site medical clinics, or wellness programs for which the employer does not charge a premium under COBRA continuation coverage or similar requirements and
- employers furnishing Forms W-2 to employees who terminate before the end of a calendar year and request a Form W-2 before the end of that year.
For more information on the additional transition relief for certain employers and with respect to types of coverage, see Section IV of Notice 2012-9.
Q5. What types of health care coverage must be included in the amount reported on the Form W-2?
A. The chart on the Form W-2 Reporting of Employer-Sponsored Health Coverage lists many types of health care coverage and various other situations, and explains whether reporting is required, prohibited, or optional.
The chart was created at the suggestion of and in collaboration with the IRS’ Information Reporting Program Advisory Committee (IRPAC). IRPAC’s members are representatives of industries responsible for providing information returns, such as Form W-2, to the IRS. IRPAC works with IRS to improve the information reporting process.
Q6. What amount should the employer report on the Form W-2 for health coverage? The amount the employer paid? The amount the employee paid? Or both?
A. In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. In the case of a health FSA, the amount reported should not include the amount of any salary reduction contributions. See Notice 2012-9 for more detail on the interim rules that apply to reporting contributions to a health FSA.
Q7. Where on the Form W-2 should the employer report the cost of these health care benefits?
A. The cost of these health care benefits will be reported in box 12 of the Form W-2, with Code DD to identify the amount.
Q8. What amount of health benefits should be reported on the Form W-2 for employees that terminated employment during the year and had employer-provided coverage both before and after termination?
A. Under the interim rules, the employer may use any reasonable method for inclusion of the coverage provided after termination, so long as that method is applied consistently. See Notice 2012-9, Q&A-6, for examples.
Q9. What amount of health benefits should be reported on the Form W-2 for an employee that leaves during the year and requests a W-2 before the end of the year?
A. If an employee makes such a request in writing, the employer must provide the W-2 within 30 days. However, under the interim rules, the employer will not be required to report any amount of health benefits in box 12, Code DD.
Q10. Will employers now be required to issue a Form W-2 to retirees or other former employees to whom the employer would not otherwise issue a Form W-2?
A. No.
Q11. Where can I get more information about the employer’s requirement to report the aggregate cost of an employee’s health care benefits on the Form W-2?
A. Detailed information about the interim rules for this reporting requirement and the additional transition rules for certain employers and with respect to certain types of coverage can be found in Notice 2012-9 and the instructions for the 2012 Form W-2.
Costs Continue to Rise for Employee Health Benefits
Source: BusinessWire
Wells Fargo Insurance survey finds medical costs projected to increase in the high single digits in 2013
SAN FRANCISCO--(BUSINESS WIRE)-- In a finding that will likely not surprise many businesses in the U.S., the cost of claims in employer-sponsored health plans continues to rise, according to a survey from Wells Fargo Insurance. Although rates remain consistent compared to six months ago, the survey of more than 70 insurance companies nationwide found that overall claim costs will continue to increase in the high single digits next year. The Wells Fargo Insurance Employee Benefits Survey was conducted between July and August 2012.
“Despite ongoing efforts to control healthcare expenses the survey found that insurers are not expecting a drop in claim costs for 2013,” said Dan Gowen, senior vice president of Wells Fargo Insurance’s national Employee Benefits Practice. “This means that employer premiums will likely rise, and it’s also likely consumers may pay more for their share of employer-sponsored healthcare plans. Employers seeking to minimize cost increases should explore more sophisticated ways to maintain and improve the health risk of employees and maximize their benefit investment.”
The survey also found that dental cost trends are lower than medical trends due to lack of cost shifting from public to private plans, and a negative cost impact from improvements in the dental technology field. Finally, survey results indicate prescription costs are down slightly, due to greater availability and the use of generic drugs.
Wells Fargo Insurance has been conducting this biannual survey since 2008 to measure national healthcare trends. Reflecting claim activity over a six-month period, projected increases in the national average cost of claims include the following:
- Health maintenance organizations (HMO) – 8.5 percent
- Point-of-sale (POS) – 8.7 percent
- Preferred provider organizations (PPO) and consumer driver health plans – 9.3 percent
- Exclusive provider organizations (EPO) – 9.4 percent
- Indemnity plans – 10.2 percent
- Prescription plans – 7.6 percent
In addition to healthcare reform provisions, claim trends are influenced by price inflation or deflation (changes in unit prices for the same services), increased or decreased use of services, population age, leveraging effect on benefit design, changes in provider treatment patterns, improvements in technology and drug therapies, and cost shifting.