Regs Limit Use of HRAs for Exchange-Purchased Coverage

Original content from https://www.shrm.org

On Sept 13, 2013, federal agencies issued further guidance via IRS Notice 2013-54 and DOL Technical Release 2013-03, reiterating that health reimbursement arrangements (HRAs), premium reimbursement arrangements (PRAs) and other employer payment plans cannot be used to pay for individual policy premiums on a pre-tax basis, such as when indivdiual coverage is purchased by employees through a public health insurance exchange or on the individual market.

For a true “retiree-only plan” under the tax code and ERISA, employers can still sponsor an HRA or PRA and reimburse individual policy premiums on a pre-tax basis.

Also, employers can provide their active employees with a defined dollar amount, on a pre-tax basis, to purchase group coverage through a private exchange, as explained in the SHRM Online articles "On Private Health Exchange, Choice Drives Satisfaction" and "Time for Defined Contribution Health Benefits?"

A set of frequently asked questions and answers (FAQs) issued by federal regulators on Jan. 24, 2013, will limit the use of employer-provided health reimbursement arrangements (HRAs) to fund employee purchases of individual (nongroup) coverage on government-run health care exchanges, scheduled to launch in 2014.

HRAs are employer-funded notional accounts that are often, but not always, linked to high-deductible group health plans. They typically consist of an employers' promise to reimburse an employee's out-of-pocket medical expenses through a dollar amount contributed annually to the employee's HRA, with unused amounts carried over to help reimburse medical expenses in future years. When the employment relationship ends, the HRA reverts back to the employer since, unlike a health savings account (HSA), an HRA is not employee owned and not portable. (To learn about HRAs and how they operate, see the SHRM Online article "Consumer-Driven Decision: Weighing HSAs vs. HRAs.")

The new guidance, jointly issued by the U.S. Departments of Health and Human Services, Labor and Treasury, distinguished between HRAs that are "integrated" with other coverage as part of a group health plan and HRAs that are not integrated ("stand-alone" HRAs).

The FAQs clarify that an HRA that is not integrated with group health plan coverage but provided as a stand-alone benefit is subject to the Patient Protection and Affordable Care Act (PPACA) prohibition on limiting the amount of an employee's annual health care spending subject to insurance coverage.  Beginning in 2014, for employers with more than one employee, restricted annual dollar limits are not permitted.

Because of the prohibition on annual dollar limits, an employer-sponsored, stand-alone HRA cannot be used to fund the purchase of individual market coverage, or an employer plan that provides coverage through individually purchased policies, including those that might be purchased on a government-run exchange.

Public Exchanges and HRAs Don't Mix

"Some employers had hoped that with the advent of the [government-run] exchanges in 2014, they would be able to offer their employees a fixed-dollar contribution through an HRA, which would permit the employee to take advantage of the tax subsidies currently available through HRA coverage but get the employer out of the health insurance business," explained Timothy Jost, a professor at the Washington and Lee University School of Law in Virginia, in a commentary about the new FAQs posted on the journal Health Affairs' blog.

In addition, "some consumer advocates had hoped that employees would be able to couple funds offered by employers through HRAs with advance premium tax credits available through the exchanges to make individual health policies truly affordable," Jost wrote.

However, he noted, the FAQs clarify that this approach will not be permitted. "The agencies intend to issue further guidance on the issue but have concluded that stand-alone HRAs used to purchase individual coverage will not be considered to be integrated coverage that complies with the annual dollar limit requirement" under the PPACA.

Moreover, if employees are offered an HRA and group coverage but decline the latter, they still may not use the HRA to purchase individual policies, Jost said.

Not a Blanket Prohibition?

However, according to Peter Antoine, a compliance communications specialist at Middleton, Wisc.-based Employee Benefits Corporation, the fact that under the FAQ guidance a stand-alone HRA is subject to the no-limit provision does not mean that it can’t be used to reimburse the cost of an individual plan, even one purchased on an exchange. Rather, “the non-integrated HRA would have to have an unlimited benefit available, unless certain exemptions apply that weren’t spelled out in the FAQs,” he told SHRM Online.

Moreover, Antoine explained that “we believe that non-integrated HRAs that operate as health flexible spending accounts (FSAs), as described in IRS Notice 2002-45 and Internal Revenue Code Section 106, are not subject to the no-limit provision. Consequently, a stand-alone HRA that satisfies the health FSA definition could have a limited benefit, reimburse individual plan premiums and comply with health care reform.”

However, an analysis by law firm McKenna Long & Aldridge LLP concludes:

"Note that some experts have challenged whether the annual dollar limit prohibition even applies to an HRA used to fund individual premiums, since the law only prohibits annual dollar limits on EHBs [essential health benefits]. ... Other experts argue that the HRA premium reimbursement arrangements for individual market coverage should be exempt from the annual dollar limit prohibition as health flexible spending accounts meeting the definition of Code Section 106(c)(2) (i.e. the maximum amount available for reimbursement under the plan may not exceed 500% of the value of the coverage). However, the Departments apparently take a different view given the clear statement in the FAQ that HRAs reimbursing employees for individual market insurance premiums will violate the annual dollar limit prohibition."

Private Exchanges: Employer's Subsidy and Employee's Contributions Remain Pre-Tax

In Aon Hewitt's private Corporate Health Exchange, which launched in fall 2012 for plan year 2013, "the contracts between insurers and employers are traditional group contracts" covered under the Employee Retirement Income Security Act (ERISA), Ken Sperling, Aon Hewitt national health exchange strategy leader, explained to SHRM Online. "The employee contributions are still covered under Section 125, so the employer subsidy is deductible and the employee contributions are pre-tax, just like today. Nothing changes from a tax perspective." 

Private exchanges are not eligible for government-subsidized coverage, and thus differ from the new public exchanges (to learn more, see the SHRM Online article "On Private Heatlh Exchange, Choice Drives Satisfaction.")

 


Small-group employers skip SHOP, move to individual exchanges

Originally posted October 03, 2013 by Elizabeth Galentine, additional reporting by Brian Kalish on https://ebn.benefitnews.com

While President Barack Obama has frequently told Americans, “if you like your plan, you can keep it,” that is not ringing true for some small groups across the country. A number of small-group employers are already planning to send their employees to the Affordable Care Act’s exchanges. It’s an outcome predicted by many in the industry, but one surprise to some is the choice of exchange.

Rather than utilize the Small Business Health Options Program (SHOP exchanges) that the ACA has set up for employer groups of 50 or fewer full-time employees, some brokers are finding their clients are more interested in sending their employees to the individual exchanges instead.

Kelly Fristoe, owner of Financial Partners in Wichita Falls, Texas, is wary of the fact that his state’s SHOP exchange only has one insurance company participating at this point. Rather than deal with potential consequences of that, he is steering his small-group clients interested in the exchange market toward the individual plans. “We’ve had some small-group customers — not a lot — telling us that they’re going to dump their plan and send their employees to the individual market,” says Fristoe, president of the Texas Association of Health Underwriters.

“So we’ve made some arrangements with those employers to be able to be the agent that sits with those employees. They’re going to let us have time with their employees to educate them on purchasing insurance through the marketplace and qualifying for a subsidy.”

Because he wants to keep those individuals as clients no matter what, Fristoe was particularly “frustrated” Tuesday when technical glitches kept him from checking out the plans on healthcare.gov. “I’m needing to salvage that business and I need to know what those individual rates are so that I can go back to those people and show them how to qualify for a subsidy, if they qualify, and get them enrolled,” he says. “… We’re going to be the agent that’s going to try to salvage that business instead of it going to one of our competitors.”

David Smith, vice president at Ebenconcepts in Morrisville, N.C., agrees that accessing the information on exchange rates is of the utmost importance right now. “You have to recognize that we’re going to have some percentage of very small groups that have already decided they’re not going to offer a group health insurance plan next year,” he says. “So if you have four or five employees a lot of them have made a business decision to not do it, and they just want to get a feel for what it’s going to cost their employees when they make that decision.”

As an administrator for the testing process for agents to be certified with Covered California, Neil Crosby, director of sales at Warner Pacific Insurance Services in Westlake Village, Calif., is surprised that the majority of people attending his classes so far have been serving the individual market. “I’m shocked at how many … are coming to primarily do it individually. There’s so many of them,” he says. “Some of the ones that do individual they also do small group, of course, but a lot of them are representing the individual. I’d say maybe 65% of people in the room.”

A lot of agency owners “want to get a feel for” for the individual market exchanges, says Ebenconcepts’ Smith, because it is very appealing for micro groups, those with nine, 10 employees, to “go to the marketplace for subsidized coverage and maybe pay less for that than they would for their group insurance today.” An employer who is looking at saving $3,500 to $5,000 in premiums by making the switch, “they’re not walking that border, they’re running to that border,” says Smith.

A common sentiment among several brokerages contacted by EBAEBN’ssister publication, in the days following the opening of the exchanges was that they have yet to take a look at the individual or SHOP exchanges. While online enrollment in SHOP exchanges run by the federal government is delayed until Nov. 1, applicants still have the option of submitting over the phone or through the mail.

Some are using the delay as a reason not to take a look at SHOP exchanges yet, but Michael Wolff, chief operations and financial officer at Dickerson Employee Benefits in Los Angeles, cautions against such an approach. “I don’t think that’s a good idea. … I think you want to have all the tools in your tool box. In California at least they have been successful in negotiating with the carriers to come to the table and give their best offers … there’s a chance they are giving a very good rate,” he says.

Wolff references the SHOP exchange tax credit for small businesses with low-wage earners that is available for 2014. “Of course we don’t know how long that will be upheld, but it’s a real tax advantage for next year at least,” he says. “… Why not have it in your portfolio to show? Everybody’s talking about it. You don’t want to say, ‘Well, I don’t know about it, but it’s probably bad because [it’s] the government [offering it].’ Well, maybe some clients will believe you, but it’s a better story if you say, ‘Yeah, I have that, and this is what they offer.’ Why would you not?

“Our model is … to bring a representation of the market to the agent and to the client,” adds Wolff, whose agency is one of only four in the state of California authorized to be a wholesaler for Covered California’s SHOP exchange, which did open on time Oct. 1. “This is a market phenomenon right now that we want to offer and explain. That is our role. We are ready.”

Meanwhile, like millions of others in the last few days, Don Garlitz, executive director of exchange technology provider bswift Exchange Solutions, logged on to a couple of SHOP exchanges to do a little window shopping. However, he could not get past the registration screen. If people are going to purchase such plans, the window shopping experience needs to improve, he says.

“People will look until they [get] what they want. [On Tuesday] I wasn’t able to find any kind of window shopping experience, which will be important for consumers,” he said. “They will not want to go through a 35-45 minute application process just to look at a rate. The call center I spoke with was not sure if there would be window shopping available. That will be an important thing for the federal government to consider.”


Health Q&A: ‘Obamacare’ Exchanges Start as Questions Abound

Originally posted September 30, 2013 by Alex Nussbaum on https://eba.benefitnews.com

Obamacare’s insurance exchanges debut tomorrow and so far the run-up has looked a lot like a political campaign, with dueling TV ads, door-knocking volunteers and a focus on swing-state targets.

Just don’t expect the usual ending to an election: a clear winner at the end of the day.

While the exchanges are expected to open on time, that milestone is unlikely to settle the 3 1/2-year grudge match over the Affordable Care Act. A long enrollment season, complicated by a threatened U.S. government shutdown and a growing list of technical glitches, means it may be as late as April before it’s known how many uninsured Americans sign up under the law.

While the shutdown won’t stop the roll-out, which is largely funded through mandatory appropriations that can’t be curtailed by congressional inaction, it’s an open question whether it will lessen public enthusiasm to enroll. In the meantime, technical glitches are beginning to surface.

People in Oregon, for example, won’t be able to enroll in a plan for the first few weeks unless they go through a broker or designated nonprofit groups, and the exchange in the nation’s capital won’t include premium prices until mid-November.

The Obama administration says other glitches are inevitable as the system starts up. The question is how serious and how long it takes the exchange to fix any issues. An extended crash or a problem calculating subsidies could be an embarrassment for the White House -- and sour consumers just as the administration tries to convince them to enroll.

‘In Between’

“Is it going to be a train wreck, a complete failure? The answer is no,” said Dan Schuyler, a director at Leavitt Partners, a Salt Lake City-based health care consultant. “Is it going to be completely seamless and instantaneous? No. It is going to be somewhere in between.”

The exchanges are at the heart of the law’s efforts to cover more of the 48 million uninsured Americans. About 7 million people will use the system to buy subsidized insurance by the end of the first open enrollment period on March 31, according to congressional projections.

Republicans will spotlight any problem as proof the law is a disaster. Democrats say they’ll overcome technical glitches and the law will sell itself as the uninsured gain benefits. Polls show most Americans side with the skeptics.

“The lights will go on Oct. 1, but they may flicker,” said Jocelyn Guyer, a director at the Washington-based consultant Manatt Health Solutions. “I worry the most about people making premature judgments on the first couple of weeks.”

The Breakdown

Here’s a primer on what to look for, based on interviews with consultants, insurers, analysts and state and federal officials:

Q: Who runs the exchanges?

A: Fourteen states have their own on-line exchanges, with the rest run in whole or part by the U.S. government.

Q: Who will use them?

A: The exchanges are open to people who buy coverage on their own and employees of businesses with 50 or fewer workers, as well as those currently shut out of insurance because of cost or a medical condition.

Subsidies are available, on a sliding scale, to those making as much as four times the poverty level, which is $11,500 for a single person and $24,000 for a family of four. Those making less than 138% of poverty will be eligible for Medicaid if they live in one of the 26 states set to expand the program.

Sign-Up Numbers

Q: How many people will sign up early on?

A: Call it lowering expectations or a realistic assessment: either way, supporters say they don’t expect a flood of enrollees this week.

Insurance buyers have to pay their first month’s premium within 30 days of choosing a plan and the policies don’t take effect until Jan. 1. As a result, the Obama administration says most people will wait until late November or December. Another surge may come in March as the end of the enrollment period nears.

Q: What happens if the federal government shuts down?

A: The exchanges will march on. That’s because the 2010 law relies primarily on mandatory spending, which congressional inaction can’t stop. It’s the budget category used for benefits such as Medicare, the U.S. health plan for the elderly and disabled, and Social Security.

The U.S. Health and Human Services Department said in a Sept. 27 memo it “would continue large portions of ACA activities, including coordination between Medicaid and the marketplace” in the event of a temporary shutdown.

Core Unaffected

“Many of the core parts of the health-care law are funded through mandatory appropriations and wouldn’t be affected,” Gary Cohen, the director of the Center for Consumer Information and Insurance Oversight at HHS, told reporters on Sept. 24.

Q: Okay, so most of the exchanges will be up and running on time. How do you access them?

A: If all goes as planned, those not covered through work will be able to go on line or dial a call-in center, learn if they’re eligible for tax credits and choose from a menu of private plans. The exchanges can be found atwww.healthcare.gov.

Q: Who won’t use them?

A: Most of us. People who have insurance through their jobs, about 55% of Americans, aren’t directly affected by the law and are automatically in compliance with its mandate that everyone be insured. So are older Americans covered through Medicare.

Individual Mandate

Q: Do I have to buy insurance?

A: Yes, or pay a fine. The law requires that most Americans be insured starting Jan. 1. That can be through work, a government program like Medicare or Medicaid, or by buying on the exchanges. Those who opt out face a penalty starting next year at $95 or 1% of household income, whichever is higher. By 2016, it rises to $695 per individual or 2.5% of household income, whichever is greater.

Q: Is the technology for the exchanges in place?

A: Building the exchanges has been a massive technical lift, requiring computer systems with real-time links to dozens of state and U.S. agencies and private carriers. The administration says the system is ready to go, albeit with delays and reduced capabilities in places like Oregon and Washington.

Company Mandate

Q: Has anything else been delayed?

A: The law requires that large companies offer benefits to anyone working more than 30 hours a week. In July, that rule was postponed until 2015 to ease the burden of compliance.

Last week, officials said a Spanish-language version of the federal website won’t be ready until mid-October and an exchange for small business workers won’t take enrollments until November. Nevada and California also won’t transmit names of new customers to insurers for about a month, Schuyler said.

Q: Will the coverage be affordable?

A: It depends on who you are and where you live. Six in 10 uninsured people will find insurance for less than $100 a month because of subsidies and expansions to Medicaid, the administration said last week. Those who make too much for assistance may be in for sticker shock: the same report said even bare-bones coverage, known as a bronze plan, will average almost $3,000 a year for individuals.

For families, the cost of mid-level coverage, a silver plan, ranges from $559 a month to $1,216 a month in 36 states where the federal government controls the exchanges. Tax credits will reduce the cost for many: a family earning $50,000 a year may find the price of a bronze plan cut to zero in some states.

Young and Healthy

Q: How will insurers cover the costs for all those added sick people?

A: By signing up the young and healthy. The administration said it needs about 40% of new enrollees to be in this group to help balance costs from older, sicker customers and keep premiums stable.

Q: Do Americans understand what they’re getting into?

A: No. The polls indicate consistent confusion. Three in five say the law will raise medical costs, and more say they’ll be worse off under it than better, according to a Bloomberg National Poll conducted Sept. 20-23. Half also said Republicans should back off on demands to defund the law, a schizophrenic view that’s persisted for months.

Q: So does anybody like this law?

A: Yes. Sixty-one percent of Hispanics and 91% of blacks, according to a September poll by the Pew Research Center and USA Today. That could make the sales pitch easier because those two groups comprise the bulk of the uninsured in the U.S. – 47% of the total, according to an analysis by the Kaiser Family Foundation. The law also is designed to benefit people with pre-existing medical conditions: insurers will no longer be able to deny them coverage.

Big States

Q: What’s happening in the big states?

A: Supporters have focused on states such as TexasFloridaOhio and New Jersey, where many uninsured live and Republican governors refuse to help in enrollment. California, which has the most uninsured, is spending $100 million to promote its exchange while New York plans to spend $27 million to train community groups and brokers to assist consumers.

Q: How much help do consumers get?

A: The administration is spending $67 million to train health workers, hospitals and other groups, called navigators, to help people enroll. Grants didn’t arrive until August, though, and many began a two-week training course this month. If they’re not up to the task, enrollment may suffer.

“You’re going to have tens of thousands if not hundreds of thousands of individuals who have never been exposed to health insurance before -- don’t know what a premium is, what a deductible is,” said Schuyler, the Leavitt Partners consultant.

Changes Needed

Q: Do Democrats think the law needs to change?

A: Some have called for changes: Families of workers whose company plan doesn’t include dependents can’t get subsidies. A tax credit for small businesses has been criticized as ineffective. And there are bipartisan bills in Congress to change a provision that may encourage businesses to cut workers’ hours to avoid insuring them. A quick fix seems unlikely: Republicans say they won’t tinker with a law they consider fundamentally flawed.

Q: What’s happening with Medicaid?

A: While the government health program for low-income Americans is expanding under the law, about half the states have opted out. The Obama administration last week agreed to let Arkansas use the money to help poor citizens buy private insurance on its exchange. The deal could entice other states where Republicans have opposed the expansion.

Expense Rising

Q: Is Obamacare making health-care more expensive?

A: Time will tell.

Medical costs have moderated in the U.S. the past three years, offering some relief to the public and private sectors alike. Prices for medical care rose 1% in July compared with a year earlier, the lowest growth rate since the 1960s, according to U.S. Commerce Department data.

There’s a debate among economists about how much credit to give the health law compared with a weak economy and employer moves to curtail benefits. Obamacare supporters say at least some of the slowdown is thanks to regulations and pilot programs in the act aimed at reducing waste in the medical system.

 


How much will Obamacare premiums cost? Depends on where you live

Originally posted September 25, 2013 by Sandhya Somashekhar and Sarah Kliff on https://www.washingtonpost.com

A 27-year-old in Austin who earns $25,000 could pay $85 per month for health insurance next year, and a family of four in St. Louis with income of $50,000 might face a $32 monthly premium, according to new federal data on health insurance rates under the Affordable Care Act.

The report, released Wednesday by the Department of Health and Human Services, showed significant variation in the insurance premiums that Americans shopping on the individual market could pay under the president’s health-care overhaul. Across the 48 states for which data were available, the unsubsidized monthly premiums could be as low as $70 for an individual and as high as $1,200 for a moderate plan for a family of four.

The average national premium for an individual policy will be $328 in 2014, before including any of the tax credits that will be available to low- and middle-income Americans to help them purchase coverage.

Officials say these prices will be affordable for people buying insurance through the government marketplaces slated to open next week.

“For millions of Americans, these new options will finally make health insurance work within their budgets,” Health and Human Services Secretary Kathleen Sebelius said.

Information about how much insurance plans will cost under the law, sometimes called Obamacare, has been dribbling out for months on a state-by-state basis.

But the report from the administration, which has been collecting rate information since the spring, offers the first comprehensive look at the effect of the law on many Americans — specifically those who buy coverage privately and not through their employers, as well as low-income uninsured people who are not poor enough to qualify for Medicaid.

Beginning Tuesday, those people will be able to log on to government Web sites called marketplaces to peruse their plan options, apply for government subsidies and sign up for coverage effective next year. That is when the requirement kicks in that virtually every American carry health insurance or face a fine.

The report also includes information for more than two dozen states that declined to set up their own marketplaces, leaving at least part of the job up to the federal government.

Premiums will vary significantly depending on an individual’s income, where she lives and what type of coverage she buys. A 27-year-old in Fairfax County, for example, could spend between $124 and $258 on a health plan, depending on how robust she wants it to be.

A family of four in Fairfax County that earns $50,000 could get a health insurance plan with no premium at all, because the federal tax credit would cover the bill.

Most people using the marketplaces will have incomes low enough to qualify for a government subsidy. A recent administration report found that 56 percent of the roughly 41 million uninsured people eligible for the marketplaces could pay monthly premiums of $100 or less.

Health experts say it is a good sign for consumers that premiums have come in lower than expected. Under the law, the plans must offer a basic set of benefits, including mental health and maternity care, which previously were not included in many private plans. Insurers are also forbidden from rejecting or charging people more because of preexisting conditions.

Many experts worried that those factors would drive up the cost of insurance. They partially credit competition on the marketplaces, where people will be able to directly compare plans from different insurance companies, for restraining premiums.

But they warn that premiums don’t tell the whole story.

The low rates are possible in part because insurance companies created special plans that include fewer in-network doctors and hospitals than many current plans.

This may not be a problem for healthy people who currently lack insurance. But those with illnesses may discover that their specialists are not covered by an exchange insurance plan. Low-income people accustomed to a certain community clinic may find that going there is no longer an option. And everyone may encounter long waits to see a doctor.

In addition, many of the lowest-cost plans may carry high deductibles, despite a cap imposed by the law that limits out-of-pocket costs to $6,350 per person per year.

“Despite the fact that the premiums are lower than expected, enrollees on exchanges are likely to face very high out-of-pocket costs before they hit their cap, and they are at risk of being in very narrow network plans that may or may not include all the providers they need access to,” said Caroline Pearson, vice president of health reform at the consulting firm Avalere Health, which did its own report on rates this month.

Some healthy people may also experience sticker shock on premiums. A recent analysis by the Manhattan Institute, a conservative think tank, found that some people who buy low-cost private plans today could see their rates jump by 24 percent.


What happens on Oct. 2?

Originally posted September 18, 2013 on https://ebn.benefitnews.com

Will you be ready for the day after the Affordable Care Act’s public exchanges go live?

At 2 p.m. ET on Oct. 2, EBN and EBA will offer a web seminar on issues relating to ACA implementation and what they mean for employers – whether or not they plan having their workers participate in ACA marketplaces. Hosted by SourceMedia’s Employee Benefit News Group Editorial Director David Albertson, the webinar will include speakers such as Rodger Bayne, president of the Benefit Indemnity Corporation.

Topics of the hour-long, real-time seminar are set to include updates on the functionality of state and federal exchanges, the mandate that employers educate on health care marketplaces, the union push for qualified health plans and enrollment in individual and small business exchanges. The web event is designed for businesses of all sizes, as well as the brokers, advisers and third parties who consult and assist them.

Americans at large remain demonstrably confused over ACA and its applications; wise plan sponsors will use benefits communication to stay ahead of the curve on employee inquiries. Any further delays of ACA mandates will also be discussed.


HHS releases federal exchange rates

Originally posted by Allison Bell on September 25, 2013 on https://www.benefitspro.com

With the public exchanges under the Patient Protection and Affordable Care Act preparing to open their phone lines and their Web enrollment sites Tuesday, the Obama administration is getting closer to revealing what federal exchange plans might actually cost.

A health policy office at the U.S. Department of Health and Human Services on Wednesday released a report showing what the average starting price for individual bronze, silver, gold and catastrophic exchange coverage will be for a 27-year-old in each state in which HHS will be running a "federally facilitated exchange."

The report also shows what the starting price for each level of individual coverage will be in the biggest city in each FFE state; what a 27-year-old individual coverage buyer with an annual income of $25,000 and access to exchange tax credits would pay for the lowest-cost coverage out of pocket; and what a family of four with an annual income of $50,000 would payout-of-pocket if it did or did not have access to the tax credits.

In Texas, for example, the average cost of the cheapest bronze coverage available to a 27-year-old would be $139 per month. The average cost of the cheapest gold coverage available would be $225 per month.

In Houston, the state's largest city, bronze coverage for the 27-year-old would start at $138 per month.

A look at medically underwritten 2013 rates available from eHealthInsurance.com for a 27-year-old who lives in Houston suggests that typical carriers there would now charge that consumer about $100 to $300 for coverage per month, with a majority charging $100 to $200 per month.

The family of four might have to pay $727 per month for silver coverage if it had no tax credits. Tax credits could cut the monthly cost of the coverage to $282.

Vermont posted preliminary exchange rates in April, and State Refor(u)m has posted a map showing that 27 states and the District of Columbia had at least posted preliminary rates for their state-based or federally facilitated exchanges as of Monday.

HHS — the parent of the Centers for Medicare & Medicaid Services, the agency running the exchanges — has repeatedly postponed the release date for FFE rate information without explaining why.

Some states have used state public records laws to justify releasing FFE exchange plan information on their own.

Other states, including Texas, have treated the FFE plan rates as confidential information.

HHS officials said the cost of the "second lowest cost silver plan" in the District of Columbia and 47 states is 16 percent lower than what HHS had expected, based on Congressional Budget Office projections.

HHS Secretary Kathleen Sebelius said in a statement that high prices have shut many consumers out of the health insurance market in the past.

"We excited to see that rates in the marketplace are even lower than originally projected," Sebelius said.


Open Enrollment Tips Under Health Care Reform

Originally posted September 6, 2013 on https://www.thestreet.com

This year's open enrollment season for selecting workplace benefits comes just before some of the biggest changes of health care reform go into effect.

Never before has it been more important to pay attention as you choose a health plan for you and your family.

"You really need to do your homework this year," says Carol Taylor, an employee benefit adviser with D & S Agency Inc. in Roanoke, Va.

Here are 5 tips for open enrollment this fall.

1. Understand the health care reform individual mandate: You must have coverage.

Starting in 2014, federal law will require virtually everyone to have health insurance or face a tax penalty. So if your employer doesn't offer health insurance for next year or your company's health plan doesn't meet certain minimum standards, you'll need to shop for health insurance on your own. Your employer must let you know by Oct. 1 whether its health plan meets "minimum standards," says Taylor, a member of the National Association of Health Underwriters National Legislative Council.

To meet the minimum standards under health reform, employers must offer coverage at the "bronze level," which is one of the four levels of coverage defined under health reform provisions. The other three are silver, gold and platinum. They are based on actuarial value, which measures the amount of financial protection the policy offers, or the percentage of health costs a plan would pay for an average person. For a bronze plan, the insurance would cover 60 percent of all health care costs for an average person. Enrollees, on average, would be responsible for paying 40 percent of the costs.

If you're shopping for an individual health plan, you can buy one from an insurance company directly or through your state's new health insurance marketplace. The online health insurance marketplaces, sometimes called exchanges, are scheduled to open for business Oct. 1. Coverage can begin Jan. 1.

If you're not eligible for coverage through an employer or your employer's plan doesn't meet government standards, then you might qualify for a tax credit to save money on premiums when you buy a marketplace plan. People who earn up to 400 percent of the federal poverty level -- that's $94,200 for a family of four in 2013 -- will be eligible for premium subsidies in the form of tax credits. People who earn up to 250 percent of the federal poverty level will be eligible for lower deductibles and copayments.

2. Don't assume your family will qualify to save money in the new marketplaces.

Think you can get a better deal in the new marketplace than what your employer is offering? Maybe not. If you and your family have access to affordable employer-sponsored health insurance that meets minimum standards, then you and your dependents are not eligible for premium tax credits or help with cost-sharing - which includes aid in paying deductibles, copayments or co-insurance -- in the new marketplaces. You can shop there, but you'll pay full price.

"Affordable" means you pay no more than 9.5 percent of your household income toward the coverage for yourself. The amount you pay for your dependents to be covered on the employer-sponsored plan isn't factored into the equation. So even if you have to pay a bundle to keep your dependents on the employer plan, they're still not eligible for subsidies in the marketplace if the portion you pay to cover yourself is deemed affordable and they have access to the employer plan.

That could put a lot of moderate-income families with a sole breadwinner in a financial bind, says Mindy Anderson-Wallis, president of Employee Benefit Solutions of Indiana in Lafayette, Ind.

3. Compare benefits and health insurance plan networks.

Check out the provider networks of the plans you're offered to make sure your doctors and preferred hospital system are included, especially if you have a serious or chronic condition and are undergoing treatment. Given all the standards that must be met, one way health plans may cut costs is to cut the provider networks, Taylor warns.

You pay substantially more out of pocket to see providers outside the network with a preferred provider organization (PPO) plan. Except in special circumstances, you typically pay for the full cost of services for providers outside the network with a health maintenance organization (HMO) plan.

4. Understand that your employer doesn't have to offer coverage in 2014, and it won't have to offer coverage to your spouse.

Starting in 2015, the Patient Protection and Affordable Care Act will require employers with at least 50 workers to provide affordable health insurance for workers and their dependents or pay a penalty. The so-called employer mandate was supposed to go into effect in 2014, but the Obama administration delayed implementation for a year.

Still, most employers are gearing up for the mandate, and there's one tricky technicality you should know. The federal government will define dependents as children, not spouses. So even when the employer mandate goes into effect, your workplace won't have to offer coverage to your spouse.

Nobody knows yet how this will play out, but Anderson-Wallis says she doesn't think the definition of "dependent" will have much impact.

"I don't think we'll see large employers not continue to cover spouses," she says. "Benefits are seen as a way to attract and retain employees."

If your spouse isn't eligible for employer-sponsored coverage, then he or she will qualify for a tax credit to save money on a health plan in the new marketplace if your household income is less than 400 percent of the federal poverty level.

5. Crunch the numbers and pick the health insurance plan with the best value.

Compare the out-of-pocket costs of each health plan if your employer offers a choice of plans. Your costs include:

  • Deductible.
  • Doctor visits, urgent care and emergency room copayments.
  • Co-insurance -- the percentage the health plan pays after you satisfy the deductible.
  • Prescription drug copayments or co-insurance.
  • Your portion of the premium.

Consider how often you go to the doctor, the medicines you take and what services you might need in the next year. Run some scenarios to see how much each health plan would cost, and choose one that meets your unique needs.

"Don't just roll the dice without calculating," Anderson-Wallis says.


More on the Oct. 1 ACA notices: Who has to provide them

Originally posted by Keith R. McMurdy on https://eba.benefitnews.com

After last week’s reminder about the Oct. 1 deadline for Affordable Care Act communications, the following question came up frequently — Does the notice requirement apply to employers with less than 50 employees?

Further clarification is provided in Technical Release 2013-02 called “Guidance on the Notice to Employees of Coverage Options under Fair Labor Standards Act 18B and Updated Model Election Notice under the Consolidated Omnibus Budget Reconciliation Act of 1985.” Section 18B of the FLSA was added as a result of the ACA. And it is 18B of the FLSA that contains the notice requirement that employers must communicate about the ACA with their employees. Overall, it says that every employer that is subject to the FLSA must provide the notice about coverage options. Fact Sheet 14 from the U.S. Department of Labor tells us that businesses covered by the FLSA must have at least two employees, and are those that have an annual dollar volume of sales or business revenue of at least $500,000 or are hospitals, businesses providing medical or nursing care for residents, schools and preschools or government agencies.

So, if your business is subject to the FLSA, you have to give the notice to employees of coverage options to existing employees by Oct. 1, and to all new hires within 14 days. It does not matter if you have 10 or 35 or 50 or 100 employees. If you are subject to the FLSA, you have to provide the notice.

Keith R. McMurdy is a partner with Fox Rothschild, focusing on labor and employment issues. He can be reached at kmcmurdy@foxrothschild.com or 212-878-7919.

This alert is intended for general information and educational purposes and should not be taken as specific legal advice. 


Should exchanges be part of your company's plan?

Originally posted August 06, 2013 by Justyn Harkin on https://ebn.benefitnews.com

Although considering the new health care exchanges may have seemed radical a few weeks ago, now that everybody gets to drop ten and punton the employer mandate penalty in 2014, the idea may not be so strange.

Sure, migrating employees to the exchanges isn’t right for every organization. If the move would upset your workforce, then keeping your current group plan is probably best. But if employees would view exchange offerings as equal or better than what they current have, then there could be plenty of upsides.

If you think the exchanges would be better than what you have now for both your company and your employees, or even if you just want to get a leg up on communications (and believe me, that’s never a bad idea), then you and your employees have three options — public exchanges, private exchanges (fully insured), private exchanges (self-insured).

Which one might be best for your organization? Let's see.

Public exchanges

One of the most attractive ideas about moving to a public exchange has to be handing over the considerable financial and administrative burdens for running your company’s health benefits.

For some organizations, the move might be cheaper than what they are doing now. Even when you factor in the likely, eventual activation of the $2,000-per-employee fine for not providing insurance, you could still be paying less than what you would if you were covering premiums.

Of course, sending employees to public exchanges isn’t necessarily a slam-dunk move. Your workforce could straight-up riot if you tell them you’re cutting health benefits, and even if you raise salaries (oh, hello there, higher payroll taxes) to help them cover the costs of buying their own insurance, your recruiting efforts could take a hit if your competitors keep their health benefits.

Private exchanges with fully insured plans

Perhaps the biggest advantage of using a private exchange is the ability to shift some of the rising costs of health care to employees and give them the ability to control their spending.

In a private exchange, employees get an allowance from their employer that can be used to buy insurance. The idea is that giving employees control of the purchasing decision takes some of the heat off of your company. After all, if the cost of health care rises, that’s not your fault?

So what’s the downside to this type of exchange? Well, in the worse-case scenario it’s a less healthy, less productive workforce. Because employees will be making purchasing decisions, they may choose lower premiums over better coverage, and that can contribute to poorer health and higher rates of absenteeism.

Private exchanges with self-insured plans

The last of your exchange options are private exchanges with self-insured plans. Compared with the types of plans offered on public exchanges and private exchanges with fully insured plans, the plans available on private exchanges with self-insured plans can seem very attractive employees — generally lower premiums, more generous plan features, and more in-network doctors — but they will be more expensive.

The self-insured private exchange option might be slightly more expensive than what you could do with a fully insured private exchange, that’s true, but the available plans would be more oriented toward long-term health.

Still, using self-insured plans means you’ll have to assume all the risk and pay for all your employees’ claims. Also your employees will become customers of the private exchange insurance companies, and that means you won’t have the same influence (over the companies or choices) that you would otherwise have.

How will you spend the bonus year?

Assistant Secretary for Tax Policy Mark J. Mazur’s July 3 announcement might have seemed like the best health care reform–related thing to happen to employers all year.

If you take the “transition year” at face value, meaning the mandatory employer and insurer reporting requirements are being postponed, then you have the perfect chance to carefully consider your company’s next moves.

Maybe you’ll decide to take the plunge. Perhaps you’ll rule out the exchanges altogether. You might even decide to let other companies test the waters first so you can be prepared later on.

No matter what path you chose, though, the most important thing is taking the time to make the best decision for your company and your employees. And then communicate that decision in a clear and engaging way. Good luck!


Feds add exchange employer site

Originally posted August 2, 2013 by Allison Bell on https://www.benefitspro.com

Three federal agencies have joined to set up a Patient Protection and Affordable Care Act website for small businesses.

Business.USA.gov/healthcare offers a "wizard," or interactive tool, that offers to help business owners understand what they need to know about the new PPACA insurance options in a few quick steps.

The Small Business Administration worked with the U.S. Department of Health and Human Services and the U.S. Treasury Department to set up the site.

The wizard starts by asking visitors about their companies' location and size.

On the size menu, for example, the wizard asks whether the user is self-employed with no employees, has fewer than 25 employees, has up to 50 employees, or has 50 or more employees.

The site includes an explanation of how an employer can determine whether it has 50 or more full-time or full-time equivalent employees.

Users who, say, might want to set up group health plans will see information about the new PPACA Small Business Health Options Program small-group exchange program.

In most states, in the pages of information for employers interested in setting up health plans, the SBA gives an answer to the question, "Can I use an agent or broker to buy health insurance in the marketplace?"

"You will be able to use a licensed agent or broker to provide help or handle your SHOP business," the SBA says. "You won't pay more if you use a SHOP agent or broker."

For users in Vermont, a state that is trying to eliminate small-group market broker commissions, the SBA makes no mention of agents and brokers.