Employers create game plan for expected health care cost increases
Originially posted on August 22, 2014 by Michael Giardina on https://ebn.benefitnews.com
Employers across the country predict that their health care costs will increase by 5.2% in 2015 if they decide to maintain their current health plan structures. With modest changes, this increase drops down to 4%, according to a recent Towers Watson’s survey of nearly 400 employee benefit professionals from midsize and large companies.
Meanwhile, Towers Watson finds that the rising tide of health care costs has become a main focus of executives, with two-thirds of chief financial officers and chief executive officers holding a key place in health benefit strategy discussions. It’s coming down to wire for many employers to get costs down as the ACA’s excise tax takes effect in 2018.
Randall Abbott, senior consultant with Towers Watson, says that many employers are approaching the cost conversation “as a balance of shareholder responsibility and social responsibility.” But it’s not a surprise that three-quarters of employers are worried about the excise tax, commonly referred to as the Cadillac tax.
“There is this impression that employers are just raising costs up,” Abbott explains, but highlights “they are doing it out of necessity.”
“They are trying to do it as thoughtfully and as responsibly as they can, and that’s a constant battle,” Abbott continues.
This battle, according to Towers Watson’s survey, is becoming a reality for many. More and more employers are planning to incorporate consumer-driven health plans, and other high-deductible health plans, into their coverage umbrella. By 2017, more than half of respondents expect to make this plan the only option, eliminating other plans.
“Inaction is not an option here,” Abbott explains, while noting that account-based health options such as health savings accounts can help all interested parties realize the costs at point-of-care.
Tom Meier, vice president of product development for Health Care Service Corporation, the nation’s largest customer-owned health insurer, agrees that CDHPs have been growing at record rates. Trade group America’s Health Insurance Plans reports that 15.5 million Americans were covered in HSA-eligible plans – a number that has tripled in the last six years.
“We’re seeing employers go all in on CDHPs, and I don’t see that slowing anytime soon,” Meier explains to EBN. “Employers are going to have to revisit their plan design and likely move out of those high cost benefit designs in order to comply and get under [the ACA’s excise tax] that threshold.”
Currently, HCSC has more than 2 million members enrolled in CDHPs under the insurer’s offering, which includes five Blue Cross and Blue Shield states. Meier adds that moving from $250 preferred provider organization health plan to a full-replacement $5,000 deductible CDHP is not something that employers should rush into. He adds that HR and benefit managers can also help to alleviate some of the expected employee unrest from the change by offering resources.
“As you’re asking them [employees] to be the consumers of care, you have to give them the tools to survive and thrive, or else you are kind of throwing them out into the wilderness,” Meier says.
Another growing trend for employees, which has been tabbed for movement in 2016 and 2017 by a third of Towers Watson survey respondents, is reducing company subsidies for spousal and dependent coverage. Also, 26% indicate they are considering excluding spousal coverage all together should they have coverage elsewhere.
Last summer, it was reported that UPS planned to stop providing coverage to a portion of employees’ spouses who were able to opt into medical coverage through their own employers. First reported by Kaiser Health News, it was disclosed that more cost associated with the landmark health care law was forcing the move. Of the more than 33,000 spouses being covered, UPS said that about 15,000 could gain coverage from their current employers.
UPS said in a memo to employees that “limiting plan eligibility is one way to manage ongoing health care costs, now and into the future, so that we can continue to provide affordable coverage for our employees.”
While UPS declined to comment on the past spousal health plan coverage change, Paul Fronstin, director of the Employee Benefit Research Institute’s health research and education program, notes that re-examining spousal coverage, as well as looking at HSA-eligible plans and health exchanges, are areas where employer interest is growing.
Fronstin adds that “everything is on the table,” however.
Play or Pay in 2015 — so many requirements, so little time
Originally posted August 6, 2014 by Dorothy Summers on https://ebn.benefitnews.com
2015 is getting close and the Employer Shared Responsibility Mandate (“Play or Pay”) under the Affordable Care Act (ACA) is almost here. So what does this mean for your organization? Play or Pay requires certain employers to offer affordable and adequate health insurance to full-time employees and their dependents, or they may be liable for a penalty for any month coverage is not offered.
Play or Pay goes into effect in the calendar year of 2015 for large employers only. However, mid-size employers aren’t entirely off the hook. They’ll have to report on insurance coverage even though they won’t be liable for penalties in 2015. By January 1, 2015, businesses with 100 or more full-time or full-time-equivalent employees must ensure they are offering health benefits to all of those working an average of 30 hours per week, or 130 hours per month. If an employer has a non-calendar year plan and can meet certain transitional rules, they can delay offering employee health benefits until the start date of their non-calendar year plan in 2015. Mid-sized employers will have to comply beginning in 2016.
Here are important questions that employers need to answer today:
- Do you know which category your business fits into?
- How do you classify who is a full-time employee?
- What do you need to do to comply with Play or Pay requirements?
Let’s take an in-depth look at each of these questions.
Which category do you fit into?
Whether you are a small, mid-sized, or large employer is determined by the number of full-time and full-time equivalent employees (FTEs). It sounds simple on the surface:
- Small employers have 1-49 full-time or FTE employees
- Mid-sized employers have 50-99 full-time or FTE employees
- Large employers have 100+ full-time or FTE employees
However, it’s important to remember that these numbers can be affected by several factors, including whether the employer is a part of a control group, seasonal employees and variable-hour employees. That brings us to our next question:
Who is a full-time employee?
The law defines a “full-time employee” for penalty purposes as an employee who, for any month, works an average of at least 30 hours per week, or 130 hours. This includes any of the following paid hours: vacation, holiday, sick time, paid layoff, jury duty, military duty and paid leave of absence under the Family and Medical Leave Act.
Employees who aren’t considered full-time include non W-2 leased workers, sole proprietors, partners in partnerships, real estate agents, and direct sellers.
Variable-hour employees—those who don’t work a set amount of hours each week—fall into a gray area. That is, they don’t need to be counted as full-time employees until and unless it becomes an established practice for them to work more than 30 hours per week.
To assist employers in determining whether variable hour workers will meet the definition of full-time employees (and therefore need to be offered health insurance), employers may use various “look back” and “look forward” periods. Here is a summary of terms used for measuring variable-hour employees:
- Measurement Period: A period from three to 12 months in which the employer would track hours to determine whether the employee worked an average of more than 30 hours per week.
- Stability Period: A period from six to 12 consecutive months in which the employer must provide health insurance coverage to employees who worked more than 30 hours per week in the Measurement Period. Note: must be at least six months and cannot be shorter than the Measurement Period.
- Administrative Period: A period not to exceed 90 days, which falls between the Measurement Period and Stability Period, and/or a short period after a new employee’s date of hire. Using this waiting period allows employers to analyze eligibility of full-time employees and provide enrollment information to enroll them in a plan before penalties could be assessed.
Does your plan meet the Play or Pay requirements?
To avoid penalties, you’ll need to make sure your plan meets certain requirements. First, coverage must be offered to full-time employees and their dependents. Under the ACA, dependents are defined as children under age 26. Spouses are not considered dependents.
Revisiting Medical Loss Ratio Rebates
Originally posted July 5, 2012 by Bob Marcantonio on https://www.shrm.org
The Patient Protection and Affordable Care Act (PPACA or ACA) requires insurers to report their Medical Loss Ratios (MLRs) to regulators and to meet certain MLR targets. If an insurer exceeds the minimum MLR, the insurer must issue a rebate to the policyholder. The first of these annual rebates is due in August 2012. How are rebates determined?
Rebates are determined according to the prior year’s MLR. Rebates issued in August 2012 will depend on 2011 performance and are not group or individual specific. They are calculated at the carrier and market segment (i.e., individual, small group and large group) level. In some instances the individual and small group markets may be merged.
The ACA defines a small employer as an employer having at least one but no more than 100 employees. However, it provides states the option of defining small employers as having at least one but not more than 50 employees in plan years beginning before Jan. 1, 2016.
Generally, if you have fewer than 100 employees (using the definition for full-time equivalents) you will be purchasing coverage in the small group market.
The MLR is calculated by dividing the medical expenses of the carriers’ segment by the net earned premiums. Medical expenses include claims and activities to improve health care quality as defined in the rules. Net earned premiums include premiums paid by the policyholder minus taxes, licensing and regulatory fees. The MLR threshold for large groups (51+ benefits eligible) is 85 percent and the threshold for small groups (50 or fewer benefit eligible employees) is 80 percent. Certain states have received exemptions until 2014 that allow the MLR to be lower than those levels. In the case of states having more stringent MLR requirements, those requirements supersede the lower federal requirements.
Below are answers to common questions about MLR rebates.
My plan’s paid loss ratio is less than the target. Do I get a rebate?
Not necessarily. Rebates are not issued based on a single plan’s performance. Rebates depend on the insurer’s performance in a given market segment as outlined above.
How will insurers issue rebates?
For group health plans, insurers must issue the rebates to the plan. The plan must then pay out the rebates to the plan’s participants. If a group health plan terminates after the plan year but before the insurer issues rebates and the insurer cannot locate the plan, the insurer must attempt to issue the rebates directly to participants.
Who may receive a rebate?
Only fully insured policyholders are eligible. A policyholder can be an individual or an employer-sponsored group health plan. In the case of a group health plan receiving a rebate, Employee Retirement Income Security Act (ERISA) regulations regarding fiduciary duty apply. If the rebate is small—$20 or less for a group health plan—the insurer does not need to issue the rebate to the plan.
What should you do if your group receives a rebate?
The Department of Labor (DOL) issued Technical Release No. 2011-04 outlining the proper handling of rebates. The release states that:
"If the participants and the employer each paid a fixed percentage of the cost, a percentage of the rebate equal to the percentage of the cost paid by participants would be attributable to participant contributions. Decisions on how to apply or expend the plan’s portion of a rebate are subject to ERISA’s general standards of fiduciary conduct. Under section 404(a)(1) of ERISA, the responsible plan fiduciaries must act prudently, solely in the interest of the plan participants and beneficiaries, and in accordance with the terms of the plan to the extent consistent with the provisions of ERISA.
"With respect to these duties, the Department notes that a fiduciary also has a duty of impartiality to the plan’s participants. A selection of an allocation method that benefits the fiduciary, as a participant in the plan, at the expense of other participants in the plan, would be inconsistent with this duty. In deciding on an allocation method, the plan fiduciary may properly weigh the costs to the plan, the ultimate plan benefit, and the competing interests of participants or classes of participants provided such method is reasonable, fair and objective. For example, if a fiduciary finds that the cost of distributing shares of a rebate to former participants approximates the amount of the proceeds, the fiduciary may decide to allocate the proceeds to current participants based upon a reasonable, fair and objective allocation method.
"Similarly, if distributing payments to any participants is not cost-effective (e.g., payments to participants are of de minimis amounts, or would give rise to tax consequences to participants or the plan), the fiduciary may utilize the rebate for other permissible plan purposes including applying the rebate toward future participant premium payments or toward benefit enhancements."
When will insurers issue the rebates?
Under the regulations, the first rebates are due Aug. 1, 2012, although the precise dates of receipt may be before the deadline, depending on the insurer. Insurers will send written notices to subscribers informing them that a rebate has been issued. Plan administrators should be prepared to field questions from employees who receive such notices.
Additionally, insurers not issuing a rebate must send letters to subscribers explaining the MLR rule notifying their health insurer had a medical loss ratio that met or exceeded the requirements.
How much might the rebates be worth?
The not-for-profit Kaiser Family Foundation released statistics garnered from insurers’ filings to the National Association of Insurance Commissioners. In the large-group segment, total reported rebates are $541 million nationwide. Among the insurers, 125 reported they expect to issue rebates to large groups covering 7.5 million enrollees. Insurers in 14 states do not expect to issue rebates in 2012. The largest average per-enrollee rebates projected are in Vermont ($386), Nebraska ($248), Minnesota ($146), New York ($142) and North Carolina ($121).
Among large group enrollees, 19 percent are projected to receive rebates nationwide. Taken in total, the average annual rebate in the entire large group segment per year will be $14 per enrollee, according to rebate estimates based on insurer filings to the National Association of Insurance Commissioners (NAIC).
Hobby Lobby ruling spilling over to corporate world
Originally posted July 10, 2014 by Alan Goforth on https://www.benefitspro.com.
Both proponents and opponents of the recent ruling by the U.S. Supreme Court in the Hobby Lobby contraception case agree on at least one thing: The case may be settled, but how it will play out in the workplace is far from certain.
The court ruled that the 1993 Religious Freedom Restoration Act prevents certain employers from being forced to pay for contraceptives they oppose for religious reasons. However, the definition of which types of corporations are excluded remains murky.
"Nobody really knows where it is going to go," said Richard Primus, professor of constitutional law at the University of Michigan. "I assume that many more businesses will seek exemptions, not just from the [Patient Protection and] Affordable Care Act, but from all sorts of things they want to be exempt from, and it will put courts in a difficult position of having to decide what is a compelling government interest."
About 50 lawsuits filed by corporations nationwide, which were put on hold during the Hobby Lobby appeal, must now be resolved or re-evaluated. "We don't know ... how the courts will apply that standard," Primus said.
The decision also has ramifications beyond the courtroom. Even closely held companies with sincere religious beliefs must carefully consider the potential marketplace ramifications of crafting health-care coverage according to religious beliefs.
"Many owners of companies don't want to distinguish the difference between what's good for them personally and what's good for their business," said John Stanton, professor of food marketing at Saint Joseph University in Philadelphia. "I believe that if a business owner believes something is the right thing to do — more power to them. That's his business. However, he's got to be ready for the negative repercussions."
Eden Foods of Clinton, Mich., a natural-foods manufacturer, has filed a lawsuit and is balancing religious beliefs and business concerns. Since Eden initially filed its lawsuit last year over mandates to cover birth control in PPACA, some customers have taken to social media to express disapproval and outrage, even threatening a social boycott. However, the corporation also has gained new customers who support its stance.
"It's very conceivable they could lose business," said Michael Layne, president of Marx Lane, a public relations firm in Farmington Hills, Mich. "And they could lose employees, too."
Experts agree that the myriad issues raised by the Hobby Lobby decision could take a while to play out. "I think there will be a rush of litigation in the next year or two," Primus said. "I think that the exemptions are likely to get broader before they are limited."
IRS Urged To Broaden Preventive Coverage In High-Deductible Plans
Originally posted May 9, 2014 by Julie Appleby on https://capsules.kaiserhealthnews.org.
High deductible health plans paired with tax-free savings accounts — increasingly common in job-based insurance and long a staple for those who buy their own coverage – pose financial difficulties for people with chronic health problems. That’s because they have to pay the annual deductible, which could be $1,250 or more, before most of their medications and other treatments are covered.
In a white paper released Thursday, researchers at the University of Michigan say such plans would be more attractive if the IRS broadened the kinds of preventive care insurers were allowed to cover before the patient paid the deductible. Currently, only a limited set of preventive care benefits is included.
“I want the deductibles removed on those things I beg my patients to do,” such as getting annual eye exams if they are diabetic, says author A. Mark Fendrick, a professor of medicine and director of the University of Michigan Center for Value-Based Insurance Design.
If insurers were allowed to offer high-deductible plans that covered “secondary prevention,” such as eye exams, or insulin for diabetics, they would attract 5 million buyers on the individual market, the report projects. Many consumers would see the policies as an improvement over more “bare-bones” coverage, even if the premiums were higher, said co-author Steve Parente, a professor of finance at the Carlson School of Management at the University of Minnesota. At least 10 million in job-based insurance might also switch, some of them from more expensive plans that have limited networks of doctors and hospitals, Parente said. Such plans would be most attractive to those with chronic conditions such as diabetes, asthma or high blood pressure.
“If it is attractive to the chronically ill, it could be a major change,” said Parente. The Gary and Mary West Health Policy Center, a nonpartisan research group in Washington, D.C, funded the report.
Still, such plans would carry premiums at least 5 percent higher than current high-deductible health saving account plans, according to the report.
Whether the IRS would consider changing the rules for high deductible plans connected with health savings accounts is unclear. The agency did not respond to questions. If it altered the rules, insurers would also have to choose to offer the plans.
Currently, more than 15 million Americans have high-deductible plans that can be paired with tax-free savings accounts, called HSA-eligible plans, according to America’s Health Insurance Plans, the industry trade group. Of those, about 2 million buy their own policies and the rest get them through their jobs.
Under federal rules, such plans must have at least a $1,250 annual deductible for singles and a $2,500 deductible for families. Workers can contribute money pre-tax to the special savings accounts to help pay those deductibles. Most large employers offer such a plan as an option and an estimated 15 percent of firms offer only HSA plans or a similar arrangement, called a health reimbursement account, according to the benefit firm Towers Watson.
IRS rules say only primary prevention can be fully covered by the plan outside of the deductible, including such things as routine prenatal and well-child care, some vaccines, and programs to help people lose weight or quit smoking. The rules say such preventive care does not generally include treatments for “existing illness, injury or condition.”
Fendrick and colleagues want the definition changed to allow insurers and employers more options, including allowing coverage of any kind of medical services, including drugs that would prevent complications from or a worsening of a chronic condition, such as diabetes, heart disease or major depression.
“This would be entirely optional for health plans,” Fendrick said. “One plan could [cover] just about everything before the deductible, and another might say they cover five or six drugs, some doctor visits and maybe glucose test strips.”
Employers Eye Moving Sickest Workers To Insurance Exchanges
Originally posted May 7, 2014 by Jan Hancock on www.kaiserhealthnews.org.
Can corporations shift workers with high medical costs from the company health plan into online insurance exchanges created by the Affordable Care Act? Some employers are considering it, say benefits consultants.
"It's all over the marketplace," said Todd Yates, a managing partner at Hill, Chesson & Woody, a North Carolina benefits consulting firm. "Employers are inquiring about it and brokers and consultants are advocating for it."
Health spending is driven largely by patients with chronic illness such as diabetes or who undergo expensive procedures such as organ transplants. Since most big corporations are self-insured, shifting even one high-cost member out of the company plan could save the employer hundreds of thousands of dollars a year -- while increasing the cost of claims absorbed by the marketplace policy by a similar amount.
And the health law might not prohibit it, opening a door to potential erosion of employer-based coverage.
"Such an employer-dumping strategy can promote the interests of both employers and employees by shifting health care expenses on to the public at large," wrote two University of Minnesota law professors in a 2010 paper that basically predicted the present interest. The authors were Amy Monahan and Daniel Schwarcz.
It's unclear how many companies, if any, have moved sicker workers to exchange coverage, which became available only in January. But even a few high-risk patients could add millions of dollars in costs to those plans. The costs could be passed on to customers in the form of higher premiums and to taxpayers in the form of higher subsidy expense.
Here's how it might work. The employer shrinks the hospital and doctor network to make the company plan unattractive to those with chronic illness. Or, the employer raises co-payments for drugs needed by the chronically ill, also rendering the plan unattractive and perhaps nudging high-cost workers to examine other options.
At the same time, the employer offers to buy the targeted worker a high-benefit "platinum" plan in the marketplaces. The plan could cost $6,000 or more a year for an individual. But that's still far less than the $300,000 a year that, say, a hemophilia patient might cost the company.
The employer might also give the worker a raise to buy the policy directly.
The employer saves money. The employee gets better coverage. And the health law's marketplace plan --required to accept all applicants at a fixed price during open enrollment periods -- takes on the cost.
"The concept sounds to[o] easy to be true, but the ACA has set up the ability for employers and employees on a voluntary basis to choose a better plan in [the] Individual Marketplace and save a significant amount of money for both!" says promotional material from a company called Managed Exchange Solutions (MES).
"MES works with [the] reinsurer, insurance carrier and other health management organizations to determine [the] most likely candidates for the program."
Charlotte-based consultant Benefit Controls produced the Managed Exchange Solutions pitch last year but ultimately decided not to offer the strategy to its clients, said Matthew McQuide, a vice president with Benefit Controls.
"Though we believe it's legal" as long as employees agree to the change, "it's still gray," he said. "We just decided it wasn't something we wanted to promote."
Shifting high-risk workers out of employer plans is prohibited for other kinds of taxpayer-supported insurance.
For example, it's illegal to induce somebody who is working and over 65 to drop company coverage and rely entirely on the government Medicare program for seniors, said Amy Gordon, a benefits lawyer with McDermott Will & Emery. Similarly, employers who dumped high-cost patients into temporary high-risk pools established by the health law are required to repay those workers' claims to the pools.
"You would think there would be a similar type of provision under the Affordable Care Act" for plans sold through the marketplace portals, Gordon said. "But there currently is not."
Moving high-cost workers to a marketplace plan would not trigger penalties under the health law as long as an employer offered an affordable companywide plan with minimum coverage, experts said. (Workers cannot use tax credits to help pay exchange-plan premiums in such a case, either.)
Half a dozen benefits experts said they were unaware of specific instances of employers shifting high-cost workers to exchange plans. Spokespeople for AIDS United and the Hemophilia Federation of America, both advocating for patients with expensive, chronic conditions, said they didn't know of any, either.
But employers seem increasingly interested.
"I have gotten probably about half a dozen questions about it in the last month or so from our offices around the country," says Edward Fensholt, director of compliance for the Lockton Companies, a large insurance broker and benefits consultant. "They're passing on questions they're getting from their customers."
Such practices could raise concerns about discrimination, said Sabrina Corlette, project director at the Georgetown University Center on Health Insurance Reforms.
They could also cause resentment among employees who didn't get a similar deal, Fensholt said.
"We just don't think that's a good idea,” he said. "That needs to be kind of an under-the-radar deal, and under-the-radar deals never work," he said. Plus, he added, "it's bad public policy to push all these risks into the public exchange."
Hill, Chesson & Woody is not recommending it either.
"Anytime you want to have a conversation with an employee in a secretive, one-off manner, that's never a good idea," Yates said. "Something smells bad about that."
HSA enrollment jumped in 2013: Fidelity
Originally posted May 7, 2014 by Jerry Geisel on www.businessinsurance.com
Enrollment in health savings accounts continues to surge as more employers are moving to consumer-driven health care plans, Fidelity Investments said Wednesday.
Fidelity said in a statement that the number of HSAs it administered in 2013 jumped to 269,000; up nearly 48% compared with 182,000 in 2012 and a 126% increase over 2011, when Fidelity administered 119,000 HSAs.
“Fidelity continues to drive adoption of its health savings account business as companies and their employees realize their potential advantages both today and over the long haul,” Will Applegate, a Fidelity vice president in Boston, said in the statement.
Numerous surveys have found that the cost of high-deductible consumer-driven health care plans linked to HSAs are less costly compared with other health care plans.
For example, a survey last year by Mercer L.L.C. found that the cost of coverage in CDHPs with HSAs is about 20% lower, on average, than the cost of preferred provider organization coverage — $8,482 per employee compared with $10,196 per employee for preferred provider organization coverage.
That cost difference will become even more important starting in 2018, when a health care reform law provision that imposes a 40% excise tax on health care plan costs exceeding $10,200 for single coverage and $27,500 for family coverage kicks in.