Moving beyond baby steps with wellness
Source: https://ebn.benefitnews.com
By Samuel H. Fleet
Employers want to do the right thing when it comes to health benefits for their employees, not only because it is humane, but also because it makes good business sense to take care of their most important assets. As health benefits have become increasingly costly, employers have struggled to find the key to meeting healthcare needs without breaking the bank. Many have pinned their hopes on wellness initiatives, the most popular offerings including newsletters and websites, weight-loss programs and smoking cessation programs.
Why baby steps are not enough
The earliest wellness initiatives were grounded in the concept that once employees are confronted with information about unhealthy behaviors they will make improvements that will lead to better health.
Information alone, however, is rarely enough to make a difference. Employers are beginning to face the hard truth that giving employees access to wellness support has done little to change the overall health of their workforces. To reach that goal, they have to move beyond providing information to a much more effective level of wellness support: Employee health risk management.
Tying consequences to health risk management
Employee Health Risk Management is an approach that allows employers to actively manage the health risks of their employees. Among the tools are health risk assessments and biometric health screenings to help identify risks that are driving healthcare expenses.
When made mandatory for employees, these tools can be coupled with consequences. Instead of appealing to reason (“if you exercise, you will be healthier”), these advanced wellness initiatives provide both carrots and sticks to link an employee’s actions and outcomes to consequences. For example, people who continue to smoke even after having access to cessation support pay higher premiums for their health care. Or people who join a gym and use it three times a week pay lower premiums. Or a person who agrees to regular cholesterol and blood pressure screening earns an annual bonus. Ultimately the goal is to implement value-based plan designs tailor-made for employee populations.
Finding the right partner
When plans are well-designed, the requirements are both attainable and accompanied by support to help employees succeed. For example, a well-designed plan does not ask an employee to reduce Body Mass Index from 40 to 25 in one year. A 10% or 15% reduction goal, supported by free access to plans like Weight Watchers, and supported with rewards and recognition may inspire the behavioral changes that will lead to a lower BMI with little further encouragement.
Wellness initiatives have always had the right idea: a healthy workforce costs less when it comes to health care benefits. But until recently, most have stopped short of the hard work it takes to get people to change their habits and lifestyles. In the era of health care reform, smart employers are stepping up their wellness efforts to make them more effective, and brokers are leading the way with cost-effective solutions. Now is the time to move beyond baby steps and actively manage the health and well-being of employees and their dependents.
A Consumer's Guide To The Health Law
By Mary Agnes Carey and Jenny Gold
Source: https://www.kaiserhealthnews.org
Some analysts argue that there could be modifications to reduce federal spending as part of a broader deficit deal; for now, this is just speculation. What is clear is that the law will have sweeping ramifications for consumers, state officials, employers and health care providers, including hospitals and doctors.
While some of the key features don't kick in until 2014, the law has already altered the health care industry and established a number of consumer benefits.
Here's a primer on parts of the law already up and running, what's to come and ways that provisions could still be altered.
I don't have health insurance. Under the law, will I have to buy it and what happens if I don’t?
Today, you are not required to have health insurance. But beginning in 2014, most people will have to have it or pay a fine. For individuals, the penalty would start at $95 a year, or up to 1 percent of income, whichever is greater, and rise to $695, or 2.5 percent of income, by 2016.
For families the penalty would be $2,085 or 2.5 percent of household income, whichever is greater. The requirement to have coverage can be waived for several reasons, including financial hardship or religious beliefs.
Millions of additional people will qualify for Medicaid or federal subsidies to buy insurance under the law.
While some states, including most recently Alabama, Wyoming and Montana, have passed laws to block the requirement to carry health insurance, those provisions do not override federal law.
I get my health coverage at work and want to keep my current plan. Will I be able to do that? How will my plan be affected by the health law?
If you get insurance through your job, it is likely to stay that way. But, just as before the law was passed, your employer is not obligated to keep the current plan and may change premiums, deductibles, co-pays and network coverage.
You may have seen some law-related changes already. For example, most plans now ban lifetime coverage limits and include a guarantee that an adult child up to age 26 who can't get health insurance at a job can stay on her parents' health plan.
What other parts of the law are now in place?
You are likely to be eligible for preventive services with no out-of-pocket costs, such as breast cancer screenings and cholesterol tests.
Health plans can't cancel your coverage once you get sick – a practice known as "rescission" – unless you committed fraud when you applied for coverage.
Children with pre-existing conditions cannot be denied coverage. This will apply to adults in 2014.
Insurers will have to provide rebates to consumers if they spend less than 80 to 85 percent of premium dollars on medical care.
Some existing plans, if they haven't changed significantly since passage of the law, do not have to abide by certain parts of the law. For example, these "grandfathered" planscan still charge beneficiaries part of the cost of preventive services.
If you're currently in one of these plans, and your employer makes significant changes, such as raising your out-of-pocket costs, the plan would then have to abide by all aspects of the health law.
I want health insurance but I can’t afford it. What will I do?
Depending on your income, you might be eligible for Medicaid. Currently, in most states nonelderly adults without minor children don't qualify for Medicaid. But beginning in 2014, the federal government is offering to pay the cost of an expansion in the programs so that anyone with an income at or lower than 133 percent of the federal poverty level, (which based on current guidelines would be $14,856 for an individual or $30,656 for a family of four) will be eligible for Medicaid.
The Supreme Court, however, ruled in June that states cannot be forced to make that change. Republican governors in several states have said that they will refuse the expansion, though that may change now that Obama has been re-elected.
What if I make too much money for Medicaid but still can't afford to buy insurance?
You might be eligible for government subsidies to help you pay for private insurance sold in the state-based insurance marketplaces, called exchanges, slated to begin operation in 2014. Exchanges will sell insurance plans to individuals and small businesses.
These premium subsidies will be available for individuals and families with incomes between 133 percent and 400 percent of the poverty level, or $14,856 to $44,680 for individuals and $30,656 to $92,200 for a family of four (based on current guidelines).
Will it be easier for me to get coverage even if I have health problems?
Insurers will be barred from rejecting applicants based on health status once the exchanges are operating in 2014.
I own a small business. Will I have to buy health insurance for my workers?
No employer is required to provide insurance. But starting in 2014, businesses with 50 or more employees that don't provide health care coverage and have at least one full-time worker who receives subsidized coverage in the health insurance exchange will have to pay a fee of $2,000 per full-time employee. The firm's first 30 workers would be excluded from the fee.
However, firms with 50 or fewer people won't face any penalties.
In addition, if you own a small business, the health law offers a tax credit to help cover the cost. Employers with 25 or fewer full-time workers who earn an average yearly salary of $50,000 or less today can get tax credits of up 35 percent of the cost of premiums. The credit increases to 50 percent in 2014.
I'm over 65. How does the legislation affect seniors?
The law is narrowing a gap in the Medicare Part D prescription drug plan known as the "doughnut hole." That's when seniors who have paid a certain initial amount in prescription costs have to pay for all of their drug costs until they spend a total of $4,700 for the year. Then the plan coverage begins again.
That coverage gap will be closed entirely by 2020. Seniors will still be responsible for 25 percent of their prescription drug costs. So far, 5.6 million seniors have saved $4.8 billion on prescription drugs, according to the Department of Health and Human Services.
The law also expanded Medicare's coverage of preventive services, such as screenings for colon, prostate and breast cancer, which are now free to beneficiaries. Medicare will also pay for an annual wellness visit to the doctor. HHS reports that during the first nine months of 2012, more than 20.7 million Medicare beneficiaries have received preventive services at no cost.
The health law reduced the federal government's payments to Medicare Advantage plans, run by private insurers as an alternative to the traditional Medicare. Medicare Advantage costs more per beneficiary than traditional Medicare. Critics of those payment cuts say that could mean the private plans may not offer many extra benefits, such as free eyeglasses, hearing aids and gym memberships, that they now provide.
Will I have to pay more for my health care because of the law?
No one knows for sure. Even supporters of the law acknowledge its steps to control health costs, such as incentives to coordinate care better, may take a while to show significant savings. Opponents say the law’s additional coverage requirements will make health insurance more expensive for individuals and for the government.
That said, there are some new taxes and fees. For example, starting in 2013, individuals with earnings above $200,000 and married couples making more than $250,000 will paya Medicare payroll tax of 2.35 percent, up from the current 1.45 percent, on income over those thresholds. In addition, higher-income people will face a 3.8 percent tax on unearned income, such as dividends and interest.
Starting in 2018, the law also will impose a 40 percent excise tax on the portion of most employer-sponsored health coverage (excluding dental and vision) that exceeds $10,200 a year and $27,500 for families. The tax has been dubbed a "Cadillac" tax because it hits the most generous plans.
In addition, the law also imposes taxes and fees on several major health industries. Beginning in 2013, medical device manufacturers and importers must pay a 2.3 percent tax on the sale of any taxable medical device to raise $29 billion over 10 years. An annual fee for health insurers is expected to raise more than $100 billion over 10 years, while a fee for brand name drugs will bring in another $34 billion.
Those fees will likely be passed onto consumers in the form of higher premiums.
Has the law hit some bumps in the road?
Yes. For example, the law created high-risk insurance pools to help people purchase health insurance. But enrollment in the pools has been less than expected. As of Aug. 31, 86,072 people had signed up for the high-risk pools, but the program, which began in June 2010, was initially expected to enroll between 200,000 and 400,000 people. The cost and the requirements have been difficult for some to meet.
Applicants must be uninsured for six months because of a pre-existing medical condition before they can join a pool. And because participants are sicker than the general population, the premiums are higher.
Enrollment has increased since the summer, after the premiums were lowered in some states by as much as 40 percent and some states stepped up advertising.
A long-term care provision of the law is dead for now. The Community Living Assistance Services and Supports program (CLASS Act) was designed for people to buy federally guaranteed insurance that would have helped consumers eventually cover some long-term-care costs. But last fall, federal officials effectively suspended the program even before it was to begin, saying they could not find a way to make it work financially.
Are there more changes ahead for the law?
Some observers think there could be pressure in Congress to make some changes to the law as a larger package to reduce the deficit. Among those options is scaling back the subsidies that help low-income Americans buy health insurance coverage. The amount of the subsidies, and possibly the Medicaid expansion as well, could be reduced.
It’s also possible that some of the taxes on the health care industry, which help pay for the new benefits in the health law, could be rolled back. For example, legislation to repeal the tax on medical device manufacturers passed the House with support from 37 Democrats (it is not expected to receive Senate consideration this year). Nine House Democrats are co-sponsoring legislation to repeal the law’s annual fee on health insurers.
Meanwhile, the Independent Payment Advisory Board (IPAB), one of the most contentious provisions of the health law, is also under continued attack by lawmakers. IPAB is a 15-member panel charged with making recommendations to reduce Medicare spending if the amount the government spends grows beyond a target rate. If Congress chooses not to accept the recommendations, lawmakers must pass alternative cuts of the same size.
Some Republicans argue that the board amounts to health care rationing and some Democrats have said that they think the panel would transfer power that belongs on Capitol Hill to the executive branch. In March, the House voted to repeal IPAB.
Consulting leaders advise employers to ‘be nimble’ amid changing health care landscape
By Tristan Lejeune
A roundtable discussion from benefits consulting leaders on what employers need to know and need to be thinking about going forward with their health strategies served as the wrap-up to a National Business Group on Health annual business agenda event last week in Washington, D.C. With cost-control still very much top of mind for employers, NBGH President and CEO Helen Darling aptly pointed out that, “If they were charging, this would be hundreds and hundreds of dollars an hour. So, this is your chance to get some free consulting from these leaders.”
The group included Julie Stone, health and group consulting leader at Towers Watson; Sharon Cunninghis, U.S. health and benefits regional business leader for Mercer; and Jim Winkler, Aon Hewitt senior vice president and chief innovation officer. Darling served as the panel’s moderator.
As employers plan for the realities of health care reform cost and compliance in 2014, Cunninghis said, “it’s really important to be nimble.” Employers may think they have a firm bead on health care changes at the moment, but many, she said, could use some help.
“You have to really stay on top of everything that’s happening, and I know that’s hard,” Cunninghis said. “Many of you have employees all over the world, so, to some degree, I would start leaning on others — whether it’s leaning on your health plan [or] other vendors that you work with. Make sure — literally on a weekly basis — that you’re on top of all the changes.”
Winkler agreed that it’s important benefits leaders seek assistance when they need it, but also cautioned that providers and vendors may be primarily seeking an opportunity, not necessarily serving an employer’s best interests. He urged employers to watch their backs and their bottom lines.
“One man’s cost savings is another man’s income reduction,” he said. “I think it’s a critical moment for employers to be activists … Work with your health plans, but don’t cede total control to them.”
Stone said that quality is tied to efficiency and warned that often, employers lose track of the former in search of the latter. “I think we need not to lose focus on quality,” she said, and that way employers can reach and enjoy the benefits of a cycle of good health among workers.
In addition to targeted messaging, Darling asked, how can employers move to the next stage of engagement on employee health care and wellness?
“You have to think of this as a marketing exercise, not a benefits communication exercise,” Winkler answered. He said “we have to take that targeted messaging to a new level,” to really squeeze every drop into return on investment, but he emphasized using language and formats that actually work.
“If you think about how we have all shifted to a new paradigm of communication — technology, texting, Skyping, — we changed our routines and patterns in a fundamental way and we’re not going back,” Stone said. “We need to change those same routines around health, health management, healthy eating, all of those things, so they really are routine” and health becomes a matter of natural course.
Cunninghis agreed about using natural English, but she said employer shouldn't be looking beyond targeted language, but at how to change it. “The next generation … is very into the notion of self-serving,” she said, and they can be taught to seek out their own best-case health solutions.
“I think we’ve been very limited in how we target to people, and I think we should take that a step further and ask, how do we get people to target to themselves?” Cunninghis asked.
5 Steps to Assess Employees' Benefits Eligibility Under PPACA
Source: https://ebn.benefitnews.com
By Laurie S. Miller
"Health care reform is overrated," a broker responded flippantly to his (now former) employer-client after the employer initiated the call. "I'll email you a one-page cheat sheet." The client had reached out to his broker following a two-hour presentation about the impact of health care reform from the broker's competitor. This was the same broker who, for the last two years, had faxed over the client's renewal and had delegated the servicing of the employees to the client's bookkeeper. Shaking his head, the client hung up the phone, then dialed his broker's competitor and moved the business.
Consulting firms around the nation have deployed significant resources and compliance teams to help clients proactively manage the strategic, financial and operational impact of the Patient Protection and Affordable Care Act. There are significant penalties for noncompliance so it is important that employers keep up with the regulations. In addition, employers may see increased enrollment as employees seek to comply with the individual mandate, which requires coverage.
Eligibility for coverage is one area that employers need to assess. PPACA defines a full-time employee as working 30 hours per week. Many employers currently set their eligibility threshold at a higher level, such as 35 or 40 hours a week.
"We could potentially have 40 new enrollees on our plan," pointed out one human resources executive at a recent health care reform seminar, as she weighed the cost impact.
If your plan defines eligibility as greater than 30 hours a week or excludes certain classes of employees (for example, a nine-month non-certified employee at a school vs. a 12-month employee), this is the time to assess the impact of the legislation and determine an action plan. Here's a checklist to get you started:
1. Review employees who currently waive the plan. Model potential plan costs if these employees join the health plan.
2. Review employees who are currently ineligible due to higher eligibility thresholds (greater than 30 hours per week.) Assess the financial impact of newly eligible employees joining the health plan.
3. Review variable-hour employees. If they exceed an average of 30 hours a week during the measurement period, they may be eligible for benefits.
4. Are partial-year employees eligible for coverage? (i.e., nine-month employees who don't work during the summer months?) If currently excluded, assess potential impact if they exceed 30 hours per week.
5. Review seasonal employees. Do they exceed 120 days per year? They may be eligible for benefits.
There are many other components to developing a strategic approach to health care reform. Look for a broker that offers a proprietary financial modeling tool that can help your company determine a cost-effective strategy for the future.
6 key compliance deadlines for 2013 and beyond
Source: https://ebn.benefitnews.com
By Kathleen Koster
For plan sponsors, 2013 is a year of crossing Ts and dotting Is on PPACA compliance for their health care plans and strategizing for next year, when the employer mandate and public exchanges go into effect. The health care reform law has many moving parts and a great deal of regulations yet to come, which will keep benefits professionals on their toes all year.
"Employers have never experienced this complexity and oversight in compliance for their health plans. Employers are used to a compliance-rich environment around their retirement plans, but they need an equally robust and hands-on approach to managing the compliance of their health plans," says Mike Thompson, a principal in the human resources services practice of PricewaterhouseCoopers. He adds that "the rules, regulations and level of enforcement have never been greater."
Thompson believes "2013 is a period of strategic re-evaluation of whom the employer will provide benefits to in light of the changes in the individual market allowing guaranteed issue and subsidies for lower- and middle-income Americans."
He believes that employers will also transition around financing as "more employers look at community-type programs with the interest of moving away from their own programs and potentially contributing towards a private exchange or facilitating access to coverage in the open market."
To help employers keep all their compliance ducks in a row while managing and determining long-term strategies for their plans, EBN asked legal and health care experts for top issues to keep in mind for 2013 and beyond.
1. Preparing for the 2014 employer mandate
"At the top of the list is the interpretation of employer responsibility provisions that includes what constitutes minimum essential coverage that employers have to provide or be subject to penalties. Along with that, there are very important issues around the minimum value of the coverage they provide as well as who they have to provide it to," says Paul Dennett, senior vice president of health care reform at the American Benefits Council.
The employer mandate applies only to large employers. Whether an employer is defined as large under PPACA (generally companies with 50 or more employees) depends on the number of its full-time equivalent employees. Companies with 50 or more full-time workers (averaging at least 30 hours per week) must offer minimum health care coverage that is affordable.
In 2013, an employer ought to be determining whether it is a large employer and, therefore, subject to the mandate. "If they offer coverage in 2014, the coverage must meet the minimum value standards and the contributions the employer requires of employees cannot be so high the coverage is unaffordable relative to the employee's household income," says Jean C. Hemphill, practice leader of Ballard Spahr's health care group.
To determine the minimum value, fully insured plans will rely on their insurance carrier for information on whether they meet the minimum value of 60% for their plan. Self-insured plans can turn to an actuary or determine their value with the aid of a government-provided calculator or government-provided checklists.
When it comes to determining the affordability of the plan, an employer cost-sharing arrangement must be affordable relative to the employees' household income, as stated under PPACA. So, "the employee's contribution and cost-sharing obligations can't exceed 9.5% of their household income," says Hemphill.
However, the IRS acknowledges that employers don't know workers' household income, and suggests employers use W-2 wage information instead to determine their plan's affordability.
Hemphill expects more guidance on this issue since employees' contributions are typically much greater for dependents coverage than their own. An employee offered otherwise qualifying coverage by their employer can't use the public exchange unless they prove their employer-sponsored coverage is unaffordable.
The affordability issue may be of greater concern to employers with fairly low-income workforces or for employers not offering comprehensive plans to employees or all employees, such as the mini-medical plans sometimes offered in the retail industry. Employers only need to offer one affordable plan with minimum value to satisfy the rules, however mini-medical plans will be illegal after 2014.
Actuarial experts predict that most high-deductible health plans with deductibles in the $2,000-$3,000 range will most likely qualify, however those with much higher cost-sharing may not meet the minimum value.
While sponsors can vary the deductible and coinsurance amount of HDHPs, they should remember that the higher the deductible, the lower actuarial value of the plan.
"There are variables that can be adjusted in the plan design, but the most important one is where to set the amount of the deductible," says Dennett. He adds that guidance so far has indicated employer contributions toward HSAs or credits toward HRAs will count toward the minimum value. The question is whether the amount contributed is counted 100% to the plan or if it is discounted in the actuarial value formula that HHS would use in the calculation of actuarial value coverage.
Overall, "the Affordable Care Act was designed so employers don't need to make too many plan design changes to their plan," says J.D. Piro, national practice leader for Aon Hewitt's health and benefits legal department. "They may need to open it up to more employees but, generally speaking, they should be able to meet the affordability and minimum value requirements."
2. Public exchanges
Employers are required to provide employees with notice alerting them of the existence of public insurance exchanges. It is thought that the government will issue a model notice for this purpose. At press time, the government had yet to produce this model notice or other guidance about the notice requirement. The March 1 notification deadline has been extended until "late summer or fall," according to a recent FAQ announcement from the Centers for Medicare and Medicaid Services.
"There may still be unanswered questions about whether the state exchanges, partnership exchanges or the federal exchanges are really at an operational readiness stage to be able to go live as of October 2013," says Dennett.
Assuming the exchanges are on track and sponsors receive the guidance they need, they should expect many questions from workers about how the process affects them.
"While most major employers will continue to offer coverage to employees, there will be some confusion around the availability of coverage in the public exchanges and what the implications are [for employees] getting coverage from their employer, says Thompson.
He suggests employees will primarily want to know:
* Do I still have coverage through my employer?
* Am I eligible to get coverage through the exchange?
* Can I potentially get subsidies through the exchange?
* Is it in my best interest to go through the exchange?
3. Waiting periods
Another design-related issue employers must factor into their plans is that under PPACA, waiting periods for health care coverage cannot exceed 90 days. The 90-day period begins when the employee is otherwise eligible for coverage. Employers with a high-turnover workforce that currently have long waiting periods will have to shorten them.
If an employer requires employees to work a minimum number of hours to qualify for coverage, it may need to monitor workers' timesheets in 2013 to determine if and when coverage needs to be offered in 2014; this may be complicated for seasonal employees and other employees with variable hours.
Thompson believes this is part of a larger question of meeting qualifications for providing coverage.
"It's part of a package in my mind," he says. "Employers must evaluate employee classes when looking at whether they meet the minimum threshold of providing coverage to full-time employees. Seasonal, temporary, or contract workers are classes that need to be evaluated in order to avoid or at least understand what the penalties might be."
4. Pre-existing and non-discrimination prohibitions
"The non-discrimination rules are new for insured plans in 2014," says Hemphill. Even though these prohibitions should already be in effect, government agencies have delayed enforcement until they release regulations.
"It will be an important issue because right now there is no requirement to offer coverage to part-time employees, but with the definition of full-time employees as an average of 30 hours per week and new non-discrimination testing rules, the employer obligation may be different," she says.
Either way, employers can expect notice and guidance well before implementation because, "it is a big plan design issue," says Edward I. Leeds, counsel in the employee benefits and executive compensation group at Ballard Spahr.
5. Wellness programs
PPACA includes rules that prohibit plans from discriminating against individuals based on a range of health-related factors. Plans cannot impose restrictions on eligibility or increase employee costs for coverage based on these factors.
"When the government issued guidance under ACA, they actually revised the HIPAA regulations. So now the ACA and HIPAA rules ... will be the same," says Leeds. "By and large the rules follow HIPAA with some changes, the most significant of which is that the potential reward for meeting requirements under the wellness programs will increase as of January 1, 2014."
The potential reward for meeting a wellness requirement will increase from 20% of cost of coverage to 30% of cost of coverage. Incentives related to tobacco cessation will increase up to 50%. (For more details, read "Regs increase wellness rewards," page 28.)
6. Upcoming fees and taxes
Patient-Centered Outcomes Research Institute, established by PPACA, will collect and publish information about clinical effectiveness of treatments for patients. It will be paid for through fees assessed against insurers and self-funded plans equal to $2 ($1 in the first year) per covered life. The assessment will last seven years and eventually be adjusted for inflation. Employers with self-funded plans will need to report and pay these fees starting in July 2013.
The Transitional Reinsurance Program aims to stabilize the individual health insurance market as insurers provide coverage, starting in 2014, to large numbers of individuals who do not currently have coverage and present uncertain risks. The program will provide reinsurance payments to insurers that take on high-risk individuals. The program is funded through a three-year tax (expected to be $63 per covered life in the first year.)
The Additional Medicare Tax, in effect this year, is an additional 0.9% tax applied to high-income individuals. Employers are responsible for withholding the tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year.
Employers aren’t doing reform math
Source: https://www.benefitspro.com
By Denis Storey
For as cost-conscious as most employers are, a new study reveals more than half of them haven’t even worked out the math when it comes to how much health reform is going to cost them.
But among those who have started doing the math, the survey, just released from Willis Human Capital Practice, shows two-thirds of them have already seen compliance-based cost increases stemming from the reform law. And this makes for a strange dichotomy, since the experts at Willis insist employers are relying on some misguided perceptions as the plan for life after reform, which is why, they say, so many employers haven’t done anything yet.
In fact, the study shows that only 20 percent of employers expect to adjust their benefits plans as a result of increased compliance costs. But perhaps most damning—or embarrassing—is this revelation: “Consequently, the vast majority of employers still hope to comply with health care More than half of employers haven’t even worked out the math when it comes to healthcare reform.reform and expand their health coverage as necessary—without reducing other benefits,” lifted straight from the Willis press release.
“Employers are still coming to terms with the impact of health care reform, and many employers still seem to function in a ‘shock mode.’ While few employers consciously manage their group medical benefits as a component of their total rewards perspective, survey responses indicate the very beginning of an employer trend in this direction,” said Jay Kirschbaum, practice leader, national legal and research group, Willis Human Capital Practice.
IRS Proposes Regulations on Employer Penalty
Source: UBA
The Internal Revenue Service has released proposed regulations on the health care reform employer "shared responsibility" penalty provision. This is the penalty on "large" employers (those with at least 50 full-time or full-time equivalent employees) that do not provide affordable minimum essential coverage for full-time employees and their dependents and have at least one full-time employee who receives subsidized Exchange coverage (new Internal Revenue Code section 4980H, enacted as part of the Patient Protection and Affordable Care Act of 2010 as amended by the Health Care and Education Reconciliation Act of 2010). The IRS also posted on its website a set of related questions and answers.
Employers Affected
An employer meets the penalty provision's large employer threshold if it employed, on average, at least 50 full-time or full-time equivalent employees in the prior calendar year. Thus, for 2014, the first year the penalty is effective, an employer would consider the average number of such employees it had during 2013 to determine whether it is a covered large employer. The proposed regulations include a transition rule under which employers may use any consecutive six-month period in 2013, instead of the full year, to calculate the average number of employees.
A full-time employee is one who is employed by the employer an average of 30 hours per week. Part-time employees count, too, taking into account the number of full-time equivalents: For a given month, add the number of hours for all part-time employees (counting no more than 120 hours for any one employee) and divide by 120. Count all hours worked and all hours for which payment is made or due for vacation, illness, holiday, incapacity, layoff, jury duty, military duty, or leave of absence. Notice 2011-36 had limited the period of leave that must be included to 160 hours but the proposed regulations eliminate this limitation.
The proposed regulations clarify that the IRS's safe harbor for determining full-time status (i.e., using the look-back/stability period approach) will not apply for purposes of determining whether an employer meets the threshold of 50 full-time employees. Instead, whether an employer is a large employer for a given year will be determined by calculating employees' actual hours of service in the immediately preceding year. Equivalency rules may be used for employees not paid on an hourly basis. An entity not in existence in the preceding year may be a large employer in its first year if it is reasonably expected to employ an average of at least 50 full-time employees during its first year. Special hours-counting rules are proposed for educational institutions, employees paid on a commission basis, and other circumstances.
Whether a worker is an employee of a particular employer will be based on the long-standing common law principle that, if a service recipient has the right to direct and control how a worker performs services, that service recipient is the worker's employer. The proposed regulations also reiterate that controlled group rules apply for purposes of identifying the employer. Thus, all common law employees of all entities that are part of the same controlled group or affiliated service group must be counted to determine whether the threshold of 50 full-time employees is met.
Assessable Penalty for Affected Employers
For a given month beginning after 2013, if an employer does not offer minimum essential coverage to "substantially all" of its full-time employees and their dependents and a full-time employee obtains subsidized Exchange coverage, the employer must pay a penalty equal to $166.67 multiplied by the number of its full-time employees in excess of 30. Under the proposed regulations, "substantially all" means all but five percent of full-time employees or, if greater, five full-time employees. The proposed regulations define "dependent" as a child, within the meaning of Code 152(f)(1), who is under age 26. (Thus, a spouse is not a dependent.) The proposed regulations offer transitional relief (only for 2014) for employers that do not currently provide dependent coverage. Any employer that takes steps during its plan year that begins in 2014 toward offering dependent coverage will not be liable for penalties solely on account of its failure to offer dependent coverage for that plan year. The proposed rules also explain that the 30-employee reduction used when calculating this penalty is applied on a controlled group basis so that each member company reduces its number of full-time employees by a ratable share of 30.
If an employer offers minimum essential coverage to substantially all of its full-time employees and their dependents, but a full-time employee nevertheless obtains subsidized Exchange coverage (i.e., because the employer's coverage fails to meet the minimum value or affordability test), the employer must pay a penalty equal to the lesser of the penalty determined in the preceding paragraph or $250 multiplied by the number of full-time employees who are certified as having subsidized Exchange coverage for the month.
Since no penalty is triggered unless at least one full-time employee obtains subsidized Exchange coverage, it is important to know whether a full-time employee can obtain subsidized Exchange coverage. An employee can obtain subsidized Exchange coverage only if his or her household income is between 100 percent and 400 percent of the federal poverty line, he or she enrolls in Exchange coverage and is not eligible for Medicaid (or other government coverage), and either no employer coverage is offered or the employer coverage offered fails to meet either a minimum value test or an affordability test:
- Employer coverage meets the minimum value test if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan. The Department of Health and Human Services is working with IRS to develop a calculator that employers may use to determine whether this test is met.
- Employer coverage meets the affordability test if the employee is required to pay no more than 9.5% of his household income for self-only coverage. Since employers have no practical way of knowing what an employee's household income is, the IRS previously stated that employers could use an employee's W-2 reported wages as a safe harbor. The proposed regulations explain how that safe harbor would apply, including how it would apply to partial years worked. The W-2 safe harbor will be very useful to most employers, but the proposed regulations also offer two additional safe harbors that employers may use to determine affordability: one based on monthly rate of pay (i.e., coverage is affordable if the employee's monthly cost for self-only coverage does not exceed 9.5% of his monthly rate of pay) and the other based on eligibility for Medicaid (i.e., coverage is affordable if the employee's cost for self-only coverage does not exceed 9.5% of the federal poverty line for a single individual).
If an employee elects coverage under an employer's group health plan, the employee cannot qualify for subsidized Exchange coverage even if the employer coverage fails the minimum value or affordability test. However, providing mandatory group health coverage that fails the minimum value or affordability test will not prevent an employee from obtaining subsidized Exchange coverage.
The proposed regulations retain the look-back/stability period safe harbor method provided in prior guidance for determining which employees are full-time for purposes of the penalty calculation. Thus, an employer can use a look-back period of up to 12 months to determine whether an on-going employee (i.e., one employed for at least the length of the look-back measurement period selected) is a full-time employee. If an employer uses a look-back/stability period for its on-going employees, it also can use the look-back/stability period for new and seasonal employees. The proposed regulations include additional special rules for a new variable-hour employee or seasonal employee whose status changes during the look-back measurement period, for rehired employees and employees returning from unpaid leaves of absence, for employees of temporary agencies, and for other special circumstances.
The proposed regulations assure that an employer will (a) receive certification of an employee's receipt of subsidized Exchange coverage and (b) have an opportunity to respond regarding application of the penalty before IRS actually assesses a penalty in connection with that employee.
Recordkeeping obviously is important both for compliance (existing law already requires substantial recordkeeping for tax purposes) and to substantiate any defense to a penalty.
Opportunity to Comment on Proposed Regulations
Employers and other stakeholders can help shape final regulations at a public hearing on April 23, 2013, and by submitting written comments by March 18, 2013. In addition, the government also requests comments on the new Code § 6056 employer-reporting requirements and the 90-day waiting period rule.
New PPACA Fees Will Strike Employers
Source: UBA
By Josie Martinez
The goal of health care reform is health care for all… but at what cost? By 2014, businesses with 50 or more full-time-equivalent employees will be at risk for financial penalties (the so-called “shared responsibility assessments”) if they do not offer health coverage to full-time employees. We are all well aware of the $2,000 and $3,000 assessments that could be applied to employers that do not offer affordable, minimum value coverage to full-time employees, and most of us have been advising clients on penalty avoidance strategies for many months already. Meanwhile, business owners nationwide struggle with weighing the financial aspects of providing such coverage or paying the penalties. A recent survey suggests that only 28 percent of companies that employ a large number of low-income workers offer health benefits.
But there are other costs to consider, as well. In addition to shared responsibility assessments, there will be various other fees that will be felt by employers that are expected to ultimately result in higher premiums and could undermine a core principle of the Patient Protection and Affordable Care Act (PPACA) that is meant to provide basic health protections for all Americans. Over the next several years, insured group health plans will be required to absorb the costs of three new fees. These fees imposed by PPACA on insurers will inevitably trickle down to increase rates in the coming years. In a recent meeting presented by a major national health insurance carrier, regarding “State and Federal Reform Impact,” it became clear that at least three new assessments/fees imposed on carriers will affect employers’ renewal rates in the future and ultimately their bottom line:
- Reinsurance Assessment - This per capita fee on medical plans will fund a three-year reinsurance program designed to reimburse companies that insure high-cost individuals in the individual health insurance market. The total amounts to be assessed are $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016. The estimated fee is approximately $63 per year ($5.25 per month) per covered individual in the first year; however, fees are expected to decrease in subsequent years. The assessment applies to both insured and self-funded plans. Insurance providers will pay the fee for insured plans while third-party administrators may pay the fee on behalf of self-funded plans.
- Comparative Effectiveness Research Fee (CERF) – This is an annual fee imposed on all insured and self-insured plans. The goal of the research is to determine which of two or more treatments works best when applied to patients, thereby comparing different types of therapy against each other. CERF will be charged to health plans to help fund the research that will be conducted by the Patient Centered Outcomes Research Institute, a nonprofit organization established by PPACA. The initial annual fee is $1 per year per health plan member (includes dependents). The annual charge increases to $2 per member the following year and then increases annually with inflation after that until it ends in 2019. Insurance providers will pay the fee on behalf of insured plans, while employers with self-funded plans will need to determine their liability and account for this fee in their own reporting. For many plans, the first payments will be due July 2013.
- Health Insurance Industry Fee – This annual fee affects all fully insured plans. The estimated cost of this tax will be $8 billion for 2014 and eventually increase to $14.3 billion by 2018. The tax is divided among health insurers and will likely be passed on to plan sponsors as an addition to premium. The Health Insurance Industry Fee has a much greater potential financial impact than either of the other two taxes because it is intended to help fund the cost-generating provisions of the PPACA. The fee will be divided among health insurance carriers based on each carrier’s share of the overall premium base and will only be assessed relative to insured health plans, inclusive of medical, dental and vision plans. Self-funded health plans and associated stop loss premium will not be included in the premium base. Adding insult to injury, this fee is not deductible for federal income tax purposes. This substantially increases the cost impact, which is expected to be in the range of 2 percent to 2.5 percent of premium in 2014, increasing to 3 percent to 4 percent of premium in later years. Insurance companies will likely begin to reflect this additional cost in their premium rates in 2013 and/or 2014.
These new fees are supposedly intended to raise revenues that will support the individual insurance market, help fund the state exchanges and assist with conducting research for more effective treatments. But they will also dramatically impact group health plan premiums and could spur many employers to drop their group health plan sponsorship, pushing more employees into the individual market. In anticipation of what lies ahead, it behooves us to work proactively with employers so they can plan their finances accordingly rather than be blindsided by unwelcome surprises well before implementation happens.
Employee questions on PPACA exchanges likely to spike
Source: https://eba.benefitnews.com
By: Gillian Roberts
Ignorance will not be bliss come October when state and federal exchanges begin enrollment for individuals and small group employees. While brokers are experiencing anxiety about their role in such exchanges, employees of all types may be confused about their options — thus providing brokers the chance to come to the rescue with targeted communication on the subject.
“Most employees don’t think [health reform] impacts them yet,” says Mike Thompson at PricewaterhouseCoopers’ human resource services. But, when more information begins to come out on public exchanges, “employees are very likely to be very confused,” he adds. “It’s one of the reasons that HHS deferred employers communicating about the exchanges to their employees.”
Jim Blaney, CEO, human capital practice, Willis North America, says employees are concerned about costs the Patient Protection and Affordable Care Act might pass on them, and how exactly PPACA’s exchanges will affect them. “I get the feeling that employees might start to think that their employer will just throw them out on the exchanges for coverage,” he says. “That will bring around a whole set of communications opportunities for the broker and the employer.”
According to a Kaiser Family Foundation analysis in fall 2009, about 2% of uninsured people could purchase health insurance through a workplace plan, but simply chose not to do so. These same employees are likely to have questions about exchange eligibility come this fall, and turn to their HR department (and broker) for answers. For example, according to a Lake Research and Enroll America survey compiled last fall, 78% of all uninsured were not aware that they may qualify for subsidies and will have coverage options in 2014.
“There's a lot of need for targeted education by state, versus federal campaigns,” says Mollyann Brodie, director of public opinion and media research at Kaiser Family Foundation.
The Department of Health and Human Services in late January launched Health Insurance Marketplace, a website and marketing campaign designed to educate people about exchange open enrollment. According to HHS spokesman Fabien Levy, the agency is targeting both uninsured and insured people through email and text message updates, as well as social media conversations on Twitter, Facebook, Tumblr and YouTube. He points out that the Congressional Budget Office predicts that 9 million Americans will obtain coverage through the exchanges in 2014.
State organizations vary drastically in the level of education and tools provided to residents. Some of the most active states so far are Maryland and California. Both have informational websites dedicated to their respective exchanges. Willis’ Blaney says confusion for employees will likely increase when more states begin their awareness campaigns.
There is also a need for education in the small business market, says Sarah Dash, a researcher at Georgetown University’s Center on Health Insurance Reforms. With so much still undetermined, and many more HHS regulations and communications to come, Kaiser’s Brodie says moving forward with an education campaign is more important than ever. “If we wait until the public is perfectly informed” on the details of PPACA, she says, “we’ll be waiting forever.”
Determining if 'play or pay' applies to you
Source: https://eba.benefitnews.com
By Deborah L. Grace
Under the Patient Protection and Affordable Care Act, a large employer is subject to penalties if it fails to offer to full-time employees health coverage or if the coverage that it offers is not affordable or does not provide minimum value. These new “shared responsibility” rules are effective as of January 1, 2014, and apply to all employers, including non-profits and governmental entities. This article describes the regulations proposed by the Internal Revenue Service in December 2012 for determining if an employer is a “large employer” for purposes of the shared responsibility rules of Section 4980H of the Internal Revenue Code.
What is a large employer?
For any calendar year, an employer is a “large employer” if it employed an average of at least 50 full-time and full-time equivalent employees on business days during the preceding calendar year. The calculation used to determine large employer status seems deceptively easy. An employer totals the number of full-time employees and FTEs that it employed each month and then divides that total by 12. If the resulting number is 50 or greater, the employer is a large employer.
An exception is provided for an employer who, for 120 days or less during the calendar year, exceeded the 50 full-time employee threshold due to the employment of seasonal employees. This means that hiring activity for 2013 may affect an employer’s status as a large employer for 2014. Note also that this analysis must be made for every calendar year.
All employees of entities that are under common control, as determined under Code Section 414(b) or (c), or that are members of an affiliated service group under Code Section 414(m) or (o), are taken into account in determining if the members of the group constitute a large employer. For example, suppose Company A has 20 full-time employees and Company B has 40 full-time employees. Company A owns 80% of the stock of Company B.
Under Code Section 414(b), Company A’s ownership of at least 80% of the stock of Company B causes Companies A and B to be members of a parent-subsidiary controlled group. Because of the controlled group status, the employees of Company A and B are added together when determining large employer status, resulting in both Company A and Company B being large employers for purposes of the shared responsibility rules.
Who is an employee?
For purposes of these rules, only common-law employees are counted. A sole proprietor, a partner in a partnership, a member of a limited liability company taxed as a partnership, and a 2-percent or more S corporation shareholder is not counted as an employee. Also excluded from this test’s definition of “employee” is any individual who is paid by a staffing agency but provides services to an employer on a substantially full-time basis, including an individual whose services would meet the “leased employee” definition of Code Section 414(n).
How does an employer determine if an employee is full-time?
A “full-time employee” is one who is employed by the employer an average of at least 30 hours of service per week or 130 hours of service per calendar month. Consistent with longstanding Department of Labor rules, hours of service include both hours for which the employee is paid for services performed and also hours for which the employee is paid and no services are performed due to vacation, holiday, illness, disability, layoff, jury duty, military duty or leave of absence. If an employee is paid on an hourly basis, then the employer must use those hours to determine if the employee’s status for the month is full-time.
Use of equivalencies for non-hourly employees. If an employee is not paid on an hourly basis, then the employer may use one of the following methods to determine the hours that the employee worked: (i) count actual hours worked by the employee; (ii) credit 8 hours of service for any day that the employee would be credited with at least 1 hour of service; or (iii) credit 40 hours for each week that the employee would be credited with at least 1 hour of service. An employer cannot use an equivalency method if it would result in understating an employee’s hours. For example, if an employee usually works three 10 hour days a week, the employer cannot use the days-worked equivalency, since that would understate the employee’s hours.
Service outside the U.S. Hours worked outside the U.S. where the employee does not receive the U.S. source income for that service are disregarded. As a result, a U.S. entity that is a member of a multinational controlled group may, for purposes of determining whether it is a large employer, exclude individuals who do not work in the U.S. For example, a U.S. sales office of a multinational entity with no other presence in the U.S. that has 5 full-time employees will not be a large employer for purposes of the shared responsibility rules. Note, the proposed regulations do not change the rules under COBRA that require all employees, including foreign nationals with no U.S. source income, to be counted when determining if the entity has crossed the 20 employee threshold and thereby be required to offer COBRA continuation coverage to qualified beneficiaries.
How does an employer calculate the number of full-time equivalents?
All employees (including seasonal employees) who were not full-time employees for any month are included in calculating the employer’s FTEs for that month. The number of FTEs is determined using a two-step process. First, the employer must calculate the aggregate number of hours of service (but not more than 120 hours of service for any employee) for all employees who were not employed on average at least 30 hours of service per week for that month; second, the total hours for the month for all such non-full-time employees is divided by 120. Fractions are included in determining a monthly FTE count but, as explained in the next paragraph, are disregarded for the determination of whether an employer is a large employer.
How does an employer calculate its large employer status?
Once the employer has the number of full-time employees and FTEs that it employs each month during the prior calendar year, the employer totals these monthly numbers and then divides that total by 12 to determine the average. Fractions are disregarded for this purpose. For example, an employer that has on average 49.9 full-time employees (including FTEs) for the preceding calendar year is allowed to round the total down, and therefore would not be a large employer.
Transition Rule. For 2014, an employer may determine its large employer status by using a period of at least 6 consecutive months in 2013 rather than the full 2013 calendar year. This transition rule will allow an employer who is close to the 50 full-time employee threshold time to determine its status for 2014 and make any needed adjustments to its health plan to comply with Code Section 4980H. For example, an employer could determine its large employer status during the period of March through August 2013 and then decide what changes are needed for its health plan (or implement a plan) between September through December 2013.
What is the seasonal employee exception?
An employer that on average exceeds the 50 full-time employee threshold (taking into account FTEs) for 120 days or fewer during a calendar year due to the employment of seasonal workers during that 120 day period is not a large employer. The 12 day period does not need to be consecutive, and an employer may choose to use four months as a measuring period in place of 120 days. An employee may be able to be treated as a “seasonal worker” for purposes of the large employer definition if the employee worked on a seasonal basis for more than four consecutive months.
Definition of Seasonal Worker. Under Code Section 4980H, employees who perform services on a seasonal basis as defined by the Secretary of Labor, including migrant and seasonal agricultural workers, and retail workers employed exclusively during holiday season qualify as seasonal workers. Under the proposed regulations, the IRS has determined that the term seasonal employee is not limited to agricultural or retail workers, and would include individuals whose employment “is of the kind exclusively performed at certain seasons or periods of the year and which, from its nature, may not be continuous or carried on throughout the year.” Until further guidance is issued, an employer may apply a reasonable good faith interpretation of this definition. For example, it may be reasonable for an accounting firm to determine that the additional staff hired during the months of February through April to prepare individual income tax returns are seasonal workers.
If an employer is not in existence during all of 2013, then it will be a large employer if it reasonable expects to employ an average of at least 50 full-time employees (taking into account FTEs) on business days during 2014.
In a merger of acquisition situation, Code Section 4980H defines the term “employer” to include any predecessor to such employer. The IRS has indicated that in defining a predecessor employer, it may use rules similar to those that apply for determining a successor employer for employment tax purposes. Under those rules, an employer that acquires all of the property used in a trade or business of another employer is a successor employer to the predecessor business.
What are the Suggested Next Steps?
Determine if your business will be a large employer for 2014, based on the company’s anticipated full-time employee count for 2013. If the company and other members of its controlled group regularly employ between 40 and 60 full-time employees and FTEs, establish a 6 month or longer transition period in 2013 to determine large employer status for 2014.
Steps that a large employer will want to take, including determining if the health plan that it offers employees is affordable and provides minimum value and identifying full-time employees who must be offered coverage to avoid a penalty, will be addressed in a subsequent article.