Archive for the ‘2010 updates for employers’ Category

Questions and answers about the new health insurance law – Part 10 (mostly about employer/group coverage)

Friday, November 19th, 2010

Good Neighbor Insurance (www.gnazhealth.com and www.gninsurance.com) is continuing to update our clients on the new health insurance laws.   There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work.  Many critical details of this new insurance law will be clarified in the months and years to come. 

These six major coverage options are:

(1) Individual or family coverage (private health care plans)

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military service.

Carve-Out Plans

Q – I need some clarification on existing group coverage. I am trying to quote a group that renewed in April. They made changes to their plan at that time by increasing the deductible and adding an HSA option. They are a carve-out of management positions. They have 26 employees but only offer health insurance to 8. Will they have to now offer group coverage to all eligible employees? If so, when would that have to start?

A – They are now subject to 105(h) discrimination testing, so if they don’t pass, they will either need to offer coverage to the entire group or pay a penalty.

Discrimination Testing

Q – Can you explain how the 105(h) discrimination testing can be measured? What factors and information are needed and how does one use this information to find out if discrimination is determined to exist?

A – The following information is necessary to run a Discrimination test under 105(h):

1. Date of hire

2. Date of birth

3. Hours if PT

4. Status (ft, pt, seasonal)

6. Shareholder and % of stock held

7. Officer

8. Compensation

9. Collective Bargaining Arrangement

10. Non Resident Alien

This information determines the “control” group, then both the Eligibility test and the Benefits test must be performed on this group.

FSA’s

Q – If a company wants to keep grandfathered status for their medical and dental plans, and eliminates there FSA, will that cause the group to lose grandfathered status?

A – If a plan is not changed, grandfathered status is lost only if one of six changes occurs:

  1. Elimination of all or substantially all benefits to diagnose or treat a particular condition.
  2. Increase in a percentage cost-sharing requirement (e.g., raising an individual’s coinsurance requirement from 20% to 25%).
  3. Increase in a deductible or out-of-pocket maximum by an amount that exceeds medical inflation plus 15 percentage points.
  4. Increase in a copayment by an amount that exceeds medical inflation plus 15 percentage points (or, if greater, $5 plus medical inflation).
  5. Decrease in an employer’s contribution rate towards the cost of coverage by more than 5 percentage points.
  6. Imposition of annual limits on the dollar value of all benefits below specified amounts

Assuming none of these happen, eliminating a FSA would not cause a loss of grandfathered status.

Grandfathered Status

Q – If the employer is contributing a specific amount (say $200) and the plan has a rate increase of more than 5%, because the employee’s contribution will go up by more than 5%, the plan will lose its grandfathered status…..is this true?

A – The test established in the regulation is that an employer can only decrease his/her contribution PERCENTAGE (not absolute dollar amount) by five points and retain grandfather status.

For example, if the employer contributes 70% of premium today, he or she must contribute at least 65% of premium to maintain grandfather status.

The current understanding (based on communications from EBSA and HHS) is yes, the plan would no longer be grandfathered.

High Risk Pool

Q – A dependent Spouse is currently covered under COBRA through May 2011 under the 65% discount and then one more month makes 18 months.

The spouse has Rheumatoid Arthritis, what should they do?

A) Apply now & get denials so in May or June the denials will be documented?

B) Is there a high risk pool for AZ yet? (90 days after signing)

A – A) In order to qualify for the High Risk Pool, this individual will need to go 6 months without creditable coverage.

B) Arizona is utilizing the Federal high risk pool at www.pcip.gov.

Patient Protection Model Disclosure

Q – If the plan does not need to select a PCP, etc. do they still need to send this notice out as well to stay “grandfathered”?

A – This notice is not necessary if selection of a PCP is not required.

Penalty

Q – What are the penalties if a group does not pass discrimination testing?

A – $100 per day, per person who is discriminated against; to a maximum of the lesser of 10% of the total plan cost, or $500,000.

Q – I have a group that is a small company with 6 to 8 employees and no medical plan for those employees. The owner claims he will not HAVE to start a benefit plan under the new laws, and that he will not have to pay any penalties.

I know over 50 lives if you drop coverage there is a $2,000 per EE fee to pay the government.

What is the ruling for small groups who offer NO medical coverage?

A – There is no requirement for employers with less than 50 full-time employees to provide coverage or pay a penalty.

Q – A question has come up with a small group of about six employees. The employer does NOT provide health insurance to employees because ALL the employees are either covered by their spouse’s plan, or have individual coverage. At this time it appears that NONE of these employees will purchase from the exchange. Will this employer be subject to penalties? If so effective when, and how much?

A – They will not. Penalties only come into play on groups of 50+.

Preventive Benefit

Q – If a plan renews their current benefits and maintains grandfathered status, is the preventive benefit effective on their first plan anniversary following September 23?

A – Grandfathered plans are not required to cover preventative at 100% as long as they maintain grandfathered status. All non-grandfathered plans must implement 100% coverage on preventative on the first day of the plan year following 9/23/10.

Q – I thought that 100% preventative benefit was automatically added on the plan’s anniversary?

A – Unless a carrier makes a determination to add it, the grandfathered plan has the right to voluntarily add any component of the legislation, but must do so 60 days in advance and must note their “file” that it was voluntary and they are still maintaining their grandfathered status.

Management Carve-Out

Q – I have a new group that currently has no group plan in place, a total of 12 employees, and wishes to set-up a “Management Carve Out ” for the owner and 3 managers, and offer nothing to the line employees. Are there any restrictions, special rules, or requirements I should be aware of?

A – If there is not a “business” reason for doing the carve-out, they may be subject to penalties. The plan is now subject to the Highly Compensated Discrimination test 105(h).

Miscellaneous

Q – Any idea where I can get some kind of plan design for the bronze plan in 2014? I have a group with a $10,000 deductible plan with copays for PCP visits and drugs. I would think that is not rich enough to qualify.

A – Other than it must cover 60% of the average cost of essential benefits, nothing has been published.

Q – It is my understanding that starting in 2011 a company can no longer deduct the health insurance premiums paid out. I also understand that all employees will need to claim as income the part of their health insurance premium paid for by the company.  Is this information correct?

A – No, neither piece is correct.

Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care and overseas health care, www.gninsurance.com , information with him at all times when he travels   Keep our blog close by you, www.gntravelinsurance.com, for continual updates on the changes with the US health care system.

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Posted in 2010 updates for employers |

Update on grandfathered plans for US group insurance – November 16, 2010

Wednesday, November 17th, 2010

Good Neighbor Insurance (www.gnazhealth.com and www.gninsurance.com) is continuing to update our clients on the new health insurance laws.   There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work.  Many critical details of this new insurance law will be clarified in the months and years to come. 

These six major coverage options are:

(1) Individual or family coverage (private health care plans)

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military service.

Note:  Grandfathered update is effective immediately

Yesterday, the federal government published an amendment to the original “grandfather” regulations that were published last June concerning how employers can maintain grandfathered health plan status.

The new amendment “allows all group health plans to switch insurance companies and shop for the same coverage at a lower cost while maintaining their grandfathered status, so long as the structure of the coverage doesn’t violate one of the other rules for maintaining grandfathered plan status.”

The updated announcement is posted on the U.S. Department of Health and Human Services website, click here to view that announcement. This amendment is scheduled to be published tomorrow, November 17, in the Federal Register.

The HHS website states further: 

“The purpose of the grandfather regulation is to help people keep existing health plans that are working for them. This amendment furthers that goal by allowing employers to offer the same level of coverage through a new issuer and remain grandfathered, as long as the change in issuer does not result in significant cost increases, a reduction in benefits, or other changes described in the original grandfather rule.”

HHS notes that “the original regulation only allowed self-funded plans to change third-party administrators without necessarily losing their grandfathered plan status.”  The revised regulation impacts “insured group health plans” but not the “individual market.”  HHS elaborates that “(u)nder this amendment, all employers have the flexibility to keep their grandfathered plan but change insurance company or third-party administrator.” The regulation was motivated in part to allow employers to shop around for better-priced insurance. 

Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care and overseas health care information with him at all times when he travels (check out his diving travels at www.douggulleson.com).  Keep our blog close by you, www.gntravelinsurance.com , for continual updates on the changes with the US health care system.

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Posted in 2010 updates for employers |

Reporting value of insurance plans on employee W-2 forms

Friday, November 12th, 2010

Good Neighbor Insurance (www.gnazhealth.com and www.gninsurance.com) is continuing to update our clients on the new health insurance laws.   There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work.  Many critical details of this new insurance law will be clarified in the months and years to come. 

These six major coverage options are:

(1) Individual or family coverage (private health care plans)

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military service.

*  Effective January 1, 2011 – Employers required to report aggregate value of the benefits they provide for all health coverage, excluding salary reduction contributions to medical FSAs, on employees’ W-2 forms.

*  Effective January 1, 2018 – Plan administrators or insurers will be charged a 40% excise tax if the total value of the employer-sponsored health coverage (dental and vision plans excluded) is above $10,200 for single coverage or $27,500 for family coverage.

 Who is responsible for reporting insurance value on Forms W-2?

Employers are required to report the aggregate value of the benefit they provide for all health insurance coverage, excluding coverage for stand alone vision and dental plans and salary reduction contributions under health FSAs, on employees’ Forms W-2.

What is the Cadillac Plan Tax?

Effective January 1, 2018, plan administrators or insurers will be charged a 40 percent excise tax if the total value of the employer-sponsored health insurance coverage is above $10,200 for single coverage or $27,500 for family coverage. For high-risk professions and qualified retirees, the figures change to $11,850 for single coverage and $30,950 for family coverage. Note that the IRS has not finalized the regulations on this provision.

What constitutes the total value of the employer premium that must be reported on the Form W-2?

Form W-2 must include the combined cost of the employer-sponsored health coverage taking into account both the amount the employer pays and the amount the employee pays. The value will then be determined under rules similar to COBRA. The aggregate cost will specifically exclude stand alone vision and dental plans and salary reduction contributions under a health FSA. The IRS will be issuing further guidance.

Is reporting the value of insurance on Form W-2 informational or a taxable component?

The Form W-2 provision for reporting the total value of health insurance is informational and does not change the taxability.

Does the W-2 Reporting Requirement mean that the value of health insurance will be taxable to employees?

The Health Care Reform Act includes a provision that all employers must report the total value of employer-sponsored insurance coverage, excluding salary reduction contributions under medical flexible spending accounts (FSAs), on employees’ Forms W-2 beginning with tax year 2011.

There is much speculation in the public and political arena about how this information will affect taxable income and corresponding taxes paid by employers and employees. There is no indication, at this time, or reason to believe that this reporting requirement is an indicator that insurance coverage will be taxed simply because it’s reportable on Form W-2.

Certain employer contributions to discriminatory health plans may result in taxable income to the employee; however, this is not a result of the W-2 reporting requirement included in the Health Care Reform Act. Neither the Secretary of Health and Human Services nor the Internal Revenue Service (IRS) has provided specifics regarding the W-2 reporting requirement for 2011.

In 2011 when we have to start including the cost of the insurance premium we pay for an employee (currently 100%), will it be subject to social security and Medicare tax by the employer and employee?

Neither the Secretary of Health and Human Services nor the Internal Revenue Service have provided guidance on the Form W-2 reporting requirement, which is effective for tax years beginning after December 31, 2010; however, we know of no indication nor have reason to believe that the reporting requirement is an indicator that the value of employer-sponsored insurance coverage will be taxable simply by virtue of being employer-sponsored coverage reportable on the Form W-2. Certain employer contributions to discriminatory health plans may result in taxable income to the employee; however, such treatment is not a result of the Form W-2 reporting requirement of PPACA. Tax structure for employee and employer contributions for the most part have not changed under the new law. The only notable exception was the expansion of the tax exclusion of adult dependents to the age of 27 under section 125 plans. This change allows more dependents covered under their parents’ employer’s section 125 plan to be excluded from tax contributions, essentially reducing tax liability.

Will employees be required to pay federal, state, or local tax against the value of their health insurance?

Neither the Secretary of Health and Human Services nor the Internal Revenue Service have provided guidance on the Form W-2 reporting requirement, which is effective for tax years beginning after December 31, 2010; however, we know of no indication nor have reason to believe that the reporting requirement is an indicator that the value of employer-sponsored insurance coverage will be taxable simply by virtue of being employer-sponsored coverage reportable on the Form W-2. Certain employer contributions to discriminatory health plans may result in taxable income to the employee; however, such treatment is not a result of the Form W-2 reporting requirement of PPACA. Tax structure for employee and employer contributions for the most part have not changed under the new law. The only notable exception was the expansion of the tax exclusion of adult dependents to the age of 27 under Section 125 plans. This change allows more dependents covered under their parents’ employer’s section 125 plan to be excluded from tax contributions, essentially reducing tax liability.

Will employees be taxed on both the employee and employer cost of the health insurance plan?

Neither the Secretary of Health and Human Services nor the Internal Revenue Service have provided guidance on the Form W-2 reporting requirement, which is effective for tax years beginning after December 31, 2010; however, we know of no indication nor have reason to believe that the reporting requirement is an indicator that the value of employer-sponsored insurance coverage will be taxable simply by virtue of being employer-sponsored coverage reportable on the Form W-2. Certain employer contributions to discriminatory health plans may result in taxable income to the employee; however, such treatment is not a result of the Form W-2 reporting requirement of PPACA. Tax structure for employee and employer contributions for the most part have not changed under the new law. The only notable exception was the expansion of the tax exclusion of adult dependents to the age of 27 under section 125 plans. This change allows more dependents covered under their parents’ employer’s section 125 plan to be excluded from tax contributions, essentially reducing tax liability.

If a small employer doesn’t offer group health insurance but pays accident insurance, does that premium need to be reported on the Form W-2?

Plans in which coverage costs must be reported on Form W-2 include medical, prescription, executive physicals, on-site clinics, Medicare supplemental policies, and employee assistance programs. The cost of coverage of stand-alone dental and vision plans and specific disease or hospital/fixed indemnity plans is excluded from the reporting requirement.

What premiums need to be included on the Form W-2?

Employer-sponsored coverage under the Form W-2 reporting requirement generally includes (but is not limited to): major medical coverage; amounts an employer contributes to a health reimbursement account (HRA); Medicare supplemental coverage; employer-provided Medicare Advantage plans; and limited benefit plans. Coverage under dental and vision plans are also included unless they are “stand-alone” plans.

Does Form W-2 recording apply to all employers?

Yes, but not until tax year 2011.

Does the Form W-2 insurance premium reporting begin for the 2010 Form W-2 or 2011?

The Form W-2 reporting requirement is effective for calendar years starting January 1, 2011. The aggregate cost of employer-sponsored health coverage will need to be included on the 2011 Form W-2, which must be released by January 31, 2012.

Does insurance still need to be reported on Forms W-2 if a section 125 is in place?

Whether group health insurance premiums are deducted from an employee’s pay on a pretax or post-tax basis does not affect whether it needs to be reported on the Form W-2. According to the new health care reform law, the combined cost of employer-sponsored health coverage must be included on the employee’s Form W-2. This combined cost specifically excludes salary reduction contributions under a section 125 health FSA, not the premiums under the premium portion of the section 125.

 Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care and overseas health care, www.gninsurance.com , information with him at all times when he travels   Keep our blog close by you, www.gntravelinsurance.com, for continual updates on the changes with the US health care system.

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Posted in 2010 updates for employers |

Questions and answers about the new health insurance law – Part 8 (mostly about employer/group coverage)

Wednesday, November 3rd, 2010

Good Neighbor Insurance (www.gnazhealth.com and www.gninsurance.com) is continuing to update our clients on the new health insurance laws.   There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work.  Many critical details of this new insurance law will be clarified in the months and years to come. 

These six major coverage options are:

(1) Individual or family coverage (private health care plans)

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military service.

The president signed the Patient Protection and Affordable Care Act (PPACA) into law on March 23, 2010. Additionally, he signed the Health Care and Education Reconciliation Act of 2010 on March 30, 2010, which made amendments to the PPACA law. The president’s signature on the reform bills triggered a series of major changes to the health care system that will affect every American. There were several changes that became effective upon President Obama’s signature. The rest of the changes are scheduled to become effective at varying times over the next several years.

The law is wide-reaching and encompasses more than 2,700 pages and many more pages of expected new regulation. Many of the specific details are yet to be finalized by federal agencies and state officials. This guide outlines some of the major sections of the law, and we’ve indicated when guidelines are pending from the United States Department of Health and Human Services (HHS) and other federal or state agencies. These guidelines will help all health insurance companies comply more completely with the reforms.

We have some additional information on common ownership:  an employer who is part of a group of employers treated as a single employer under §414 (b), (c), (m), or (o) of the IRC (including employees of a controlled group of corporations, employees of partnerships, proprietorships, etc., which are under common control, and employees of an affiliated service group) are treated as a single employer.  

Cadillac Plans

Q – Please clarify some of the taxation for year 2018 “Cadillac Plans”. We are being told that the excise tax on High Cost Insurance is placed on the “Insurers” of employer sponsored plans with aggregate expenses that exceed $10,200 for individual coverage, and $27,500 for family coverage. I thought this tax would go against the employees receiving the benefit. How is that going to work?

A – This is correct. Although at first glance it seems to make no sense, this is directly impacting union plans and the richer self-insured plans.

Carve-Outs

Q – Will all of the carriers do carve-out as it is the Employers responsibility to comply with HCR?

A – As far as I am aware, all carriers are still doing carve-outs.

Q – Do you know if the 2010 tax return documents for businesses are going to impose/include the fines and penalties for discriminating (carve-outs)?

A – I haven’t seen any changes to the tax forms, except the new 8941 for the small business tax credit. But, it’s still early – the forms could still change.

Class Act Program

Q – I read some small print that indicated that employers could opt out of the so-called Class Act program. Is this true? If so, do we know HOW yet?

A – Employers CAN opt out, but no details have been disclosed. The general opinion at this time is CLASS is going to have a delayed implementation date of 2013.

Employer Contribution

Q – If a group pays a different benefit for some employees based on the years of service with the company, is that ok now or not with all the reform stuff? (example: 5-years employment with the company, the company pays 50% of dependent cost; 10-years employment, the company pays 100% of dependent cost) I have not read anything on this, and could not find any information on the length of service.

A – They can do this, but each different contribution must comply with 105(h) independently of the other.

Q – Is it true that under the new law, an employer must charge every employee the same deduction regardless of tenure? I have a client that will not be grandfathered and now charges employees with less than 5 years employment a percentage of the dependent premium, but charges nothing to employees with over five years service. Is it legal for him to retain this deduction schedule, or since he will not be grandfathered will he have to change and start charging all employees the same deduction?

A – If the plan is not grandfathered – it will be subject to the 105(h) testing.

Grandfathered Status

Q – When do client administrators need to send the Grandfather Plan memo to employees?

A – It should be distributed with the first open enrollment following September 23, 2010.

Q – If the carrier gives you a 15% increase and you don’t change your contribution, does that automatically make you non-grandfathered because you passed on the increase? In addition, what if your contribution is a flat dollar amount. If that dollar amount doesn’t change but you get an increase?

A – Plans are allowed to increase premiums, so as long as the contribution is not lowered, they will remain grandfathered. A defined contribution plan is not specifically discussed.

Q – A group has a health plan that includes optional benefits, (like supplemental accident, preventive care buy-up, enhanced diagnostic x-ray and lab benefit, etc.); if the group changes one of those optional benefits, does that cause loss of grandfather status? I’m guessing at this point, any change to any benefit, even outside of the core benefit plan is a trigger?

A – If the benefit is actually part of the health plan, then I would agree – they are reducing benefits and thus would loose their grandfathered status. If they are offered independent of the health plan, there would be no impact.

Q – We have a renewal to handle for a group that currently has two separate plans which, at the present time, both offer the same benefits. One is specifically for the owners and the other is for key employees only excluding all other employees. In order for the key employee plan to continue to carve-out, I understand they can make only minor changes and not change carriers. But how about the owners’ plan? I know that the owners’ plan would lose their grandfathered status if we switched carriers but would this change affect the other plan’s status in anyway?

A – The owners plan would loose grandfathered status and be subject to testing. It would not impact the other plan.

Q – I am hearing from some carriers that the Waiver Procedure for the limited medical plans, also may contain guidance that will waive the provision which mandates that Grandfathered Plan Status is lost if you change insurance carriers, have you heard any confirmation on this?

A – Not true, DOL reiterated that changing carriers will cause you to lose grandfathered status on their webinar earlier this week.

Miscellaneous

Q – Do the group benefits (or individual) that are going to be required to be “reported” on someone’s W-2 form for health benefits, going to be considered part of their salary and subject to being taxed or not?

A – This is not taxable at this time.

Q – Currently an employer is required to pay 50% of the employee rate, is the percentage expected to change?

A – This is a carrier requirement, not a legislative issue.

Q – In 2014, what if an employer offers insurance to an employee and they refuse the coverage because they don’t want to pay the additional premium?

A – There is an individual mandate in 2014, so if they don’t purchase coverage somewhere, they will be penalized. If they go to the Exchange and buy coverage AND qualify for a tax credit or cost-sharing reduction, the employer would be penalized.

Q – A group I have has 2 group policies; 1 is for owners, and the other for management. In the owner’s policy, if they take a draw instead of a paycheck, will they have to claim their health premiums as income?

A – This is a question for the CPA.

Q – Companies with less than 50 employees don’t have to offer insurance to their employees, but many choose to set up group plans. I understand that the number designated as “small group” is going to change to companies employing over 100, so would that mean that companies with less than 100 employees would not have to offer insurance?

A – Employer penalties begin at 50 full-time employees (FTE) in 2014.

Q – If an employer has more than one group medical plan available, is the employer required to give employees a 30-day window prior to renewal to choose between plans?

A – I am not aware of any such requirement. The 30 days come into the situation, it’s addressing someone who was previously excluded who is now eligible to join/rejoin the plan. For example, children who previously aged-off, but are under 26.

Disclaimer: The above information is not intended to be legal advice. This is based on current interpretations and subject to change

Q – Is 30 hrs considered part-time currently?

A – No, this is the definition in 2014.

Model Notices

Q – I have a list of notices and when they are to be published/made available to employees. My list includes “PPA (before 1-1-2011)”, but I can’t remember what this is. Do you know?

A – It is the notice used for the Patient’s Bill of Rights – the one that addresses pediatricians, OB/Gyn’s, etc.

Non-Discrimination

Q – We have a group with over 50 employees who pays 100% of employee cost. The dependent contribution is based off of employee compensation. They are planning on passing on some or most all of the increase for their December renewal to the dependent portion. They want to remain grandfathered. I advised that if they change the contribution on any of the tier’s more than 5% they lose their grandfathered status. The group has read material that it’s only if the employee portion contribution changes more than 5%. Who’s right?

A – The following information is from a legal analysis from Groom Law Group: “Decrease in Employer Contribution: A policy or plan will lose grandfather status if an employer (or employee association) decreases its contribution rate toward the cost of any tier of coverage (e.g., self or family) by more than 5% below the contribution rate on March 23, 2010.”

Q – I have a non-grandfathered health plan that will offer 2 levels of benefits. The core plan is a $3,000 deductible which everyone will get, and the employer will pay 99% of the employee premium, and 0% for dependents. Is there a problem if the employer also offers say a $1,500 deductible and allows any employee to choose that plan if they pay 100% of the difference?

A – As long as both plans are offered on a non-discriminatory basis, (i.e. everyone gets the same contribution and has the same waiting period), this is not a problem, even if the highly-compensated drift toward one of the two plans.

Q – Small business, older owner opts out of the group and buys an individual plan for himself and his family, (typically an HSA or Catastrophic plan with less benefits than the group) the strategy being to keep him out of the group census due to age. Can this impact the non-discrimination rules if he isn’t contributing to employee dependent costs on the group plan?

A – As long as he’s contributing at the same level for all employees who are on the group plan, this is not an issue under 105(h).

Non-Grandfathered Plans

Q – In the minimum design requirements for Non-Grandfathered plans, is there allowed to be more than a $2,000 deductible option for employer groups? I have a group asking and I am not familiar with this provision.

A – This provision doesn’t come into play until 2014.

Participation Laws

Q – Do you have any more information on the 50% participation requirement that small businesses need to comply with? A client wants to know how the health reform is impacting this rule.

A – PPACA has nothing to do with the participation requirement – this is a carrier requirement and the carriers can continue to require at least 50% participation. However, in 2014, if the group has more than 50 ees, there may be a penalty to the employer if an employee seeks coverage in the Exchange instead of through the employers plan.

Q – Under last week’s Q & A regarding the mandate for coverage in 2014, why would the employer be penalized if the employee was able to obtain coverage from the exchange – the employee is covered per the mandate?

A – If the employee purchases through the Exchange and gets a tax credit or cost-sharing subsidy, the employer’s plan may be deemed “unaffordable” and the employer is penalized for each employee getting a tax credit or subsidy through the exchange.

Penalties

Q – Can you clarify the “carve out” penalties and when they will become effective for “grandfathered” and “non-grandfathered” health plans?

A – If a plan fails the highly compensated test for plan years beginning after September 23, 2010, the penalty is $100 per day per incident. This does NOT apply to grandfathered plans.

Premium Tax/Tax Credit

Q – If the employer pays 100% or 50% of the employee premium, under the new bill is the employee now being taxed on the premium the employer is paying?

A – No.

Q – How does a non-profit implement the tax credit? They have done the preliminary 3 step and have determined they would benefit but since they don’t pay taxes, how do they get their money?

A – It will actually be part of their 2010 tax return when they file.

Tax Credit

Q – I have a small group consisting of 2 corporate officers/owners with no other employees. If they meet the salary limitations would they be eligible for the tax credit? I can determine that owners are not included in the calculation, but I’m unclear on whether the business is still eligible to receive the tax credit?

A – The tax credit is for employer contributions paid on behalf of employees, so since there are no non-owner employees, I would presume NO. Unfortunately, until the instructions for 8941 are released, the definition of who is considered an employee for purposes of the credit is unknown. The draft of 8941 has been released, but the instructions and final version aren’t expected until later this year.

Waiting Periods

Q – Can a small group have different waiting periods for different classes?

A – Yes, but if the plan is not grandfathered each waiting period must be tested for compliance with 105(h).

Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care and overseas health care, www.gninsurance.com , information with him at all times when he travels   Keep our blog close by you, www.gntravelinsurance.com, for continual updates on the changes with the US health care system.

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Compliance alert: US health insurance law for employers in the US – 2010

Thursday, October 14th, 2010

Good Neighbor Insurance (www.gnazhealth.com) is continuing to update our clients on the new health insurance laws.   There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work.  Many critical details of this new insurance law will be clarified in the months and years to come. 

These six major coverage options are:

(1) Individual or family coverage (private health care plans)

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military service.

The president signed the Patient Protection and Affordable Care Act (PPACA) into law on March 23, 2010. Additionally, he signed the Health Care and Education Reconciliation Act of 2010 on March 30, 2010, which made amendments to the PPACA law. The president’s signature on the reform bills triggered a series of major changes to the health care system that will affect every American. There were several changes that became effective upon President Obama’s signature. The rest of the changes are scheduled to become effective at varying times over the next several years.

The law is wide-reaching and encompasses more than 2,700 pages and many more pages of expected new regulation. Many of the specific details are yet to be finalized by federal agencies and state officials. This guide outlines some of the major sections of the law, and we’ve indicated when guidelines are pending from the United States Department of Health and Human Services (HHS) and other federal or state agencies. These guidelines will help all health insurance companies comply more completely with the reforms.

9-30-2010 / COMPLIANCE ALERT: Large employers to make changes to their health care plans for 2011

A survey of 72 of the largest companies in the U.S. conducted by the National Business Group on Health in August 2010 found that most of the large employers surveyed will be changing their health care plans for 2011. These companies represent more than 3.7 million employees.

Health care costs in 2011 are expected to increase an estimated 8.9% as a result of the recently passed Patient Protection and Affordable Care Act. To manage this situation, many employers in the survey claim that they will implement changes in their health care plans that shift some of the financial burden onto employees:

  • 63% of the respondents indicated they would increase the percentage employees contribute to premiums,
  • 46% stated they would raise out-of-pocket maximums,
  • 44% said they would raise in-network deductibles,
  • 40% indicated they would raise out-of-network deductibles,
  • 21% stated they would raise the co-pay for specialist care, and
  • 6% said they would raise the co-pay for primary care.

Also, 62% of the large companies surveyed indicated they will switch to consumer-driven health plans (CDHPs) in 2011, either through health savings accounts (HSAs) or health reimbursement arrangements (HRAs) which most employers will combine with a high-deductible plan.

The survey also found that to manage retiree health care costs, 46% of the surveyed employers will impose caps on company contributions, 37% will increase employee contributions, and 5% will drop the coverage altogether.

In terms of prescription drugs, 25 % of the respondents indicated they will raise the co-pay for retail pharmacy prescription drug benefits, while 21% will do the same for mail-order pharmacy benefits.

REQUIRED ACTIONS
Benefits administrators face the important task of keeping benefit plans cost-effective as health care costs continue to increase in 2011. Switching to consumer-oriented health plans and increasing employee contributions and copayments are among the preferred strategies for large companies in the U.S.

Employers should be cautious when redesigning employer-sponsored health care plans, particularly because the Patient Protection and Affordable Care Act stipulates that health care plans will lose their grandfathered status if significant measures are taken to reduce the benefits or increase the costs to consumers. Keep in mind that to maintain grandfathered status, plan sponsors may not take any of the following actions with respect to plan elements in effect on 23 March 2010.

  • Significantly cut or reduce benefits. For example, if a plan decides to no longer cover care for people with diabetes, cystic fibrosis or HIV/AIDS.
  • Raise co-insurance charges.
  • Significantly raise co-payment charges. Compared with the copayments in effect on March 23, 2010, grandfathered plans will be able to increase those co-pays by no more than the greater of $5 (adjusted annually for medical inflation) or a percentage equal to medical inflation plus 15 percentage points.
  • Significantly raise deductibles. Compared with the deductible required as of March 23, 2010, grandfathered plans can only increase these deductibles by a percentage equal to medical inflation plus 15 percentage points.
  • Significantly lower employer Contributions to the Plan. Grandfathered plans cannot decrease the percent of premiums the employer pays by more than 5 percentage points.
  • Add or tighten an annual limit on what the insurer pays. Plans cannot tighten any annual dollar limit in place as of March 23, 2010. Moreover, plans that do not have an annual dollar limit cannot add a new one unless they are replacing a lifetime dollar limit with an annual dollar limit that is at least as high as the lifetime limit (which is more protective of high-cost enrollees).
  • Change insurance companies. If an employer changes insurers, the plan will not be considered a grandfathered plan. This does not apply when employers that self-insure switch plan administrators or when changes are required by collective bargaining agreements.
  • 9-22-2010 / COMPLIANCE ALERT: Employers must report cost of health care plans on W-2 starting with tax year 2011

Enacted 30 March 2010, the Patient Protection and Affordable Care Act (PPACA) includes reporting provisions for form W-2 starting tax year 2011. Specifically, W-2s for tax year 2011, which should be distributed to employees on or before 31 January 2012, will have to report the aggregate cost of applicable employer-sponsored health care plan.

An applicable employer-sponsored health care plan is health coverage under a group health plan offered to employees by their employers, which premiums are excluded from the calculation of the employee gross income.

The calculation of the aggregate cost of the health care plan is straightforward for most group health plans, as said aggregate cost is equal to the premiums paid by both the employer and by each employee. For self-insured plans like HRAs, however, calculation of the aggregate cost is more complex and the IRS is expected to issue a set of regulations for on the matter in the near future.

REQUIRED ACTIONS
Starting tax year 2011, at the end of each tax year employers must calculate the aggregate cost of the applicable health coverage for each employee. The employer must then report that individual aggregate cost on each employee’s W-2.

9-29-2010 / Survey finds medical and prescription drug trend rates are to remain relatively stable in 2011

The 2011 Segal Health Plan Cost Trend Survey revealed that relative to 2010, medical and prescription drug trend rates will remain stable in 2011, with the exception of indemnity plans and high-deductible health plans (HDHPs), medical preferred provider organizations (PPOs), and point of service plans (POS). Compared to 2010 forecasts, the trend rate for indemnity plans and HDHPs are expected to decrease, while trend forecasts for PPOs plans/POS are slightly higher (up 0.2% to 0.6%) than last year.

A trend is a forecast of the per capita claims cost which is usually highly correlated with the actual cost increase a plan carrier assesses, but they are not the same. In fact, changes in the cost of a plan may be very different from the projected claims cost trends, as the plan cost reflects variables such as group demographics and changes in plan design and/or participant contributions.

The 2011 Segal Health Plan Cost Trend Survey of managed care organizations, health insurers, pharmacy benefit managers and third party administrators, examines trend ranges, trends for active participants and retirees, trend components and the accuracy of trend projections.

Other noteworthy findings of the survey include:

  • In 2011, medical plans are projected to experience cost trends more than 8x the consumer price index for urban consumers (CPI-U), which was 1.2% in July 2010.
  • Also, in 2011, medical plans are projected to experience cost trends more than 5x the annual increase in average hourly wages, which was 1.8% in July 2010.
  • In 2011, prescription drugs trends are projected at 9.2% for active participants and early retirees.
  • Fixed-scheduled dental plans and dental-maintenance organizations (DMOs) trend rates are forecasted to decrease by 0.8% and 0.5% respectively in 2010.
  • Combined projected trend rates for PPOs and POS plans are lowest in the Midwest (9.8%) and highest in the Northeast and the West (11.2%).

For 2011, Medicare Advantage (MA) health-maintenance organizations (HMOs) trend rates are projected to decrease from 7.7% to 7%, while MA PPOs trend rates are forecasted to be 6.4%.

The survey findings indicate that health plan cost trends continue to outpace increases in inflation and average earnings, imposing a significant challenge on plan sponsors as they try to maintain affordable health care coverage for employees and their families.

Adding to the challenge, there’s the 2010 Patient Protection and Affordable Care Act (PPACA) and its provisions, which are expected not only to add to cost trend rates but also to have a significant financial impact inasmuch as they remove lifetime dollar limits. This is why many plan sponsors have already begun to build-in the cost of the coverage for adult dependent children up to age 26 into future participant contributions within the new rules’ permissions. In addition, some plan sponsors are considering requiring that adult children have no access to other employer-sponsored health plans. Other plan sponsors covering pre-Medicare-eligible retirees are choosing to file for the retiree reinsurance subsidy program, by which, until 1 January 2014, employers will be reimbursed up to 80% of claims between USD 15,000 and USD 90,000 for pre-Medicare retirees ages 55 to 64 who are covered under employer-provided insurance plans in a given year.

Plan sponsors are faced with the challenge of balancing plan costs while implementing practical solutions to comply with the PPACA. Providing a financially sustainable yet high-quality health care requires plan sponsors to craft plan design strategies. In an effort to balance cost mitigation and quality of the health plan, plan sponsors have begun to focus on cost management strategies such as wellness and care management investments, value-based designs (use of high quality providers at a relative low cost), data mining and discounted provider networks.

Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care and overseas health care information with him at all times when he travels (check out his diving travels at www.douggulleson.com).  Keep our blog close by you, www.gntravelinsurance.com , for continual updates on the changes with the US health care system.

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Employee W-2 forms pertaining to the new health insurance law

Thursday, August 5th, 2010

Good Neighbor Insurance (www.gninsurance.com and www.gnazhealth.com) is continuing to update our clients on the new health insurance laws.   There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work.  Many critical details of this new insurance law will be clarified in the months and years to come. 

Note:  Updated 8-16-2010

These six major coverage options are:

(1) Individual or family coverage

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military service

Q:  The PPACA requires that businesses include the value of the health care benefits they provide to employees on W-2s, beginning with those issued for calendar year 2011. How will this work and what will it mean, tax-wise, for employees?

A:  The law will require employers to include the value of applicable employer-sponsored coverage on each employee’s W-2 for taxable years after December 31, 2010. This means the reporting will appear on an employee’s W-2, beginning with the one that is issued in early 2012. However, this reporting will be more for informational purposes and will have no impact on the taxable income of an employee. Employees’ premiums will still be made on a pre-tax basis. The purpose of this reporting requirement is to allow each employee to understand the actual value of their employer-provided health care benefits.

Q: Does the new health care law require workers to pay income tax on the value of employer-provided health insurance?

A: No. The value will appear on employees’ W-2 form.

Q. I have heard that this new law will now require employers to include the value of health care benefits on our W-2s. Is this correct? If so, does this mean that we will now have the value of these health care benefits included in our taxable income?

A:  Yes.  The value of your health benefits will show up as a separate entry on your W-2, the notice of wages and income that your employer mails each January.  But that will not happen until January 2012, when your employer reports your wages for the 2011 tax year.

You won’t be taxed directly, but your insurer might be, or your employer could be if it is self-insured, and either one could pass along that cost to you. But before you get upset, consider one more caveat: The tax is only on high-premium plans, better known as “Cadillac health plans,” and it doesn’t kick in until 2018. The tax, at 40 percent, won’t be on the full value of your health plan. Instead, it will be on the “excess benefit” — that is, the amount above $10,200 for a worker with single coverage and $27,500 for an employee with a family policy. Thresholds would go up with inflation.  Most Americans’ plans don’t cost that much. The average employer-sponsored plan for a family costs $13,375, according to the Kaiser Family Foundation, with the employer picking up $9,860 of the cost.

Doug Gulleson totally adores scuba diving and travels overseas throughout the year with his underwater camera in one hand and a cup of coffee in the other.   Visit Good Neighbor Insurance at www.gnazhealth.com  and www.gninsurance.com/tripcancellation for Arizona and international travel insurance coverage.

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