All posts tagged health costs

Our Firm is making a big push to provide compliance assessments for our clients and using them as a marketing tool with prospects. Since the U.S. Department of Labor (DOL) began its Health Benefits Security Project in October 2012, there has been increased scrutiny. While none of our clients have been audited yet, we expect it is only a matter of time and we want to make sure they are prepared.

We knew most fully-insured groups did not have a Summary Plan Description (SPD) for their health and welfare plans, but we have been surprised by some of the other things that were missing. Here are the top five compliance surprises we found.

  1. COBRA Initial Notice. The initial notice is a core piece of compliance with the Consolidated Omnibus Budget and Reconciliation Act (COBRA) and we have been very surprised by how many clients are not distributing this notice. Our clients using a third-party administrator (TPA), or self-administering COBRA, are doing a good job of sending out the required letters after qualifying events. However, we have found that many clients are not distributing the required COBRA initial notice to new enrollees. The DOL has recently updated the COBRA model notices with expiration dates of December 31, 2019. We are trying to get our clients to update their notices and, if they haven’t consistently distributed the initial notice to all participants, to send it out to everyone now and document how it was sent and to whom.
  2. Prescription Drug Plan Reporting to CMS. To comply with the Medicare Prescription Drug Improvement and Modernization Act, passed in 2003, employer groups offering prescription benefits to Medicare-eligible individuals need to take two actions each year. The first is an annual report on the Centers for Medicare & Medicaid Services (CMS) website regarding whether the prescription drug plan offered by the group is creditable or non-creditable. The second is distributing a notice annually to Medicare-eligible plan members prior to the October 15 beginning of Medicare open enrollment, disclosing whether the prescription coverage is creditable or non-creditable. We have found that the vast majority (but not 100 percent) of our clients are complying with the second requirement by annually distributing notices to employees. Many clients are not complying with the first requirement and do not go to the CMS website annually to update their information. The annual notice on the CMS website must be made within:
  • 60 days after the beginning of the plan year,
  • 30 days after the termination of the prescription drug plan, or
  • 30 days after any change in the creditability status of the prescription drug plan.
  1. ACA Notice of Exchange Rights. The Patient Protection and Affordable Care Act (ACA) required that, starting in September 2013, all employers subject to the Fair Labor Standards Act (FLSA) distribute written notices to all employees regarding the state exchanges, eligibility for coverage through the employer, and whether the coverage was qualifying coverage. This notice was to be given to all employees at that time and to all new hires within 14 days of their date of hire. We have found many groups have not included this notice in the information they routinely give to new hires. The DOL has acknowledged that there are no penalties for not distributing the notice, but since it is so easy to comply, why take the chance in case of an audit?
  2. USERRA Notices. The Uniformed Services Employment and Reemployment Rights Act (USERRA) protects the job rights of individuals who voluntarily or involuntarily leave employment for military service or service in the National Disaster Medical System. USERRA also prohibits employers from discriminating against past and present members of the uniformed services. Employers are required to provide a notice of the rights, benefits and obligations under USERRA. Many employers meet the obligation by posting the DOL’s “Your Rights Under USERRA” poster, or including text in their employee handbook. However, even though USERRA has been around since 1994, we are finding many employers are not providing this information.
  3. Section 79. Internal Revenue Code Section 79 provides regulations for the taxation of employer-provided life insurance. This code has been around since 1964, and while there have been some changes, the basics have been in place for many years. Despite the length of time it has been in place, we have found a number of groups that are not calculating the imputed income. In essence, if an employer provides more than $50,000 in life insurance, then the employee should be paying tax on the excess coverage based on the IRS’s age rated table 2-2. With many employers outsourcing their payroll or using software programs for payroll, calculating the imputed income usually only takes a couple of mouse clicks. However, we have been surprised by how many employers are not complying with this part of the Internal Revenue Code, and are therefore putting their employees’ beneficiaries at risk.

There have been other surprises through this process, but these are a few of the more striking examples. The feedback we received from our compliance assessments has been overwhelmingly positive. Groups don’t always like to change their processes, but they do appreciate knowing what needs to be done.

Audit-proof your company with UBA’s latest white paper: Don’t Roll the Dice on Department of Labor Audits. This free resource offers valuable information about how to prepare for an audit, the best way to acclimate staff to the audit process, and the most important elements of complying with requests.

By Bob Bentley, Manager
Originally published by www.ubabenefits.com

Question: If an employee has a small health flexible spending account (FSA) balance with a carryover to the next year, and the employee chooses not to participate in the new FSA year, can the employer force the employee to use those funds so as not to incur additional administrative fees in the next plan year?

Answer: An employer can prevent “perpetual carryovers” by carefully drafting the cafeteria plan document with respect to carryover amounts. IRS guidance allows carryovers to be limited to individuals who have elected to participate in the health FSA in the next plan year. Health FSAs may also require that carryover amounts be forfeited if not used within a specified period of time, such as one year. Note that this plan design requires additional administration (to track the time limit for each carryover dollar, for instance) as well as ordering rules (e.g., will carryovers be used first?), so you will need to carefully review the cafeteria plan document. Under no circumstances are amounts returned to participants.

According to IRS guidance, a health FSA may limit the availability of the carryover of unused amounts (subject to the $500 limit) to individuals who have elected to participate in the health FSA in the next year, even if the ability to participate in that next year requires a minimum salary reduction election to the health FSA for that next year. For example, an employer sponsors a cafeteria plan offering a health FSA that permits up to $500 of unused health FSA amounts to be carried over to the next year in compliance with Notice 2013-71, but only if the employee participates in the health FSA during that next year. To participate in the health FSA, an employee must contribute a minimum of $60 ($5 per calendar month). As of December 31, 2016, Employee A and Employee B each have $25 remaining in their health FSA. Employee A elects to participate in the health FSA for 2017, making a $600 salary reduction election. Employee B elects not to participate in the health FSA for 2017. Employee A has $25 carried over to the health FSA for 2017, resulting in $625 available in the health FSA. Employee B forfeits the $25 as of December 31, 2016 and has no funds available in the health FSA thereafter. This arrangement is a permissible health FSA carryover feature under Notice 2013171. The IRS also clarifies that a health FSA may limit the ability to carry over unused amounts to a maximum period (subject to the $500 limit). For example, a health FSA can limit the ability to carry over unused amounts to one year. Thus, if an individual carried over $30 and did not elect any additional amounts for the next year, the health FSA may require forfeiture of any amount remaining at the end of that next year.

Originally published by www.thinkhr.com

The Affordable Care Act (ACA) has brought about many changes to the health insurance industry. As we are now in the sixth year of implementation of the Act, we are seeing more changes coming just around the corner.

Generally speaking, most health plans can be classified into two categories: HMO and PPO. With an HMO plan, you choose your physician group where you will seek services, and you choose a primary care physician that you will see for all of your needs, who will refer you to a specialist or other service facility, if needed. The HMO model is designed to be as cost-effective as possible, only providing services when the physician deems it necessary, or solely for the benefit of the patient.

Due to the ACA, with an HMO plan, a woman is no longer required to get a referral from her primary care physician to an OB-GYN, and a parent is not required to get a referral to a pediatrician for his or her children even though neither are classified as primary care physicians.

In contrast, a PPO plan has more flexibility for the patient. With a PPO plan you are encouraged to see physicians and providers that are participating in your plan’s network, but are not required to do so. You can, in fact, see any doctor or provider that you wish, when you wish to see them, and without a referral from your primary care physician.

However, times they are a-changin’. Beginning January 1, 2017, Covered California, California’s state insurance exchange, will require both HMO and PPO enrollees to specify their primary care physician during the enrollment process. If one is not selected, the plan will select one for the plan participant. A plan participant is allowed to change their primary care physician at any time. Right now, this is only being implemented for individual plan subscribers.

It is expected that this change will be implemented for group PPO plan subscribers in 2018.

Beginning in 2012, the ACA implemented the Patient-Centered Outcomes Research Institute (PCORI) fee. This is a charge of $1 to $2 per enrollee, per year in a plan. If the plan is fully insured, the fee is paid to the government directly by the insurance carrier. If the plan is self-funded it is paid by the plan sponsor using IRS Form 720 and is due by July 31 for the previous plan year.

The purpose of the PCORI is to help analyze the overall costs of health care and identify trends to find ways to best reduce the overall cost of health care.

HMOs like Kaiser Permanente have fully integrated information systems that allow them to track each patient electronically so that they can see everything about the patient in one place. By tracking each patient, notes from the nurses and physicians, treatments, and medications, they can track costs and trends easily by mining the data from the system.

Most PPO plans do not track this data, in part because patients in the past have not had to choose a primary care physician or provider group. When they can see whomever they choose, it makes tracking of this data very difficult across multiple providers. In addition, participants in a small group, fully-insured plan are pooled with other small groups where claim data is not shared with the plan sponsor, and there is no need to track it closely as the information at the patient level is not relevant to the actuaries that calculate plan costs and premiums.

However, that is going to change. In order to study the overall cost of medical care, identify trends, and discover ways to curb inflating costs, data is needed, and selecting a primary care physician for plan participants is the first step.

Cigna, which provides both HMO and PPO plans, has implemented a Collaborative Care Program with more than 120 physician groups in 29 states, including provider group Palo Alto Medical Foundation (PAMF) in the San Francisco Bay area. By tracking client claims data and patient outreach programs to help patients to remember to take their medications as prescribed and continue with follow up treatments, PAMF has been able to reduce its inflation trend by 5 percent compared to other providers in the San Francisco Bay Area. The goal is to duplicate and build on the success that Cigna has already shown through its program and control and reduce the cost of health care.

So when you or your employees are applying for health insurance, make sure that primary care physician information is handy, because it is going to be needed.

Originally published by www.ubabenefits.com

pills0805According to UBA’s new Special Report – Trends in Prescription Drug Benefits, 61.8% of plans required employees to pay more when they elect brand-name drugs over an available generic drug (a 5.5% increase from 2014); 37.9% of those plans require the added cost even if the physician notes “dispense as written.” On the other hand, only 1% of plans offer no coverage for brand-name drugs if generics are available and 37.2% offer no added cost coverage. So while most employers aren’t completely penalizing those who choose brand-name drugs, more and more plans are requiring employees to pay higher copays when they elect brand-name drugs. Some plans have a mandated step therapy program that makes sure employees try a lower class alternative before they move to a medication in a higher class (or try a generic or generic equivalent in a particular therapeutic class). Some plans exclude certain drugs altogether. This cost pressure has made employers more aware of drug costs, so many are beginning to educate employees about using benefits cost-effectively. Here’s what our Health Plan Survey data shows about which employers are steering employees to generics:

  • Predictably, the larger the employer, the more generous it is in covering brand name drugs either with no added cost or at least not incurring added cost when the physician notes “dispense as written.” Seventy-seven percent of plans for groups with 1,000+ employees fall in this category while only 51% of small group plans offer this benefit.
  • Plans in the central U.S. and within the construction, agriculture, mining, and transportation industries are making the most aggressive push to generic drugs, with only 46.3% and 53.8%, respectively, providing relief for brand name drugs.

While injectable drugs are often watched as a significant liability when it comes to cost containment, nearly all plans have no separate deductible for these medications. Additional tiers, coinsurance models and mail order benefits are overwhelmingly the way employers are dealing with the highest cost drugs.

In 2015 alone, 38 specialty drugs received FDA approval, and more are in the pipeline. “The latest development among aggressively managed drug plans is to move specialty drugs (oral and injectable) to the major medical portion of the policy, delivering an initial 7- to 15-day supply to confirm the drug’s effectiveness before dispensing a full 30-day supply” says Scott Deru, President of UBA Partner Firm Fringe Benefit Analysts. “Requirements also include frequent patient follow-up to verify adherence to the prescription schedule, any adverse reactions, and to verify that mail order drugs amounting to tens of thousands of dollars are being tracked and received by the patient. Other cost containment strategies include bringing a registered nurse to a patient’s home for infusion therapy to avoid the facility and prescription mark-up costs from inpatient and outpatient facilities.”

Originally published by United Benefit Advisors – Read More

The Latest UBA Survey data shows employers are flocking to two strategies to control rising prescription drug costs: moving to blended copay/coinsurance models vs. copay only, and adding tiers to the prescription drug plans. Almost half (48.9%) of prescription drug plans utilize three tiers (generic, formulary brand, and non-formulary brand), 4.3% retain a two-tier plan, and 44.1% offer four tiers or more. The number of employers offering drug plans with four tiers or more increased 34% from 2014 to 2015. The fourth tier (and additional tiers) pays for biotech drugs, which are the most expensive. By segmenting these drugs into another category with significantly higher copays, employers are able to pass along a little more of the cost of these drugs to employees. Over the last two years, the number of plans with four or more tiers grew 58.1%, making this a rapidly growing strategy to control costs.

Employers with 1 to 99 employees have been driving the trend to adopt prescription drug plans with four or more tiers. In three years, plans with four or more tiers increased approximately 60% among these groups, making this the top cost-containment strategy for small employers, who make up the backbone of America.

Even the largest employers (1,000+ employees), 81% of which historically have offered plans with two or three tiers, have seen a 12.9% decrease in these plans as they, too, migrate to plans with four or more tiers (albeit more slowly).

The construction, mining and retail industries have also been steadily leading the migration to plans with four or more tiers over the last three years, and in the latest UBA survey, 47.5%, 53.2% and 46.3% of their respective plans fall in this category. But this year, the utilities industry has made a more sudden switch, with 58.3% of those plans now consisting of four or more tiers, leapfrogging its perennial tier-climbing peers. This is a significant jump, considering nearly 20% of plans in the utilities industry were still two-tier plans just three years ago—far more two-tier plans than any other industry group at that time. However, this wasn’t a total surprise since, in the 2014 survey year, the industry had an above-average amount of three-tier plans (65.9% vs. an average of 57.1%).

The education and manufacturing industries are more reluctant to shift to plans with four or more tiers. Over the last three years those industries have maintained the highest amounts of three-tier plans, and in the latest survey, 52.8% of their plans remain at three tiers.

Two-tier plans are becoming nearly as rare as single-tier plans, shrinking 45% to 4.3% of all prescription plans in three years. Agriculture has the most holdouts, with 14.8% of plans still comprised of one or two tiers.

Regionally, the East Central U.S. has been leading the migration to plans with four or more tiers for the last three years, followed by North Central and Southeast employers. In the 2015 survey year, Southeast employers eclipsed East Central employers with 60.7% of their plans with four or more tiers.

Strangely enough, East Central and Southeast employers have the lowest percentage of three-tier plans (34.3% and 34.1%, respectively) but the highest percentage of single-tier plans (4.7% and 4.2%, respectively). Other Western employers (excluding California) also have below-average three-tier plans (40.6%), above-average four-tier plans (49.1%) and above-average (10.2%) one- to two-tier plans.

Groups increasing tiers most aggressively for cost savings

California employers have the most two-tier plans (22.9% vs. the average of 4.3%) which, although still off the charts, represents a 20% decline from the previous survey year.

Mid-Atlantic and New England employers have had the most three-tier plans for the last three years, making them the top resisters of plans with four or more tiers over time.

Groups resisting 4+ tier plans

For more information on prescription drug trends, including the companies making an early leap to five-tier plans, download UBA’s free (no form!) publication: Special Report: Trends in Prescription Drug Benefits.

Originally published by UBABenefits.com

 

ubablog0412Health insurance premium renewal rates increased an average of 6.2 percent for all plans in 2015, up from the previous year’s 5.6 percent increase, according to UBA’s Health Plan Survey. Small businesses with fewer than 25 employees, which account for five million U.S. employers, were hit the hardest—see our breaking news with the details.

When looking at the data regionally, the Northeast continues to be the region with the highest average annual health insurance cost per employee in the country, with four of the five highest cost states in that region. Plans in the Northeast continue to cost the most since they typically have low or no deductibles, contain more state-mandated benefits, and feature higher in-network coinsurance, among other factors. But the state with the highest average annual cost per employee is on the other side of the continent.

Alaska tops the chart with an average annual cost of $12,822 per employee. To put that in perspective, that is 27.4% above the national average of $9,736 per employee annually, and 11.8% above next highest cost state of Massachusetts, at $11,468. Rounding out the top five are New York at $12,162, New Jersey at $12,059 and Vermont at $11,920 per employee per year in average annual health insurance costs.

Average Annual Health Care Cost per Employee

Highest Cost States Lowest Cost States
Alaska $12,822 Hawaii $7,610
New York   12,162 Arkansas   7,704
New Jersey   12,059 New Mexico   7,793
Vermont   11,920 Virginia   7,858
Massachusetts   11,468 Oklahoma   7,915

 

On the other end of the spectrum, Hawaii has the lowest average annual cost per employee, which is 24.5% below the national average at $7,610. In contrast, Alaska’s average annual cost is 51.0% higher than Hawaii. Other states that fare better than the national average and are among the five best states for health plan costs are Arkansas ($7,704), New Mexico ($7,793), Virginia ($7,858), and Oklahoma ($7,915).

To see your state’s average monthly premiums, download our free (no form!) State-by-State chart.

See our news release for health plan cost trends by industry—there is some surprising news about the finance industry.

To quickly benchmark your plan by industry, region, or employer size, download our Quick Check Benchmarking Tool.

UBA’s Health Plan Survey analyzes a wide range of health care costs trends. To comprehensively benchmark your exact plan to your peers, contact a UBA Partner near you to run a custom benchmarking report.

For detailed findings from our Health Plan Survey, view the Executive Summary, or download our free highlights.

 

Originally published by United Benefit Advisors – Read More

Cafeteria Plans: How to Handle Participant Contributions | Team Kaminsky

Categories: General Health
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By Danielle Capilla, Chief Compliance Officer at United Benefit Advisors

Cafeteria plans, or plans governed by IRS Code Section 125, allow employees to pay for expenses such as health insurance with pre-tax dollars. Employees are given a choice between a taxable benefit (cash) and specified pre-tax qualified benefits, for example, health insurance. Employees are given the opportunity to select the benefits they Cafeteria Planswant, just like an individual standing in the cafeteria line at lunch.

Only certain benefits can be offered through a cafeteria plan:

  1. Coverage under an accident or health plan (which can include traditional health insurance, health maintenance organizations (HMOs), self-insured medical reimbursement plans, dental, vision, and more)
  2. Dependent care assistance benefits or DCAPs
  3. Group term life insurance
  4. Paid time off, which allows employees the opportunity to buy or sell paid time off days
  5. 401(k) contributions
  6. Adoption assistance benefits
  7. Health savings accounts or HSAs under IRS Code Section 223

Some employers want to offer other benefits through a cafeteria plan, but this is prohibited. Benefits that you cannot offer through a cafeteria plan include scholarships, group term life insurance for non-employees, transportation and other fringe benefits, long-term care, and health reimbursement arrangements (unless very specific rules are met by providing one in conjunction with a high deductible health plan). Benefits that defer compensation are also prohibited under cafeteria plan rules.

Cafeteria plans as a whole are not subject to ERISA, but all or some of the underlying benefits or components under the plan can be. The Patient Protection and Affordable Care Act (ACA) has also affected aspects of cafeteria plan administration.

Employees are allowed to choose the benefits they want by making elections. Only the employee can make elections, but they can make choices that cover other individuals such as spouses or dependents. Employees must be considered eligible by the plan to make elections. Elections, with an exception for new hires, must be prospective. Cafeteria plan selections are considered irrevocable and cannot be changed during the plan year, unless a permitted change in status occurs. There is an exception for mandatory two-year elections relating to dental or vision plans that meet certain requirements. Participants may only make election changes based on IRS provided changes in status, or certain triggering events as contained in the Health Insurance Portability and Accountability Act (HIPAA).

For all the best practices regarding participant contributions, including when participants are unable to pay their required contribution, request UBA’s new ACA Advisor, “Cafeteria Plans: Participant Contributions.”

To benchmark your health plan against others in your industry, region, and group size, be sure to pre-order the 2015 Health Plan Survey Executive Summary to get the most up to date information on premiums, employee/employer contributions, plan design trends and more.

 

Read More …

IRS Issues Regs on Wellness Program Incentives

Categories: Team K Blog, wellness
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Financial incentives that employers provide to employees participating in wellness programs generally could not be included in determining if an employee is exempt from a healthcare reform law requirement to enroll in a plan offering minimum essential coverage under newly proposed regulations. Read more