Wednesday, December 18, 2013

ACA Compliance Checkup (2014 Strategies Deployed)

 
As the 2014 open enrollment season comes to a close (bringing an overwhelming sense of relief and joy to HR professionals and Benefits Brokers/Consultants throughout the land!), I thought I’d review the major Affordable Care Act (ACA) related compliance issues addressed in preparation for the new (benefits) year. 

Wednesday, December 11, 2013

ACA's Essential Health Benefits, Minimum Essential Coverage, & Minimum Value

Given the enormous complexity of the Affordable Care Act (ACA), it’s understandable that there’s confusion about the terms used to describe 3 key provisions scheduled to take effect in 2014. They are: Essential Health Benefits (EHB)Minimum Essential Coverage (MEC), and Minimum Value (MV).  Each of these provisions has an important impact on employers, employees, and individuals. This week's post defines these terms and describes their impact in 2014 and beyond.
Essential Health Benefits
Starting in 2014, all non-grandfathered, fully insured individual and small-group health plans (covering up to 50 people) offered on and off the public health insurance Marketplaces/Exchanges must cover what the ACA classifies as Essential Health Benefits, which consist the following health benefit categories:

To access the complete article, click - https://smstevensandassociates.com/ResourceLibrary/tabid/192/Default.aspx

Wednesday, December 4, 2013

Health Insurance and the Tax Code


For years, politicians, policy wonks, and various health insurance stakeholders have debated the merits of how the tax code encourages employer provided coverage, yet seemingly discourages the individual purchase of coverage outside of the workplace.  



The primary example of this confounding situation is the fact that health insurance is tax deductible to an employer, yet not so to an individual who purchases coverage on their own, outside of the workplace.  There are numerous tax incentives and benefits available to individuals who purchase health insurance, but virtually all of these incentives are attached to the purchase of employer based, group coverage.  With the relatively recent introduction of so called “defined contribution” health plan offerings to the benefits world (see Walgreens, Sears, Darden Restaurants, etc.), you can expect more pressure on the federal government to expand and change the current tax code. 
Interestingly, the IRS recently issued guidance (Notice 2013-54) affecting two (2) tax advantaged spending accounts – Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs).  (See http://www.irs.gov/pub/irs-drop/n-13-54.pdf) The guidance places strict requirements on the use of these tax advantaged savings arrangements in conjunction with health insurance plans.  In short, the guidance ties these arrangements to GROUP HEALTH INSURANCE PLANS, and indirectly discourages the establishment of INDIVIDUAL HEALTH INSURANCE PLANS.
Key provisions of this guidance affecting HRAs and FSAs follow:

Wednesday, November 27, 2013

ACA's Top 10 Misconceptions (Nos. 6 - 10)


Last week's post revealed the first 5 of my "Top 10 List of ACA Misconceptions".  This week I finish out the Top 10 list with nos. 6 - 10.  There's a tremendous amount of information pertaining to the Affordable Care Act (ACA) that must be read, understood, translated, and communicated.  I will continue informing and communicating as much as possible on this site; and I encourage readers to reach out to me with questions, comments, and suggestions.

Here are nos. 6 - 10 of my "Top 10 List of ACA Misconceptions"...

Wednesday, November 20, 2013

ACA's Top 10 Misconceptions


Over the course of the last 3 years, I have had both the honor and pleasure of discussing the Affordable Care Act (ACA) with a number of organizations, clubs, groups, and even a local radio show.  Throughout this time, and unfortunately it persists, I have encountered a number of misconceptions and misunderstandings relative to several provisions of the law.  So I decided to assemble a list of...you guessed it...the top 10 most common ACA misconceptions that I have come across to date. Here are the first 5:

Thursday, November 14, 2013

***SPECIAL EDITION - Individual Plans May Offer Non-ACA Compliant Coverage in '14!***

Earlier today (11/14/13) the President announced that he will "allow 2014 sales of previously cancelled Individual Health Plans that don't meet Affordable Care Act (ACA) guidelines".  Administration officials clarified that the exception would only be available to those who have lost their [individual health] insurance coverage. 





The announcement was lacking many of the details that are necessary in order to move forward with this exception.  Among the few details mentioned were that Insurers will...
  • NOT be allowed to offer the non-ACA compliant plans to "...other Americans as it would threaten the ACA's financial viability".
  • Be required to notify customers that "alternatives exist" under the ACA, including the availability of tax credits.
  • Have to point out the areas where their plans fall short of government (i.e., ACA) standards.
  • Have to get permission from state insurance commissioners.
The exception, which has no direct impact on group health plans, is a de facto extension of the grandfather clause that was already a provision of the ACA.  Insurers have the choice of whether or not to continue offering the (formerly) non-compliant plans in 2014.  The other challenge would be reaching out to the millions of insureds (like me) that have already received notice of the cancellation of their current plan, and the automatic conversion to an ACA compliant plan.  With only 6 weeks left until the new year, and the various considerations involved in taking advantage of this relaxation of the rules (i.e., cost, technology, impact on rates, etc.), there might not be very many takers on the insurance company side.

I just received an email from the largest issuer of Individual Health Insurance coverage in the state of Nebraska - Blue Cross Blue Shield of Nebraska - which read in part - "...leaders are analyzing the impact of the President's proposal, and will give further information soon about how we will proceed".

Once again I want to stress that although this announcement does not directly affect or pertain to the Group Health Insurance market; to the extent that a significant number of individual health insurers decide to "un-do and/or re-do" policies could impact open enrollment.  In other words, if fewer individuals are forced to accept higher premiums and/or reduced coverage (like me) associated with some of the 2014 renewal offers, there will be fewer "group insurance eligible" individuals wanting to enroll in employer coverage during open enrollment.

Stay tuned!
 
#####

Wednesday, November 13, 2013

FSA Rollover…An Early Christmas Present From the IRS!


When people hear or see the acronym – IRS – they generally do not associate it with gift giving.  But that is precisely what the IRS delivered on October 31, 2013 in the form of Notice 2013–71, which allows for a partial carryover of unused FSA funds (click - http://www.irs.gov/pub/irs-drop/n-13-71.pdf). The often cited “use it or lose it” rule deters many otherwise eligible Flexible Spending Account (FSA) enrollees from setting aside funds on a pre-tax basis for future use.  However, with the issuance of Notice 2013-71, the IRS is allowing the option of a rollover of up to $500 at the end of the FSA plan year…even for 2013 plan years!  This is great news for FSA plan participants and employers alike.

Back in 2005, the IRS issued a similar relaxation of the code, which allowed for a 2.5 month grace period in which plan participants could continue to incur FSA reimbursable expenses (see IRS Notice 2005-42; click - http://www.irs.gov/pub/irs-drop/n-05-42.pdf ).
Since plan participants still faced the prospect of forfeiting unused balances at the conclusion of the grace period, this provision seemingly had little impact on increasing FSA plan participation.  The allowance of up to a $500 rollover, if effectively communicated, should have the effect of increasing FSA plan participation, thus saving eligible individuals, and their employers, valuable tax dollars. (Note: according to a recent CNN Money article, approximately 14 million families participate in FSAs.)

Here is a summary of the IRS notice, and some things for employers and plan participants alike to keep in mind:

To access the complete article, click - https://smstevensandassociates.com/ResourceLibrary/tabid/192/Default.aspx

Wednesday, November 6, 2013

Is Your Company CDH Ready?


Over the course of the last several years, Consumer Driven Health (CDH) has grown in popularity, and effectiveness, as a way for employers to reduce their health insurance and health care related costs.  CDH's evolution has not come easy or without its detractors.  However, both the empirical and anecdotal data collected over the last ten years point to CDH as a proven and effective method of true - "health care reform"!  According to the Kaiser Family Foundation (KFF), the number of employers offering CDH plans has jumped from 4% in 2005 to 31% in 2012.  KFF also released data indicating the average cost of family coverage is $1,500 less per employee on a CDH plan than a traditional PPO plan.  And benefits consulting firm Aon Hewitt's health care survey revealed that CDH plans had a 2 percent lower cost trend in 2012, versus all other health plan types (i.e., PPO, HMO, EPO).

Today's post provides a list of "CDH Readiness Considerations" for employers who are contemplating implementing some form/level of CDH into their organization.  Employers that presently offer a CDH plan(s) might also benefit from a review of these considerations...

1.      COMPANY/ORGANIZATIONAL READINESS

a.     The executive management of the company/organization is supportive and committed to CDH.

b.     Company/Organization is willing to offer a plan(s) that may change over time due to government regulation.

c.      To ensure effective plan use, the company/organization would be in favor of increasing funds or resources allocated to health plan education and communication.

d.     Company/Organization is willing to invest in wellness programs (health risk assessments, health screenings, smoking cessation, weight management, etc.) to keep employees healthy and reduce, if not avoid, high cost claims in the future.

2.      EMPLOYEE READINESS

a.     Employees have a solid understanding of the fundamentals of health care benefits and plan designs (e.g., copays, deductibles, coinsurance, out of pocket expenses).

b.     Employees are comfortable using, and have access to, the Internet.

c.      A majority of employees would prefer health insurance plan option(s) with lower premiums in exchange for higher deductibles. This means employees would pay less premium, yet possibly have more “out of pocket” exposure if they got sick or needed health care benefits.

3.      FINANCIAL CONSIDERATIONS

a.     Company/Organization believes it’s important to improve cash flow related to health care spending.

b.     Company/Organization would be willing to contribute to an account based health plan, and in so doing, would realize tax savings relating to such contributions.

c.      Company/Organization believes that a plan with first dollar (i.e., 100%) coverage for preventive care is important to help drive utilization savings and increase enrollment in a CDH plan. (Note: The Affordable Care Act (ACA) requires virtually all health insurance plans to cover specified preventive care at 100%.)

4.      BENEFITS PHILOSOPHY

a.     Company/Organization believes members should be more engaged in decisions about and expenses for discretionary services, such as outpatient or scheduled procedures, where they have time and information to make choices.

b.     It’s important to help employees save long term (i.e., 5-10 years) for medical expenses.

c.      Health plan might consider covering more discretionary benefits, such as in-vitro fertilization and gastric bypass surgery.

5.      PLAN DESIGN

a.     In the recent past, the company/organization has made plan design changes to increase member out of pocket expenses (e.g.., copays, deductibles, coinsurance).

b.     A large percentage of employees participate in the 401(k) plan, if available.

c.      Company/Organization would consider replacing the tiered, copay drug plan with a plan that covers drugs under the applicable deductible/coinsurance  to help drive better utilization and reduce pharmacy costs.

d.     It’s very important for the company/organization to offer health plan(s) that is/are easy to understand and use.

#####

Wednesday, October 30, 2013

ACA Reset...Let's All Take a Deep Breath!


 
This week’s post is meant to be sort of a “deep breath” or reset on where we’re at with respect to the Affordable Care Act (ACA). Clearly much is being said and written about the law, and in particular, its implementation. Those of us who are charged with explaining and implementing the various requirements of the law don’t have the luxury of questioning its content, complaining about its impact, or bemoaning its "unintended consequences". It’s full speed ahead with implementation and compliance, unless or until Congress, HHS, DOL, CMS, IRS, or someone in a position of authority tells us to STOP…and that is highly unlikely.

So here are some important points to keep in mind as we take stock of where we are at, now some 3 ½ years since the law was signed. More importantly, for the Human Resource managers, Benefits Consultants, CFO’s, CEO’s, Executive Directors, and other stake holders charged with ACA compliance, the following points are meant to help keep “moving the implementation ball forward".

Wednesday, October 23, 2013

Self Funding Overview/Summary

As medical costs and insurance premiums continue to escalate, and health care reform poses new and additional cost pressures, employers are seeking innovative ways to reduce the costs associated with group insurance programs.  The solution for many employers has been the implementation of some form of self-funding.
[IMPORTANT: A previous blog post listed the specific Affordable Care Act (ACA) provisions that DO NOT APPLY to self funded plans.  Click here to access this blog - http://sstevenshealthcare.blogspot.com/2013/08/aca-compliance-understanding.html]
SELF-FUNDING ALLOWS THE EMPLOYER TO ASSUME ONLY AS MUCH RISK OR EXPOSURE AS THE COMPANY CAN WITHSTAND, WITHOUT CAUSING FINANCIAL DISTRESS.

Wednesday, October 16, 2013

Health Reimbursement Arrangements (HRAs) - HSA's 1st Cousin



Last week's post provided an overview of Health Savings Accounts or HSAs.  This week's post is meant to provide an in depth understanding of the HSA's 1st cousin - the Health Reimbursement Arrangement or HRA.

In June of 2002 the IRS issued an important revenue ruling which created the HRA (through a tweaking of existing IRC section 105).  The ruling created tremendous flexibility for the use of employer funded dollars set aside to pay for specific health care items.  As this week's blog title suggests, HRAs are similar to HSA's, but are actually much more similar to Flexible Spending Accounts (FSAs).  However, HRAs have distinct advantages for both employer and employee, over FSAs and HSAs.

So exactly what is an HRA?  HRAs are defined as accounts that:

Wednesday, October 9, 2013

Health Savings Accounts (HSAs) ~ Summary/Overview


 
 Last week's blog post recognized (and celebrated!) the upcoming 10th birthday of Health Savings Accounts (HSAs) in 2014.  Recognizing that some readers don't necessarily understand all the "in's and out's" of HSA's, this week's post offers an in depth overview, and addresses many of the key requirements, limitations, benefits, etc.  Once again, HAPPY BIRTHDAY HSAs!

OVERVIEW

A Health Savings Account (HSA) is a tax-favored savings account used to pay qualified medical expenses (See IRS Publication 502; click - http://www.irs.gov/pub/irs-pdf/p502.pdf ), in conjunction with a QUALIFIED HIGH DEDUCTIBLE HEALTH PLAN.  Some have described them as a "medical IRA".  In the employer/group insurance space, an employer and/or employee may contribute tax preferred funds to the account, which accumulate, earning tax-free interest, to pay for qualified expenses.  Outside of the work place, individuals are also eligible to open and fund an HSA if they are otherwise eligible, and have a qualified health insurance plan. Funds used for non-qualified expenses prior to age 65 are subject to a penalty of 20%, plus income tax (unless the account holder is deceased or disabled).
 
The HSA belongs to the individual on whose behalf it is opened, and is portable to the extent an employee changes jobs, becomes unemployed, etc.   HSA funds used to pay for eligible medical expenses are not taxed!  Employees can make pre-tax or tax deductible HSA contributions, subject to specified maximums (see below). Employer and Employee HSA contributions are exempt from payroll related taxes, including federal and state income tax (except AL, CA, and NJ).  Funds remain in the account holder’s control, and unlike Flexible Spending Accounts (FSAs), they NEVER revert to an employer if unused.

In effect, HSAs enjoy specific tax benefits that NO OTHER savings vehicle offers - a TRIPLE tax benefit.  1.Contributions are pre-tax and/or tax deductible. 2. Interest/Dividends accumulate tax free (in most states). 3. Distributions (qualified) are tax exempt.

In order to establish an HSA and take advantage of the tax savings, a qualified high deductible health insurance plan (QHDHP) must be established (Note: additional health insurance coverage, including Medicare, is NOT allowed).  The qualified high deductible plan, often less expensive, and much easier to understand than traditional health plans, acts as a safety net and covers eligible expenses that are beyond the individuals reach, after the deductible (and if applicable, coinsurance) is met.

ADVANTAGES

·         Favorable tax treatment of HSA contributions [Note: contributions are pre-tax or tax deductible.]

·         Reduced insurance premiums through the accompanying qualified high-deductible plan.

·         Tax-free interest on HSAs accumulates over time.

·         Provides funds to pay for qualified medical expenses (including many expenses not covered by traditional insurance plans) through the HSA account.

·         Funds available to pay for COBRA coverage, and in certain cases, individual insurance in between jobs.

·         Funds can be used to supplement retirement without penalty at age 65. Funds can also be used for items such as Long Term Care insurance, Medicare Part B and D premium, and many more qualified expenses.

·         Generally lower health care out of pocket expenses

HSA CONTRIBUTIONS

·         Contributions are limited to a calendar year maximum, as announced by the IRS each year.
       (For 2013: Individual - $3,250; Family - $6,450.  For 2014: Individual - $3,300; Family - $6,550.)

·         Excess contributions are subject to a 6% excise tax plus ordinary income tax.

·         Contribution limits may increase each year according to federal law.

·         Contributions can be made on a pre-tax (generally via payroll) or tax deductible basis. The deadline for HSA contributions in any given year is April 15th of the year following the year in which the contribution is intended to be made.

·         Account holders age 55 and older are allowed to make “catch up” contributions of $1,000          annually. 

SUMMARY


An HSA is comprised of two parts, the first of which is a qualified high-deductible health insurance plan (QHDHP) that covers eligible pharmaceutical, medical and hospital expenses. The second part of the HSA allows you to make tax-free contributions to an investment or regular bank account, from which you can withdraw money tax-free to pay for qualified expenses. The money accumulates with tax-free interest until age 65, when you can withdraw it penalty free for any purpose, and only be subject to ordinary income taxes. Funds that are withdrawn and used for qualified expenses are penalty and tax free.  HSA plans are personally owned by each participant or employee and thus, go with an individual if they leave one job, whether or not they assume employment elsewhere.  To continue funding the account, the participant must stay enrolled in a Qualified High Deductible Health Plan (QHDHP).


#####