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".

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

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.

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

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:

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

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).

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HAPPY BIRTHDAY HSAs!

HEALTH SAVINGS ACCOUNTS (HSAs)

  

The attractiveness and establishment of HSAs continues to grow, as HSAs approach their 10^th birthday.  For many, it has long since been forgotten how they came to be, save for those “consumer driven health care geeks” like yours truly.  While many realize that HSAs or Health Savings Accounts, replaced MSAs (Medical Savings Accounts) starting in January of 2004, how they came to be is rather interesting, if not disjointed.  Actually, HSAs were created by the very law that gave us the largest expansion of Medicare since its origin in 1965 - the Medicare Prescription Drug Improvement and Modernization Act of 2003 (later referred to as the MMA), signed by then President George W. Bush on December 8, 2003.  HSAs offer a significant improvement over their predecessor – MSAs – on several levels; not the least of which was a significant increase in the amount of money that could be set aside, tax preferred in the account, for future health care related use.

This week’s blog post is a “celebration” of HSAs (see previous reference to “CDH Geek”), by sharing some insights on the numbers, their application, and their future.

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

10 Health Care Cost Reducing Strategies for Employers

Since the launch of this blog site earlier this year, the majority of posts have been focused on compliance issues. This week, I'm changing things up, and shifting the focus to strategies that can help employers and employees REDUCE the cost of their health insurance.  These strategies are not merely theoretical, conceptual ideas, but rather, time tested and proven ways to reduce the cost of health insurance.  And depending on the type of coverage you offer today, there may be no better time than NOW to consider making some changes!

Unlike any other form of insurance, health insurance has a high claims loss ratio.  In fact, approximately 80 cents of every dollar of premium collected is paid back out in claims to the policyholder. (Note: The Affordable Care Act includes a provision known as “minimum loss ratio”, or MLR, which requires health insurers to pay out 80% or 85% (depending on the size of the insured company) of every dollar of collected premium in claim benefits, or rebate the shortage.)  Health insurance is expensive because health care is expensive, and becoming ever increasingly so. There are a number of strategies that employers can consider to reduce the cost of health insurance.  Here are ten (10):

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

Medicare Part D Disclosure Notices - DEADLINE LOOMING!

It seems as though the entire employee benefits/human resource universe has been transfixed on the upcoming, October 1 deadline for the ACA Marketplace Notice requirement (now deemed optional).  In fact, this very blog site thoroughly addressed the Marketplace Notice requirement a mere two weeks ago, and provided guidance and compliance assistance!  Meanwhile, another notice requirement, the 8th anniversary no less, looms...

OVERVIEW

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) created a voluntary prescription drug program, called Medicare Part D, for Medicare eligible individuals. Medicare beneficiaries are eligible to elect supplemental coverage and receive (subsidized) prescription drug coverage through this program.  Medicare beneficiaries who have other sources of drug coverage (e.g. employer group coverage) may decide to keep their current coverage and forgo enrollment in a Medicare Part D plan if the other plan is at least as good as the Medicare drug benefit. If the actuarial value of the employer-sponsored coverage is equal to or exceeds the actuarial value of the Medicare Part D prescription drug coverage, the employer-sponsored coverage is considered “creditable coverage.”  Alternatively, if the actuarial value of the other plan's drug coverage is LESS than Part D, it is considered non-creditable, which may result in penalties to affected Medicare beneficiaries (penalty = 1% of eventual/elected Part D premium x the no. of months they had non-creditable coverage).

Under the Medicare Part D program, employer group health plans have a two-part compliance requirement.  
No. 1: employers are required to provide a notice of creditable prescription drug coverage at least annually to those Medicare Part D eligible individuals who are covered by prescription drug coverage under the employer's group health plan. (Note: The notices vary depending on the creditability of coverage.) ;and 
No. 2: The MMA also requires plan sponsors to make a disclosure to the Centers for Medicare & Medicaid Services (CMS) on an annual basis.
NOTE: If you are unsure of the creditable status of your plan option(s), contact your Broker/Consultant (for many of you, me) and request this information.

1. DISCLOSURE NOTICES

In order for Medicare Part D eligible individuals to make informed and timely enrollment decisions, group health plan sponsors must annually disclose the status (creditable or non-creditable) of the plan’s prescription drug coverage. If an individual’s enrollment in Part D is to be considered timely, the individual must enroll before the end of his or her Initial Enrollment Period.

The Initial Enrollment Period for Part D is concurrent with an individual’s Initial Enrollment Period for Medicare Part B. The Initial Enrollment Period is 7 months long, and includes the month in which an individual first meets the eligibility requirements for Parts A & B, and the 3 months before and after initial eligibility. After the Initial Enrollment Period, the individual may only subsequently enroll in a Part D plan during the Annual Coordinated Election Period from Oct. 15 through Dec. 7 of each year.

An eligible individual who fails to enroll in Medicare Part D during the Initial Enrollment Period must maintain “creditable coverage” or pay the late enrollment penalty(see above). The late enrollment penalty will be imposed after a break in creditable coverage that lasts for a period of 63 days or longer (after the Initial Enrollment Period) and will apply for as long as the individual remains enrolled in Part D. Thus, the Disclosure Notice is essential to an individual’s decision regarding whether to enroll in a Part D prescription drug plan.

TIMING OF NOTICES TO EMPLOYEES

At a minimum, Disclosure Notices must be provided at the following times:

·         Prior to the Medicare Part D Annual Coordinated Election Period – Oct. 15 through Dec. 7;

·         Prior to an individual’s Initial Enrollment Period for Part D;

·         Prior to the effective date of coverage for any Medicare eligible individual that joins the plan;

·         When prescription drug coverage ends or creditability status changes; and

·         Upon a beneficiary’s request.

If the Disclosure Notice is provided to all plan participants annually, prior to the Annual Coordinated Election Period, CMS considers items 1 and 2 to be met. Further, “prior to” means that the individual must have been provided the Disclosure Notice within the past 12 months.

2. EMPLOYER DISCLOSURE TO CMS

Plan sponsors are also required to disclose to CMS whether their prescription drug coverage is creditable or non-creditable. The disclosure must be made to CMS on an annual basis, or upon any change that affects whether the coverage is creditable. At a minimum, the CMS Creditable Coverage Disclosure Notice must be provided at the following times:

·         Within 60 days after the beginning date of the plan year for which the entity is providing the form;

·         Within 30 days after the termination of the prescription drug plan; and 

·         Within 30 days after any change in the creditable coverage status of the prescription drug plan.

CMS has released guidance for making such disclosures (i.e., timing, format and model language). Plan sponsors are required to provide the disclosure notice to CMS through completion of the disclosure form on the CMS web page. You can access this guidance along with the reporting portal at - http://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/index.html?redirect=/CreditableCoverage/40_CCDisclosure.asp

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