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During this episode of Myra’s Minutes, we discuss ways to navigate the confusing world of insurance benefits and claims with AAG on your side.
You can view this short video here.
The IRS has released the 2014 Form 720 that plan sponsors of self-insured group health plans will use to report and pay the Patient Centered Outcomes Research Institute (PCORI) fee. The fee is due by July 31, 2014 for plan years ending in 2013.
The Affordable Care Act (ACA) imposes a fee on health insurers and plan sponsors of self-insured group health plans to help fund the Patient Centered Outcomes Research Institute. PCORI is responsible for conducting research to evaluate and compare the health outcomes and clinical effectiveness, risks, and benefits of medical treatments, services, procedures, and drugs.
The PCORI fee is assessed for plan years ending after September 30, 2012. The initial fee is $1 times the average number of covered lives for the first plan year ending before October 1, 2013 and $2 per covered life for the plan year ending after October 1, 2013 and before October 1, 2014. Fees for subsequent years are subject to indexing. The PCORI fee will not be assessed for plan years ending after September 30, 2019, which means that for a calendar year plan, the last plan year for assessment is the 2018 calendar year.
Plan sponsors must pay the PCORI fee by July 31 of the calendar year immediately following the last day of that plan year. All plan sponsors of self-insured group health plans will pay the fee in 2014, but the amount of the fee varies depending on the plan year.
The IRS has released the 2014 Form 720 with instructions for plan sponsors to use to report and pay the PCORI fee. Although the Form 720 is a quarterly federal excise tax return, if the Form 720 is filled only to report the PCORI fee, no filing is required in other quarters unless other fees or taxes have to be reported.
Please contact our office for information on the Affordable Care Act (ACA) and how it affects your business.
Can corporations shift targeted workers who have known high medical costs from the company health plan to public exchange (aka Marketplace/SHOP) based coverage created by the Affordable Care Act? Some employers are beginning to inquire about it and some consultants are advocating for it.
Health spending is driven largely by those patients with chronic illness, such as diabetes, or those who undergo expensive procedures such as an organ transplant. Since a large majority of big corporations are self-insured and many more smaller employers are beginning to research this as an option to help control their medical premiums, shifting even one high-cost member out of the company health plan could potentially save the employer hundreds of thousands of dollars a year by shifting the cost for the high-cost member claims to the Marketplace/SHOP plan(s).
It is unclear if the health law prohibits this type of action, which opens a door to the potential deterioration of employer-based medical coverage.
An employer “dumping strategy” can help promote the interests of both employers and employees by shifting health care expenses on to the public through the Marketplace.
It’s unclear how many companies, if any, have moved any of their sicker workers to exchange coverage yet, which just became available January 1, 2014, but even a few high-risk patients could add millions of dollars in claim costs to those Marketplace plans. The costs could be passed on to customers in the next year or two in the form of higher premiums and to taxpayers in the form of higher subsidy expenses.
A Possible Scenario
Here’s an example of how an employer “dumping-situation” it might work:
At renewal, an employer reduces the hospital/doctor network on their medical plan to make the company health plan unattractive to those with chronic illness or high cost medical claims. Or, the employer could raise the co-payments for drugs or physician visits needed by the chronically ill, also making the health plan unattractive and perhaps nudging high-cost workers to examine other options available to them.
At the same time, the employer offers to buy the targeted worker a high-benefit “platinum” plan in the Marketplace. The Marketplace/SHOP plan could cost $6,000 or more a year for an individual in premiums, but that’s still far less than the $300,000 a year in claim costs that a hemophilia patient might cost the company.
The employer could also give the worker a raise so they could buy the Marketplace/SHOP policy directly.
In the end, the employer saves money and the employee gets better coverage. And the Affordable Care Act marketplace plan, which is required to accept all applicants at a fixed price during open enrollment periods, takes over the costs for their chronic illness/condition.
Some consultants feel the concept sounds too easy to be true, but the ACA has set up the ability for employers and employees to voluntarily choose a better plan in the Individual Marketplace which could help save a significant amount of money for both.
Legal but ‘Gray’
The consensus among insurance and HR professionals is that even though the employer “dumping-strategy” is technically legal to date (as long as employees agree to the change and are not forced off the company medical plan), the action is still very gray. This is why many employers have decided this is not something they want to promote at this time.
Shifting high-risk workers out of employer medical plans is prohibited for other kinds of taxpayer-supported insurance. For example, it’s illegal to persuade an employee who is working and over 65 to drop company coverage and rely entirely on the government Medicare program. Similarly, employers who dumped high-cost patients into temporary high-risk pools established originally by the ACA health law are required to repay those workers’ claims back to the pools.
One would think there would be a similar type of provision under the Affordable Care Act for plans sold through the Marketplace portals, but there currently is not.
The act of moving high-cost workers to a Marketplace plan would not trigger penalties under ACA as long as an employer offers an affordable medical plan to all eligible employees that meets the requirements of minimum essential coverage, experts said. If workers are offered a medical plan by their employer that is affordable coverage and meets the minimum essential coverage requirements, workers cannot use tax credits to help pay for the Marketplace-plan premiums.
Many benefits experts say they are unaware of specific instances where employers are shifting high-cost workers to exchange plans and the spokespeople for AIDS United and the Hemophilia Federation of America, both advocating for patients with expensive, chronic conditions, said they didn’t know of any, either.
But employers are becoming increasingly interested in this option.
This practice, however, could raise concerns about discrimination and could cause decreased employee morale and even resentment among employees who are not offered a similar deal, which could end up causing the employer more headaches and even potential discrimination lawsuits.
Many believe that even though this strategy is currently an option for employers, in the end, it may not be a good idea. This type of strategy has to operate as an under-the-radar deal between the employer and targeted employee and these type of deals never work out. Most legal experts who focus on employee benefits do not recommend this strategy either as it just opens the door of discrimination claims from employees.
Please contact our office for assistance in reviewing all of the benefit options available to your company and employees under ACA.
Did you know that some of the major insurance carriers have revised their requirements on small group medical insurance regarding employee participation and employer contribution?
One major carrier offers 5 group medical plans in Florida for employers (with 2-100 employees) that lowers the required employer contribution to the lesser of 25% of the employee medical premium or $50 per employee. Additionally, they also only require 50% employee participation on any of these 5 plans.
Currently most major medical carriers require the employer to contribute 50% towards the cost of the employee premium and the group must maintain 75% employee participation (this does not include any eligible employees who can provide proof of valid coverage elsewhere).
Another national medical insurance carrier just lowered their employee participation requirements for all small group medical plans in Florida. This is valid only for new business with 2-50 eligible employees, but it does apply to all of their small business medical plans offered. Any existing small group clients with this carrier are still subject to the 75% participation requirement currently.
If you would like more information on any of the plans offered, please contact our office for more information.
On June 26, 2013, the US Supreme Court declared the Defense of Marriage Act (DOMA) as unconstitutional. DOMA had previously established the federal definition of marriage as a legal union only between one man and one woman. The extinction of DOMA already has HR departments thinking how this will impact the future of the Family and Medical Leave Act (FMLA) as well as other benefits.
How FMLA is Impacted
As we know, the FMLA allows otherwise eligible employees to take leave to care for a family member with a serious health condition. “Family member” includes the employee’s spouse, which, under the FMLA regulations, is defined as:
a husband or wife as defined or recognized under State law for purposes of marriage in the State where the employee resides, including common law marriage in States where it is recognized. 29 C.F.R. 825.102
Initially, this seems to suggest that the DOL would look to state law to define “spouse”…but not so fast. According to a 1998 Department of Labor opinion letter, the DOL acknowledged that the FMLA was bound by DOMA’s definition that “spouse” could only be a person of the opposite sex who is a husband or wife. Thus, the DOL has taken the position that only DOMA’s definitions could be recognized for FMLA leave purposes. As a result, FMLA leave has not been made available to same-sex spouses.
That changes yesterday, at least in part.
What’s Clear about FMLA After the Ruling
In striking down a significant part of DOMA, the Supreme Court cleared the way for each state to decide its own definition of “spouse”. Thus, if an employee is married to a same-sex partner and lives in a state that recognizes same-sex marriage, the employee will be entitled to take FMLA leave to care for his/her spouse who is suffering from a serious health condition, for military caregiver leave, or to take leave for a qualifying exigency when a same-sex spouse is called to active duty in a foreign country while in the military.
What’s Unclear about FMLA After the Ruling
But what about employees who live in a state that does not recognize same-sex marriage? Are they entitled to FMLA leave to care for their spouses?
As an initial matter, the regulations look to the employee’s “place of domicile” (aka state of primary residence) to determine whether a person is a spouse for purposes of FMLA. Therefore, even if the employee formerly lived or was married in a state that recognized the same-sex marriage, he/she is unlikely to be considered a spouse in the “new” state for purposes of FMLA if the state does not recognize the marriage. This is no small issue, since 30+ states currently do not recognize same-sex marriage and some don’t go all the way (e.g. Illinois, which recognizes same-sex unions, not marriages).
Surely, some might argue that the U.S. Constitution requires other states to recognize the marriage; however, this issue is far from settled. Clearly employers need some help from the DOL. It is speculated that the DOL may draft regulations on how employers can administer FMLA in situations where the employee’s spouse is not recognized under state law. This would give life to concepts such as a “State of Celebration” rule, in which a spousal status is determined based on the law of the State where the employee was married and not where they reside. However, without more guidance, it is still too early to tell how the DOL will handle this.
Other Key Benefits Affected by the DOMA Decision
FMLA is not the only federal law impacted by the fall of DOMA. If federal regulations follow through, some of the notable federal laws and benefits impacted may include:
Proposed guidance on the 90 day waiting period limit that was set in place by the Affordable Care Act (ACA) was issued on March 21, 2013 by the Department of Labor, Health & Human Services, and the Treasury (the “Departments”). This rule will apply to plan years beginning on or after January 1, 2014.
The 90 day limit set under Health Care Reform prevents an eligible employee or dependent from having to wait more than 90 days before coverage under a group health plan becomes effective. All calendar days (including weekends and holidays) are counted when determining what date the employee has satisfied the 90 day probationary period.
The Departments have confirmed that there is no de minimis exception for the difference between 90 days and 3 months. Therefore, plans with a 3 month waiting period in their group benefit contracts (including the Section 125 plan document) will need to make sure these are amended for the 2014 plan year. In addition, plans with a waiting period in which coverage begins on the first day of the month immediately following 90 days will also need to be amended as coverage can not begin any later than the 90th day. Employers who prefer to use a first day of the month starting date for coverage rather than a date sometime mid-month should consider implementing a 60 day waiting period instead. If an employer runs into an instance where an employee is in the middle of their waiting period when the regulations become effective (on the group’s renewal anniversary date on or following January 1, 2014), the waiting period for the employee may need to be shortened if it would exceed the 90 days.
Caution: Employers sponsoring a group health plan should also be mindful of the rules under the employer “pay or play” mandate. The 90 day limit on waiting periods offers slightly more flexibility than the employer mandate. For instance, if an employer’s health plan provides employees will become eligible for coverage 90 days after obtaining a pilot’s license, that requirement would comply with the 90 day limit on waiting periods. However, the same employer could be liable under the employer mandate for failing to provide coverage to a full time employee within 3 months of their date of hire. So, employers sponsoring a group health plan should confirm that any plan eligibility criteria aligns with both the employer mandate and the 90 day limit on waiting periods.
The Departments have also announced that HIPAA Certificates of Creditable Coverage will be phased out by 2015. Plans will not be permitted to impose any pre-existing condition exclusions effective for plan years beginning on or after January 1, 2014. This provision is also in effect for enrollees who are under age 19. Plan sponsors must continue to provide Certificates through December 31, 2014 since individuals enrolling in plans with plan years beginning later than January 1 may still be subject to pre-existing condition exclusions up through 2014.