Insurance Rebates

As part of the “Affordable Care Act” passed by the Obama administration, insurers are expected to pay $1.3 billion in rebates this summer, as reported by the AP news on 4/27, and picked up by over 250 news sites that day. The reason for the rebates is the Medical Loss Ratio (MLR) provision in the ACA, which requires an insurer to spend 80% of the premium dollars it receives on “patient care” (85% in large groups), or refund the difference to its customers.

While we want some good news, and we need more affordable health care, this provision of the law is a lot of trouble and excitement about something which will have a relatively minor benefit to consumers. The story stated, “Democrats are hoping they’ll send an election-year message that Mr. Obama’s much-criticized health care overhaul is starting to pay dividends for consumers. Critics of the law call that wishful thinking.” The story also points out that “with employer coverage averaging about $5,400 a year for an individual, $15,100 for a family, $127 isn’t a whole lot of money.”

For individual and family plans, the rebates will come directly from the insurance companies. Businesses offering health insurance to employees that receive rebates will be required to refund part of that money to employees, if the employees share in the cost of coverage. In either case, these rebates will be taxable. The cost of administering this provision offsets the benefits, both to the employer and the employee. In the meantime, insurance companies are still making profits, and health care costs continue to rise at a higher rate than inflation and wages.

Yes We Take PPO…

At this month’s bill review in Sacramento, the California Association of Health Underwriters, in which I am a member, reviewed SB 1373.  This bill would require health care service providers to give an insured written notice to inform when the provider is not in the patient’s network.  An issue that occurs with great frequency is that when patients undergo surgery with an in-network doctor in an in-network facility, they are getting hit with an unexpected anesthesiology bill of $2,000 or more.  Sure, the anesthesiologist takes PPO, but they are not in-network most of the time, which results in a higher-than-expected cost. 

Even when the insurance carrier agrees to pay the claim as an in-network claim, as in the case of one of our clients recently, the payment was only $800, so the patient still owed $1,200 for the anesthesiologist.  The bill would also prohibit a health facility or a provider group from holding itself out as being within a plan network, unless all of the individual providers providing services at the facility or with the provider group are within the plan network.

The burden of determining whether or not anesthesiologist is in-network is on the part of the patient, even though the hospital and physician or medical group is coordinating all the players.  Those professionals could have the knowledge about whether or not they are an “in-network” provider, so are they not helping the patient determine this because they do not know, or do not care to look into it?  In an emergency surgery, there is no time do any prep work, and this situation is almost always detrimental to the patient.  Regardless of in-network status or out-of-network status, in the event of true emergency, the insurance normally pays the bill as an in-network cost, and I think the anesthesiologist should accept that payment as paid in full.

In Plain English, Please! Or Spanish, Or Chinese, Or…

One of the new requirements in PPACA healthcare reform is that insurers must provide a “Summary of Benefits and Coverage” (SBC).  This is in addition to the other required plan documents, and the reason for this new document is so that individuals and businesses who are trying to compare plans across different carriers may do so more easily.  Insurance plans renewing on or after 9/23/2012 must provide a document with these components:

<1> The summary of benefits section has required content, including deductible, copays, etc.  There is a pre-determined format, no more than 4 pages, double-sided, and MUST be in 12 point font.  It tells the plan features, and then why it is important.  The HHS will determine by zip code which languages are most prevelant, and determine if a second language version will be required.  The insurer provides this to the employer, and the employer must distribute it via a technolgically appropriate means to all insureds.

<2>The next section includes coverage facts for two diagnoses: a) normal child birth and b) managing type 2 diabetes.  This section will indicate how the plan would work in covering these expenses.  The HHS intends to add more diagnoses over time.  Here is a sample completed SBC:  http://www.dol.gov/ebsa/pdf/SBCSampleCompleted.pdf

<3>Uniform glossary of terms to explain what things like “copay” and “allowed charges” mean.  Here is the template for that: http://www.dol.gov/ebsa/pdf/SBCUniformGlossary.pdf

<4>Notice of modification – 60 days prior to a change in the plan, insureds must be given notice.

Hopefully this will help people to better understand their benefits, and what to expect when they receive care.  This is a positive thing in my mind!

Do your employees really understand what they’re worth?

If you asked your employees how much they are compensated, they’d probably reference the salary or hourly rate they earn. However, the true essence of a compensation package encompasses more than just wages. This is like a “Hidden Paycheck”.

Moore Benefits provides clients with The Hidden Paycheck report, which is a line-itemed summary of an employee’s entire compensation package.  It includes an employee’s health plan costs, ancillary benefits such as dental and life insurance, paid time off, and paid holidays. Plus, many employees forget that as an employee, the employer pays half of their FICA tax burden.

This report, when given during salary discussions, becomes a timely reminder of what an employee is actually earning.  When given throughout the year, it can be a way to continuously market your business to current employees, and can be a real eye-opener.

One of our major initiatives at Moore Benefits is educating employees on their benefits, which includes sharing the full scope of their compensation package. Providing employees with a Hidden Paycheck report is a great way to communicate the true value of working for your company. Here’s a sample benefit summary that we provide our clients for each of their employees:

Additionally, one of the new provisions in health care reform requires employers to report the cost of health care coverage on employees’ W-2 wage and income statements.  Since we already provide our clients with this information, it will be incredibly easy for them to comply with the mandate by just turning over the data to their accountants.

California tries again for a single-payer health care bill. What could this mean for your tax dollars?

SB 810, proposed legislation that would create a single payer, government-run health care system in California, went before a key Senate committee on January 17.

Authored by Senator Mark Leno, SB 810 proposes the creation of a new agency with a new health care commissioner who would be tasked to set a single standard of care for all California residents. According to the California Association of Health Underwriter’s (CAHU):

Under SB 810 no health care service plan contract or health insurance policy, except for the California Health Insurance System plan, could be sold in California for services provided by the single payer system. The proposed system would make all California residents eligible for coverage, and all Californians will be required to buy into the system through an unspecified premium tax set by SB 810′s proposed Premium Commission.

Although well-intentioned, there are a few fundamental issues with SB 810:

• The fiscal impact of this measure was analyzed by a legislative committee and would cost the state an estimated $200 billion annually, but the bill doesn’t establish any new taxes or fees. Where would that money come from? Surely not from the California government’s already overextended budget. According to a legislative committee review, the costs would be “offset by an unknown extent of re-direction of revenues from existing health coverage programs.”
• SB 810 is different than the Federal Patient Protection and Affordable Care Act (PPACA), which sets out an extensive access program through state-run health care exchanges. California is already implementing and complying with PPACA, and SB 810 would be in addition to PPACA guidelines.
• As outlined by California Chamber of Commerce lobbyist Marti Fisher, the legislation is based on the premise that government systems are more efficient than private business and that a single-payer system would be less costly than the current system, but there is no proof to substantiate those claims.

Two similar bills came across Governor Schwarzenegger’s desk; both were vetoed. What will Governor Brown do? Based on concerns expressed by legislative committees surrounding the extreme costs of implementing and maintaining SB 810, the Senate Appropriations Committee has put the measure on hold to allow for further consideration.

We’ll keep our finger on the pulse of this measure as it progresses and provide timely updates via our twitter feed @MooreBenefits.

Open Enrollment: What You Need to Know

Open enrollment season is here and you’ve probably made the unpleasant discovery that insurance rates are on the rise. But fear not, there are still opportunities for you to maximize the value your benefit plan in 2012 and ensure your employees are well covered. Here are a few tips:

Consider coverage options: Typically your carrier has a multitude of coverage plans available to choose from, so get in touch with your broker to talk about what the best options are according to your specific needs.

Gauge your employees’ needs: Your specific needs are tantamount to your employees’ needs, so if increased rates means you have to make changes to health plans, ask your employees what coverage matters most to them. This will give you a better idea of what types of plans to offer to keep your employees most satisfied.

Offer options to your employees: No two employees are alike and what satisfies the health needs of one may not meet the needs of another, so offer them different plans. Your broker can help identify plans that require the same financial contribution from you but allow employees to choose from a diverse sampling of plans.

Offer some perspective: Most employees are appreciative of health insurance but aren’t really aware of how much employers pay toward their coverage. If increased costs result in changes to employee plans, make sure they understand that this is the reason behind the changes.

Encourage your employees to understand their new plans: Enrolling in a new plan could mean that deductibles, prescription coverage, etc. have all changed. (Moore Benefits offers employee education programs on a year-to-year basis to ensure employees understand the ins and outs of their plans.)

Open enrollment ends on December 31, so feel free to contact us with questions about your 2012 plan options. We can help you select a plan that is friendly to your budget and your staff.

Are ACOs the Answer to Rising Health Care Costs?

As part of Health Care Reform, the government is trying to streamline the delivery of health care services to help control the rising cost of benefits. But how do you slow a runaway train? Enter Accountable Care Organization (ACO) legislation—laws that create financial incentives for health care providers to eliminate unnecessary procedures and focus on preventive health care.

To give you some insight as to why this legislation is important for Health Care Reform to actually reduce the cost of health care, remember that providers are paid for their services; the more services they provide, the more money they make. In theory, ACOs would help eliminate the financial incentive of providing unnecessary tests, procedures and care.

An ACO would allow physicians, hospitals and other health care providers to come together under an umbrella organization, making them accountable for both the health of their patients and the cost of delivering care. The concept is designed to allow for a higher level of coordination of care and more efficiency.

In theory, ACOs would allow providers to share in the savings of delivering the right care at the right time.  However, the first wave of ACO legislation was announced by the U.S. Department of Health and Human Services (HHS) in March 2011 and was met with quite a bit of negative feedback regarding the difficulty of implementing the plan due to challenges with compliance. HHS took the feedback into consideration and released a revised proposal in early November.

People generally agree that, although improved, the new rules still won’t deliver on the cost containment promised by Health Care Reform. The challenges to implementing ACOs are twofold:

1. The cost of creating the infrastructure is very high and many insurers run the risk of losing money if they aren’t able to generate enough savings with the new program

2. The program is designed to incentivize health care professionals and insurers by promising them a savings bonus, which currently may equal less than if they did not adjust their procedures.

Although sound in concept, ACOs still have a long way to go before they can consolidate the fragmented world of health care.

Medical Loss Ratio: What does it mean?

If you’re an employer, you probably saw a rise in healthcare costs this year, but the rise for 2012 is lower than it has been. One reason may be the Medical Loss Ratio (MLR) provision of Healthcare Reform that requires insurers to spend at least 80-to-85 percent of premium dollars on healthcare services and healthcare quality improvement.  If the insurance carriers do not meet this new requirement, they will be required to refund excess premiums to policyholders.

The other 15-to-20 percent insurance carriers may use for programs like education, prevention, overhead and even administrative systems that make healthcare more efficient. With the 80/20 budget requirements, insurers have redesigned their plans, cut broker commissions, and began looking for new ways to improve profitability.

With higher healthcare costs trickling down to business owners, some employers are less able to provide benefits to their employees. As a business owner, you recognize the benefits of providing health insurance for your employees, so what can you do?

Despite the uncertainty, working with a partner that has a clear vision of the legislative and economic environment can help you find a plan that is a) in line with your budget and b) ensures that your employees are still well taken care of.

We’ll continue to watch this issue and advocate for employers as legislation moves forward.

Long-Term Care: Who’s Footing the Bill?

How many of you have health insurance? Life? Disability? What about long-term care insurance? Considering that half the money you will spend on medical care for your lifetime is spent in the last two-to-three years of life, overlooking long-term care coverage can be financially devastating.

Long-term care provides personal assistance when someone can no longer care for themselves—not to be confused with long-term disability, which stops after age 65 (watch this video to learn more about the differences).

There are more than 50 million Americans today providing unpaid care for family members and loved ones, a huge expense to shoulder. Custodial care (feeding, bathing, dressing, transferring) in a home setting, nursing home or assisted living facility is not covered by health plans or Medicare, and these expenses can add up to tens of thousands of dollars over a few short years.  Long-term care insurance can cover those out-of-pocket expenses should you or a loved one need custodial care.

The government’s attempt to address long-term care, the CLASS (Community Living Assistance Services and Supports) Act, was recently repealed as part of the health care reform due to a lack of financial sustainability; however, the urgency of long-term care has not changed. The government was unable to address this issue, but that doesn’t mean it’s out of reach for you.

At Moore Benefits, we offer a range of long-term care plans for groups as low as 15 people. Plans are portable and coverage can be extended to family members (grandparents, parents, spouses, adult children, etc.).

Interested in learning more? Our team is happy to answer any questions you might have about putting a long-term care plan in place for you and your employees.

Health Care Reform Update May 2011

To align the federal tax code with the health care reform law, the IRS issued a notice in March 2010 that allows employees to exclude from their gross income any employer-sponsored accident or health insurance benefits for children younger than 27. However, some states – including California – did not make similar changes to state tax code in 2010.  

On April 7, 2011, Gov. Jerry Brown signed a bill that makes health care benefits for children under age 27 exempt from taxable income in California. The law took effect immediately, and it applies to tax returns for 2010 and future years. For more information, go to http://www.ftb.ca.gov/professionals/taxnews/Patient_Protection_and_Affordable_Care_Act.shtml

Broker Compensation | Medical Loss Ratio

As part of health care reform, insurance carriers as of January 1, 2011, must spend 80% – 85% of premium dollars on “patient care.”  So their “loss ratio” cannot exceed 80% in small group, and 85% in large group.  The lion’s share of premiums must be used to pay doctors, hospitals, pharmacies and the like.  That leaves no more than 15% – 20% to provide ID cards, customer service staff, and overhead costs.

Most health insurance carriers in California already meet the 85% loss ratio. Insurance carrier profit margins average 3% per year.  So, the huge insurance premiums we pay now are due more to the higher cost of providing care than inflated insurance company profits.

There is legislation pending in Congress now to allow brokers to be paid as a “pass through” cost, similar to the way insurance carriers pay their taxes.  This way, the broker who is the insured’s advocate, shopper and educator, can be included (or not) as an add-on cost.  Otherwise, insurance carriers will be forced to cut broker commissions or perhaps eliminate the brokerage system altogether. 

Repealed | 1099 Expanded Provisions

Part of the PPACA health care reform included a new and expanded 1099 reporting rule, which required business owners to report payments for any purchase of “property” totaling $600 or more to a single payee.  This would have applied to various goods, computer and office equipment, tools, fixtures, and so on. 

Another little known new rule was a requirement for private individuals to complete a 1099 for receipt of rental income for $600 or more. These two new requirements would have created a crushing burden of paperwork for taxpayers and the IRS, alike.

Last week, President Obama signed the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011.  This new law repeals both of the expanded 1099 reporting requirements mentioned above and allows the 1099 rules previously on the books to remain unchanged.

Repeal of Expanded Information Reporting Requirements

http://www.irs.gov/govt/fslg/article/0,,id=238635,00.html

New Guidance | W-2 Reporting of Health Care Costs

PPACA requires employers to report the cost of employer-provided health coverage to employees on annual W-2 forms.  Though the amounts are not taxable, they will be used to provide information about the cost of health care.

On March 29, 2011, the IRS provided guidance in Notice 2011-28.  Here are the highlights:

• Will not be mandatory for 2011 Forms W-2
• Becomes mandatory with 2012 Forms W-2 for most employers
• Smaller employers have until the the 2013 Forms W-2 (“smaller” defined as employers who file fewer than 250 Forms W-2 for 2011)

Health care costs to be reported include the aggregate cost of employer-sponsored group health coverage.  For self-insured plans, that would be the “applicable premium” for purposes of COBRA continuation coverage.  This does not apply to contributions to Health Savings Accounts, Medical Savings Accounts or Flexible Spending Arrangements.  It also does not apply to long term care insurance or for a separate policy for dental or vision coverage.  If the dental and vision are “bundled” into the same policy, then it would be includable.

IRS New Release Notice 2011-31 (3/29/2011)
 IRS Issues Interim Guidance on Information Reporting of Employer-Sponsored Health Coverage
 http://www.irs.gov/newsroom/article/0,,id=237870,00.html