Friday, 29 April 2011
California Pre-Tax | Dependents to Age 26
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Repealed | 1099 Expanded Provisions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
Monday, 22 November 2010
Health Care Reform, also known as PPACA, provides that most everyone must purchase health insurance, and insurance carriers must offer it to everyone by the year 2014. One way to facilitate this mandate is to create state “Exchanges” to allow individuals and small businesses to pool together and purchase health insurance more affordably.
On September 30, Governor Schwarzenegger signed two bills, AB 1602 (Perez) and SB900 (Alquist), that made California the first state to have passed legislation in accordance with the health care reform bill. It is know as the “California Health Benefits Exchange”.
This Exchange is a purchasing pool for individuals and small group plans, for employers with 1 to 100 employees, to use premium tax credits and cost-sharing subsidies. These credits and subsidies may be used by moderate income persons (defined as up to 400% of federal poverty level), and those whose employers either do not offer affordable health insurance coverage. Private insurers will compete to offer QHPs (Qualified Health Plans) inside the Exchange, which are five HMOs and five PPOs. They are referred to as Bronze, Silver, Gold, Platinum, and a lower cost “catastrophic plan that may be sold only to people under age 30 or who qualify for an affordability exemption from the individual mandate.
Certain employers with more than 50 full-time equivalent employees (“FTE”) will be required to pay a penalty if they do not offer “affordable” health insurance to employees, and at least one of their employees receives a premium credit in the Exchange. The penalties are weak, in comparison to cost of health insurance, so we’ll have to see how that works out. Small companies do not have to worry about offering coverage if they are not doing so currently, and larger companies who already provide good benefits to their employees have no worries about penalties, either.
There will still be insurance plans outside the Exchange for the majority of Americans, and the same plans offered inside the Exchange will be offered outside the Exchange, and at the same premium.
There are some aspects of these bills that create significant concerns with adverse selection and the viability of the Exchange relative to the outside market. The Exchange provides for no involvement of agents and brokers. The new law supports the use of “Navigators” to assist Californians in understanding and enrolling in Exchange Plans. Navigators need not be trained or licensed, and may end up being nothing more than a call center. My humble opinion, as an insurance broker, is that without agents and brokers to help with the educational outreach that must occur, the Exchange will not be as effective as it could be.
The operation of the Exchange will be supervised by a board of five appointees, with virtually no outside governance. This governing board will select participating insurance carriers, define the health plans, and set procedures for how the whole thing will work. As Bill Robinson, CAHU VP of Legislation points out,
“So neither the CA legislature, nor the elected state officials, nor state agencies nor the courts will have any jurisdiction over the actions of this new board. They are also exempt from the “open meeting laws”, and state pay review standards, and a lot more. This is how the State Compensation Fund operated for many years, until 3 or 4 years ago Steve Poisoner stepped in and somehow secured a court order to audit the State Fund. The result revealed a horrendous amount of corruption, fraud and excess pay levels within the State Fund. This could also happen to the new Exchange governing board.”
In the hopes of avoiding this nightmare, the governing board is required to file an annual report to the Legislature and Governor on expenses, performance, operations, and progress. This report is also posted on the Exchange website. The budget must also be posted on the website, including staff salaries.
From a cost standpoint, there is a great unknown with the Exchange, and could end up being much more costly than we expect. If the Exchange is required to be self-sustaining, and not supported by additional tax dollars, the outside market may end up being more cost competitive. There are already two states with Exchanges in place, passed prior to PPACA, known respectively as the Massachusetts Connector and the Utah Exchange. The original projections for the Massachusetts Connector program were to ultimately cover approximately 215,000 people at a cost of $725 million. By June 2011 enrollment is projected to grow to 342,000 people at an annual expense of $1.35 billion.[1]
That means that the Exchange could end up housing only the “bad risk” and cause the rates of those plans to rise disproportionately compared to the outside market. Those who qualify for the subsidies and tax credits may be the only ones who can afford to buy insurance through the Exchange. The California Health Benefits Exchange requires that the same plans must be offered inside and outside the plan, however, insurance carriers may offer whatever plans they want outside the Exchange.
[1] ^ Alice Dembner url=
http://www.boston.com/news/health/articles/2008/02/03/subsidized_care_plans_cost_to_double+(February 3, 2008). “Subsidized care plan’s cost to double: Enrollment is outstripping state’s estimate”.
The Boston Globe.
Monday, 17 May 2010
With all the focus on health care reform, it is easy to lose track of all the OTHER new laws that affect employee benefits. A number of new federal laws and regulations were enacted and adopted in 2008 and 2009 that will have 2010 compliance implications for many employers. Here’s an overview of new requirements for the 2010 plan year.
The Genetic Information Nondiscrimination Act of 2008 (GINA)
The federal departments of Labor, Health and Human Services and Treasury issued an interim final rule to implement the Genetic Information Nondiscrimination Act of 2008 (GINA) in October 1, 2009 went into effect on December 7, 2009. The new law and rule prohibit group health plans from discriminating on the basis of genetic information and strictly limits the collection of any information that could possibly contain genetic information by employers. Unfortunately, the rules extend these prohibitions to family-history questions on health-risk assessment (HRA) forms used to place people in appropriate employer-based wellness and disease management programs. They also prohibit providing any incentive or reward for employees who complete an HRA.
This is an interim final rule, which means while it could be changed for 2011, its requirements are in effect for the 2010 plan year. Since its effective date was just December 7, 2009, it is very important to make sure your company is not unintentionally out of compliance. The majority of employer-sponsored health benefit plans are based on the calendar year, and many calendar-year plans have already distributed HRAs that include questions about family medical history as part of their open enrollment materials for the 2010 plan year. These plans may or may not have expectation of getting these documents back before January 1, 2010, and may have rewards already planned and promised to employees for completion to be distributed after the start of the new plan year. If this is the case, please take steps to correct your wellness or disease management programs right away!
Mental Health Parity
For most group benefit plans (all calendar-year plans), the Wellstone-Domenici Mental Health Parity and Addiction Equity Act goes into effect on January 1, 2010. The law applies to employers of more than 50 people who provide mental health and substance abuse services as part of the employee benefits program. While large employers are not required to provide those benefits to employees, those who do may not impose any stricter financial requirements on mental health or substance use coverage than the predominant financial requirements for medical and surgical coverage under the plan. Generally, this means plans may not have higher cost sharing provisions for mental health and substance abuse benefits (e.g., deductibles, co-payments and out-of-pocket requirements) than those that apply to medical and surgical coverage. In addition, plans may not have stricter annual and lifetime dollar limits or any more restrictive coverage limits on the number of office visits or similar restrictions on the duration of coverage for mental health or substance use services than there are for medical or surgical treatment generally. And if the plan provides out-of-network benefits for medical and surgical services, then they also have to provide them for mental health and substance abuse, and they cannot be subject to stricter financial requirements or treatment limitations than those that apply to out-of-network medical and surgical services.
Michelle’s Law–Coverage for College Students
Michelle’s Law, which was signed in 2008, also goes into effect on January 1, 2010 for calendar year plans. It applies to all most all group plans if they cover dependents and use student-status as a means of determining whether or not an individual is a dependent. This measure prohibits group health plans from terminating a college student who is on medical leave from school or has had to reduce their college status to part-time for medically necessary reasons for one year after the first day of the medically necessary leave of absence, or until the date coverage otherwise would terminate under the terms of the plan (like exceeding the plan’s age limits).
Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA)
The passage of CHIPA last year created special enrollment rules, effective April 1, 2009, that require employers to amend their plans to allow special enrollment rights (similar to a qualifying event under HIPAA) for individuals that become eligible for state-paid coverage under CHIP or lose their CHIP eligibility. In addition, if your state offers a CHIP premium assistance program to help subsidize employer-sponsored coverage as an alternative to CHIP enrollment, employers must provide their employees with annual notification of the existence of the premium assistance program.
COBRA Premium Subsidy
The temporary 65% federal subsidy of COBRA health insurance premiums for workers and their families who were involuntarily terminated between September 1, 2008 and December 31, 2009 began to phase out last month. Employers are responsible for advancing the premium subsidy and receive a federal tax credit as reimbursement. The reduced-cost premiums only last for nine months, so those who started getting subsidized coverage in March of 2009 — the first full month after the stimulus bill was signed — lost their subsidy in December 2009. Unless the subsidy is extended by new legislation (which is pending but has not been acted on yet) then no newly laid-off workers are currently eligible. However, those involuntarily laid-off workers who started receiving subsidies after March can continue receiving subsidized benefits in 2010. The expiration date for those individuals continues to be nine months after the start of benefits, meaning that even without any federal subsidy extension legislation employers will potentially need to continue to advance this subsidy until August 2010 for eligible individuals.
Protecting the Privacy of Medical Information
Privacy and security rules under the Health Insurance Portability and Accountability Act (HIPAA) were extended this year, so that they now cover all business associates of entities covered by HIPAA, including health care plans as well as third-party administrators and other vendors. The potential civil penalties for HIPAA violations were also substantially increased and a tiered penalty structure based on categories of violations became effective on November 30, 2009, and applies to violations occurring on or after February 18, 2009. Also, interim final rules on the breach notification requirements and guidance on encrypting/decrypting protected health information became effective September 23, 2009, but the Department of Health and Human Services has announced they will not begin enforcement of the rules for failure to provide notifications that are discovered before February 22, 2010. Until then, covered entities are expected to attempt to comply and DHHS will help covered entities through technical assistance and voluntary corrective action.
Reprinted with permission. Content copyright © 1998-2010 National Association of Health Underwriters. All rights reserved. National Association of Health Underwriters · 2000 North 14th Street, Suite 450 · Arlington, VA 22201
703.276.0220 · fax 703.841.7797 · info@nahu.org
Wednesday, 4 February 2009
2009 Benefits Guide
This guide allows business owners to see whether your company is maximizing available health care products in the ever-changing world of employee benefits. The approach here is understandable, since the examples are in terms that everyone can relate to—- Ice Cream!
If you are starting from scratch, be sure to implement these strategies over time, rather than all at once. A trusted insurance broker, who is competent and caring, and understands your needs, will make this journey much more fulfilling. Chocolate, Vanilla and Swirl – plus Strawberry! What flavor is right for you? Take a look at the terms below and decide what blend will work for your unique situation.
Chocolate, Vanilla and Swirl – plus Strawberry
Chocolate: You have funds to lure the best and brightest, how do you maximize your dollar?
Vanilla: You want the best protection for your employees at the lowest cost.
Swirl: You need to be creative in what you choose from the Chocolate menu.
Strawberry: You have no interest in offering a real benefits plan, yet you are willing to offer voluntary plans that pass the smell test.
HINT: You can mix and match to make your own Benefits Sundae.
Chocolate. $$$$
- Health plans that maximize both tax advantaged plans and traditional choices. Employer contribution: 75% EE / 50% Dep. (or more)
- Disability plan, employer-paid, with executive carve out, and business overhead protection for key employees.
- Retirement plan, with match, possibly ESOP.
- Life plan, basic life and voluntary; key man life to protect the business.
- Voluntary (employee-paid) plans (accident, specified illness) that are administered through payroll with minimal effort.
Vanilla. $$
- Basic health plan that covers preventive care, catastrophic loss, and some level of day to day expenses. Employer contribution: 50% EE / 0% Dep.
- Ancillary package including dental, vision and life, which could be employee-paid (voluntary or employer-paid).
- Direct deposit voluntarily from employees to IRA, savings or credit union.
Swirl. $$$
- Upgrade health plan dollars from Vanilla program. Offer one traditional copay plan in HMO and PPO, and one maximized tax-advantaged plan. Employer contribution: 75% EE / 25% Dep.
- Add in disability insurance, either employer-paid or voluntary.
- No match 401k, or safe harbor 401k, if owners are profitable.
- Voluntary (employee-paid) plans (accident, specified illness) that are administered through payroll with minimal effort.
Strawberry. $
- Employer contribution: $10
- Access to government-sponsored programs (MediCal, AIM, Health Families) through community specialist contact.
- Offer TeleDoc, and NurseLines telephononic access systems.
- Offer limited medical plans which are NOT major medical, but help for uninsured who cannot be covered by government programs.
- No match 401k, or safe harbor 401k, if owners are profitable.
- Voluntary (employee-paid) plans (accident, specified illness) that are administered through payroll with minimal effort.
