What Questions Should You be Asking?
Employee benefits are one of the most significant bottom line costs for any organization. Chief financial officers play an essential role in determining what benefit plan solutions not only fit into the organization’s budget, but have the potential for the greatest cost savings. As you plan for the coming year’s expenses and work with your human resources director and benefits consultant to determine the right employee benefit solutions for your employees, ask the following questions:
Is our current health benefit plan at risk for the Affordable Care Act’s (ACA) Cadillac Tax?
The Cadillac Tax is a 40 percent excise tax on employer-sponsored health plans with annual premiums in excess of $10,200 for individual coverage, and $27,500 for family coverage. The mandate is set to go into effect in 2018¹, leaving employers only two full calendar years to make plan changes in order to avoid the tax. For organizations that are collectively bargained in particular, it may be necessary to begin negotiations and planning now, in order to avoid the tax in 2018. To mitigate the risk of the tax, some employers are choosing to restructure benefits, move to narrow networks, or offer a high-deductible health plan (HDHP) in order to reduce overall plan costs and health plan value.
What is the cost of our spousal coverage?
According to BenefitsPro, the average cost of providing health care for a family was $16,351 in 2013, a 4 percent increase from the year prior, and employees paid, on average, only $4,565 of that total. As part of a trend to not only reduce overall health care costs, but also as a strategy to further avoid Cadillac Tax implications, a growing number of employers are restricting spousal benefit coverage by implementing a working spouse rule. The rule stipulates that if the spouse of an employee has access to primary health care through his/her own employer, and the employer pays for a designated portion of the single coverage cost, the spouse is not eligible for coverage under your plan. As an alternative, some employers are allowing spouses to remain covered, but are adding a surcharge to the cost for the employee. CFOs should weigh the cost benefits of a working spouse rule against how such a significant change may be viewed by employees. Though bottom line costs are a priority, recruitment and retention of talent must be considered with every benefit decision.
Are we conducting eligibility audits?
One of the largest causes of benefit leakage is outdated or inaccurate coordination of benefits. Employees may inadvertently fail to notify their employer of a change in their dependent’s status, but regardless of the reason, employers have an obligation to protect their health plan by ensuring that claims are not paid to anyone who is not truly eligible for coverage. Eligibility audits are a helpful tool for identifying such scenarios as dependents that have exceeded the plan’s age limit, a change in marital status such as a divorce, or cases when a child is not a legal dependent per the terms of the plan, such as a nephew or grandchild. According to Employee Benefit Advisor, a dependent eligibility audit can provide a typical ROI of nearly 15 percent and millions of dollars in cost savings. Organizations should conduct an eligibility audit at least every four years in order to identify enrollees who, per the plan guidelines, should no longer be eligible for coverage
Have we considered self-funding?
According to the Kaiser Family Foundation’s 2014 Employer Health Benefits Survey, more employers are self-funding their employee benefits, and that number has been on the rise. According to Kaiser, 15 percent of covered employees at small companies with 3-199 employees, and 81 percent of covered employees at larger firms, are enrolled in plans which are either partially or completely self-funded. CFOs should consider the advantages of self-funding, which include a greater flexibility in plan design and benefit options, access to actionable claims data, and lower administrative costs. Self-funding also provides enhanced cash flow options. Unlike fully insured plans that require advanced premium payment, under a self-funded plan, claims can be funded as they are due, which allows employers to keep more money in a bank account where it can earn interest.
For a health benefit plan assessment and customized cost-avoidance solution for your health benefit plan, contact the benefit experts at POMCO today.
¹ After this article was published in December 2015 Congress delayed the Cadillac tax until 2020. Read more here.