HHS Announces 2017 Out-of-Pocket Maximums

Money and gavelThe Department of Health and Human Services (HHS) has announced the 2017 out-of-pocket maximums applicable to self-funded and fully insured employer health plans. The maximums for 2017 have been set as follows:

  • Individual coverage: $7,150
  • Family coverage: $14,300

All non-grandfathered health benefit plans in effect on or after January 1, 2014 are required to comply with the Affordable Care Act’s (ACA) mandate that employer health plans’ annual in-network out-of-pocket maximums not exceed HHS’ established limits. The 2017 limits represent an increase from the current 2016 maximums of $6,850 for individual coverage (an increase of $300), and $13,700 for family coverage (an increase of $600).

The out-of-pocket limits represent the maximum amount that an enrollee must pay for covered essential health benefits through cost-sharing. It typically includes the annual deductible as well as any cost-sharing obligations the enrollee must meet after the deductible has been satisfied. The out-of-pocket maximum does not include premiums, cost sharing associated with of out-of-network services, or the cost of nonessential health benefits.

According to a recent study by United Benefits Advisors (UBA), out-of-pocket costs have increased significantly over the past decade, although median plan limits have remained below HHS’ out-of-pocket maximums. According to UBA, both individual and family coverage plans saw significant increases in median in-network plan out-of-pocket maximums in 2015. It is expected that out-of-network expenses will continue to increase significantly as well, as employers continue to widen the cost-share gap between employer and employee responsibilities.

For solutions to help mitigate employee health benefit plan costs that don’t simply shift costs to valued employees, contact the benefits experts at POMCO today.


Congress Delays Cadillac Tax Until 2020

BusinessmanPresident Obama has signed into law a two-year delay of the Cadillac Tax. The delay is part of Congress’s $1.8 trillion omnibus spending deal, the Consolidated Appropriations Act of 2016. In response to strong concerns expressed by employers and labor groups regarding the potential negative financial impact of the tax, Congress proposed the two-year delay.

The Cadillac Tax was added to the Internal Revenue Code by the Affordable Care Act (ACA) and was originally slotted for 2018. It is a 40 percent excise tax on the health plan value  that exceeds $10,200 for individual coverage and $27,500 for family coverage. The tax would be imposed on applicable employers, health insurers and “persons who administer plan benefits.” The Consolidated Appropriations Act also makes the Cadillac excise tax deductible for those entities required to pay it. The tax was originally enacted as non-deductible, so the change in tax status will potentially ease the burden to some applicable employers.

The Consolidated Appropriations Act also authorizes the U.S. comptroller general and the National Association of Insurance Commissioners to study whether the ACA uses appropriate benchmarks to determine whether the tax should be adjusted to reflect age and gender factors when setting excise tax thresholds.

Over the past several years employers have started making strategic benefit plan decisions to avoid the pending tax, such as shifting costs to members, reducing benefits, or transitioning to high deductible health plans. Even though the tax has been delayed, employers are still encouraged to work with their benefits administration partners and brokers to assess whether their health benefit plan is at risk of being subject to the tax so that adjustments can be made prior to its eventual enforcement.

It is anticipated that the two-year implementation delay will provide time for further examination of the proposed Cadillac Tax law to allow Congress and the new Administration to further examine and consider how best to execute the proposed tax. Some are still hopeful that the tax will be repealed before January 1, 2020.


New Regulations Impacting the Calculation of Full Time Employees for the ACA’s Applicable Large Employers

ALE CalculationsThe recently signed Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 amends the section of the Affordable Care Act (ACA) that defines an applicable large employer, and will impact how employers calculate their total number of full time employees moving forward.

According to the Internal Revenue Service (IRS) an employer’s status as an applicable large employer is determined each calendar year and generally depends on the average size of the organization’s workforce during the prior year. If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an applicable large employer for the current calendar year and is therefore not subject to the ACA’s employer shared responsibility provisions or information reporting requirements for the current year.

If an employer does have at least 50 full-time employees, including full-time equivalent employees, on average during the prior year however, the employer meets the definition of an applicable large employer for the current calendar year, and is therefore subject to the employer shared responsibility provisions and the employer information reporting provisions.

The Surface Transportation and Veterans Health Care Choice Improvement Act now allows employers to calculate whether they meet the applicable large employer definition by excluding employees enrolled in TRICARE or veteran’s coverage. Since the effective date of this new provision is January 1, 2014, employers that will be impacted by this provision may recalculate their status for their current plan year.

Employers looking to recalculate their total number of full-time employees and full-time equivalents should note that not all TRICARE or veteran’s coverage plans will qualify as coverage, as not all plans meet the ACA’s definition of minimum essential coverage. More guidance is needed to determine which plans qualify. Employers should also be aware that this new provision only affects how an employer counts employees to determine applicable large employer status. Employees eligible for qualifying TRICARE or veteran’s coverage are not otherwise excluded from the employer shared responsibility requirements.

Employers who believe their applicable large employer status may be impacted by this new regulation may want to survey their employees to determine if any are covered by qualifying TRICARE or veteran’s coverage, and should seek the assistance of legal counsel before completing any filings.


Updated Information for Applicable Large Employers on the ACA’s Electronic Returns Filing Requirements

health care reformThe Internal Revenue Service (IRS) recently released updated guidance on the Affordable Care Act’s (ACA) requirement for applicable large employers to file information returns. The ACA requires applicable large employers to report to the IRS whether or not they offer their full-time employees and their employees’ qualified dependents, the opportunity to enroll in a health benefit plan that meets minimum essential coverage requirements. Employers who will be subject to the requirement relative to the 2015 plan year should make note of the new guidance issued that will impact information return forms 1094-B, 1095-B, 1094-C and 1095-C.

The ACA defines an applicable large employer as an organization that employed an average of at least 50 full-time employees (including full-time equivalent employees) during the preceding calendar year. Beginning in January 2016, applicable large employers that meet this definition will be required to file Form 1094-C, which is a transmittal report that summarizes the associated Forms 1095-C and a Form 1095-C for each employee who was full-time for one or more months during 2015.

Form 1095-C reports any offers of health care coverage, and any codes denoting affordability safe-harbor provisions, or other explanations affecting the applicable large employers’ liability for ACA Employer Shared Responsibility assessments, in monthly detail. The first Forms 1095-C must be provided to employees by January 31, 2016, and must be filed with the IRS in tandem with W-2 form deadlines. Employers filing 250 or more forms must file electronically.

Applicable large employers should note that the IRS has developed a new, and unique electronic filing system just for the purpose of the ACA’s electronic filing requirements. The new system will be known as the Affordable Care Act Information Return System (AIR). To file electronically, applicable large employers must submit an Application for Transmitter Control Code (TCC), which establishes the organization’s registration as either a software developer, transmitter, or issuer. Note that for purposes of the AIR system, an “issuer” is a business that is required to file ACA information returns and is transmitting only their information returns. All ACA information returns must be submitted in XML format. Returns will not be accepted electronically in any other format. Applicable large employers must also plan to complete required testing. Test files must be submitted in an XML format, and the submitter must verify that the IRS processed the transmission and returned a Receipt ID, acknowledgement, and an associated error file.

Applicable large employers should be aware that ACA information returns can be subject to the same penalties under IRC Sections 6721 and 6722 that apply to other information returns, such as Forms W-2 and the 1099-series. These penalties can be as much as $100 per statement up to $1.5 million annually for failure to file, late filing, non-electronic filing, or for incorrect or incomplete information. While the IRS has stated that relief is available from penalties for ACA information returns filed for calendar year 2015, the penalty relief only relates to incorrect or incomplete information reported. No relief is provided in the case of applicable large employers that fail to file, fail to file on time, or that fail to file in the required format.


Final ACA Regulations: Summary of Benefits and Coverage and Uniform Glossary

ACA changesOne of the primary goals of the Affordable Care Act (ACA) was to improve access to affordable health care for all Americans. As a strategy to achieve this goal, the Federal Government acknowledged that it would be necessary to educate Americans on the health coverage plan options available to them in order to enable them to choose the plan option that best suits their needs and the needs of their dependents. To this end, in 2012, the ACA implemented the summary of benefits and coverage (SBC) mandate, which required all health plans to make available a document that would help individuals eligible to enroll in coverage to understand and compare available health coverage options. Each SBC is required to include the uniform glossary, a government-issued list of commonly used health care terms and definitions.

SBCs must be provided by all health plans and insurance carriers in a standard format as defined by the ACA, and may only be different based on the specific benefits offered by the plan. Recently, the Department of Health and Human Services (HHS), the Department of Labor (DOL), and the Department of the Treasury (collectively, The Departments) have issued final regulations regarding the SBC and uniform glossary that clarify the original regulations. Key among the clarified regulations are the following provisions:


Provision to Require Online Access to Plan or Policy Information

The final regulations clarify that issuers must include an Internet web address where a copy of the master plan document or individual coverage policy can be reviewed and obtained. The final regulations require these documents to be easily available to individuals, plan sponsors, and participants and beneficiaries shopping for coverage prior to submitting an application for coverage. The final regulations also clarify that all plans and issuers must include in the SBC contact information for questions.


Provisions to Reduce Unnecessary Duplication

The final regulations help to prevent unnecessary duplication of materials. The 2012 regulations stated that if either the plan administrator or the insurance carrier or third party administrator (TPA) provides the SBC to a participant or beneficiary in accordance with the timing and content requirements, both will have satisfied their SBC obligations. The final regulations apply this same rule in the following situations:

  • A group health plan has a binding contractual arrangement where another party assumes responsibility to provide the SBC
  • A group health plan uses two or more insurance products provided by separate issuers to insure benefits with respect to a single group health plan
  • An SBC for student health insurance coverage is provided by another party (such as an institution of higher education).


Provision Regarding Formatting and Content Changes

The original ACA regulations limited the SBC to four double-sided pages. Since then however, some plans have expressed concern regarding the ability to include all required information in this amount of space. The final regulations clarified that the new template and associated documents that will be released will address specific issues related to formatting all of the required information into the four-page, double-sided template.


Effective Dates

For group health plans, the final regulations generally apply to coverage that begins on or after September 1, 2015.

Please be advised that the SBC’s are not a substitute for a complete listing of benefits which are found in the Summary Plan Documents.


Remember to Embed Your Out-of-Pocket-Maximums for 2016

Affordable Care Act (ACA), Out-of-Pocket-MaximumsSix years after the Affordable Care Act (ACA) was passed into law, employers are still addressing ACA requirements by modifying their benefit plan to meet pending mandates. Employers preparing for the 2016 benefit plan year should take into consideration their health plan’s out-of-pocket maximums. The ACA requires that health benefit plans limit the annual maximum cost sharing imposed on plan enrollees for out-of-pocket costs associated with essential health benefits. For plan years beginning in 2016, the maximum out-of-pocket cost limits will be:

  • $6,850 for individual coverage
  • $13,700 for family (or all forms of non-self-only) coverage

On February 27, 2015, The Department of Health and Human Service (HHS) mandated that the $6,850 maximum limit on individual coverage will apply to each individual irrespective of whether that individual is enrolled in self-only coverage or family coverage. Based on this requirement, an enrollee with family coverage would not be subject to cost-sharing for costs associated with covered benefits if one of two scenarios has been met:

  1. The enrollee and his/her enrolled dependents have reached a combined out-of-pocket limit of $13,700. Under this scenario, no members of the family would be subject to cost-sharing for covered benefits in the future.
  1. Any one of the family members reaches the embedded individual coverage maximum of $6,850. Under this scenario, only the member of the family that reached the $6,850 individual limit would not be subject to cost-sharing for covered benefits in the future.

On May 26,2015 it was clarified by HHS and The Department of Labor (DOL) that this mandate applies to all health plans, including non-grandfathered plans, large and small group plans, high-deductible health plans (HDHP), and plans that are both fully insured and self-funded.

Employers implementing this rule within their HDHP should take special care to clearly communicate this change to their plan members. The embedded out-of-pocket maximum requirement may cause confusion for HDHP members since the ACA maximum out-of-pocket limit is not the same as the maximum out-of-pocket limit established by the Internal Revenue Service (IRS) on HDHPs. In 2016, HDHP dollar limits are only $6,550 for individual coverage and $13,100 for family coverage. Therefore, for members enrolled in individual coverage in 2016 in an HDHP plan their maximum out-of-pocket limit for a particular individual will be $6,550 while the limit for individuals enrolled in family coverage in 2016 in an HDHP will be $6,850. These family plan members will also be subject to an earlier limit if the individual’s aggregate family out-of-pocket costs exceed the $13,100 family coverage limit.

Employers that currently do not have an embedded out-of-pocket maximum should begin working with their benefit plan administrator and broker now to make necessary plan changes and to build a member communication strategy, to be prepared for the changes to go into effect in 2016.


The Impact of Marriage Equality on Health Benefit Plans

Impact of Marriage Equality on Health Benefit PlansOn Friday June 26, the Supreme Court of the United States ruled in a historic decision in the case of Obergefell v. Hodges, by a 5-to-4 vote, that the Constitution guarantees a right to same-sex marriage. This latest decision comes exactly two years after a majority opinion in United States v. Windsor struck down a federal law denying benefits to married same-sex couples. The Obergefell v. Hodges decision, which comes after decades of activism by same-sex couples, resulted in the legalization of same-sex marriage in thirteen states that had previously banned such unions.

It seems that the ruling to allow same-sex unions is aligned with the spousal benefit eligibility philosophy of the majority of health plans. According to consulting firm Aon Hewitt, 77 percent of employers with employee health plans already offer same-sex partner coverage. The decision to overturn same-sex marriage bans at the federal level will still impact many employer health plans, however. In particular, the employers that will be most impacted will be those in the four states that still banned same-sex marriages prior to the Obergefell v. Hodges ruling: Kentucky, Michigan, Ohio and Tennessee.

In light of the Obergefell v. Hodges decision, employers should consider their spousal benefit classifications in consideration of their employee recruitment and retention goals, as well as any budgetary limitations. Organizations reviewing their dependent eligibility requirements should take the following into consideration in reaction to this impactful legal determination:

  1. Plans that did not already allow for coverage of same-sex partners and that will make the allowance moving forward, may want to conduct an analysis to determine if the cost for spousal coverage should be adjusted to accommodate a greater number of spouses being enrolled onto its health benefit plan.
  1. Depending on their employee culture and benefit goals, plans that allowed for coverage of same-sex domestic partners, but not same-sex spouses, may want to consider changing coverage to allow coverage for anyone who meets the legal definition of a spouse, regardless of whether they are a same or opposite sex spouse, and eliminating the domestic partner eligibility classification.
  1. Conversely, employers that previously only allowed coverage for same-sex, but not opposite sex, domestic partners, want to expand their definition of a domestic partner to allow for opposite gender domestic partners who meet defined financial dependency requirements.
  1. Employers should also discuss with their legal counsel, benefit consultant, and plan administrator or insurance carrier, the impact of any applicable state or local laws that may require employers to offer domestic partner benefits.
  1. Employers should work with their benefits administrator or insurance carrier to ensure that all enrollment forms are updated accordingly to accommodate any changes to classes of eligible dependents.
  1. Employers should work with their benefits administrator or insurance carrier to ensure that all plan documents are updated to document any benefit class changes, and that those documents are made available to plan members.
  1. Organizations should discuss with their legal counsel if they will be impacted by any changes to state income tax requirements relative to employer-provided benefits. With anticipated changes to state income tax treatments, employees with same-sex spouses covered by employer plans may no longer need to pay imputed income on those benefits.

Self-funded employers should also be aware that the Obergefell v. Hodges ruling will be applied differently for fully insured plans and self-insured plans. Any fully insured plan will be required to extend coverage to spouses regardless if they are opposite or same-sex; however, self-funded plans are not legally required to extend benefits to same-sex spouses in certain limited circumstances. Regardless, self-funded employers should seriously consider including same-sex spouses in their coverage, as not doing so may put them at risk of a discrimination lawsuit being filed against them.


Reminder: PCORI Filing Due to IRS by July 31, 2015

PCORI Filing Due to IRS by July 31, 2015

As a reminder to self-funded plan administrators subject to the ACA’s PCORI fee mandate, the deadline to file the required paperwork with the Internal Revenue Service (IRS) is July 31, 2015.

The Patient-Centered Outcomes Research Institute’s Trust Fund fee is a fee on both fully-insured and self-funded health plans that helps to fund the Patient-Centered Outcomes Research Institute (PCORI). The goal of the institute is to advance the quality and relevance of evidence-based medicine. To fund PCORI, all health insurers and self-funded plans are required to pay an annual fee for plan years ending after Sept. 30, 2012, and before Oct.1, 2019. For the 2014 plan year, the PCORI fee is $2.08 per covered life for plan years ending on or after October 1, 2014. The total fee owed by each plan must be reported on, and remitted with, IRS Form 720 by July 31, 2015.

Note: For plan years ending on or after October 1, 2013, and before October 1, 2014, the fee due on July 31, 2015 is $2.00 per covered life due on July 31, 2015.

The fee may not be paid from plan assets. It is not a permissible expense of a self-funded plan and cannot be paid in whole or part by participant contributions. As such, the PCORI expense should not be included in the plan’s cost when calculating COBRA premium payments. The fee is a tax-deductible businesses expense for self-funded employers, however.

For self-funded plans, the employer, or plan sponsor, is responsible for submitting the fee and accompanying paperwork to the IRS. Third party administrators (TPA) are not permitted to remit payment on behalf of the plan sponsor.

The process of reporting and remitting payment for the PCORI fee is largely unchanged from last year. To complete the process, using Form 720, on page two, Part II, employers should designate the average number of covered lives under its “applicable self-insured plan.” The number of covered lives is to be multiplied by $2.08 for calendar year plans, or $2.00 for any plans whose benefit plan year begins on the first day of any month from February through September. The total amount calculated is the total amount owed to the IRS.

720-V, the Payment Voucher associated with Form 720, should indicate the tax period for the fee is “2nd Quarter.” This quarter designation is an essential step in the reporting processes, as failure to properly designate “2nd Quarter” on the voucher will trigger a tardy filing notice from the IRS.


The Importance of Safety Training for Part-Time Employees

In the wake of the Affordable Care Act’s (ACA) requirement that applicable large employers provide health benefit coverage to employees working at least thirty hours or more per week, or face a potential financial penalty, many employers are increasing their hiring of part time employees. Employers facing an increased part-time population should understand the importance of providing proper safety training to part-time employees. Providing proper training to part-time employees may help employers avoid the potential for increased workers’ compensation claim costs.

This article from Business Insurance predicts that employers that have modified their staffing model to hire more part-time employees may face higher workers’ compensation claim costs. An increase trend in workers’ compensation claims in the state of California may be indicative of a burgeoning national trend. In August of 2014, the Workers’ Compensation Insurance Rating Bureau of California reported a 19% increase in workers compensation indemnity claims in Los Angeles County over the past three years.

The potential for increased workers’ compensation claims may be caused by three primary factors:

  1. Employers are replacing full-time employees with a larger number of part-time employees. As a result, employers are managing an increased number of new, less seasoned employees. These new employees tend to have a higher potential for accidents and injuries sustained in the workplace.
  2. An overall increase in part-time employees means an overall increased number of Americans in the workforce. While a decrease in unemployment is certainly a positive labor trend, on an employer level, an overall larger number of total employees, both full and part-time, can mean an increase in the overall total number of workers’ compensation claims. This is a costly reality for those employers looking to save on the cost of health insurance coverage by hiring part-time employees. As a further financial complication for employers that choose to fully-insure their workers’ compensation plan, an overall increased number of workers’ compensation claims can increase an employer’s experience modification factor, ultimately leading to higher plan premiums the following year.
  3. Potentially the most significant factor is that part-time workers may not receive the same level of safety and job training as their full-time counterparts, or may not receive any training at all.

The third factor may be the easiest for employers to impact and mitigate. Employers should offer the same level of job safety and training to part-time workers as is provided to full-time employees. This additional investment in these individuals may help to keep them safer on the job and reduce the employer’s exposure to an increased number of workers’ compensation claims associated with these employees.

For information on safety committee design and development services available from POMCO that can benefit both your full- and part-time employee populations, contact our Risk Management experts.


Three Financial Benefits of Self-Funding for Small Businesses

Large employers with 1,000 or more employees have long known the financial benefits that self-funding can provide: improved cash flow, avoidance of insurance industry taxes and fees, and reinvestment of budget dollars back into the benefit plan. Smaller organizations, those with 100 to 1,000 employees, are also starting to realize the financial benefits of self-funding. In addition, newly mandated elements of the Affordable Care Act (ACA) have offered additional financial benefits for smaller organizations to self-fund. What follows is a list of three key financial benefits of self-funding for small businesses.

  1. Strategic alignment of financial goals with employee benefit goals

    For organizations to remain competitive in the marketplace relative to the recruitment and retention of employee talent, organizations must offer a competitive benefit package; one that offers benefits that fit the specific needs of the employee population and that are affordable from an employee cost-share perspective. A fully-insured health benefit plan with pre-defined benefits does not offer employers the ability to easily and quickly customize their benefit options and cost-share elements, such as copays, deductibles, and coinsurance. For small employers, customization of benefits is essential to employee satisfaction and budget alignment.

    Self-funding allows smaller organizations to align their goals of offering a competitive and personalized employee benefit plan to their employees with their goal of financially managing their overall plan costs.

  2. Avoidance of costly ACA health insurance taxes

    The ACA has imposed several new employer cost-share requirements in the form of taxes and fees; however the tax which could be the most financially significant to many organizations, and referred to as the health insurance tax, is not applicable to self-funded group health plans. The health insurance tax aims to raise eight billion dollars in 2014, increasing to $14.3 billion in 2018. The tax is largely passed on from insurance carriers to employers in the form of premium rate increases. It was estimated that in 2014, to accommodate the tax, employer premiums were increased, on average, anywhere from .9 percent to 2.3 percent, and will increase by as much as, on average, 2.8 percent to 3.7 percent by 2023.

    Self-funded employers stand to avoid the financial burden of this tax in both the short and long-term. In addition, self-funded plans avoid other state taxes and fees that impact fully-insured plans.

  3. Reporting Access and Data Analysis

    An expert self-funded benefit plan administrator can offer an employer plan experience data and analysis that far exceeds the level of reporting provided by insurance carriers for their health plan products. Under a self-funded model, an employer is given full access to health claim data that can be used to help the organization to make informed decisions regarding provider networks, benefit design, cost-share, and wellness plan interventions. In a self-funded model, all of these elements can be customized to mitigate overall plan costs. Many insurance carriers do not provide this level of data to employers that have purchased fully-insured health plans. The lack of this detailed information leaves organizations unable to understand the reasons for their skyrocketing annual premium increases, and further unable make informed proactive decisions that can impact claim costs.

    A self-funded employer, on the other hand, can work with their plan administrator to analyze the diagnoses most-impacting their employee population, such as diabetes or chronic obstructive pulmonary disorder. Many such chronic conditions may be impacted by the addition of wellness intervention programs or case management services. An expert self-funded plan administrator that maintains its own proprietary provider network can work with the organization to analyze the providers utilized most frequently and attempt to further custom negotiate rates with key providers to optimize overall claim costs.

    This level of analysis enables impactful strategic decision-making that can result in significant plan savings and further plan customization that can ultimately lead to a more attractive benefit plan offering from an employee recruitment and retention perspective.

    If your organization is looking to make the transition from a fully-insured health benefit plan to a self-funded plan, and you would like to learn more about the benefits of self-funding, download our free white paper, Self-Funding 101.