Self-Funding: Points to Consider

Gaining popularity similar to it’s peak in the early 1980’s, self-funding is making a comeback. Many brokers / advisers are not well versed in this concept, and therefore are less likely to present the approach to clients. One point they will also likely not share with clients: commissions are paid on the stop loss premiums, not the entire premium amount.

There are reasons to consider self-funding that typically outweigh the reasons not to self-fund. Most importantly, you should be working with an experienced adviser. One who works with self-funded clients day-in and day-out. An adviser who has relationships with a number of Stop Loss Carriers, Third Party Administrators (TPAs) and Pharmacy Benefit Managers, just to name a few.

The first point to consider – self-funding is not a “one year” solution. I do not recommend self-funding to any of our clients if they are not willing to commit to an overall 3-5 year plan. Typically the concept is a win for the client on average four out of five years, but you must be prepared for the bad along with the good.

Additionally, the size of the group should not deter your group from exploring self-funding as an option for your plan. I hear many of my peers say a group has to be at least 200 or 100 employees to consider self-funding, and that is just not true. If a client is financially stable and the adviser understands and communicates all risks involved in the contract, self-funding can be offered successfully as an alternative for clients with as few as 20-25 employees. Some of our clients in the range of 25 employees have been self-funded for over ten years, and are very happy with the stability of the rates over that time period.

Many smaller to mid-size clients should consider a closer look at self-funding due to some distinct advantages under the Patient Protection and Affordable Care Act (PPACA).

This is the first in a series of posts that will focus on the concept of self-funding. With 30+ years experience in all things self-funded, we have a lot to share. We welcome questions and hope those who read will learn something. Continue to follow us for more information coming soon.

Price Transparency in Healthcare

As a business owner, one of the most appreciated benefit offerings to our own employees is a price transparency tool. As one of the first agencies in Dallas to deliver the valuable behavior modification tool, it is amazing to see the product now being offered across the entire nation in under a decade. With over 2,000,000 members now covered, from the Houston Rockets to the employees of Southwest Airlines and Michaels, your employees could also benefit from a true concierge program.

As we implement plans with increased deductibles and copays, we need to give employees the tools and skills to support their efforts to become good consumers of healthcare. All of us have tools to price a vehicle before we head to the car lot. Few of our employees have ever had a tool to price a surgery, the price of which could be comparable to purchasing a car. We do not stop to analyze how much the surgery, the surgeon, the surgery center or even an MRI or prescription drug will cost prior to the procedure being performed. Our transparency tool can compare many choices side by side, and will take it a step further and schedule the appointment, complete the follow up and review the bills after they have been processed if your employees have questions.

Think of the potential dollar savings to your plan, and just as important, the time saved by your employees and the increased satisfaction level as they truly have a patient advocate working for them, hired by you.

For more information, contact Sharon McReynolds: smcreynolds@medconbenefit.com or 214-739-5215.

What Should You Look for When Searching for an Employee Benefits Advisor?

When evaluating, expanding and maintaining your benefits, including self-funding, fully insured or voluntary benefits, look for these qualities in a broker:

1. Comfort and trust level: Do you feel comfortable working with your broker? Do you feel they have your best interests in mind? Do you trust their intentions – are they assisting you with meaningful benefits or merely “selling” benefits?

2. Resources: Does your broker have resources to evaluate how your plans are working? Can they compare them to other plans in the marketplace; do they have benchmarking tools? Are they providing any level of HR services or tools?

3. Experience: Has your broker implemented both self-funded and fully insured plans? Have they worked with large groups, small groups? Do they have experience in traditional and voluntary plans? Short- and long-term disability? Long-term care? Do they have a working relationship with various carriers? Enough to know who requires what and who provides exceptional service?

4. Strategy: Is your broker experienced enough to actually think out of the box and provide innovative solutions? Do they have a long-term strategy for your future over a three- to five-year plan, or do they just bring you a spreadsheet with a “pick a rate” strategy for the year?

5. Compliance and Regulation: Is your broker well-versed in all things ACA (Affordable Care Act) as well as the DOL, ERISA, HIPAA and Plan Document requirements, just to name a few?

6. Compensation Disclosure: Do you know each and every year exactly how much your advisor is compensated on each product?

All of these questions should be answered with confidence in your relationship with your benefits partner. You know up front exactly what to expect from your CPA and your lawyer. They are strategic business partners and have responsibilities in the success of your firm. We submit that your benefits is every bit as important, should not your partner be chosen just as carefully?

The Affordable Care Act – How the Individual Mandate Impacts Your Employees

As the Patient Protection and Affordable Care Act (PPACA) continues to be implemented, employers and their employees have questions about how the health care law affects them.

In an effort to keep our clients up to date about PPACA, we commit to answering the many questions that arise. Here is a basic sampling of the top questions:

Q: What is the individual mandate?

A: The individual mandate is the provision in the PPACA that says most US citizens and legal residents must have health insurance. For a listing of exemptions refer to www.Healthcare.gov. Some examples include: those who are incarcerated, members of a federally recognized tribe, those with religious exemptions, etc.

Your employees who do NOT comply with the individual mandate will be responsible for penalties when preparing individual tax returns. For 2014, the penalty equates to the greater of $95 or 1% of your annual income. If you earn under $10,150, there is no penalty. For 2015, the penalty equates to $325 or 2% of annual income. For 2016, the penalty equates to $695 or 2.5% of annual income.

As you can see, the Affordable Care Act has a direct impact on your employees regardless of whether or not you offer coverage. Dollars spent paying penalty fees could be used to contribute to group health insurance premiums, which in turn can lead to numerous benefits for your business – including employee retention, higher morale and peace of mind for our employees.

Q: What is the exchange or marketplace?

A: The public marketplace, or exchange, is the website where individuals can comparison shop for health plans and sign up for coverage. You have probably heard this referred to as: www.Healthcare.gov.

Federal tax subsidies to help pay for medical coverage may be available to eligible individuals if they enroll for coverage through the public marketplace.

The types of plans offered through the marketplace must be qualified health plans and must meet certain “metallic” levels of coverage – bronze, silver, gold or platinum. These metallic designations refer to the actuarial value of the plan, or how much, on average, the plan pays for the cost of covered benefits.

Q: What are essential health benefits?

A: Effective for plan years beginning on or after January 1st, 2014, all plans offered through the exchange are also required to cover certain, essential benefits. The PPACA requires plans to cover at least 10 general categories of items and services:

  • Ambulatory patient services (outpatient care)
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder benefits, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care

Q: Who is eligible for a subsidy through the individual marketplace?

A: Some individuals are eligible for tax credits to assist with premium payments and cost-sharing. Individuals with incomes between 100% and 400% of the federal poverty level are eligible, a family of four with income between $23,850 and $95,400.

Q: As an employer, should I offer health insurance to my employees?

A: Should you decide not to provide health insurance to your employees, you may be subject to penalties of up to $3,000 per employee. If you do provide coverage, it must be affordable and meet minimum value requirements. To maintain affordability, premiums may not exceed 9.55% of an employee’s annual income.

Most employees will find coverage offered through an employer to be more affordable than coverage offered on the marketplace based on your contributions. You have to weigh the cost of providing the benefit against the penalties as well as the intangible impact of not offering any coverage to your employees.

For help in making this important decision, we can work with you through our many resources and tools to estimate potential penalties against the cost of providing health care coverage to your employees.

This content is provided without any warranty of any kind. MedCon has taken reasonable steps to ensure this information is accurate and timely. If you have specific questions that pertain to your unique business environment or industry, we recommend that you consult legal council.

NAPEO White Paper Released: “PEO’s – Keeping Turnover Low and Survival High”

The National Association of Professional Employer Organizations (NAPEO) has released its second white paper entitled “Professional Employer Organizations: Keeping Turnover Low and Survival High.” MedCon’s sister company, Employee Resource Administration (ERA) – a Professional Employer Organization, has been serving clients of all sizes throughout the country with the significant issues addressed in the white paper.

 

Key findings highlight the lower employee turnover rate for small businesses in PEO arrangements, faster growth and significantly decreased failure rate.

 

As small businesses continue to struggle in a professional world of ever-changing compliance issues, MedCon and ERA strive to provide greater professional services tailored to meet specific needs of our clients. MedCon aims to provide provide custom employee benefit solutions specific to each client’s needs. ERA provides services to give relief from administrative functions that inhibit clients from doing what they do best – promoting, managing and expanding business. With 4 principals who have all spent their careers working in the insurance and administrative fields, the experience level provided to clients of all industries is unmatched.

 

If you have considered partnering with professional consultants, now is a crucial time to do so. With many changes imposed by the Affordable Care Act, small employers must have a resource to assist with various legislation and compliance matters. Instead of taking time away from the business you have built, consider partnering with the experienced team at MedCon and ERA to provide your professional solution.

 

 

The National Association of Professional Employer Organizations (NAPEO) is the largest trade association for professional employer organizations (PEOs) nationwide.  NAPEO advocates for the interests of its PEO members at all levels of government.

HSA Limits and Out Of Pocket Maximums Released for 2015

The IRS has released HSA contribution limits as well as maximum out of pocket amounts for 2015.

The maximum HSA contribution will be $3,350 for individuals with self-only coverage, up from $3,300 for 2014. For those with family coverage, the maximum contribution will be $6,650, up from $6,550.

The maximum out of pocket expense will increase to $6,450 for single coverage from $6,350 and to $12,900, from $12,700, for family coverage. These changes will take effect in 2015, and will impact group health plans in both the small and large group markets.

Please reach out to your MedCon Benefit Systems representative with any questions.

Small Group and Individual Markets: New Rating Restrictions for Health Insurance Premiums

Effective for 2014, the Affordable Care Act (ACA) reforms the rating practices of health insurance issuers in the individual and small group markets by limiting the factors that can vary premium rates. These rating restrictions do not apply to grandfathered plans, large group plans or self-funded plans.

Under the ACA’s reforms, issuers may vary the premium rate charged to a non-grandfathered plan in the individual or small group market from the rate established for that particular plan only based on the following factors:

  • Age (within a ratio of 3:1 for adults)
  • Family Size (individual or family)
  • Tobacco Use (within a ratio of 1.5:1)
  • Geography (rating area)

All other rating factors are prohibited. This means that several factors commonly used by issuers to set higher premiums prior to 2014, such as health status, claims history, duration of coverage, gender, occupation, small employer size and industry, can no longer be used.

Rating Methodology

In the final rule, HHS directs issuers to use the per-member rating methodology in the small group market. According to HHS, per-member rating ensures compliance with the requirement that age and tobacco rating only be apportioned to an individual family member’s premium, enhances employee choice inside the Exchanges’ Small Business Health Options Program (SHOP) and promotes the accuracy of the ACA’s risk adjustment methodology.

States may require issuers to offer premiums based on average employee amounts where every employee in the group is charged the same premium. Also, according to HHS, the age bands, as implemented by the per-member-rating methodology, are consistent with the Age Discrimination in Employment Act of 1967 (or the ADEA).

PERMISSIBLE RATING FACTORS

Age

The premium rate charged by an issuer for non-grandfathered health insurance coverage in the individual or small group market may vary by age, except that the rate may not vary by more than 3:1 for adults. The final rule defines “adults” as individuals age 21 and older.

The final rule specifies the following standard age bands for use in all states and markets subject to the ACA’s premium rating restrictions:

  • Children: A single age band for children ages 0 through 20.
  • Adults: One-year age bands for adults ages 21 through 63.
  • Older adults: A single age band for adults ages 64 and older.

Age for rating purposes is based on the date of policy issuance and renewal. However, for individuals who are added to the plan or coverage other than on the date of policy issuance or renewal, age may be determined as of the date they are added or enrolled in the coverage.

Geography

States may establish rating areas based on certain geographic divisions—counties, three-digit zip codes or metropolitan statistical areas (MSAs) and non-MSAs. The final rule provides flexibility for states regarding the rating area configurations that will be presumed adequate by HHS. If a state does not establish rating areas, the default will be one rating area for each MSA in the state and one rating area for all other non-MSA portions of the state.

The final rule provides that states may establish different rating areas for the individual or small group markets, but rating areas must apply uniformly within each market and may not vary by product. If a state merges its individual and small group markets, rating areas will apply uniformly in both the individual and small group markets in the state.

Also, the final rule clarifies that the ACA does not limit the amount by which rates may vary based on geography. Thus, states and issuers may determine the appropriate variation for the geographic rating area factor. However, HHS cautions that rating area factors should be actuarially justified to ensure that individuals and employers are not charged excessively high premiums that would make the ACA’s guaranteed availability protections meaningless.

Family Size

Under the ACA’s rating restrictions, issuers may vary premiums based on the number of individuals covered under a policy, or family size. The final rule instructs issuers to develop premiums for family coverage by adding up the rates of covered family members. However, no more than the three oldest covered children under age 21 may be included in the family rate. According to HHS, this cap on covered children will mitigate premium increases for larger families. The final rule does not contain a cap on the number of family members age 21 and older whose per-member rates are added into the family premium.

The final rule does not specify the minimum categories of family members that must be rated together on a family policy. Since state laws differ with respect to marriage, adoption and custody, HHS believes that states are in the best position to make decisions regarding family coverage practices. Thus, states have the flexibility to require issuers to include specific types of individuals on a family policy.

Tobacco Use

The premium rate charged by an issuer for non-grandfathered health insurance coverage offered in the individual or small group market may vary for tobacco use, except that the rate may not vary by more than 1.5:1. The final rule clarifies that issuers may vary rates for tobacco only based on individuals who may legally use tobacco under federal and state law.

The final rule defines “tobacco use” as use of tobacco an average of four or more times per week within no longer than the past six months, including all tobacco products but excluding religious and ceremonial uses of tobacco. Tobacco use will be based on when a tobacco product was last used.

Issuers in the small group market may apply the tobacco rating factor only in connection with a wellness program that allows a tobacco user to avoid paying the full amount of the tobacco factor by participating in a tobacco cessation program.

Also, if an enrollee provides false or incorrect information about their tobacco use, the final rule allows an issuer to retroactively apply the appropriate tobacco use rating factor to the enrollee’s premium. However, the issuer may not rescind the coverage.

 

This MedCon Benefit Systems Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

Employer Mandate Delay – How Will it Affect Your Group?

On July 9, 2013, the Internal Revenue Service (IRS) issued Notice 2013-45 to provide formal guidance on the delay of the Affordable Care Act (ACA) large employer “pay or play” rules and related information reporting requirements. The provisions affected by the delay are:

  • § 4980H employer shared responsibility provisions;
  • § 6055 information reporting requirements for insurers, self-insuring employers and certain other providers of minimum essential coverage; and
  • § 6056 information reporting requirements for applicable large employers.

*For 2014, compliance with the information reporting rules is completely optional and the IRS will not assess penalties under the pay or play rules. Both the information reporting and the employer pay or play requirements will be fully effective for 2015.

One-year Implementation Delay

According to the IRS, the delay of the reporting requirements provides additional time for input from employers and other reporting entities in an effort to simplify these requirements, consistent with effective implementation of the ACA. This delay is also intended to provide employers, insurers and other providers of minimum essential coverage time to adapt their health coverage and reporting systems.

The delay of the employer mandate penalties was required because of issues related to the reporting requirements. Because the reporting rules were delayed, the Treasury believed it would be nearly impossible to determine which employers owed penalties under the shared responsibility provisions.

The pay or play regulations issued earlier this year left many unanswered questions for employers. The IRS highlighted several areas where it would be issuing more guidance. Presumably, the additional time will give the IRS and Treasury the opportunity to provide more comprehensive guidance on implementing these requirements.

Effect on Other ACA Provisions

The delay does not affect any other provision of the ACA, including individuals’ access to premium tax credits for coverage through an Exchange and the individual mandate.

Individuals will continue to be eligible for the premium tax credit to purchase coverage through an Exchange as long as they meet the eligibility requirements (for example, their household income is within a specified range and they are not eligible for other minimum essential coverage).

Click here for a chart illustrating the provisions that will and will not be affected by the employer mandate delay.

**This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

Login to MedCon Connect for Live Updates

Your trusted advisors at MedCon Benefit Systems Group, Inc. would like to take this opportunity to remind our clients to login to MedCon Connect for live updates regarding health care reform and other compliance related issues. MedCon Connect is our company portal designed exclusively for clients so they may have access to a myriad of HR and Benefits related resources. Anything from wellness program design, health care reform related notices, employee handbook templates to benchmark surveys can be found within the portal, available to clients 24/7.

Although we attempt to update this blog on a regular basis, the portal and direct client communications via email are our primary avenues for compliance updates. As always, you may also contact us directly.