The Effects of Age Rating Band Changes Under Health Care Reform

The Affordable Care Act (ACA) includes provisions that prohibit discrimination by health plans against people with pre-existing conditions and provide certain protections for consumers. Effective for plan years beginning on or after Jan. 1, 2014, ACA extends guaranteed issue protections for individuals and employers, prohibits the use of health and other factors to set premium rates, limits age rating and prohibits insurers from dividing up insurance pools.

On Feb. 22, 2013, the Department of Health and Human Services (HHS) released an advance copy of a final rule regarding ACA’s health insurance market reforms and existing rate review program. These reforms apply to health insurance issuers offering non-grandfathered coverage both inside and outside of ACA’s health insurance exchanges (Exchanges).

Fair Health Insurance Premiums

ACA and the final rule limit the factors that can vary premium rates in small group and individual markets for non-grandfathered plans. Specifically, health insurance issuers will only be allowed to vary premiums based on:

  • Age (within a 3:1 ratio for adults);
  • Tobacco use (within a 1.5:1 ratio, subject to wellness program requirements in the small group market);
  • Family size; and
  • Geography.

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

These limitations represent minimum federal standards for fair health insurance premiums. States can choose to enact stronger consumer restrictions. In addition, starting in 2017, states have the option of allowing large employers to purchase coverage through the Exchanges. For states that choose this option, these rating rules would also apply to all large group health insurance coverage.

Naturally, older patients tend to utilize health care more than younger patients. Currently the 5:1 age rate band, which is effective in 42 states, spreads the premium costs over 5 ranges of age groups. An older individual will pay no more than five times what a younger individual pays in premium, as set by the limits. On January 1, 2014, those premium costs will change overnight for both groups, with the younger patients’ premiums going up as much as 50% and the older patients’ premiums dropping up to 10%. While this is great news for some, it will likely drive premium rates even higher overall. If the younger population experiences an increase in premium that is unaffordable, they may choose not to purchase coverage or possibly drop current coverage. As the young patients drop off and leave only older patients who utilize health care more frequently, premiums will increase for everyone.

Age rating band changes, combined with limitations on other rating factors such as gender, health status and loss of SIC code discounts will increase your group coverage costs in 2014. Additionally, there are several fees which will become effective in January: exchange fees, insurance assessment fees, health insurance industry fees and the Patient-Centered Outcomes Research Institute Fee. While insurance companies are responsible for some of these fees, much of the cost will likely be shifted employers and in turn, employees.

Some industry experts expect fully insured health plans to experience minimum increases of 30% on 2014 renewals. As HHS releases new information almost daily, MedCon Benefit Systems Group, Inc. is assisting clients in plan design strategy and preparation to meet compliance rules. If you are unsure where you stand in the world of health care reform, MedCon is here to help.

Sources: Department of Health and Human Services and Insurance Network America

*The information discussed on this page is not intended to be exhaustive nor should any discussion or opinion be construed as legal advice. Readers should contact legal counsel for legal advice.

Health Care Consumerism: 22 Ways to Cut Health Care Costs

The way we purchase health care is unlike most other purchases we make. Many Americans will search through a newspaper for a coupon that saves them 50 cents at the local supermarket. However, when it comes to health care—a far more complex and expensive service—we rarely ask questions or consider all the options that could save us time and money.

Learn to shop for value when it comes to health care. With little effort you can save thousands of dollars on your medical bills. Share these helpful tips with your employees regularly to promote educated decisions when choosing health care.

1.     Let’s make a deal. Ask your doctor, hospital or dentist if they will accept less. Studies show that the majority of individuals who bargain succeed.

2.     Know how much it costs. You will be better armed to negotiate discounts when you know the real costs of care. You can find rates on the websites of large insurers like UHC, Cigna and Aetna.

3.     Pay in cash. You can often save up to 10 percent on your bill by paying in cash up front. Doctors lose thousands of dollars each year on credit card processing fees, unpaid bills and collection fees.

4.     Look at your bill closely. You will often find mistakes. Keep track of your visits, tests and medications, and compare them against your bills. Request a corrected bill if you find an error and notify your insurance company.

5.     Follow instructions. Follow your health care provider’s instructions for medications. Most medications work most effectively when they are used according to doctor’s instructions. Ignoring instructions could result in additional prescription costs, extra trips to the doctor or even hospitalization.

6.     Visit a retail health clinic. Retail health clinics are growing in numbers. They are popping up in high-traffic retail outlets in metropolitan areas around the country. While these clinics lack the personal nature of seeing a family physician who knows your complete medical history, their appeal is the convenience and low prices advertised for all to see.

7.     Stay in-network. Your medical costs can increase greatly when you visit a provider not in your plan’s network. Make sure your primary care doctor and any specialists you may need to see are in your network whenever possible.

8.     It doesn’t hurt to ask. If you must see a specialist who isn’t within your network, call your insurance company’s pre-certification department and explain why you must use an out-of-network specialist. Often times you can get your insurance company to agree to pay at in-network rates in order to avoid the expensive appeal process. If that doesn’t work, ask your specialist to accept the in-network rate.

9.     Fight back. If your claim has been denied, start with a phone call to customer service. If that doesn’t work, follow your plan’s appeal process. Remember to document everything and keep copies.

10.     Choose your health plan wisely. Sticking with the same plan year to year may not be the smartest option. Anticipate your family’s medical expenses and look closely at each plan option to find the most appropriate and cost-effective one for you.

11.     Consider an HSA. Health Savings Accounts (HSAs) are growing in popularity. They are combined with a high-deductible health plan. The high-deductible policy protects you from the cost of a catastrophic illness or prolonged hospitalization. You control the savings account and use it for small and routine health care expenses. You will save about $1,500 in taxes for every $5,000 you put into an HSA. Funds you don’t use grow tax-free and can be rolled over from year to year.

12.     Take advantage of flexible spending accounts. A flexible spending account, or FSA, is an employee benefit program that allows you to set aside money on a pretax basis for certain health care and dependent care expenses. That means you keep more of your money. For every $1,000 you put in, you’ll save approximately $300 in taxes.

13.     Don’t skimp on preventive care. Be sure your child gets routine checkups and vaccines as needed, both of which can prevent medical problems (and bills) down the road. Also, adults should get preventive screenings recommended for their age to detect health conditions early. Many of these services are now provided at no cost through employer-sponsored health plans.

14.      Visit a dental school. Look into local dental schools where you will be treated by dental students, who perform the dental treatment closely supervised by their instructors. Expect to pay about 20 to 60 percent of what you’d pay for the same treatment by a private dentist.

15.     Don’t forget to floss. Studies have demonstrated that those who floss regularly have a decrease in periodontal disease, bad breath and cavity incidence. The cost of periodontal disease treatment can range from $200 to $2,000 per procedure.

16.   Discount contacts. Discount websites and stores can provide the exact contact lenses prescribed by your eye doctor, in factory-sealed packaging, at savings of up to 70 percent off what you would pay at the retail level.

17.   Chill out. Over 60 percent of doctor visits are for stress-related conditions. Studies show that relaxation techniques are effective in controlling anxiety, enhancing the immune system and reducing conditions such as high blood pressure, substance abuse and chronic pain.

18.   Quit smoking. On average, health care costs are $1,600 per year for a smoker. Plus, if you quit smoking you can expect to save approximately $1,800 a year on the cost of cigarettes alone.

19.   Live a healthy lifestyle. Focus on eating nutritiously, cutting down on fast food and getting more physical exercise. Striving toward a healthier lifestyle and maintaining a healthy weight can drastically reduce future medical conditions and diseases.

20.   Wash your hands. According to the Centers for Disease Control and Prevention, hand hygiene is the most important factor in preventing the spread of germs. In fact, health experts estimate that 80 percent of common infections are spread through hand contact. Save hundreds of dollars a year on cold and flu treatments.

21.   Get a second opinion. Save thousands of dollars a year on cutting-edge medical tests, which usually are not covered by insurance by following the guidelines recommended by the U.S. Preventive Services Task Force – www.ahrq.gov/clinic/uspstfix.htm.

22.   Think twice about the emergency room. Don’t ever go to the emergency room (ER) when your regular doctor or an urgent care visit would suffice. If you or your child is feeling ill on Friday, get into the doctor that day to avoid overpaying at the ER during the weekend.

Providing your employees with resources to help them understand the complex health care system and pricing can benefit your employer-sponsored health plan tremendously. The more educated we are, the smarter decisions we can make when it comes to health care. Wise health care consumerism not only leads to more money in your employee’s pocket, but also more savings for you, the employer. If you are looking for innovative ways to manage your group health costs, please contact us. We have several clients of all sizes who have experienced exceptional success in educating employees and managing costs through a health care price transparency tool we offer. We welcome the opportunity to discuss if this tool woud be right for you employees as well.

HHS to Delay Part of Small Employer Exchanges

Beginning in 2014, individuals and small employers will be able to purchase health insurance through online competitive marketplaces, or Exchanges. The Affordable Care Act (ACA) requires each state that chooses to operate an Exchange to also establish a Small Business Health Options Program (SHOP) Exchange. The SHOP Exchange is intended to assist eligible small employers in providing health insurance for their employees.

HHS will establish and operate a federally-facilitated Exchange (FFE) in each state that does not establish its own Exchange. The FFE will include both individual market and SHOP components.

Small employers with up to 100 employees will be eligible to participate in the Exchanges. However, until 2016, states may limit participation in the SHOP Exchanges to businesses with up to 50 employees. Beginning in 2017, states may allow businesses with more than 100 employees to participate in the Exchanges.

On March 11, 2013, HHS issued a proposed rule that would amend some of the standards for SHOP Exchanges. Most notably, the proposed rule creates a transition policy regarding an employee’s choice of qualified health plans (QHPs) in the SHOP. The transition policy would delay implementation of the employee choice model as a requirement for all SHOPs for one year, until 2015.

FUNCTIONS OF THE SHOP EXCHANGE

On March 27, 2012, HHS issued a final rule on establishment of the Exchanges. This final rule describes the minimum functions of a SHOP. The final rule provides that a SHOP must allow employers the option to offer employees all QHPs at a level of coverage chosen by the employer—bronze, silver, gold or platinum. In addition, the final rule permits SHOPs to allow a qualified employer to choose one QHP for its employees.

In a separate final rule issued in March 2013, HHS provided that the federally-facilitated SHOP (FF-SHOP) would give employers the choice of offering only a single QHP, as employers customarily do today, in addition to the choice of offering all QHPs at a single level of coverage.

TRANSITION POLICY

In the proposed rule, HHS provides a transition policy for 2014 plan years that is intended to provide all SHOPs (both state SHOPs and the FF-SHOP) with additional time to prepare for the employee choice model.

Under the transition policy, for plan years beginning on or after Jan. 1, 2014, and before Jan. 1, 2015, state SHOPs would not have to allow employers to offer their employees a choice of QHPs at a single level of coverage. However, a SHOP may decide to provide this option to employers for 2014 plan years.

In addition, for plan years beginning on or after Jan. 1, 2014, and before Jan. 1, 2015, FF-SHOPs would not allow qualified employers to offer their employees a choice of QHPs at a single level of coverage. For 2014 plan years, the FF-SHOP would assist employers in choosing a single QHP to offer their qualified employees.

According to HHS, the transition policy would increase the stability of the small group market while providing small groups with the benefits of SHOP in 2014 (for example, choice among competing QHPs and access for qualifying small employers to the small business health insurance tax credit).

The 2012 final rule also included a premium aggregation function for the SHOP that was designed to assist employers whose employees were enrolled in multiple QHPs. Because this function will not be necessary in 2014 for SHOPs that delay implementation of the employee choice model, the proposed rule would make the premium aggregation function optional for plan years beginning before Jan. 1, 2015.

MedCon Benefit Systems, Inc. will continue to monitor health care reform developments and will provide updated information as it becomes available.

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

MedCon Legislative Brief: Cost-sharing Limitations and Preventive Care Coverage Clarified

The Affordable Care Act (ACA) includes many changes related to health care coverage and raises a number of questions for employers. The Departments of Labor (DOL), Health and Human Services (HHS) and Treasury (Departments) jointly provide guidance in the form of Frequently Asked Questions (FAQs) to assist in implementing ACA’s changes.

On February 20, 2013, the Departments issued FAQs on the ACA’s limitations on cost-sharing and coverage of preventive care services.

Limitations on Cost-sharing Under the ACA

The ACA added Public Health Service (PHS) Act section 2707(b). This section requires a group health plan to ensure that any annual cost-sharing imposed under the plan does not exceed the ACA’s limitations on out-of-pocket maximums and deductibles for employer-sponsored plans.

Those limits are foudn in Section 1302(c)(1) and (2). Section 1302(c)(1) limits out-of-pocket maximums and section 1302(c)(2) limits deductibles for employer-sponsored plans. The out-of-pocket maximums are tied to the limits under high-deductible health plans and the deductible limts are slated to start at $2,000 for single coverage and $4,000 for other than single coverage.

Due to unclear language in the statute, there has been confusion over which plans are subject to these limits, although grandfathered plans are clearly not subject to these requirements. The FAQs, along with the final rule on essential health benefits issued by HHS, provide clarification on this issue. This information is illustrated below, with additional detail provided in the following sections.

Deductible Limits

The Departments stated that they continue to believe that only non-grandfathered plans and issuers in the small group market (that is, small insured plans) are required to comply with the deductible limit described in section 1302(c)(2).

Under this guidance, the annual deductible limit does not apply to self-insured plans or large group market plans. The Departments intend to issue additional rules related to self-insured and large group health plans. Until final guidance is issued and becomes effective, self-insured or large group health plans can rely on the Departments’ stated intention to apply the deductible limits only to plans and issuers in the small group market.

Small insured plans are provided some relief in the final rule. A health plan’s annual deductible may exceed the ACA limit if a plan could not reasonably reach the actuarial value of a given level of coverage (that is, a metal tier—bronze, silver, gold or platinum) without exceeding the limit.

Out-of-Pocket Maximum Limits

The text of ACA’s out-of-pocket maximum limit broadly refers to “health plans.” HHS’ final rule provides that all non-grandfathered group health plans will be required to comply with the limitation on out-of-pocket maximums. This would include, for example, self-insured health plans and insured health plans of any size. These plans cannot exceed the 2014 limits under teh Internal Revenue Code for HSA (health savings account) out-of-pocket limits. For example, the 2013 limits are $6,250 for self-only coverage and $12,500 for family coverage – these amounts will be indexed annually.

The Departments recognize that plans may use more than one service provider to help administer benefits (for example, a third-party administrator for major medical coverage, a separate pharmacy benefit manager and a separate managed behavioral health organization). Separate plan service providers may impose different levels of out-of-pocket limitations and may utilize different methods for crediting participants’ expenses against any out-of-pocket maximums. These processes will need to be coordinated to comply with the annual out-of-pocket maximum limit, which may require new regular communications between service providers.

The Departments have determined that, only for the first plan year beginning on or after Jan. 1, 2014, where a group health plan or group health insurance issuer utilizes more than one service provider to administer benefits that are subject to the annual out-of-pocket maximum limit, the annual limit will be satisfied if both of the following conditions are met:

  • The plan complies with the out-of-pocket maximum limit with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and
  • To the extent there is an out-of-pocket maximum on coverage that does not consist solely of major medical coverage, this out-of-pocket maximum does not exceed the maximum dollar amount under ACA.

The Departments note, however, that existing regulations implementing Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) prohibit a group health plan (or health insurance coverage offered in connection with a group health plan) from applying a cumulative financial requirement or treatment limitation, such as an out-of-pocket maximum, to mental health or substance use disorder benefits that accumulates separately from any cumulative financial requirement or treatment limitation established for medical/surgical benefits. Accordingly, under MHPAEA, plans and issuers are prohibited from imposing an annual out-of-pocket maximum on all medical/surgical benefits and a separate annual out-of-pocket maximum on all mental health and substance use disorder benefits.

Coverage of Preventive Services

ACA requires non-grandfathered health plans to cover certain preventive health services without imposing cost-sharing requirements for the services. This requirement generally became effective for plan years beginning on or after Sept. 23, 2010. It does not apply to grandfathered health plans.

The FAQs address which specific services non-grandfathered health plans must cover in order to comply with this requirement. Most notably, non-grandfathered health plans must cover:

  • Contraceptives The FAQs confirm that the preventive care coverage requirements ensure women’s access to the full range of FDA-approved contraceptive methods including, but not limited to, barrier methods, hormonal methods and implanted devices, as well as patient education and counseling, as prescribed by a health care provider. Thus, a plan or issuer is not permitted to cover only oral contraceptives. However, plans and issuers may use reasonable medical management techniques to control costs and promote efficient delivery of care. For example, plans may cover a generic drug without cost-sharing and impose cost-sharing for equivalent branded drugs (although certain limitations apply).
  • Lactation Counseling and Breastfeeding Equipment and Supplies – Coverage of comprehensive lactation support and counseling and costs of renting or purchasing breastfeeding equipment extends for the duration of breastfeeding. Nonetheless, plans and issuers may use reasonable medical management techniques to determine the frequency, method, treatment or setting for a recommended preventive item or service, to the extent not specified in the recommendation or guideline.

Additionally, the FAQs address issues relating to out-of-network services, if a plan does not have any in-network providers to provide a particular preventive service required under the ACA. While nothing in the interim final regulations generally requires a plan or issuer that has a network of providers to provide benefits for preventive services provided out-of-network, this provision is premised on enrollees being able to access the required preventive services from in-network providers. Thus, if a plan or issuer does not have in its network a provider who can provide the particular service, then the plan or issuer must cover the item or service when performed by an out-of-network provider and not impose cost-sharing with respect to the item or service.

 

Source: U.S. Department of Labor

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

Exchange Notice Requirements Delayed

The Affordable Care Act (ACA) requires employers to provide all new hires and current employees with a written notice about ACA’s health insurance exchanges (Exchanges), effective March 1, 2013.

On Jan. 24, 2013, the Department of Labor (DOL) announced that employers will not be held to the March 1, 2013, deadline. They will not have to comply until final regulations are issued and a final effective date is specified.

This MedCon Benefit Systems, Inc. Legislative Brief details the expected timeline for the exchange notice requirements.

Exchange Notice Requirements

In general, the notice must:

  • Inform employees about the existence of the Exchange and give a description of the services provided by the Exchange;
  • Explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer’s plan does not meet certain requirements;
  • Inform employees that if they purchase coverage through the Exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of this employer contribution may be excludable for federal income tax purposes; and
  • Include contact information for the Exchange and an explanation of appeal rights.

This requirement is found in Section 18B of the Fair Labor Standards Act (FLSA), which was created by the ACA. The DOL has not yet issued a model notice or regulations about the employer notice requirement.

When do Employers have to Comply with the Exchange Notice Requirements?

Section 18B provides that employer compliance with the notice requirements must be carried out “[i]n accordance with regulations promulgated by the Secretary [of Labor].” Accordingly, the DOL has announced that, until regulations are issued and become applicable, employers are not required to comply with the exchange notice requirements.

The DOL has concluded that the notice requirement will not take effect on March 1, 2013, for several reasons. First, this notice should be coordinated with HHS’s educational efforts and IRS guidance on minimum value. Second, the DOL is committed to a smooth implementation process, including:

  • Providing employers with sufficient time to comply; and
  • Selecting an applicability date that ensures that employees receive the information at a meaningful time.

The DOL expects that the timing for distribution of notices will be the late summer or fall of 2013, which will coordinate with the open enrollment period for Exchanges.

The DOL is considering providing model, generic language that could be used to satisfy the notice requirement. As a compliance alternative, the DOL is also considering allowing employers to satisfy the notice requirement by providing employees with information using the employer coverage template as discussed in the preamble to the Proposed Rule on Medicaid, Children’s Health Insurance Programs and Exchanges.

Future guidance on complying with the notice requirement under FLSA section 18B is expected to provide flexibility and adequate time to comply.

Source: U.S. Department of Labor

 

*This MedCon Benefit Systems, Inc. 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.

Form W-2 Reporting Requirements

The Affordable Care Act (ACA) requires employers to report the aggregate cost of employer-sponsored group health plan coverage on their employees’ Forms W-2. The purpose of the reporting requirement is to provide information to employees regarding how much their health coverage costs. The reporting does not mean that the cost of the coverage is taxable to employees.

This reporting requirement was originally effective for the 2011 tax year (for the W-2 Forms due by the end of January 2012). However, the IRS later made reporting optional for 2011 for all employers. The IRS further delayed the reporting requirement for small employers (those that file fewer than 250 Forms W-2) by making it optional for these employers until further guidance is issued. For the larger employers, the reporting requirement is mandatory for the 2012 Forms W-2 (that must be issued by the end of January 2013).

The IRS has provided interim guidance on how employers should comply with the Form W-2 reporting requirement. This guidance was first issued in April 2011 in Notice 2011-28. The IRS then revised and clarified its interim guidance by releasing Notice 2012-9 on Jan. 3, 2012. Notice 2012-9 provides technical reporting information for employers that include health coverage cost information on Forms W-2 for 2012 and later years. Employers that voluntarily comply with the reporting requirement for 2011 may also rely on the IRS’s interim guidance in Notice 2012-9.

This MedCon Benefit Systems, Inc. Legislative Brief describes the Form W-2 reporting requirement, including guidance provided by the IRS in Notice 2012-9.

Form W-2 Reporting Requirement

Section 9002(a) of ACA provides that employers must disclose the aggregate cost of applicable employer-sponsored coverage provided to employees on the Form W-2. Section 9002(a) specifically adds this information to the list of other items that must be included on the Form W-2. These items include information such as the individual’s name, social security number, wages, tax deducted, the total amount incurred for dependent care assistance under a dependent care assistance program and the amount contributed to any health savings account (HSA) by the employee or his or her spouse.

The inclusion of this information on the Form W-2 does not change the requirements with respect to taxable income, or the tax exclusion for amounts paid for medical care or coverage. Those items are addressed in another portion of the tax law that is not affected by this change. However, this information may be used to determine whether a plan is a “Cadillac plan” for purposes of the excise tax on high-cost health plans that will take effect in 2018.

The IRS has clarified that the reporting rule does not require an employer to issue a Form W-2 including the aggregate cost of coverage to an individual if the employer does not otherwise have to issue a W-2 for that person. For example, an employer would not have to issue a Form W-2 to a retiree or other former employee receiving no reportable compensation.

Employers Subject to the Reporting Requirement

In general, all employers that provide applicable employer-sponsored coverage must comply with the Form W-2 reporting requirement. This includes government entities, churches and religious organizations, but does not include Indian tribal governments or tribally chartered corporations wholly owned by an Indian tribal government.

For 2012, small employers are not subject to the reporting requirement. Small employers will continue to be exempt from the reporting requirement for later years, unless and until the IRS issues further guidance.

An employer is considered a small employer if it had to file fewer than 250 Forms W-2 for the prior calendar year. Thus, if an employer is required to file fewer than 250 Forms W-2 for 2011, the employer would not be subject to the reporting requirement for 2012. The IRS has indicated that the Internal Revenue Code’s aggregation rules do not apply for purposes of determining whether an employer filed fewer than 250 Forms W-2 for the prior year. However, if an employer files fewer than 250 Forms W-2 only because it uses an agent to file them, the employer does not qualify for the small employer exemption.

Coverage That Must Be Reported

Under the Form W-2 reporting requirement, the information that must be reported relates to “applicable employer-sponsored coverage.” Applicable employer-sponsored coverage is, with respect to any employee, coverage under any group health plan made available to the employee by the employer which is excludable from the employee’s gross income under Code section 106.

For purposes of this reporting requirement, it does not matter whether the employer or the employee pays for the coverage – it is the aggregate cost of the coverage that must be reported. The aggregate cost of the coverage is determined using rules similar to those used for determining the applicable premiums for purposes of COBRA continuation coverage. It must be determined on a calendar year basis.

Some types of coverage do not need to be reported on the Form W-2 under this requirement. These are:

  • Coverage under a dental or vision plan that is not integrated into a group health plan providing other types of health coverage;
  • Coverage under a health reimbursement arrangement (HRA);
  • Coverage under a multiemployer plan;
  • Coverage for long-term care;
  • Coverage under a self-insured group health plan that is not subject to COBRA (such as a church plan);
  • Coverage provided by the government primarily for members of the military and their families;
  • Excepted benefits, such as accident or disability income insurance, liability insurance, or workers’ compensation insurance;
  • Coverage for a specific disease or illness or hospital indemnity or other fixed indemnity insurance, provided the coverage is offered as independent, noncoordinated benefits and payment for the benefits is taxable to the employee; and
  • Coverage under an employee assistance program (EAP), wellness program or on-site medical clinic if the employer does not charge COBRA beneficiaries a premium for the benefits.

The reporting requirement does not apply to amounts contributed to an Archer medical savings account (Archer MSA) or amounts contributed to an HSA. Those amounts are already required to be separately accounted for on the Form W-2.

Also, salary reduction contributions to a health flexible spending arrangement (FSA) under a cafeteria plan are not required to be reported. However, if the amount of the health FSA for the plan year (including optional employer flex credits) exceeds the salary reduction elected by the employee for the plan year, the amount of the health FSA minus the salary reduction election for the health FSA must be reported.

Example: ABC Company maintains a cafeteria plan that offers permitted taxable benefits (including cash) and qualified nontaxable benefits (including a health FSA). The plan offers a flex credit in the form of a match of each employee’s salary reduction contribution. Sandy makes a $700 salary reduction election for a health FSA. ABC Company provides an additional $700 to the health FSA to match Sandy’s salary reduction election. The amount of the health FSA for Sandy for the plan year is $1,400. The amount of Sandy’s health FSA ($1,400) for the plan year exceeds the salary reduction election ($700) for the plan year. ABC Company must include $700 ($1,400 health FSA amount minus $700 salary reduction) in determining the aggregate reportable cost.

In addition, employers may include in the Form W-2 reportable amount the cost of coverage that is not required to be included in the aggregate reportable cost, such as HRA coverage, provided the coverage is applicable employer-sponsored coverage and is calculated under a permissible method.

Methods of Reporting

Coverage Provided after Termination of Employment

If an employer provides coverage (such as continuation coverage) to an employee who terminates employment during the year, the employer may apply any reasonable method of reporting the cost of coverage for that year, as long as that method is used consistently for all employees. Regardless of the method used, an employer does not have to report any amount for an employee who requests a Form W-2 before the end of the calendar year in which the employee terminated employment.

Example: Bob is an employee of XYZ Company on January 1, and continues employment through April 25. Bob had individual coverage under XYZ Company’s group health plan through April 30, with a cost of coverage of $350 per month. Bob elected continuation coverage for the six months following termination of employment, covering the period May 1 through October 31, for which he paid $350 per month. XYZ Company will have applied a reasonable method of reporting Bob’s cost of coverage if it uses either of the following methods consistently for all employees who terminate coverage during the year:

  • Reports $1,400 as the reportable cost under the plan for the year, covering the four months during which Bob performed services and had coverage as an active employee; or
  • Reports $3,500 as the reportable cost under the plan for the year, covering both the monthly periods during which Bob performed services and had coverage as an active employee, and the monthly periods during which Bob had continuation coverage under the plan.

Programs with Non-reportable Benefits

Also, if a program offers benefits that must be reported, and other benefits that are not subject to reporting, an employer may use any reasonable allocation method to determine the cost of the portion of the program providing a reportable benefit. If the portion of the program that provides a reportable benefit is only incidental in comparison to the portion of the program providing other benefits, the employer is not required to include either portion of the cost on the Form W-2.

Coverage Periods Spanning Calendar Years

If a coverage period, such as the final payroll period of a calendar year, includes December 31 and continues into the next calendar year, the employer has the following options:

  • Treat the coverage as provided during the calendar year that includes December 31;
  • Treat the coverage as provided during the following calendar year; or
  • Allocate the cost of coverage between each of the two calendar years using a reasonable allocation method that is consistently applied to all employees. The allocation method should generally relate to the number of days in the period of coverage that fall within each of the two calendar years.

Compliance Steps for Employers

Employers that file 250 or more Forms W-2 for 2011 will have to comply with the reporting requirement for 2012 (W-2 Forms provided in January 2013). These employers should ensure that they (or their payroll providers) are prepared to gather the health coverage information in advance of having to complete the Forms W-2 for 2012. In doing so, they should make sure they can identify the applicable employer-sponsored coverage that was provided to each employee and be prepared to calculate the aggregate cost of that coverage.

Employers may also have to address questions from employees regarding whether their health benefits are taxable under this new requirement. They can assure employees that this reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee’s income, and it is not taxable.

 

MedCon Benefit Systems, Inc. will continue to update you if additional information becomes available with respect to this reporting requirement.

2013 Compliance Checklist

In light of the Supreme Court’s June 28, 2012, decision to uphold the health care reform law, or Affordable Care Act (ACA), employers must continue to comply with ACA mandates that are currently in effect. Employers must also prepare to comply with ACA changes that will go into effect in the future. To prepare for upcoming changes, employers need to be aware of the ACA mandates that will go into effect in 2013.

This MedCon Benefit Systems, Inc. Legislative Brief provides a compliance checklist for employers for 2013. Please contact your MedCon Benefit Systems, Inc. representative for assistance or if you have questions about changes that were required in previous years.

GRANDFATHERED PLAN STATUS

A grandfathered plan is one that was in existence when health care reform was enacted on March 23, 2010. If you make certain changes to your plan that go beyond permitted guidelines, your plan is no longer grandfathered. Contact your MedCon Benefit Systems, Inc. representative if you have questions about changes you have made, or are considering making, to your plan.

□    If you have a grandfathered plan, determine whether it will maintain its grandfathered status for the 2013 plan year. Grandfathered plans are exempt from some of the health care reform requirements. A grandfathered plan’s status will affect its compliance obligations from year-to-year.

□    If you move to a non-grandfathered plan, confirm that the plan has all of the additional patient rights and benefits required by ACA. This includes, for example, coverage of preventive care without cost-sharing requirements.

ANNUAL LIMITS

Effective for plan years beginning on or after Jan. 1, 2014, health plans will be prohibited from placing annual limits on essential health benefits. Until then, however, restricted annual limits are permitted.

□    Unless a health plan received an annual limit waiver, its annual limit on essential health benefits for the 2013 plan year cannot be less than $2 million. (This limit applies to plan years beginning on or after Sept. 23, 2012, but before Jan. 1, 2014.)

SUMMARY OF BENEFITS AND COVERAGE

Health plans and health insurance issuers must provide a Summary of Benefits and Coverage (SBC) to participants and beneficiaries. The SBC is a relatively short document that provides simple and consistent information about health plan benefits and coverage in plain language. A template for the SBC is available, along with instructions and examples, and a uniform glossary of terms.

Plans and issuers must provide the SBC to participants and beneficiaries who enroll or re-enroll during an open enrollment period beginning with the first open enrollment period that begins on or after Sept. 23, 2012. The SBC also must be provided to participants and beneficiaries who enroll other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees) effective for plan years beginning on or after Sept. 23, 2012.

□    If your plan has an open enrollment period beginning on or after Sept. 23, 2012, confirm that the SBC is included with the open enrollment package. For participants and beneficiaries who enroll outside of the open enrollment period, confirm that the SBC will be provided to these individuals beginning with the plan year starting on or after Sept. 23, 2012.

  • If you have a self-funded plan, the plan administrator is responsible for providing the SBC.
  • If you have an insured plan, both the plan and the issuer are obligated to provide the SBC, although this obligation is satisfied for both parties if either one provides the SBC. Thus, if you have an insured plan, you should work with your health insurance issuer to determine which entity will assume responsibility for providing the SBC. Please contact your MedCon Benefit Systems, Inc. representative for assistance.

60-DAY NOTICE OF PLAN CHANGES

□    A health plan or issuer must provide 60 days’ advance notice of any material modifications to the plan that are not related to renewals of coverage. Notice can be provided in an updated SBC or a separate summary of material modifications. This 60-day notice requirement becomes effective when the SBC requirement goes into effect for a health plan.

PREVENTIVE CARE SERVICES FOR WOMEN

□    Effective for plan years beginning on or after Aug. 1, 2012, non-grandfathered health plans must cover specific preventive care services for women without cost-sharing requirements.

The covered preventive care services for women include: well-woman visits; gestational diabetes screening; human papillomavirus (HPV) testing; sexually transmitted infection (STI) counseling; human immunodeficiency virus (HIV) screening and counseling; FDA-approved contraception methods and contraceptive counseling; breastfeeding support, supplies and counseling;  and domestic violence screening and counseling. Exceptions to the contraception coverage requirement apply to certain religious employers. The preventive care guidelines for women are available at: www.hrsa.gov/womensguidelines/.

$2,500 CONTRIBUTION LIMIT FOR HEALTH FSAs

□    Effective for plan years beginning on or after Jan. 1, 2013, an employee’s annual pre-tax salary reduction contributions to a health flexible spending account (FSA) must be limited to $2,500. (The $2,500 limit will be indexed for cost-of-living adjustments for 2014 and later years.)

Health FSA plan sponsors are free to impose an annual limit that is lower than the ACA limit for employees’ health FSA contributions. Also, the $2,500 limit does not apply to employer contributions to the health FSA and it does not impact contributions under other employer-provided coverage. For example, employee salary reduction contributions to an FSA for dependent care assistance or adoption care assistance are not affected by the $2,500 health FSA limit.

W-2 REPORTING

□    Beginning with the 2012 tax year, employers that are required to issue 250 or more W-2 Forms must report the aggregate cost of employer-sponsored group health coverage on employees’ W-2 Forms. The cost must be reported beginning with the 2012 W-2 Forms, which are issued in January 2013.

ACA’s W-2 reporting requirement is optional for smaller employers until further guidance is issued. Also, the reporting is for informational purposes only; it does not affect the taxability of benefits.

RETIREE DRUG SUBSIDY

The Medicare Part D program includes a Retiree Drug Subsidy (RDS) to encourage employers to continue providing prescription drug coverage to Medicare-eligible retirees. The RDS is available to certain employers that sponsor group health plans covering retirees who are entitled to enroll in Medicare Part D but elect not to do so. Employers receive RDS payments tax-free. In addition, before 2013, employers receiving the RDS could take a tax deduction for their retiree prescription drug costs, unreduced for the subsidy amount.

□    Beginning in 2013, employers receiving the RDS will no longer be permitted to take a tax deduction for the subsidy amount.

MEDICARE TAX INCREASES

□    Effective Jan. 1, 2013, the Medicare Part A (hospital insurance) tax rate increases by 0.9 percent (from 1.45 percent to 2.35 percent) on wages over $200,000 for an individual taxpayers and $250,000 for married couples filing jointly. (The tax is also expanded to include a 3.8 percent tax on unearned income in the case of individual taxpayers earning over $200,000 and $250,000 for married couples filing jointly).

An employer must withhold the additional Medicare tax on wages or compensation it pays to an employee in excess of $200,000 in a calendar year. An employer has this withholding obligation even though an employee may not be liable for the additional Medicare tax because, for example, the employee’s wages or other compensation together with that of his or her spouse (when filing a joint return) does not exceed the $250,000 liability threshold. Any withheld additional Medicare tax will be credited against the total tax liability shown on the individual’s income tax return (Form 1040).

EMPLOYEE NOTICE OF EXCHANGES

□    Effective March 1, 2013, employers must provide all new hires and current employees with a written notice about ACA’s health insurance exchanges (Exchanges). In general, the notice must:

  • Inform employees about the existence of the Exchange and give a description of the services provided by the Exchange;
  • Explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer’s plan does not meet certain requirements;
  • Inform employees that if they purchase coverage through the Exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of the employer contribution to employer-provided coverage may be excludable for federal income tax purposes; and
  • Include contact information for the Exchange and an explanation of appeal rights.

Federal agencies are expected to issue more specific guidance on this notice requirement and provide a model notice for employers to use.

CER FEES

ACA created the Patient-Centered Outcomes Research Institute (Institute) to help patients, clinicians, payers and the public make informed health decisions by advancing comparative effectiveness research. The Institute’s research is to be funded, in part, by fees paid by health insurance issuers and sponsors of self-insured health plans. These fees are called comparative effectiveness research fees or CER fees.

□    Self-funded plans and health insurance issuers must pay a $1 per covered life fee for comparative effectiveness research. Fees are effective for plan years ending on or after Oct. 1, 2012. Fees increase to $2 the next year and will be indexed for inflation after that. Full payment of the research fees will be due by July 31 of each year. It will generally cover plan years that end during the preceding calendar year. Thus, the first possible deadline for paying the CER fees is July 31, 2013.

HIPAA CERTIFICATION

□    Health plans must file a statement with the Department of Health and Human Services (HHS), certifying their compliance with HIPAA’s electronic transaction standards and operating rules. Under ACA, the first deadline for certifying compliance with certain HIPAA standards and rules is Dec. 31, 2013. HHS has indicated that it intends on issuing more guidance on this requirement in the future.

This MedCon Benefit Systems, Inc. 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.
© 2012 Zywave, Inc. All rights reserved. EEM 10/12

Introducing MedCon Connect

Your benefits consultants at MedCon Benefit Systems are excited to introduce a new comprehensive set of resources to our clients through our new client portal, MedCon Connect. Designed to provide you with time-saving tools and resources, MedCon Connect is a convenient, easy-to-use tool that enables you to manage your everyday tasks in the workplace. MedCon Connect allows you to:

  • Collaborate with our agency via the internet.
  • Quickly access timely news, information, and resources.
  • Connect with hundreds of thousands of peers in your industry.

If tackling your compliance with some of today’s most complicated legislation seems daunting, find clear, easily accessible answers with our set of comprehensive guides, frequently asked questions, quick reference and up-to-date briefs on salient topics including Health Care Reform, ADA, CHIPRA, COBRA, FMLA, HIPAA, HIPAA Privacy, Mental Health Parity, Section 125, Medicare Part D and more. In just a few clicks, access the following popular resources:

  • Health Care Reform – Find up-to-date information, including legislative updates, timelines and explanations to educate both you and your employees.
  • Questions and Answers – Resolve your doubts about federal legislation with daily questions and answers on popular, current legislative topics.
  • Legislative News – Educate yourself with updated benefits information on any specific legislative category, including COBRA, COBRA State, HIPAA, HIPPA Privacy and FMLA topics.
  • Compliance Forms – Choose election forms, eligibility forms and other general forms related to COBRA, HIPAA, FMLA and more. All forms can be downloaded in PDF or Word format, and many are available in Spanish.
  • Quick Links to Compliance – Find a comprehensive list of links to external government resources to help with compliance issues. Instead of spending hours searching the web for answers to your compliance questions and wondering which version is correct, you can now find your answers by category, directly from the government websites.

Clients will also have access to an extensive library featuring both employee-facing and informational documents for employers which allow you to quickly and effortlessly resolve a host of human resources and insurance-related issues. Find articles, brochures, forms, reports and more regarding:

  • Plan Design
  • Employee Newsletters
  • Wellness Programs

As our client, you have probably heard from us about the impact a health and wellness program can have on your overall health plan costs. MedCon Connect provides clients with an on-demand content library – communications promoting wellness and consumerism are pre-written and ready to distribute, saving you time and money. If you have never initiated a wellness program before, we have guides to get you started as well as research data to help you drive wellness initiatives and methods to evaluate your outcomes.

The nationwide benchmarking surveys administered through and available on MedCon Connect give insight into best practices across the industry. We are also connecting you with other HR professionals throughout the country via the Community Tab. MedCon Connect users have the ability to share industry-specific information and resources through an interactive forum that allows you to post questions to your peers, provide insight into others’ questions and share best practices.

Staying in compliance with OSHA is a snap with the practical and easily accessible collection of occupational safety resources you’ll find on MedCon Connect, including:

  • Compliance and FAQ – Information and answers regarding OSHA’s record-keeping guidelines, coupled with various related resources.
  • Instant OSHA Reporting – Generate up-to-the-minute OSHA reports and drill down by injury type, body part, group or division to identify trends and cost drivers.
  • Custom OSHA Forms – Generate a PDF with your OSHA 200 Log or Summary of Work-Related Injuries and Illnesses for a certain division or year.
  • Easy OSHA Log Maintenance – Edit, view and delete log entries quickly and easily with the log maintenance wizard, which makes maintenance simple and guarantees that your records are current.
  • View Recent Incidents – Stay on top of your company’s workplace safety with the online log’s handy at-a-glance view.

This is just another valuable tool we are proud offer to our clients. We encourage all of our clients to login to MedCon Connect by clicking here or using the link on the right-hand side of your screen on our home page. If you have not yet received your login information, please contact Maureen McReynolds: mmcreynolds@medconbenefit.com. We are looking forward to visiting with you and providing training on how to use this invaluable new tool.