3 Signs You May Need A Second Opinion About Benefits

It’s often a good idea to get a second opinion before making a big decision. Because of the dramatic changes influenced by the Affordable Care Act (ACA) and other factors, the employee benefits strategy you have utilized until now may be unavailable, inadequate, or dramatically more expensive in 2015.  Here are three signs you might benefit from a second opinion:

You’ve just been hit with dramatic cost increases.

While some cost increases might be expected, if your employee benefits package for 2015 has given you “sticker shock,” it can’t hurt to shop around for a new strategy that will yield equal or better quality at a lower price. There are a number of innovative strategies that are worth a look.

You’re being forced to change companies and/or plans.

With the rules and regulations under the Affordable Care Act, many programs are no longer being offered. Others are offered but in a highly modified or watered-down format.  Before accepting a replacement plan, it may be valuable to look at other options.

It’s difficult to get answers to your questions.  

Does your current benefits provider answer all of your questions in a prompt manner? Do they have the knowledge about the current benefits environment to provide cutting edge advice? Are they sharp in their bookkeeping, in other words do you receive periodic statements, together with an organized summary document about your program, in case you ever get audited? Are they communicating with you about changes well before they happen and in a clear, concise manner?

If your answer to any or all of these questions is “yes,” you will most likely benefit from getting a second opinion about your program.

All that Glitters is… Gold

The introduction of Affordable Care Act (ACA) labels can be a positive communications opportunity for employers. Defining how much upfront coverage is built into health care plans has never been simple. Small businesses are embracing “metallic” names when choosing ACA approved plan options. Expect more and more large employers to add labeling as follows:

• Platinum
• Gold
• Silver
• Bronze
• Gold HSA
• Silver HSA
• Bronze HSA

Want more money deducted from your pay so you spend less out of pocket at the doctor’s office or when being tested? Then pick the Platinum or Gold plan and enjoy simplified management of your financial out of pocket expenses.

Ready to accept risk that you will not need much health care? Then choose a Silver or Bronze plan. If you go in this direction, consider a qualified plan that allows for a Health Savings Account (HSA) and build up a tax deductible reserve that rolls over from year to year and can be invested, earning tax free interest.

My family is currently enrolled in a Bronze HSA because the premiums are low and the same preventive plus diagnostic medical and prescription services are covered as in a Platinum plan. It’s just that every expense other than preventive is subject to a deductible.

Having started my Health Savings account back in 2008, its current balance is $40,000. This reserve buffer allows easy rest even if a family member hospitalization occurs and we must come up with almost $13,000 before the insurance plan pays in full. Our Bronze plan glitters like Gold due to long term planning that includes funding and investing our tax deductible HSA.

Offering Health Insurance as a Small Employer

Small businesses and the people who own them are the backbone of their communities. In a larger, interwoven sense, when combined with similar-sized businesses across the United States they are the backbone of this country. While the intrinsic benefits of owning a small business are numerous, providing health insurance to employees is not necessarily one of them. For many employers, the expense has not been affordable, and in some industries with higher employee turnover, the obligation seems as appealing as a can of worms.

This may be changing as there are several benefits to offering health insurance. Here are some examples:

Pre-tax payment of premiums. The employer and the employ deduct the cost of premiums from their income resulting in a 30% savings on average versus paying individual premiums with after tax income.

Tax credits. The IRS offers a Small Business Healthcare Tax Credit to qualifying businesses who offer benefits to their employees. If you’re an employer with fewer than 25 full-time equivalent employees, pay an average wage of less than $50,000 (as adjusted for inflation beginning in 2014) a year, and pay at least half of employee health insurance premiums, you may qualify for the credit.

High Deductible, Lower Premium Plans. It is more and more common for employees to select plans that allow Health Savings Accounts (HSAs). By design they are lower in cost than traditional plans with copays, and so more affordable. And owners have the same opportunity as employees to save money for future health care needs on a pre-tax basis.

Offering benefits attracts high-quality employees. A competitive benefits package offered to potential new hires can be the deciding factor between an employee choosing your company over another. Attracting higher quality employees increases efficiency, attentiveness, and morale. Working conditions are better and ultimately the bottom line!

 

 

 

 

Health Benefits Orientation Period for Adding New Employees Clarified

The IRS, Employee Benefits Security Administration, and Department of Health and Human Services have released a joint ruling aiming to clarify what’s been a big topic surrounding administering “waiting periods” for offering new employees coverage under the Affordable Care Act. The law states that any waiting period may not exceed 90 days from the first eligibility date, with all calendar days (business days, holidays and weekends) included in the count.

A potential loophole has been closed with the ruling. Employer orientation periods for new employees, commonplace when training and certification is required for types of employees in some businesses, can no longer exceed 30 days. This means that once the first 30 days are up, eligibility for health coverage must occur within the next 90 days. The ruling is applicable for plan years beginning on or after January 1, 2015.

The 30-day period is not necessarily as it appears though, as 30 days is measured by adding one calendar month and subtracting one calendar day. If an employee’s first day on the job is August 10 for example, the final day of their orientation would have to occur on September 9 at the latest. Their eligibility period then begins the following day on September 10 in this case, and can last no more than calendar 90 days.

The ruling is designed to curtail extensive employer orientation periods, while respecting that there are legitimate delays for health coverage eligibility beyond 90 days from date of hire. Caution is merited for employers to ensure that orientation periods are supportable for legitimate business purposes. Compliance penalties may result should enrollment practices be audited and a legitimate business need cannot be validated.

Counting Full-Time Employees for Benefits – Pay or Play

If you employ 100 or more full time employees, the Affordable Care Act requires that they be counted beginning in 2015 to confirm if eligible for health benefits. The “30” hours per week standard that begins next year is delayed until 2016 for employers with 50 to 99 employees. Employers with fewer than 50 full-time employees are not required to count, at least not under current law.

There are generally two types of employees; “hourly” and “salaried.” Actual hours worked is easy for the hourly workers. Days worked or weeks worked is used for salaried workers. And, “30” hours per week is the same as “130” hours of service in a calendar month. Why not “120” hours per month? This has to do with the variation in the number of days per month.

Two choices exist for actual counting. One is called the “Monthly Measurement Method,” resulting in a month-to-month analysis and best for employers with consistency of time worked. The “Look Back Measurement Method” is an option designed for more flexibility in counting. Ongoing versus new, plus variable, seasonal and part time employees must be considered.

Terms like “Initial Measurement Period,” “Standard Measurement Period,” “Stability Period,” “Administrative Period” and “Look Back Period” are included for averaging purposes, and employers have some flexibility in choosing their length. It all comes down to how long an employee is eligible for benefits in the future, even if their work hours are reduced.

Employer Dumping Leads To New IRS Rules

In lieu of offering health insurance benefits, certain employers have been paying employees to purchase their own individual insurance through the Marketplace exchanges. The rub is that employers have deducted these amounts as a cost of doing business the same way they deducted funds used to pay premiums.

The IRS has now moved to block this practice, colloquially dubbed “employer dumping.” Harsh tax penalties to the tune of $100 per day or $36,500 per year can now be assessed to employers. This new penalty in no way offsets other penalties that can be assessed under the Affordable Care Act.

“Employer payment plans,” as they’re sometimes called, do not satisfy the requirements of offering a health insurance plan, which must include preventive care. If employers choose to pay employees more to purchase their own health insurance, the amount must be treated as taxable income.

Self-Funding in the Age of the Affordable Care Act

To avoid rates based upon age, Federal and State premium taxes of up to 5% on every premium dollar, and flexibility in plan design, employers down to 10 employees in select parts of America will consider self funding. Per person deductibles of $25,000 or more will be accepted by employers with the hope and expectation their employee group is healthier than the average. Plan designs that minimize claims activity are likely reality long term, but initially self funded employers continue coverage levels in place when fully insured.

Stop loss insurers expect employers to disclose information on potential high cost claimants, and employers will readily comply since they are financially responsible for claims losses up to the deductible. Contract types that include claims runout protection will be increasingly popular the smaller the employer. Self funding was often an obvious choice for employers spending $1 million or more in premium annually. Times have changed with the advent of Obamacare as the Law of Large numbers is less of a consideration in the past, and when there is hope under self funding that actual costs in the future will be lower than a fully insured 25% – 50% rate increase.

Private Health Care Exchanges

It is expected that 20% of employees will be informed by their employer that they have a bank of funds available to select from up to 30 benefit options for health insurance, dental, vision, life and disability benefits. Respect that the main driver of this approach is to establish a budget amount for benefits that may or may not be increased based upon company performance, even as premium rates increase.

More and more employees will accept higher deductibles and out-of-pocket cost exposure over time under this model. The wise will take reasonable risk early and enroll in plans that allow for the buildup of Health Savings Account funds as a buffer in future years when the need for expensive care becomes a reality.

Does Obamacare Kill the COBRA snake?

When access to individual insurance without pre-existing condition exclusions became law, many thought this would reduce COBRA continuation coverage post employment. Now that the facts are better known about the value of individual plans including multi-thousand dollar deductibles and annual out of pocket exposure exceeding $6,000 single and $12,000 with dependents, expect COBRA coverage to continue to be a vibrant choice. It may be that the duration of time terminated employees remain on COBRA declines, but people will still sign up for COBRA post employment to avoid having to satisfy deductibles and out of pocket maximums all over again. COBRA will continue to be the coverage of choice at employers who maintain Platinum level benefits with expansive provider networks.

The COBRA coverage liability snake lives on in the age of Obamacare!

Payroll Contributions & Age Band Rates

Many benefits professionals recognize that non-discrimination rules for benefits coverage merit an update. Government planners will have a heavy task ahead to develop rules that make sense due to ACA premium rates that increase with age. Basic thinking has always been that more highly compensated employees should be allowed financial benefits coverage no better than the lower paid.

And yet, if for the same insurance plan the premium rate for lower paid workers is three times less than the premium for the senior management team simply due to age, is this discriminatory?

And what about payroll contribution amounts for health insurance coverage? Logic again supports charging the same deduction per pay based upon status whether single and covering dependents.

In reality, a vice president covering herself, her spouse and three children could result in a $20,000 annual premium if they started having children late and both parents are now in their fifties. And the same size family of a warehouse supervisor where he and his spouse are in their thirties could result in a $15,000 annual premium. Is the vice president receiving a discriminatory advantage since their family premium is 35% higher? These are “wait and see” realities caused by the new health care law. Proof of discriminatory practices results in higher taxes and financial penalties so time will tell what the government believes is “fair.”