Tuesday, March 26, 2013
Employers turning to incentives to improve worker health
Employers are increasingly offering rewards to their employees to persuade them to make better decisions about their health, according to a new survey released Monday. But it isn’t all fun and games — a growing number of companies are also penalizing workers who do not make healthy choices.
Aon Hewitt’s survey of nearly 800 large and mid-size U.S. employers found that 83 percent offer incentives to employees for participating in programs that help them become more aware of their health status. Of those, 79 percent offer incentives in the form of rewards while 5 percent impose penalties. Sixteen percent offer a mix of both.
Almost two-thirds (64 percent) of employers offer monetary incentives of between $50 and $500, and nearly one in five (18 percent) offer monetary incentives of more than $500, the survey finds.
A growing number of employers are beginning to link incentives to sustainable actions and results, as opposed to having employees simply participate in a program.
More than half (56 percent) of the companies offering incentives require employees to actively participate in health programs, comply with medications or participate in activities like health coaching, while 24 percent offer incentives for progress toward or attainment of acceptable ranges for biometric measures such as blood pressure, body mass index, blood sugar and cholesterol. And more than two-thirds say they are considering this approach in the next three to five years.
Though some groups argue that programs that seek to penalize workers by charging them higher premiums or other surcharges, several large employers have adopted such policies. For example, CVS Caremark, the pharmacy and drug-benefit provider, recently said it would require its employees to report their weight, blood sugar and cholesterol or be forced to pay an annual penalty of $600.
“Employers recognize the first step in getting people on a path to good health is providing employees and their families with the opportunity to become informed and educated about their health risks and the modifiable behaviors that cause those risks,” says Jim Winkler, chief innovation officer for health and benefits at Aon Hewitt.
“HRQs and biometric screenings are the key tools in providing that important information and serve as the foundation that links behaviors to action. Motivating people to participate through the use of incentives is a best practice in the industry and these strategies will continue to be a critical part of employers’ health care strategies in the future,” Winkler says.
By Kathryn Mayer, from BenefitsPro.Com
Tuesday, March 5, 2013
Six key compliance deadlines for 2013 and beyond
March 1, 2013
For plan sponsors, 2013 is a year of crossing Ts and dotting Is on PPACA compliance for their health care plans and strategizing for next year, when the employer mandate and public exchanges go into effect. The health care reform law has many moving parts and a great deal of regulations yet to come, which will keep benefits professionals on their toes all year.
"Employers have never experienced this complexity and oversight in compliance for their health plans. Employers are used to a compliance-rich environment around their retirement plans, but they need an equally robust and hands-on approach to managing the compliance of their health plans," says Mike Thompson, a principal in the human resources services practice of PricewaterhouseCoopers. He adds that "the rules, regulations and level of enforcement have never been greater."
Thompson believes "2013 is a period of strategic re-evaluation of whom the employer will provide benefits to in light of the changes in the individual market allowing guaranteed issue and subsidies for lower- and middle-income Americans."
He believes that employers will also transition around financing as "more employers look at community-type programs with the interest of moving away from their own programs and potentially contributing towards a private exchange or facilitating access to coverage in the open market."
To help employers keep all their compliance ducks in a row while managing and determining long-term strategies for their plans, EBN asked legal and health care experts for top issues to keep in mind for 2013 and beyond.
1. Preparing for the 2014 employer mandate
"At the top of the list is the interpretation of employer responsibility provisions that includes what constitutes minimum essential coverage that employers have to provide or be subject to penalties. Along with that, there are very important issues around the minimum value of the coverage they provide as well as who they have to provide it to," says Paul Dennett, senior vice president of health care reform at the American Benefits Council.
The employer mandate applies only to large employers. Whether an employer is defined as large under PPACA (generally companies with 50 or more employees) depends on the number of its full-time equivalent employees. Companies with 50 or more full-time workers (averaging at least 30 hours per week) must offer minimum health care coverage that is affordable.
In 2013, an employer ought to be determining whether it is a large employer and, therefore, subject to the mandate. "If they offer coverage in 2014, the coverage must meet the minimum value standards and the contributions the employer requires of employees cannot be so high the coverage is unaffordable relative to the employee's household income," says Jean C. Hemphill, practice leader of Ballard Spahr's health care group.
To determine the minimum value, fully insured plans will rely on their insurance carrier for information on whether they meet the minimum value of 60% for their plan. Self-insured plans can turn to an actuary or determine their value with the aid of a government-provided calculator or government-provided checklists.
When it comes to determining the affordability of the plan, an employer cost-sharing arrangement must be affordable relative to the employees' household income, as stated under PPACA. So, "the employee's contribution and cost-sharing obligations can't exceed 9.5% of their household income," says Hemphill.
However, the IRS acknowledges that employers don't know workers' household income, and suggests employers use W-2 wage information instead to determine their plan's affordability.
Hemphill expects more guidance on this issue since employees' contributions are typically much greater for dependents coverage than their own. An employee offered otherwise qualifying coverage by their employer can't use the public exchange unless they prove their employer-sponsored coverage is unaffordable.
The affordability issue may be of greater concern to employers with fairly low-income workforces or for employers not offering comprehensive plans to employees or all employees, such as the mini-medical plans sometimes offered in the retail industry. Employers only need to offer one affordable plan with minimum value to satisfy the rules, however mini-medical plans will be illegal after 2014.
Actuarial experts predict that most high-deductible health plans with deductibles in the $2,000-$3,000 range will most likely qualify, however those with much higher cost-sharing may not meet the minimum value.
While sponsors can vary the deductible and coinsurance amount of HDHPs, they should remember that the higher the deductible, the lower actuarial value of the plan.
"There are variables that can be adjusted in the plan design, but the most important one is where to set the amount of the deductible," says Dennett. He adds that guidance so far has indicated employer contributions toward HSAs or credits toward HRAs will count toward the minimum value. The question is whether the amount contributed is counted 100% to the plan or if it is discounted in the actuarial value formula that HHS would use in the calculation of actuarial value coverage.
Overall, "the Affordable Care Act was designed so employers don't need to make too many plan design changes to their plan," says J.D. Piro, national practice leader for Aon Hewitt's health and benefits legal department. "They may need to open it up to more employees but, generally speaking, they should be able to meet the affordability and minimum value requirements."
2. Public exchanges
Employers are required to provide employees with notice alerting them of the existence of public insurance exchanges. It is thought that the government will issue a model notice for this purpose. At press time, the government had yet to produce this model notice or other guidance about the notice requirement. The March 1 notification deadline has been extended until "late summer or fall," according to a recent FAQ announcement from the Centers for Medicare and Medicaid Services.
"There may still be unanswered questions about whether the state exchanges, partnership exchanges or the federal exchanges are really at an operational readiness stage to be able to go live as of October 2013," says Dennett.
Assuming the exchanges are on track and sponsors receive the guidance they need, they should expect many questions from workers about how the process affects them.
"While most major employers will continue to offer coverage to employees, there will be some confusion around the availability of coverage in the public exchanges and what the implications are [for employees] getting coverage from their employer, says Thompson.
He suggests employees will primarily want to know:
* Do I still have coverage through my employer?
* Am I eligible to get coverage through the exchange?
* Can I potentially get subsidies through the exchange?
* Is it in my best interest to go through the exchange?
3. Waiting periods
Another design-related issue employers must factor into their plans is that under PPACA, waiting periods for health care coverage cannot exceed 90 days. The 90-day period begins when the employee is otherwise eligible for coverage. Employers with a high-turnover workforce that currently have long waiting periods will have to shorten them.
If an employer requires employees to work a minimum number of hours to qualify for coverage, it may need to monitor workers' timesheets in 2013 to determine if and when coverage needs to be offered in 2014; this may be complicated for seasonal employees and other employees with variable hours.
Thompson believes this is part of a larger question of meeting qualifications for providing coverage.
"It's part of a package in my mind," he says. "Employers must evaluate employee classes when looking at whether they meet the minimum threshold of providing coverage to full-time employees. Seasonal, temporary, or contract workers are classes that need to be evaluated in order to avoid or at least understand what the penalties might be."
4. Pre-existing and non-discrimination prohibitions
"The non-discrimination rules are new for insured plans in 2014," says Hemphill. Even though these prohibitions should already be in effect, government agencies have delayed enforcement until they release regulations.
"It will be an important issue because right now there is no requirement to offer coverage to part-time employees, but with the definition of full-time employees as an average of 30 hours per week and new non-discrimination testing rules, the employer obligation may be different," she says.
Either way, employers can expect notice and guidance well before implementation because, "it is a big plan design issue," says Edward I. Leeds, counsel in the employee benefits and executive compensation group at Ballard Spahr.
5. Wellness programs
PPACA includes rules that prohibit plans from discriminating against individuals based on a range of health-related factors. Plans cannot impose restrictions on eligibility or increase employee costs for coverage based on these factors.
"When the government issued guidance under ACA, they actually revised the HIPAA regulations. So now the ACA and HIPAA rules ... will be the same," says Leeds. "By and large the rules follow HIPAA with some changes, the most significant of which is that the potential reward for meeting requirements under the wellness programs will increase as of January 1, 2014."
The potential reward for meeting a wellness requirement will increase from 20% of cost of coverage to 30% of cost of coverage. Incentives related to tobacco cessation will increase up to 50%. (For more details, read "Regs increase wellness rewards," page 28.)
6. Upcoming fees and taxes
Patient-Centered Outcomes Research Institute, established by PPACA, will collect and publish information about clinical effectiveness of treatments for patients. It will be paid for through fees assessed against insurers and self-funded plans equal to $2 ($1 in the first year) per covered life. The assessment will last seven years and eventually be adjusted for inflation. Employers with self-funded plans will need to report and pay these fees starting in July 2013.
The Transitional Reinsurance Program aims to stabilize the individual health insurance market as insurers provide coverage, starting in 2014, to large numbers of individuals who do not currently have coverage and present uncertain risks. The program will provide reinsurance payments to insurers that take on high-risk individuals. The program is funded through a three-year tax (expected to be $63 per covered life in the first year.)
The Additional Medicare Tax, in effect this year, is an additional 0.9% tax applied to high-income individuals. Employers are responsible for withholding the tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year.
"Employers have never experienced this complexity and oversight in compliance for their health plans. Employers are used to a compliance-rich environment around their retirement plans, but they need an equally robust and hands-on approach to managing the compliance of their health plans," says Mike Thompson, a principal in the human resources services practice of PricewaterhouseCoopers. He adds that "the rules, regulations and level of enforcement have never been greater."
Thompson believes "2013 is a period of strategic re-evaluation of whom the employer will provide benefits to in light of the changes in the individual market allowing guaranteed issue and subsidies for lower- and middle-income Americans."
He believes that employers will also transition around financing as "more employers look at community-type programs with the interest of moving away from their own programs and potentially contributing towards a private exchange or facilitating access to coverage in the open market."
To help employers keep all their compliance ducks in a row while managing and determining long-term strategies for their plans, EBN asked legal and health care experts for top issues to keep in mind for 2013 and beyond.
1. Preparing for the 2014 employer mandate
"At the top of the list is the interpretation of employer responsibility provisions that includes what constitutes minimum essential coverage that employers have to provide or be subject to penalties. Along with that, there are very important issues around the minimum value of the coverage they provide as well as who they have to provide it to," says Paul Dennett, senior vice president of health care reform at the American Benefits Council.
The employer mandate applies only to large employers. Whether an employer is defined as large under PPACA (generally companies with 50 or more employees) depends on the number of its full-time equivalent employees. Companies with 50 or more full-time workers (averaging at least 30 hours per week) must offer minimum health care coverage that is affordable.
In 2013, an employer ought to be determining whether it is a large employer and, therefore, subject to the mandate. "If they offer coverage in 2014, the coverage must meet the minimum value standards and the contributions the employer requires of employees cannot be so high the coverage is unaffordable relative to the employee's household income," says Jean C. Hemphill, practice leader of Ballard Spahr's health care group.
To determine the minimum value, fully insured plans will rely on their insurance carrier for information on whether they meet the minimum value of 60% for their plan. Self-insured plans can turn to an actuary or determine their value with the aid of a government-provided calculator or government-provided checklists.
When it comes to determining the affordability of the plan, an employer cost-sharing arrangement must be affordable relative to the employees' household income, as stated under PPACA. So, "the employee's contribution and cost-sharing obligations can't exceed 9.5% of their household income," says Hemphill.
However, the IRS acknowledges that employers don't know workers' household income, and suggests employers use W-2 wage information instead to determine their plan's affordability.
Hemphill expects more guidance on this issue since employees' contributions are typically much greater for dependents coverage than their own. An employee offered otherwise qualifying coverage by their employer can't use the public exchange unless they prove their employer-sponsored coverage is unaffordable.
The affordability issue may be of greater concern to employers with fairly low-income workforces or for employers not offering comprehensive plans to employees or all employees, such as the mini-medical plans sometimes offered in the retail industry. Employers only need to offer one affordable plan with minimum value to satisfy the rules, however mini-medical plans will be illegal after 2014.
Actuarial experts predict that most high-deductible health plans with deductibles in the $2,000-$3,000 range will most likely qualify, however those with much higher cost-sharing may not meet the minimum value.
While sponsors can vary the deductible and coinsurance amount of HDHPs, they should remember that the higher the deductible, the lower actuarial value of the plan.
"There are variables that can be adjusted in the plan design, but the most important one is where to set the amount of the deductible," says Dennett. He adds that guidance so far has indicated employer contributions toward HSAs or credits toward HRAs will count toward the minimum value. The question is whether the amount contributed is counted 100% to the plan or if it is discounted in the actuarial value formula that HHS would use in the calculation of actuarial value coverage.
Overall, "the Affordable Care Act was designed so employers don't need to make too many plan design changes to their plan," says J.D. Piro, national practice leader for Aon Hewitt's health and benefits legal department. "They may need to open it up to more employees but, generally speaking, they should be able to meet the affordability and minimum value requirements."
2. Public exchanges
Employers are required to provide employees with notice alerting them of the existence of public insurance exchanges. It is thought that the government will issue a model notice for this purpose. At press time, the government had yet to produce this model notice or other guidance about the notice requirement. The March 1 notification deadline has been extended until "late summer or fall," according to a recent FAQ announcement from the Centers for Medicare and Medicaid Services.
"There may still be unanswered questions about whether the state exchanges, partnership exchanges or the federal exchanges are really at an operational readiness stage to be able to go live as of October 2013," says Dennett.
Assuming the exchanges are on track and sponsors receive the guidance they need, they should expect many questions from workers about how the process affects them.
"While most major employers will continue to offer coverage to employees, there will be some confusion around the availability of coverage in the public exchanges and what the implications are [for employees] getting coverage from their employer, says Thompson.
He suggests employees will primarily want to know:
* Do I still have coverage through my employer?
* Am I eligible to get coverage through the exchange?
* Can I potentially get subsidies through the exchange?
* Is it in my best interest to go through the exchange?
3. Waiting periods
Another design-related issue employers must factor into their plans is that under PPACA, waiting periods for health care coverage cannot exceed 90 days. The 90-day period begins when the employee is otherwise eligible for coverage. Employers with a high-turnover workforce that currently have long waiting periods will have to shorten them.
If an employer requires employees to work a minimum number of hours to qualify for coverage, it may need to monitor workers' timesheets in 2013 to determine if and when coverage needs to be offered in 2014; this may be complicated for seasonal employees and other employees with variable hours.
Thompson believes this is part of a larger question of meeting qualifications for providing coverage.
"It's part of a package in my mind," he says. "Employers must evaluate employee classes when looking at whether they meet the minimum threshold of providing coverage to full-time employees. Seasonal, temporary, or contract workers are classes that need to be evaluated in order to avoid or at least understand what the penalties might be."
4. Pre-existing and non-discrimination prohibitions
"The non-discrimination rules are new for insured plans in 2014," says Hemphill. Even though these prohibitions should already be in effect, government agencies have delayed enforcement until they release regulations.
"It will be an important issue because right now there is no requirement to offer coverage to part-time employees, but with the definition of full-time employees as an average of 30 hours per week and new non-discrimination testing rules, the employer obligation may be different," she says.
Either way, employers can expect notice and guidance well before implementation because, "it is a big plan design issue," says Edward I. Leeds, counsel in the employee benefits and executive compensation group at Ballard Spahr.
5. Wellness programs
PPACA includes rules that prohibit plans from discriminating against individuals based on a range of health-related factors. Plans cannot impose restrictions on eligibility or increase employee costs for coverage based on these factors.
"When the government issued guidance under ACA, they actually revised the HIPAA regulations. So now the ACA and HIPAA rules ... will be the same," says Leeds. "By and large the rules follow HIPAA with some changes, the most significant of which is that the potential reward for meeting requirements under the wellness programs will increase as of January 1, 2014."
The potential reward for meeting a wellness requirement will increase from 20% of cost of coverage to 30% of cost of coverage. Incentives related to tobacco cessation will increase up to 50%. (For more details, read "Regs increase wellness rewards," page 28.)
6. Upcoming fees and taxes
Patient-Centered Outcomes Research Institute, established by PPACA, will collect and publish information about clinical effectiveness of treatments for patients. It will be paid for through fees assessed against insurers and self-funded plans equal to $2 ($1 in the first year) per covered life. The assessment will last seven years and eventually be adjusted for inflation. Employers with self-funded plans will need to report and pay these fees starting in July 2013.
The Transitional Reinsurance Program aims to stabilize the individual health insurance market as insurers provide coverage, starting in 2014, to large numbers of individuals who do not currently have coverage and present uncertain risks. The program will provide reinsurance payments to insurers that take on high-risk individuals. The program is funded through a three-year tax (expected to be $63 per covered life in the first year.)
The Additional Medicare Tax, in effect this year, is an additional 0.9% tax applied to high-income individuals. Employers are responsible for withholding the tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year.
Monday, March 4, 2013
Where Will You Buy Health Insurance And What Will It Cost?
The Affordable Care Act has been the “law of the land” for almost three years. Time really flies. Despite the many resources available, most of the general population has no clue how “Obamacare” is supposed to work. With the insurance provisions finally kicking in January 1, 2014 and the realization that the law is not going away, people need to brush up quickly on their basic knowledge. Where will you get your health insurance and how much will it cost? Today I share with you information about the “Health Insurance Marketplace.”
Health insurance will be available through the same avenues where insurance is currently purchased:
Employer Based Coverage
Companies with more than fifty employees are required to offer health insurance or pay a fine. One advantage I have of speaking at numerous financial planning conferences is the opportunity to attend sessions about tax planning. And what is one of the favorite topics of tax planners? Instructing companies on how they can get around the rules of providing health insurance under Obamacare. In a previous post, I discussed a few concepts on how this can be accomplished. I predicted from the outset that Obamacare would push employers out of the business of providing health insurance. In fact, the conspiracy theorist in me thinks this was one intention of the law.
For people who purchase their insurance for the entire family through their employer, there will be another change. An employer is required to provide insurance only for the employee and their dependents. Is your spouse a dependent? No. Therefore, employers may choose to not provide insurance to the spouse.
The Individual Market
What do you do if your employer no longer provides health insurance coverage or your spouse cannot obtain coverage through your employer? The good news: the individual market policies will provide the same coverage as the group policy purchased through your employer. The bad news: the insurance will cost a bit more than group insurance for two reasons I’ll discuss shortly.
Individual insurance has historically been a crap shoot – policies may have sub-standard benefits such as no mental health or maternity coverage, insurance companies can turn you down because of health factors, or the policies can be hugely expensive because of medical underwriting. Individual insurance is regulated by the states, and each state is very different on how well it looks out for its constituents. With Obamacare, policies will still be regulated by the states, but the policies are required to provide minimal essential benefits, such as mental health and maternity coverage. Also, insurance is “guaranteed issue,” meaning you cannot be turned down no matter what illness you have in your past. Finally, price is determined only by four criteria:
So what about cost?
Let’s discuss employer based coverage first. Employees have a delusional disorder when it comes to the cost of health insurance. They know their employer pays some of the cost but have little idea how much the employer pays. Even when an employee quits their job and goes on COBRA, they are under the impression that COBRA is a different insurance and it is much more expensive than their previous employer coverage. Folks, COBRA is your employer coverage, except now you pay 100% of the cost instead of just a portion of the premium. There can be an additional 2% charge for “administrative expenses,” but that is pretty much it. Your employer has been providing a great benefit.
Compared to individual insurance, employer based insurance has been traditionally more expensive because it has mandated benefits and it must be guaranteed issue. No one who works in a group can be turned down for health insurance, even if they’ve had cancer or any other serious disease. In Florida, I could easily buy an individual policy for $250 per month in premiums, but I cannot get pregnancy coverage and the insurance company can deny coverage if I’m not a good risk for them. My current group policy costs about $500 per month with the same deductible, but I’m guaranteed coverage and have great pregnancy benefits. The bad news for me? At age 48, I am past my pregnancy prime but don’t have the choice to turn that coverage down.
Back to the individual market costs… now that individual coverage will have the same benefits and be guaranteed issue like group coverage, the costs will theoretically equal group insurance. However, there are two factors that will make individual insurance more expensive than group insurance: the taxation of health insurance and overhead allowances to insurance companies.
The taxation of health insurance:
Employers get a tax break for providing health insurance, and the employee is allowed to pay their part of the premium on a pre-tax basis, so they get a tax break too. If a person is self-employed and earns income through a business or receives a 1099, they can also deduct 100% of their health insurance premiums.
Who gets the short end of the stick? Employees who receive a W-2 tax form and purchase their own health insurance. They can deduct the premium as an itemized medical expense only above 10% of their adjusted gross income and they must itemize – this will knock most people out of the running for any tax deduction and it will only be a partial deduction. Basically, the employee will pay more for the same insurance because they will pay for it with after tax dollars. This is an inequity for which a fix is long overdue. If employers leave the market, the government will get a nice bump up in revenue from the extra income. Until a fix comes around, one way to get a tax break is to get a side job that pays 1099 income – most of that income will be tax free up to the cost of the insurance premiums.
Overhead allowances to insurance companies:
One part of Obamacare I applaud is the requirement that insurance companies reduce their overhead. Previously, overhead in the small group and individual market could be as high as 30% of premiums. Of course, generous CEO paychecks are part of that overhead, along with a lot of waste such as advertising. With Obamacare, overhead for large group insurance cannot be greater than 15% of premiums. For the small group and individual market, overhead cannot be more than 20% of premiums. If overhead is higher than the target, the insurance company must provide a rebate of premiums. Many people benefited from premium rebates this past year.
So how does this affect insurance premiums in the individual market? Since overhead can be up to 20% of premiums, you can be darn certain the insurance company will allow the overhead to stay as high as allowed. This is more money in their paycheck. Will it be 5% higher than large group coverage since that is the difference in overhead allowances? That remains to be seen.
Healthcare reform is the best soap opera on the internet (although I haven’t watched Downtown Abbey,) and I look forward to providing future installments. Questions, comments, suggestions? Post here, reach me on Twitter @CarolynMcC, or at Carolyn.mcclanahan@gmail.com. Thanks for reading.
Health insurance will be available through the same avenues where insurance is currently purchased:
- Group insurance through employers
- Individual insurance
- Public programs such as Medicare or Medicaid
Employer Based Coverage
Companies with more than fifty employees are required to offer health insurance or pay a fine. One advantage I have of speaking at numerous financial planning conferences is the opportunity to attend sessions about tax planning. And what is one of the favorite topics of tax planners? Instructing companies on how they can get around the rules of providing health insurance under Obamacare. In a previous post, I discussed a few concepts on how this can be accomplished. I predicted from the outset that Obamacare would push employers out of the business of providing health insurance. In fact, the conspiracy theorist in me thinks this was one intention of the law.
For people who purchase their insurance for the entire family through their employer, there will be another change. An employer is required to provide insurance only for the employee and their dependents. Is your spouse a dependent? No. Therefore, employers may choose to not provide insurance to the spouse.
The Individual Market
What do you do if your employer no longer provides health insurance coverage or your spouse cannot obtain coverage through your employer? The good news: the individual market policies will provide the same coverage as the group policy purchased through your employer. The bad news: the insurance will cost a bit more than group insurance for two reasons I’ll discuss shortly.
Individual insurance has historically been a crap shoot – policies may have sub-standard benefits such as no mental health or maternity coverage, insurance companies can turn you down because of health factors, or the policies can be hugely expensive because of medical underwriting. Individual insurance is regulated by the states, and each state is very different on how well it looks out for its constituents. With Obamacare, policies will still be regulated by the states, but the policies are required to provide minimal essential benefits, such as mental health and maternity coverage. Also, insurance is “guaranteed issue,” meaning you cannot be turned down no matter what illness you have in your past. Finally, price is determined only by four criteria:
- Age – older people will not pay more than three times the amount younger people pay.
- Premium rating area – high cost health areas will have more expensive insurance than low cost areas.
- Number of family members getting coverage.
- Tobacco use – this is the only lifestyle factor that is allowed to be considered.
So what about cost?
Let’s discuss employer based coverage first. Employees have a delusional disorder when it comes to the cost of health insurance. They know their employer pays some of the cost but have little idea how much the employer pays. Even when an employee quits their job and goes on COBRA, they are under the impression that COBRA is a different insurance and it is much more expensive than their previous employer coverage. Folks, COBRA is your employer coverage, except now you pay 100% of the cost instead of just a portion of the premium. There can be an additional 2% charge for “administrative expenses,” but that is pretty much it. Your employer has been providing a great benefit.
Compared to individual insurance, employer based insurance has been traditionally more expensive because it has mandated benefits and it must be guaranteed issue. No one who works in a group can be turned down for health insurance, even if they’ve had cancer or any other serious disease. In Florida, I could easily buy an individual policy for $250 per month in premiums, but I cannot get pregnancy coverage and the insurance company can deny coverage if I’m not a good risk for them. My current group policy costs about $500 per month with the same deductible, but I’m guaranteed coverage and have great pregnancy benefits. The bad news for me? At age 48, I am past my pregnancy prime but don’t have the choice to turn that coverage down.
Back to the individual market costs… now that individual coverage will have the same benefits and be guaranteed issue like group coverage, the costs will theoretically equal group insurance. However, there are two factors that will make individual insurance more expensive than group insurance: the taxation of health insurance and overhead allowances to insurance companies.
The taxation of health insurance:
Employers get a tax break for providing health insurance, and the employee is allowed to pay their part of the premium on a pre-tax basis, so they get a tax break too. If a person is self-employed and earns income through a business or receives a 1099, they can also deduct 100% of their health insurance premiums.
Who gets the short end of the stick? Employees who receive a W-2 tax form and purchase their own health insurance. They can deduct the premium as an itemized medical expense only above 10% of their adjusted gross income and they must itemize – this will knock most people out of the running for any tax deduction and it will only be a partial deduction. Basically, the employee will pay more for the same insurance because they will pay for it with after tax dollars. This is an inequity for which a fix is long overdue. If employers leave the market, the government will get a nice bump up in revenue from the extra income. Until a fix comes around, one way to get a tax break is to get a side job that pays 1099 income – most of that income will be tax free up to the cost of the insurance premiums.
Overhead allowances to insurance companies:
One part of Obamacare I applaud is the requirement that insurance companies reduce their overhead. Previously, overhead in the small group and individual market could be as high as 30% of premiums. Of course, generous CEO paychecks are part of that overhead, along with a lot of waste such as advertising. With Obamacare, overhead for large group insurance cannot be greater than 15% of premiums. For the small group and individual market, overhead cannot be more than 20% of premiums. If overhead is higher than the target, the insurance company must provide a rebate of premiums. Many people benefited from premium rebates this past year.
So how does this affect insurance premiums in the individual market? Since overhead can be up to 20% of premiums, you can be darn certain the insurance company will allow the overhead to stay as high as allowed. This is more money in their paycheck. Will it be 5% higher than large group coverage since that is the difference in overhead allowances? That remains to be seen.
Healthcare reform is the best soap opera on the internet (although I haven’t watched Downtown Abbey,) and I look forward to providing future installments. Questions, comments, suggestions? Post here, reach me on Twitter @CarolynMcC, or at Carolyn.mcclanahan@gmail.com. Thanks for reading.
Wednesday, November 7, 2012
Monday, September 10, 2012
Form W-2 Guidance
The Affordable Care Act (ACA) requires employers report the aggregate cost of employer-sponsored health coverage on employees’ Form W-2s. The reporting is for informational purposes to show employees the value of their health care benefits.
The IRS website provides specific guidance and a chart depicting the who, what, when, where and how of reporting health care benefit value. For instance, the reporting requirement is optional for employers filing fewer than 250 Form W-2s, until further IRS guidance is issued. Health Alliance recommends employers consult with a trusted tax professional regarding this and any other tax matter.
Thursday, August 23, 2012
Business Travel Insurance
Unfortunately,
employers are sometimes innocently unaware that their domestic group
health and workers compensation plan's, don't adequately cover their employees
when they travel abroad on business. Benefits such as Accidental Death &
Dismemberment (AD&D), Emergency Medical Air Evacuation & Repatriation,
Political Evacuation, and 24 Hour Assistance Services are rarely included in
traditional group health plan's. These benefits are critical to anyone
traveling abroad and should always be included in any risk management or
employee benefit plan. Our products
include:
Business Travel
Accident: This fully customizable insurance provides World - Class protection
and is an inexpensive but extremely valuable coverage that supplements any
employee benefit program. Benefit Options: Accidental Death &
Dismemberment, International Medical, Emergency Medical Evacuation and
Repatriation, Political / Natural Disaster Evacuation, War Risk, and 24-Hour
Multilingual Global Assistance Services.
Blanket
International Group Medical (Groups of 5 or more): Customized blanket coverage
for any business, corporation, church, school, and non-profit organization that
has employees or group members traveling outside their home country, for short
or long periods of time. This comprehensive but inexpensive insurance solution,
fills the gaps in traditional U.S. state-side group health or nationalized
health plans that limit or exclude, when an employee or group member travels
abroad
A Nation at Risk
Americans
remain dramatically uninsured–and underinsured–for life insurance. In fact,
life insurance ownership is at an all-time low. A startling 41 percent of U.S.
adults have no life insurance at all, according to recent LIMRA data, and 43
percent of those who have coverage admit it’s not enough. Both men and women
are less likely to own life insurance today than they were in 2004.
The
odds of not having life insurance have increased dramatically for every age
group since that time, and only one in 10 insured adults owns both permanent
and term life insurance—half as many as in 2004.
This
creates a nation of families who could be on the brink of financial ruin if a
primary wage-earner dies. For example, of the households that own life insurance,
seven in 10 have only enough to replace their household income for 3.5 years.
The
general rule of thumb is to carry enough life insurance to replace income for
seven to 10 years. For those fortunate enough to have employer-provided life
insurance, many assume the relatively small amount of coverage it offers will
be adequate for their needs, when in reality it often will pay for little more
than final expenses.
Tally
up the ongoing costs of mortgage payments, utilities, food, transportation,
health care, clothing and all the daily necessities of life—not to mention
longer-term expenses such as children’s college education—and you’ll quickly
see the gap in coverage.
Those without life protection are obviously
at even greater risk, especially since 61 percent of American workers live
paycheck to paycheck, and 34 percent of households admit they would immediately
have trouble meeting everyday living expenses if a primary wage earner died
today.
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