2011 Benefits/HR Updates: Healthcare Reform, 401 K Fee Disclosure and Health Plan Benchmarking Presented by: Scott Rappoport Charles Bruder The material provided herein is for informational purposes only and is not intended as legal advice or counsel.
• Please help yourself to food and drinks • Please let us know if the room temperature is too hot or cold • Bathrooms are located past the reception desk on the right • Please turn OFF your cell phones • Please complete and return surveys at the end of the seminar
The Impact • Resulting in significant changes to structure, cost and administration of group health plans • Phased in from 2010 through 2018 • More questions than answers on many details; however regulations are coming from HHS fast and furious
Access to Information? • Regulations will be published in Federal Register www. gpoaccess. gov • Comment Periods • Final Regulations-expecting more than 100, 000 pages when finished
Grandfathering • Defined: Any group health plan or individual plan that was in effect on March 23, 2010 • Allows for change in family status, adds/dels, etc. as long as permitted prior to March 23 rd
Grandfathering Mandates Applicable to All Plans • Prohibition on lifetime limits for “essential” benefits • Prohibition on rescissions of coverage, except for fraud or misrepresentation • Restrictions on “unreasonable” annual limits on “essential” benefits • Elimination of pre-existing condition exclusion for dependents under age 19 • Required coverage of dependent children to their 26 th birthday (regardless of marital status) unless they have access to other employer coverage
Grandfathering Mandates Not Applicable to Grandfathered Plans • Restriction on cost sharing for preventive care • Internal and external appeal rules • Restrictions on referral requirements and cost sharing for out of network emergency services • No referral needed for OB/GYN treatment from an in-network specialist • Nondiscrimination- cannot base eligibility based upon annual or hourly salary of full time employees or use other eligibility criteria that favor highly compensated employees • Health insurers must accept every applicant applying for new or renewed coverage • Effective January 1, 2014 sponsors must provide payment for at least 60% of the total cost of coverage and must abide by maximum limits placed on out of pocket expenses (subject to adjustment in 2015 or after, $5, 900/individual and $11, 900/family
What Will Jeopardize Grandfathering? • Significantly cutting or reducing benefits • Raising the coinsurance • Raising the copay - can be raised the greater of $5 or medical inflation plus 15% • Raising the deductible - can be raised the medical inflation plus 15% • Decreasing the employer % paid by more than 5% • Changing Carriers - now permitted based on revised rules • Adding or tightening annual limits
Advantages of Remaining Grandfathered plans are exempt from the following reform provisions: • Required coverage for emergency services at in-network levels • Required first-dollar coverage for certain preventive services (immunizations and screenings), subject to no deductible • A prohibition on restricting the designation of primary care providers or requiring referrals for OB/GYN services
Grandfathered plans are also exempt from: • Required coverage of routine expenses for participation in clinical trials • Enhanced claim appeal procedures, including implementation of an external appeals process • A prohibition on discriminating in favor of highly compensated individuals (i. e. , applying the same nondiscrimination rules to both insured and self-funded plans) • Due to these exemptions, many plan sponsors will want to retain their plan's grandfathered status for as long as that proves to be feasible
Should a Plan Aim to Achieve Grandfathered Status? • Cost benefit analysis of what is saved from being excused from certain PPACA restrictions versus what is lost by not being able to perform certain actions in order to maintain grandfathered status • Example - Boeing recently announced that deductible and copays will rise above the limits set for grandfathered plans in order to in part combat rising health care costs and avoid the possible impact of the “Cadillac” tax in 2018
2010 Issues - Limits • Lifetime limits on the dollar value of benefits for any participant or beneficiary for all fully insured and selfinsured groups and individual plans, including grandfathered plans, are prohibited within six months of enactment. If a participant has previously reached a lifetime limit then he/she must be provided a 30 day period to reenroll beginning no later than January 1, 2011 for calendar year plans • Annual benefit limits for “non-essential” coverage only • Annual limits will be prohibited completely by January 1, 2014
Waivers for “Limited Benefit” or “Mini Med” Plans • “Limited Benefit” or “Mini Med” plans are usually health insurance plans that offer lower cost coverage to part-time workers, seasonal workers and volunteers • These plans may apply for a waiver from PPACA’s annual limit requirements • To be eligible to potentially receive a waiver, a plan must have offered the relevant coverage prior to September 23, 2010 for the plan year beginning between September 23, 2010 and September 23, 2011 AND must submit a waiver application not less than 30 days prior to the beginning of the plan year • For plan years beginning before November 2, 2010, waiver application must be submitted not less than 10 days before the beginning of the plan year
Waivers for “Limited Benefit” or “Mini Med” Plans • A waiver application must include: – Terms of the plan – Number of individuals covered by the plan – Annual limits and rates applicable to the plan – Brief description of why compliance with annual limit requirements would result in a significant decease in access to benefits for those covered by the plan – Attestation signed by plan administrator or chief executive officer that the plan was in effect prior to September 23, 2010 and that application of restricted annual limits would result in a significant decrease in access to benefits for those currently covered • Must reapply for each plan year until 2014 when the waiver expires subject to future HHS guidance
Case Example – Waiver of Annual Limits • Mc. Donald’s provides a limited benefit plan for certain parttime or hourly employees • The Mc. Donald’s limited benefit plans offers caps on annual limits at levels well below PPACA required limits • Mc. Donald’s along with other companies requested and received a waiver after it and others communicated that limited benefit plans would likely not be offered if such plans were forced to comply with annual limit requirements
Essential Coverage • Ambulatory patient services • Emergency services • Hospitalization • Maternity & newborn care • Mental health, substance abuse, behavioral health • RX • Rehabilitative services and devices • Laboratory service • Pediatric services including oral and vision care • Preventive, wellness, chronic disease management
Other 2010 Issues • All group plans will be required to comply with the Internal Revenue Section 105(h) rules that prohibit discrimination in favor of highly compensated individuals • HCE means the top 25% of EEs by pay plus the 5 highest paid officers anyone who owns 10% of the stock The Impact: • Must provide the same plan options to all employees • Must offer those plans at the same contributions to all employees
105(h) Discrimination Issues The Impact Continued: • If you give a benefit to even 1 HCE that you do not give to all NHCEs you fail the test • If you have a tier that is not the best benefit and it has both HCEs and NHCEs you will fail the benefits test
Small Business Tax Credit - 2010 • Eligible small businesses are eligible for phase one of a small business premium tax credit –Small employers with less than 25 employees may be eligible for a tax credit on a sliding scale based on number of employees and average payroll, of up to 50% of premiums for up to 2 years if the employer contributes at least 50% of the total premium cost –Average salary must be $50, 000 or less –Businesses with no tax liability and non-profits are eligible for the credit
Preventive Services - Defined • Evidence-based items or services that have a rating of “A” or “B” in the current recommendations of the U. S. preventive Services Task Force • Immunizations that have a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention • Evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration • With respect to women, such additional preventive care and screenings not described in paragraph (1) as provided for in comprehensive guidelines supported by the Health Resources and Services Administration for purposes of this paragraph
Dependent Age 26 • All group and individual plans, including self-insured plans and grandfathered plans, within six months of enactment, will have to cover dependents up to age 26 • Practical Perspective - Carriers are making this available on either May 1 or June 1 • Dependents can be married as long as they have no other eligibility for group coverage
Dep. Age 26 - Administration • Significant administrative implications: –Written notice –Special one time open enrollment –Effective latest of 1/1/11 for 1/1 plans –Includes FSA’s & HRA’s –Plan document amendments –Allows for change in elections including FSA to pay for dependent premiums –Does not apply to dental or vision • Discrepancy with NJ age 31 - awaiting guidance
2010 Issue - Pre-Existing • All group and individual health plans, including self-insured plans, will have to cover pre-existing conditions for children 19 and under for plan years beginning on or after six months after date of enactment • By 2014 all coverage must be guaranteed issue and without pre-existing
2010 - Other Issues • For all group and individual plans, including self-insured plans, emergency services covered in-network regardless of provider • Enrollees may designate any in-network doctor as their primary care physician including OB/GYN. No referral requirement permitted for OB/GYN • New coverage appeal process-Culturally & Linguistically Appropriate • Federal grant program for small employers providing wellness programs to their employees will take effect on October 1, 2010
2011 - Tax & Cost Items • The tax on distributions from a health savings account that are not used for qualified medical expenses increases from 10% to 20% • OTC drugs no longer reimbursable under HSAs, FSAs, HRAs and Archer MSAs unless prescribed by a doctor, even if prescribed by a Dr. Debit cards not an option • Small employers (less than 100 employees) will be allowed to adopt new “simple cafeteria plans”
2011 Admin Issues - SPD’s • Requires that all: –Group Health Plans (including self-insured plans) –Group Health Insurers –Individual Health Insurers • Provide a summary of benefits and coverage explanation to: –All applicants at the time of application –All enrollees prior to the time of enrollment or re-enrollment –All policyholders at the time of issuance or delivery • Must include specific information, be no more than 4 pages and be culturally and linguistically appropriate • $1000 per enrollee fine for non-compliance
2012 Admin Issues - Material Modifications 60 Day notice requirement prior to changes
2012 Admin Issues - W 2 s • OPTIONAL- All employers must include on their W 2 s the aggregate cost of employersponsored health benefits –IRS announced in October 2010 that it would delay making W 2 reporting mandatory for W 2 s issued for year 2011 income, but would instead make reporting optional for such W 2 s –Additional guidance has been promised by the end of the year • However, the W 2 requirement as previously described by relevant authorities provides the following: –If an employee receives health insurance coverage under multiple plans, the employer must disclose the aggregate value of all such health coverage. –Excludes all contributions to HSAs and Archer MSAs and salary reduction contributions to FSAs –Applies to benefits provided during taxable years after 12/31/10 • The Department of Labor will begin annual studies on self-insured plans using data collected from Form 5500.
2012 Admin - Quality Reporting • All group health plans (including self-insured plans) and individual health insurance carriers must annually submit to: –The Secretary of DHHS as well as –To plan enrollees during the annual open enrollment • A report on whether the benefits under the plan –Improve health outcomes –Prevent hospital readmissions –Improve patient safety –Reduce medical errors –Implement wellness and health promotion activities
2013 - New Taxes • FSA Limited to $2500 (indexed for inflation) • Additional 0. 9% Medicare Hospital Insurance tax on self-employed individuals and employees with respect to earnings and wages received during the year above $200, 000 for individuals and above $250, 000 for joint filers (not indexed) – Self-employed individuals are not permitted to deduct any portion of the additional tax • 3. 8% Medicare contribution on certain unearned income from individuals with AGI over $200, 000 ($250, 000 for joint filers)
2013 - New Taxes • The threshold for the itemized deduction for unreimbursed medical expenses would be increased from 7. 5% of AGI to 10% of AGI for regular tax purposes – The increase would be waived for individuals age 65 and older for tax years 2013 through 2016
2014 - Market Reforms • Coverage must be offered on a guarantee issue basis in all markets and be guarantee renewable • Exclusions based on preexisting conditions would be prohibited in all markets • Full prohibition on any annual limits or lifetime limits in all group (even self-funded plans) or individual plans • Redefines small group coverage as 1 -100 employees – States may also elect to reduce this number to 50 for plan years prior to January 1, 2016
2014 - Market Reforms • All individual health insurance policies and all fully insured group policies 100 lives and under (and larger groups purchasing coverage through the exchanges) must abide by strict modified community rating standards • MLR 80% for small group and 85% for large group • Market de-stabilization • States can waive out • 90 day maximum waiting period for 50+ employers
2014 - Exchanges • Requires each state to create an Exchange to facilitate the sale of qualified benefit plans to individuals, including new federally administered multi-state plans and non-profit cooperative plans – In addition the states must create “SHOP Exchanges” to help small employers purchase such coverage – The state can either create one exchange to serve both the individual and group market or they can create a separate individual market exchange and group SHOP exchange – States may choose to allow large groups (over 100) to purchase coverage through the exchanges in 2017
2014 - Coverage Mandate • Requires all American citizens and legal residents to purchase qualified health insurance coverage. Exceptions are provided for: – Religious objectors – Individuals not lawfully present – Incarcerated individuals – Taxpayers with income under 100 percent of poverty, and those who have a hardship waiver – Members of Native American tribes – Those who were not covered for a period of less than three months during the year – People with no income tax liability
Coverage Mandate Penalties • Penalty for non-compliance is either a flat dollar amount person or a percentage of the individual’s income, whichever is higher • In 2014 the percentage of income determining the fine amount will be 1%, then 2% in 2015, with the maximum fine of 2. 5% of taxable (gross) household income capped at the average bronze-level insurance premium (60% actuarial) rate for the person’s family beginning in 2016 • The alternative is a fixed dollar amount that phases in beginning with $325 person in 2015 to $695 in 2016
Surprise! Employer Mandate • Applies to employers with 50 full time equivalent workers - no exception for temporary or seasonal workers. Special rules for construction and where all employees over 50 are seasonal • To determine full time employees, take the total part time hours for the month and divide by 120 and add this to the number of employees working 30 or more hours per week • Applies when one or more employees receives a premium assistance tax credit to buy coverage through an exchange An employer does not have to offer coverage. But if they do it must be both: –Qualified - must pay at least 60% of allowed charges and meet the minimum benefit standards-”essential coverage –Affordable - EE contribution must not exceed 9. 5% of household income
Mandate Fines Employers must pay a fine: • If no coverage is offered, $2, 000 per year (calculated monthly) times the number of full-time employees; however: – The first 30 employees are exempted from the calculation – Full-time employees in the waiting period (90 days or less) are not counted – The surcharge does not apply to employees who get vouchers • If you offer coverage but it is not "qualified" AND "affordable", $3, 000 for each of those employees receiving a premium assistance tax credit (penalty capped at $2, 000 times the number of FTEs; the first 30 employees are again disregarded in this calculation)
How Will They Know - 2014 In order to determine if surcharges apply employers must report by 1/31 the following: • The employers coverage • Eligibility • Premium requirements • Employer contributions • Health plan enrollees Must be reported to both the IRS and covered individuals!
2014 - EE Free Choice Vouchers The third prong of the employer responsibility requirements: • Requires employers to provide a voucher to use in the exchange instead of participating in the employer-provided plan in limited circumstances – Employees must be ineligible for subsidies – An affordability test is required – Voucher to be provided must be adjusted for age – Employee can keep amounts of the voucher in excess of the cost of coverage
2014 - Auto Enrollment Mandate • Requires employers of 200 or more employees to auto-enroll all new employees into any available employer-sponsored health insurance plan – Waiting periods subject to limits may still apply – Employees may opt out if they have another source of coverage – Implementation date is unclear, may change to earlier via regulation
Beyond 2014 - Cadillac Tax • 40% excise tax on insurers of employer-sponsored health plans with aggregate values that exceed $10, 200 for singles and from $27, 500 for families takes effect in 2018 – Transition relief would be provided for 17 identified high-cost states – Values of health plans include reimbursements from FSAs, HRAs and employer contributions to HSAs – Stand-alone vision and dental are excluded from the calculation – Premium values are indexed to CPI – Allows plans to take into account age, gender and certain other factors that impact premium costs
Communicating to Employees • Employees should be provided with general responses to their questions • Stress that current law may change prior to implementation in future years • Focus on current provisions taking effect imminently • Communicate possible future costs of the law • Convey the cost and administrative burden placed on the employer
Employer Responsibilities • Focus on compliance!!! Fines will be onerous!!! • Reform impacts HR, Benefits, Payroll and Finance departments in your organization. It is important to coordinate with them • Be ware of making changes you will regret later • Be sure to align your self with a benefits broker/consultant who will guide you effectively through these murky waters • Focus on current provisions taking effect imminently • Prepare for cost implications
The New 408(b)(2) Regulation Effective 7/16/11 What to Expect
ERISA § 408(b)(2) Background • As part of the prohibited transaction rules, ERISA § 406(a)(1)(C) prohibits the furnishing of services by a party-ininterest to a plan • Section 4975 of the Internal Revenue Code has a similar prohibition • However, ERISA § 408(b)(2) creates an “exemption” to the prohibition when a party-in-interest acts as a service provider to a plan under the following scenario: -The contract or arrangement between the parties is reasonable -The services are necessary for the establishment or operation of plan -No more than reasonable compensation is paid to the service provider
Amendment to Existing Regulations Under ERISA § 408(b)(2) • Amendment provides additional guidance on what constitutes a “reasonable” contract or arrangement • Currently, the amendment only applies to “covered service providers” of a defined benefit or a defined contribution plan. In the future it may expand to IRAs and welfare plans • Imposes additional fee disclosure requirements on service provider in order to establish that a contract or arrangement is reasonable
Covered Services Providers • A “covered service provider” is a service provider that expects to receive $1, 000. 00 or more in connection with certain services • Covered service providers include 3 categories: – Plan fiduciaries; investment advisors – Recordkeepers, Brokers – Other service providers that reasonably expect to receive indirect compensation for a host of services including, accounting, auditing, actuarial, appraisal, valuation services, banking legal and consulting. Additionally, brokers and recordkeepers are included if they expect to receive indirect compensation.
Disclosures • The following disclosures must be made: - Services - Status - Compensation • Proposed disclosures relating to conflicts of interest were eliminated
Disclosures Initial disclosure requirements: The service provider must disclose the following information to a “responsible plan fiduciary, ” in writing: • Services - A description of the services to be provided to the plan pursuant to the arrangement (with limited exceptions for specified non-fiduciary services) • Status - If applicable, a statement that the service provider will provide, or reasonably expects to provide: – Services directly to the plan (or to an investment contract, product or entity that holds plan assets and in which the plan has a direct equity investment) as a fiduciary and/or. . . – Services pursuant to the arrangement directly to the plan as an investment adviser registered under either the Investment Advisers Act of 1940 or any State law
Disclosures Categories of Compensation Disclosures • Direct compensation – may be disclosed as an aggregate number, except that recordkeepers must separately account for all direct and indirect compensation that an affiliate or subcontractor expects to receive • Indirect compensation – compensation that is received from a source other than the plan, plan sponsor, the covered service provider, an affiliate of the service provider or a subcontractor of the service provider • Compensation paid among related parties – applies to compensation set on a transaction basis (e. g. commissions) or charged against plan investments and shown in the net value of investments • Compensation for termination of arrangement – compensation reasonably expected to be received in connection with termination and how prepaid amounts are to be calculated and refunded
Reporting & Disclosure Requirements • The service provider must disclose the information to the responsible plan fiduciary reasonably in advance of the date the contract or arrangement is entered • Changes to the information provided must be disclosed as soon as possible, but not later that 60 days from the date that the service provider knows of the changes…unless such disclosure is precluded due to extraordinary circumstances beyond the service provider’s control, in which case the information must be disclosed as soon as practicable
Plan Fiduciary Exception • If a service provider fails to make adequate disclosures, a plan sponsor as a plan fiduciary may still qualify for this prohibited transaction exemption if the plan fiduciary: – Had no knowledge or reason to know of the inadequate disclosure – Upon learning of inadequate disclosure, submits a written request to service provider for any necessary information – If service provider does not provide such information within 90 days of written request, Plan fiduciary must alert the United States Department of Labor • Plan fiduciary must reevaluate the contract or arrangement in light of new information received after the inadequate disclosure
About United Benefit Advisors • 145 Member Firms • Over 165 offices nationally • 2, 000 + Benefits Professionals • One of the Five Largest Employee Benefits Organizations in the Country
Survey Summary • # of Companies Participating – 11, 413 • # of Medical Plans Report – 17, 113
Survey Summary • # of Employees – 1. 8 Million • # of Total Lives – ~ 6. 6 Million
Why Use Benchmarks? • You Can’t Manage What You Can’t Measure • Strategic Planning Requires Market Information – How Does Your Plan Stack Up To Competitors? – What’s New on the Horizon?
Why Use Benchmarks? • What You Don’t Know Can Hurt You – Are Your Costs in Line with the Market? – What are Other Employers Doing to Control Costs?
Health Plan Costs • The avg. Mo. Premium was $415 single, $1, 009 Family • The 2010 average annual plan cost per employee was $8, 211 vs. $ 7, 646 in 2009
Health Plan Costs • 2010 Employee share was up slightly, $3, 459 vs. $3, 298 in 2009 • Employer share increased a little more than the average from $4, 347 last year to $4, 753 this year
PPO Plan Designs • Median PPO Deductible = $1, 000 / $2, 000 • Median PPO Coinsurance = 80% / 60% • Median PPO OOP Max. = $3, 000 / $6, 000 • Median PPO Office Visit Co. Pay = $25
Domestic Partner Coverage 62
Summary - Wellness • Wellness programs are underutilized in companies <500 • Wellness Plans from 2009 to 2010 grew from 11. 1% to 13. 8%; a 24. 3% increase • Over ¾ (77. 1%) of firms with Wellness plans use Health Risk Assessments
Summary - Wellness • Less than half of Wellness plans use Incentives: – 41. 9% use Cash / 401(k) / FSA incentives – 48. 8% use gift cards or health club memberships • 2010 UBA ER Opinion Survey result: 47. 5% said Wellness was Effective / Very Effective way to control rising costs
% of Employers Offering CDHP by Employee Size 65
CDHC Plan Designs • Median CDHP Deductible = $2, 000 / $4, 000 • Median CDHP Coinsurance = 100% / 70% • Median CDHP OOP Max. = $3, 000 / $6, 000 • Median CDHP Office Visit Co. Pay = $20
Prescription Drug - Summary • 77. 5 of all plans offer a copay only option while only 3. 4% offer coinsurance only • 68. 8% of all plans are a three tier structure • Median Copays (3 -tier) are unchanged at $10 / $30 / $50
Average Annual Medical Plan Cost per Employee by Plan Type – Employee Cost 68
Average $ Contribution by Plan Type - Single 69
Average $ Contribution by Plan Type - Family 70
Differences by Region • More Employer-Paid Products – West (Dental, Vision, Group Legal) – Northeast (LTD, STD, Group LTC) • More Voluntary Products – Southeast (STD) – Northeast (Group Auto, Supp. Life) • Fewer Voluntary Products – Northeast (Cancer, Hospital Indemnity, Critical Illness)
Programs That Increase By # Of Employees • All prevention & wellness programs • Disease Management & Predictive Modeling • On-Site Clinics/Nurses • “Hidden Paycheck” statements • Nurse/Doctor Hotline or Call Center • Dedicated EE web portal
How Can We Help • Employer Advocate Advantage • Cost Control Strategies • Benefits Benchmarking • Participant Communication • HR Outsourcing • BP Outsourcing • Scott Rappoport: srappoport@benefitsource. com • Charles Bruder: cabruder@nmmlaw. com 732 -560 -1010 x-111 908 -722 -0700 x-4165
Скачать презентацию 2011 Benefits HR Updates Healthcare Reform 401 K Fee
89705a65c6f7655b1b7c627972cf4d8c.ppt