Boca Benefits Consulting Group Inc.

BBCG’s blog is back up at 12:00 noon 4/15/2010. We are trying a different look on this blog concurrent with the conversion to the most recent version of WordPress. It is cleaner and easier for a new user to navigate. We also feel it is just a lot easier to read due to its font and layout. Let us know how you like it!

Whether your company is a small firm or a very large one, there is probably at least one similarity. Workman’s compensation insurance has historically been purchased based on estimates of payroll size and risk categories that are trued-up at year-end via some form of insurance carrier audit. During the course of the year some carriers require that the estimating employer provide a deposit which functions as a reserve against loss of cashflow and ultimate payment if the estimated premium payment is determined to be short. Neither employers nor carriers have been happy with this arrangement.  As a small employer, these year-end true-ups can be very traumatic if additional funds are due over and above the deposit. From the carriers perspective, in addition to cashflow and bad debt implications, they just never like chasing funds after the risk event has occured.

The concept of “pay-as-you-go” has emerged which means that the workman’s compensation liability is tracked per employee per pay period and premium is paid on the actual as opposed to an estimated liability. It eliminates the need for up-front deposits for smaller employers and year-end audits. For carriers, it improves cash flow and more accurately matches the premium flow with the underlying risk. In a shrinking economy this is somewhat less important than in an expanding economy where estimated payrolls may be based on dampened historical data that does not currently reflect renewed economic vitality.

Smaller employers have had “pay-as-you-go” offered to them by big name payroll companies which have forged deals with insurance companies to provide the required reporting. Many of those smaller employers feel that they are locked-in and have no other alternative due to the potential financial implications. They feel that moving to another payroll solution means a return to the deposit and audit methodology. They might be unhappy but they bite their tounge and endure the present relationship. However, that is not the required reality.

For the smaller employer, BBCG can work with virtually any property and casuality licensed agent who handles your workman’s compensation insurance. If there is no agent an employer wants to protect, BBCG will facilitate a new relationship. The one absolute: it is necessary to utilize a payroll service company which utilizes one of the major payroll software systems. This does not mean one of the “big name” payroll companies. A small CPA with whom you have developed a comfort level as your payroll service company over time can provide the required reporting if he/she uses one of the major software vendors. The requirement lies in the software vendor and the insurance carrier interface company having established the appropriate data sharing protocol. Most of the major payroll systems are represented but there are in fact a few for which this solution is not viable. We would encourage you to call us at 727-510-7138 to discuss how you are presently structured.

Larger employers may not be using a payroll company at all. If payroll is an in-house function, the software and data reporting issues might become more problematic. However, that does not preclude larger employers from having similar access to “pay-as-you-go”. If the degree of sophistication is present, we can likely structure a data reporting protocol directly between the employer and the carrier interface company. The key is structuring a data reporting methodology which regularly transmits all the data elements required by the insurance carriers. These specfications are in place for each of the major payroll software systems. A major large employer could be treated as a new software system if it is using a proprietary in-house system. If using one of the major commercially available systems, the interface may already be there.

A question often arises as to which workman’s compensation insurance carriers the “pay-as-you-go” concept might apply. Due to the way the carrier interface company has been built, virtually all the major carriers subscribe. If your company presently uses a “captive” agent who can only show you his/her company’s product there might be a disconnect. However, if your company uses an independent agent or broker it is more than likely that he/she can be protected either by using one of the carriers with which an agent appointment already exists or by newly appointing the agent/broker with a carrier that has the best terms for the employer. Again, if no agent protection is required, BBCG will assist the employer with having an agent/broker from the company with the best terms named as a new “broker of record.”

Please call BBCG at 727-510-7138 if you have any questions.


[Note: to share only this single post, click title of this post above prior to clicking on Share icon.]

Health Care Reform Impact on Employer-Sponsored Health Plans

Excerpted from Various Insurance and Benefits Industry Sources

(impact on self-insured plans is annotated in bold text below)

• Prohibition of lifetime limits – Prohibits all plans from establishing lifetime limits. Only applicable to self-insured plans established after 6 months from date of enactment.
• Prohibition of annual limits – Prohibits all plans from establishing annual limits on the dollar value of benefits starting in 2014. Prohibits plans from setting limits that would “impair essential health benefits” in subsequent years. Only applicable to self-insured plans established after 6 months from date of enactment.
• Prohibition on rescissions – Prohibits all plans from rescinding coverage except in instances of fraud or misrepresentation. Only applicable to self-insured plans established after 6 months from date of enactment.
• Coverage of preventive health services – Requires all plans to cover preventive services and immunizations, recommended by various Federal agencies, also specifically includes certain child preventive services and women’s preventive care. Plans are prohibited from imposing any cost-sharing requirements. Only applicable to self-insured plans established after 6 months from date of enactment.
• Dependent coverage – Requires all plans offering dependent coverage to make coverage available to dependents that are under the age of 26 and unmarried. Plans are not required to cover dependents of dependents. Only applicable to self-insured plans established after 6 months from date of enactment.
• Prohibition of preexisting conditions – No group health plan or insurer offering group or individual coverage may impose any pre-existing condition exclusion or discriminate against those who have been sick in the past. Only applicable to self-insured plans established after 6 months from date of enactment.
• Prohibiting discrimination based on health status – No group health plan may set eligibility rules based on health status, medical condition, claims-experience, receipt of healthcare, medical history, genetic information or evidence of insurability – including acts of domestic violence or disability. Permits employers to vary insurance premiums by as much as 30 % for employee participation in certain health promotion and disease prevention programs. Only applicable to self-insured plans established after 6 months from date of enactment.
• Prohibition on waiting periods – Prohibits any waiting periods for group or individual coverage that exceed 60 days. Employers are penalized $600 per full-time employee for each employee required to wait beyond 60 days. Only applicable to self-insured plans established after 6 months from date of enactment. 
• Required Plan Information Disclosure
  • Requires plans to issue a summary of benefits and explanation of coverage to beneficiaries with the following criteria:
    • In uniform format
    • In “easily understood” language
    • Inclusion of uniform definitions of standard insurance and medical terms
    • Explanation of cost-sharing exceptions, reductions and limitations on coverage
    • Provide common benefits scenarios 
• Expanded Beneficiary Appeals Availability
  • Requires plans to implement a process for external appeals of coverage determinations and claims
  • Requires self-insured plans to comply with minimum standards to be established by the Secretary of DOL
  • Only applicable to self-insured plans established after 6 months from date of enactment.
• Health Information Technology Standards and Plan Requirements
  • Adoption of uniform standards and operating rules for the electronic transactions that occur between providers and health plans that are governed under HIPAA (such as benefit eligibility verification, prior authorization and electronic funds transfer payments)
  • Establishes a process to regularly update the standards and operating rules for electronic transactions and requires health plans to certify compliance or face financial penalties collected by the Treasury Secretary
• “Young Invincibles” Plan
  • Allows health insurers to offer a catastrophic, high-deductible plan as an exchange option
  • To be eligible for plan, individuals must be either
    • Under the age of 30
    • Exempt from the individual responsibility requirement because coverage is unaffordable to them
    • Individuals with access to employer-sponsored plans who meet criteria may join
  • Plan must
    • Cover essential health benefits
    • Cover at least 3 primary care visits
    • Require cost-sharing up to the HSA out-of-pocket limits
• Allowable Prevention and Wellness Incentives
  • Allows employers to discount up to 30% of the premium or cost-sharing requirements for participants in a workplace wellness program
  • Provides discretion to HHS to permit discounts up to 50%
• Low-Income Tax Subsidies Effects on Employer-Sponsored Health Plans
  • Employees with access to employer-sponsored coverage are eligible for credit (for use in an Exchange only), if:
    • Plan covers less than 60% of total coverage cost
    • The premium exceeds 9.8 of total income
• Employer Responsibility
  • Requires an employer with more than 50 full-time employees that offers coverage, but has employees receiving the “premium assistance” tax credit, to pay the lesser of $3,000 for each employee receiving the credit, or $750 for each full-time employee – adjusted annually and non-deductible
  • An employer with more than 50 full-time employees that maintains an enrollment waiting period would be required to pay
    • $600 for any full-time employee subjected to longer than a 60 day waiting period – adjusted annually and non-deductible
• Employee “Free Choice” Voucher
  • Allows employees with access to an employer-sponsored plan, under certain income eligibility, to receive a voucher from their employer, equal to their employer’s contribution (“free choice” voucher), to purchase coverage through an Exchange participating plan.
  • To be eligible for a voucher, an employee would have to meet both of the following criteria:
    • The cost of the employee’s coverage needs to be between 8% and 9.8 percent of the employee’s household income
    • Employee has a household income below 400% FPL
  • The contribution amount to the voucher must be equal to the amount the employer contributes to their own health plan
  • If the employee chooses coverage that costs less than the voucher, the employee keeps the remainder amount
  • Vouchers cannot be taxed as income
• Automatic Employee Enrollment
  • Requires employers with more than 200 employees to automatically enroll new full-time employees in coverage
  • Requires employers to provide adequate notice and the opportunity for an employee to opt out of any coverage the individual or employee was automatically enrolled in 
• Reporting Requirements for Employer-Plan Sponsors
  • Requires large employers (over 200 employees) to report the following
    • Whether it offers to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan
    • The length of any applicable waiting period
    • The lowest cost option in each of the enrollment categories under the plan
    • The employer’s share of the total allowed costs of benefits provided under the plan
    • The number and names of full-time employees receiving coverage
    • Disclose the value of the benefit provided by the employer for each employee’s health insurance coverage on the employee’s annual Form W-2 
• Requirement to Disclose Coverage Options
  • Requires that an employer provide notice to their employees informing them of the existence of an exchange
• Excise Tax on Generous Plans
  • Levies an excise tax of 40% on insurance companies and plan administrators for any health coverage plan that is above the threshold of:
    • $8,500 for single coverage
    • $23,000 for family coverage 
• Fees on Self-Insured Plans
  • In 2013, the plan sponsor of a self-insured plan is required to pay $2 multiplied by the average number of covered lives
  • From 2013-2019 the previous year’s fee is multiplied by projected per-capita amount of National Health Expenditures
  • Plans are not required to pay fees beyond 2019 
• Termination of Deductibility of Medicare Prescription Drug Subsidies
  • Elimination of the deductibility of Federal subsidies for Medicare Rx programs 
• Limitation on Health Flexible Spending Arrangements
  • Limits the amount of contributions to health FSAs to $2,500 per year indexed by CPI 
• Annual Report on Self-Insured Plans
  • Requires the Secretary of DOL to prepare an annual report, using information obtained from submitted Form 5500, on various aspects of self-insured, group health plans. Report will include:
    • Plan type
    • Number of participants
    • Benefits offered
    • Funding arrangements
    • Benefit arrangements
    • Data from the financial filings including:
      • Information on assets
      • Liabilities
      • Contributions
      • Investments
      • Expenses 
• Indirect Health Industry Fees Likely to Increase Plan Costs 
  • Fees on Pharmaceuticals
    • Imposes an annual flat fee of $2.3 billion on the pharmaceutical manufacturing sector beginning in 2010
  • Fee on Medical Devices
    • Imposes an annual flat fee of $2 billion on the medical device manufacturing sector in years 2011 – 2017
    • Imposes an annual flat fee of $3 billion on the medical device manufacturing sector in years after 2017

Many cost strapped employers are looking for ways to have older, more costly, employees seek early retirement without violating any age discrimination statutes. Below are some healthcare considerations to think about if you are approached.

If retiring at approximately 62 years old, there are four  healthcare options that might be available to you:

• COBRA ( http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.HTML )
• Individual policy ( http://bocabenefits.com/GR 4-2009 Plans Brochure.pdf   )
• A “bridge” provided by the employer to age 65
• New employer with a group plan

COBRA with ARRA 2009 Considerations

In the case of COBRA, the expense may or may not be prohibitive depending on how your separation from service is actually defined. If “involuntary” between now and 12/31/2009 the 65% subsidy required by the American Recovery & Reinvestment Act 2009 would apply and for the nine months following the separation date your cost would be 35% of the normal 102% of true cost COBRA rates (i.e., true cost being what the total premium is for your enrollment type, not just the percentage of the cost passed along to the employee) for that period. Unless the ARRA 2009 were to be extended, the costs would go back to 102% of true costs at that point. See the piece at http://bocabenefits.com/stimulus_cobra.pdf for more info. Specifically, take a look at the income thresholds that might reduce the subsidy for you. Note: this is a zero cost subsidy for your employer.  One hundred percent of the subsidy amount is recovered via a payroll tax offset.

Individual Health Policies

Individually purchased policies are problematic for several reasons. Costs for just one person at 62 will run about $400-$500 per month (possibly less if an HSA plan). Essentially twice that for a couple. They are also not “guaranteed issue” meaning that your health status will be considered before an application is accepted and a policy issued. You can be declined, be up-rated or have policy benefit terms modified.

Early Retirement Bridge With Current Employer

A “bridge to 65” agreement with an employer is usually the best course for everyone. That is, the employer continues the employee on the health plan as if they remained an active employee until they reach Medicare eligible age. It is likely that the employee would be kept in prolonged “leave of absence” status to remain qualified for participation in the plan if no retirement health is offered otherwise. A highly paid, tenured employee can be replaced by a less experienced and less expensive new hire. Over the course of three years that could be worth in excess of $100,000 for the employer (i.e., likely substantially more). Most employers would jump at the chance to trade off three years of health care premium  for the separating employee and spouse (i.e., a guess at the cost: $36,000 pre-tax ) against the direct and indirect payroll savings. However, there is a potential downside to the employer. If the health plan is self-funded, every claim dollar incurred by the employee or spouse below some threshold per year (i.e., varies by employer size from $50,000 to $250,000;  threshold possibly higher for jumbo sized employers) will be a direct pre-tax cost to the employer. A million dollar organ transplant can eat up the entire payroll savings very quickly. It is therefore somewhat of a roll of the dice for the employer. Note: this also applies to “experience rated” insured plans to some degree where deficits from prior years are recoverable via going-forward underwriting.

It is very important that if negotiating a bridge type agreement that spouse coverage be an absolute deal breaker. You must have it if you have a spouse of roughly equivalent age who does not have a source of health care at his/her employment or who has retired earlier. You may be able to strike an agreement whereby a Medicare eligible spouse specifies that Medicare is to be “primary” and the employer’s plan will be “secondary” in claims payment order when age 65 is attained. That lessens the possible claims impact somewhat. You can also make the argument that more than likely the employer is going to own the employee and dependent claims under most of the above scenarios (i.e., stays employed, goes on COBRA, or falls under a bridge agreement).

Many large employers have canned early retirement packages on the shelf with the above kind of provisions. Human Resources professionals should be aware of them on the local/regional level. However, if that does not appear to be the case, an inquiry at the home office level might be required. HR people should also be willing to discuss these matters “off the record” to ensure no negative behavior by supervisors.

The Minimal Employment Scenario

Lastly, the new employer alternative. Many older early-retired people find work at the minimum hours and minimum skill levels required for them to qualify for health care coverage at a new employer. It occurs frequently at the ski resorts in Colorado where formerly high powered execs are now running ski lifts, acting as mountain guides or teaching lessons. If it fits your life style, it is a consideration. If it were to cramp the post-retirement life-style you envision, it obviously would not.

 Suggested Course of Action

Set up a confidential meeting with the appropriate HR person and discretely explore your options.

Many employers are struggling to determine the precise COBRA requirements under the 2009 ARRA. Employer size, state situs of the benefit plan, specific state actions, and other things, effect the answers. In addition, where certain responsibilities have been placed on carriers, their unique administrative decisions may also drive procedures.

Below is a link to a Frequently Asked Questions (i.e., FAQ) piece on this subject provided by United Healthcare. Although some of it is specific to their own client base, much of it provides generic information that benefits professionals might find valuable as they weave their way through the huge number of variables.

This subject may also be something that in-house and contracted financial professionals need to address. Who pays the 65% COBRA subsidy and how it is ultimately recovered are key items.

Non-benefit HR types may also want to spend some time with the definitions of eligibles. Although this appears at this point to be a short-term program, the costs of which are recoverable as a credit against future payroll tax liability, certain CEO’s may want to minimize participation due to the hit on quarterly cashflow or if the company is clearly in such dire straights that a payroll tax recovery may not be viable.

Link to FAQ Resource

In mid-2008 BBCG began sending an email newsletter with various items of topical interest to benefits professionals, business owners and senior managers. As with this blog, we got somewhat distracted during the last few months with other priorities. We intend to have the next addition of The Insight out shortly. In the interim, below is a link to the archive page that contains the prior editions.

Archive link below:

http://archive.constantcontact.com/fs009/1102162493446/archive/1102248850983.html


[Note: to share only this single post, click title of this post above prior to clicking on Share icon.]

Injured or Ill Members of the Armed Forces

The Labor Department will release regulations November 14, 2008 which will let family members of seriously injured or ill members of the armed services take up to 26 weeks off from work each year to care for them.

The military caregiver provision gives family members up to 26 weeks off, longer than the normal maximum of 12 weeks under the Family and Medical Leave Act. The provision also allows additional family members, including siblings and cousins – not just spouses, parents or children – to take time off.

Relatives of National Guard or Reservists Called to Duty

The regulations also will allow family members of those called to active duty in the National Guard or the Reserves to take up to 12 weeks off so they can manage needed and often rushed matters regarding a service member’s departure or return.

Labor Department officials said the law creating the leave for such situations did not cover regular active-duty military members.  DOL indicates that the provision is to assist families of deploying Guard or Reservists where significant family adjustments must be made as a result.

Other Changes

• Allowing employers to require “fitness-for-duty” evaluations for workers who took leave time and are returning to jobs that could endanger themselves or others.
• Forcing workers to tell employers in advance when they want leave time. Current regulations allow employees to tell employers up to two days after not showing up for work that they are using leave time. Employees will now have to follow their employer’s regular rules for informing them about missing work “absent unusual circumstances.”