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Prepare your ‘health plan’ for 2012:

In Employee Benefits, Health Care Reform on November 7, 2011 at 6:54 pm

What changes are in store for employee healthcare benefits in 2012? Here are some facts that will help you better manage your program in the coming year.

Health insurance premiums: In 2011, average employer-sponsored family health plans cost $15,073—9 percent higher than 2010, according to a recent survey by the Kaiser Family Foundation and the Health Research and Educational Trust. Single coverage costs an average of $5,429, up 8 percent from 2010. Gary Claxon, director of Kaiser’s Health Care Marketplace Project, attributed most of the cost increase to rising healthcare costs. Changes caused by the Patient Protection Act, which now allows children up to age 26 to remain on their parents’ insurance and requires insurers to cover certain preventive services with no co-payment, accounted for about one percent of the increase.

Look for slightly better news in 2012. Preliminary findings from a Mercer survey indicate health benefit costs could increase an average of 5.4 percent, the smallest increase since 1997. Of course, this is still higher than the general rate of inflation and these are averages only. Premiums for your group could increase more or less, depending on group size, location and claims experience.

Mercer researchers attributed the smaller cost increase to lower utilization of health services. Several reasons could account for this: higher out-of-pocket costs discouraging employees from using healthcare; employees skipping non-urgent care due to less disposable income; employer wellness and disease management programs improving workers’ health; or some combination of these factors.

Consulting firm Segal said in a recent news release, “Price inflation for services and supplies continues to be the biggest element of overall medical plan cost trends.” To control medical costs, it recommends employers obtain deeper discounts from provider networks, invest in wellness and disease management, encourage healthier lifestyles, manage imaging/diagnostic technologies and implement value-based plan designs, among other steps.

Employee cost-sharing: Many employers will pass along most of the cost increases to their employees. According to Mercer, about one-third of survey respondents plan to raise deductibles or co-payments in 2012.

High-deductible health plans: To control their healthcare costs, employers are increasingly turning to high-deductible health plans linked to health savings accounts or health reimbursement arrangements. In 2011, 31 percent of workers with health insurance have high-deductible health plans. For 2012, a qualifying “high deductible health plan” must have an annual deductible of at least $1,200 for self-only coverage or $2,400 for family coverage — no change from calendar year 2011.

Reporting requirements: Employers must begin reporting the value of their health insurance coverage on employees’ Form W-2 for tax year 2012. Employers are not required to report the cost of health coverage on any forms furnished to employees before January 2013. The requirement does not apply to employers filing fewer than 250 Forms W-2 for the previous calendar year. The IRS has clarified that reporting is for informational purposes only and employees will not be taxed on the value of their health benefits.

The Patient Protection Act also requires sponsors of most group health plans to provide a summary of benefits and coverage (SBC) to the plan’s participants and beneficiaries. In the fall, the U.S. Departments of Labor, Treasury and Health and Human Services issued a proposed regulation that would make this requirement effective March 23, 2012. This means employers would not have to comply for 2012 calendar year plan open enrollments. However, if the proposed regulation is adopted, they will have to comply by mid-year HIPAA special enrollment dates.

SBCs must follow a specific format, with four pages and simplified language. Plan sponsors must provide SBCs with open enrollment materials, as well as to new hires and other new enrollees. Plan sponsors must also provide enrollees written notice of any plan changes at least 60 days before their effective date.

Healthcare reform: Employers remain apprehensive about the Patient Protection Act. In a May 2011 survey by Lockton, a consulting firm, 56 percent of employers said it would “significantly increase” their administrative responsibilities, while 26 percent said it would “slightly increase” those responsibilities.

As this issue went to press, the fate of the Act remained unclear. By fall of 2011, 26 states had sued to stop the law from taking effect. In August, a three-judge panel of the U.S. Court of Appeals in Atlanta ruled that the law’s centerpiece, a requirement that individuals buy health insurance, was unconstitutional. In late September, the Department of Justice filed a cert petition asking the Supreme Court to review the 2-1 decision. This action makes it likely the U.S. Supreme Court will hear a case on healthcare reform in late 2011 or early 2012.

If you have any questions on managing your employee health benefits for 2012, please contact us.

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The information presented and conclusions within are based solely upon our best judgment and analysis.  It is not guaranteed information, but is intended to provide accurate and authoritative information in regard to the subject matter covered.  It does not necessarily reflect all available data, and is provided with the understanding that we are not rendering legal, accounting, or tax advice.  Any web links/addresses are current at time of publication but subject to change.  This material is being reproduced with the permission of the publisher via a paid subscription by Insurance One Management, Inc. dba Don Crawford & Associates, Midland, TX.

©2011 Smart’s Publishing – Employee Benefits Report – Volume 9, Number 11 – All Rights Reserved. – Website: http://www.smartspublishing.com

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FMLA Fast Facts:

In FMLA on November 7, 2011 at 6:11 pm

Which employers must comply? The FMLA applies to any employer that employs 50 or more workers in a 75-mile radius each working day during each of 20 or more calendar workweeks in the current or preceding calendar year.

Which employees are eligible? Employees can take FMLA leave if they have worked for an FMLA-qualified employer for at least 12 months and have worked at least 1,250 hours over the previous 12 months.

How much leave can workers take? Eligible workers can take up to 12 weeks of leave per year for serious health conditions; to care for a family member (spouse, child or parent) with a serious health condition; or for childbirth, adoption or foster care. Workers can take leave consecutively or intermittently. Leave may run concurrently with workers’ compensation, short-term disability and salary continuation.

What is “a serious health condition”? The FMLA defines this as incapacity or treatment that involves inpatient care (an overnight stay) in a medical care facility, as well as subsequent treatment related to inpatient care. It also includes any period of incapacity due to pregnancy, a chronic serious health condition or a health condition lasting more than three days that requires treatment by a health care provider. The FMLA also applies to absences to receive multiple treatments to address serious conditions.

What other responsibilities do employers have? The FMLA requires employers that provide health benefits to continue them during an employee’s leave. Following the 12 weeks of unpaid leave, employers must reinstate the employee in the same job or an equivalent one. Employers that deny or restrict an employee’s rights under FMLA may be liable for lost wages and benefits, as well as damages and legal fees. Keep in mind that medical privacy rules apply to FMLA, and safeguard any medical information.

The employer has the ultimate responsibility of designating FMLA-eligible leave as FMLA leave based upon information furnished by the employee. You may not wait to designate FMLA leave after the leave has been completed and the employee has returned to work, unless you are: (1) awaiting medical certification to confirm a serious health condition, (2) unaware that leave was for an FMLA reason, and later receive employee requests for additional leave or (3) unaware of the situation and the employee notifies the company of the FMLA leave within two days after returning to work.

Many states have their own family or medical leave laws. Check to make sure that your leave policies comply with state law, which may be more generous in certain areas, including: (1) employee hours requirement (1,000 vs. 1,250 hours), (2) the minimum number of employees required for the law to apply (15 vs. 50 workers) and (3) the definition of family member (to include in-laws).

What are employees’ obligations? To qualify for FMLA leave, an employee must provide sufficient information to substantiate the need for leave. For medical leave, they do not have to have their health care provider supply a specific diagnosis, but merely certify the need for medical leave. Once an employee qualifies for FMLA leave, he or she does not have to provide advance notice if the leave is not foreseeable — for example, a migraine sufferer could leave work every time he gets a headache.

Should we outsource FMLA administration? Some employers use outside companies to manage their leave programs. Their reasons include avoiding potential litigation and fines, adding a layer of privacy regarding personal health information and reducing administrative burdens and the need for additional training.

Carefully evaluate an administrator’s experience and qualifications. Outsourcing FMLA administration might not completely insulate your company from liability if there is a violation. However, you can require indemnification from vendors for negligence related to their administration of your company’s FMLA program.

Whether you choose to outsource your FMLA administration or handle it in-house, you’ll want a tracking process to ensure consistency and integration of FMLA with other benefits, including appropriate documentation and state-leave requirements. For more information on FMLA compliance, go to www.dol.gov/dol/topic/benefits-leave/fmla.htm

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The information presented and conclusions within are based solely upon our best judgment and analysis.  It is not guaranteed information, but is intended to provide accurate and authoritative information in regard to the subject matter covered.  It does not necessarily reflect all available data, and is provided with the understanding that we are not rendering legal, accounting, or tax advice.  Any web links/addresses are current at time of publication but subject to change.  This material is being reproduced with the permission of the publisher via a paid subscription by Insurance One Management, Inc. dba Don Crawford & Associates, Midland, TX.

©2011 Smart’s Publishing – Employee Benefits Report – Volume 9, Number 11 – All Rights Reserved. – Website: http://www.smartspublishing.com

USDOL has increased enforcement against employers that delay or fail to forward employee contributions to benefit plans:

In Employee Benefits on February 3, 2011 at 6:29 pm

The U.S. Department of Labor has increased enforcement against employers that delay or fail to forward employee contributions to benefit plans. ERISA requires employers to remit employees’ contributions to pension and health plans “in a timely manner” and gives the Labor Department authority to conduct civil and criminal investigations against employers that fail to do so.

“In a timely manner” means as soon as possible, subject to defined maximums. For pension benefit plans, employers must remit employees’ funds: “[no]…later than the 15th business day of the month following the month in which the participant contribution amounts are received by the employer…, or the 15th business day of the month following the month in which such amounts would otherwise have been payable to the participant in cash (in the case of amounts withheld by an employer from a participant’s wages).”

For welfare benefit plans, employers have “…90 days from the date on which the participant contribution amounts are received by the employer (in the case of amounts that a participant or beneficiary pays to an employer) or the date on which such amounts would otherwise have been payable to the participant in cash…”

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The information presented and conclusions within are based solely upon our best judgment and analysis.  It is not guaranteed information, but is intended to provide accurate and authoritative information in regard to the subject matter covered.  It does not necessarily reflect all available data, and is provided with the understanding that we are not rendering legal, accounting, or tax advice.  Any web links/addresses are current at time of publication but subject to change.  This material is being reproduced with the permission of the publisher via a paid subscription by Insurance One Management, Inc. dba Don Crawford & Associates, Midland, TX.

©2011 Smart’s Publishing – Employee Benefits Report – Volume 9, Number 2 – All Rights Reserved. – Website: http://www.smartspublishing.com

Health Care Reform puts limits on Limited Benefit Plans (Mini-Med Plans):

In Health Care Reform on February 3, 2011 at 6:11 pm

Although limited benefit medical plans (also called “mini-medical” plans) have existed for nearly 30 years, healthcare reform is likely to bring about their demise by 2014, unless the law is changed or repealed. If your organization currently offers a limited benefit plan, here’s what you need to know now…and what to look for in 2014.

The Patient Protection and Affordable Care Act (PPACA) requires new or existing group health plans to provide minimum annual limits of at least $750,000 for “essential health benefits” in 2011.

The minimum limit increases to $1.25 million in 2012 and $2 million in 2013. For plan years beginning on or after January 1, 2014, group plans will no longer be able to put annual limits on essential health benefits.

By definition, limited benefit plans usually provide annual limits of much less than the new $750,000 threshold—sometimes as little as $2,000 per year. This means that limited benefit plans do not comply with the PPACA.

Limited benefit plans often offer lower-cost coverage to part-time workers, seasonal workers and volunteers who otherwise might not be able to afford coverage at all. For this reason, regulations implementing the PPACA allow waivers of the minimum annual limits requirement if compliance would “result in a significant decrease in access to benefits or a significant increase in premiums.” Health plans or insurers offering a limited benefit plan must apply to the U.S. Department of Health and Human Services for a waiver.  If your organization currently offers an insured limited benefit plan, your insurer has likely applied for a waiver. Waivers are good for one year, but will not be available for plans beginning after January 1, 2014.

When it receives waiver approval, a group health plan or health insurer must notify current and eligible members that their plan does not comply with the provisions of the Affordable Care Act. The Office of Consumer Information and Insurance Oversight (OCIIO) developed a model notice, which reads (in part) as follows:

The Affordable Care Act prohibits health plans from applying arbitrary dollar limits for coverage for key benefits. This year, if a plan applies a dollar limit on the coverage it provides for key benefits in a year, that limit must be at least $750,000.

Your health insurance coverage, offered by [name of group health plan or health insurance issuer], does not meet the minimum standards required by the Affordable Care Act described above. Instead, it puts an annual limit of: [dollar amount] on [all covered benefits] and/or [dollar amount(s)] on [which covered benefits – notice should describe all annual limits that apply].

In order to apply the lower limits described above, your health plan requested a waiver of the requirement that coverage for key benefits be at least $750,000 this year. That waiver was granted by the U.S. Department of Health and Human Services based on your health plan’s representation that providing $750,000 in coverage for key benefits this year would result in a significant increase in your premiums or a significant decrease in your access to benefits. This waiver is valid for one year.

If the lower limits are a concern, there may be other options for health care coverage available to you and your family members.

Other low-cost health options

Some employers that offered limited benefit plans in the past are switching to fixed indemnity plans on renewal. These plans qualify as a supplemental plan under healthcare reform—therefore, the minimum annual benefit limits under the PPACA do not apply.

For example, a hospital indemnity policy is a supplemental policy that pays cash benefits when the insured is hospitalized for a non-occupational injury or illness.

Unlike medical plans, which pay benefits according to expenses incurred, a hospital indemnity plan pays a flat benefit whenever the insured is hospitalized for a non-occupational injury or illness. Hospital indemnity plans may pay benefits on a per-confinement basis or a per diem basis. The first type pays a flat dollar amount for each hospital confinement, typically ranging from $1,000 to $2,000. Many plan sponsors select limits that correspond with deductibles on their major medical plan. The second type pays a fixed benefit for each day of hospitalization, usually about $100 per day. Each plan type has annual maximums.

Indemnity plans differ from major medical coverage in several ways. First, benefits go directly to the insured rather than the healthcare provider. The insured can use benefits however he chooses. The claim process for these policies is relatively simple—the insured simply provides proof of hospitalization, and the insurer will pay benefits. Under a major medical policy, insured individuals must file a claim with their insurer, which evaluates the claim to make sure it is covered, then makes payment directly to the healthcare provider as reimbursement. (Many providers will file a claim on behalf of the insured.)

Indemnity policies—like all supplemental policies—don’t replace major medical plans. They “wrap around” and complement basic health insurance.

If you are interested in providing lower-cost basic health insurance coverage to your employees, a high-deductible health plan linked to a health savings account (HSA) could offer a solution. High-deductible plans can provide coverage for catastrophic illness/accident, while workers can use funds in the linked HSA to pay for unreimbursed medical expenses.

Either the employer, the employee or both can make tax-exempt contributions to the HSA. However, the employee owns the HSA, so balances are fully portable. Balances can accumulate year to year indefinitely and tax-free.

You can further tailor your health benefit program by offering supplemental benefits to wrap around the basic health plan. These programs, such as hospital indemnity plans, pharmacy indemnity plans and others, can help bridge the gaps in high-deductible health plans. Many are available on a voluntary (employee-paid) basis. For more information on the many health benefit options available, please contact us.

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The information presented and conclusions within are based solely upon our best judgment and analysis.  It is not guaranteed information, but is intended to provide accurate and authoritative information in regard to the subject matter covered.  It does not necessarily reflect all available data, and is provided with the understanding that we are not rendering legal, accounting, or tax advice.  Any web links/addresses are current at time of publication but subject to change.  This material is being reproduced with the permission of the publisher via a paid subscription by Insurance One Management, Inc. dba Don Crawford & Associates, Midland, TX.

©2011 Smart’s Publishing – Employee Benefits Report – Volume 9, Number 2 – All Rights Reserved. – Website: http://www.smartspublishing.com

401(k) Basics – Nondiscrimination Testing:

In 401(k), Planning, Retirement on February 3, 2011 at 6:08 pm

Test anxiety isn’t just for students. The words “nondiscrimination testing” can strike fear into even the bravest of benefit administrators. What is nondiscrimination testing, why is it necessary, and how can you avoid it?

Under a 401(k), employees can elect to have the employer contribute a portion of their wages to the plan. These plans enjoy several tax advantages: the employees’  deferred wages (elective deferrals) are not subject to federal income tax withholding at the time of deferral, and they are not reflected as taxable income on the individual income tax return. Employers can also make contributions to employees’ accounts. These contributions do not count as taxable income to the employee, and the employer may deduct them as business expenses.

In exchange for tax-favored status, a qualified benefit plan must meet these basic qualifications:

  1. Provisions in the plan document must satisfy the requirements of IRS Code.
  2. Plan sponsors must follow those plan provisions.
  3. The IRS limits the amounts each participating employee can defer per year; plans may have lower limits but not higher. The maximum an employee can contribute to a 401(k) in 2011 will remain at $16,500, the same as in 2010. As in 2010, individuals over the age of 50 can make an additional catch-up contribution of up to $5,500.
  4. The plan cannot favor highly compensated employees (HCEs) with respect to contributions, benefits, rights or features of the plan.
  5. A “top-heavy” plan must meet additional minimum vesting and allocation requirements to ensure that lower-paid employees receive at least a minimum benefit. A plan is considered top-heavy when, as of the last day of the preceding plan year (the determination date), the aggregate value of the plan accounts of key employees exceeds 60% of the aggregate value of the plan accounts of all employees under the plan. Note that the definition considers aggregate values, not annual contributions!

Types of Nondiscrimination Testing

If your plan allows employees to make salary deferral contributions, the plan administrator must do an annual nondiscrimination test to ensure that it does not favor highly compensated individuals. There are two types of test: the Actual Deferral Percentage test (ADP) and the Actual Contribution Percentage test (ACP).

Under the ADP test, the plan administrator calculates the average percentage of compensation that has been deferred, pre-tax, to the 401(k) plan by each employee. The deferral percentages of the HCEs and non-highly compensated employees (NHCEs) are then averaged to determine the ADP of each group. To pass the test, the ADP of the HCE group may not exceed the ADP for the NHCE group by 1.25 percent or 2 percentage points.

Similar to the ADP test, the ACP test applies to matching contributions and/or employee after-tax contributions. The plan satisfies the nondiscrimination requirements of the law if it passes the ADP and ACP tests.

Corrective Actions

If the plan fails the ADP and/or ACP tests, the plan sponsor must take corrective action to protect the plan’s qualified status. Laws and applicable regulations allow for a 12-month “correction period” after the close of the plan year in which the mistake occurs. “Corrective action” means making qualified non-elective contributions on behalf of the non-highly compensated employees. In simpler terms, the employer (rather than the employees) must make contributions to the accounts of NHCEs.

Smaller employers, or those whose workforce consists of a high proportion of NHCEs, might want to consider a safe harbor 401(k) plan. A safe harbor plan eliminates the need for annual nondiscrimination testing. In exchange, the plan must provide for employer contributions that are fully vested when made. These contributions may be employer matching contributions, limited to employees who defer, or employer contributions made on behalf of all eligible employees, regardless of whether they make elective deferrals. Safe harbor 401(k) plans that do not provide any additional contributions in a year are exempted from the top-heavy rules.

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The information presented and conclusions within are based solely upon our best judgment and analysis.  It is not guaranteed information, but is intended to provide accurate and authoritative information in regard to the subject matter covered.  It does not necessarily reflect all available data, and is provided with the understanding that we are not rendering legal, accounting, or tax advice.  Any web links/addresses are current at time of publication but subject to change.  This material is being reproduced with the permission of the publisher via a paid subscription by Insurance One Management, Inc. dba Don Crawford & Associates, Midland, TX.

©2011 Smart’s Publishing – Employee Benefits Report – Volume 9, Number 2 – All Rights Reserved. – Website: http://www.smartspublishing.com

Preventive Benefit Changes and Your Health Plan under PPACA:

In Health Care Reform, Preventive Care on February 3, 2011 at 6:03 pm

The Patient Protection and Affordable Care Act (PPACA) requires most group health plans that are not “grandfathered” to cover certain evidence-based preventive services with no copayments or cost-sharing. This includes screenings, check-ups and patient counseling to prevent illnesses, disease or other health problems.

Covering preventive care services with no cost-sharing sounds like a good idea. Allowing your employees to schedule annual exams or certain screenings without having to pay out-of-pocket could encourage more of them to do so.

In theory, the increase in preventive services will lower healthcare costs in the long term, by catching certain illnesses and conditions early, when treatment costs less. However, nothing is really free. Experts estimate the cost of covering these preventive care services with no cost-sharing—along with the additional treatments and follow-up care likely to result—will add another 1 to 3 percent to your group health premiums.

News stories, healthcare providers and others are telling the public that healthcare reform laws require group and individual insurance plans to cover preventive treatments with no deductible, co-payment or coinsurance. They may fail to explain that this requirement doesn’t apply to grandfathered plans, those already in existence when the PPACA was enacted on March 23, 2010. If your organization’s plan is grandfathered and does not waive cost-sharing for preventive treatments, you will need to educate your employees.

The PPACA does not address instances when there are changes to the insurance carrier offering the plan (e.g., new corporate owner); it is not clear whether organizational changes would make grandfathered plans into new plans. If any of these changes have occurred to your organization’s plan, please check with your carrier or contact us—the preventive care and other provisions of the PPACA might apply. We can also help with employee benefit education—please contact us for more information.

What’s Covered

What preventive care services qualify for coverage with no cost-sharing under healthcare reform?

The preventive care provisions of the PPACA give insureds under qualifying group plans “free” access to preventive services such as:

  • Blood pressure, diabetes and cholesterol tests;
  • Many cancer screenings, including mammograms and colonoscopies;
  • Counseling on such topics as quitting smoking, losing weight, eating healthfully, treating  depression and reducing alcohol use;
  • Routine vaccinations against diseases such as measles, polio or meningitis;
  • Flu and pneumonia shots;
  • Counseling, screening and vaccines to ensure healthy pregnancies;
  • Regular well-baby and well-child visits, from
    birth to age 21.

Availability of benefits might vary depending on age, gender and other risk factors.

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The information presented and conclusions within are based solely upon our best judgment and analysis.  It is not guaranteed information, but is intended to provide accurate and authoritative information in regard to the subject matter covered.  It does not necessarily reflect all available data, and is provided with the understanding that we are not rendering legal, accounting, or tax advice.  Any web links/addresses are current at time of publication but subject to change.  This material is being reproduced with the permission of the publisher via a paid subscription by Insurance One Management, Inc. dba Don Crawford & Associates, Midland, TX.

©2011 Smart’s Publishing – Employee Benefits Report – Volume 9, Number 2 – All Rights Reserved. – Website: http://www.smartspublishing.com

Health Care Reform Bill “Surprise” – 1099 Nightmare:

In Health Care Reform on January 24, 2011 at 5:29 pm

– An article from Bloomberg BusinessWeek regarding a clause buried in the health care reform bill that requires more tax forms, and small business will bear the brunt of it.

– H.R. 5297: Senate Nixes 1099 Fix

– Three Senate Democrats say they will support efforts to repeal the broad new Form 1099 tax reporting law – but only if they get a clean bill from the House.

– Senators Reid and Baucus introduce ’1099 Fix’ Bill

Addressing the timing of the application of the PPACA provisions prohibiting insured group health plans from discriminating in favor of highly compensated individuals:

In Health Care Reform on January 5, 2011 at 12:22 am

The Patient Protection and Affordable Care Act (PPACA) included a provision that prohibited non-grandfathered group health plans from offering coverage that discriminated in favor of highly compensated individuals. The IRS released Notice 2011-01 on December 23, 2010, which indicates the IRS, Department of Labor and the Department of Health and Human Services will not require compliance with this non-discrimination provision until these Departments are able to issue further regulations or other guidance on the topic.

– An article from TaxArticles.info

– IRS Notice 2011-1

– An article from Employee Benefit News

– IRS Temporarily Suspends Compliance With Non-Discrimination Rules

Personal Health Account debit card users can still use their cards to buy “doctor-prescribed” over-the-counter (OTC) drugs at a wide range of stores after Jan. 15, 2011, IRS says:

In Health Care Reform, Pharmacy, Rx on January 5, 2011 at 12:17 am

– An article from LifeAndHealthInsurancenews.com