Insurance One Management, Inc.

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.


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:


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