Employers Canceling Health Insurance Coverage – First Do No Harm

PPACA offers expanded coverage to the currently uninsured by subsidizing the cost of health insurance plans from the private market (via Exchanges) and by expanding MediCaid.   Low-income employees currently covered by their small business group insurance plan, are now seeking affordable coverage for their dependents through these new avenues.

These insured employees reaching out to the Exchanges for subsidized dependent coverage are quickly finding out their family is ineligible for federal help solely due to the existence of their employer group insurance plan.   Once clamoring for employer based group health insurance, the employees are now demanding the employer plan be canceled so that Exchange subsidies can be accessed for their entire family.

Many employers may see this as an easy out of the benefit business.   With no barriers to the individual market, the employer may see this as an option for everyone.   Could it be that easy?  Low-income subsidy-eligible employees and their families head to the Exchange while the rest of the group hits the guaranteed coverage options within the individual market?   The answer is not so straightforward.  Any professional benefit agent could point out the obvious problems.

Everyday issues that might be considered include:

  •  Employees age 65 and over need time to prepare for a switch to Medicare and all it entails.
  • Employees with household incomes below FPL levels of 250%-150% need to understand their private Exchange policy will not be issued as applied for.
  • Everyone needs to know new policies both in and out of the Exchanges will be providing substantially reduced provider lists.
  • Those seeking subsidies might get more than they asked for.   Part or all of the family may find they have fallen into a MediCaid plan (MediCal in CA) with no way back to the private market.
  • Individuals, especially those with specific needs, have no guarantee that providers, services, therapies and drugs will be available to them.
  • Employers need to understand the tax consequences of such a move.

Individual needs aside, the markets inside the Exchanges are a mess at best.   Quoted benefits and costs are merely estimates.   Benefits outlined are merely a promise of coverage written on a government spreadsheet.   Most States haven’t even produced specimen policies for the professional to inspect for detail.

The private market is functioning, but only as fast as the State will approve plans for sale.   It could be December before we get a glimpse of what the breadth of private options really looks like.  Do we really want to make decisions based only on what can be seen today?

Before any employer writes that cancellation letter, they need to remember why they had the group plan in the first place.   Canceling coverage and dropping people into an unknown myriad of issues is not going to further your goal to attract and retain quality employees.


Small Employers – The ACA Creates The New Employee Benefit!

Small Employers – The ACA Creates The New Employee Benefit!

Paula L. Wilson, RHU, REBC

Paula L. Wilson, Inc.

www.paulawilson.com

paula@paulawilson.com

951-694-1009

Californians are heading to the internet in search of the golden ticket to low cost insurance through Covered California.  Covered CA is the name of California’s version of the Affordable Care Act  (ACA).   In most cases, they are finding this search leads only to confusion.  Instead of an easy road to clear answers, everyone is finding out that the ACA is nothing more than a set of prepackaged insurance policies with all of the same confusing definitions and options they have encountered in the past.    On the phones they find Navigators are merely community organizations staffed to enroll people.  Navigators are not allowed to make any recommendations and lack the expertise, knowledge and liability coverage to advise anyone on such an important issue.

There’s also a dirty little secret everyone is uncovering.  The law disqualifies employees and most dependents from subsidized coverage if they are eligible to enroll in a group insurance plan – regardless of the cost (with a few exceptions).    For this reason, small employers already struggling to keep up with increasing health insurance costs, may opt to cancel their group insurance and open the floodgates for employees and family members to enroll in the exchanges and receive the hefty premium and benefit subsidies that may be available to them.

Although this option WILL NOT BE THE BEST ROUTE FOR MOST SMALL EMPLOYERS, it could work for many.  Before an employer makes the decision to cancel their group insurance, they are cautioned to consider:

Tax Implications

  • Review Federal Mandate Compliance
  • Eligibility for the Small Business Tax Credit
  • Income/Subsidy level of the employees
  • Special needs of employees/dependents
  • Review the coverage and access loopholes of Exchange plans with a qualified agent
  • Review their overall benefit and compensation strategy with a benefits specialist

The employer that cancels his group insurance program has just cancelled the one golden handcuff that may have created and continued employee loyalty over the years.  What will be the new golden handcuff for the employee?

Providing your employees with access to the professional counseling of a licensed insurance agent is not only a free benefit, but also the best kept secret of the ACA.    Insurance agents continue to provide employers and individuals with free insurance advice regardless of whether it comes direct from the open market or through a vehicle like Covered California.  Allowing employees to meet with a qualified agent during work hours will ensure that golden handcuff feeling that employees have come to expect in employee benefits.

Employees not eligible for subsidies or willing to accept the reduced PPO and HMO networks of Covered CA will appreciate the opportunity to look at this new post ACA world of options.   It’s a new landscape of options and a thoughtful look at all of your options is in order!

Whether you are providing this service to all employees after canceling your group insurance plan, or offering it to those employees already employed but not eligible for your group insurance, it’s a great free employee benefit.  Small businesses that don’t currently offer group coverage will find they can now provide guaranteed coverage for their employees with the free services of their very own agent!

This service with a revised compensation and ancillary benefit structure could be a win-win for your small business.   Your employees will appreciate the fact that you have done your research and found the most qualified, experienced and trusted advisor for them.   Use caution when using any internet agent or agency, the purpose of using an agent is to provide you employees personal service.   Impersonal online order takers are not what is called for here.

Employers are still in the best position to provide access to the right medical coverage whether through their traditional group insurance plan or ACA compliant plans.

IMPORTANT NOTE:  Unlike Navigators, insurance agents provide ongoing support and carry liability insurance to make sure they give you the right advice. There is no recourse for bad advice or ongoing service provided if you proceed directly to Covered California to apply for your coverage.


Juror Number One – What say you?

With not much else to do and with a great need to avoid the CNN blaring in the Jury Waiting Room, I spent my time pouring over the first concrete result of ObamaCare received in our agency.   The results leave me with a very screwed up look on my face. (no jokes)

We need to hear from the entire jury to even begin to reach a verdict.   What I am posting below is an actual set of results from a mid sized employer group plan.   The rates pulled represent different age categories and family combinations.   This one company is different from the rest of the market because the physician list DOES NOT change.   It will be interesting to see the first set of real numbers from a standard PPO or HMO.

The result is a clear reduction in coverage with rates going -/+ 25%!    Assuming the same rate basis, the rates would have been much higher if they had not reduced the benefits.  Frankly, this makes absolutely no sense.  Although I expected this carrier to look good, I did not expect this result.

Those of you who understand the rate compression rule of 3-1 from ages 19-64, would know that we expected to see older folks getting the best result while the under 30s should get increases.  What we have here makes no sense.   The only explanation is going to be found in the drug formulary, lab and specialty drugs.   I have not made that comparison yet.   Without a actual Summary of Benefits and Coverage, I can’t make a final ruling from this juror.

I submit Exhibit 1 for you perusal:

Before ObamaCare After Obamacare
 Contract 8-1-2013  January 1, 2014
Plan A 2013 ObamaCare version Plan A 2014
Benefits
Plan Type Staff Model HMO Staff Model HMO
Office visits $30 $30/$50
Co-Insurance none none
Annual Max Risk Per Person $3,000 $6,350
In Patient Hospital $400 day $600 day
Prescription $10 gen/ $35 Brandafter $250 $19 Generic $50 Brand
Age 37 $289.00 $350.00   ^
Age 45 $372.00 $408.00  ^
Age 54 $485.00 $604.00  ^^
Age 24 $261.00 $283.00  ^
Age 45 with 2 children $707.00 $547.00  v
Age 48 with Family $1,130.00 $1,066.00  v
 result Lower benefits – Higher Rates Prevail

You may be wondering if I rigged this comparison.   I did not.   In a previous Blog I explained how insurers will MAP or CHOOSE one of the new ObamaCare plans for your renewal.  This must be done for all non-grandfathered plans because all plans must be canceled at their 2014 renewal.   The insurer chose this new plan.

I look forward to receiving and reviewing the details hidden within this plan to see where benefits have been reduced or enhanced.

I hope to bring you some examples for the national small business insurers shortly.


Who Canceled My Insurance Policy?

If you have a private health plan for you and your family, you will probably receive a notice of plan cancellation shortly.   Please don’t panic and understand that it is all part of the metamorphosis we are all going to be forced to take over the next year.

Remember that pledge:  “If you like your insurance, you can keep it”?  Well, that is a dream for most of the population in the real world.    In reality, any policy written, rewritten or changed substantially since March 23, 2010 is considered NOT grandfathered and therefore will be cancelled and replaced with an ObamaCare approved plan.   If you hear nothing else I write, hear this:   Just because Obama approves it doesn’t mean you will.  And you must review the plan details.

In the new world, choices will be reduced DRASTICALLY.   Your new world will consist of cookie cutter plans with much smaller physician networks.   In California,  PPOs will be replaced widely with EPOs.   Get used to that term because it is going to take hold.   A PPO covers you if you use the a PPO physician while allowing lesser coverage if you don’t use a PPO physician.  An EPO ONLY covers you if you use a network physician.   If you don’t, you are not covered.   This limitation along with a much reduced list of PPO physicians greatly reduces your choices in where you get care.

Why did my family costs go so high?

One of the MAJOR changes with ObamaCare is how a family rate is put together.   In the past, a family could have 3 to 10 members and all be eligible for the same rate.   Not so any longer.   All family participants are now rated separately.   Remember that 22  year old you put back on your plan just because you could?   That adult child will now carry and adult rate to the table with them.   Surprise!

Back to the cancellation letter you are about to receive.  In essence, ObamaCare requires ALL non grandfathered individual policies to be cancelled 1-1-14.  BUT, that doesn’t necessarily mean you don’t have coverage. Your carrier should move you to a plan closest to your current benefits or cost.  Which benchmark they use is up to the carrier.  If you don’t like where they put you, look at the options they give you.  If you plan to make a change, don’t sit on it. You can only make a change during this national open enrollment and annually at future open enrollments. (Again, there are exceptions for qualifying events.)

To recap:

  • You probably can’t keep your plan.
  • Watch for changed family deductibles, higher out of pocket maximums, far higher specialty drug costs, and many hidden co-payments.
  • You might not be able to keep your doctor.
  • Don’t forget to take the time to inquire about the new physician list.  IT WILL BE SMALLER.
  • You aren’t going to be free to change whenever you want.

A guarantee issue market comes with limits.  Rule vary case by case.   This first Open Enrollment will run from October 1, 2013 to 3-31-14.   In subsequent years, Open Enrollment will be the fourth quarter of every year for January 1 effective dates.

There will be new choices.  Use a GOOD insurance agent to guide you.  Look for years of experience and specialty in health care.   Many newbies are picking up overnight expert designations and titles.   Don’t fall for the scam.   A good agent will have all the information available for private market and government subsidized plans through your State Exchange.   If they don’t, use Find an Agent at http://www.NAHU.org.

Since subsidies are only available if you buy a cookie cutter plan through your State Exchange, you should advise the agent you would like to inquire about the Exchange.  Any agent worth a nickel will be able to give you a good estimate of your subsidy.

Whatever you do.  DO NOT go directly to an Exchange.   They will be staffed with less educated and completely non accountable employees.  Agents are free and will explore ALL of your options, so use them.

If you get to keep your plan and you like it, stay there and let the guinea pigs work out the kinks for a few years.  I know I am holding on to mine!

Paula L. WIlson, RHU, REBC

http://www.paulawilson.com

paula@paulawilson.com


More Money! Insurance Rebates On the Way!

PPACA requires health insurers to maintain specific loss ratios.  If an insurer spends more than 20% on non claims related expenses, they need to provide rebates to the insureds. (15% for large employers).  Sounds great!

This portion of PPACA went into effect for premiums paid starting 1-1-2011.   The deadline for calculating and returning your overpaid 2011 premiums is August 1, 2012.  Many of you have already seen communications letting you know where your insurer stands on this issue.

FOR EMPLOYERS

Employers need to start thinking about how they are going to handle this refund check.  For some employers this may not be a daunting task. For others, not so easy.   You need to remember that premiums are plan assets and need to work for the member of the plans.  The law does NOT allow the employer to pocket those premium refunds unless the employer paid 100% of the premiums with no employee contribution.  Let’s consider some of the rules for the use of these rebates when any level of employee contribution is involved.

The employer has three options when dealing with the rebate.  Simply stated, they can offer:

  • A Cash rebate
  • A Reduction in future employee contributions
  • An Increase in future benefits

The DOL is discouraging Options 2 and 3 unless the cash rebate is just too expensive to process.

You aren’t going to cut everyone a check and be done with this.   Premiums that were originally deducted from the employees paycheck on a pre-tax basis will be given back to them as a taxable event.  If you use it to reduce future premium deductions, you will save that accounting step.  Either way, it’s fairly easy for you to deal with.

The fun part for employers is going to be deciding how to divvy up the money.   The money must be returned to the employee proportionally  the way the premium was collected.  Also, the money has to go back only to the employees that were participating in the plan that is providing the rebate.   Let’s say you have two insurers in play and both of them give you a rebate.  Of course the rebates won’t be the same.   Your process needs to go like this, per carrier:

  • Who will get a rebate?  You will need to go back and see who was on the plan IN 2011.  Don’t fall into the trap of looking at your current invoices.  You have certainly experienced open enrollment and some employees have changed coverage.
  • How were they covered?  Were they in the same bracket all year?  Did they add dependents?  Did they experience an age change?  You can’t look at one invoice to determine their annual contributions.  You can’t even look at the payroll unless it specifies the insurer for each employee each month (if more than one insurer is in play).
  • Terminated employee money does not have to be returned to the terminated employee.  But, it does have to be evenly distributed the remaining employees still participating in that plan.
  • How will you distribute this rebate to them?  Cash or reduction in future payroll deductions.

The insane thing about this process is that rebates are expected to be very small.  Even in States with really inept actuaries, average rebates are expected to average $44 per employee for small groups and $14 for large groups.  That is a ridiculous amount of work for the benefit.  But employers must rebate the money.

FOR INDIVIDUALS

Individual policyholders have to pay a bit of attention as well?   If the individual paid for their health insurance with post tax dollars, there is nothing to discuss.  Cash the check.   But if the you wrote off your health insurance premiums, you will now need to pay tax on the returned premium.  Again, a ridiculous exercise for a small amount of money.

As the June 25th SCOTUS expected opinion date looms closer, employer must continue to plan as if everything is staying in place.  PPACA’s impact on employers and the added responsibility to follow numerous new regulatory hurdles is not something you want to be scurrying around for this fall.  Be prepared, pay attention and be prepared to act.

In our next blog we are going to review what we already know about the W-2 regulations that will be in effect for all W-2’s issued after 1-1-13. (for 2012 tax year)

Paula L. Wilson, RHU, REBC

Elections have consequences!


Health Care Reform Is Here To Stay (And YOU better plan on it)

No one seems to want to talk about it.   But it is almost here and you will be affected by it.  It is time to seriously start paying attention.

For Everyone:  There are reports from all directions that confirm what I keep saying:   Health Reform isn’t going away.   Many states are just waiting to enact Plan B.  Just this week Peter Lee, the Executive Director of the California Exchanges said:   “The shape and speed and nature of that effort may change a little.  We need to see, how do we adjust course after that decision.”   As a matter of fact, there is talk around Sacramento that the State just might go ahead and write their own individual mandate.   And why not?  Massachusetts did it and there isn’t any law on the books in California stopping them.    If the entire Federal Law gets thrown out in the severability issue, employers better not take a deep breath.   California would be the one State you could bet on to go after the employers.   After all, someone needs to fill up these insured pools with money so the claims can get paid.

For all Employers:  Employers who continue to ignore the reality of the situation are going to be unpleasantly surprised.   Even if the Individual Mandate is struck down by SCOTUS, the Employer Mandate will remain.  Large employers will have to make some decisions.  They may be inclined to pay to the $2,000/$3,000 fine per employee to un or underinsure, but they should be considering the entire picture when making those decisions.  Even small employers will be affected.  They are going to be inundated with employees looking for answers.   Who else are they going to ask?   Small employers not subject to the employer mandate will be analyzing which way to go with their benefits in the future.   They aren’t just going to lose all of their employees to the competition without some consideration.

Between the employees and HR, employers better have a benefit agent with some knowledge and history of being on top of benefit legislation knowledge.   Determining how to keep employees while rationally taking advantage of the individual and group subsidies will take some finessing.   Avoiding regulatory hurdles from the IRS, HHS, DOL and the new slew of agencies is going to be fun for all.

For the Average Consumer:  If the Individual Mandate fades away, rates are going to rise.   And they are going to rise like there is no tomorrow.   Does this sound like it’s going to end well?  When all is said and done PPACA is going to be the death knell of the current system.   A death that was premeditated by the U.S. Congress over time.  Forbes did a great article on the incidents leading up to the end desired result.  For the good of my profession and general public, I really hope the professional insurance agent survives in a manner in which they can remain in business.  I think the need for assistance is going to increase exponentially.

For Insurance Professionals:  Insurance agents making a living sells on rates and not taking this profession seriously are going to be in a world of hurt.   You can wish all you want, the California Exchange isn’t going away.  And remember, for an individual to get a subsidy, they have to purchase their insurance from the Exchange (If and how you can sell it remains to be set in stone).  Mr. Lee went on to say, “It’s misleading and not productive to just look at all of the ‘what-ifs,'” Lee said. “California will address the needs of Californians. And that includes the exchange.”    There is one “what-if” we don’t hear them talking about.   “What-If” national leadership changes and the Federal Funding to the States goes away.

Now, anyone with any institutional knowledge knows how well the State can compete with the private market in the absence of Federal Funding.   Mr. Lee can hope all he wants, unless they get the Federal Funding to support the premium subsidies…….well, game on.

Paula Wilson, RHU, REBC, Southern California Insurance Agent and Benefits Consultant


$5,000 Health Insurance Subsidy…for you?

While PPACA is simmering in the Supreme Court, the U. S. Treasury Department has been busy defining who will be the recipient of the Health Insurance Premium Tax Credits (HIPTC).   These new regulations were published last week and can be seen in their entirety here.

Who gets the subsidy?

As PPACA outlines, individual and families with incomes from 100% to 400% of the Federal Poverty Level (FPL) are eligible for the credit.   (In 2011 dollars, eligible incomes would fall between $22,350 and $89,400)  A recent estimate from the Congressional Budget Office (CBO) puts the average credit in the area of $5,000.    With the latest cost estimate for family coverage topping the $20,000 level this year, many will find this a welcome relief.   (How are you doing so far?)

Eligibility will be determined by the difference between the “benchmark plan” and the amount your contribution is expected to be.   Now stay with me on this.   The “benchmark plan” will be the second lowest (or Silver) plan offered through the Exchange.   Your contribution will be calculated between 2% to 9.5% of your annual income depending on where you stand on the FPL scale.

But what will it really cost?

It is hard for industry and non industry citizens to envision what this means because PPACA changes everything so radically that the rates you see today and the rates post-PPACA are a mystery.   When you consider the complete lack of underwriting, an unenforceable mandate* and rating restrictions that limit the ratio in premium between an 18 year old and a 64 year old to 1 to 4……your guess is an good as mine.   As soon as the rates are out they will be subject to change at the next legal opportunity.  The effect of the shift in the demographic of the insured public and the dumping of employer sponsored coverage (directly or indirectly from the 9.5% AGI limit) is yet to be seen.

Employer Concerns

PPACA subjects employers to “shared responsibility” penalities if they don’t offer affordable coverage and this set of regulations suggests there are more penalties to come if the employer contribution toward the cheapest plan offered exceeds 9.5% of the the employee’s AGI.  For employers who might pay into Health Savings Accounts (HSA) for their employees, you may be surprised to note that these regulations do state that the IRS will not include the employer HSA contributions into that calculation when determining if the employees coverage is affordable.  This is because HSA contributions cannot be used to pay for group medical insurance premiums and therefore, cannot reduce the “cost” of the insurance for the employee.

As I read this 87 page document my head is reeling with questions of implementation.  It’s almost like these people have never run a business or spent much time working with employers on the intracacies of providing benefits.   Employers who run any kind of benefits program spend money on many health related items in addition to “Health Insurance Premiums”.  Even employer expenses on Wellness Programs may not necessarily be counted as an employer contribution to the health plan.

What?

If you are asking yourself how in the heck the average Joe is supposed to follow all of this, think about how they get through it now and consider this.

Employee Benefits experts and consultants are going to need an entirely new set of expertise in their portfolio to assist employers in determining where to put their benefit dollars.   The lifespan of the Health Insurance Agent is not only under direct attack from PPACA, but the day of the agent who provides “rates only” as a mode of service is over.   Benefit Professionals like our agency will survive as long as we are welcome in the market and not regulated out of existence.

For the individual purchaser, things may get more impersonal.  Government employed Exchange “agents” are going to spend more time calculating your subsidy than worry too much about advising you what is best for you and your family.

Well, it’s not all bad….you might get $5,000!

Paula L. Wilson, RHU, REBC

*subject to SCOTUS decision due in June, 2012.