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.
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.
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!
Leave a comment | tags: 2012, agent, benefit advisor, california, Employee Benefits, employer, employers, Health Care Reform, Insurance Agent, insurance agent Temecula, MLR rebates, obamacare, PPACA, premium, rebates, reform, supreme court decision, Temecula, updates | posted in Health Care, Health Care Reform, PPACA, Uncategorized
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
Leave a comment | tags: 2012, agent, california, california exchange, Employee Benefits, employers, forbes, health care, Health Care Reform, increase, Insurance Agent, insurance agent Temecula, mandate, obamacare, peter lee, PPACA, premium, reform, scotus, updates | posted in Health Care, Health Care Reform, PPACA, Uncategorized
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.
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.
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.
1 Comment | tags: $5, 000 Health Insurance Subsidy, 2012, benefit advisor, cost, cost estimate, Employee Benefits, employer, employers, health care, Health Care Reform, health insurance, HIPTC, Insurance Agent, insurance agent Temecula, mandate, obamacare, PPACA, premium, premium subsidy | posted in Health Care, Health Care Reform, PPACA
It’s hard to find a family that has not been touched by the diagnosis of Autism. It’s epidemic spread not only causes devastating concern for families but the financial implications are extreme. Federal and State educational programs are only spread so thin before resources run dry for many. Even with Federal and State Mental Health Parity Laws, the insured public continues to fight on a daily basis for therapies to help their children.
As insurance agents engaged in this daily fight, we welcome this clarity of coverage. Our agency has always worked as an advocate for our clients to get the most out of their policies and to provide as much covered care as possible. Help is arriving in California on July 1, 2012 in the form of SB946. SB946 (aka. Mental Illness: Pervasive Developmental Disorder) will add coverage for Behavioral Health Treatment (BHT).
The technical definition of BHT is “professional sevices and treatment programs, including applied behavior analysis and evidence-based intervention programs that develop or restore, to the maximum extent practicable, the functioning of an individual with pervasive development disorder or autism.” Coverage must be prescribed by a licensed physician and pre-authorized by the health plan. It will cover treatment in non-institutional and home settings as well as in-office services.
In addition to mandating coverage for autism treatment, the bill requires the creation of the Autism Advisory Task force. Advocates for Autism issues will be well represented on this board. “Autism Speaks” Vice President, Lorri Unumb was named as a member of this important task force. “I am honored to serve on this task force and to contribute to making California’s autism insurance reform law one of the most effective in the nation,” said Unumb. “Autism Speaks welcomes this opportunity to work with the DMHC.”
California insurers will begin mailing notices to all policyholders over the next month to provide information on this important July 1, 2012 amendment. The bill also mandates that insurers provide adequate access to providers that will be able to provide these services. This will help to assure policyholders that covered services will also be made more available.
When an employee is dealing with this family issue they are very often pulled away from work. They may spend hours on the phone fighting for coverage approvals and provider access. Employers are paying the price for this lack of “presenteeism” in these employees. We look forward to educating employers and employees on the benefits of this new law and how proper Wellness and Employee Assistance Programs can work together to provide the best outcome when dealing with the issues affected by this new law.
Paula L. Wilson, RHU, REBC is principal of Paula L. Wilson, Inc., an Employee Benefits Firm. Employers are encouraged to contact Paula at 888-447-2852.
Leave a comment | tags: 2012, autism, Autism July 1, Autism mandate, Autism Speaks, Autism Task Force, California Autism Insurance, EAP, Employee Assistance Programs, Employee Benefits, insurance agent Temecula, presenteeism, SB946, Wellness | posted in Health Care, Health Care Reform