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
Employers with health insurance costs weighing heavily on their backs should enjoy a small sigh of relief as Buck Consultants released their recent survey results of 129 insurers and administrators. The results? For the first time since 2001 they estimate the cost increase for health plans to be less than 10%……..only 9.9% for 2012.
The survey goes on to explain the reduction in the rate of increase is primarily due to a correction in margins insurers had previously built in for health reform as well as a reduction in elective procedures by the insured public. During a time of such prolonged economic slowdown, people are just putting off what they consider to be elective.
Last year the trend was 11.2%.
Even at 10%, the result is a huge new nut to crack on top of already enormous numbers. It isn’t quite what employers were looking for in upcoming benefit budgeting. They still long for that time when rates remained relatively flat.
It is my opinion that employers and benefit professionals should continue to push everyone to take advantage of the preventive services now available on all non-grandfathered plans. Getting the right preventive care and continuing the expansion of Wellness Programs is vital in order to avoid the explosion of costs to follow if new disease is left undiagnosed or untreated due to cost concerns. Employers and their Benefit Advisors cannot to overlook the proactive role they must continue promote.
If you are interested in learning more about Health Care Reform, Wellness Programs or preparing for the upcoming mandates, please contact Paula Wilson at 951-694-1009.
Leave a comment | tags: benefit advisor, buck consultants, cost, employers, health care, Insurance Agent, PPACA, reform | posted in Health Care, Health Care Reform, PPACA