Grandfathered Plans under the new Healthcare Legislation (Union & Non Union Employees)

Everyone's been asking me how their current plans will be effected by this new legislation. They want to know what will happen to their plan if they have standard employees or union employees. This was covered in the new legislation, under Grandfathered plans.

The term Grandfathered applies to any plan in existence before the legislation was passed. Grandfathered plans DO NOT have to conform to the new law until the plans renewal date. So as long as the plan was in effect on March 23rd, 2010 it is not subject to the new rules until the plan renews. Any new employees will NOT alter the grandfathered status, so employer can feel free to hire new employees without the threat of penalties or restrictions.

Companies that have union employees where a Collective Bargaining Agreement is present are not subject to the new legislation (Due to the reconciled Bill) until the Agreement reaches its conclusion. Once the agreement is renegotiated, it will then have to be within compliance with the new legislation.

This helps to clear up a few misconceptions as to how businesses and unions will be effected by the new legislation. Next Week I'll cover what changes Grandfathered plans must make by Jan 1st, 2011 & Jan 1st, 2014.

If you have any questions you can reach me at (631) 338-9917.

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Health Care Reform Has Arrived - Summary of Changes

Everyone's been asking me how the new Healthcare legislation is going to effect them. So, I wanted to post a great article about the new Health Care Reform written by our in house legal team Proskauer Rose LLP. Its a brief outline of some of the changes set to take place with the new legislation.

Health Care Reform Has Arrived
March 23, 2010
By Proskauer Rose LLP

Health care reform has arrived as have new mandates on employers and medical service providers. On Sunday night, March 21, 2010, the U.S. House of Representatives passed the Patient Protection and Affordable Care Act (H.R. 3590), which had been previously approved by the Senate on December 24, 2009 (the “Reform Act”). With this law approved by both bodies, health care reform is now here, and has been signed into law today by President Obama.

A remaining question is whether the proposed Health Care & Education Affordability Reconciliation Act of 2010 (H.R. 4872) (“Reconciliation Act”) also approved by the House on March 21, 2010 will be passed by the Senate. The Reconciliation Act would amend the Reform Act to reflect House concerns that were not addressed in the Reform Act. Republicans in the Senate are expected to fight passage of the Reconciliation Act, a fight that will officially begin on the Senate floor after the President signs the Reform Act into law.

Below is a summary of pertinent provisions of the Reform Act as well as the impact the Reconciliation Act would have on those provisions if passed by the Senate and signed into law by the President.

What Happens Right Now

Many of the Reform Act’s provisions take effect in 2013, 2014, or later years, or are gradually phased in. Some provisions, however, become effective immediately or within a short time. A few of these are:

A temporary national high-risk pool will go into effect within 90 days of enactment.
Restrictions on insurers regarding lifetime limits, excessive waiting periods (over 90 days), rescissions, and pre-existing condition exclusions for children.

Limitations on insurers’ ability to impose annual limits on the dollar value of coverage as determined by the Secretary of Health and Human Services.

New insurance must pay the full cost of specified preventive care.

Children can stay on their parents’ insurance policies until they are 26.

Rebates on Medicaid prescription drugs are increased effective January 1, 2010.

Starting in 2011, health insurers must make rebates to enrollees if medical loss ratios are lower than specified levels.

Effective January 1, 2011, the elimination of the ability of employers to exclude from taxation (Medicare Part D) the subsidies they receive for maintaining retiree drug coverage for their Medicare-eligible retirees.

Effective January 1, 2011, contributions to employee flexible spending accounts will be limited to $2,500 per year, indexed to CPI, and reimbursements for non-prescription drugs will no longer be allowed.

Impact on Employers

Employer Mandate. Effective January 1, 2014, the Reform Act assesses a fee of $750 per full-time employee (30+ hours per week) on employers with 50 or more employees that do not offer health coverage and that have at least one full-time employee who receives a premium tax credit. For employers that impose a waiting period before employees can enroll in coverage, there will be a penalty payment of $400 for any full-time employee in a 30-60 day waiting period and $600 for any full-time employee in a 60-90 day waiting period. The length of permitted waiting periods is particularly important for employers with a high turnover workforce. The Reconciliation Act would increase the penalty to $2,000 per full-time employee, excluding the first 30 employees from the assessment. Employers would not be assessed any payments if they require a waiting period before any employee can enroll in the health coverage, but the amount of any waiting period will be limited to 90 days.

Grandfathering. The Reform Act generally grandfathers existing individual and group health plans with respect to the new benefit standards under the Reform Act as well as the Reform Act’s requirement to provide coverage for dependent children up to age 26. The Reform Act also appears to generally grandfather existing individual and group health plans with respect to the prohibition on lifetime limits, excessive waiting periods and rescissions. Under the Reconciliation Act, the prohibition on lifetime limits, excessive waiting periods, rescissions, and dependent coverage up to age 26 would apply to Grandfathered Plans within six months of the law’s enactment.

Automatic Enrollment. Subject to regulations, the Reform Act requires employers with more than 200 employees to automatically enroll them into health plans unless an employee demonstrates that the employee has coverage from another source.

High-Cost Plan Excise Tax. Effective January 1, 2013, employer-sponsored health plans with aggregate values that exceed $8,500 for individual coverage and $23,000 for family coverage ($9,850 and $26,000 for retirees and high-risk professionals) will have to pay an excise tax equal to 40% of the excess benefit. The tax is owed by insurers of insured plans and the employer or administrator in the case of self-insured plans. The thresholds will be indexed to inflation. The threshold amounts will be increased by 20% in the 17 states with the highest healthcare costs, and this increase will be subsequently reduced by half each year until it is phased out in 2015. Under the Reconciliation Act, the excise tax does not take place until January 1, 2018, and the thresholds increase to $10,200 for individual coverage and $27,500 for family coverage ($11,850 and $30,950 for retirees and high-risk professionals) and may increase upward if healthcare costs unexpectedly rise prior to 2018.

Taxation of Retiree Drug Subsidies (Medicare Part D). Effective January 1, 2011, employers will be taxed on the Medicare Part D subsidies they receive for maintaining retiree drug coverage for their Medicare-eligible retirees. Because this provision requires employers to treat the subsidies as taxable income, it is thought by some that the provision would be a deterrent to the continued maintenance of employer sponsored retiree drug coverage. The Reconciliation Act would delay the elimination of the tax exclusion until January 1, 2013.

Flexible Spending Accounts. Effective January 1, 2011, the Reform Act limits contributions to employee flexible spending accounts to $2,500 per year, indexed to CPI. Such a limit will raise health care costs for employees with unreimbursed health care expenses in excess of $2,500 to the extent the employee currently has a flexible spending account that permits contributions in excess of $2,500. The Reform Act also excludes over-the-counter drugs as an expense that is reimbursable under flexible spending accounts. The Reconciliation Act would delay the limits on employee flexible spending accounts until January 1, 2013.

Tax Issues

Medicare Tax. Effective January 1, 2013, the employee’s share of the Medicare (hospital insurance) tax rate on wages would increase by an additional 0.9 percent (in addition to the existing 1.45 percent) for individuals with a modified adjusted gross income of $200,000 or $250,000 in the case of married couples filing jointly. The Reconciliation Act would also modify the Medicare tax to include net investment income in the Medicare tax base, which would be taxed at 3.8 percent, for individuals who file jointly with a modified adjusted gross income of $250,000 or $200,000 in the case of a single return. Net investment income includes gross income from interest, dividends, annuities, royalties, rents, and disposition of properties and excludes (among other items), distributions from qualified retirement plans and IRAs.

Economic Substance Doctrine. As a revenue-raiser, the Reconciliation Act codifies the “economic substance” doctrine; this judicial doctrine denies tax benefits when the transaction generating the benefits lacks economic substance. Under the codification of this doctrine, a taxpayer must demonstrate that the transaction changes in a meaningful way (apart from tax effects) the taxpayer’s economic position, and that the taxpayer has a substantial non-tax purpose for entering into the transaction.

Reporting of Payments to Corporations and for Goods. Effective for payments made beginning in 2013, the Reform Act expands the current Form 1099 information reporting requirement for compensation paid for services to individuals and partnerships to payments made to corporations and to payments made for goods as well as services.

W-2 Reporting. Effective for tax years beginning after December 31, 2010, the Reform Act requires employers to report on Form W-2 the aggregate cost of health coverage (determined on a basis similar to that under COBRA) received by an employee under the employer’s healthcare plan. For this purpose, FSAs, HRAs, and Archer medical savings accounts are excluded from the cost analysis.

Impact on Providers

Health Insurers. Providers of health insurance will face dramatic changes in how they can do business, starting almost immediately. Changes include limitations on policy restrictions and exclusions as well as on premiums as they relate to expenditures for medical services. The health insurance industry will also be subject to an excise tax starting in 2011. The Reconciliation Act would delay this tax to 2014. Medicare Advantage payments to managed care organizations will be reduced.

Physicians and Hospitals. The Reform Act largely eliminates on a going-forward basis the exception to the Federal physician self-referral law that permitted physicians to have ownership or investment interests in whole hospitals. The Reconciliation Act would provide that primary care physicians serving Medicaid patients must be paid no less than the Medicare rate for such services. Hospitals will see Medicare and Medicaid disproportionate share payments go down as the level of uninsured population decreases. Physicians, hospitals, and other providers will receive enhanced payment for higher-quality services. Beginning in 2012, accountable care organizations of physicians and hospitals will participate in shared savings programs. Under the Reconciliation Act, hospitals in counties with the lowest per capita Medicare spending will receive additional Medicare payments in federal fiscal years 2010 and 2011.

Provider Scrutiny and Transparency. Providers, particularly durable medical equipment suppliers, who seek to enroll as Medicare or Medicaid providers will face increased scrutiny. Review of suspicious bills before, rather than after, payment will become more frequent. Provider audits will be expanded. Pharmaceutical and medical device companies will be required to publicly disclose payments made to physicians, hospitals, and other providers starting for the 2012 calendar year. Tax-exempt hospitals will be required to make greater disclosures of their plans to meet community needs and will be limited in the amounts they can charge patients receiving partial charity care. Finally, false claims and fraud and abuse laws are strengthened and enforcement resources increased.

Pharmaceutical and Medical Device Manufacturers. Pharmaceutical companies will be subject to an industry fee starting in 2010 based on sales of brand name pharmaceuticals for government health programs. The Reconciliation Act would delay this fee to 2011. Medical device manufacturers will be subject to a percentage excise tax on medical device sales starting in 2011. The Reconciliation Act would delay this tax to 2013.

Long-Term Care. Long-term care institutions face a number of new requirements under the Reform Act, including detailed ownership disclosure and the implementation of compliance and ethics plans.

Evaluation and Investment. The Reform Act provides for many payment demonstration programs as well as investments in the health care workforce and in training.

As discussed above, the Reconciliation Act in certain circumstances will delay some of the Reform Act’s effective dates should the Reconciliation Act become law.

Proskauer’s Health Care Reform Task Force is well poised to help employers and providers navigate these new mandates. Comprised of members of the Employee Benefits, Executive Compensation & ERISA Litigation Practice Center, the Health Care Department, the Labor and Employment Department and the Tax Department, the Task Force brings to bear a unique interdisciplinary approach and perspective that will assist employers and providers in addressing health care compliance issues.

We plan on providing more in-depth analysis of some of the issues highlighted above in future Client Alerts and will continue to update our clients on new developments in this rapidly changing area of the law. In the meantime, please feel free to contact your regular Proskauer attorney or any member of our Health Care Reform Task Force should you have questions regarding the Reform Act or the Reconciliation Act.

To ensure compliance with requirements imposed by U.S. Treasury Regulations, Proskauer Rose LLP informs you that any U.S. tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

If you have any questions or concerns you can reach me at (631) 338-9917 and I would be more then happy to help further explain how these changes will impact you, your business and your family.

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Using a Health Savings Account to pay your COBRA Benefits Tax-Free

I had two interesting questions asked to me the other day by an employer. He simply wanted to know, “Can an employer continue to contribute to a Health Savings Account if they’re on COBRA?” and “Can the employee use their Health Savings Account to pay for their COBRA Benefits.

The Simple Answer… Yes (With some guidelines of course).

To answer the first question.

There are no restrictions to an employee on COBRA that wants to continue contributing to their Health Savings Account. The employer is no longer responsible for their contribution but the employee can continue as they see fit.

http://www.ustreas.gov/offices/public-affairs/hsa/faq_using.shtml

Now to answer the second question.

As per the U.S. Treasury “You can only use your HSA to pay health insurance premiums if you are collecting Federal or State unemployment benefits, or you have COBRA continuation coverage through a former employer.”

Pretty Straight Forward… If you’re on unemployment or COBRA you can use your Health Savings Account to pay your premiums.

So this technically leaves open an opportunity for someone on COBRA to pay there health insurance 100% tax free.

Think about it, if your premium is $300 a month on COBRA.

You could contribute $300 to your Health Savings Account (Get the Tax Deduction) then use the Tax-Free Money to pay for your COBRA Benefits.

Not bad, for most people this is the only opportunity for you to Take Advantage of 100% Tax Free Money. Obviously talk to you accountant first because I am not one. But this poses an interesting option.

If you have any questions you can reach me at (631) 338- 9917.

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Hoosiers and Health Savings Accounts (WSJ ARTICLE)

Instead of writing an Article this week, I thought I would share with you a great Article Emailed to me that was in the Wall Street Journal written by the governor of Indiana Mitch Daniels.

Hoosiers and Health Savings Accounts
OPINION MARCH 1, 2010, 8:51 A.M. ET
An Indiana experiment that is reducing costs for the state and its employees.
By MITCH DANIELS

As Washington prepares to revisit the subject of health-care reform, perhaps some fresh experience from Middle America would be of value. When I was elected governor of Indiana five years ago, I asked that a consumer-directed health insurance option, or Health Savings Account (HSA), be added to the conventional plans then available to state employees. I thought this additional choice might work well for at least a few of my co-workers, and in the first year some 4% of us signed up for it.

In Indiana's HSA, the state deposits $2,750 per year into an account controlled by the employee, out of which he pays all his health bills. Indiana covers the premium for the plan. The intent is that participants will become more cost-conscious and careful about overpayment or overutilization.

Unused funds in the account—to date some $30 million or about $2,000 per employee and growing fast—are the worker's permanent property. For the very small number of employees (about 6% last year) who use their entire account balance, the state shares further health costs up to an out-of-pocket maximum of $8,000, after which the employee is completely
protected.

The HSA option has proven highly popular. This year, over 70% of our 30,000 Indiana state workers chose it, by far the highest in public-sector America. Due to the rejection of these plans by government unions, the average use of HSAs in the public sector across the country is just 2%.

What we, and independent health-care experts at Mercer Consulting, have found is that individually owned and directed health-care coverage has a startlingly positive effect on costs for both employees and the state. What follows is a summary of our experience:

State employees enrolled in the consumer-driven plan will save more than $8 million in 2010 compared to their coworkers in the old-fashioned preferred provider organization (PPO) alternative. In the second straight year in which we've been forced to skip salary increases, workers switching to the HSA are adding thousands of dollars to their take-home pay. (Even
if an employee had health issues and incurred the maximum out-of-pocket expenses, he would still be hundreds of dollars ahead.) HSA customers seem highly satisfied; only 3% have opted to switch back to the PPO.

The state is saving, too. In a time of severe budgetary stress, Indiana will save at least $20 million in 2010 because of our high HSA enrollment. Mercer calculates the state's total costs are being reduced by 11% solely due to the HSA option.

Most important, we are seeing significant changes in behavior, and consequently lower total costs. In 2009, for example, state workers with the HSA visited emergency rooms and physicians 67% less frequently than co-workers with traditional health care. They were much more likely to use generic drugs than those enrolled in the conventional plan, resulting in an
average lower cost per prescription of $18. They were admitted to hospitals less than half as frequently as their colleagues. Differences in health status between the groups account for part of this disparity, but consumer decision-making is, we've found, also a major factor.

Overall, participants in our new plan ran up only $65 in cost for every $100 incurred by their associates under the old coverage. Are HSA participants denying themselves needed care in order to save money? The answer, as far as the state of Indiana and Mercer Consulting can find, is no. There is no evidence HSA members are more likely to defer needed care or common-sense preventive measures such as routine physicals or mammograms.

It turns out that, when someone is spending his own money alone for routine expenses, he is far more likely to ask the questions he would ask if purchasing any other good or service: "Is there a generic version of that drug?" "Didn't I take that same test just recently?" "Where can I get the colonoscopy at the best price?"

By contrast, the prevalent model of health plans in this country in effect signals individuals they can buy health care on someone else's credit card. A fast-food meal costs most Americans more out of pocket than a visit to the doctor. What seems free will always be overconsumed, compared to the choices a normal consumer would make. Hence our plan's immense savings.

The Indiana experience confirms what common sense already tells us: A system built on "cost-plus" reimbursement (i.e., the more a physician does, the more he or she gets paid) coupled with "free" to the purchaser consumption, is a machine perfectly designed to overconsume and overspend. It will never be controlled by top-down balloon-squeezing by insurance companies or the government. There will be no meaningful cost control until we are all cost controllers in our own right.

Americans can make sound, thrifty decisions about their own health. If national policy trusted and encouraged them to do so, our skyrocketing health-care costs would decelerate.

Mr. Daniels, a Republican, is governor of Indiana.

For more Wall Street Journal Articles please visit www.WSJ.com

Its an interesting take on an idea that unfortunately the rest of the country has been slow to realize.

For more information you can contact me at 631-338-9917.

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How to structure a Wellness Program for your company to help keep your employees active and healthy.

Recently we’ve implemented a few wellness plans for some of our clients, and I’ve come to the conclusion that most business owners aren’t 100% sure what a Wellness Program actually is.

So, I figured I’d take a few moments to talk about an idea or 2 to further explain how Wellness programs work.

If your company is above 100 employees you are considered a large group and multiple factors are taken when obtaining health insurance coverage. At this size you are individually underwritten, and certain things are set in stone, the number of employees, their ages, medical histories etc.

But the one variable is… Claims History.

When an insurance company is calculating your renewal they are going to look at the amount of claims that were put through the prior year.

So, if your group is healthy and doesn’t go to the doctor very often, you will get a much cheaper renewal then a group that has very high claims.

Many people tell me “Well when a person gets sick they go to the doctor, what can I do about it?"

My answer is, nothing. If someone is sick, catches a cold, or needs an operation, they have to have one, but a persons weight, activity and eating habits have a huge impact on the persons overall well being. If you put a plan in place to help people to stop smoking or lose weight with incentives, the amount of times they go to the doctor will go down and so will the claims.

For example:

We got one of our clients employees pedometers. Now for the next month they’ll all wear it and whoever walks the most steps will get a grand prize, say a day off, and the next 4 runners up will get a half a day off.

This encourages employees to walk more then usual, helping them to burn calories, improve lung function in a low impact way.

And you know what… Claims will decrease… So the employee gets something (Better Health and a day off) and the employer gets a health bill they can live with (Because we can’t get them a free health bill which they really want).

Its important to live a healthy life and small changes and incentives can make all the differences in your employees lives and your premiums.

If you have any questions you can reach me at (631) 338- 9917.

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The Health Insurance Portability & Accountability Act (HIPAA) and what its means to you.

I’m sure at one time or another as either a business owner or an individual you’ve heard the phrase HIPAA. Most people aren’t sure what it stands for or even what it means.

Well I’m here to tell you.

HIPAA is the Health Insurance Portability & Accountability Act. It governs how personal information is handled and protects your ability to acquire and retain your medical insurance.

What HIPAA does:

• HIPAA protects your personal information with a few exceptions (Hospitals, Doctors, Insurance Companies) so you can receive care.
• Limits pre-existing conditions to help you obtain new coverage and have claims paid for
• HIPAA does not allow employers to charge extra premiums based on prior health conditions or family hist
• It also guarantees that most individuals and small businesses can renew there coverage regardless of claims or history of insured’s within the plan.

What HIPAA Does NOT do:

• HIPAA does NOT require employers to offer or pay for health coverage for employees or family coverage for their spouses and dependents;
• HIPAA does NOT guarantee health coverage for all workers;
• HIPAA does NOT control the amount an insurer may charge for coverage;
• HIPAA does NOT require group and individual (non-employment based) health plans to offer specific benefits;
• HIPAA does NOT permit people to keep the same health coverage they had in their old job when they move to a new job;
• HIPAA does NOT eliminate all use of pre-existing condition exclusions; and
• HIPAA does NOT replace the State as the primary regulator of health insurance.

For more information about HIPPA http://www.hhs.gov/ocr/privacy/.

I wanted to give a brief overview so you can better understand what HIPAA does and does not do. It was enacted in 1996 to make medical coverage more accessible while protecting the information of businesses and individuals.

If you have any questions you can reach me at (631) 338-9917.

Self Insured or Fully Insured Medical plans, What you need to know

“What’s the difference between Fully Insured and Self Insured Medical Plans?”

At some point most companies have to make a decision, do I want a Fully Insured Plan or are we willing to Self Insure the plan ourselves.

Before, we can answer that question we should go over the differences.

Fully Insured Plans:

In a Fully Insured Plan, the employer pays a per employee cost of insurance for every enrolled employee. The Insurance Company is then responsible for providing coverage for those employees, and covering claims.

Most small businesses under 200 employees are “Fully Insured”. This can be the more expensive option, but is often the cleanest. As an employer you have set a “Maximum” cost for benefits, you pay the premium and that’s it.

Self Insured Plans:

In a Self Insured Plan, the employer acts as the insurance company. So, instead of paying a premium to an insurance company, the Employer sets aside the premiums it would have paid and pays the claims directly. The company contracts with a provider to administer the plan, but the claims are the employer’s responsibility.

As companies get larger 200+ they tend to shift more toward Self Insured plans because they have the capital to pay the claims, and a large number of employees to reduce the risk of a large claim. This option can be more cost affordable for businesses but it does involve a larger number of moving parts”.

So, the question arises “What happens if there’s a huge claim on a Self Insured Plan?”

Most businesses purchase “Stop Loss Coverage”.

Stop Loss Coverage, basically picks up any claim above a certain dollar amount.

For Example:

You have Stop Loss Coverage above $100,000 and an insured puts a claim in for $150,000 because of a major procedure.

You would pay the first $100,000 and the Stop Loss would pay the $50,000 above.

This is a great way for businesses to protect themselves from huge claims while still taking advantage of the possible upside of a Self Insured Plan.

The majority of the time, businesses are shocked to see how much they pay in premiums and how little the insurance companies actually pay out in claims. The best way to see what type of plan is right for your company is to contact a Health Insurance Professional and have them review your claims history and premiums.

If you have any questions you can reach me at (631) 338-9917.

What is a Health Reimbursement Account (H.R.A), and how is it different then a Health Savings Account (H.S.A.)?

A few of my clients recently asked me, “What’s a Health Reimbursement Account?” and “Should I have one?”

At this point you’re probably starting to get sick of all these acronyms, H.S.A, F.S.A, H.R.A etc…

A Health Reimbursement Account is an account maintained by an employer that reimburses employees for qualified medical expenses.

Your probably saying to yourself, “Isn’t that what an Health Savings Account does?”.

Yes & No

There are some actual differences between the two, the first being how their funded.

Health Reimbursement Accounts don’t need to be funded in advance, but Health Savings Accounts do. An employer can set a maximum amount they will reimburse their employees every year (Maximum for families is $6,150, & Individuals is $3,050 as of 2010) and pay the benefits as they come in (So there not forced to put aside funds in advance). Eligible reimbursements for example would be co-pays, co-insurance, deductibles, etc.

So in the case of a Health Reimbursement Account, the business gets the deduction and the employee gets the benefit. Where as in a Health Savings Account the employee has to make the contribution but they get the deduction.

The next difference is ownership; since the accounts don’t need to be pre-funded they are not owned by the employee. So, if an employee leaves a company he will no longer have access to their H.R.A account. This should not pose a problem because the account is not funded anyway. Where as in a Health Savings Account, the employee has set aside their own money pretax, so they own the account and they can take it with them wherever they go.

So, when comparing the two there is significant upside to both accounts:

H.R.A’s offer more Contribution Flexibility, Tax Deductions to the Business, and they allow the employee to not have to make any contributions.

H.S.A’s offer a Tax Deduction to the employee, Portability (They can take it with them if they leave their employer) but they must be funded by the employee.

Either way, both accounts help employees to pay for some of the expenses they’ll incur that are not covered by their medical plan. It simply depends on what option the employer decides to offer there employees and how its structured.

If you have any questions you can reach me at 631-338-9917.

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Benefits Question of the week:

As a Business owner or Benefits Administrator, what is your biggest challenge when handling your company's Benefits?

What changes have been made to COBRA and how do they benefit me?

Ever heard the phrase “You don’t know what you got till it’s gone”?

This phrase has never rung more true, then when an employee leaves their employer.

When an employee leaves their employer not only are they giving up their position and income. They’re also giving up their benefits (i.e. Medical, Dental, Vision etc.).

That’s where COBRA comes in; COBRA is the “Consolidated Omnibus Reconciliation Act” and allows a prior employee to maintain medical coverage after they have severed employment. Regardless of whether the employee left the company voluntary or was forced out, COBRA allows them to keep their benefits for up to 18 months, in the State of New York it has been amended to 36 months as of Nov 2009.

Any employer MUST notify their employees that they’re eligible for continued coverage under COBRA within 60 Days, failure to do so can lead to legal ramifications. Employers should make sure their compliant with COBRA laws; this can be accomplished through the use of an ERISA attorney to ensure all proper documentation is being communicated in a timely manner to avoid conflicts.

Most recently the “COBRA Continuation Coverage Assistance Under ASSA” has be updated. For employees that were forced out of their employment, this Act has provided “Health Insurance Premium Subsidy”.

Under this Act “eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. To qualify, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee's employment. The involuntary termination must occur during the period that began September 1, 2008 and ends on February 28, 2010. The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months.

For more information: http://www.dol.gov/ebsa/cobra.html

COBRA is a valuable tool for employers and employees to maintain coverage for themselves and their families.

If you have any questions, I’d be more than helpful to answer them (631) 338-9917.

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What’s the difference between a Health Savings Account (HSA) and a Flexible Spending Account (FSA)?

This question actually came up this morning at a Networking Function I attended and most of the attendees were surprised with the answer.

For those of you that read my prior postings, you would know that a Health Savings Account is money that you can set aside “Pre Tax” to pay for medical expenses on a tax favored basis!

Sounds pretty good huh? You get to pay for Drugs, exams and hospitalization Pre Tax!

Here’s an example:

You have a $3000 Deductible on your Health Insurance Plan. If you pay for that with after tax funds and you’re in the 25% tax bracket, you would have had to make $4,000 before taxes, paid taxes of $1,000, and then used the remaining $3,000 to pay for your medical bills.

If you used a Health Savings Account, you would have set aside $3,000 Pre Tax and it would have all went toward your medical benefits. So, the other $1,000 you would have had to set aside originally, you would pay taxes on ($250) and you would have pocketed the remaining $750.

So, if you in the 25% Tax Bracket you would save roughly $250 per $1000 by using Tax Advantaged funds.

After looking at these numbers, you clearly make out much better using a Health Savings Account.

Then you may ask, “What’s a Flexible Spending Account?”

Well, simply put they are almost identical to Health Savings Accounts with one major drawback.

In a Flexible Spending Account you CAN NOT carry over remaining balances at the end of the year!

This is considered a use it or lose it benefit. This is why it becomes so difficult to use them. Insured’s don’t want to save too much, because if you don’t use it for health care by the end of the year, you lose the balance, but if you save too little you don’t maximize your benefit! This creates a major budgeting issue!

So, why would I use a Flexible Spending Account?

Health Savings Accounts MUST be paired with a High Deductible Health Insurance Plan. So, if you have a traditional plan a Flexible Spending Account is your only option.

So, in conclusion Health Savings Accounts have a better benefit (The balances carries over year after year) because there’s greater exposure that you have to meet a high deductible at some point.

Flexible Spending Accounts offer a similar benefit (Without the carry over) to people who have a traditional health insurance plan.

So what should I do?

If you have an Health Savings Account:
Try to save Pre Tax your Deductible every year. Its Pre Tax and forced savings, it’ll benefit you in the long run.

If you have an Flexible Spending Account on a Traditional Plan:
Look at how much you spent on medical expenses the year prior, and set only that amount aside for the up and coming year. This way you’ll still take advantage of the benefit without the threat of over contribution. You should also spend the remaining balance by the end of the year (ie. Buy prescriptions, checkups etc. before the year ends).

If you have any questions you can always reach me at 631-338-9917.

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Should I hire someone to manage my benefits?

The challenge with putting a benefits plan together is twofold.

First: Do you have anyone that can devote the necessary time and effort into crafting the proper plan?

Second: Do you have someone that can devote the necessary time to maintain that plan and is that the most cost effective option?

Let me answer the first question, many times CFO’s, CEO’s, and HR people are busy handling multiple problems and don’t have the time necessary to craft the right plan.

With an ever changing landscape of challenges, is your plan current?

"Have there been changes to the census (new employees, new families etc)?", "Have there been coverage changes (Benefit Changes, Deductible Changes)?" or "Has a provider changed (HIP & GHI have become Emblem in NY)?"

These are just a few of the questions that need to be asked, but with proper leg work can be answered.

The more complex questions become “how many plans do we offer?”, “Do we offer voluntary benefits?”, “How often do we review our claims history?”, “Are we compliant with ERISA?”.

This is why its so important to outsource your benefits to someone qualified that can devote the necessary time, that ONLY focuses on employee benefits.

This ties right into the second question, do you have someone who can service and maintain your benefits?

This usually falls into two categories, for larger companies a Human Resources Person and for smaller companies an office manager.

A Human Resources Person is more equipped to handle any situations that might arise but as companies get larger, the question becomes “Do we have sufficient HR Representatives handle the activity?” and "Who can they turn to if they have a problem?"

The challenge that office managers face, is they have multiple responsibilities, so benefits are typically not a priority. This can create a “fend for yourself” environment which breeds resentment by employees, where problems aren’t addressed fast enough and employees have to figure things out on their own.

Either way both situations aren’t ideal, this is why it’s valuable to have a benefits company not just handling your plan implementation but also your maintenance.

This way the office manager can manage the office!

If you have any questions you can always reach me at 631-338-9917.

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Should my company have an employee advocacy program to help my employees with their medical benefits?

The majority of the time that you speak with business owners they’ll tell you “I don’t handle the benefits”. It’s usually the CFO, Office Manager, or HR Representative. The challenge they face is benefits are PART OF THEIR JOB, not THEIR ENTIRE JOB.

This causes quite the dilemma because benefit management is an around the clock job. Most of the aforementioned people can handle new employee paperwork or answering a simple question about a Co-Payment.

But what about the tough questions that happen everyday?

What about questions like “Why was my claim rejected?”, “Is this procedure covered?”, or “How do I appeal this bill?”

That’s where they usually refer the employee to the insurance company. Now let me ask you a question, Who’s looking out for your employees best interests? Do you think if your employee calls the insurance company they can actually get someone on the phone, nevertheless get the problem resolved in a timely manner?

We live in a world of answering machines, when a last resort is an actual person.

That’s why a business should have an employee advocacy program. Whenever you’re dealing with insurance companies it can be confusing, frustrating and difficult. An employee advocacy program provides a central administration point to help employees manage problematic claims issues. It serves as the personal benefits advocate for every employee to make sure they receive all of the benefits you've intended to give them. Employees simply make one phone call and an employee advocate helps them solve any issues directly with their provider.

This results in more productive work time and fewer distractions for everyone involved!

Who's advocating for you and your employees?

If you have any questions you can always reach me at 631-338-9917.

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What’s a Health Saving Account and why should I consider one?

Most business owners that have offered their employees High Deductible Health Insurance Plans also offer their employees “Health Saving Accounts”. Unfortunately, the majority of employees don’t utilize this potion of their health insurance plan. This has to do with a lack of information on what a “Health Savings Account” is and how it works.

A Health Savings Account is an account that allows you to save money to put toward future Medical Expenses. Think of it as saving for a rainy day to cover medical bills, and costly expenses (Braces, Laser Eye Vision etc). An employee or an employer can put aside money into an account which gives the employee a tax deduction and savings to put toward qualified medical expenses. The plan allows for money to be carried over year after year helping employees meet large expenses or cover routine exams etc.

What makes the plan so interesting is it can allow you to take a portion of what you would have normally paid in premium and save the difference. Almost giving yourself a “Bonus” for keeping yourself healthy.

Let me give you an example:

Option 1:
“Traditional” Individual Plan
Monthly Cost-$400.00
Total Cost- $400.00

Option 2:
“High Deductible Plan $2,500 Deductible w/ HSA account” Individual Plan
Monthly Cost-$200.00
Saving the difference $200.00 in an HSA account
Total Cost- $400.00

After a year the person with Option 2 has set aside $2400 (Not counting interest) and can now use that account to meet his medical expenses. If the situation arises that he had a quiet year medically, his account balance would carry over to the next year.

So in both situations, the monthly expense is the same $400.00 but with an HSA account you have the opportunity to have money set aside for future medical expenses.

Any time you can set aside money for your benefit, and get a tax deduction in the process, you should jump at the chance. Force yourself to save for the future and you’ll be better off in the long run.

If you have any questions you can always reach me at 631-338-9917.

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What do out of network benefits really mean?

I just recently ran into a few situations, where clients were concerned about “Out of Network benefits”. Typically in the health insurance world there are 2 types of coverages, “In Network Only Plans” (HMO’s, and EPO’s) and “In and Out of Network Plans” (PPO’s, and POS).

Now the question I hear the most often is, “How do out of Network benefits work?”

Typically, aside from the deductible you have to meet, there is a UCR %. What UCR means is “Usual, Customary and Reasonable”, this simply means the insurance company calculates the reasonable “cost” of the procedure and picks up that %.

It does NOT mean they will pick up that % of the total cost.

Let me give you an example.

You have a $25,000 procedure done by your doctor, your UCR % is 80%, and the insurance company thinks the reasonable cost of the procedure is $20,000.

This means they WILL PAY 80% of the reasonable $20,000 which is $16,000.

Leaving YOU with a total cost of $25,000-$16,000= $9,000.

It doesn’t mean your doctor overcharged you for a procedure, it’s simply based on how insurance companies calculate reasonable costs.

The other misconception many client have is “What if I have no out of Network benefits and someone gets hurt out of state? (i.e. on vacation).”

The simple answer… YOU’RE COVERED!

All insurance plans have to cover you regardless of whether your In Network or NOT in EMERGENCY SITUATIONS!

So, you may not be able to get a check up Out of Network but you will be covered for hospitalization!

Make sure to ask questions and see if out of network benefits are worth the additional cost!

If you have any questions you can always reach me at 631-338-9917.

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Should I consider a high deductible health plan as an option?

More often that not, employers want to offer “Comprehensive” medical benefits. What that usually means to employers is a “traditional” plan where everything is covered with low deductibles. Unfortunately, a traditional plan might not make sense to both the insured and the employer.

WHY?

Because people want insurance to protect the “WHAT IF” but they rarely go to the doctor. Last time I checked it was something like 92% of all health insurance claims come from 8% of the insureds.

WOW. I mean do the math, that means the reverse must be true. 92% of Insured’s only account for roughly 8% of claims.

Usually large deductible plans scare employees and employers because it’s different, its not what their used to. But overall it can work out better for both parties given how often they see doctors.

Here’s a quick example:

Option 1: A Traditional Plan

Monthly cost $1100/ Doctor Co Pays $30

The cost per year is $13,200 Without Co-Pays


Option 2: A High Deductible Plan

Monthly Cost $900/ Family Deductible $5000

The MAX cost for insurance is $10,800 + the deductible of $5000 for a TOTAL of $15,800.

So with a high deductible plan you would pay less a month but be responsible for the first $5000. It becomes a matter of preference, and how often you go to the doctor.

You can end up paying a higher amount upfront with a high deductible plan when you count the deductible but it could benefit you in the long run if you see the doctor very often. You should always meet with someone before you make a change because considering all options can help make you a better educated consumer.

REMEMBER KNOWLEDGE IS POWER!

If you have any questions you can always reach me at 631-338-9917.

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Are your employees well?

Have you ever heard the phrase “It’s better to be proactive, then reactive?” I’ve spent a lot of time trying to use this in both my clients and my life. Too often we as people wait till there is a problem before making a concerned effort to fix it. This is the same way our doctors and hospitals treat our patients, they fix the problem once there is one. They say to themselves, “If there’s not a symptom, there’s not a problem”.

Could you imagine if your mechanic told you “Your cars running fine, bring it in to me when it breaks down and I’ll fix it for you”. You would say he’s insane but we do that with our health care everyday. Unfortunately this is how most Medical plans work, “There’s no heart problem till a heart attack”, “No eating problem till there’s diabetes” etc.

This is another place where EMPLOYERS DROP THE BALL.

As a business, you can offer a wellness program to go along with your medical plan to keep your employees healthy and claim free.

Remember the equation: Health claims decrease = Health Insurance Renewals cheaper

You can customize a plan that makes sense for your employees that covers nutrition, smoking, weight loss etc.

Remember, it’s better to be proactive then reactive!

If you have any questions you can always reach me at 631-338-9917.

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Employees see in dollars NOT percentages

When you’re a business owner for the most part fixed costs are good, unfortunately the way healthcare is that part of your business is anything but fixed. As time goes on people get married, divorced, and have children, and your plan becomes more and more costly but your employees don’t always see the value.

Repeat after me, “People see in dollars, NOT percentages”.

I used to work with an investment advisor, who told me a story once. When he was starting out, he was evaluating client’s portfolio and asked the woman (In a down market) if she would be happy with a 10% rate of return on her $300,000 investment. The woman thought for a second and said to him “That’s the best you can do?” The advisor was confused, as no one had ever given him that response before. He then asked the woman “would you be happy if I was able to earn you $30,000 a year in interest?” The woman almost did a double take and said “Are you kidding me? That would be incredible”. The morale of the story is… PEOPLE SEE IN DOLLARS NOT PERCENTAGES.

So, how does this relate to Employee Benefits? If you’re a business owner and your giving your employees a fixed dollar amount toward their benefits employee can quantify that and will appreciate it. Your employee now becomes aware of the TOTAL cost and will be thankful for what you offer them. Instead of them saying “I have to pay $400 toward benefits” like there getting a discount, there actually saying “My employer paid $400 toward my benefits and I have to pay the other $400”.

Sometimes employees are just handed the bill for there benefits, and they have NO IDEA how much you contribute for them. Let them know, they’ll tend to appreciate you more.

Also, when your renewal comes in and its more expensive, you can say to them “I decided to contribute $420 this year” and you look like a hero.

Where this also helps the businesses save money is you can offer multiple plans but keep your benefit cost fixed.

Here’s an example below:

Option 1 Plan Cost: $1200
Option 2 Plan Cost: $1000
Option 3 Plan Cost: $800

If you decide to pick up 50%, you would pay $400 for option 3, $500 for option 2 and $600 for option 1. But if you offer a fixed amount, you allow your employee to pick which plan best fits there needs, WHILE THINKING OF COST.

Some clients will prefer the best option (Option 1) but they will be willing to pay the difference because the improved coverage means something to them, they will be grateful that they have the choice. Where as someone who doesn’t care about benefits or a drug card (Maybe a 25 year old) doesn’t want to pay more and will be thankful they also have a choice.

Remember… “People see in dollars NOT percentages”.

If you have any questions you can always reach me at 631-338-9917.

Why pay for one plan, when you can have two or three…

The startling thing that I’ve encountered with businesses is they only offer one medical plan.

Why do you think that’s the case? Because they didn’t no better!

I bet if I took out 20 business owners and offered to buy them ice cream the majority of them would say yes… but what if I offered to buy them ice cream with the catch that they can only order coffee ice cream with no toppings? Nothing against coffee ice cream but I’m sure I would get more no’s then when I gave them options… Do you see what I’m getting at? People tend to have different needs, and they tend to value different things. So why only offer one medical plan, when you can have two or three for the same cost?

Most employees will be thrilled that you gave them choices. Maybe they wanted a better drug card, or an improved network. Maybe the most important thing to them is paying the least amount possible. When you have employees from different walks of life they have different needs. Does a 25 year old go to the doctor as often as a 60 year old? NO, at least not usually but let them choose!

THE BEST PART IS… THIS DOESN’T COST YOU MORE MONEY!!! THIS IS A WAY TO OFFER MORE DIVERSE BENEFITS TO YOUR EMPLOYEES WITHOUT ANY ADDITIONAL COST!

IF YOUR BROKER DIDN’T MENTION THIS TO YOU ALREADY, YOU MIGHT WANT TO ASK HIM WHY!

If you have any questions you can always reach me at 631-338-9917.

Benchmarking, and why it’s important for your business

Every Business Owner regardless of profession asks me the same question…

What is everyone else doing?

See that’s the thing, no one wants to be left out, left behind. Business Owners like to use their peers as a gauge to see how well their doing. How long would it take for the Yankees to make a big off-season signing if the Redsox made a big splash the day before? I’m sure it wouldn’t take too long.

Whether it’s sales, promotion, advertising, and especially their benefits, Businesses want to stay with the pack. The problem is too often the information they receive is clouded. Most businesses, believe it or not don’t know how many people are on their Medical Plan, what the coverages are, or what their being charged. They can pay too much for benefits, carry additional coverages their employees don’t need or want, or simple hurt themselves by not asking the right questions.

That's why benchmarking can be so valuable. My company collects data from every business we work with, big and small. Whether or not we get the client, we take down their information so we can help advise future clients on what’s going on in the benefits world.

Here’s just some of the information you could gain.

• Medical Surveys – Would it shock you to know 50% of employers don’t survey their employees? How do you know what your employees need if you never ask them. You may be paying for benefits they don’t need nor use.

• Eligibility Audits – Over 65% of businesses we interviewed said they never get updates on who’s eligible for benefits. Things constantly change, and that applies to your employees. They get married, divorced; they retire, have children, and even pass away. But the majority of businesses don’t take a moment to even see if there have been any changes in their employee’s lives. It could simply be that your employees are actually unaware that they have to inform you of the change.

BECOME EDUCATED, KNOWLEDGE IS POWER, AND IN THIS CASE, MONEY! JUST BECAUSE YOUR COMFORTABLE DOESN'T MEAN YOUR IN THE BEST POSITION POSSIBLE.

If you have any questions you can always reach me at 631-338-9917.

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