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The Transitional Reinsurance Fee: Mitigating Risk Could Be Pricey

The Transitional Reinsurance Fee: Mitigating Risk Could Be Pricey

August 29, 2012

Authored by: benefitsbclp

Employers sponsoring self-funded group health care plans are likely familiar with the Patient-Centered Outcomes Research Fees which will be imposed beginning in July 2014 as a result of the health care reform bill.  The fees — $1 per covered life for the first year, and $2 per covered life thereafter — can add up for plans.  These fees may be dwarfed, however, by another health care reform fee-the Transitional Reinsurance Fee.

What The Transitional Reinsurance Fee, which applies to both insured and self-funded group health plans, has been somewhat of a sleeper in benefits news.  Although final regulations were issued March 23, 2012, the annual amount of this per capita fee is still unknown.  However, preliminary projections indicate that the annual fee could be at least $60, and perhaps as high as $105, per covered life (covered employees and their dependents), making the Patient-Centered Outcomes Research Fee seem like a pittance.

Why The Transitional Reinsurance Fee is intended to stabilize premiums for high-risk individual health insurance policy-holders.  Reinsurance payments will be distributed to health insurance issuers to offset high costs for covering high-risk populations.  The program will operate from 2014 to 2016, with the first quarterly payments due January 15, 2014.

Who Insurers are responsible for the fees for insured individual and group health plans, whereas “third-party administrators” — not defined in the final regulations — must remit payments on behalf of self-funded group health plans and their sponsors, which will bear the financial responsibility for the Transitional

Considering Whether to Play or Pay: Taking Into Account PPACA’s New Research Fees

Now that the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (“PPACA”) has been upheld by the U.S. Supreme Court, employers need to consider whether to “play or pay”.  Among the many factors an employer should consider in making its determination are (1) the transitional reinsurance fee (which we will discuss in an upcoming post) and (2) the new annual fee intended to fund clinical effectiveness research.

Employers with fully insured plans should note that even though responsibility for reporting and paying the annual fee rests with the health insurance issuers, such expense will likely be passed along by the issuer to policyholders in the form of increased premiums.

Covered Plans

Employers who sponsor one or more of the following health plans on a self-funded basis will be subject to the annual fee based on the average number of covered lives:

  • Major medical plans
  • Retiree-only plans (even though such plans are not subject to PPACA mandates)
  • Health reimbursement arrangements
  • Health flexible spending accounts (unless an excepted benefit under HIPAA)
  • Dental and vision plans (other than those offering limited scope dental or vision benefits, as determined under HIPAA)
  • Employee assistance programs, disease-management programs, or wellness programs that provide significant benefits in the nature of medical care or treatment

 

 A covered plan is considered self-funded if any portion of its coverage is provided through a means other than an insurance policy, including funding through a voluntary employees’

Wellness is Alive & Well in the 11th Circuit

Wellness is Alive & Well in the 11th Circuit

August 23, 2012

Authored by: benefitsbclp

On Monday, the Eleventh Circuit Court of Appeals ruled in Seff v. Broward County that Broward County, Florida’s wellness program qualified for the Americans with Disabilities Act (ADA) bona fide benefit plan safe harbor and therefore was not discriminatory under the ADA.  This is a helpful ruling for employers maintaining or looking to implement wellness programs.

Background.  The ADA generally provides that an employer can only require medical examinations of its employees if they are job-related and consistent with business necessity.  However, the ADA also says that it is not intended to prohibit an employer “from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law.”

The Case. In the case, Broward had a wellness program with biometric screening and an online health risk assessment.  Employees who were determined to have asthma, hypertension, diabetes, congestive heart failure, or kidney disease were offered the opportunity to participate in a disease management program, which gave them the chance to receive waivers of co-payments for some medications.  If an employee chose not to participate in the wellness program at all, he or she was charged $20 on each bi-weekly paycheck.

The issue in the case was whether the wellness program was part of the Broward County’s health plan, within the meaning of the ADA safe harbor.  If it did not meet the safe harbor, it could

DoL Clarifies Fee Disclosures for Brokerage Windows

DoL Clarifies Fee Disclosures for Brokerage Windows

August 21, 2012

Authored by: benefitsbclp

On May 7, 2012 the DOL issued Field Assistance Bulletin 2012-02, consisting of 38 questions and answers intended to clarify some of the issues raised since the issuance on October 20, 2010 of the final participant fee disclosure regulations (as discussed in our prior post here).  Q&A 30 included language that would have required plan administrators to treat a brokerage window or a broad-based platform of funds as a designated investment alternative, subject to the fee disclosure requirements if a “significant number” of participants invested in the same alternative.  This position took plan sponsors and practitioners by surprise because it was not consistent with prior interpretations of the regulations.  In addition, many commentators noted that the DOL should have announced this position, which was viewed as a significant change, in proposed rules with the opportunity for review and comment, rather than in a Field Assistance Bulletin.

On July 30, 2012, the DOL issued Field Assistance Bulletin 2012-02R, which deleted Q&A 30 and replaced it with Q&A 39.  The DOL clarified that a plan is not required to have designated investment alternatives (DIAs); there is no required number of DIAs.  An investment alternative is a DIA only if it is specifically designated as such.  A plan sponsor can designate no DIAs if it chooses.  As a result, fee disclosures are not required for brokerage windows or broad-based platforms unless they are specifically identified as designated investment alternatives.

Although new Q&A 39 provides some relief, the

Massachusetts Tries to Bend the Cost Curve: A Model for PPACA 2?

Massachusetts Tries to Bend the Cost Curve: A Model for PPACA 2?

August 16, 2012

Authored by: benefitsbclp

While the Patient Protection and Affordable Care Act is not a carbon copy of the original Massachusetts health care reform law, there are many similarities.  One similarity is that critics of both laws have argued at different times that they don’t  do enough to “bend the cost curve” on health care.

(As an aside, we always thought the term “health care reform” was a bit of a misnomer for PPACA, as it is really a health insurance reform and tax bill.  Interestingly, the President agrees.  On the day he signed the law, he said, “today…health insurance reform becomes the law in the United States of America.”)

To address this issue, Massachusetts recently passed Bill S. 2400, which is designed to reign in the cost of health care in the Commonwealth.  As you might expect, the bill is a long, complicated piece of legislation (a briefer summary is here).  The bottom line goal of the legislation is to control the health care cost growth rate.  It is designed to limit the annual increases in the cost of health care in Massachusetts to the increase in the Gross State Product (GSP) of Massachusetts from 2013 to 2017.  After that, the increase would be between GSP and GSP – 0.5%.

When the bill was passed, we asked on Twitter whether this could be a model for a “PPACA 2.”   If it is, a writer for the Health Policy

Single-Employer Defined Benefit Pension Plans: Minimum Funding Requirements Revised Again

Among many other things, the MOVING AHEAD FOR PROGRESS IN THE TWENTY-FIRST CENTURY ACT (“MAP – 21”), which became law last month, changes the minimum funding rules for single-employer defined benefit pension plans. Your actuary can help to determine the effect of  these changes on your company in the short and long run.

Background. Since 2001, the IRS has published rates for determining minimum contributions for each month.  These rates are based on the prior month’s current short-, medium- and long-term corporate bond yields.  Until enactment of MAP-21, a plan could either apply the current month’s full yield curve or use a smoothing technique that blends the rates published over the prior 24 months. In the current low interest rate environment, these rules require very high minimum contributions. This has been mitigated so far by means of short-term patches.

What MAP-21 does. MAP-21 gives longer-term relief by permitting use of rates based on 25-year averaging. There is no change in the plan sponsor’s overall funding obligation, but now the obligation can be spread over a longer time period.

How the new rules work. A plan can still use the IRS’ current yield curve with no averaging.  For plans that use the averaged rates, MAP-21 creates a collar for the minimum and maximum rate in each range (short, medium and long), based on a 25-year average of the IRS published rates, as follows:

2012 90%-110%

2013 85%-115%

2014 80%-120%

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COBRA and STD/FMLA – The Appeal

COBRA and STD/FMLA – The Appeal

August 9, 2012

Authored by: benefitsbclp

As we near the first anniversary of benefitsbclp.com, it is a good time to reflect on the past, such as one of our first posts on the importance of clear eligibility terms in a self-funded health plan.  This is a particularly timely reflection because the case discussed on that post was just upheld by the Sixth Circuit Court of Appeals in an unpublished opinion.

For those unfamiliar, in the case, an employee who was participating in a self-funded medical plan went out on FMLA leave.  When that leave expired, she did not return to work and the employer put her on short-term disability, but continued to allow her to be eligible for the medical plan.  After her short-term disability period expired, the employer offered her COBRA, which she elected.

However, the terms of the medical plan provided that eligible employees were those regularly scheduled to work a minimum of 40 hours per week with an express exception only for FMLA leaves.  When the stop-loss carrier inquired about her eligibility, the employer said it had a “corporate practice” of continuing to allow employees on short-term disability to be covered under the plan.  The stop loss carrier, however, had only committed to provide its coverage for claims that were covered under the terms of the self-funded medical plan.  In arriving at its decision, the court narrowly construed the medical plan’s eligibility provisions.  (A few additional details are noted in the prior post.)

As we noted in our prior

Eighth Circuit Finds No Abuse of Discretion in Administrator’s Termination of Benefits and Raises Questions Concerning Proper Standard of Review Upon Allegations of “Procedural Irregularities”

 In a decision released July 24, 2012, the Eight Circuit affirmed a lower court judgment that a plan administrator committed no abuse of discretion when it terminated an employee’s long-term disability benefits. The case, styled Wade v. Aetna Life Ins. Co., No. 11-3295 (8th Cir. July 24, 2012), involved a Quest Diagnostics, Inc. employee’s challenge to Aetna’s termination of her benefits despite a previous, contrary decision from the Social Security Administration (SSA), coupled with allegations of “serious procedural irregularities.” 

In its decision, the 8th Circuit began by concluding that the district court had reviewed the termination decision under the correct “abuse-of-discretion” standard. Under ERISA, a court’s review of a plan administrator’s denial of benefits considers whether the benefit plan gives the administrator the discretion to determine eligibility for benefits. Here, the plan unequivocally granted Aetna this discretionary authority. Nevertheless, Wade sought de novo review of Aetna’s termination decision by alleging that Aetna had committed “serious procedural irregularities,” which included Aetna’s failure to provide the plaintiff’s attorney with the operative plan documents for more than two years. Under plaintiff’s desired de novo review, the district court would independently examine the termination of benefits without any deference to Aetna’s previous decision.

Citing the district court’s opinion below, the 8th Circuit observed that the irregularities all took place after the decision to terminate the plaintiff’s long-term disability benefits, as well as the appeal of that decision. The plaintiff had failed to offer any explanation how these irregularities could have affected the termination decision

The True Cost of Paying Instead of Playing

The True Cost of Paying Instead of Playing

August 2, 2012

Authored by: benefitsbclp

A recent study by Truven Health Analytics attempts to model the employer and employee cost impact of various strategies for dealing with PPACA’s “play or pay” employer mandates/penalties.  The study is notable primarily for two reasons. First, it attempts to take into account the employee, as well as the employer, cost associated with each strategy.

The report essentially concludes that any cost savings an employer may receive will result in a precipitous increase in costs to employees.  In effect, Truven is saying that the balance between employer and employee is a zero-sum game (or nearly so): there is no way for an employer to save money that does not result in a precipitous increase in employees’ cost.  Furthermore, if an employer attempts to make employees whole for the cost, then it will actually end up costing the employer more than providing health coverage, Truven concludes.

Perhaps more importantly, however, it looks beyond the penalties and costs of health coverage in attempting to quantify the employer cost and also attempts to quantify both the impact on an employer’s other programs (such as workers compensation and short- and long-term disability) and the impact on employee productivity (such as through increased absenteeism).  The report is a good summary, but is short on details on how the researchers determine the costs of these collateral impacts.

Even so, it is worth considering whether, and how, the lack of employer control over health insurance could have an impact in these collateral areas. 

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