Friday, August 29, 2014

AHIP: 2014 brought significant changes in plan choices and cost-sharing options

A wide range of plan choices and cost-sharing options was a vital part of 2014’s initial open enrollment under the Patient Protection and Affordable Care Act (P.L. 111-148; ACA), according to an issue brief just issued by America’s Health Insurance Plans (AHIP). From the four plan categories available, bronze, silver, gold, and platinum, 65% of the eight million individuals who selected a plan chose a silver plan. Silver plans averaged $5,730 for out-of-pocket expenses nationwide, while platinum plans, which were chosen by only five percent of individuals, had an average out-of-pocket limit of $1,855. AHIP adds that many plans have now set their out-of-pocket limits well below required levels. 

Improvements in cost-sharing. Under the ACA, all health plans in the individual and group market have maximum out-of-pocket limits. Before these annual limits on cost-sharing went into effect in 2014 ($6,350 for individuals and $12,700 for families, to be increased annually), approximately 12% of individuals with employer-sponsored health plans had no annual limits on cost-sharing, and out-of-pocket spending for prescription drugs often did not count toward the limit for those whose plans provide a cost-sharing limit.

 Starting in 2014, the ACA provided another subsidy, besides the premium subsidies for those with incomes between 100% and 400% of the federal poverty level (FPL), to further reduce cost sharing for those with incomes between 100% and 250% of the FPL (for individuals, from $11,670 to $29,175 for 2014). The subsidy comes in the form of reduced cost-sharing plans, which, AHIP advises, are based on the standard silver plans with a 70% actuarial value.
The reduced cost-sharing plans have lower maximum out-of-pocket limits, co-payments, coinsurance, and deductibles. Individuals would be assigned to one of three silver plans based on their income. The average plan for those with the lowest income range ($11,670 to $17,505) had an actuarial value of 94%, with an average out-of-pocket maximum of $1,107.

AHIP says that every major patient organization and consumer group supported the ACA’s annual limit on cost-sharing, including the American Cancer Society Cancer Action Network, the American Heart Association, Georgetown University’s Health Policy Institute, and the Center on Budget and Policy Priorities. 

Other ACA provisions.  The issue brief summarizes other basic ACA provisions, such as the fact that the law requires all health plans in the individual and small group market to cover essential health benefits (EHB), and explains that states can select among several federally-designated “benchmark” plan options that form the foundation of the EHB package. Further, prescription drugs must be covered in the individual and small group markets, and, under the EHB requirements, the breadth of that coverage is based on the state’s benchmark plan.

A state’s benchmark plan is based on popular private sector group options available in the marketplace. Finally, AHIP states that health plans subject to the EHB requirements generally need an actuarial value of at least 60%, and it quotes a Health Affairs study that found 51% of those enrolled in the individual market prior to the implementation of the ACA had plans with a value below that (AHIP Issue Brief, Patient Cost-Sharing Under the Affordable Care Act,

Wednesday, August 27, 2014

Post-Hobby Lobby: Changes to rules for contraception coverage issued

The Department of Health and Human Services (HHS), Department of Labor (DOL), and Treasury have responded to two recent Supreme Court rulings by issuing interim final and identical proposed regulations allowing an alternative to the use of EBSA Form 700. They are also issuing proposed regulations that would extend the current religious employer accommodation for nonprofits to certain closely held for-profit entities. The final interim regulations regarding Form 700 are effective on August 27, 2014.

Background. On June 30, 2014, the Supreme Court ruled in Burwell v. Hobby Lobby Stores, Inc. that, under the Religious Freedom Restoration Act of 1993 (RFRA), the requirement to provide contraceptive coverage could not be applied to the closely held for-profit corporations before the Court because their owners had religious objections to providing such coverage, and because the government’s goal of guaranteeing coverage for contraceptive methods without cost-sharing could be achieved in a less restrictive manner by offering such closely held for-profit entities the accommodation the government already provided to religious nonprofit organizations with religious objections to contraceptive coverage.

On July 3, 2014, the Supreme Court issued an interim order in connection with an application for an injunction pending appeal in Wheaton College v. Burwell in which the plaintiff challenged under the RFRA the requirement that an eligible organization invoking the accommodation send EBSA Form 700 to the insurance issuer or third-party administrator.

Alternative for EBSA Form 700. The government has provided an alternative process in the interim final regulations (and identical proposed regulations) which provides that an organization eligible for the religious employer accommodation may notify HHS in writing of its religious objection to coverage of all or a subset of contraceptive services.

The notice must include the name of the eligible organization and the basis on which it qualifies for an accommodation; its objection based on sincerely held religious beliefs to providing coverage of some or all contraceptive services (including an identification of the subset of contraceptive services to which coverage the eligible organization objects, if applicable); the plan name and type (i.e., whether it is a student health insurance plan or a church plan); and the name and contact information for any of the plan’s third-party administrators and health insurance issuers. A model notice to HHS that eligible organizations may, but are not required to, use is available at:

Monday, August 25, 2014

Will cost hikes force cuts in benefits for spouse and kids?

Even if both Mom and Dad work for an employer that offers health insurance, many families find it more economical to choose the "employee+family" option on one employer's plan. But, according to recent survey results from Towers Watson, that may be changing.

An expected four percent increase in 2015 health care costs for active employees (after plan design changes), is causing many employers to rethink some plan provisions, including company subsidies for spouses and dependents, according to Towers Watson, using results from the 2014 Towers Watson Health Care Changes Ahead Survey. A 5.2% growth rate is anticipated where no adjustment will be made, putting absolute cost per person for health care benefits at an all-time high.

The good news for employees is that despite this cost trend, most (83%) employers consider health benefits an important element of their employee value proposition, and plan to continue subsidizing and managing them for both full-time and part-time active employees, the survey shows. Three out of four employers (77%) said they are not at all confident public exchanges will provide a viable alternative for their active full-time employees in 2015 or 2016.

However, for 2016 and 2017, a third (33%) of employers are considering significantly reducing company subsidies for spouses and dependents; 10% have already implemented such reductions, and nine percent intend to do so in 2015. In addition, 26% said they are considering spouse exclusions or surcharges if coverage is available elsewhere; 30% have that tactic in place now, and another seven percent expect to add it in 2015.

Cadillac tax engages CEOs, CFOs. Although it doesn’t go into effect until 2018, the so-called Cadillac tax is of particular concern on the cost front for employers. The Cadillac tax is the Patient Protection and Affordable Care Act’s (P.L. 111-148; ACA’s) non-deductible excise tax on the value of employer-sponsored health programs that exceed an aggregate value of $10,200 for individual coverage and $27,500 for family coverage. The tax equals 40% of the value that exceeds these thresholds.

Nearly three-quarters (73%) of employers said they are somewhat or very concerned they will trigger the tax based on their current plans and cost trajectory. More than four in 10 (43%) said avoiding the tax is the top priority for their health care strategies in 2015. As a result of the excise tax and other provisions of the health care reform law, CEOs and CFOs are more actively engaged in strategy discussions.

According to Randall Abbott, senior consultant at Towers Watson, “The emphasis is on achieving or maintaining a high-performance health plan. And CFOs are now focused on a new gold standard: managing health cost increases to the Consumer Price Index. This requires acute attention to improving program performance.”

Friday, August 22, 2014

Big tax tab possible for employers who fund individual medical coverage via cafeteria plans

Making individual major medical coverage available to employees on a tax-free basis as part of an employer-sponsored arrangement may have significant adverse tax consequences for employer plan sponsors. That’s according to a recent employer alert from the Employers Council on Flexible Compensation (ECFC), which indicates it has received numerous inquiries on this issue from employer plan sponsors after the IRS issued guidance in IRS Notice 2013-54.

The IRS notice provided that pre-tax funding of individual major medical (IM) coverage for active employees through a cafeteria plan violates the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) and may result in a $100 per employee per day excise tax.

Not a group health plan? The ECFC alert states that some in the industry are alleging that the IRS guidance does not prohibit payment of IM policy premiums through a cafeteria plan because the cafeteria plan is not a group health plan subject to the ACA. The ECFC agrees that a cafeteria plan, in and of itself, is not a group health plan subject to the ACA. But the guidance states that any arrangement, which pays or reimburses an employee’s IM policy premiums on a pre-tax basis, would be an “employer payment plan,” and such plans are group health plans subject to the ACA. An employer payment plan violates the ACA, and employers who sponsor such arrangements would be subject to a potential excise tax of $100 per employee per day, according to the ECFC.

What to do next? The ECFC suggests that employers who are considering implementing an arrangement involving pre-tax funding of IM coverage for active employees (through a cafeteria plan or otherwise) consider the following actions: 
  • Seek the advice of independent legal counsel to determine the application of IRS Notice 2013-54 to the employer’s specific circumstances.
  • Request a binding legal opinion from the vendor stating that no adverse tax (including excise tax) or financial consequences will result from adoption of such an arrangement.
  • Request that the vendor provide indemnification for any excise taxes imposed as a result of the pre-tax funding of IM coverage.

Wednesday, August 20, 2014

Register on, start collecting information now, CMS advises reporting entities

Have you heard of If your organization is a reporting entity for purposes of the Patient Protection and Affordable Care Act’s (ACA) transitional reinsurance program, you might want to become familiar with that website. That’s because it will be used to report annual enrollment information and pay reinsurance contributions, according to a recent Centers for Medicare & Medicaid Services’ (CMS) webinar about the reinsurance program. The webinar, which is one in a series about the program, provided detailed information on the Supporting Documentation requirements.
Background. ACA Sec. 1341 established the transitional reinsurance program to help stabilize premiums in the individual market. Reinsurance contributions are required for the 2014, 2015 and 2016 benefit years. The program is funded by contributions collected from health insurance issuers and certain self-insured group health plans (i.e., contributing entities) to cover costs for high-cost individuals enrolled in non-grandfathered reinsurance-eligible individual market plans.
Contribution submission process. To successfully complete the reinsurance contribution process, contributing entities, or third party administrators or administrative services-only contractors on their behalf (i.e., reporting entities), must register on
Also on, reporting entities must submit the “ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form” (Form) along with Supporting Documentation. The Supporting Documentation contains information on the contributing entities for whom a reporting entity is submitting enrollment counts.
File specifications. The webinar speakers explained that the Supporting Documentation must be a Comma Separated Value (CSV) file. This is also known as a “flat file” or “comma delimited file.” Each line represents one entry or record and a comma separates each data element within a record. Each data element in the file is limited to a certain field length based on the requirements of the database.
The Supporting Documentation must not exceed 2MB, and it must not contain special characters. In addition, the speakers noted that the total of all enrollment counts in the file must not exceed 1,587,301.58 covered lives if remitting a combined collection or 1,904,761.90 covered lives if remitting a two-part collection. A combined collection is the entire 2014 benefit year contribution in one payment no later than January 15, 2015 reflecting $63.00 per covered life. A two-part collection is two separate payments for the 2014 benefit year, with the first remittance due by January 15, 2015,reflecting $52.50 per covered life, and the second remittance due by November 15, 2015, reflecting $10.50 per covered life.
File layout fields. The speakers presented an overview of the fields in the Supporting Documentation. The fields include, among others, the reporting entity and contributing entity legal business name (LBN), reporting entity and contributing entity federal tax identification number (TIN), contributing entity organization type (for profit or non-profit), benefit year (2014, 2015 or 2016), and annual enrollment count (number of covered lives of reinsurance contribution enrollees for the contributing entity).
Regarding the LBN associated with the contributing entity’s TIN, the speakers noted that for self-insured group health plans, this would be the TIN of the plan sponsor of that self-insured group health plan.
Multiple Forms. The speakers noted that it’s possible that a reporting entity may need to submit more than one Form and, potentially, more than one Supporting Documentation. This might occur if the reporting entity: 

  • wants to follow the two-payment schedule,
  • has more enrollees than would be permitted for a single transaction on,
  • wants to use more than one bank account, or
  • has a business reason for wanting to complete multiple Forms.
Prepare now. Although the Form is not available yet, the speakers noted there are several actions that reporting entities can take now to prepare for the submission process. They can:
  • register on,
  • collect the information needed to compete the Form and Supporting Documentation,
  • contact their bank to have the ALC+2 value (Agency Location Code used to prevent Automated Clearing House debit blocks) added to allow for automatic debits (if applicable),
  • monitor the Center for Consumer Information & Insurance Oversight (CCIIO) web page, including the Reinsurance Contributions-specific CCIIO webpage, and
  • submit questions via REGTAP using “Submit an Inquiry” and note “Reinsurance-Contributions” in the question text.