Monday, 29 September 2014
Virtus Featured in NBJ - Measure it, manage it, control it: your employee medical benefits
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Measure it, manage it, control it: your employee medical benefits

We are quickly approaching that time of year January 1. It is a date that represents a time when two out of three employers across Tennessee renew their medical benefits.

Chances are they are the second or third costliest line item expense you have, but if you are fully insured, how can you manage this expense when you have no data to measure? You know the answer, and as an executive it frustrates you immensely.

Every year, about two or three months prior to your policy anniversary date, you get this surprise increase that is impossible to plan for. Liken it to each year, all your employees banding together and coming to management for a pay raise that can vary from 5 to 50 percent. You have no control over it other than to acquiesce at some level.

Well, actually, you do. It is not a silver bullet, and it is not recommended for every employer. What is recommended is that every employer at least has their adviser evaluate it on their behalf. The answer is self-funding your medical benefits. It comes in a variety of flavors, and each of them is financially sound when provided the right information.

I know what you are thinking. In your mind, you are saying, "Self-funding scares me. I have heard horror stories," or, "We were once self-funded, and it was a disaster." Times have changed.

So why self-funding now? No state premium tax, no insurance carrier profit margin and no ACA health insurance tax are just a few reasons. Just these three can account for as much as 10 percent of your premium yes, you read that correctly. Yet the biggest reason is control. You can finally take that huge, unpredictable, annual surprise and begin to control it into something that is budgetable and predictable. You will have data that will allow you to make appropriate and meaningful decisions.

In your business today, you manage what you measure at every step. Now you can finally (and safely) do the same with one of your costliest line item expenses. That has to make self-funding at least merit an evaluation. I'll bet you lunch you won't regret it.

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Posted on 09/29/2014 1:55 PM by David Johnson
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Monday, 29 September 2014
Virtus Featured in NBJ - Measure it, manage it, control it: your employee medical benefits
clear

Measure it, manage it, control it: your employee medical benefits

We are quickly approaching that time of year January 1. It is a date that represents a time when two out of three employers across Tennessee renew their medical benefits.

Chances are they are the second or third costliest line item expense you have, but if you are fully insured, how can you manage this expense when you have no data to measure? You know the answer, and as an executive it frustrates you immensely.

Every year, about two or three months prior to your policy anniversary date, you get this surprise increase that is impossible to plan for. Liken it to each year, all your employees banding together and coming to management for a pay raise that can vary from 5 to 50 percent. You have no control over it other than to acquiesce at some level.

Well, actually, you do. It is not a silver bullet, and it is not recommended for every employer. What is recommended is that every employer at least has their adviser evaluate it on their behalf. The answer is self-funding your medical benefits. It comes in a variety of flavors, and each of them is financially sound when provided the right information.

I know what you are thinking. In your mind, you are saying, "Self-funding scares me. I have heard horror stories," or, "We were once self-funded, and it was a disaster." Times have changed.

So why self-funding now? No state premium tax, no insurance carrier profit margin and no ACA health insurance tax are just a few reasons. Just these three can account for as much as 10 percent of your premium yes, you read that correctly. Yet the biggest reason is control. You can finally take that huge, unpredictable, annual surprise and begin to control it into something that is budgetable and predictable. You will have data that will allow you to make appropriate and meaningful decisions.

In your business today, you manage what you measure at every step. Now you can finally (and safely) do the same with one of your costliest line item expenses. That has to make self-funding at least merit an evaluation. I'll bet you lunch you won't regret it.

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Posted on 09/29/2014 1:55 PM by David Johnson
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Thursday, 25 September 2014
Virtus Legal Alert - IRS to Amend Cafeteria Plan Regulations to Facilitate Enrollment in Marketplace Coverage
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ADVISORY:

IRS to Amend Cafeteria Plan Regulations to Facilitate Enrollment in Marketplace Coverage

 

On Thursday, September 18, 2014, the Internal Revenue Service ("IRS") released Notice 2014-55, which expands the cafeteria plan "change in status" rules to allow plans to offer employees an option to revoke their elections for employer-sponsored health coverage to purchase a qualified health plan through a Health Insurance Marketplace ("Marketplace").   The notice is effective immediately and will appear in IRB 2014-41, to be published Oct. 6, 2014.

The notice addresses two specific situations in which a plan could allow an employee to revoke a cafeteria plan election (other than a health FSA election): due to enrollment in the Marketplace; and due to a reduction in hours of service. This should be a welcome relief to employers that may have been struggling with how to allow employees to change coverage from under the employer's plan to a Marketplace or other group health plan.

 

Revocation Due to Enrollment in the Marketplace  

Under current cafeteria plan rules, an employee may not revoke an election for coverage under a group health plan solely to purchase a Marketplace plan. This is not a concern for employees who are eligible for a calendar year cafeteria plan because they may transition to a Marketplace plan during open enrollment with no gap in coverage, as both the employer plan and the Marketplace would have an open enrollment period for coverage effective January 1. However, an employee covered by a non-calendar year cafeteria plan is unable to synchronize the change - Marketplace coverage only operates on a calendar year open enrollment period. Thus, employees covered by non-calendar year cafeteria plans who wish to enroll in Marketplace coverage would experience a period where there is either dual coverage or no coverage, depending on when they are able to drop the employer-provided coverage.

 A similar issue occurs when an employee experiences an event such as a birth or marriage. In these situations, it may be more advantageous for some employees to purchase a Marketplace plan for themselves and their families rather than to add family members to the employer's group health plan. Despite the fact that birth and marriage are both special enrollment events for Marketplace coverage, the cafeteria plan rules do not allow an employee to make a mid-year revocation of coverage for employer-sponsored coverage based on a desire to enroll in Marketplace coverage.

For all of these reasons, the IRS Notice permits a cafeteria plan to allow a participating employee to revoke an election in order to obtain coverage through the Marketplace under the following conditions:

  1. The employee is seeking to enroll in Marketplace coverage during the Marketplace's annual open enrollment period or during a special enrollment period; and
  2. The employee enrolls, along with any related individuals who cease coverage due to the revocation, in a Marketplace plan effective immediately following the revocation.

An employer may rely on the reasonable representation of an employee who is enrolling in Marketplace coverage that the employee and related individuals have enrolled or intend to enroll in a Marketplace plan that is effective immediately following the revocation (i.e., there is no gap in coverage). In other words, employers do not have to require employees to prove that Marketplace coverage was actually elected once they cease to participate in the employer's plan.

As a reminder, the special enrollment rules for Marketplace coverage include entry due to an individual:

  • losing other health coverage;
  • gaining a dependent (or becoming a dependent) through marriage, birth, or adoption;
  • newly gaining status as a citizen, national or lawfully present individual;
  • unintentionally or inadvertently failing to enroll due to an error on the part of the Marketplace;
  • demonstrating to the Marketplace that the plan in which the individual is enrolled substantially violated a material provision of its contract in relation to the enrollee (this would permit an individual to change Marketplace plans);
  • being determined newly eligible (or experiencing a change in eligibility) for subsidized coverage (regardless of whether the individual is already enrolled in Marketplace coverage);
  • changing residence such that the individual gains access to new Marketplace options; or
  • demonstrating that the individual meets other exceptional circumstances as the Marketplace may provide.

 

Revocation Due to Reduction in Hours of Service

Under the ACA's pay-or-play mandate, an employer may choose to measure an employee's hours over a period of time (called a measurement period) to determine the employee's status as either full-time or not full-time for the subsequent stability period, using a 30-hour per week average for full-time status. If an employee works full-time during the measurement period, the employee must be treated as full-time-and continue to be offered affordable coverage-during the subsequent stability period if an employer is attempting to avoid pay-or-play penalties.

This creates a potential problem when an employee in a stability period changes from a full-time position to a part-time position and wishes to purchase a Marketplace plan. This might happen because the reduction in hours has triggered eligibility for a premium tax credit or perhaps because the individual simply cannot afford the coverage, as a practical matter, on reduced pay. Under existing cafeteria plan rules, a cafeteria plan could not allow the employee to drop coverage mid-year because there hasn't been a loss of eligibility for coverage in the underlying group health plan.

 To fix this issue, the notice provides that a cafeteria plan may allow an employee to revoke prospectively an election of coverage under a group health plan (other than a health FSA) provided the following conditions are met:

  1. The employee changes from full-time status to part-time status and is reasonable expected to remain in part-time status; and
  2. The employee enrolls, along with any related individuals who cease coverage due to the revocation, in another plan no later than the first day of the second full month following the revocation.

An employer may rely on the reasonable representation of an employee who is changing to part-time status that the employee and related individuals have enrolled or intend to enroll in another plan within the above timeframe.

 

Employer Action Step

As with the other cafeteria plan change in status rules, these new permitted election changes are voluntary - an employer is not required to adopt them. Employers that wish to extend the new permitted election change opportunities to employees will need to amend their cafeteria plans to allow the changes. The amendment must be adopted by the last day of the plan year in which the changes are allowed, and may be effective retroactively to the first day of that plan year; however, any election changes may not have a retroactive effect. Note that for plan years beginning in 2014, the employer has until the last day of the 2015 plan year to amend the plan. The IRS intends to amend the applicable cafeteria plan regulations in the future to reflect the guidance in the notice.

 Separately, if an employer chooses to use these change in status rule exceptions, the employer ought to consider other administrative issues and communication issues that can arise - employees need to be apprised of these new options and the options need to be administered consistently with other plan provisions, including any applicable COBRA provisions. As employers enter into open enrollment season, those employers wishing to permit these changes should consider including a discussion of the new options in enrollment materials.  

 

 

 

Peter Marathas, Esq.

Compliance Director

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Posted on 09/25/2014 11:02 AM by David Johnson
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Wednesday, 24 September 2014
Virtus Legal Alert - Large Self-Insured Plans Must Register for an HPID by November 5, 2014
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ADVISORY:

Large Self-Insured Plans Must Register for an HPID by November 5, 2014

As part of the Affordable Care Act's ("ACA") Administrative Simplification provision, all "controlling health plans" (defined below) must obtain a 10-digit numeric identifier known as a Health Plan Identifier, or HPID. The HPID is part of a project that federal agencies, health insurers and health care provider groups have been working on for years, as final rules for the HPID requirement were published in the Federal Register on September 5, 2012 (77 FR 54719) (the "Final Rules").

 The Final Rules require health plans to register for an HPID by November 5, 2014 (small health plans have until November 5, 2015 to register). Specifically, all "Controlling Health Plans" must obtain a HPID. The U.S. Department of Health and Human Services ("HHS") describes a Controlling Health Plan ("CHP") as a health plan that controls its own business activities, actions, or policies; or is controlled by entities that are not health plans. In plain English, this includes most employer-sponsored self-insured group health plans.  

OVERVIEW

Self-insured group health plans are "health plans" for purposes of HIPAA and therefore must obtain an HPID if they meet the definition of a CHP. In general, most employer-sponsored group health plans are CHPs; however, the insurance carrier obtains and uses the HPID for its fully insured plans.

 The HPID is required to be used in HIPAA-covered electronic transactions (sometimes referred to as "standard transactions") by November 7, 2016. Standard transactions may include medical and dental claims or premium payments, for example. Employers must obtain HPIDs for their self-insured group health plans, even if their plans are administered by a third party administrator ("TPA"). That said, in most cases, TPAs will use their own identifier-called an Other Entity Identified, or OEID in standard transactions performed on behalf of its clients' plans. [1]

 A CHP's subhealth plan ("SHP") may, but is not required to, register for an HPID or the SHP may choose to use the number of its CHP. For example, an employer that sponsors self-insured medical and dental plans might consider the medical plan to be a CHP and the dental plan to be a SHP. An SHP is defined as a health plan whose business activities, actions or policies are directed by a CHP. As another example, an employer that consolidates multiple health plans under one ERISA plan number may generally treat the consolidated plan as a CHP.

COMPLIANCE DATES 

Plan Type

Compliance Date

Large Health Plan

Must obtain an HPID by November 5, 2014

Small Health Plan

Must obtain an HPID by November 5, 2015

All Health Plans Generating Electronic Transactions

Must start using HPIDs in covered transactions by November 7, 2016

 For these purposes, the regulations define a small health plan as a health plan with annual receipts of $5 million or less. A CMS FAQ indicates that self-insured plans should use the total amount paid for health care claims by the employer or plan sponsor on behalf of the plan during the plan's last full fiscal year in determining the amount of annual receipts.[2] Only amounts paid for actual health care claims incurred by participants should be included in determining the amount of annual receipts. Premiums for stop-loss coverage and other administrative expenses of the self-funded plan are not included.

In addition to registering for the HPID, CHPs must disclose their HPID when requested and communicate any changes to their required data elements in the HPID Enumeration System within 30 days of the change.

The final rule also provides that the HPID may be used for other lawful purposes that require the identification of health plans. For example, HPID may be used for:

  • Identification purposes on health plans internal files;
  • On health insurance cards;
  • As a cross-reference in health care fraud and abuse files; and
  • To identify health plans on Health Information Exchanges ("HIEs") and Federal and State insurance exchanges. 

OBTAINING AN HPID

For self-insured health plans, the responsibility for obtaining an HPID ultimately rests with the plan sponsor (e.g., the employer). A TPA or other entity may assist a plan sponsor with the HPID application process; however, an individual with the authority to legally bind the company must sign-off on the application in order for an HPID to be generated. We note that the application process can be challenging for employers, who may not possess some of the information requested during the application process. For example, the application requests a Payer ID number; however, HHS has advised that self-funded employers that do not have these numbers may enter "not applicable" in this field on the application and will still be able to apply for their HPID successfully.

Employers and other plan sponsors may complete their HPID application at: http://www.cms.gov/Regulations-and-Guidance/HIPAA-Administrative-Simplification/Affordable-Care-Act/Health-Plan-Identifier.html 

HHS provides videos to assist Health Plans in the application process and a 111 page User Manual published by CMS:

http://www.cms.gov/Regulations-and-Guidance/HIPAA-Administrative-Simplification/Affordable-Care-Act/Downloads/HIOSHPOESUserManual0401012014.pdf 

Once a plan obtains an HPID, it must certify to HHS that it is in compliance with HIPAA's standards and operating rules and report on the number of covered lives under its major medical plan. For plans obtaining an HPID before January 1, 2015, the deadline is December 31, 2015. For plans obtaining an HPID between January 1, 2015 and December 31, 2016, the deadline is 365 days after the plan obtains the HPID. Further guidance from HHS on the certification process will be forthcoming. 

[1] In the preamble to HPID regulations, HHS acknowledges that "very few self-insured group health plans conduct standard transactions themselves; rather, they typically contract with TPAs or insurance issuers to administer the plans. Therefore, there will be significantly fewer health plans that use HPIDs in standard transactions than health plans that are required to obtain HPIDs, and only health plans that use the HPIDs in standard transactions will have direct costs and benefits." 

[2] See https://questions.cms.gov/faq.php?id=5005&faqId=10380, as visited September 22, 2014.

This e-mail is a service to our clients and friends. It is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Benefit Advisors Network and its smart partners are not attorneys and are not responsible for any legal advice. To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

© Copyright 2014 Benefit Advisors Network. Smart Partners®. All rights reserved.

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Posted on 09/24/2014 2:37 PM by David Johnson
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Thursday, 4 September 2014
Virtus featured in NBJ- Trimming the Fat in Your Health Care Costs
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TRIMMING THE FAT IN YOUR HEALTH CARE COSTS 

As recent as two months ago, I wrote about the rising cost of health care and what choices we have to control it. I later listened to Rick Johnson, president and CEO of our Governor's Foundation for Health and Wellness, present to us at a weekly Downtown Rotary meeting.

Are you an executive who believes that corporate wellness is important, but chokes when you see the cost of a robust wellness program? Or possibly, you just cannot simply get your arms around what the ROI is on a wellness program. If you are, you are among many. Well, Healthier Tennessee is something you should know about and it is free. It's not the Cadillac of wellness plans, but it's a great and simple start. The initiative is part of a statewide effort to get Tennessee healthy, because we simply are not we've ranked in the bottom 10 states for health for the last 20 years (as reported by the Center for Disease Control).

What I wrote in my earlier blog focused on just two things: managing weight and tobacco use. Healthier Tennessee does just that. They highlight on their site a very simple quick start guide and easy ways to implement programs educating your employees on food choices, activity, and tobacco cessation designed to make small changes every day that can make a big difference.

Everyone knows they shouldn't use tobacco, but they don't know the best ways to stop using it. Everyone knows they could probably stand to lose a few pounds (two of three Tennesseans are over-weight or obese), but we don't know the best way to go about starting. Healthier Tennessee is a start.

As an employer, the only thing you can influence in controlling health care costs for your company and your employees is the utilization of health care. There is no reason not to try and start here with Healthier Tennessee. In doing so, you're promoting other like-minded employers to do the same and in the same way as you. It's a Tennessee problem; now we can solve it together as Tennesseans.

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Posted on 09/04/2014 3:58 PM by David Johnson
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