The Patient Protection and Affordable Care Act is well named, as its aim is to make health care providers accountable for delivering better care. As a result, the reforms make skilled health care risk management even more vital.

“The Patient Protection and Affordable Care Act has initiated a fundamental shift in the manner in which health care providers are going to be paid,” says Ron Calhoun, managing director and national health care practice leader with Aon Risk Solutions. “We are beginning a transition from volume-based methodologies to outcome-based methodologies. Prior to this, we have been on a fee-for-service model, as health care providers were compensated for volume.”

Smart Business spoke with Calhoun about how risk management integrates with health care in an age of reform.

What effect is health care reform having on the health care delivery system?

One of the consequences is that reform is creating the need for delivery systems to more fully integrate and provide a broader continuum of services. To take a bundled reimbursement, as opposed to the old pay-for-volume model, health care providers will be compensated based on outcomes. That creates a need for them to more fully integrate. On the front end, they will need to build out their ambulatory capabilities, and on the back end, they will need to improve post-acute capabilities.

How will the shift to outcome-based compensation affect providers?

The Centers for Medicare and Medicaid Services has implemented a compensation mechanism called the value-based purchasing program for providers to measure quality. There are 12 clinical process measures and nine patient experience measures. This program, which took effect in fiscal year 2013, is about 70 percent weighed toward the 12 clinical processes and about 30 percent weighed toward the nine patient experience measures.

If health care providers have Medicare or Medicaid reimbursements in 2013, they can participate in this program. Then, those measures will have a real impact on their reimbursement thresholds. The measurements, plus the overall shift away from volume toward getting paid for outcomes, makes risk management programs even more critical than their historical place in patient safety.

How can a risk management program help with those measures?

Nationally, our health care delivery system does not have a standardized, systemic quality measuring process. When The Institute of Medicine issued its 1999 report, ‘To Err is Human,’ it started the patient safety movement.

Risk management has been proactive in patient safety since 1999, but we still have negative outcomes in our health care delivery service. After a six-year decline, we are starting to see an increase in the frequency of health care professional liability claims.

What factors affect the frequency and severity of health care liability claims?

From 2000 to 2006, there was a decrease in the frequency of health care professional liability claims, driven by three factors. One was the proliferation of tort reform. Second, there was an investment in patient safety systems at the provider level. Third, the provider community did a good job managing the perception of there being an availability-of-care crisis because of malpractice costs. Those have contributed to a downward pressure on health care professional liability claims.

From 2007 to the present day, there have been continued investments in patient safety initiatives, but we are seeing an increase in claims because of two factors. The first is tort reform erosion. In some states, tort reform bills have been either reformed or weakened. The second factor is economic stress.

There is an interesting correlation between the unemployment rate and an increase in health care professional liability and medical malpractice claims frequency. For every 1 percent increase in the unemployment rate, there is a corresponding 0.3 percent increase in health care professional liability and medical malpractice claims frequency, with a three-year lag. We are starting to see the post-2007 unemployment rate as a contributing factor to increasing claims frequency.

Unlike claims frequency, claim severity has increased at a steady rate, 4 percent over the past six years. That is cause for concern.

What can be done to improve outcomes and reduce medical claims?

One of the biggest barriers to improving risk management and patient safety is the ability to measure outcomes and the speed with which outcomes can be measured. One feature of the Patient Protection and Affordable Care Act is providing financial incentives to hospitals and physicians to further the meaningful use of electronic medical records (EMRs). The proliferation is dramatic, but it is still a fractured business.

There are three levels of sophistication in EMRs. The first level is simply making a paper file electronic. The second is computerized physician order entry, or CPOE. The third and most complex level is platforms with clinical decision support data. That third level will be necessary going forward to drive down the incidence of preventable medical errors.

More sophisticated EMRs will improve outcomes because physicians will have clinical decision support to help them adhere to clinical protocols at their fingertips. This is important because one of the biggest variables for integrated delivery systems to manage as they make the shift from volume-based to outcome-based methodologies is their ability to narrow physician practice pattern variation.

This technology comes with liabilities. If physicians have clinical decision support at their fingertips and depart from protocols, and an adverse event occurs, these errors could have a greater financial consequence than in the absence of such technology.

Ron Calhoun is managing director and national health care practice leader with Aon Risk Solutions. Reach him at (704) 343-4128 or

Insights Risk Management is brought to you by Aon Risk Solutions

Published in St. Louis

While the future of health care reform in its entirety remains uncertain, many provisions of health care reform are already in place as a result of the Patient Protection and Affordable Care Act (PPACA). And there are things that businesses must be doing now to stay on the right side of the law.

As an employer, have you taken the necessary measures to ensure your business is compliant? If you haven’t, you could find yourself in trouble with the Department of Labor, says Ron Smuch, insurance and benefits analyst at JRG Advisors, the management arm of ChamberChoice.

“The  DOL has begun exercising its investigative authority to enforce compliance with the health care reform law, requesting that health plan sponsors provide proof of compliance with PPACA’s mandates,” says Smuch.

Smart Business spoke with Smuch about the DOL’s audit requests related to PPACA compliance and what businesses need to know to stay on the right side of the law.

What areas has the DOL been looking into?

The DOL’s audit requests related to PPACA compliance have been divided into three categories — requests for grandfathered plans, requests for nongrandfathered plans and requests for all health plans.

A grandfathered plan is a group health plan that existed as of March 23, 2010 — the date PPACA was enacted — and that has not had certain prohibited changes made to it since that date. If a plan is grandfathered, it is exempt from certain health care requirements, such as providing preventive health services without cost sharing. However, if a plan makes changes — including changing providers, increasing co-insurance charges, significantly raising co-pays or deductibles, significantly lowering employer contributions, etc. — it loses its grandfathered status and must comply with additional health care reform requirements.

Regulations require a plan to disclose to participants (every time it distributes materials describing plan benefits) that the plan is grandfathered and, therefore, not subject to certain PPACA requirements. For grandfathered health plans, the DOL has been requesting records documenting the terms of the plan on March 23, 2010, and the participant notice of grandfathered status included in materials that describes the benefits provided under the plan.

If a plan has lost its grandfathered status, what must it do differently? 

Plans that do not have a grandfathered status must comply with additional PPACA mandates, including providing coverage for preventive health services without cost sharing. For nongrandfathered health plans, DOL audits are requesting documents related to preventive health services for each plan year beginning on or after September 23, 2010, the plan’s internal claims and appeals procedures, contracts or agreements with third-party administrators, and documents relating to the plan’s emergency services benefits.

Some of PPACA’s mandates apply to all health plans, regardless of whether they have grandfathered status. For example, all plans must provide dependent coverage to age 26 and must comply with the PPACA’s restrictions on rescissions of coverage and on lifetime and annual limits on essential health benefits.

The DOL has been requesting the following information from both grandfathered and nongrandfathered health plans: a sample notice describing enrollment opportunities for children up to age 26; a list of participants who have had coverage rescinded and the reason(s) why; documents related to any lifetime limit that has been imposed under the plan since September 23, 2010; and documents related to any annual limit that has been imposed under the plan since September 23, 2010.

What else do employers need to demonstrate?

Employers should be prepared to further demonstrate their compliance by producing records of the steps they have taken to comply with PPACA requirements, including plan participation information, plan amendments or procedures that were adopted, and notices that were provided to those covered, such as the notice of grandfathered status or notice of enrollment for children up to age 26. Plans must also show that they cover out-of-network emergency services without requiring more cost sharing that would otherwise be required by covered participants using in-network emergency services.

If a plan’s PPACA compliance documents are maintained by a service provider, the employer should make sure the necessary documents are being retained and can be produced upon request. Your adviser can work as an intermediary with the insurance company/service provider to ensure compliance requirements are satisfied.

And if your company receives a PPACA audit request from the DOL, consult with your advisors immediately for more information on how to proceed.

What are the penalties for failing to comply?

Penalties are significant. Under PPACA, employers with more than 50 employees are required to provide coverage. Those that fail to do so will be assessed a fine of $2,000 per employee per year, minus the first 30 employees. So an employer with 50 employees that does not provide coverage would pay a penalty on 20 employees, or $40,000 a year.

An employer that offers coverage can also find itself in trouble. For example, an employer’s willful and intentional failure to comply with the Summary of Benefits and Costs requirement may result in a penalty of  $1,000 per day per participant. And while the cost of providing coverage for employees is tax-deductible for employers, the cost of paying penalties is not.

Ron Smuch is an insurance and benefits analyst with JRG Advisors, the management arm of ChamberChoice. Reach him at (412) 456-7017 or

Insights Employee Benefits is brought to you by ChamberChoice

Published in Pittsburgh

As each element of the Patient Protection and Affordable Care Act unfolds, those who provide health care for American communities continue to pursue the legislation’s Triple Aim goals of better care, better health and better management of costs.

Smart Business spoke with MemorialCare Health System President & CEO Barry Arbuckle, Ph.D., to discover  more about this.

How are you preparing for health care reform?

MemorialCare is committed to bold goals in clinical and service excellence, steadfast fiscal discipline and in staying ahead of the curve. We are now implementing new approaches that we do anticipate will improve and ensure the satisfaction of our patients, our continued partnerships with physicians and engagement with employees while growing our capacity to greatly improve health care for our communities. We’re expanding ambulatory care, adding more hospitals and broadening outpatient offerings with the goal of delivering the very best value across all of our 250 facilities.

Well before reform began, we implemented substantial changes, moving from a system of caring for the sick to one focused on improving each individual’s health and wellness. Then, beginning some two decades ago, top physicians began an ambitious

effort to come up with a more scientific approach to the improvement of medical outcomes. Those efforts — today involving thousands of physicians, nurses and other clinicians who are studying the best medical care around the globe — have led to

MemorialCare surpassing the national standards regarding both evidence-based, best-practice medicine and medical outcomes.

What options are there for physicians?

MemorialCare has a very proud history of physician leadership and engagement. Partnership opportunities with our 3,000 affiliated physicians range from the joint ventures, leadership, management positions and participation in the MemorialCare Physician Society, to joining our employment and Independent Practice Association (IPA) models, and collaborations that involve innovative medical technology. We will continue to forge unique partnerships that will favorably impact an integrated approach to the delivery of health care while also ensuring a sound future for our physicians. Earlier in 2012, MemorialCare Medical Foundation announced that it would be affiliated with Greater Newport Physicians and would acquire the Nautilus Healthcare Management Group. By offering a range of partnership opportunities and forging strengthened alignments with physicians, we’re positioned to provide the best possible care, offering patients a choice from among the Southland’s best physicians, and carefully managing health care costs to both employers and consumers. Critical to this broad-ranging physician partnership approach is our commitment to maintaining strong relationships with independent physicians, medical groups and IPAs, and offering physicians myriad opportunities through the MemorialCare Physician Society.

How does technology improve medical care?

Groundbreaking medical technology has proved to yield faster, improved diagnoses; superior, less invasive and more targeted treatments; reduced hospital stays; quicker recoveries; and enhanced quality of life for our patients. The 320-Slice CT Scanner — the most powerful X-ray imaging device — provides high-quality imaging for early and accurate diagnosis and treatment of the heart, brain and tiny blood vessels. Robotic surgery enables physicians to operate with amazing precision through very tiny incisions for heart, gynecology, urology, gastroenterology and cancer procedures. MemorialCare, with one of the West’s busiest robotic surgery programs, boasts the county’s first national robotic surgical training center and is among only a few hospitals that have introduced robotic technology into a hybrid cardiovascular suite.

MemorialCare Cancer Institutes have the latest cancer diagnosis and treatment modalities for adults and children with the most sophisticated treatment technologies that are available today. The MemorialCare Heart and Vascular Institutes are offering

comprehensive centers for diagnosis, treatment and rehabilitation of cardiovascular disease with advanced, world-class care.

Digital technologies that take the form of Electronic Medical Records (EMRs) are allowing clinicians to have immediate

access to a patient’s health and medical history, maximize the clinical quality and patient outcomes at points of decision-making, reduce medical errors and vastly improve patient care. MemorialCare was the very first health care system in Orange County to initiate comprehensive EMRs for its hospitals that can now be found in physician offices and ambulatory sites. Many patients are accessing their health records to track and improve their own health and wellness.

Are health and wellness efforts working?

Our Good Life program works to improve the health and wellness of our employees and their families through our fitness challenges, our nutritional offerings and support for chronic conditions. Employers can take advantage of our expertise to improve the health of their staff with on-site screenings, physicals and more. MemorialCare can help employers adapt to health reform, trim health benefits and health costs and improve productivity. Further, as the only health system in Orange and Los Angeles counties with adult and children’s hospitals, we offer lifetime care and help consumers take control of their health and their lives.

Barry Arbuckle, Ph.D., is the president and CEO of MemorialCare Health System. The Southern California not-for-profit integrated  health care delivery system includes Long Beach Memorial, Community Hospital Long Beach, Miller Children’s Hospital Long Beach, Orange Coast Memorial Medical Center in Fountain Valley, Saddleback Memorial Medical Center in Laguna Hills and San Clemente; MemorialCare Medical Group; Greater Newport Physicians, an Independent Practice Association (IPA); MemorialCare HealthExpress retail clinics; and numerous outpatient health centers throughout the Southland. For information, go to

Insights Health Care is brought to you by MemorialCare Health System

Published in Los Angeles

Many employers are beginning to cope with the realities of the Patient Protection and Affordable Care Act as its mandates, confirmed as constitutional by the Supreme Court, begin to take effect. Still, many questions exist, as some of the law’s major provisions have yet to apply.

“Complying with the new regulations might be frustrating and confusing for the first few years and employers will have to rely on their trusted advisers and insurance carriers for assistance and guidance,” says Paul Baranowski, Director of Account Management at Benefitdecisions, Inc.

Smart Business spoke with Baranowski about the impending reforms and the effects they will have on your employees, their benefits and your business.

What are the key concerns employers will face regarding health care reform?

The immediate concerns for most employers are the mandates that will go into effect with this next benefits renewal cycle. The primary mandates include women’s health preventive care amendments, uniform summary of benefits and coverage statements, W-2 reporting requirements and a reduction in the maximum amount an employee can put into his or her health flexible savings account (FSA).

Regarding the women’s amendment, the mandates require that plans cover 100 percent of expanded services, including preventive screenings for HPV, sexually transmitted infections, HIV and gestational diabetes. Additionally, counseling for these services will be covered. Finally, commonly used contraceptive methods will be covered, as well. Some services related to these categories have been a part of plans for some time but are now covered at 100 percent. By expanding the definition of covered services, the act will increase costs to insurance carriers in the short term, which will then be passed on to employers as premium increases.

The Uniform Summary of Benefits and Coverage is required for group plans with open enrollment periods after Sept. 23, 2012. This is a new, separate benefit coverage document that attempts to explain coverage in a standardized format. It is intended to make plan comparisons easier and to illustrate what an employee’s costs under the plan will be. However, due to design and content restrictions, employees may get confused and potentially misunderstand what their own expenses will be for their health care services. As a consequence, employers will have to be more thorough, cautious and deliberate in their open enrollment meetings and education to employees. Most employers are fully insured, so their insurance carriers will produce the Uniform Summary document. Employers that are self-funded, however, will be required to assemble these themselves. Some claims administrators will charge fees to produce the summary on behalf of a self-funded employer.

The mandate that requires employers issuing 250 or more annual W-2s to include the annual value of health coverage on the W-2 is pretty straightforward and most, if not all, employers are ready to comply for W-2s issued in January 2013 for the 2012 tax year.

Regarding health FSAs, the maximum amount an employee can contribute is being capped at $2,500. Previously, there was no stated limit to these tax-favored plans. Not many employees currently contribute more than $2,500, so this new provision primarily affects higher paid employees.

What provisions of the act will employers need to deal with in 2014?

2014 is the year that many of the big changes required by the reform act will take place. The state insurance exchanges, where smaller firms and individuals can purchase medical coverage, will be in place in 2014. Also, the requirement that employers ‘pay or play’ will take effect. This means that employers with 50 or more full-time employees are required to provide coverage that meets the ‘affordability’ and ‘coverage’ rules or face penalties. However, companies with fewer than 50 employees will not face these penalties. Employees will also face a tax penalty if they do not purchase required coverage.

Assessing the impact, determining the best strategy to navigate through these reform changes and, at the same time, maximizing an employer’s benefit spend can be very  complex. Determining the exposure and risk depends on an employer’s size, industry, location, the mix of part-time employees, the company’s core values and other factors. The law will have a greater impact on employers in certain industries (e.g. retail, hospitality) in which the number of hours that employees work changes frequently. To avoid penalties, many employers in these industries will likely need to offer some form of health benefits to employees who didn’t have them previously. Because there is no universal answer as to what an employer should do, employers should partner with trusted advisers to help them strategize through this process.

Are there parts of the legislation that can ease an employer’s pain?

Yes, some new regulations are being released that give temporary relief, particularly for companies facing the largest penalties for not offering ‘adequate and affordable’ coverage. For example, recent notice was given that allows employers to take up to 13 months to offer coverage to employees who do not consistently work an average of 30 hours a week. Previously, the legislation was interpreted to mean that coverage had to be offered to these employees in 2014.  For companies that have a large variable-hour work force, this notice has delayed millions of dollars in potential costs.

How might reform play out in the long term?

Regardless of the November election outcome, we expect that the major features of this legislation will remain, albeit with delays and changes. Employers can best prepare by relying more heavily on consultants and advisers to handle the significant changes over the next few years.

Paul Baranowski is Director of Account Management at Benefitdecisions, Inc. Reach him at or (312) 376-0436.

Insights Employee Benefits is brought to you by Benefitdecisions, Inc.

Published in Chicago

The constitutionality of the Affordable Care Act was upheld recently by the U.S. Supreme Court, defining and solidifying many legal obligations employers have when it comes to health care coverage for employees.

“The crux of the Affordable Care Act is to make ‘minimal essential coverage’ more available,” says Christopher J. Carney, chair of the Labor and Employment Practice Group at Brouse McDowell. To achieve this, the Act contains provisions referred to as the ‘employer mandate’ or ‘play or pay.’

However, he says the Act does not require employers to provide minimal essential coverage.

“It is more accurate to state that the Act requires employers that meet a certain minimum employee threshold to make available minimal essential coverage or pay a penalty for failing to do so,” says Carney.

Smart Business spoke with Carney about some of the law’s caveats and what employers need to know in order to become compliant.

How does the law impact employers of various sizes?

The employer mandate provides that ‘large’ employers, or those with 50 or more full-time employees, are required to offer full-time employees health coverage effective Jan. 1, 2014. Businesses with fewer than 100 employees will also be eligible to shop for plans in health benefit exchanges that each state is required to establish as part of the Act.

What are the consequences of noncompliance?

Starting in 2014, large employers will be assessed an annual fee of $2,000 per full-time employee — in excess of 30 employees — if any full-time employee is not offered coverage and enrolls in and receives an income-based tax credit to participate in an insurance exchange. For example, assuming at least one employee satisfies the tax credit requirement, a business with 51 full-time employees that does not offer coverage must pay a monthly penalty of 21 (51 total employees minus 30) times the per-employee penalty amount, i.e., one-twelfth of the annual $2,000 per full-time employee. For purposes of the Act, a full-time employee is one employed at least 30 hours per week on average.

Furthermore, if an employee opts out of an employer’s health plan — either because the employee’s share of the premium would exceed 9.5 percent of his or her income, or because the employer’s or insurer’s share of the total cost of benefits is less than 60 percent and the employee obtains a tax credit for coverage in a health insurance exchange — the employer is also subject to a penalty.

Under these circumstances, the employer must pay a monthly penalty of one-twelfth of $3,000 multiplied by the total number of full time employees who obtain the income-based tax credit for that month. This penalty is capped at one-twelfth of $2,000, multiplied by the total number of full-time employees.

How do the state exchanges come into play?

The Act provides for government-run health benefit exchanges from which individuals and employers with fewer than 100 employees can purchase insurance. Plans in the exchanges will be required to offer four levels of coverage that vary based upon factors such as premiums and out-of-pocket costs. Premium and cost-sharing subsidies will be available for low-income families.

Each state is required to have its own health benefit exchange. If a state chooses not to create its own health benefit exchange, then one will be set up by the federal government. Ohio Gov. John Kasich says the state will not create its own and will rely upon the federal government’s health benefit exchange.

Considering the efforts to derail the Act, what would you advise an employer to do?

Employers should continue with their efforts to comply with the Act’s requirements and some provisions need immediate attention. For example, employers and insurers must provide a Summary of Benefits and Coverage for the open enrollment period beginning on or after Sept. 23, 2012. The SBC is similar to, but does not supplant, the Employee Retirement Income Security Act’s Summary Plan Description. If an employer’s SBC fails to satisfy the requirements of the Act, then the employer is subject to a penalty of $1,000 per failure, per participant. Another example is that the aggregate cost of employer-sponsored health coverage must be reported on Form W-2 for 2012 and going forward.

I would not expect a repeal of this law any time soon. Therefore, employers should determine the extent to which the new rules apply. Because the Act does not apply uniformly, an employer should review the law to identify which requirements apply and the compliance deadlines corresponding to each requirement.

When must employers come into compliance with the law?

The Act was passed on March 30, 2010, and not all changes set forth were imposed immediately. Generally, the provisions that were not controversial went into effect first. The provision prohibiting health plans from denying coverage or limiting benefits for children under the age of 19 because the child has a pre-existing condition went into effect immediately. But the ‘play or pay’ provisions for employers go into effect after Dec. 31, 2013.

What can legal counsel offer as employers look to come into compliance with the law?

Particularly when an employer is close to the 50-employee threshold limit, legal counsel can be helpful in identifying and analyzing employer options and obligations. The ‘play or pay’ regulations have not even been promulgated yet, but expect them to be complicated. Issues that will likely require the assistance of counsel include how to account for independent contractors to whom employee functions have been outsourced and whether common ownership of business would require the aggregation of employees.

Christopher J. Carney is Chair of the Labor and Employment Practice Group at Brouse McDowell. Reach him at (216) 830-6825 or

Insights Legal Affairs is brought to you by Brouse McDowell

Published in Akron/Canton

On June 28, 2012, the Supreme Court announced its decision to uphold the majority of President Barack Obama’s 2010 healthcare law. Known as the 2010 Patient Protection and Affordable Care Act (PPACA), the law includes hundreds of provisions.

The Supreme Court upheld the mandate that all nonexempt individuals maintain a minimum level of health insurance coverage or pay a tax penalty. It also upheld new reporting requirements and mandates for employers that offer coverage to their employees, as well as coverage and benefit requirements for health insurers.

While the Supreme Court’s decision confirmed that Americans will see significant changes to the health care industry in the coming years, it also left many individuals wondering about the personal impact this decision will have on them, their families and their businesses.

“While the Supreme Court’s ruling does not affect current coverage for most health insurance policy holders, it is understandable that many are wondering how the ruling affects them personally in the future,” says Marty Hauser, president of SummaCare, Inc. “And although we don’t have all the answers, we do know some things to help employers and individuals work their way through the mandates and provisions of PPACA that may affect them.”

Smart Business spoke with Hauser about what the Supreme Court’s decision will mean to individuals and employers in the coming years, as well as what employers should be doing now to prepare for the upcoming mandates.

What does the Supreme Court’s ruling mean for the average American?

The ruling of the Supreme Court and the provisions under PPACA affect everyone, from the individual with pre-existing conditions to someone who can’t afford health insurance, to the employer that provides coverage to employees and the health insurance company that administers the plan and benefits. Overall, the goal of PPACA is to make health care coverage available to more individuals than ever before.

The ruling not only affects the availability and affordability of health care, but it offers peace of mind for individuals by requiring insurers to provide 100 percent coverage of some benefits, including preventive care and wellness visits, immunizations and some types of counseling and testing.

What are the next mandates and/or provisions that will affect employers and individuals?

Effective Aug. 1, health insurers are required to cover women’s preventive services at 100 percent. This includes well-woman visits; gestational diabetes screening for women 24 to 28 weeks pregnant and those at high risk of developing gestational diabetes; human papillomavirus DNA testing every three years; sexually transmitted infection counseling and HIV screening and counseling; contraception and contraceptive counseling; breastfeeding support, supplies and counseling; and domestic violence screening.

In addition to newly covered preventive services for women, another provision of PPACA that will affect employers and individuals is the Summary of Benefits and Coverage provision. The SBC provision applies to both fully-insured and self-funded group health plans and is meant to help employers and individuals compare benefits between different insurers and/or plans.

The SBC document is designed to describe health plan benefits, including what the plan will cover, limitations and coverage examples. The SBC document must be provided to participants of a health plan enrolling or re-enrolling on or after Sept. 23, 2012. Check with your insurer to determine their process for providing the SBC.

What mandates go into effect in 2013 that will impact employers and/or plan sponsors?

Upcoming mandates slated to go into effect in 2013 for employers and/or plan sponsors include Form W-2 reporting for the 2012 tax year; a $2,500 limit on employee contributions to health Flexible Spending Accounts for plan years beginning in 2013; a requirement for employers to notify employees of the availability of health insurance exchanges; a 0.9 percent tax on earned income of high-income individuals under the Federal Income Contributions Act; and a 3.8 percent Unearned Income Medicare Contribution tax for high income individuals/families.

What mandates go into effect in 2014 that will impact employers and/or plan sponsors?

Mandates effective in 2014 include the ‘pay-or-play’ mandate; employer certification to Health and Human Services regarding whether the group health plan offered to employees provides minimum essential coverage; an increase in permitted wellness incentives from 20 percent to 30 percent; automatic enrollment of new employees in a group health plan for large employers with 200 or more employees; a 90-day waiting period limit for coverage; coverage of certain approved clinical trials for non-grandfathered plans; guaranteed availability and renewability of insured group health plans; prohibition on pre-existing condition exclusions; and complete prohibition on annual dollar limits, which will primarily impact those in the individual market.

What should employers/plans sponsors be doing now to prepare for upcoming mandates?

The most important thing employers or plans sponsors should do now is to start talking to their insurer about insurance options available to them and consider their long-term goals and strategies. It’s also important to figure out when the mandate and provisions will affect the coverage and benefits offered to employees, as some mandates and provisions go into effect upon renewal and are not automatically required, and not every provision applies to each plan type.

Because parts of the mandates and rules aren’t fully written, guidance is still needed. Employers and plan sponsors should pay attention to information regarding upcoming items as information is released.

Marty Hauser is the president of SummaCare, Inc. Reach him at

Insights Employee Benefits is brought to you by SummaCare, Inc.

Published in Akron/Canton

[caption id="attachment_51858" align="alignright" width="200" caption="Bruce Davis, Principal and leader, Health and Group Benefits Consulting, Findley Davies"]


On June 28, the U.S. Supreme Court upheld the majority of the Patient Protection and Affordable Care Act with a 5-4 ruling. As both sides of the political spectrum use the decision on the controversial law to win support for their own policies, employers may be wondering where this leaves them.

“The decision provides some necessary clarity that can lead to more decisive health benefits planning,” says Bruce Davis, principal and leader of Health and Group Benefits Consulting at Findley Davies.

At the same time, Davis warns this ruling isn’t the end of the matter. Some health care issues are unlikely to be resolved until after the November election and the health care exchanges smaller Ohio employers were counting on will be operated by the Department of Health and Human Services.

Smart Business spoke with Davis about what the Supreme Court’s decision means for employers now and in the future.

How does the Supreme Court’s decision impact employers?

Employers now know what they need to do this fall as they head into open enrollment. They need to:

  • Comply with the new Summary Benefit Coverage requirements by modifying open enrollment materials to include new coverage examples with help from health insurance carriers or third-party administrators and professional advisers.

  • Work with payroll vendors, IT staff and human resources to ensure they can report the aggregate cost of their employer-sponsored health coverage on employees’ W-2s to be issued in January if they have more than 250 employees.

  • For plan years beginning on or after Aug. 1, provide expanded coverage for eight categories of women’s preventive care without cost sharing if they are nongrandfathered under the PPACA.

What might this mean in terms of cost?

For 2013, businesses can examine their demographics to understand what expanded women’s preventive care requirements mean in terms of increased claims costs, but generally, Findley Davies believes it will be approximately 1 percent. Other costs, such as coverage for children up to age 26 and general adult/child preventive care requirements had already gone into effect.

Cost increases may elicit new work force strategies. For example, employers with more than 50 employees will be penalized for not offering essential health benefits or offering benefits deemed unaffordable. However, those requirements apply to full-time employees — those working an average of 30 or more hours weekly. Employers in some industries may begin using part-time employees or independent contractors to a much higher degree.

What parts of the Affordable Care Act remain undecided?

In July 2012, Ohio and several other states decided not to participate in expanded Medicaid, which was permitted in the Supreme Court decision, and will not establish a state-based health insurance exchange. HHS will operate the exchange in Ohio in 2014 to serve individuals and employers with fewer than 100 employees. Smaller employers were investigating the idea of moving toward a defined benefit contribution model and letting employees use the exchange to choose their own coverage based on their risk tolerance.

If you have fewer than 100 employees, you’ll need to follow the developments in each of the states in which you do business to determine whether they will move ahead with a health insurance exchange for 2014. It won’t be clear for another year which carriers will participate in each exchange, which plans will be offered and their costs.

Further, the first comparative effectiveness research fees are due July 2013. Employers will remit the $1 per member fees using IRS Form 720, but the IRS has not yet revised that form to take these fees into account. There also are several requirements where the federal government should be issuing guidance in 2012, such as how to file a quality of health care report and how non-discrimination rules apply to insured plans that favor highly compensated employees.

How does politics play into what happens next?

This will be a huge issue for the November election. For example, if the Democratic majority in the Senate changes, then some smaller measures might pass, such as restoring the ability to pay for over-the-counter medicines under flexible spending or health savings accounts.

However, employers cannot wait for the election results. Even if Republican candidate Mitt Romney is elected, the inauguration won’t happen until Jan. 20, well after businesses must comply with some of the act’s provisions.

What should employers tell their employees?

The decision relieved some anxiety and provided clarity, but employers need to begin communicating to their employees. Take advantage of this opportunity and reinforce your commitment to providing a competitive, affordable health plan as you work to comply with the new PPACA requirements.

Employers also need to be ready for questions from their female employees. Health care flexible spending accounts will become limited to $2,500 in January, which needs to be explained in upcoming open enrollment materials. In addition, there’s the misconception that reporting the value of health care coverage on a W-2 means it is taxable. Employers need to be proactive in explaining that this is information gathered for the federal government so it can administer the premium subsidies under the health insurance exchange programs.

Health benefits remain a very important part of employees’ total compensation. Employers will want to drive that message, as well as demonstrate how these benefits fit into the overall value proposition of what it means to work for their organization.

Bruce Davis is principal and leader of Health and Group Benefits Consulting at Findley Davies. Reach him at (419) 327-4133 or

Insights Human Capital is brought to you by Findley Davies, Inc.

Published in Akron/Canton

The entire health insurance industry is holding its breath right now, waiting for the Supreme Court to hand down its decision regarding the Patient Protection and Affordable Care Act.

But regardless of what happens, insurance brokers are urging companies to take steps now to ensure that they have the best insurance plans in place.

“We’re expecting most employers to maintain what they currently have,” says Danone Simpson, founder and CEO of Montage Insurance Solutions. “However, to be prepared, employers need to make sure they are offering a variety of insurance plans that can compete with a low-cost insurance plan in a health care exchange.”

Smart Business spoke with Simpson about how changes will impact business’s health insurance and how companies can work with their insurance carriers to prepare.

What critical steps do companies need to take in regard to their health insurance plans right now?

Employers with 50 employees or more, if they provide insurance, need to work with an insurance brokerage firm to make sure it offers a variety of plans, including a low-cost plan that can compete with health insurance exchanges. It’s a good idea to have two to four plans available.

States are currently putting together health insurance exchanges where employees can look for other plan options that may be lower in cost due to reduction in benefits.  In addition, some of the the insurance carriers, are setting up exchanges. Our firm, Montage Insurance Solutions is setting up an exchange called SIMPLAN™ which will offer all the carrier's plans.  If an employee finds an insurance plan on the exchange that he or she wants to purchase, the employee can purchase it on his or her own.  So many individual plans however, may create problems because it could quickly become unmanageable for a company’s human resources department to assist employees properly.  An HR department might already oversee one group plan — one set of plans with one carrier or two — but if employees buy individual insurance on their own, they will be going to the HR department, asking questions about very complicated and different plan designs from multiple carriers within the exchanges. Even if the reform bill is struck down, these exchanges likely will still exist in some form, as the legislation leaves the design up to individual states.

In addition to placing more strain on HR, under current laws, if an employer of 50 or more employees doesn’t offer what is considered affordable health insurance — 60 percent of covered expenses for a typical population, or employees paying less than 9.5 percent of family income coverage — businesses pay a penalty of $3,000 annually for each employee, with a maximum of $2,000 times the number of full-time employees minus 30. That means that a company with 100 employees would pay no more than $140,000 per year in penalties. The penalty also increases each year with growth of insurance premiums.

However, penalties do not apply to small employers. And if an employer has 25 or fewer employees and an average wage of up to $50,000, the company may even be eligible for a health insurance tax credit.

Will employers’ insurance be affected regardless of the Supreme Court decision?

That’s the part no one knows. The entire insurance industry is in limbo waiting to find out if laws that have already been passed, such as preventive care at no cost, will stay in place. If laws already in place are struck down, each individual insurance carrier will be handling it differently.

For example, the mandate of having young people ages 26 and younger on their parents’ plans will likely be kept by many insurance carriers, as it is a healthy demographic that has been profitable. On the other hand, carriers might not want to keep covering children up to age 18 with pre-existing conditions. If it is no longer law, it might not look good for insurance carriers to make that move, but it will cut costs.

Right now, most health insurance renewals with health insurance carriers will only have single digit increases this year (2012), compared to increases of 11 to 20 percent in 2010 and 2011. One exception might be increases of as much as 40 percent if a company with 50 employees or more has a lot of claims, as carriers want to move them off of their books.

One way to ensure that nothing changes with a business’s insurance plan is through grandfather status, in which a company has kept the same plan it had since 2010. However, carriers are charging more for those with such a status, as it is more costly for them to keep two platforms of insurance plans.

How can a company keep track of its health insurance carriers’ updates and changes?

Every carrier's legal department is reading and handling reform differently. However, it is easier for employers with group plans; not much will change for them as long as they offer at least one plan that is similar to those within health care exchanges.

Make sure you are working with a broker that educates your HR department, and consider education through seminars and informing employees of your benefits through annual enrollment meetings, an annual health-fair and wellness events. Our firm also updates constantly through social media, using powerpoints and whitepapers.. This is a national issue that impacts all employers, but there are also separate state nuisances. For example in California, Gov. Jerry Brown says he plans on keeping the California health insurance exchange in place, no matter what the Federal government decides.

Danone Simpson is the founder and CEO at Montage Insurance Solutions. Reach her at (818) 676-0044 or

Please join us on June 12th from 8:00 am to 12:00 pm PDT for the seminar, “Make your benefits count: cost, delivery, self-insurance and innovations” – A presentation and panel discussion with powerhouse health carrier executives, brought to you by Montage Insurance Solutions.

Smart Business will be presenting live streaming audio for this event. If you want to listen in, please register here.

If you are in California and would like to attend the actual live event, please use this registration link.

Published in Los Angeles

The Patient Protection and Affordable Care Act (PPACA) was signed into law on March 23, 2010, and since then, the health care delivery system has experienced rapid change. Health care reform will be the biggest change to the U.S. health care system since Medicare was established in 1965. According to KPMG and Milliman reports prepared for the Ohio Department of Insurance, nearly 1 million more Ohioans will shift to Medicaid in 2014 at a cost of $250 million to taxpayers. It is estimated that this will increase to $600 million in 2019, while another 524,000 individuals could shift into the proposed government subsidized exchange. It’s also estimated that 660,000 fewer Ohioans will get their health insurance coverage from their employers. Not only does health care reform impact the way health care services are covered and administered, it also changes the delivery of health care and the ways consumers will obtain insurance. In addition, employer groups that offer benefits to their employees will experience change due to health care reform laws. Therefore, many employers have questions regarding how they can continue to offer comprehensive benefits to their employees while maintaining the costs of such benefits. “The small- to medium-sized employer will definitely be affected by the new legislation,” says Marty Hauser, president of SummaCare, Inc. “Many employers plan to continue offering benefits to their employees, but the way these benefits will be offered and the contributions made by the employer will likely change.” Smart Business spoke with Hauser about changes and mandates under the health care reform law, as well as post-reform strategies employers may use when offering benefits. What changes under PPACA have already gone into effect? In 2010, changes include coverage of children with pre-existing conditions; coverage of dependents up to age 26 under federal law and up to age 28 under Ohio law; elimination of lifetime limits of coverage; regulation of annual dollar limits of coverage; and a prohibition against rescission of coverage. In addition, certain preventive services became covered at 100 percent for most policies. What changes under PPACA are up next? While many of the changes under the PPACA law will go into effect in 2014, others will take effect in the coming months, and insurance companies are busy making appropriate preparations now. In August 2012, new women’s health preventive services, including contraception, will be covered at 100 percent if received in-network. These services fall into the categories of evidence-based screenings and counseling, routine immunizations and other preventive services for women. For policies issued or renewed after Sept. 23, 2012, insurance issuers will be required to distribute Summary Benefits of Coverage (SBC) documents to potential enrollees upon application and upon renewal. These documents will allow consumers to easily compare plans from different insurance companies. Under the law, two new resources scheduled to be available for consumers to purchase policies. Consumer Orientated and Operated Plans (CO-OPs) go into effect in 2014 and will offer consumers more choice when it comes to purchasing an insurance policy. CO-OPs are nonprofit groups designed to offer individuals and small businesses more affordable options, and their customers will direct them. Low-interest federal loans will be available to eligible private, nonprofit groups to help set up and maintain the CO-OPs, which can be operated locally, statewide or across several states. The second new resource for consumers in 2014 will be exchanges. Exchanges are state-based transparent, competitive insurance marketplaces, administered by a governmental agency or nonprofit organization, where individuals and small businesses with up to 100 employees can buy affordable and qualified health benefit plans. Standard benefit tiers will be offered on each exchange, and states will have broad latitude in design of the exchanges. All plans offered on the exchanges will be guaranteed issue with no medical underwriting, and some consumers may be eligible for subsidies based on their income. What strategies might employers use so they can continue to offer health insurance to their employees in the post-reform market? Strategies include providing employees with a stipend to pay for health insurance in the individual market or providing a defined contribution and moving to the purchase of policies on the exchanges. Another strategy is offering a policy that promotes a culture of wellness that features a smaller network, larger employee contribution or incentives for meeting wellness and/or preventive care goals. Employers may also continue offering benefits in the same manner as they have in the past. What changes are insurance carriers making? While the focus of most carriers has always been to provide cost-effective care in the most appropriate setting, insurance carriers now are participating with providers in creating Accountable Care Organizations (ACO) and Patient Centered Medical Homes (PCMH) that aim to further provide savings and promote coordinated, appropriate care.  More information and education about these activities will be forthcoming in the near future. Where can employers get more information? Begin with your current insurance carrier or broker. Share questions or concerns. You can work together to determine the best option for your business. Also, provides information that outlines the basics of the reform law and its provisions.  Regardless of the final outcome of PPACA, health care delivery will be changing. With the spotlight on quality, effective outcomes and transparency, the move toward improving the delivery system is certainly well under  way. MARTY HAUSER is the president of SummaCare, Inc. Reach him at Insights Health Care is brought to you by SummaCare, Inc.

Published in Akron/Canton

In order to raise revenue without raising taxes, part of the Patient Protection and Affordable Care Act (PPACA) included some provisions that have had business owners up in arms since the act was signed into law last year.

Small businesses were facing mountains of paperwork, thanks to a requirement contained in the PPACA requiring them to submit Form 1099 to the IRS for all purchases of goods and services of more than $600 annually, regardless of what businesses were purchasing.

“With all the attention paid to this issue, businesses need to know the facts about the reporting requirement’s repeal, as this relates to most all businesses, including non-profits,” says Mike Pine, senior manager at Crowe Horwath LLP. “They should also be aware that there are still some penalties included in the PPACA relating to the repealed legislation that shouldn’t be ignored.”

Smart Business learned more from Pine about the repeal of the Form 1099 requirements in the PPACA and what it means for businesses.

What new reporting requirements were businesses facing with the PPACA?

Signed into law in March 2010, the ‘health care act’ contained a number of components that would have imposed a greater burden on businesses in terms of paperwork and cost. One of these mandates was the expanded Form 1099 reporting requirement, which was enacted as part of the Small Business Jobs Act of 2010, and was in addition to the 1099 reporting requirements imposed on taxpayers who receive rental income.

The additional rules included in the PPACA were going to require any business that made payments of $600 or more per year to any recipient, including payments made for property, to file Form 1099 for each recipient beginning after Dec. 31, 2011. Also, rules included in the Small Business Jobs Act would have required any business making payments of $600 or more to any service provider while earning rental income to file Form 1099 with the IRS and the service provider.

Naturally, businesses and members of the accounting community raised concerns about the additional time and effort that would be required of taxpayers if these requirements were enacted.

What does the repeal of the 1099 legislation mean for businesses?

In April of this year, the president signed legislation that repealed the new 1099 reporting requirements for payments made to corporations and for payments made for property. Basically, the 1099 reporting requirements are back to what they were before the PPACA and the Small Business Jobs Act, which most business are familiar with.

However, the increased penalties portions of the aforementioned legislation were not repealed, so the penalties are now much stiffer than they used to be.

Under the old rules, the penalties for failure to timely file a Form 1099 ranged from $15 to $50 per form, with an annual maximum ranging from $75,000 to $250,000, depending on how late the forms were filed. Under the new rules, the penalties per late filed Form 1099 range from $30 to $100 per form, with an annual maximum ranging from $250,000 to $1.5 million also depending on how late the forms are filed. In addition, the minimum penalty for each failure to file due to intentional disregard increased from $100 to $250.

The increase in the annual maximum should be a real concern to taxpayers. Some small businesses with average annual gross receipts of less than $5 million, however, may be able to take advantage of smaller annual maximum penalties ranging between $25,000 and $50,000.

How can businesses make sure they are avoiding undue taxes and penalties surrounding the PPACA and Small Business Jobs Act?

Because the penalties for failing to comply with these rules can get out of hand quickly, it is important that businesses either have a comprehensive understanding of these rules and procedures in place to ensure adherence to them or that they regularly consult with their CPA to do the same.

What else should business owners do to prepare for and/or mitigate risks associated with this issue?

Considering that taxpayers now face a maximum annual penalty of up to $1.5 million for late filing of Form 1099, this may be an area that businesses should revisit, especially if they have deemed in the past that the risk wasn’t material enough for them to make an investment in their compliance planning and adherence model. This is one of those areas in tax where it may save taxpayers a lot of money to spend the time and resources in advance to make sure they are in compliance of these rules rather than figure it out after it is too late and be stuck with a very large penalty due to Uncle Sam.

These are complex issues, and businesses should consult with a qualified CPA who is familiar with their industry and the steps they should take to avoid financial or filing burdens.

Mike Pine is a senior manager with Crowe Horwath LLP. Reach him at (214) 574-1042 or

Insights Accounting is brought to you by Crowe Horwath LLP

Published in Dallas
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