Taking your benefits plan for a ‘test drive’

Considering changes to your employee benefits plan can be a perplexing process. And the risk associated with making any plan modification is heightened when the supporting data are not available.

In today’s health care environment, however, plan design adjustments need to be considered far more frequently due to the pressures of managing costs.

“Providing a comprehensive benefits package is a vital component to attracting and retaining employees. Employers need to carefully consider how changes to the benefits plan design can affect their current and future workforce,” says Aaron Ochs, managing consultant at JRG Advisors. “When considering plan changes, partner with an experienced benefits professional who can utilize plan modeling to determine your best benefits strategy.”

Smart Business spoke with Ochs about how plan modeling helps employers to identify the best use of resources and to engage in experimentation without taking on risks.

What is plan modeling?

Plan modeling makes it possible to create scenarios that consider how medical claims would be paid given various plan design modifications. The analysis also identifies problem areas within the plan. With the results of the professional analysis, employers can consider the realistic solutions that are aligned with their coverage and cost objectives.

For instance, if emergency room costs were disproportionately high, an employer could consider raising the emergency room co-pay, while educating employees about 24/7 telemedicine and urgent care facilities. This would create a lower out-of-pocket cost for these more convenient options to the expensive ER visit.

Even if an employer is just thinking about making plan design adjustments because it suspects it would drive better claims results, the use of modeling can help the employer test-drive those changes before implementing them. The results of the modeling will help an employer see the outcome of suggested changes to its current benefit structure, before actual implementation.

How specifically might the plan benefit from modeling?

Plan modeling gives employers the ability to see the likely impact of plan changes beforehand.

With access to the data provided by plan modeling, employers can identify the strategies that fit the employee population coverage needs and the company goals. Employers mitigate the risk of a benefits design misstep like implementing drastic changes to popular — and necessary — benefits offerings.

With these data points, an employer can make educated, strategic decisions that balance the financial benefit with employees’ coverage and access needs. Some models even illustrate how many employees will be affected by each change, allowing employers to truly balance value and cost.

What are the popular plan changes?

Some of the more popular plan modifications include adjustments to deductibles and co-insurance, office visit versus specialist co-pay, urgent care versus emergency room co-pay, tiered rates for prescription drugs and Health Savings Account plans.

Identifying and managing even just a fraction of costs can generate significant savings year-over-year. That is because the smallest percentages of identified high-spending areas represent the most promising potential for savings. And, the more models employers run, the more likely they will find hidden ways to curb benefits costs.

In a burgeoning area where employers are trying to manage expenses, plan modeling is essential. With this approach, employers can consider changes without having to wait until after implementation to measure success.

Insights Employee Benefits is brought to you by JRG Advisors

Bridging the gap of time, distance and affordability in health care

As technology develops, so too have the improvements and capabilities with the delivery of health care.

“Telehealth innovations in the health care industry are a significant step forward in mitigating rising health care costs,” says Ron Carmassi, client advisor at JRG Advisors.

He added that technology can lead to better outcomes and lower costs, thus saving time and money for the patient, provider and insurance company.

Smart Business spoke with Carmassi about how telehealth can be a supplement or temporary substitute for traditional medical care.

What is telehealth?

Telehealth utilizes technology to facilitate communication, whether real-time or delayed, between a doctor and patient.

One advantage is that medical evaluation, diagnosis and treatment can be accomplished without the doctor and patient being in the same location. In other words, telehealth accomplishes the virtual doctor vist. It also facilitates the exchange of medical information from one location to another so that the evaluated patient can seek treatment in a convenient clinical setting.

How does telehealth help both doctors and patients?

Telehealth offers numerous benefits for doctors and patients. Here are a few of the advantages.

Remote accessibility — The primary functions of telehealth are efficiency and convenience of the communication between the patient and doctor. With this technology, doctors can reach patients in remote, rural and underserved areas where there might not be an available doctor or hospital.

Additionally through telehealth, patients can access doctors for routine visits, emergency care or diagnostics from a specialist from the comfort of their home or the convenience of their workplace.

Specialist availability — Telehealth also provides increased access to specialists. Even when patients live in urban areas with numerous doctors and hospitals, specialists for some health conditions may not practice in the area. This technology enables patients in both rural and urban areas to easily connect with specialists who may be hundreds of miles away.

Cost savings — Patients save money for routine and specialist care because they do not have to pay travel expenses for distant doctors or take excessive time off from work. Additionally, many health plans offer telehealth visits at lower copayments than a primary care physician or specialist visit.

Doctors participating with telehealth also can serve more patients in a day, which can reduce overhead and related costs. With remote monitoring through telehealth services, the larger costs associated with hospitalization, in-home nursing and chronic conditions management can be significantly lessened. For example, remote monitoring provides proper supervision of a patient following discharge from the hospital, which reduces hospital readmissions.

Convenience of care — For some patients, the comfort and convenience of consulting with a doctor from their homes is a tremendous advantage. The convenience also can improve care. For example, whereas patients often forget to bring medications with them to a traditional office visit, when patients are at home they have ready access to the information necessary for the doctor to diagnose and prescribe.

Also, because the patient is at home, it is often easier to take notes or even include a family member who can help retain important information from the doctor.

Fueled by technological advances and answering the demand for consumer-convenient care, telehealth is widely offered through all insurance companies and delivers many advantages. Although not the same as sitting in an actual doctor’s office, a telehealth visit with a doctor can prove beneficial by warding off further illness or disease, stabilizing a condition until a patient is able to reach a hospital or monitoring a patient at home.

Telehealth is not a complete replacement for face-to-face health care, but it can be a helpful supplement and even a temporary substitute for traditional medical care.

Insights Employee Benefits is brought to you by JRG Advisors

How workplace culture props up wellbeing initiatives, and vice versa

More employers recognize that employees’ physical and emotional wellbeing affects job performance. That’s one reason why 41 percent offer a wellness program and an additional 29 percent expect to adopt this benefit by 2019, according to a 2017 Gallagher survey.

What employers may not realize is how significantly their culture and work environment can influence wellbeing outcomes — for better or worse.

Workplace-induced stress has been linked to depression, diabetes, absenteeism, disability and employee turnover. Medical research also shows a relationship between chronic stress and opioid misuse. These findings help explain why it’s important for employers to have both effective wellbeing initiatives and a workplace culture that doesn’t inadvertently undermine these initiatives or employers’ larger objectives.

Smart Business spoke with Joe Roberts, area vice president, Benefits & HR Consulting, Gallagher, about how to empower a healthy workforce.

Realistically, what can employers do to help employees better manage stress?

It’s not possible to eliminate stress entirely, but employers can equip employees to manage stress and the challenges that cause it in wiser, more agile ways. Helping them develop resilience is one key opportunity.

How does improved resilience translate to healthier employees?

Resilience in a work-life integration context means the ability to withstand, grow and adapt, while weathering personal, professional and societal stressors.

Research from the American Heart Association shows that resilience among employees is associated with reduced stress, greater job satisfaction, work happiness, organizational commitment and employee engagement. The benefits of resilience, however, extend beyond the individual. Individual resilience helps build organizational resilience, making it easier to withstand the inevitable ups and downs of striving to achieve organizational goals.

What role do managers play in this equation?

Managers can make or break workplace culture. Equipping them to help build a better employee experience is one of the biggest challenges employers encounter. Many managers have technical expertise but aren’t experienced in guiding and supporting others’ performance. Yet, creating proficient people managers is critical.

Managers impact whether employees perceive their work environment as positive, and how those employees experience that environment can affect their physical health. For instance, research has found stressful working conditions may contribute to injuries. At least one study suggests a negative work environment can also contribute to poor health outcomes because of increased stress.

How can employers give managers the skills to better support the people under them?

Several methods can help managers grow in their roles and actively contribute to a positive, supportive work environment.

On a large, collaborative scale, focus groups, engagement surveys and similar opportunities for direct and indirect dialogue allow employees to have a voice in decisions that affect them. Management that solicits feedback — and takes it into account when making decisions — shows respect for the wants and needs of the workforce. Employers also gain an outlet for ideas.

Tactics that center on the individual employee include defining clear performance goals, giving timely and constructive feedback, communicating in a way that fosters trust and confidence, and supporting employees in developing and pursuing a career path.

A 2017 Gallagher benchmarking survey of mid-sized and large employers shows that top-performing employers use these tactics more often than their same-size peers.

Certainly, many factors affect the ability of employers — and their workforce managers — to build a sustainably engaging culture and productive work environment that drives the business results they’d like. But a reliable, guiding principle for developing a resilient workforce empowered by that culture is: Do whatever is possible to take care of the employees that take care of the business. It’s a no-lose proposition, because the culture that helps employees thrive helps the business thrive, too.

Insights Employee Benefits is brought to you by Gallagher

Are you an applicable large employer?

The Affordable Care Act (ACA) doesn’t require all employers to offer coverage to their employees. Only those employers defined by federal law as applicable large employers (ALEs) must make health insurance available.

“Accurately calculating and knowing your company’s ALE status is crucial to ACA compliance and helping your company avoid a costly penalty,” says Judy Griffith, compliance officer at JRG Advisors.

Smart Business spoke with Griffith about how to determine your ALE status to see if you must offer health insurance.

What exactly is ALE status?

An employer that had an average of at least 50 full-time employees on staff per month during the prior calendar year is an ALE.

ALE status must be determined each year. This determination is vitally important to a business or organization’s ACA compliance. ALEs are subject to the employer shared responsibility and information reporting provisions for offers of minimum essential coverage to employees.

How do employers determine if they are an ALE or not?

You must consider many items to determine whether an organization employs 50 full-time employees and is therefore an ALE. The first question to think about is how are full-time employees defined under the ACA? Full-time employees include an employee who works 30 hours or more per week or employees working 130 or more hours in a calendar month.

Full-time equivalent employees are also included in the count of full-time employees. Full-time equivalent employees are not full-time employees. Instead, the number of full-time equivalent employees is determined by combining the number of hours of service for all part-time and variable hours employees working 120 hours or less during the month and dividing that total by 120.

This number only counts toward the total number employees per month for determining if the employer is an ALE. It won’t change an individual employee’s status from part time to full time, which affects whether an offer of coverage must be made.

How are seasonal workers reflected?

Employers who exceed 50 full-time employees (including full-time equivalent employees) are not considered ALEs where the business employs seasonal workers if certain conditions apply. First, the company’s total workforce must only exceed 50 full-time employees for 120 or fewer days during the year. Second, the employees who exceed 50 full-time employees during those 120 or fewer days must be seasonal workers. Seasonal workers are generally defined as employees who work on a temporary or seasonal basis, such as retail employees who work during the holiday season or summer staff at a swimming pool.

What happens if a company is part of a larger ownership group?

Companies with common ownership may be part of a controlled group, which requires employers to aggregate the total number of employees across the group to determine if the included companies are ALEs. In other words, the employees of every company within a controlled group determine if any company within the controlled group is an ALE.

Also, for a calendar year in which an employer is an ALE, the regulations applicable to ALEs apply to each company within the controlled group regardless of whether the individual company has 50 or more full-time employees or full-time equivalent employees.

What else do employers need to know?

The final item to consider is the definition of a common law employee. Common law employees are generally defined as workers whose work schedule is controlled by the employer (rather than by the worker himself or another employer).

Employers should closely review the job duties and expectations for workers from temporary staffing agencies and those classified as independent contractors because their employment status can be easily confused. These workers may be considered employees who count toward a company’s full-time employee or full-time equivalent employee number. Failure to correctly account for these employees can result in a false conclusion as to whether an employer is an ALE.

Insights Employee Benefits is brought to you by JRG Advisors

How to include cost predictability without the risk in your health plan

While the Affordable Care Act (ACA) has resulted in significant health insurance plan premium increases, employers continue to seek the magic bullet to manage health care costs within the constraints of the ACA while still providing a comprehensive benefits package to their employees.

Historically, self-funded health plans have only been utilized by larger employer groups. However, the ACA’s small group community rating rules continue to result in unsustainable premium increases for small employers, making self-funding a viable alternative to ACA in the form of level-funded health plans.

Smart Business spoke with Craig Pritts, sales executive at JRG Advisors, about this self-insured hybrid health plan and whether it makes sense for your organization.

What is a level-funded health plan?

A level-funded health plan is an underwritten administrative services only or ASO product with integrated stop loss coverage offered by insurance companies and third party administrators (TPAs). As the name suggests, a level-funded plan has fixed or level monthly costs associated with the funding of the employees’ health coverage.

The level cost typically comprises three components: a claims allowance, a TPA fee and a stop-loss coverage premium. The claims allowance is utilized to fund employee medical costs. The TPA fee pays for the administration of the plan, which includes adjudicating claims. The stop-loss premium is utilized toward the coverage to protect the employer against any catastrophic claims.

How does a level-funded plan work?

As claims are incurred on a monthly basis, the insurance company or TPA pays them out of the claims allowance. If there is an extraordinary claim on an individual or aggregate basis, the stop-loss insurance kicks in. At no time does the employer pay more than the level premium amount.

At the end of the plan year, the employer group performance is evaluated. If the group performs well with little or no claims, a portion or all of the unused claim allowance is returned to the group. Additionally, the group could benefit from a lower rate for the following plan year since the monthly allowance and stop-loss premium should be less. If the group performs as originally expected, there is minimal or no premium increase — a stark contrast to the ACA world.

What if the employer has a bad year?

The stop-loss coverage component of a level-funded plan protects the employer in the event of high claims or a catastrophic claim within their employee population. Again, the entire concept of a level-funded plan is that the employer never has to pay more than the level monthly premium.

Since these plans are medically underwritten, it could be realistic to expect a premium increase at renewal. A small employer group in this scenario has an advantage over its larger group counterparts. They can simply revert back to a community rated (non-underwritten) ACA plan, which would likely be to their benefit financially.

How can level-funded plans benefit employers?

Level-funded plans offer the best of both worlds, combining features of fully and self-insured plans. They offer the cost predictability of fully insured while eliminating the risk exposure of self-insured plans. An employer only pays for incurred health care costs and can share savings at renewal if the plan year ran well.

Level-funded plans do not have the same regulatory requirements as fully insured plans, which eliminates the administrative burden on employers and reduces overhead expenses.

What’s the takeaway for employers?

Level-funded plans are more complex than fully insured plans, but also can provide employers a long-term strategy and solution to combat the ACA community rating rules and subsequent surprise premium increases. Employers should consult with an experienced insurance professional who is well versed in the structure, features, implementation and costs of level-funded health plans to determine if this alternative funding strategy is right for their company.

Insights Employee Benefits is brought to you by JRG Advisors

A unique self-insured option for employers

It’s no secret that health care pricing varies widely and has a direct impact to the bottom line for employers of all types and sizes.

As health care costs continue to increase, employers have sought innovative and creative strategies to lower expenses. One strategy, which has gained momentum, is referenced-based pricing (RBP). The RBP approach typically doesn’t involve a traditional insurance company or provider network negotiating covered services for the health plan. Instead, RBP sets limits on the amount a plan will pay for certain medical services.

Smart Business spoke to Michael Galardini, director of sales at JRG Advisors, to break down how RBP works and whether it might be right for you.

How does RBP work with health plans?

RBP sets limits on the amount a health plan pays for procedures or services performed in hospitals and free-standing surgical centers without the use of a PPO network. For physician charges, a national PPO platform is utilized. The limits are based on a percentage above the amount that Medicare pays, which is based on the cost that each facility files with the U.S. Department of Health and Human Services.

The limits are selected by employers in consultation with their benefits advisor, to provide a reasonable and fair profit to the provider. A good RBP model considers both Medicare reimbursement and the actual cost to deliver the service; and adds a fair profit margin for the provider.

If the employee is balance billed for the difference, the RBP provider assigns legal counsel to the employee, at no cost, including defending the RBP payment in court.

Employers often partner with a third party administrator (TPA) to establish the best limits for a given medical procedure. The TPA helps conduct market research and negotiate the most appropriate deals with providers. Finding a reliable TPA, which works well with your company and the RBP provider, is crucial for negotiating the best price for your employees.

What are the advantages of using RBP?

Because there is no assigned network for hospitals and surgical centers, covered individuals may seek treatment at any facility they desire. RBP generally provides anywhere from 60 percent to 70 percent savings from billed medical charges. Typical PPOs only provide 40 percent to 50 percent from billed charges.

Hospital billed charges are taken from a charge master that each hospital maintains. The charge master is a list of the retail price of services that the facility charges for patients without insurance, or network discounts. The charge master changes from time to time, however, generally the charges are about 800 percent to 1,000 percent above the amount that Medicare pays the facility. Even after PPO discounts are applied, employer health plans are paying 400 percent to 500 percent above the amount that Medicare pays.

Are there any drawbacks to RBP?

Given the complexity of RBP, employers and employees need to carefully consider a number of things and be properly educated on how RBP will work for their employees. It is vital to work with a trusted partner that is reliable and experienced in the RBP process.

Furthermore, not using an experienced partner (and its legal advocacy) could potentially leave you and your employees vulnerable to providers attempting to balance bills. While the potential for payment disputes between employers, participants and health care providers always exists over RBP, there has been little RBP litigation to date. Litigation is always a potential threat to both the employer and employees, but disagreements over these issues are typically resolved by negotiation.

RBP can be an innovative strategy for lowering health care costs. As the market continues to evolve, employers are seeking cost reductions. The RBP option is unique in its ability to potentially reduce costs and create informed consumers. Is your business ready to investigate this innovative approach?

Insights Employee Benefits is brought to you by JRG Advisors

Beware of these five common blunders when contracting with a PBM

Pharmacy benefit managers (PBMs) manage the pharmacy benefits for 266 million people in the U.S., but PBM contract language has become increasingly complex.

“The terms laid out in most contracts — not to mention the pricing — can be mind-boggling,” says Gannon Murphy, Ph.D., area vice president of Pharmacy Benefit Consulting, Gallagher.

More than half of employers that responded to a recent Gallagher Benefit Services survey said their PBM contract is too complicated and often benefits the PBM at their expense. And only 30 percent understand the details of their contract.

Smart Business spoke with Murphy and Joe Roberts, area vice president of Benefits & HR Consulting, Gallagher, about five mistakes to avoid in a PBM relationship.

What’s the underlying issue?

There is a fundamental difference between price and cost when contracting with PBMs. Price is what is printed on a page — usually in the form of percentage-based discounts off of average wholesale price (AWP), dispensing fees and any administrative fees, and then offset by applicate rebates. Cost is what the PBM actually pays in hard dollars.

What are the five challenges and how can employers sidestep them?

  1. Fuzzy math — Guaranteed AWP discounts are established in each PBM contract for brand drugs, generics and specialty medications, but there is no regulation that governs AWP. Some PBMs use a recognized, objective and independent source to establish AWP; others follow a proprietary algorithm with AWP amounts that make drug discounts look better than they really are.
    So, ensure the contract states both the PBM price quotes and its reconciliation of guarantees will be based on an objective, independent source.
  2. Differing definitions — The definitions of brand, generic and specialty medications differ among PBMs. Some PBMs redefine a portion of the generic drugs, known as single-source generics, as brand drugs. Therefore, the PBM appears to have improved the discounts to both the generics and brand drugs.
    To avoid this, PBM proposals and contracts should use an objective source for the definition of brands, generics and specialty medications.
  3. Transparent-lite — With the demand for greater transparency, many PBMs offer pass-through pricing. PBMs pass through the same discount they negotiate with their pharmacies to their customer and apply an administrative fee. However, many transparent contracts are as murky as traditional ones, and some are worse.
    To get a clearer picture, have the numbers independently modeled and compared by a qualified professional. This will help establish whether the terms are really transparent or transparent-lite.
  4. Inflation games — Prescription drug costs are outpacing overall inflation, and some drug prices have tripled or quadrupled. PBMs attempt to fight this by negotiating with drug manufacturers through rebates and other means. Not all payers, however, get the full benefit. Most PBMs have inflation cap guarantees but don’t always pass along all the money. PBMs also try to tamp down costs and inflation through utilization management programs. They screen the appropriateness of medications before they’re dispensed. But what if the approval rate is 90 percent? That’s not a good use of the plan’s money. It’s also not uncommon to find PBMs preferring certain medications over viable, lower cost alternatives.
    Make sure the PBM incentives are aligned with those of the plan. The contract should secure a benefit to the plan from inflation caps and guarantees that drive sound clinical decisions.
  5. Not-so-guaranteed — PBM contracts often state a shortfall in a particular guarantee can be made up by overperformance in a different guarantee, a practice known as offsetting. Certain guarantees may look good on the surface, but if the contract language that undergirds them is adverse, the value of those guarantees can be feeble or meaningless.

So, before signing anything, ensure that any offsetting by the PBM is clear and equitable and protects the plan’s interests.

Insights Employee Benefits is brought to you by Gallagher

HIPAA laws: What employers don’t know can hurt them

When it comes to the issue of privacy concerning employees and their health care benefits, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) is one of the most misunderstood and miscommunicated laws for both employers and employees alike.

“HIPAA can seem unclear, and when coupled with an employer’s health care plan, it can further create confusion and frustration for employers, HR managers and employees,” says Keith Kartman, client advisor at JRG Advisors.

Smart Business spoke with Kartman about what employers need to understand regarding privacy laws and health benefits.

What is HIPAA?

The HIPAA Privacy Rule, as outlined by the U.S. Department of Health and Human Services, establishes national standards to protect medical records and personal health information. It applies to health plans, health care clearinghouses and health care providers that conduct certain health care transactions electronically. Specifically, the rule requires appropriate safeguards to protect personal health information privacy, and sites limits and conditions on the uses and disclosures that may be made with this information without patient authorization.

In addition, the rule provides for patients’ rights concerning their health information, including the right to examine and obtain a copy of their health records, and to request corrections. The types of patient health care information that must be disclosed to be considered ‘protected’ by HIPAA includes date of birth, full name, diagnosis and medical record number.

How does HIPAA affect employee benefits?

As an employer, you are considered a health plan if you pay for a portion of the cost of medical care. If you pay for a portion of an employee’s health plan or have a self-funded medical insurance plan, you fall under the HIPAA Privacy Rule and compliance.

HIPAA mandates how a health plan or covered health care providers disclose protected health information to an employer, including managers or supervisors. As an employer, you have access to health care information that falls under HIPAA, such as benefit enrollment, benefit changes, the Family and Medical Leave Act of 1993 (FMLA) and any wellness program information. Conversely, employees who pay for a portion of the total cost of an employee health insurance plan are also required to comply with HIPAA.

Under HIPAA, employees must first provide authorization to health care providers before they can disclose any health care related information to an employer. This is why employees must complete Family Medical Leave Forms authorizing the release of their health care information before granting them FMLA leave.

Under HIPAA, how are employers required to protect an employee’s health information?

Employers are required to protect sensitive health care information and changes to benefit paperwork and any associated plan changes that include any information that comes from an electronic health record.

Employers are also required to protect Flexible Spending Account (FSA) and wellness program information. This means program administrators and other involved employees are provided with HIPAA training to ensure employee health care information is protected.

Occupational Health Records concerning employee physicals, workers’ compensation or workplace injury under the Occupational Safety and Health Administration are also required to be protected under HIPAA. This information should be stored in a secure location. As an employer, you should provide on-going HIPAA training to any and all employees who may have access to sensitive employee health information.

Lastly, employers are required to display HIPAA privacy laws in the workplace and notify employees of any company-specific privacy policies. As an employer, you should have a clearly defined privacy violation policy that outlines the process for notification and investigation of any potential privacy violations.

HIPAA laws regulating the privacy of protected health information are complicated and ever-evolving, so employers need to stay up to date on the latest developments and seek the guidance of knowledgeable benefits professionals or their legal counsel to ensure compliance.

Insights Employee Benefits is brought to you by JRG Advisors

Benefits open enrollment 2019: What you need to know

Open enrollment can be a complicated process, especially if decisions surrounding the employee benefits plan selections are delayed. To make matters more interesting, there are legal changes affecting the design and administration of benefits for plan years beginning on or after Jan. 1, 2019, says Aaron Ochs, managing consultant at JRG Advisors.

In addition, if any changes are made to your company’s health plan benefits for the 2019 plan year, those changes should be communicated to plan participants through an updated Summary Plan Description or a Summary of Material Modifications. Employers should confirm that open enrollment materials contain the required participant notices, when applicable. Some participant notices also must be provided annually or upon initial enrollment.

With the assistance of a knowledgeable benefits professional, employers should thoroughly review plan documents to confirm they include any required changes in adherence to the Affordable Care Act (ACA).

Smart Business spoke with Ochs about a few important plan design considerations to carefully review at open enrollment.

What’s important to understand about grandfathered status, the ACA affordability standard and out-of-pocket maximums?

Grandfathered plan status — If an employer has a grandfathered plan, it needs to determine whether it will maintain its grandfathered status for the 2019 plan year. A grandfathered plan’s status affects its ACA compliance obligations from year to year. If an employer’s plan will maintain its grandfathered status, then the Notice of Grandfathered Status should be provided in the open enrollment materials. If the plan is losing its grandfathered status, the employer should confirm that the plan includes all of the additional patient rights and benefits required by the ACA.

ACA affordability standard — Currently under the ACA, an applicable large employer’s health coverage is considered affordable if the employees’ required contribution does not exceed 9.5 percent of their household income for the taxable year. For plan years that begin on or after Jan. 1, 2019, the affordability percentage is 9.86 percent. Employers should ensure that at least one of the health plans offered satisfies the ACA’s affordability standard. Since the percentage increases from 2018, employers could have additional flexibility to increase the employee share of the premium while still avoiding a penalty under the pay or play rules.

Out-of-pocket maximum — Employers should review the out-of-pocket maximum of their health plan to ensure that it complies with the ACA’s limits for the 2019 plan year. The limits for 2019 are $7,900 for self-only coverage and $15,800 for family coverage.
It is important to remember that a high deductible health plan (HDHP) must be compatible with a health savings account (HSA), and the out-of-pocket maximum must be lower than the ACA’s limit. The out-of-pocket maximum for HDHPs beginning in 2019 is $6,750 for self-only coverage and $13,500 for family coverage.

If the employer’s plan utilizes multiple service providers to administer benefits, it should ensure that the plan coordinates all claims for essential health benefits across the plan’s service providers, or that the plan divides the out-of-pocket maximum across the categories of benefits, with a combined limit that does not exceed the maximum for 2019.

How are the HDHP and HSA limits changing?

The IRS limits for HSA contributions and HDHP cost sharing are increasing for 2019. The HSA contribution limit increases from $3,450 to $3,500 effective Jan. 1, 2019. Effective for plan years beginning on or after Jan. 1, 2019, the HDHP maximum out-of-pocket limit increases from $6,650 to $6,750 for self-only coverage and from $13,300 to $13,500 for family coverage. Employers should review their HDHP’s cost sharing limits and determine if an adjustment is required to meet the 2019 limits.

If an employer communicates HSA contribution limits to its employees as part of the open enrollment process, the enrollment materials should be updated to reflect the increased limits that apply for 2019.

Insights Employee Benefits is brought to you by JRG Advisors

New health plan option for small businesses

Employers with 50 or fewer employees have wrestled with rising health care costs and the Affordable Care Act (ACA) reforms for several years. While small employers recognize that health insurance is a critical benefit to attract and retain a workforce that builds a successful business, many have opted to forgo offering benefits altogether due to affordability and administrative burdens.

On June 19, 2018, the Department of Labor (DOL), after much debate, finalized a new rule that small businesses have been waiting for — the ability to again purchase health insurance in a more effective way, as part of an Association Health Plan (AHP).

These arrangements can pave the way for access to more affordable health insurance. In addition, with AHPs, small employers can avoid certain ACA reforms that apply to the small group market. According to the DOL, this will also provide small employers with more affordable health insurance coverage options.

“Small employers joining together to purchase health insurance is not a new concept to the industry. Under current restrictive regulation, however, these types of plans are not considered a single ERISA (Employee Retirement Income Security Act) plan,” says Ron Smuch, insurance & benefits analyst at JRG Advisors. “Each employer is separately responsible for compliance requirements relating to group health plans to include HIPPA (Health Insurance Portability and Accountability Act of 1996), COBRA (Consolidated Omnibus Budget Reconciliation Act) and the ACA. Furthermore, under current regulations participating employers with 50 or fewer employees are required to comply with additional requirements under the ACA.

“Most notable are the requirements to offer ‘essential health benefits’ and to comply with restrictive community rating rules when calculating premiums. The combination of additional complex administrative burden and continued increased premium costs have made today’s fully insured association health plan less attractive for small employers,” he says.

Smart Business spoke with Smuch about how AHPs could work for your organization.

Why is the new AHP ruling a win-win?

The passage of the DOL’s new association health plan ruling is a win-win and without a doubt will be a more advantageous option for small employers, their employees and sponsoring associations going forward.

For employees, AHPs will be an attractive, more cost-effective alternative to ACA plans. Small employers will now have the ability to join together and take advantage of economies of scale to reduce administrative costs while also offering coverage that is more affordable to employees. Furthermore, the employer will be exempt from some of the burdensome ACA requirements. For the sponsoring associations, offering health plans will prove to be a valuable tool for attracting and retaining employer members.

When does the new rule take effect?

The final rule includes a ‘phased’ applicability date.

  • Fully insured plans were allowed to begin operating under the new rule on Sept. 1, 2018.
  • Existing self-insured AHPs can begin operating under the new rule on Jan. 1, 2019.
  • New self-insured AHPs can begin on April 1, 2019.

What should small employers consider?

Small employers should exercise a certain level of caution when considering an AHP. While this new ruling and benefits arrangement may yield reduced health insurance premium costs, some AHPs may actually cover fewer benefits. Most AHPs will not be subject to the ACA’s requirement for group plans to include coverage for the 10 core ‘essential health benefits.’

Employers should carefully review the benefits design with an experienced professional to ensure the plan is adequate for their overall benefits strategy and workforce coverage needs.

Insights Employee Benefits is brought to you by JRG Advisors