How to navigate the individual open enrollment period of the ACA

Open enrollment for individual plans, under the Affordable Care Act (ACA) is here. Deductibles and out-of-pocket maximums will be resetting and rates will be changing — hopefully for the good.

“This is the time when people have a lot of decisions to make about their health care benefits for the 2016 calendar year,” says Craig Pritts, senior sales executive at JRG Advisors. “Decisions about the network, plan design and whether to use are just some of the choices.”

Smart Business spoke with Pritts about what you need to know regarding the ACA’s individual open enrollment period.

When is open enrollment and why is so important?

Not making a decision by the deadline can be costly. The individual mandate requires most people to have insurance or pay a penalty. There are only a few exceptions.

The penalty for 2016 was increased to be the greater of 2.5 percent of yearly income, or $695 per adult person and $347.50 per child under 18 years old. The penalties are expected to increase in future years, based on cost of living adjustments.

This year the open enrollment period started on Nov. 1 and runs until Jan. 31, 2016. After Jan. 1, only people that qualify for a Special Enrollment Period will be allowed to enroll in an individual plan. This is true of plans direct with insurance companies and on the marketplace ( Special enrollment may be due to involuntary loss of other coverage, marriage, divorce, birth, adoption, death, change of residence or released from incarceration (not escaped).

What’s the difference between the enrollment choices?

A person may enroll in an individual non-group health plan directly with an insurance company or with an insurance company through the marketplace. The biggest difference between the two can be the potential for a reduced premium and/or reduced out of pocket costs on the marketplace.

The Advanced Premium Tax Credit, also referred to as a subsidy, is a reduction in what a person pays monthly for their coverage. The subsidy is based on factors like household income and size and is determined by the marketplace.

Some people also qualify for a Cost Share Reduction, which lowers the out-of-pocket expenses on Silver Level Plans. There are three reductions available based on the household income. Those that qualify may see a plan that normally provides about 70 percent coverage increased to cover 73 percent, 87 percent or even 94 percent of the out-of-pocket costs. This means the deductible, copayments and coinsurance are lower as a result of the cost share reduction.

The subsidy and reductions are only available on the marketplace.

How does plan design play a part in this?

It is very important to be aware of plan design in the post ACA world. As insurance companies face more costs, they are finding ways to deliver plans at an affordable cost. One way the insurance companies are doing this is shifting more of the out-of-pocket costs to the members. A thorough review of the plan and the cost for the services will help you make a better decision.

This is true of the plan network as well. Insurance companies are offering plans with a smaller network or no out-of-network coverage as a way to control premiums. Tiered networks are also becoming more popular options. These have different costs when using providers in different networks. A person may have one deductible for a certain hospital and a different deductible for other hospitals. This allows an insurance company to offer a plan at a lower cost and have the member pay more if he or she uses a facility that charges the carrier more.

At the end of the day, everyone needs coverage and the process has become more difficult to navigate, so you should work with a broker. The plans and rates don’t change and a broker shouldn’t charge you for their help.

As an employer, if you don’t offer coverage, send your employees to someone you can trust to help them. If you do offer coverage, you should be helping your part-time and seasonal employees by referring them to a trusted advisor.

Insights Employee Benefits is brought to you by JRG Advisors

It’s time to review your Medicare plan. Here’s what you need to know.

Medicare open enrollment for the 2016 plan year occurs between Oct. 15, 2015, and Dec. 7, 2016. More than 50 million Medicare recipients will review or change their policies due to alterations insurance companies may make to co-pays, premiums and maximum out-of-pocket costs for the 2016 plan year.

Recipients will also have the opportunity to change their Part D prescriptions drug plan and switch between original Medicare and a Medicare Advantage plan.

“Even if you are satisfied with your current coverage, it is important to compare your current plan to what will be offered in 2016 and to what other alternative plans will offer to ensure you have the best coverage for your situation,” says Crystal Manning, Medicare specialist at JRG Advisors.

Smart Business spoke with Manning to find out what this may mean to you, or your employees and dependents.

Why do you need to review Medicare plans every year?

Alternative plans may offer better health and/or prescription drug coverage at a more affordable price. A simple switch to a competing plan can save thousands of dollars in out-of-pocket costs, including prescription drug co-payments.

What is the Annual Notice of Change?

If you have a Medicare Advantage plan or a stand-alone Part D plan, you should receive an Annual Notice of Change and/or Evidence of Coverage from your current plan. Review these notices for cost, benefit and rule changes for the upcoming year.

If you’re dissatisfied with any change, you can choose a different plan during open enrollment. Changes made to your coverage will take effect Jan. 1 of the next year.

What’s a Medicare Advantage Plan or Part C?

The Balanced Budget Act of 1997 authorized the use of alternative health care plans to provide Medicare benefits, in order to give beneficiaries more options and help control costs. The new program was known as Medicare+Choice or Medicare Part C.

In 2003, the Medicare Prescription Drug, Improvement, and Modernization Act made additional refinements to the program and renamed it Medicare Advantage.
Plans available under the Medicare Advantage program include Private Fee-for-Service Plans, Health Maintenance Organizations, Preferred Provider Organizations, Special Needs Plans and Medical Savings Accounts. Medicare approves Medicare Advantage plans, but private insurance companies run them.

These plans must take the place of Medicare, rather than function as a supplement. Medicare Advantage plans provide Part A (hospital insurance) and Part B (medical insurance) coverage and must cover at least all of the ‘medically necessary’ services that the original Medicare Plan provides. This coverage can include Medicare Part D prescription drug coverage and extra benefits such as dental and vision coverage as well as health club memberships.

So, what do you need to do now?

Start the review process early.

If you are enrolled in a Medicare Supplement plan, you don’t need to do anything during the Medicare open enrollment, you have guaranteed coverage for life, as long as your premiums are paid. Medicare is the primary payer and your supplement is the secondary. Any provider that accepts Medicare will honor your supplement product.

If you are enrolled in a Medicare Advantage plan, research your options and make sure you understand what you’ll receive and how much you’ll pay out of pocket.

This includes checking your deductibles, which can change from year to year. Also, make sure the doctors and hospitals you use are still in the plan network and prescriptions are covered.

If you are still working or have retiree benefits, make sure you understand how those benefits coordinate with Medicare.

Finding the right Medicare plan, figuring out deductibles and worrying about the prescription drug ‘doughnut hole’ can be confusing. Some Medicare plans during the past year may have been altered or premiums may have risen or fallen. Don’t ignore your opportunity to compare plans, and don’t assume your plan will not change.

Discuss your Medicare options with an experienced Medicare specialist to avoid any penalties and confusion and to make the best choice for you.

Insights Employee Benefits is brought to you by JRG Advisors

Cost containment strategies that can control your health care costs

Despite the distractions the Affordable Care Act has caused, employers of all sizes haven’t lost sight of the fact that rising health care costs remain a significant issue that needs to be constantly addressed.

“Employers continue to seek comprehensive medical benefits at a competitive price. Being prepared for your annual renewal means knowing what alternatives exist and selecting the best plan for your company and your employees,” says Craig Pritts, senior sales executive at JRG Advisors.

Smart Business spoke with Pritts about a variety of available solutions that may be implemented alone or in conjunction with other programs to control or reduce costs.

What are some benefit trends that are being used to contain costs?

A survey conducted by the National Business Group on Health indicates full replacement Consumer-Directed Health Plans (CDHP) as the primary cost containment strategy being implemented by employers. A CDHP integrates a high deductible health plan with a health savings vehicle.

Replacing all other plans with a CDHP is a big step for many employers, and requires employee education and understanding in order to reap the full rewards of this type of plan design.

Another benefit trend that is expected to gain momentum is defined contribution strategy. With this approach, the employer contributes a set amount of premium for employees to spend on benefits.

The defined contribution strategy is often combined with two additional trends:

  • Voluntary benefits offer employees the ability to fill gaps in coverage from high deductibles and also offer additional benefits the employer may not offer, such as disability, accident coverage, cancer insurance, pet insurance, etc. Voluntary benefits are most often paid on a pretax basis through the convenience of payroll deduction.
  • Private Exchanges, developed as a result of the changing health care marketplace, act as the vehicle for the defined contribution strategy. They provide ‘one stop shopping’ for employees to purchase plans from a full menu of insurance and non-insurance options.

How does self-funding fit into the cost containment strategies of employers?

There was a time when only the largest of businesses would consider self-funding their health insurance plan, but today employers of all sizes are benefiting from a self-insurance model.

The willingness of an insurance company to administer a self-funded plan to smaller size companies, along with stop-loss insurance options, make this option one that should be discussed.

What other strategies are organizations implementing?

Adding or expanding wellness programs is becoming another popular strategy for employers. Nearly 75 percent of all health care costs are preventable, because they are a direct result of individual choices. These costs can be reduced when employees take more responsibility to manage their own health.

Incentives or disincentives are integrated with employee premium contributions and directly related to participation in wellness initiatives, often including biometric screenings.

An additional cost containment strategy is reducing spousal subsidies or implementing spousal surcharges. Studies indicate that in 2016, 29 percent of employers will have a surcharge in place for spouses who can obtain coverage through their own employers, with an additional 3 percent completely excluding spouses if their employer offers coverage.

What do these trends say about the health care environment today?

All of the trends identified share the underlying theme of helping employees become better health care consumers. Educational support on the part of the employer is critical when implementing any of these strategies.

Also, it is very important to have conversations with your advisor throughout the year about all of the options available so you can be prepared. A good strategy can help a business control costs in the current year and beyond.

Insights Employee Benefits is brought to you by JRG Advisors

How to use incentives to maximize your workplace wellness program

The Centers for Disease Control and Prevention indicates the U.S. is in the midst of a “lifestyle disease” epidemic. The burden of chronic disease is growing as rising rates of obesity, physical inactivity, poor nutrition and tobacco use are resulting in increased cases of diabetes, cardiovascular disease and chronic pulmonary conditions.

In addition, the onset of these chronic conditions is shifting to the younger-age population who are still participating in the workforce. This is causing increased concern among employers regarding the impact on the cost of employer-sponsored health benefits and employee productivity.

Smart Business spoke with Amy Broadbent, vice president of Client Services at JRG Advisors, about how to break the poor health habits of your employees.

What are employers doing to counter poor health habits?

According to the National Business Group on Health, 67 percent of employers have identified ‘employee’s poor health habits’ as one of their top three challenges to maintaining affordable health coverage.

To counter this trend, employers are adopting health promotion and disease prevention strategies, taking advantage of their access to employees at the workplace at an age when intervention geared toward healthy behaviors can still have an impact on long-term health as well as long-term costs.

Survey data indicates that 92 percent of employers with 200 or more employees offer wellness based programs and initiatives at the workplace. Yet, while the availability of lifestyle and behavior modification tools are accessible and promoted, actual participation of employees in such programs remains limited.

Achieving adequate participation is essential for employers to realize the full value of their investment in workplace health promotion. Incentives, therefore, become an integral component of workplace wellness.

How can incentives increase participation in wellness programs?

A commonly incentivized program is the completion of a Health Risk Assessment (HRA). The HRA is a confidential HIPAA-compliant questionnaire that obtains information from employees regarding nutrition, physical activity, tobacco use, weight, blood pressure, cholesterol, etc.

Employers commonly offer a financial incentive or reward for employees who complete the HRA, with the objective of using aggregate HRA reporting to identify specific areas of concern among the employee population so these can be incorporated into workplace wellness programs and initiatives.

While the HRA can offer some insight as to the overall health of a group of employees, there is no true measurement of lifestyle or behavior improvements from year-to-year and, therefore, no way for employers to gauge program effectiveness.

In addition, biometric screenings are growing in popularity — not only as an alternate way to incentivize but also as an effective employee health risk management approach to workplace wellness.

These screenings, which can be conducted on-site at the workplace, measure height, weight, blood pressure, glucose levels, body mass index and more to identify common risk factors and conditions. The goal is not only to identify employees who are at risk, but ensure those with known risk factors or health conditions are adhering to their prescribed medications and/or course of treatment.

Employees are initially incentivized based on their participation in these screenings, typically related to their financial contribution toward the cost of health care premiums. In subsequent years, the incentive is based on the level of improvement over the prior year’s biometric screening results. For example, an improvement in overall score from year one to year two would result in a lower employee health insurance premium contribution.

Despite the increased awareness and workplace promotion, there is often insufficient evidence for employers to objectively measure the true financial impact or return on their investment as a result of workplace wellness efforts.

Biometric screenings, combined with an employee health risk management approach to wellness, enable employers to maintain costs and measure results. Talk to an advisor to learn how this approach to workplace wellness can work for you.

Insights Employee Benefits is brought to you by JRG Advisors

Part 3: Should your company consider a self-insured health care plan?

Almost every employer that offers a group health benefit program is searching for methods to lower their company’s spending.

There are several ways to cut health insurance spending that are probably familiar, such as modifying plan designs, changing insurance companies and shifting more costs to employees. What many employers don’t consider is shifting from offering an insured health plan to self-insurance, says Aaron Ochs, consultant and project manager at JRG Advisors.

“The market is rapidly changing. Because of the effects of the Accountable Care Act and ever escalating costs, self-insurance — normally considered a funding method only available to large employers — is becoming a viable option for employers as small as 25 employees or less,” Ochs says.

Smart Business spoke with Ochs about who should consider getting a self-insured plan.

How does self-funding work?

As the term implies, in a self-insured, or self-funded, health plan, the employer takes on direct financial responsibility for employees’ health care costs. Rather than being pooled into a larger risk pool, the self-funding employer takes on the risk for its own employee group.

Some customization can be applied to the structure of these contracts. For example, all of a health plan may be self-funded, or a contract might be purchased to cover certain types of claims. Most self-funded employers buy stop-loss insurance to cover catastrophic claims, capping the financial risk exposure.

Self-insured health plans are exempt from most state insurance laws and mandates, and not having to pay regular premiums to an insurance company can result in substantial savings. An employer also only pays for the claims that actually occur, not the claims an insurance company projects may occur.

Despite these advantages, many employers, especially smaller ones, tend to avoid self-funding — perceiving it as too risky. According to a recent Kaiser Foundation survey, among employers with 200 or more workers, 82 percent of employees are self-insured. Conversely, only 13 percent of employees in firms with three to 199 employees are in a self-insured plan.

What do employers need to know before starting a self-insured plan?

Self-insurance is not the right approach for every employer. Some companies will benefit from such an arrangement, others will not. An employer should consider that:

  • Self-funding can provide more control over your health plan. Coverage can be customized since you are not purchasing a pre-packaged product. Self-insured plans are subject to ERISA but aren’t bound by state insurance laws and state coverage requirements. You can truly meet employee health care needs with a plan that makes sense.
  • A self-insured company pays health claims as they incur, rather than paying a monthly premium regardless of actual claims activity. This can be attractive, especially during periods where health claims are low. On the other hand, the reverse is also true in that you will have to handle large claims as they come in. Remember, however, that stop-loss insurance limits this exposure and there are other methods to minimize payment swings, such as level funding.
  • When you pay a premium to an insurance company, you pay for more than just claims. The premium takes into account the insurer’s overhead costs, including advertising, technology, legal, etc., some allowance against their own financial risk and a profit margin. Self-insured employers don’t have to pay these hidden costs, but they do incur other expenses like third-party administration of claims and the premium for stop-loss insurance.

In addition, workforce demographics can make a self-insured solution either more or less attractive. Young and healthy employees do not necessarily guarantee a less expensive self-insured solution. Nor will older and unhealthy employees always break the bank. Always remember that self-funding means your company bears the risk associated with your employees, along with the protection of a stop-loss carrier.

It’s worth closely analyzing this risk with a professional who can give you well thought out estimates of your company’s potential liability. Only then will you be able to intelligently decide whether self-insurance is for you.

Insights Employee Benefits is brought to you by JRG Advisors

Part 2: The Defined Contribution model and how it can help you

The concept of Defined Contribution is not a new one, but it is newer for small and midsized businesses. Defined Contribution models have helped large businesses control their costs and provide more choices for their employees.

For small and midsized businesses, this was not an option in the past due to insurance company restrictions on the number of plans a business could offer to employees. The larger the business, the more options the insurance companies allowed them to offer.

As the cost of providing health care increased, there became a need for a new way to offer insurance that made sense for both the employer and the employees.

“The truth is the best plan for the business and the best plan for the employees are usually two very different things,” says Craig Pritts, senior sales executive at JRG Advisors. “The best plan for the business is usually the most cost-effective plan and the plan that most employees would prefer to have is usually the most expensive plan.”

Smart Business spoke with Pritts on how Defined Contribution can work for both employers and employees.

What is the basic model for a Defined Contribution plan?

The model allows a business to establish its contribution to the employees’ benefits and provides a menu of choices for the employees to select from. The menu may only include medical coverage or may include a long list of benefits such as dental, vision, life, disability and even pet insurance in some cases.

Some insurance companies offer this on a private exchange or an electronic platform. The private exchange is built specifically for business. The employers’ contribution is pre-populated and the plans are loaded on the website. The employees are then provided a login to the website where they can shop for the plans that are best for their needs.

Some insurance companies do not use a website at this time, but simply allow the employer to offer more than the traditional one or two plans.

What are some of the benefits for employers and employees?

There are a lot of benefits to both the employer and employees when using a Defined Contribution platform. Business owners find great benefit by controlling their costs, budgeting for future years and reducing the time spent trying to determine the best option for both the business and employees.

Employees love the choice and flexibility of deciding how their money will be spent by selecting the plan that is best for their coverage needs. Experience shows that most employees, when given a choice, will select a different plan than the one the employer provided when the same plan and employer contribution are provided.

The number of businesses using this model has been increasing every year and experts predict that most insurance plans will be offered on an exchange in the next few years.

What else should employers know about Defined Contribution?

The concept of Defined Contribution is also used by the marketplace on the Small Business Health Options Program (SHOP). There are guidelines a business must meet to use the SHOP based on number of employees, average wages and employer contribution.

The SHOP also may provide a business tax credit for groups that meet guidelines set by the Affordable Care Act. In 2015, an employer may only select one plan for the employees, but in 2016 an employer will be able to define its contribution, select the metal level it wishes to offer, and the employees will be able to select a plan from multiple insurance companies within the selected metal level.

Over the last few years, the health insurance industry has seen a lot of changes that have resulted in most businesses waiting and reacting to the changes. This concept gives employers a tool to be proactive in controlling their health care costs.

Insights Employee Benefits is brought to you by JRG Advisors

Part 1: The consumer driven health care approach — HSAs, FSAs and HRAs

Consumer driven health plans are plans designed to lower monthly premiums while engaging employees to manage more of their health care and make smarter decisions.

“Typically these plans have higher deductibles resulting in lower monthly premiums and are partnered with a savings account or a funding arrangement that provides a benefit to the employee,” says Doug Fleisner, a sales executive at JRG Advisors.

The three main types of accounts used with a consumer driven health plan are a Health Savings Account (HSA), Flexible Savings Account (FSA) and Health Reimbursement Account (HRA).

All three are designed to get employees more involved with heath care decisions.

Smart Business spoke with Fleisner about these creative funding strategies.

What are HSAs?

HSAs started in 2004 to replace Medical Savings Accounts and have increased in number ever since. An HSA is only available to individuals enrolled in a qualified high-deductible health plan that is approved by and meets the standards set by the IRS.

If the plan is qualified, whether it is through an employer or purchased as an individual, an HSA may be set up. The account may be funded by anyone, but the insureds’ funds are deposited into the account pre-tax. The IRS will allow a single insured person to deposit up to $3,350 in 2015 and anyone enrolled with a spouse or dependents up to $6,650 in 2015.

Individuals 55 years old and over can contribute an extra $1,000 per year as a ‘catch-up’ contribution. These amounts are reviewed and adjusted for cost of living from time to time. The money in the account can earn interest and grow through a savings account or investment options.

There are sometimes minimum balance requirements for the investment option. Any interest or gains earned are tax-free, in that a person will not pay income tax on that money and if the money is used to pay for qualified medical expenses there is no tax paid on the money when used either. This is often referred to as a triple tax advantage.

Qualified plans with an HSA promote and encourage engagement by placing more of the upfront costs on the employee. This in part has resulted in more people shopping for the best costs and outcomes before using their insurance when they can.

What are FSAs?

FSAs are similar to HSAs in that an employee can use pre-tax dollars to pay for qualified medical expenses. There are even options to use the account for certain dependent day care and transportation costs. The account is set up through an employer and is only funded by the employee or the employer. An employee may choose how much to deposit in the account pre-tax from their paycheck and what qualified items to use the money for.

These plans have a maximum that may be deposited in the account. For 2015, the maximum is $2,550 and a maximum of $500 may carry over. It is important to consider what the FSA will be used for to avoid overfunding the account and losing money. These accounts do not offer investment options and do not earn interest, but they do allow a person use pre-tax dollars for medical and non-medical items and services. It is also important to verify items approved by the IRS for purchase with an FSA.

What are HRAs?

With HRAs, an employer will select a plan with a higher deductible and a lower monthly premium. The savings generated by the lower premium can be used to reimburse the employee for some portion of the deductible and out-of-pocket costs. The account is owned by the employer and typically administered by the insurance company or a third party administrator.

There are more restrictions on this type of funding arrangement now due to the Affordable Care Act (ACA). There may be limits on how much an employer may contribute. Those interested in this option should work closely with their benefits advisor to be sure to remain in compliance with the ACA and the insurance company’s guidelines.

Insights Employee Benefits is brought to you by JRG Advisors

Health care reform signifies new obligations for companies

Of the many components to the Affordable Care Act (ACA), one of the more complex and confusing is just around the corner: new reporting requirements under Internal Revenue Code Sections 6055 and 6056.

“Under these new reporting rules, certain employers must provide information to the IRS about the health plan coverage they offer (or do not offer) to their employees,” says Aaron Ochs, consultant and project manager at JRG Advisors.

Smart Business spoke with Ochs on the new reporting requirements and their impact.

What are some of the new reporting requirements?

On Feb. 8, the IRS released final versions of forms and related instructions that employers may use to report under Sections 6055 and 6056 for 2014. These forms are not required to be filed for 2014, but reporting entities may voluntarily file them in 2015 for 2014 coverage. Forms and instructions for 2015 reporting have not yet been released.

One of the changes permits an Applicable Large Employer (ALE) to use either the first or last day of the first payroll period that starts during each month, or the first or last day of each month, when determining the total employee count.

An ALE is defined as having employed an average of at least 50 full-time employees on business days during the preceding calendar year. A full-time employee generally must have worked 30 hours in a week or meet the definition of full-time equivalents (FTE) as defined by the FTE calculation requirements.

All ALEs will be required to file Form 1094-C (a transmittal) and Form 1095-C (an information return) for each full-time employee. Form 1094-C is used to report employer summary information to the IRS and to transmit Forms 1095-C to the IRS. Form 1095-C is used to report information about each employee.

What is the purpose of these forms?

These forms help the IRS determine whether an ALE owes penalties under the employer shared responsibility rules and to determine whether an employee is eligible for premium tax credits.

Form 1095-C will generally be used by ALEs to satisfy both the Section 6055 and 6056 reporting requirements, as applicable. If an ALE sponsors a self-insured plan they will complete all sections of Form 1095-C to report the information required under both Sections 6055 and 6056; therefore, these ALEs will be able to use a single form to report information regarding whether an employee was covered. In turn, each full-time employee, as defined by the ACA, will receive a copy of Form 1095-C.

The final instructions for Forms 1094-C and 1095-C include a new option for ALEs reporting information for nonemployees (such as nonemployee directors, retirees or nonemployee COBRA beneficiaries).

The final instructions for Forms 1094-C and 1095-C also made several changes to the alternative methods of reporting under Section 6056. Two alternative methods of reporting are available under Section 6056 — the Qualifying Offer Method (and the Qualifying Offer Method Transition Relief for 2015), and the 98 Percent Offer Method.

What about deadlines and any penalties?

It is important to be aware of the deadlines established for reporting. These forms must be filed with the IRS annually, no later than Feb. 28 or March 31, if filed electronically, of the year following the calendar year in which it provided coverage. Any ALE that files at least 250 returns under Section 6055 or 6056 must file electronically. ALEs will be required to furnish statements annually to full-time employees on or before Jan. 31 of the year immediately following the calendar year to which the statements relate.

An ALE that fails to comply with Section 6055 or Section 6056 reporting requirements may be subject to the general reporting penalties. The penalty is generally $100 for each return, up to $1.5 million per calendar year. Penalties may be waived, however, if the failure is due to reasonable cause and not to willful neglect.

All ALEs need to pay attention to the new reporting requirements as they apply to them. Now is the time for companies to begin to track the data that will be needed and decide how best to get this data by discussing this with their payroll provider, tax adviser and benefits consultant.

Insights Employee Benefits is brought to you by JRG Advisors

Health care reform audits: Summary plan descriptions vs. summary of benefits and coverage

With the goal of enforcing compliance with the Patient Protection and Affordable Care Act (PPACA), the federal government has started regular audits of group health plans. These audits extend into compliance of the Employee Retirement Income Security Act (ERISA).

“Sadly, many employers are unaware of the potentially large penalties they face for failure to prove compliance,” says Chuck Whitford, consultant at JRG Advisors.

“In 2013, more than 70 percent of audits resulted in fines or other corrective action. The most common triggers are participant complaints and incomplete or inconsistent information.”

Smart Business spoke with Whitford on what to know about health care reform compliance.

What is the most common compliance failure employers may experience?

The most common one may be having and maintaining an up-to-date Summary Plan Description (SPD). Over the past several years, the government has issued penalties in the $10,000 to $18,000 range for simply failing to provide an SPD within 30 days of a request.

Many employers, to their surprise, may think they are too small to be required to have an SPD. Nearly every employer providing benefits covered under ERISA needs an SPD. The other misconception is that the certificate of insurance from their insurance company will suffice. It does not in almost all cases.

What is an SPD document?

This document is provided to plan participants to explain the plan’s benefits, claims review procedures and participants’ rights. ERISA contains standards for the information that must be included in the SPD and for how the SPD must be distributed to participants.

Employers are responsible for providing an SPD within 120 days of starting a group health plan, within 90 days of enrollment for new participants, within 30 days of a participant’s request for an SPD, every five years if material modifications are made during that period and every 10 years if no changes have occurred.

Are there any other ERISA requirements?

In addition to the SPD document itself, ERISA requires additional notifications that must be provided to plan participants. This includes documents showing compliance with Health Insurance Portability and Accountability Act and COBRA. Last year, one employer was fined $25,000 for continuous failure to provide COBRA election notices.

The Affordable Care Act (ACA) has created additional notices that employers must provide. For example, the ACA requires plan administrators and issuers to provide participants in a group health plan with a Summary of Benefits and Coverage (SBC) during open enrollment and 60 days in advance of any change in plan terms or coverage that takes place mid-plan year.

An SBC is different from an SPD but is no less important. A willful failure to provide and SBC in the required format and delivery can trigger a $1,000 per day penalty for each affected individual. Both the insurer and plan administrator are potentially subject to this penalty.

Have there been recent changes proposed for the SBC?

On Dec. 22, 2014, the departments of Health and Human Services, Labor and Treasury issued proposed regulations for changes to the SBC. These changes clarify when and how a plan administrator or insurer must provide an SBC, shorten the SBC template, add a third cost example (simple foot fracture) and revise the uniform glossary.

The proposed SBC is 2½ double-sided pages instead of the current four double-sided pages. References to essential health benefits and pre-existing condition exclusions will be removed. These proposed changes are effective for plan years and open enrollment periods beginning on or after Sept. 1, 2015.

Every employer, regardless of size, needs to be certain it complies with these laws in the event that the DOL comes knocking on the door. Employers should consult with their benefit adviser for information to avoid DOL triggers, as well as tools to prepare for and navigate an audit.

Insights Employee Benefits is brought to you by JRG Advisors

A new wave of options gives employees choices in coverage with voluntary benefits

Although voluntary benefits are not a new concept, they have increased in popularity as the landscape of health care continues to change and evolve with the implementation of the Affordable Care Act. Traditionally, these types of benefits were offered by large employers.

Smart Business spoke with Michael Galardini, sales executive with JRG Advisors, about the growth in demand for voluntary benefits.

What are voluntary benefits?

These benefits are made available to employees on a voluntary or optional basis. Some key characteristics of voluntary benefits include 100 percent employee-paid insurance, offered through an employer with premiums paid through automatic payroll deductions. Others may include accident insurance, critical illness, auto/homeowners, cancer, disability income and pet insurance. Because these types of benefits are cost efficient and contribute to the employee’s work/life balance, they are becoming a central component of many companies’ overall benefits strategies.

Why should employers consider adding them to the benefits portfolio?

Since many employers find it increasingly difficult to provide employees with a complete benefits package, voluntary benefits have become a solution or supplement to an employee benefits program. Employers can offer these types of coverages without any added expense to the company. Implementation requires little or no administration or support. Trends also show that voluntary benefits have strong emotional appeal to employees, and they have actually come to expect them.

What are some of the advantages to offering voluntary benefits?

Voluntary benefits appeal to both the employer as well as the employee. From an employer standpoint, they offer a means of increased expense control. They provide the employer with a cost-effective way of supplementing benefit cuts or reductions that may be necessary due to budget constraints. By offering voluntary benefits, an employer can stand out from competitors in offerings and image, and thus may attract and retain valued employees.

From the employees’ perspective, voluntary benefits provide the opportunity to access a broader array of benefits in one place and the freedom to choose what best suits their needs. Voluntary benefits often have lower premiums than individual policies that employees would purchase on their own, and the premiums are payroll deducted, often on a pre-tax basis.

What should an employer consider when offering voluntary benefits in its portfolio?

First, employers wishing to offer voluntary benefits must show their support for the benefit program if they want them to be successful with the employees. Such support on behalf of the employer lends itself to motivating employees to see the value of voluntary benefits for themselves and their families. An employer should talk to employees to help determine what offerings would be most useful.

In addition, employers should carefully examine their current benefits package to determine which benefits are popular and those that are not. Most importantly, employers need to determine the type(s) of voluntary benefits that offer the most value for the lowest cost. This is crucial to the success of the voluntary benefits program due to employee’s perceived value.

As the program is implemented, employers should educate employees on what voluntary plans are available and the benefits of enrolling. Lastly, employers should follow up with employees on a regular basis to ensure that they are satisfied, and that there are no problems.

How is the success of a program measured?

Employers should review their voluntary benefits program every 12 to 24 months to gauge the program’s success and effectiveness. This can be accomplished through employee surveys to measure employee awareness, understanding and satisfaction with the benefits that are being offered. In addition, through benchmarking and reviewing participation rates among their workforce, employers can further determine if they are at industry norms with regard to enrollment, re-enrollment and persistency.

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