Adjusted Community Rating under PPACA is explained here, what Employers and Individuals need to know.
Posts Tagged company benefits cost reduction
This is an overview of the Penalties, Taxes, Fees, and other items that need to be considered and calculated by individuals and businesses as it relates to the Provisions and mandates under the Patient Protection and Affordable Care Act PPACA.
One component of the huge healthcare legislation is a tax credit for small employers who pay at least 50% of their employees’ health insurance premiums. Unlike most of the future healthcare bill provisions, this employer federal tax credit can be claimed for year 2010 tax returns due this Spring.
Calculations for this new tax credit are very complex (even by tax law standards!) and are reported on new IRS Form 8941 – a one page tax form which requires completion of 7 different worksheets to accurately calculate the tax credit. You can review IRS Form 8941 with instructions at www.irs.gov. IRS information and resources
Initially, the IRS outlined rules for the tax credit in Notice 2010-44. A follow-up document, Notice 2010-82, explained transition relief related to the rules for a qualifying arrangement and provided more details about the requirements. For example, Notice 2010-82 clarifies how an employer that offers more than one plan determines whether its contribution amount meets the threshold for a qualifying arrangement. The IRS has released several additional items related to the tax credit, including:
“Small employers” who qualify for this 2010 income tax credit (including churches and section 501(C) (3) charitable organizations) must satisfy ALL of the following conditions:
1) You paid at least 50% of the “single employee” premium cost for year 2010. Insurance costs are for primary health insurance and dental and vision insurance. Employer contributions to HSAs, HRAs and FSA medical accounts are not deemed insurance and thus are not eligible for the tax credit; AND
2) You employed fewer than 25 “full-time equivalent” (FTE) employees during 2010. In determining FTE employees, 30 employees who worked 20 hours per week count as 15 FTE employees. Employees who you exclude from this FTE “count” include:
- Owners of the employer and their relatives (parents, children, in-laws, aunts/uncles, etc);
- “Seasonal” employees who worked 120 or fewer days for you during 2010; AND
3) Your “average annual wages” paid to employees during 2010 were less than $50,000 per FTE employee. For this purpose “wages” are gross wages paid before any tax or retirement withholdings.
IF YOU MEET ALL 3 OF THESE CONDITIONS, YOU LIKELY QUALIFY FOR THE TAX CREDIT.
How Much is the Tax Credit?
Small employers who pay at least 50% of their employees’ health insurance, have 10 or fewer full-time equivalent employees, with average annual wages of $25,000 or less per “FTE” employee, will receive a tax credit of 35% (25% for churches and 501(C) (3) charitable organizations) of the employer-paid health insurance premiums in 2010. This can be a large tax credit! HOWEVER, as the FTE employee count trends from 10 employees to 25, and the “average wages” per FTE employee trends from $25,000 to $50,000, the tax credit percentage decreases from the 35%/25% ”starting” tax credit rates.
CAN I “EYEBALL” IT?
Catalist has posted a “Short-Cut Small Employer Insurance Credit Percentage” worksheet as a downloadable form, CLICK HERE . Note that the worksheet is divided unto 2 sections, For-Profit Business and Nonprofit Entity. A for-profit business with 14 “FTE” employees and with average 2010 wages per FTE employee of $35,000 would be eligible to claim a federal tax credit of 12% of the employer-paid health insurance premiums paid during 2010. If the employer paid $30,000 of health insurance premiums for their employees in 2010, their 2010 tax credit would be $3,600.
CLAIMING THE TAX CREDIT
So you have met all three of the eligibility requirements and have “eyeballed” our worksheet and estimated you can claim a tax credit of several thousand dollars. Now what?
You begin the process of completing IRS Form 8941, which for-profit employers will attach to their 2010 business income tax return, and churches and other 501 (C) (3) charities/ministries will complete and attach to non-profit IRS Form 990-T.
Since the Form 8941 calculations are confusing and lack substantial guidance from the IRS, we recommend that you be “pragmatic” and make your best effort to complete an accurate Form 8941 and claim the tax credit based on your calculations. “Close is good enough” in horseshoes and with Form 8941 calculations! If your calculations are later found to be slightly incorrect by the IRS, and you have made a “reasonable effort” to accurately prepare Form 8941, then you will be fine.
The calculations require that you capture 2010 payroll information for employee hours paid during 2010, and gross wages paid for 2010. Legal updates and tax considerations intended to inform clients and colleagues of Catalist about current payroll issues and planning techniques. You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques. For a recommendations, Catalist recommends first consulting with Strategic Partner Profitable Accounting Services.
Grandfathering allowed for most standard and non-standard plans
As we recently communicated with you, the federal government has issued Interim Final Regulations for the grandfathering provision. Because there are advantages to grandfathering, we will grandfather most standard and non-standard plans in our portfolio. To help you better understand what this means to you, we’ve put together this Grandfathering Fact Sheet. It explains:
£ More about grandfathering
£ What changes can be made without losing grandfathered status
£ What changes will result in losing the grandfathered status
This is an important provision for many individuals and group policyholders. You can expect more information about grandfathering, including how we will implement it. As always, please talk with your consultant if you have any questions.
Grandfathering Fact Sheet
Under the recently enacted federal health care reform legislation, health plans can be grandfathered. Interim Final Regulations have been published to provide further clarification on grandfathering. These rules are designed, according to the Obama administration, to allow grandfathered plans to “innovate and contain costs by allowing insurers and employers to make routine changes without losing grandfather status.” In general, grandfather status will be lost if there are significant reductions to benefits or increases in out-of-pocket spending for consumers, such as deductibles or co-pays.
We believe there are benefits to grandfathering for our groups and individual members who wish to maintain their existing health benefit coverage. For this reason, we will grandfather most group and individual plans. In a continued effort to simplify our plan offerings, we are reviewing our current options by state to determine which ones we will offer as grandfathered plans. More information explaining how we will implement grandfathering for our individual and group customers will be provided in the near future.
Additionally, in limited situations, the legislation allows clients that made benefit changes after March 23, 2010, that would not meet the grandfathering rules to regain grandfathered status at the next renewal in 2011. We are working to determine how to help plans possibly regain grandfathered status.
What is grandfathering?
Grandfathering allows groups and individual members that keep their existing plan from March 23, 2010, to January 1, 2014, to be exempt from the new product and rating framework that is effective in 2014. To maintain grandfathered status, a client must continue to keep the plan and the plan’s benefits essentially the same. Grandfathering also exempts plans from some of the requirements of the plan-related provisions effective September 23, 2010.
The following changes can be made without impacting grandfathered status:
Changes in premiums of a policy or plan
Changes required to comply with federal or state law
Changes to increase benefits, or voluntarily comply with provisions of the Patient Protection and Affordable Care Act
Changes to plan structure, for example, switching from a health reimbursement arrangement to major medical coverage, or from insured to self-funded coverage
Changes to a provider network
Changes to a prescription drug formulary
Changes to accommodate mergers and acquisitions (as long as the merger or acquisition is not done solely to allow a group to move from one grandfathered plan to another when the plan change would reduce benefits or increase cost sharing in excess of that allowed by the regulations)
Changes to an ASO plan’s third-party administrator
The following changes would cause a loss of grandfathered status:
Eliminate all (or substantially all) benefits to diagnose or treat a particular condition.
Increase coinsurance (or another percentage cost-sharing requirement) above the level at which it was set on March 23, 2010. In other words, any increase in an insurer or plan’s coinsurance will result in a loss of grandfathered status.
Increase fixed-amount cost-sharing requirements other than copayments, such as a deductible or an out-of-pocket limit, by a total percentage (measured from March 23, 2010) that is more than the sum of medical inflation plus 15%.
Increase copayments above the level in effect on March 23, 2010, by an amount that exceeds the greater of (a) the sum of medical inflation plus 15%, or (B) $5 increased by medical inflation.
Reduce employer contributions (calculated by cost or formula, such as hours worked) toward any tier of group health insurance coverage or a group health plan by more than 5% below the contribution rate on March 23, 2010.
Impose an annual limit on the dollar value of benefits if an annual or lifetime limit had not been previously imposed on all benefits or, for plans that previously imposed a lifetime limit of all benefits, impose an overall annual dollar limit that is lower than the lifetime limit, or, for plans that
previously imposed an annual limit on all benefits, decreases the dollar value of the annual limit.
Issuer or plan sponsor does not disclose to participants and beneficiaries that the plan or coverage is a grandfathered health plan.
Change from one insurer to another
New government website lets consumers compare insurance plans
The U.S. Department of Health and Human Services (HHS) has just launchedHealthCare.gov, a website designed to help individuals and small businesses compare both private and public health insurance plans. Through HealthCare.gov, consumers can find information on literally thousands of private and public health care products.
Important note about how some products appear on the site
Please note that the products are listed under the legal entities – not their brand names, which may cause confusion. Companies currently working with HHS to correct this matter, and they hope to have their familiar brand names appear on the website soon. Until then, please be aware of how our products are listed on the website, state by state:
£ California: Blue Cross of California, Anthem Blue Cross Life & Health Insurance Company
£ Colorado: Rocky Mountain Hospital and Medical Service, Inc.
£ Connecticut: Anthem Health Plans, Inc.
£ Georgia: Blue Cross and Blue Shield of Georgia, Inc., Blue Cross Blue Shield Healthcare Plan of Georgia, Inc.
£ Indiana: Anthem Insurance Companies, Inc.
£ Kentucky: Anthem Health Plans of Kentucky, Inc.
£ Maine: Anthem Health Plans of Maine, Inc.
£ Missouri: RightCHOICE® Managed Care, Inc. (RIT), Healthy Alliance® Life Insurance Company (HALIC),
£ Nevada: Rocky Mountain Hospital and Medical Service, Inc.
£ New Hampshire: Anthem Health Plans of New Hampshire, Inc.
£ New York: Empire HealthChoice HMO, Inc., Empire HealthChoice Assurance, Inc.,
£ Ohio: Community Insurance Company
£ Virginia: Anthem Health Plans of Virginia, Inc.
£ Wisconsin: Blue Cross Blue Shield of Wisconsin, Compcare Health Services Insurance Corporation
In October, HealthCare.gov will also start including rate estimates for private insurance plans. Insurance companies are working with the government to determine how small group information will appear in states with no community ratings.
HealthCare.gov can be a valuable tool for you, which is why Insurance Companies are working hard to have their recognizable names appear on it soon. We’ll keep you posted as more information becomes available to us. If you have any comments or questions, please talk with your sales representative.
Getting to the bottom of health care costs
Did you know: Only three cents of every premium dollar is profit?
On average, 87 cents of every premium dollar you pay is spent covering medical care and services that members receive like doctor visits, hospital costs, prescription drugs and more according to a PriceWaterhouseCoopers medical cost trend report for 2009. Another 10 cents funds services we provide like claims processing, enrollment and billing and provider credentialing. That leaves 3 cents of every premium dollar for profits. Kaiser Health news has reported that the combined annual profits of the top 10 health insurers are equal to just two days work of national health care expenditures or just 0.5% of the estimated $2.5 trillion the nation spent on health care in 2009.
There are no silver bullets or quick fixes but there is a recipe and it tastes good and is healthy. Even if the feds take over insurance there is a role for leaders to lead.
If you would like to see some eye popping data on the value of work-site clinics, just contact BILL CRIMMINS (see below)
The root problem in health care costs defined is lifestyle: thinking and actions by membership. It’s the same old stuff…think right, eat right, exercise, don’t do certain behaviors, sleep enough. All the things your mom told you. Your heart told you.
Any solution will incorporate a system and people that can influence membership to the extent that they take responsibility for their own life and health and do the right things. It may have simplistic characteristics but in reality it will be a well orchestrated effort and balance of simplistic tools synced with timing tools like a finely tuned engine or orchestra.
The most significant tool available today that creates an environment for change and potentially creates a win/win situation for all involved if managed by the most appropriate team without conflict of interest…Work Site-Clinics. It’s not the be all by itself but it may be the Keystone that can be a dynamic and central part of the solution.
It appears from all the data that by itself even if not carefully managed that the work-site clinic model saves money significantly. Like many strong foundational tool’s it has the potential to significantly impact all the players positively. However if not carefully laid (managed) it can become another reproduction of the current system and may prove to be a passing phase.
So…how can you help make your work-site clinic pay off for the long term? Really make a difference?
Make sure it’s managed by people who have a mission and vision to positively influence change in membership and the provider community. They must want to play a role in creating a win/win for all involved.
Make sure they have no conflict of interest beyond being a reasonably profitable business with staying power.
Make sure they charge you enough to do the job correctly. You really do get what you pay for. Don’t be penny wise and pound-foolish. The work-site clinic can be done within your clients current benefit budget but the base pricing may not be enough to really orchestrate the kind of strategy needed to take advantage of the possibilities.
Some examples of tools that will compliment work-site clinic efforts include but are not limited to: A powerful and cooperative benefit administrator, a willing and cooperative provider community partner(s), a reasonably discounted network, a reporting engine that captures clinical and financial data that becomes actionable, a wellness and disease management firm that syncs and is integrated into the medical practices of the provider community and work-site clinic and coaches members visiting the clinic and even those not visiting the clinic, an independent data base that helps members distinguish the highest quality providers within your network of providers, a communications company that reaches out to your membership in their homes not only telephonically but via mail and email so that members are reached where they live out the behaviors we need them to embrace.
Make sure they have reporting tools that will hold you, your membership and all the players accountable.
Don’t be afraid to pay for these services. I can assure you, even if you pay’s the full retail price for these services you will be paying less than every company not using these services.
All these tools independently have impact but synchronized and integrated will powerfully influence members to do the right things. This will have long-term productivity and cultural dividends for employers who want to win over the long haul.
Let me know how I may assist.
Bill Crimmins - Ambassador (Ofc: 765-720-0392)
Bill Crimmins is an experienced consultant serving national markets with a wide array of wholesaling services, he works with brokers, consultants, vendors, TPA’s and Employers to facilitate the changes needed for cost reductions for employers and employees by helping create happy, healthy cultures espcially as it relates to integrating wellness programs with insurance benefits.