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Maximum Individual Mandate Payment for 2017 Announced

The IRS has released the 2017 monthly national average premium for a bronze-level health plan offered through the Health Insurance Marketplace, which is used to determine the maximum individual mandate penalty.

New Guidance
According to the new IRS guidance, the monthly national average premium for qualified health plans that have a bronze level of coverage and are offered through the Health Insurance Marketplace in 2017 is:

  • $272 per individual (up from $223); and
  • $1,360 for a family with five or more members (up from $1,115).

The guidance is effective for taxable years ending after December 31, 2016.

Calculating the Payment
The Affordable Care Act’s “individual mandate” provision requires every individual to have minimum essential health coverage for each month, qualify for an exemption, or make a penalty payment when filing his or her federal income tax return.

The annual penalty amount is either a percentage of an individual’s household income in excess of the tax return filing threshold or a flat dollar amount, whichever is greater. The maximum penalty amount is capped at the cost of the national average premium for a bronze level health plan available through the Marketplace. At this time, the 2017 inflation adjustment for the flat dollar amount penalty has not been announced.

Visit our section on the Individual Mandate (Individual Shared Responsibility) for more information on the individual mandate.

IRS: Health FSAs Cannot be Used for Insurance Premiums

A recently released IRS letter reaffirms the agency’s view that funds from a health flexible spending arrangement (health FSA) may notbe used to reimburse health insurance premium payments or Medicare premium expenses.

Certain Premiums May be Deducted
The IRS letter points out that health insurance premium payments, including those for Medicare, may qualify for purposes of the itemized deduction for medical expenses. However, only premiums for which the taxpayer is not claiming a separate credit or deduction can be included as part of a medical expenses deduction. Additional restrictions apply to this deduction. For more information, please see IRS Publication 502Medical and Dental Expenses.

Click here to read the IRS letter in its entirety.

For additional information on health FSAs, visit our HSAs, FSAs, and Other Tax-Favored Accounts section.

DOL Releases Updated Model CHIP Notice

An updated model notice for employers to provide information on eligibility for premium assistance under Medicaid or the Children’s Health Insurance Program (CHIP) is now available for download from the U.S. Department of Labor (DOL).

Click here to download the latest employer CHIP notice in PDF format. A Microsoft Word version is also available.

Annual Notice Requirement
The employer CHIP notice must be provided annually before the start of each plan year to inform each employee (regardless of enrollment status) of potential opportunities for premium assistance in the state in which the employee resides. This may or may not be the same as the state in which the employer or its principal place of business is located.

An employer can choose to provide the notice on its own or concurrently with the furnishing of:

  • Materials notifying the employee of health plan eligibility;
  • Materials provided to the employee in connection with an open season or election process conducted under the plan; or
  • The summary plan description (SPD).

The updated model notice includes information on how employees can contact their state for additional information and how to apply for premium assistance, with information current as of August 10, 2017.

Our section on CHIPRA (the Children’s Health Insurance Program Reauthorization Act) contains additional information on employer responsibilities related to the state Children’s Health Insurance Program.

Must Employers Still Comply with The ACA?

Must Employers Still Comply with The ACAMust Employers Still Comply with The ACAEmployers may be confused with all of the bluster and proposals to “repeal and replace” or perhaps “amend” the Affordable Care Act. What parts of this complex law do employers and their employees still need to comply with?

In offering important relief to individuals, the Internal Revenue Service has relaxed enforcement of the individual mandate and did not require taxpayers to report whether they had health insurance coverage on their 2016 tax returns.

However, the IRS has not relaxed enforcement of the employer mandate. This has been confirmed in a release from the Department of Labor. Although the IRS has acknowledged glitches in the ACA reporting system, the IRS has confirmed that an applicable large employer is still subject to an employer shared responsibility payment if it fails to offer coverage to 95% of its full-time employees or has a full-time employee who obtains coverage on the insurance marketplace and receives premium assistance or a tax credit, and the employer’s coverage is not affordable or did not provide minimum value.

Large employers should continue to offer minimum essential coverage to their full-time employees to avoid penalties and to track offers of coverage in order to comply with reporting requirements on IRS Forms 1094 and 1095.

Although the individual mandate has been “non-enforced”, It’s business as usual on the compliance front for employers- especially those subject to the employer mandate and shared-responsibility payments for non-compliance.

MLR Rebates Due to Plan Sponsors by September 30

The Medical Loss Ratio (MLR) rules under Health Care Reform require an issuer to provide rebates if its medical loss ratio (the amount of health insurance premiums spent on health care and activities to improve health care quality) falls short of the applicable standard during a reporting year. Each year’s rebates must be provided by issuers to policyholders (typically the employer that sponsors the plan) by September 30 of the following year.

Employer Distribution
The MLR rules provide that issuers must pay any rebates owed to persons covered under a group health plan to the policyholder, who is then responsible for distributing the rebate to eligible plan enrollees.

In general, there are several ways rebates may be distributed to plan enrollees, including:

  • A rebate check in the mail;
  • A lump-sum reimbursement to the same account that was used to pay the premium if it was paid by credit card or debit card; or
  • A direct reduction in future premiums.

In addition to the above methods, employers may also apply the rebate in a way that benefits employees.

Check out our section on Medical Loss Ratio (MLR) Rebates & Employer Responsibilities to learn more.

Senate “Repeal and Replace” Bill Fails: What’s Next for Employers?

The Senate Republican effort to pass the ACA “repeal and replace” bill appears to have reached a dead-end. When two more Republican Senators voiced their opposition to the “Better Care Reconciliation Act” (BCRA) last night, the effort was effectively a failure.

In the end, the bill couldn’t bridge the gap between moderate and conservative GOP senators. There wasn’t any provision for both making the conservatives happy with full repeal, and moderates happy with less impact on Medicaid.

Although Senate leadership hints that the next round will be to attempt repeal separately from “replace” legislation. This will likely fail as well. So that leaves us with the ACA in effect and a whole basket of questions and unknowns about the rest of 2017 on into 2018. Will the Trump administration enforce the employer mandate? How about the individual mandate?

Will Trump administration DOL employees enforce compliance through audits and fines? Or, will they slack off of enforcement as the administration directed earlier? There are no easy answers and employers will need to pay attention to communications and notices from their advisors for guidance.

Markets and the economy in general don’t like uncertainty… but that is what we have. Employers, employees, individuals and insurance carriers all have a huge stake in the outcome. The battle over the ACA is one of the more unique battles in the history of recent politics. On the one hand, it is doomed to failure with adverse impact on millions within a very short time- FACT. On the other hand, it’s so political that a compromise in the “common sense” course of thought can’t be reached. Unfortunately, everyone is likely to be a loser in the status quo unless our elected officials can drop the political labels and pass a bill that creates financially sustainable, affordable health care for all Americans.

OSHA Not Currently Accepting Electronic Submissions of Form 300A Information

The federal Occupational Safety and Health Administration (OSHA) has announced that it is not accepting electronic submissions of information from 2016 Forms 300A at this time. As a result, OSHA has proposed extending the July 1, 2017 date by which certain employers are required to electronically submit these forms pursuant to its recent “Electronic Recordkeeping Rule” to December 1, 2017.

‘Electronic Recordkeeping Rule’ Explained
The Electronic Recordkeeping Rule, generally effective as of January 1, 2017, requires certain employers to electronically submit injury and illness data to OSHA that they are already required to record on their OSHA Forms 300A. Under the rule, the following entities were required to make these submissions by July 1, 2017:

Click here to read OSHA’s announcement.

Note: Establishments located in OSHA “State Plan” states should check with their state plans for the implementation date of the new requirements in their state.

To read more about OSHA’s record keeping requirements, please visit our Safety & Wellness section.

Benefit Contributions Should be Designed to Achieve Company Goals

Over the years, it has always amazed me how little thought some employers put into their contribution scheme for employee benefits. When I ask employers why they have the contribution schedule they use, I frequently get something like… “I’m not really sure; I think the old HR director set that up in 2003.” I’m not joking.

At worst, poorly designed plans can incent employees to do the opposite of what you want to accomplish. At best, a well-designed contribution scheme can attract higher quality employees, lower turnover, and cost your company less in premiums. Let’s look at some of the characteristics of a well-designed contribution strategy for employers in a dual-option or triple option environment:

  • In general, the employer should NOT pay 100% of the employee-only premium. If the employer pays 100% of the cost, who will opt out of the plan if they have access to other coverage? NO ONE. While paying all of the cost may seem generous, this approach is almost always wasteful. Employers covered as retired military have Tri-Care, which provides these people with a high level of benefits. Requiring even a small contribution will eliminate employees with other coverage from “double-dipping”. Other categories of employees with access to other coverage are retired workers of many types, employees covered on a spouse’s plan where the employer pays all of the cost, and some union plans.
  • Consider paying a flat amount per employee instead of a percentage of the premium. This is especially fair if the rates for the medical plan are age rated, as many small group policies are. A case could be made that the percentage is discriminatory to younger employees, whose age rates are much lower. Older employees are getting a much larger benefit, if a percentage is paid, as their age rates are much higher. There are many different thoughts as to the “fairness” of this approach.
  • Base the contributions on your company culture, type of business, and what the competition for employees is like. Some industries are quite competitive, and benefit costs to employees can make or break retention and recruitment. Other industries such as hospitality and retail are not facing as difficult a hiring environment and benefits are not expected to be as rich. There is a wide range of strategies, even within the same industry.
  • Make the contribution plan purposeful. Contribution approaches that pay the same percentage of the premium, regardless of what plan is chosen are not recommended. Most employers are not interested in encouraging employees to choose the most expensive, least cost-efficient plan. High-cost plans with a small or no deductible may be offered alongside more moderate plans for a variety of reasons. However, contributions as a percentage should be based on the lowest cost plan, and employees should have to “buy-up” and pay the difference between the two. Paying a flat percentage of any plan subsidizes the high-end plan and encourages selection of the highest cost option, even when it isn’t the best value for employees.
  • By keeping these guidelines in mind, employers can gain more control over their benefit dollars and still provide excellent benefits to employees. Carefully considering how contributions will affect employee decisions can save a company thousands of dollars a year.

Potential Pitfalls of Self-Funding Medical Benefits

There is a lot of talk about self-funded or level-level funded medical plans as a way for companies to save money on health benefits… for good reason. It is possible for employers to save 20% or more of health plan costs with self-funding. But what are some of the potential downsides of self-funding to consider?

  • Although there is stop-loss insurance in place, typically, the total plan cost can be 20% to 25% more than fully-insured if the claims level is significantly higher than projected.
  • Only employers with proof of better than average claims expense should consider self-funding.
  • There can be a higher risk of liability since the employer is technically the insurer of the plan, and not an insurance company.
  • Employers with under about 500 employees should seek out a “partially self-funded”, or “level-funded” contract, where monthly claim reimbursement levels from employer funds are capped at the level of a fully-insured plan, or at one-twelfth of the total expected paid claims. Without this protection, only one month of higher than normal claims can be a burden for a smaller company.
  • Employers need to work with a broker or consultant who has experience with setting up and working with TPAs and stop-loss carriers. Also, there are compliance and cost issues that require the help of an experienced professional in self-funding.

Self-funding is an attractive alternative to fully-insured health plans for many companies. Self-funded policies are now available to employers with as few as 10 employees in some areas. With proper stop-loss insurance levels and an experienced professional to guide the way, more companies than ever can save money by implementing self-funded Health plans.

The Advantages of Self-Funding or Level-Funding for Employee Health Plans

Dependent on the size of the employer, there are four key reasons to implement this strategy: 

  • Potential claim cost savings: With self-funding, employers with better than average claim losses will save money, as claims are not “pooled” or averaged with other employers that may have much higher claim levels.
  • Tax savings: Reduced administrative costs due to no state premium tax. Unlike insured policies, self-insured plans are not subject to state premium taxes, a savings of 2 to 3 percent of the premium dollar value.
  • Improved cash flow: Self-insured employers do not have to pre-pay for coverage, and claims are paid as they become due.
  • Customization: Ability to customize plan design, as well as flexibility to work with multiple vendors. Employers can choose the benefits they want to offer and select benefits to offer on an individual basis or eliminate them altogether.

Employers can build the program their way, rather than fit into the “one size fits all” approach usually required in a fully-insured arrangement. This freedom gives employers the ability to structure their benefit offerings around the needs of its employees. In self-funding, employers are not required to provide many of the “state mandated” benefits that may not be useful to the employer’s specific population.

Employers are not locked into only one carrier’s services for pharmacy, case management or other services. Employers typically employ a “third party administrator” to pay claims on behalf of the employer.  These organizations are highly skilled and structured to save employers significant administrative dollars over fully-insured plans.

Within self-funded plans, there is always stop-loss insurance included for both individual insured employees, and the company as a whole.  As a result, even though the approach is called “self-funded”, the risk is tightly managed by stop-loss policies that protect the employer.

Advanced Benefit Strategies has extensive experience in moving qualified clients to self-funded arrangements.  Talk to us about how it may save your company up to 20% in health plan costs.


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