Medicaid expansion: A comparison of two states under Section 1115 demonstration waivers

September 3rd, 2015

By Javier Sanabria

Section 1115 of the Social Security Act gives the Secretary of the Department of Health and Human Services authority to approve experimental, pilot, or demonstration projects that promote the objectives of Medicaid and the Children’s Health Insurance Program. Both Michigan and Indiana opted to use a Section 1115 demonstration waiver to implement their respective programs. While both programs were implemented to provide coverage to parents and childless adults up to 133% FPL under a 1115 waiver, the programs were implemented using different characteristics. Milliman consultants Christopher Pettit and Rob Damler provide perspective in this article.

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Virtual conference for pharmacy benefit management professionals

September 2nd, 2015

By Javier Sanabria

Milliman consultant Brian Anderson will copresent at the AIS Health Virtual Conference, “Proven pharmacy benefit strategies for a rapidly changing marketplace,” on September 16. His presentation, “Exclusions and other emerging formulary management strategies,” examines tactics employed within the prescription drug marketplace and provides perspective on strategies that can be effective under particular circumstances. Anderson will be presenting alongside Joshua Freddell, senior director of Enterprise Product Innovation at CVS Health.

The conference will focus on pharmaceutical drug spending and highlight steps the nation’s leading pharmacy benefit managers are taking to control it. For more information on the virtual conference, click here.

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Regulatory roundup

August 31st, 2015

By Employee Benefit Research Group

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

CRS publishes two reports regarding the Cadillac tax
The Congressional Research Service (CRS) has published two reports regarding the Cadillac tax. The first, “The excise tax on high-cost employer-sponsored health insurance: Estimated economic and market effects,” evaluates the potential effect the Cadillac tax may have on health insurance coverage and the healthcare market. It also examines the expected incidence of the tax—which group income will be reduced by the tax. The report discusses implications for economic efficiency in the context of tax administration as well.

To read the entire report, click here.

The second report, “The excise tax on high-cost employer-sponsored health coverage: Background and economic analysis,” highlights the legislative origins of the tax and provides an analysis of the revenue effects of the tax. It analyzes health insurance premium data to provide insights on the share of health insurance plans that could exceed the tax threshold and how the threshold could affect more health plans over time.

To read the entire report, click here.

EBRI Notes: HSA investment accounts: Small, but growing
Investment options in health savings accounts (HSAs) are a fairly new and not widely used option, but they tend to draw larger contributions and have higher balances where they do exist, according to a new report by the Employee Benefit Research Institute (EBRI).

HSAs have been available since 2004, having been created by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), which allows individuals enrolled in certain high-deductible health plans to open and fund a health savings account. HSAs provide account owners a triple tax-advantage, which is one of their key selling points: Contributions to an HSA reduce taxable income, earnings on the assets in the HSA build up tax-free, and distributions from the HSA for qualified expenses are not subject to taxation.

The full report, “Investment options and HSAs: Findings from the EBRI HSA database,” is published in the August EBRI Notes and available for download here.

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Ten considerations for risk adjustment strategy

August 26th, 2015

By Javier Sanabria

The federal risk adjustment program is set up to transfer funds from payers with lower-risk populations to those with higher-risk populations. This was done to “level the playing field” among insurers by removing the incentive to attract only healthy individuals.

Milliman consultants Mary van der Heijde and Jordan Paulus offer some considerations for carriers in their paper “Risk adjustment: Overview and opportunity: Top 10 notable issues related to the federal risk adjuster.”

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Regulatory roundup

August 25th, 2015

By Employee Benefit Research Group

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

IRS publishes final test packages for electronic filers of ACA information returns
The Internal Revenue Service (IRS) has published Publications 5164 and 5165, final test packages for electronic filers of information returns for the Patient Protection and Affordable Care Act (ACA).

Publication 5164, Test Package for Electronic Filers of Affordable Care Act (ACA) Information Returns (AIR), contains general and program-specific testing information for use with ACA Assurance Testing System (AATS). AATS refers to both the process and the system used to test software and electronic transmissions prior to accepting software developers, transmitters, and issuers into the AIR system. Software developers are required annually to pass predefined AATS submissions and test scenarios for the forms that they will support. Transmitters and issuers are required to pass communication tests for the forms they will file.

Publication 5165, Guide for Electronically Filing Affordable Care Act (ACA) Information Returns (AIR) for Software Developers and Transmitters (Processing Year [PY] 2015), outlines the communication procedures, transmission formats, business rules, and validation procedures for returns transmitted electronically through the AIR system. To develop software for use with the AIR system, software developers, transmitters, and issuers should use the guidelines provided in this publication along with the eXtensible Markup Language (XML) schemas published on The procedures in this publication should be used when the following information returns are transmitted electronically:

o Form 1094-B, Transmittal of Health Coverage Information Returns
o Form 1095-B, Health Coverage
o Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
o Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

Note: This publication does not contain information or procedures for filing Forms 1095-A. The transmittal forms 1094-B and 1094-C provide information about the issuer of the ACA information returns and the forms 1095-B and 1095-C provide information about the covered individuals.

IRS releases draft publication
The IRS has released a draft of publication 5223, “General rules and specifications for ACA substitute Forms 1095-A, 1094-B, 1095-B, 1094-C and 1095-C.” The publication states:

“If you do not use the official IRS form to furnish statements to recipients, you must furnish an acceptable substitute statement. Information presented in substitute statements should be in a point size large enough to be easily read by recipients. To be acceptable, your substitute statement must comply with the rules in this Part. Generally, information returns may be furnished electronically with the consent of the recipient.”

To read the entire draft publication, click here.

CMS’s RDS program announcement: Authorized representative verification requirement removed
Previously, in order to receive a retiree drug subsidy (RDS) payment, plan sponsors were required to submit an authorized representative verification form to the Centers for Medicare and Medicaid Services (CMS) to verify that the authorized representative listed on the application has the legal authority to bind the plan sponsor to the terms of the plan sponsor agreement.

Effective immediately, CMS has removed this requirement. New or existing authorized representatives that are assigned to an application are no longer required to be verified in order for a plan sponsor to receive payment.

If you have questions or need additional information, contact CMS’ RDS Center.

IRS issues health tip regarding the ACA and aggregated companies
The IRS has issued Health Tip 2015-50, discussing how the ACA affects aggregated companies. According to the IRS, the ACA applies an approach to common ownership that also applies for other tax and employee benefit purposes. This longstanding rule generally treats companies that have a common owner or similar relationship as a single employer. These are aggregated companies. The law combines these companies to determine whether they employ at least 50 full-time employees including full-time equivalents.

If the combined employee total meets the threshold, then each separate company is an applicable large employer. Each company—even those that do not individually meet the threshold—is subject to the employer shared responsibility provisions.

These rules for combining related employers do not determine whether a particular company owes an employer shared responsibility payment or the amount of any payment. The IRS will determine payments separately for each company

For more information, click here.

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IRS seeks comments on additional ACA “Cadillac tax” issues

August 19th, 2015

By Employee Benefit Research Group

The Internal Revenue Service (IRS) has issued Notice 2015-52, requesting comments on the procedures for calculating and assessing the 40% nondeductible excise tax (also referred to as the “Cadillac tax”) that in 2018 will apply to high-cost employer-sponsored health coverage under the Patient Protection and Affordable Care Act (ACA). The notice supplements the agency’s Notice 2015-16, which sought comments on “applicable coverage” issues (see Client Action Bulletin 15-2). The IRS will consider comments received by October 1, 2015, on both notices in developing a proposed rule.

Key issues Notice 2015-52 specifically requests comments on include:

The persons liable for the excise tax: The IRS is considering two approaches for determining the party responsible for paying the tax in situations where the “coverage provider” has not been defined (i.e., the insurer or, for health savings accounts, the employer): the person administering the plan benefits with day-to-day administrative functions (e.g., a third-party administrator [TPA] in the case of many self-insured plans) or the person with the ultimate authority or responsibility for plan administration. The IRS requests comments—including from collectively bargained multiemployer health plans—on these approaches, the ease or difficulty in identifying such persons, and any other related issues they raise. For example, if a plan sponsor engages a pharmacy benefit manager to process all pharmacy claims separate from the medical TPA, how should this be addressed?

Employer aggregation: The IRS requests comments on the practical challenges of requiring single-employer treatment under the aggregation rules, such as identifying applicable coverage, determining the age and gender adjustment, and identifying the taxpayer responsible for calculating and reporting the excess benefit or the employer liable for the penalties for a failure to properly calculate the tax. When applying single-employer logic to a multiemployer plan, how should costs, excess calculations, and reporting responsibilities be allocated?

Calculating the cost of applicable coverage: The notice indicates that future regulations will exclude excise tax reimbursements (e.g., where the tax is calculated by an employer, paid by an insurer or TPA, and then repaid by the employer/plan sponsor to the insurer or TPA) from the cost of applicable coverage. Thus, the reimbursements will be treated as additional taxable income to the coverage provider. The IRS requests comments on whether some or all of the income tax reimbursement could be excluded from the cost of applicable coverage, and if so, how the agency could develop and present a workable approach.

The notice discusses the timing of the final calculation relative to the different types of financial arrangements: fully insured plans, plans that reward favorable experience in a final accounting, and self-insured plans. The run-out of claims following the applicable year will determine actual costs for the latter two arrangements, and the IRS requests comments on whether there is a timelier approach to reporting.

The notice also contemplates how contributions to health flexible spending arrangements (FSAs), health savings accounts (HSAs), and health reimbursement arrangements (HRAs) could be allocated on a pro rata basis over a plan year rather than on a month-by-month basis when contributions are actually made. For health FSAs with employer flex credits, the IRS is considering safe harbors. The agency invites comments on these approaches and possible alternatives.

Age and gender adjustment to the dollar limit: The notice details possible options for employers to apply the permitted, limited age- and gender-based cost adjustments and seeks comments on the various aspects of the calculation.

For additional information about the IRS’s announcements about the changes to the determination letter program or the closing of the avenues to obtain answers to technical questions, please contact your Milliman consultant.

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HR fatigue: Outsourcing solutions and private exchanges

August 18th, 2015

By Mikel Gray

Gray-MikelMost sales pitches about private exchanges position them as a game-changing way to cut benefit costs while offering employees more choices. While the market will determine whether the private exchanges can deliver on their cost-savings promise over time, they may prove to be appealing for some organizations even if they are cost-neutral, given their other attributes.

The prospect of spending several months forecasting health and benefit budgets, and then either gaining approval or spending even more time refining the budgets by tweaking the plan design, can exhaust a weary human resources (HR) benefits staff. Here are four questions for your organization to consider.

1. Is the HR team keeping up with all of the latest requirements of the Patient Protection and Affordable Care Act (ACA), including the new reporting requirements?
2. Does HR spend more time reviewing budgets and plan designs annually than makes sense?
3. Are the number of vendor contracts and meetings still manageable?
4. Does HR have the support of the management team to hire staff to effectively deal with all of the above?

If you answer no to any of these questions we recommend evaluating an outsourcing solution, or an outsourcing upgrade. In addition, you could also consider a private exchange. Below we show a comparison between outsourcing and private exchanges:

Feature Outsource Private Exchange
Manage Enrollment and Vendor Data Feeds Yes Yes
ACA Reporting Yes Yes
Member Services Yes Yes
Outsource Vendor Renewals No Yes
Rate and Budget Setting No Yes

While the private exchange solution offers a couple of key advantages, it also comes with some downside. Once your organization is committed to exploring either of these options, we encourage you to also consider the following:

• To what degree is your organization’s culture consistent with the change?
• Is there a risk to your organization’s reputation for making this type of change?
• Will your new vendor improve the employee/dependent experience in dealing with enrollment and issues?
• Will the cost of the additional administration be offset by decreases in soft dollars within your organization? Will you be able to show that to decision makers?
• How long is the contract? Are there early termination penalties?
• What if, two to three years down the road, the private exchange decides to evolve to a platform that you are no longer comfortable with? Can you take it back in-house?

Milliman is here to help you work through issues with HR fatigue to find the best solution for your organization.

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Regulatory roundup

August 17th, 2015

By Employee Benefit Research Group

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

IRS issues reporting guidance for applicable large employers
The Internal Revenue Service (IRS) has issued Health Care Tax Tip 2015-48, Reporting Guidance for Applicable Large Employers. The tax tip discusses monthly tracking, annual information reporting, and other reporting requirements.

For more information, click here.

Agencies issue ACA FAQ regarding transparency reporting
The U.S. Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury have prepared a frequently asked questions (FAQ) sheet regarding the implementation of the Patient Protection and Affordable Care Act (ACA). The FAQ answers questions from stakeholders seeking to understand transparency reporting for nonqualified health plan issuers and non-grandfathered group health plans.

To read the entire FAQ sheet, click here.

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Regulatory roundup

August 10th, 2015

By Employee Benefit Research Group

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

IRS releases draft ACA 2015 employer health coverage reporting forms and instructions
The Internal Revenue Service (IRS) issued draft instructions for the forms that employers will use to report health coverage they offer to their employees as required by the Patient Protection and Affordable Care Act (ACA). These draft instructions apply to the draft forms periodically released (and revised) in 2015.

Instructions for Form 1094-B and 1095-B
Instructions for Form 1094-C and 1095-C
Form 1095-B, Health Coverage
Form 2095-C, Employer-Provided Health Insurance Offer and Coverage

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Regulatory roundup

July 28th, 2015

By Employee Benefit Research Group

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

IRS provides tax tips for employers with self-insured health plans
The Internal Revenue Service (IRS) has provided a tax tip for employers with self-insured health plans. All employers that provide self-insured health coverage to their employees are treated as coverage providers. These employers must file an annual return reporting certain information for each employee they cover.

For more information, click here.

Treasury provides update on the ACA and tax filing season
The U.S. Department of Treasury has published a post on its Treasury Notes blog providing an update on the Patient Protection and Affordable Care Act (ACA) and tax filing season. To read the post, click here.

Congressional Research Service publishes health exchange report
The Congressional Research Service has released a report entitled “Overview of Health Insurance Exchanges,” which provides an overview of the various components of the health insurance exchanges.

The report includes summary information about how exchanges are structured; the intended consumers for health insurance exchange plans; and consumer assistance available in the exchanges, as specified in the ACA. It also describes the availability of financial assistance for certain exchange consumers and small businesses, and outlines the range of plans offered through exchanges.

To read the entire report, click here.

CMS RDS program posts announcements on user accounts and Medicare Part D enrollment
The Retiree Drug Subsidy Program (RDS) of the Centers for Medicare and Medicaid Services (CMS) has posted the following two announcements on its website:

Maintain active user accounts to receive payment
Prepare now – Medicare Part D open enrollment period (OEP) is approaching

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