Manual reenrollment may lessen impact on ACA subsidies and out-of-pocket costs

November 19th, 2014

By Javier Sanabria

Policyholders may receive a lower advanced federal subsidy than they otherwise would if they fail to visit the federal health insurance exchange to reenroll or update their financial information, resulting in higher out-of-pocket costs. Milliman actuary Paul Houchens discussed the auto-enrollment process with Trudy Lieberman, and explains how premium trends affect subsidies and out-of-pocket costs in this Rural Health News article.

The actuarial consulting firm Milliman has found that even small premium increases – in the 5 percent range – can lead to out-of-pocket increases of between 30 and 100 percent for those with low incomes if income information is not updated. Data suggest that most individuals with exchange policies have incomes of $25,000 or less and most families have incomes around $50,000, said Paul Houchens, an actuary with Milliman.

Houchens told me several reasons premiums will be higher this year for many exchange buyers. (Some will see decreases.) Insurers, which offered super low rates in the exchanges last year to entice more customers to their plans, are finding they need to increase their premiums. And in many parts of the country the benchmark plan (the second lowest cost silver level policy) on which subsidies are based has changed, meaning higher premiums for some people.

Premiums also go up each year gradually each year you get older. Because the Affordable Care Act allows insurers to charge older people three times more than younger ones, older people will certainly feel the pinch if last year’s subsidy is too low. They might get larger subsidies if they reapply.

This paper provides more perspective on the potential implications for policyholders and insurance companies related to changes in federal subsidies and the renewal process.

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Regulatory roundup

November 17th, 2014

By Employee Benefit Research Group

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

Instructions for correction or supplemental filing for transitional reinsurance report and payment
The Centers for Medicare and Medicaid Services (CMS) has posted instructions for correction or supplemental filing for transitional reinsurance report and payment.

To read the instructions, click here.

GAO report on small business health insurance exchanges
The U.S. Government Accountability Office (GAO) has released a report entitled “Small business health insurance exchanges: Low initial enrollment likely due to multiple, evolving factors.” The report presents the results of a study the GAO conducted on small business health insurance exchanges.

To read the entire report, click here.

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Agencies warn against reimbursement incentives for employee purchase of ACA exchange insurance

November 13th, 2014

By Employee Benefit Research Group

In a new set of frequently asked questions (FAQs) on the Patient Protection and Affordable Care Act (ACA), federal agencies warn employers against providing premium reimbursement arrangements to help employees purchase individual policies on the health insurance exchanges. The set of FAQs (Part XXII), posted on the website of the U.S. Department of Labor (DOL) and coordinated with the U.S. Departments of Treasury and Health and Human Services (HHS), addresses three circumstances that will be subject to excises taxes for failing to comply with the ACA.

Under one scenario, a vendor claims that employers can cancel their group policies, establish a tax code section 105 reimbursement plan that works with health insurance brokers or agents to help employees select individual insurance policies, and allows eligible employees to access the premium tax credits available in the exchanges. The FAQ states that these arrangements are not permissible because they are group health plans and, as such, would prohibit employees from receiving the federal subsidies. In addition, such arrangements are subject to the ACA’s market reform provisions, such as providing certain preventive services without cost sharing. These types of employer healthcare arrangements “cannot be integrated with individual market policies to satisfy the market reforms,” the FAQ notes, and can trigger excise taxes and other penalties.

The two other FAQs also conclude that the illustrated examples would violate the ACA’s market reforms.

• Offering employees cash to purchase an individual policy would violate the ACA because the arrangement remains a group health plan, which cannot be integrated with an individual health insurance market policy.
• Providing cash to encourage only “high claims risk” employees to decline enrollment in the group health plan would violate the ACA’s nondiscrimination requirements by requiring them, in effect, to pay higher premiums on the basis of an adverse health factor as opposed to employees who are not high claims risks and who were not offered the cash incentive. In addition, this type of arrangement—offering taxable cash or a tax-favored qualified benefit—could result in discrimination in favor of the highly compensated employees under the cafeteria plan rules of tax code section 125.

For additional information about the FAQs and the reimbursement arrangements discussed, please contact your Milliman consultant.

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Premium subsidies considerations for ACA health plan providers

November 12th, 2014

By Javier Sanabria

The U.S. Supreme Court’s recent decision to review the legality of the premium subsidies provision of the Patient Protection and Affordable Care Act (ACA) has major implications for the health insurance industry. In a new article, Milliman consultants Jason Siegel and Jason Karcher address several questions concerning the uncertainty the high court’s decision creates for insurers participating on the healthcare exchange.

Here is an excerpt:

How many people will use FFEs?
As mentioned earlier, APTCs are one of the major legs upon which the ACA stool stands. Individuals are required to maintain minimum essential coverage as long as it is affordable to them. Of those who enrolled in coverage through an FFE, 86% received these credits. Removal of these credits will likely reduce participation. A RAND Corporation study3 commissioned by the U.S. Department of Health and Human Services (HHS) estimates that this would decrease enrollment to 32% of what it would otherwise be. Impacts of decreased enrollment on economies of scale and volatility of claims experience should be considered when planning for 2016.

What will the morbidity of these individuals look like?
The removal of subsidies would encourage adverse selection, as there will be a tendency for the sicker of those who would otherwise receive subsidies to maintain coverage, while the healthier will tend to lapse. The same RAND Corporation study concluded that removal of the APTCs would result in a 43% increase in premiums in the individual market, which would primarily be due to the higher claims levels. Individual issuers should consider the extent to which these forces may impact their memberships and the memberships of their competitors when setting rates for 2016.

Will health plans still have sufficient incentives to participate in the exchange?
APTCs are only available to enrollees through the exchange, which has been a substantial incentive for insurers to offer their plans in the exchange market. In the absence of APTCs, the exchange user fee (3.5% of exchange premiums) may be too high relative to any remaining benefits of exchange participation. In recognition of this, the 2015 FFE contracts with health plans include a clause that these contracts may be terminated by the health plan4 in the event that APTCs are no longer available, subject to state and federal law. However, doing so may engender bad will from members who signed up through the exchange and enjoy the transparency it creates. This should be taken into account when considering exchange participation for 2016 and beyond.

To read the entire article, click here.

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Final rule issued on “excepted” benefits under the ACA

November 11th, 2014

By Employee Benefit Research Group

Employee assistance programs (EAPs) and dental, vision, and long-term care (LTC) benefits that satisfy newly relaxed requirements under a recent final rule are exempt from the health insurance market reforms of the Patient Protection and Affordable Care Act (ACA), starting with plan years that begin on or after January 1, 2015. With the exemption, these programs and “limited scope” benefits will not have to satisfy the ACA’s requirements on preexisting condition exclusions, prohibition on discrimination based on health status, and guaranteed renewability, among other standards. In addition, the final rule from the U.S. Departments of Treasury, Labor, and Health and Human Services will not preclude an individual from receiving federal subsidies to purchase coverage in a health insurance exchange if he or she is eligible for these excepted benefits, thereby removing the penalties a group health plan sponsor could face under the ACA’s employer mandate. This Client Action Bulletin offers more perspective.

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Agencies warn that minimum value plans must cover inpatient hospital and physician services

November 11th, 2014

By Employee Benefit Research Group

The Internal Revenue Service (IRS) has issued Notice 2014-69, stating that an employer-sponsored health plan cannot be considered to offer “minimum value” (MV) coverage unless it provides “substantial” coverage for inpatient hospitalization or physician services (or both). Accordingly, an employer will not be allowed to rely on the MV calculator or on an actuarial certification or valuation to establish MV of a plan that does not cover these services. The IRS coordinated the substance of the notice with the U.S. Departments of Labor (DOL) and Health and Human Services (HHS).

The agencies intend to propose regulations on this prohibition soon, with an expectation of issuing a final rule by the end of March 2015, and applying it then rather than delaying the applicability to the end of 2015 or the end of the 2015 plan year.

However, as of November 4, 2014—the date the IRS released the notice—employers may not adopt new MV plans that do not cover inpatient hospitalization or physician services. If an employer has entered into a binding written commitment to adopt, or has already begun enrolling employees in, a plan without these services for a plan year that begins before March 1, 2015, it will not be penalized. A large employer that fails to offer its full-time employees an affordable health plan that offers MV is subject to a penalty of $3,000 (indexed by the premium adjustment percentage) per full-time employee who receives premium tax credits by purchasing coverage through the health insurance exchanges.

An employer that offers employees a plan without the required services (including a plan before November 4, 2014) must not state or imply that the offer precludes an employee from obtaining a premium tax credit in any disclosure materials. Furthermore, an employer, in a timely manner, must correct any prior disclosures that indicated the plan met MV or precluded employees from receiving a premium tax credit. However, an employer that offers an employee another plan with inpatient hospital and physician services that is affordable and provides MV is permitted to advise employees that the offer will or may preclude them from obtaining premium tax credits.

For more information about the IRS’s notice restricting plans that exclude inpatient hospitalization and/or physician services, please contact your Milliman consultant.

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Regulatory roundup

November 11th, 2014

By Employee Benefit Research Group

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

IRS issues guidance for group health plans that fail to cover inpatient hospitalization services
The Internal Revenue Service (IRS) has issued Notice 2014-69 advising employers and other taxpayers that employer-sponsored health plans that fail to provide substantial coverage for inpatient hospitalization services or for physician services do not provide minimum value within the meaning of § 36B and that the IRS, the U.S. Department of the Treasury, and the U.S. Department of Health and Human Services (HHS) expect shortly to propose regulations to this effect.

The notice also advises that IRS, Treasury, and HHS are considering whether the continuance tables underlying the Minimum Value Calculator produce valid actuarial results for plans with these designs. Employers offering plans that fail to cover inpatient hospitalization or physician services should exercise caution in relying on the Minimum Value Calculator to demonstrate that these plans provide minimum value for any portion of a taxable year after publication of final regulations.

To read the entire notice, click here.

IRS issues FAQs on transitional reinsurance program
The IRS has published frequently asked questions (FAQs) on the transitional reinsurance program of the Patient Protection and Affordable Care Act (ACA). The FAQ provides information on the treatment of contributions made under the reinsurance program.

To read the FAQs, click here.

DOL issues 2014 annual report on self-insured group health plans
The U.S. Department of Labor (DOL) has published its 2014 annual report on self-insured group health plans. Under the ACA, the Secretary of Labor is required to prepare an aggregate annual report that includes certain general information on self-insured group health plans using data collected from the Form 5500, Annual Return/Report of Employee Benefit Plans, as well as certain data from financial filings of self-insured employers.

The 2014 report presents:

• Aggregate statistics describing self-insured plans that file the Form 5500—generally, private-sector employee health plans that cover 100 or more participants or hold assets in trust
• Certain available financial information on employers that sponsor such plans
• Conclusions

To read the entire report, click here.

DOL issues ACA’s implementation FAQs part XXII: Compliance of premium reimbursement arrangements
The DOL’s Employee Benefits Security Administration (EBSA) has published ACA implementation FAQs part XXII. The FAQs address compliance of premium reimbursement arrangements.

To access these FAQs, click here.

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HHS announces indefinite delay of the use of a Health Plan Identifier (HPID)

November 4th, 2014

By Employee Benefit Research Group

Sponsors of most self-insured group health plans need not apply for a health plan identifying number (HPID) by the November 5, 2014, deadline formerly required by regulations from the U.S. Department of Health and Human Services (HHS), according to an October 31 HHS announcement. The use of the HPID in HIPAA transactions will not be enforced until further notices, according to the HHS.

The HPID requirement applied to all “controlling health plans,” although those with $5 million or less in annual receipts had an additional year to comply (see Benefits Alert 14-8).

The delay resulted from a review by the National Committee on Vital and Health Statistics (NCVHS), an advisory body to the HHS, which found a “lack of benefit and value in the use of and reporting of HPIDs in health care transactions” and made several recommendations. The HHS noted that the delay would provide additional time for the agency to review NCVHS’s recommendations.

For additional information about the HHS delay or the final regulations on the use of the HPID, please contact your Milliman consultant.

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Regulatory roundup

November 3rd, 2014

By Employee Benefit Research Group

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

Survey data on health insurance coverage
The U.S. Department of Health and Human Services (HHS) has published survey results assessing health insurance coverage for 2013 and 2014.

Health insurance marketplace coverage became available on January 1, 2014, as a result of the Patient Protection and Affordable Care Act (ACA), and its federally financed, state-optional, Medicaid expansion started on the same day. Since then, millions of Americans have gained coverage through each of these sources, and total insurance coverage has expanded markedly. All told, estimates based on data from the Gallup-Healthways Well-Being Index (WBI) suggest that 10.3 million previously uninsured nonelderly adults (ages 18 to 64) gained coverage under the ACA through June 2014. This estimate includes the effect of the surge in marketplace enrollment in late March, at the end of the open enrollment period, as well as Medicaid/Children’s Health Insurance Program (CHIP) growth through June.

To read the entire survey, click here.

IRS’s IRPAC issues 2014 public report warning of trouble ahead in determining minimum essential coverage
The Information Return Reporting and Advisory Committee (IRPAC) of the Internal Revenue Service (IRS) has released its 2014 IRPAC Public Report. The report provides recommendations on many issues, including determining minimum essential coverage.

To read the Executive Summary, click here.
To read the full report, click here.

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COLAs for retirement, Social Security, and health benefits for 2015

October 31st, 2014

By Employee Benefit Research Group

With the release of the September 2014 Consumer Price Index (CPI) by the U.S. Bureau of Labor Statistics, the Social Security Administration (SSA) and the Internal Revenue Service (IRS) have announced cost-of-living adjustment (COLA) figures for Social Security and retirement plan benefits, respectively, for 2015. The 2015 adjusted figures for high-deductible health plans (HDHPs) and health savings accounts (HSAs) included in this Client Action Bulletin were released by the IRS earlier this year and are provided here for convenience.

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