Category Policies

The Internal Revenue Service has released a new summary of tax credits created by recent legislation that impact small businesses, including the new Patient Protection and Affordable Care Act (PPACA) small business health insurance premium tax credit and the federal COBRA subsidies. The new summary Web page consolidates many of the IRS’ tax credit resources in one convenient location.

Most businesses are having problem understanding the tax credit. The fine print is making it difficult for most small business to qualify for the tax credit. A very big exclusion is a small group cannot take the tax credit for family members that are employees. As we learn more and more about the tax credit it becomes less and less.,,id=223909,00.html

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  As of June 1st 2010 the COBRA Subsidy has expired.

The program provided individuals who involuntarily lost their employer-sponsored health insurance benefits with a 15-month 65% subsidy of their COBRA health insurance premium.

Going forward all new COBRA Eligible people will have to pay the entire premium. All eligible individuals that are still in their 15  month period will still continue to receive the subsidy.Without the subsidy we should see a huge drop off of COBRA participants. The reason is most people will be able to go out to the individual market and pick up polices that have much lower premium. Some people will have to take the COBRA if they have major ongoing health conditions.  Even with ongoing conditions there are options available.

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A cafeteria plan is an employer-sponsored plan that allows employees to choose certain pre-tax benefits or cash. For example, an employee may choose to pay his or her share of premiums for employer-sponsored health insurance before taxes through the plan.

A cafeteria plan must have a written plan document governing the plan and may not discriminate in favor of highly compensated or key employees. To ensure compliance with the nondiscrimination rules, plan sponsors are required to perform several nondiscrimination tests each plan year.

The Patient Protection and Affordable Care Act makes broad changes to the rules and mechanisms affecting certain types of health policies, including significant changes to cafeteria plans and health flexible spending accounts (FSA).

Under the new rules, a sponsor of a “simple cafeteria plan” is not required to perform nondiscrimination testing. Thus, the administrative burden of offering a cafeteria plan is lessened, making it is easier for small employers to offer a cafeteria plan to their employees.

Effective January 1, 2011, certain employers that establish “simple cafeteria plans” are exempt from the Code Section 125 non-discrimination requirements, as well as the non-discrimination requirements applicable to the plans offered through the cafeteria plan (for example, Code Section 129 non-discrimination testing for dependent care FSAs, Code Section 105(h) non-discrimination testing for self-insured medical plans, etc). The act defines a simple cafeteria plan as a plan “which is established and maintained by an eligible employer,” and for which certain contribution, eligibility and participation requirements are met. In general, an eligible employer is an employer that employed an average of 100 or fewer employees for either of the prior two years. Plans that qualify as a simple cafeteria plan for any given year are treated as meeting applicable non-discrimination requirements for that year (that is, non-discrimination testing is not required for these plans).

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The small group tax credit, which will benefit millions of small businesses, has just become more attractive. That’s because the IRS has just released new details clarifying that the tax credit also applies to premiums for dental and vision benefits – not just health benefits. And there’s more good news:

  •  Eligible companies that already get state tax breaks to help pay premiums can also claim the federal assistance.
  • A business owner’s salary won’t be taken into account when figuring out the company’s average wages – helping more firms stay below the cutoff for the federal credit. To qualify for the credit, companies must not employ more than 25 employees and the average annual compensation of those employees cannot exceed $50,000.
  • Nonprofits – including churches and other religious congregations – are eligible to claim a partial credit.

See the latest information at

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The excise tax was included in the Patient Protection and Affordable Care Act (PPACA) passed into law on March 23, 2010. The provision levies a 40% nondeductible tax on the annual value of health plan costs for employees that exceed $10,200 for single coverage or $27,500 for family coverage in 2018. Data reveals that the average 2010 cost of medical coverage for active single and family plans is $5,184 and $14,988, respectively. When these figures are projected out to 2018 with reasonable estimates of future health care inflation, the excise tax is often triggered.

As a result of the excise tax provision, a plan with single coverage costs of $11,200 in 2018 would exceed the limit by $1,000 and be assessed a tax of $400. If 10,000 employees were enrolled in that plan, the total tax bill would be $4,000,000. The tax is paid by the employer either through increased premiums on an insured plan or a surcharge levied by the administrator of a self-funded health plan. Employers will be forced to either absorb the additional tax or pass some, or all, of it back to employees in the form of higher premiums.

Health care reform’s so-called “Cadillac plan” excise tax will affect more than 60% of large employers’ active health plans by the provision’s 2018 effective date.

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Under the new health care reform laws each state has the option of setting up a high risk pool insurance plan. The state of Indianapolis has declined to participate in this high risk pool. Currently we have a high risk pool called Indianapolis ComprehensiveHealth that will contiune to operate seperatly from additional high risk pools.

The state of Indianapolis decided that the federal Gov can set up the High Risk Pool. There are many reason for this but the one that jumps out is cost. Under the Health care Act there has been $5 billion dollars allocated to these high risk pools. This is to fund the plans until the health insurance excahnges go into effect. Its not nearly enough money. Currently in our country we have about 200,000 people on some type of high risk pool insurance. These plans are running $2 billion a year. That $5 billion will be gone in the first year because there will be more than 200,000 on those plans. Then each state will have to fund these plans.  Where will they get the money?

Along with the fuzzy math from the Federal Gov comes along some rules with the high risk plans that makes no sense. First aspect is the premium rate. It is stated that the premium for these plans have to be the same as a standard plan. The problem here is a lot of people will switch the high risk pool because it will be much cheaper than what they are currently paying. Then funding the plan because a huge problem because the premiums are too low. The second major problem is to be eligible for the high risk pool plan you have to be uninsured for 6 months. So all of the capable/responsible people that have been paying high premiums on current high risk pools will not eligible.

These Federal High Risk Pools are going to be a mess.

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The Early Retiree Reinsurance Program helps employers provide coverage to retirees

The recently passed Patient Protection and Affordable Care Act includes an early retiree reinsurance program available to groups that provide medical coverage to early retirees and their spouses, surviving spouses and dependents. This temporary program will provide $5 billion to help employers to continue to provide coverage to retirees ages 55 to 64.

The program provides for reimbursement of an early retiree’s (and covered dependents’) health care claims in an amount equal to 80% of the costs between $15,000 and $90,000. The employer is then expected to use the reimbursement to help lower health care costs (such as premium contributions, copays and deductibles) for participating enrollees.

This program is expected to be effective from June 1, 2010, to January 1, 2014. After January 1, 2014, retirees will have additional coverage options through the health insurance exchanges and federal subsidies for coverage.

Both self-insured and fully insured employer groups that offer early retiree coverage can apply, including plans sponsored by private entities, state and local governments, nonprofits, religious entities, unions, and other employers. To participate in the program, employers must first submit applications to the Department of Health and Human Services, which is expected to make the application available in the coming weeks. We’ll share a link to the application when it becomes available.

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The Mental Health Parity and Addiction Equity Act (MHP) is one of several federal health care reform laws that are creating a significant and immediate impact on employers. The new legislation prohibits group health plans that provide mental health and/or substance use disorder benefits from applying ”

Regulations issued by the federal government

on February 2, 2010, interpret and provide additional guidance on MHP and may result in changes to your health plans. The guidance issued, considered as “interim final rules,” suggests that MHP may result in additional regulations and legislative direction still to come. We will continue to provide you updates as additional information is available. financial requirements” or “treatment limits” that are more restrictive than the “predominant” financial requirement or treatment limit that applies to “substantially all” medical/surgical benefits. We are working to ensure the health plans we offer fully comply with the provisions contained in MHP.

Mental Health Parity Basics

Whom does MHP apply to?

MHP applies to all employer groups with more than 50 total employees. This includes all fully insured and self-funded employer plans, governmental plans, union plans and church plans. Self-funded governmental plans may opt out and should contact their legal counsel if they are interested in investigating this further.

When does MHP take effect?

The new regulations apply to group plan years beginning on or after July 1, 2010. As you may remember from our earlier communications of the statute, we do not track a group’s plan year. Accordingly, we will use the group’s renewal date as the effective date for a group unless we are told otherwise. Employers who renew between November 2009 and June 2010 comply with the regulations based on the original interpretation of the law but may need to make additional changes at their next renewal (or plan year).

What is required for compliance?

MHP specifically requires the following to be in parity between medical and mental health and/or substance abuse disorder services: deductibles, copayments, coinsurance, out-of-pocket expenses and limits on frequency of treatment, number of visits and number of days of coverage.

Key Changes

Benefit Design and Parity Testing

To ensure financial parity between mental health and/or substance abuse disorder, and medical and surgical benefits, we are currently evaluating plan designs using prescribed formulas. Plans are evaluated under a “substantially all” and “predominant” three-step evaluation to determine the availability and level of cost sharing (types of cost sharing include copays, coinsurance, or deductibles).

Step 1

: Benefits are classified into one of six benefit categories: inpatient, in network; inpatient out of network; outpatient in network; outpatient, out of network; emergency care and prescription drugs.

Step 2:

Within each benefit category as specified in Step 1, a two-thirds (“substantially all”) rule is applied for each type of cost share feature employed:

A cost share feature can be applied to mental health and/or substance abuse disorder services

if it applies to at least two-thirds of all medical benefits within that benefit category.

A cost share feature cannot be applied to mental health and/or substance abuse disorder services

if it does not apply to at least two-thirds of all medical benefits. : The evaluation criteria for the tiering of prescription drug benefits differs and is based on reasonableness factors including cost, efficacy, generic versus brand name, and mail order versus pharmacy pick-up. Our current pharmacy practices comply with the new regulations.

Step 3

Following evaluation of our standard plans using the above methodology we can offer the following guidance:

All HSA/HRA plans comply and will not require plan changes.

Non-HSA/HRA plans will likely be modified, and will include features such as 100% coverage of outpatient mental health and/or substance abuse disorder services.

The outpatient benefit category will be impacted most by the rules.

Non-standard plans will be evaluated during the renewal process. Please contact your broker or sales representative for additional information.

: If cost sharing can be applied, the cost sharing amount is determined using the 50% (“predominate”) rule. The cost share is the amount that applies to more than half of the benefits in that category.

Administration of mental health and/or substance abuse disorder benefits through a third-party vendor

Definition of Mental Health and Substance Abuse Conditions

Under the regulations, whether a condition is considered a mental health and/or substance abuse disorder condition is to be determined “consistent with generally recognized independent standards of current medical practice.” Examples of such standards in the regulations include the Diagnostic & Statistic Manual of Mental Disorders, the International Classification of Diseases, and state guidelines. (Note: Standards listed as examples may include conditions not covered by a plan.) Our review indicates no changes are needed due to this provision.

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Recently we have had a handful of national carriers all agree to carry existing dependents through age 26. If the dependent is eligible for the plan you will have to wait until open enrollment. Remember to look at possible individual coverage as it may be significantly cheaper.

To clarify, we will automatically extend coverage for currently enrolled dependents through age 26 as a standard benefit for all existing ASO and fully insured business as of June 1, 2010. This extension of coverage only applies to currently enrolled dependents. Groups may not add new dependents who have previously aged off or who are already beyond the current eligibility age in place for the group

When groups renew or are effective on or after October, their dependent eligibility will automatically change to age 26. This will allow them to enroll dependents up to age 26 during open enrollment.

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As of September 23rd of 2010 dependent children can not be declined or pre-x from a health insurance policy.

This is creating some interesting situations. Right now we have seem some carriers stop selling stand alone children’s policies which is concerning. I can only speculate why they have stopped. One reason is the carriers are getting ready to increase the cost of these plans. If every child is guaranteed issue this mean the carriers are going to be absorbing much higher claims.

An example of this is we insurance children that suffer from a certain condition that  has a mandate of coverage. This mandate states the condition must be covered as any other illness and the child can not be declined from. So we have about 30 stand alone children’s policies at an avg annual premium for $2,400 x 30 policies= $72,000. For this particular condition to be treated ave about $34,000 year per patient x 30= $1,020,000 in claims.  So with this situation the insurance company is paying out much more than they are taking in.

So if we expand this on a state level of Guaranteed Issue for all children we should see an increase in premium to cover the claims.  This is the reason some carriers are not selling stand alone children’s policies as of right now.

What to do if you are in the market for a policy for your child.

If your child can get through underwriting take out a policy a.s.a.p. The reason for this is that policy will be a grandfathered policy which mean you could lock in a much lower rate than what the market has to offer after Sept. 23rd 2010. This could be the difference of paying $83 a month to paying $250 for the same policy after Sept. 23rd.

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