Healthcare Options
Health Plan Options 2014
Beginning in 2014, the ACA generally will require all U.S. Citizens and
permanent residents to maintain health insurance coverage that qualifies as
“minimum essential coverage”, or be subject to a tax penalty. Minimum essential
coverage includes coverage under an “eligible employer-sponsored plan”, which
includes any plan other than a plan that provides only “excepted benefits”
Employees covered under an eligible employer-sponsored plan are
prevented from receiving premium subsidies or cost-sharing subsidies
even if they otherwise qualify.
Certain benefits are always treated as “excepted benefits” because they are not
considered health insurance. These include accident-only coverage, disability
income insurance, and worker’s compensation benefits. Other benefits are
considered “excepted benefits” if they are offered separately and not coordinated
with benefits under another group health insurance plan. These include specific
disease and hospital indemnity or other fixed indemnity programs.
What are the circumstances under which fixed indemnity
coverage constitutes excepted benefits?
The Departments' regulations provide that a hospital indemnity or other fixed
indemnity insurance policy under a group health plan provides excepted benefits only
if:
The benefits are provided under a separate policy, certificate, or contract of
insurance;
There is no coordination between the provision of the benefits and an exclusion of
benefits under any group health plan maintained by the same plan sponsor; and
The benefits are paid with respect to an event without regard to whether benefits are
provided with respect to the event under any group health plan maintained by the same
plan sponsor.
The regulations further provide that to be hospital indemnity or other fixed indemnity
insurance, the insurance must pay a fixed dollar amount per day (or per other period)
of hospitalization or illness (for example, $100/day) regardless of the amount of
expenses incurred.
Various situations have come to the attention of the Departments where a health insurance policy is advertised as fixed indemnity coverage,
but then covers doctors' visits at $50 per visit, hospitalization at $100 per day, various surgical procedures at different dollar rates per
procedure, and/or prescription drugs at $15 per prescription. In such circumstances, for doctors' visits, surgery, and prescription drugs, payment
is made not on a per-period basis, but instead is based on the type of procedure or item, such as the surgery or doctor visit actually performed
or the prescribed drug, and the amount of payment varies widely based on the type of surgery or the cost of the drug. Because office visits and
surgery are not paid based on "a fixed dollar amount per day (or per other period)," a policy such as this is not hospital indemnity or other fixed
indemnity insurance, and is therefore not excepted benefits. When a policy pays on a per-service basis as opposed to on a per-period basis, it is
in practice a form of health coverage instead of an income replacement policy. Accordingly, it does not meet the conditions for excepted
benefits.
Health Plan Options
Variable Hour (Temporary) Employees
Limited Medical plans with deductibles, co-pays, and annual dollar limits are
eligible employer sponsored plans which are generally subject are not excepted
benefit plans are subject to the ACA insurance regulations, fiscal year plans can
continue to operate under a waiver until the end of the plan year ending in 2014
 Fixed dollar indemnity plans, are not covered by the ACA
These plans with the inclusion of preventive care, wellness benefits and
pediatric care may meet the minimum essential coverage requirements of the
ACA. However, since these plans are not considered healthcare plans, employers
may be at risk to both penalties under code 4980H
 Fixed dollar indemnity plans will continue to exist after 1/1/14, and they can
be used to provide variable hour (temporary) workers with supplemental
coverage
“Skinny plans”, plans which do not meet the 60% minimum value prong but are
not categorized as “excepted benefits”. These meet the definition of minimum
essential coverage
Health Plan Options 2014
Essential Health Benefits: Starting in 2014
Individual & Small Group Exchange Market Requirements
The Affordable Care Act ensures health plans offered in the individual and small
group markets, both inside and outside of the Affordable Insurance Exchanges
(Exchanges), offer a comprehensive package of items and services, known as
essential health benefits. Essential health benefits must include items and
services within at least the following 10 categories:
•
•
•
•
•
•
•
•
•
•
Preventive Care & Wellness
Hospitalization
Prescription Drugs
Ambulatory Services
Emergency Services
Laboratory Services
Mental Health & Substance Use Disorder Services (In & Out Patient)
Rehabilitative & Habilitative Services, includes Medical Equipment
Maternity & Newborn care
Pediatric Services including oral and vision care
Essential health benefits must be covered for individual and small market plans both inside and
outside of the exchange. Large group insurance coverage does not need to include EHB’s to be
minimum essential coverage.
Health Plan Options 2014
Core Benefits: Starting in 2014
Large Group Requirements
The Affordable Care Act does not require Large Group Plans whether self-funded or
fully insured to include all the essential benefits. Instead 4 core benefits are required;
•
•
•
•
Physician & Mid-Level Practitioner Care
Hospital & Emergency Room Services
Pharmacy Benefits
Laboratory & Imaging Services
The following Small Group Benefits can be excluded from Large Group plans
•
•
•
•
Mental Health & Substance Use Disorder Services (In & Out Patient)
Rehabilitative & Habilitative Services, includes Medical Equipment
Maternity & Newborn care
Pediatric Services including oral and vision care
Both Self-Funded & Large Group plans (in most states, groups with more than 50 employees) are
required to meet the cost-sharing limits and the benefit levels, but are not required to provide
the full scope of essential health benefit coverage as minimum essential coverage.
Health Care Plan Affordability
Under 4908H, now starting January 1st, 2015 the employer “pay or play”, employers must
pay a $2,000 annual penalty ($166.67/mo) for not offering benefits on all their full-time
employees. The penalty is an excise tax; it is not deductible and is paid as a bottom line
expense.
 Large employers are only required to offer minimum essential coverage which is defined
as a group health plan.
 If the employer offers only minimum essential coverage or an unaffordable plan, the
employee can receive a subsidy from the exchange to buy benefits thru the exchange. For
each employee receiving a subsidy, the employer receives a $3,000 annual penalty or
($250/mo).
 The excise taxes are levied thru the IRS and will probably be collected with the firm’s
quarterly taxes. If the plan is an affordable minimum value (60% actuarial value, carrier
pays 60% of costs) than the employer will not incur a penalty even if an employee receives
an exchange subsidy.
Health Plan Options 2014
for Full-Time Employees
 Fully Insured Carrier Plans; HMO’s, POS, EPO’s, PPO’s, HDHP, ACO’s
Note: As of 2014 Strict community ratings for healthcare plans,
experience ratings will be prohibited. Ratings based on age 3:1, tobacco
1.5:1, family composition, and geographic region.
(will increase premium rates for large group plans)
 Self Funded Plans & Level Premium Self Funded Plans
Customizable healthcare plans, less expensive than fully insured plans,
for groups over 75, level premium plans groups of 25-250
 Defined Contribution Private Exchange
Employer makes a cash contribution to savings accounts which
employees use to purchase insurance products of their choice
Premiums have increased at a compounded rate of 8% for the last 10 years- Kaiser Family
Foundation “High Performing (self funded) companies are trending at or below 3%”- Towers Perrin
Plan Affordability Self-Only Premium
Plan Affordability is based on the Self-Only (employee) rate of a health care plan
•The employee only premium of the healthcare plan must be less than 9.5% of the
employee’s adjusted gross income (W-2, box 1), if less than 9.5% the plan is affordable
even if the employee pays 100% of the premium.
•For the large group healthcare plan to be qualified, it must offer at least the 4 core
benefits
•A Plan must have an actuarial value of at least 60% (plan pays for 60% of benefits)
•Dependents are defined as children under age 26, the spouse is not included as a
dependent
•The Employer is not required to make a contribution
•If a plan is affordable and meets the 60% actuarial value (bronze level) than even if an
employee receives a tax subsidy from the exchange there is no employer penalty.
Minimum Essential Coverage
Minimum Essential Coverage is defined by Section 5000 (A)(f) of the Internal
Revenue Code. The IRC states that minimum essential coverage can consist of
either;
1) Government sponsored health care coverage such as Medicare or Medicaid
2) An “eligible employer sponsored plan”
3) A plan “offered in the individual market within a State”
4) A “grandfathered health plan”
5) Anything else that the Secretary of Health and Human Services deems appropriate
“SKINNY PLAN
DESIGN”
Plan will allow employer to
eliminate the risk of the $2,000
penalty for all FT employees (less
30) shifting the risk to $3,000/ee
receiving a subsidy
Fully Insured vs Self-Funded
Fully Insured
Self Funded
Carrier Profit
Maximum Claims
Liability
Pooling Premium
Stop Loss Premium
Expected Claims
Expected Claims
Administration
Administration
Employer
Keeps
Unused
Claims
Dollars
Self Funded Plan Benefits
Not subject to conflicting state health insurance regulations/benefit mandates,
as self-insured health plans are regulated under federal law (ERISA). (NJ saves 8%
of premium)
Not subject to state health insurance premium taxes, which are generally 2-3
percent of the premium's dollar value.
Offers control over insurance programs, and thereby improves cash flow and
maintains company health plan reserves for investment, reduces plan operating
costs
Creates a customized health benefit plan that meets the needs of the
workforce, which attracts and retains employees. Supplies claims data to
proactively manage risk.
Most self-insured companies can mitigate risk and lower administrative costs
by working with a health plan management firm that offers:
•Stop Loss Placement/Management
•Claims Processing/Adjudication
•Network Access and Management
•Medical Management
Fully Insured Major Medical
Disadvantages
1. Significant rate increase every year
2. Community rating
* (the good supporting the bad)
3. Little to no meaningful information
* (what is the health of my employees?)
4. State mandated coverages
5. Limited competitive options
6. Employer has 0% interest in 100% of the premium
The overwhelming majority of Large
Employers are Self-Funded, Why?
 Transparency
Knowledge of where all the dollars are going
Loss control focused on your employees specific needs
 Plan design flexibility (i.e. No State Mandated Coverage's)
 Lower administrative costs
 Elimination of insurance carrier profit
 Cash flow advantages, no pre-funding of self insured claims
 Law of large numbers – able to absorb claims fluctuations
Self Funded Administrative Support








Enrollment meetings
ID cards, booklets, forms, online support
Premium Billing
Customer Service –Dedicated team for each
employer – Employee’s and Human Resources
Weekly Online Claims Funding Report
Provider Network Issues
Risk Management Programs
No new burdens for the employer