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Employee Benefit Extensions for the COVID-19 Pandemic: COBRA, FSA, HRA, and More

July 20, 2020/in Employee Benefits, Legislation, Whitepapers /by Sonya Poland

This post was submitted by Navia Benefit Solutions. In February 2020, FlexBank Administrators, a trusted and tenured provider of pre-tax benefits, COBRA administration, and compliance solutions, announced its partnership with Navia Benefit Solutions, a nationwide consumer-directed benefits provider of health, life, and compliance solutions.

On April 29, 2020, the Department of Labor, Revenue, and Treasury (the “Departments”) issued benefit extensions for certain group health plans, disability and other welfare plans, and pension plans during the COVID-19 National Emergency.

The goal of the benefit extensions is to minimize the possibility of individuals losing benefits because of a failure to comply with an applicable timeframe.

There are eight benefit timeframes that have been extended. We go into detail about each one below and provide examples to illustrate how the benefit extensions will work. You can also download our benefit extensions infographic for a snapshot of the extensions and new timeframes.

Outbreak Period

The term “Outbreak Period” is used to define the period of time affected by the extensions.

The Outbreak Period started on March 1, 2020 when President Trump declared a National Emergency in response to COVID-19.
The Outbreak Period will end 60 days AFTER the National Emergency is declared over.
For example, the National Emergency became effective March 1, 2020 and if President Trump announces on May 31, 2020 that the National Emergency is over, the Outbreak Period will be March 1 to July 31, 2020 (National Emergency timeline plus 60 days).

The Outbreak Period goes from the beginning of the national emergency through the end of the 60 days after the national emergency is declared over. During the Outbreak Period , standard election and filing time frames are essentially on “pause” and then resume after the Outbreak Period ends.

Timeframe Extensions Disregard the “Outbreak Period”

On March 13, 2020, President Trump issued the Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak and by separate letter declared a national emergency under the Stafford Act effective March 1, 2020.

As a result of the National Emergency, the Departments recognized that participants and beneficiaries covered by group health plans, disability or other employee welfare benefit plans, and employee pension plans may find it difficult to meet or comply with certain pre-established timeframes. Similarly, the Departments recognized that group health plans may have difficulty in complying with certain notice obligations.

Essentially, this guidance requires benefit plans to disregard the period from March 1, 2020 until sixty (60) days after the announced end of the National Emergency, or such other date announced by the Agencies in a future notice (the “Outbreak Period”). To the extent there are different Outbreak Period end dates for different parts of the country, the Departments will issue additional guidance.

8 New Benefit Extensions and How they Work

Please note the date used in the examples for the “end of the national emergency” is just an example date to help illustrate how the extension timeframes work. We do not yet know when the end of the emergency will be declared.

(1) HIPAA special enrollment period

Generally, group health plans (GHPs) must allow individuals to enroll in the GHP if enrollment is requested within 30 days of the occurrence of the event (or within 60 days, in the case of the special enrollment rights added by the Children’s Health Insurance Program Re-authorization Act of 2009).

Example: Assume the end of the national emergency is April 30, 2020. During open enrollment, Randy declines coverage in his employer’s GHP. On March 31, 2020, Randy’s wife gives birth. Randy would like to enroll himself, his wife, and his child in his employer’s plan. Open enrollment does not begin until November 15, 2020. Since the timeframe beginning March 1, 2020, through the Outbreak period is disregarded, Randy now has until July 29, 2020, to enroll, provided that he pays the premiums for any period of coverage. Practical Point: If Randy waits until July 29, 2020, to exercise his special enrollment rights, neither the employer or the carrier would know to provide coverage to Randy and his family until his election is made.

(2) COBRA Election Period

COBRA generally provides a qualified beneficiary 60 days to elect COBRA continuation coverage under a group health plan.

Example: Assume the end of the Outbreak Period is June 30, 2020. Sandy is terminated on February 25, 2020. Sandy’s specific rights notice is mailed on March 1, 2020. Sandy’s 60-day COBRA election period would end on April 29, 2020 but since the timeframe beginning March 1, 2020, through the Outbreak Period is disregarded, Sandy has until August 29, 2020 to elect COBRA.

<<Need help managing COBRA? Learn how Navia can help>>

(3) COBRA Premium Payments

COBRA continuation coverage may be terminated for failure to pay premiums timely. A premium is considered timely paid if it is made not later than 30 days after the first day of the coverage period.

Example: Assume the end of the Outbreak Period is July 31, 2020. Jim is enrolled and making timely payments on COBRA as of March 31, 2020. He does not make April’s premium payment within the 30-day payment grace period. Because the 30-day grace period is disregarded through the Outbreak Period, Jim has until August 30, 2020 to make April, May, June, July, and August’s premium payments.

(4) COBRA Notices – Qualifying Event

Notice requirements prescribe time periods for individuals to notify the plan of certain qualifying events or a determination of disability. Notice requirements also prescribe the time period for employers to notify the plan of certain qualifying events.

Example: Assume the end of the Outbreak Period is September 30, 2020. Bob is enrolled in COBRA with his spouse Tricia. Bob and Tricia divorce on April 1, 2020. Bob has the obligation to notify the plan sponsor/administrator of the divorce within 60 days which will trigger a dependent level COBRA offer for Tricia. Because the 60-day notice requirement is disregarded through the Outbreak Period, Bob has until November 29, 2020 to notify the plan sponsor/administrator of the divorce.

(5) Benefit Plan Claims Filing Procedure Timeframe (FSA/HRA)

The date within which individuals must file a claim under the plan’s claims procedures.

Example: Employer, Teresa Co., provides her employees an FSA benefit. Teresa Co.’s plan runs January through December with a ninety-day claims run-out period ending March 31, 2020. The national emergency is effective March 1, 2020. In this example assume the national emergency ends May 31, 2020. As of March 1, 2020, Teresa Co’s participants had 30 days until the claims run-out deadline—due to the guidance, that timeframe is disregarded until the end of the national emergency plus 60 days. Therefore, plan participants new claims run-out deadline is August 29, 2020. August 29, 2020, is reached by assuming May 31, 2020, is end of the national emergency, plus 60 days, plus the 30 days disregarded from March to March 31^st.

(6) ERISA Adverse Benefit Determination Appeals Deadlines

The date within which claimants may file an appeal of an adverse benefit determination under the plan’s claims procedure.

FSA Example 1: Assume the end of the national emergency is May 31, 2020. Tim, an FSA participant, receives a denial of his FSA claim on March 15, 2020. Tim normally has 180 days from March 15, 2020, to file an appeal. Since the timeframe beginning March 1, 2020, through the Outbreak period is disregarded, Tim now has until January 26, 2021 to file his appeal. In this example the January 26, 2021, is determined by assuming the end of the national emergency is May 31, 2020. Add sixty more days to get to July 30, 2020 (the outbreak period) plus the 180 days to appeal.

HRA Example: Assume the end of the national emergency is April 30, 2020. Bob, an HRA participant, receives a denial of his HRA claim on January 28, 2020. Bob normally has 180 days from January 28, 2020, to appeal his denial. Since the timeframe beginning March 1, 2020, through the Outbreak period is disregarded, Bob now has until November 24, 2020, to file his appeal. In this example November 24, 2020, is determined by assuming the end of the national emergency is April 30, 2020, plus sixty days, plus 148 days (180 – 32 days following January 28 to March 1st).

(7) ERISA External Review

The date within which claimants may file a request for an external review after receipt of an adverse benefit determination or final internal adverse benefit determination.

Example: Assume the national emergency ends April 30, 2020. Megan receives a denial on March 15, 2020. Normally, Megan has four months from March 15, 2020, to file a request for external review. Since the timeframe beginning March 1, 2020, through the Outbreak period is disregarded, Megan now has until October 29, 2020, to file her request. In this example October 29, 2020, is determined by assuming the end of the national emergency is April 30, 2020, plus sixty days, plus four months.

(8) Deadline to Submit Additional Information for External Review

The date within which a claimant may file information to perfect a request for external review upon a finding that the request was not complete.

Example: Assume the national emergency ends April 30, 2020. Natalie receives notice of an incomplete external review request on March 15, 2020. Normally, Natalie has four months from March 15, 2020 to perfect her request. Since the timeframe beginning March 1, 2020, through the Outbreak period is disregarded, Natalie has until October 29, 2020, to perfect her request. In this example October 29, 2020, is determined by assuming the end of the national emergency is April 30, 2020, plus sixty days, plus four months.

Navia’s commitment to providing high-quality service has never been more important and we will continue to find ways to help during these difficult times. Please check back regularly for updates. Stay safe and healthy.

FormFire: Essential Technology in the Small Group Market

June 26, 2020/in Employee Benefits, FormFire, Whitepapers /by Jeff Lewis

Cleveland-based FormFire, has been a fixture in the Ohio health insurance marketplace since its introduction more than ten years ago. Today, the company offers their services in 24 states. Brokers take advantage of FormFire technology to price, place, and enroll small group medical products with Aetna, Anthem, Medical Mutual, UnitedHealthcare, Humana, and other medical carriers in Ohio.

FormFire’s most valuable application is their process for supporting medically underwritten small group health insurance products. The company was, arguably, originally created for that purpose. The Affordable Care Act (ACA) became law in 2010 and its rules around small group medical plans certainly threatened to end the entire concept of underwriting with Individual Medical Questionnaires (IMQs). In Ohio, the adoption of transitional plans (also known as Grandmothered plans) essentially saved the small group marketplace by allowing most small employer groups to keep their current plan and not subject themselves to the community-rated ACA products.

Fast forward to 2020 and you will find that the Ohio small group market offers a large number of medically underwritten products. Aetna’s Aetna Funding Advantage, Humana Level Funding, and UnitedHealthcare’s All Savers products are offered using a “level funding” approach. More recently, Medical Mutual, Anthem, and UnitedHealthcare are offering Multiple Employer Welfare Arrangement (MEWA) products that require IMQs. While FormFire’s IMQs are accepted by all of these carriers, the Anthem SOCA MEWA and Medical Mutual COSE MEWA require that groups are priced and enrolled through FormFire. For brokers who want to compete in today’s small group market in Ohio, access to FormFire is essential.

The expense of maintaining a FormFire account can be prohibitive to brokers who have a small block of group medical business or who are building their group practice. Some small group carriers have offered limited access to their own products through FormFire. Cornerstone can help by offering better pricing for full access to FormFire. Insurance markets are rapidly moving into the digital age and producers need to embrace the technology available to them.

Contact your Cornerstone broker advisor to get started.

How to Determine Medicare Creditable Coverage

April 1, 2020/in Compliance, Employee Benefits, Whitepapers /by Jennifer Agnello

What is Medicare creditable coverage and why does it affect me as an employer?

As part of the Medicare Modernization Act of 2003, the Medicare Part D prescription drug program was created. The law requires that each employer offering prescription drug benefits as part of their employee benefit plan must notify any Medicare-eligible participant and the federal government if the coverage offered is at least as good as the standard Medicare prescription drug plan. If the benefit the employer offers is at least that valuable, the plan is deemed “creditable.”

Notification to these participants is critical as that same law created a “late enrollment penalty” for those who did not have creditable coverage for 63 days or longer prior to their initial enrollment period for their Medicare prescription drug benefit. This will help those affected determine whether or not to stay on the employer plan or enroll in a Medicare Part D drug plan.

So as an employer, what do I need to do?

Every employer who offers a plan covering prescription drugs must file their status (creditable or non-creditable) to the Centers for Medicare and Medicaid Services (CMS) each year no later than 60 days after the start of their plan year. For example, the majority of health plans renew on January 1 of each year, which means they will need to file by March 1. To notify CMS of the plan’s status, the plan sponsor/employer needs to complete this form by entering their contact information and the federal tax identification number and completing the certification. The process is quite simple.

Employers are also responsible for notifying each plan option’s credibility status (note: many plans have more than one health plan option) to all active employees, plan participants, and any covered retirees that may be Medicare eligible.

Keep in mind, Medicare does not always apply to those 65 years or older. There are other extenuating circumstances why someone may be eligible for Medicare and since you may not be aware of any that qualify for other reasons, it is best to send the announcement to all covered persons. This notice must be delivered prior to October 15 each year, so that any person who wishes to enroll for Medicare may do so during that calendar year’s Medicare open enrollment period. Many employers tend to include the creditable status in their open enrollment packets or to new hires as they come on board. The point is, make sure all participants receive the information no later than October 15.

How will I know if our plan is creditable or non-creditable?

If your group plan is fully insured, the insurance carrier will be able to verify if the drug benefit is or is not creditable. Since every carrier is different in the handling of these notices, your agent should assist you as plan status may change each year even if there have been no changes to benefits.

Employers may also check plans status by using guidance from CMS or an independent actuary can be hired to value the benefits appropriately.

What if my plan is not deemed creditable? Are there penalties?

There is no requirement that employers offer creditable coverage and no penalty exists today if they do not. You are only required to a) notify the government annually and b) notify all active employee plan participants and covered retirees that could be Medicare eligible. We recommend that new hires (as they come onboard) are also made aware of the current plan’s Medicare creditable status. Medicare-eligible beneficiaries will be able to decide if they would like to enroll in a higher value Medicare Part D plan if the employer plan is indeed determined non-creditable.

How can I get assistance throughout this process to make sure I stay compliant?

This may be a complex and intimidating task for employers who are busy running their businesses. Our licensed advisors are equipped with the knowledge and resources you need to keep your employers informed and keep their business compliant. If you have questions about creditable coverage or questions about any other compliance issues, please contact your Cornerstone representative today.

What Drives the High Cost of Health Care?

December 5, 2019/in Whitepapers /by Jennifer Agnello

The statistics are shocking. In 2017, U.S. health care spending hit $3.5 trillion, or $10,739 per person. Under current law, national health spending is projected to grow at an average rate of 5.5 percent per year over the 2018 to 2027 period; as a result, the health share of GDP is expected to rise from 17.9 percent in 2017 to 19.4 percent by 2027.

The 2019 Kaiser Family Foundation (KFF) Employer Health Benefits Survey found that the annual family premium for employer health insurance rose 5 percent to average $20,576. On average, employees pay $6,015 toward the cost. A whopping 66 percent of those in employer health plans with high deductibles say they couldn’t pay a medical bill the size of their deductible without going into debt.

Now, let’s talk about the real problems. From all perspectives, there is no one single cause for the rise in costs, nor is there a single solution to contain them. Following are a few of the main drivers:

Pharmaceutical Costs

It’s estimated that prescription drug spending in the United States was approximately $344.5 billion in 2018. The cost has since continued to rise due to a number of factors, including population growth, an increase in number of prescriptions per person, inflation, and changes in the composition of drugs prescribed toward higher price products or price increases.

1 in 4 Americans say they take four or more prescription drugs. According to GoodRx, the average price of brand-name drugs has increased by approximately 30 percent in a nine-month time frame. The average cash price for a 30-day supply of the top 100 brand-name drugs has increased from $300 in October 2018 to more than $400 in July 2019. Specialty drugs have accounted for 41 percent of drug spending in 2018 and are projected to reach 50 percent by 2020.

In most countries, the government negotiates drug prices with drug makers, but when Congress created Medicare Part D, it specifically denied Medicare the right to use its power to negotiate drug prices. Veterans Affairs and Medicaid, which can negotiate drug prices, pay the lowest drug prices. The Congressional Budget Office found that just by giving low-income beneficiaries of Medicare Part D the same discount Medicaid recipients get, the federal government would save $116 billion over 10 years.

Aging Population

According to the World Health Organization, the projected growth of people age 65 or older, worldwide is predicted to rise from 524 million in 2010 to 1.5 billion in 2050. The Centers for Disease Control and Prevention found that Americans are living longer, but increased longevity comes with increased expense. The combined costs of the federal government’s two largest health care programs, Medicare and Medicaid, are projected to nearly double to a combined total of $1.76 trillion in 2025 from $901 billion in 2014.

By 2030 it is expected that more than 60 percent of baby boomers will manage more than one chronic condition, such as hypertension, high cholesterol, arthritis, diabetes, heart disease, cancer, dementia, and congestive heart failure. In 2014, personal health care spending per person for the 65 and older population was $19,098 in 2014, more than five times higher than spending per child ($3,749), and almost three times the spending per working-age person ($7,153).

Lifestyle and Behavioral Choices

More than 70 percent of health care costs are attributable to choices such as obesity, smoking, and alcohol abuse. According to the National Center for Health Statistics, nearly 39.8 percent of Americans are obese and one out of every six children from age 2 to 19 is overweight or obese. This number has doubled for children and quadrupled for adolescents over the past 30 years.

Lack of Adherence to Medical Advice

50 percent of patients DO NOT take medications as prescribed. The results are recurrence of symptoms, duplication of treatment, and increased hospital re-admission rates.

Inefficiencies within the System

Hospitals are estimated to waste as much as $11 billion per year on inefficiencies and unnecessary medical treatments. Preventable mistakes also account for rising costs. As many as 400,000 people die each year as the result of medical error.

Defensive Medicine

The high cost of medical malpractice insurance drives the rise in the practice of defensive medicine. A Gallup survey estimated that $650 billion annually could be attributed to defensive medicine. Duplicate tests, prescribing more drugs, and referring to more specialists provide a protection that offsets the anxiety of being sued.

Increased Utilization = Increased Cost

Increased supply, greater access to health care facilities, newly insured (previously uninsured), growing population, aging population, access to Medicare/Medicaid, new procedures and technologies, recommended increases in preventive guidelines/treatments, newer diseases and treatment categories, new drugs, and increased demand for them are all attributable to increased costs due to increased utilization.

Where is the Transparency?

The rapid adoption and growth of consumer-directed health plans makes it even more critical to have the information needed to compare costs and alternatives. Improvements in transparency will not only assist consumers, but would hold the market accountable. Without accountability for both price and quality, those who suffer the consequences are the consumers both in a general lack of understanding and financially.

We all play a significant role in containing health care costs. Are you doing your part? The expert team at Cornerstone can help you present quality, cost-saving, and creative solutions for your clients. Call us today to learn more.

Resources

https://www.kff.org/health-costs/report/2019-employer-health-benefits-survey/

https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/highlights.pdf

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/average-family-premiums-top-$20,000.aspx

https://www.goodrx.com/blog/brand-name-drugs-getting-more-expensive-july-monthly-report/

https://www.pharmacytimes.com/publications/issue/2016/january2016/the-aging-population-the-increasing-effects-on-health-care

https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html

https://nahu.org/media/1147/healthcarecost-driverswhitepaper.pdf

https://www.cdc.gov/nchs/data/factsheets/factsheet_nhanes.htm

https://www.hopkinsmedicine.org/news/media/releases/study_suggests_medical_errors_now_third_leading_cause_of_death_in_the_us

https://www.forbes.com/sites/realspin/2013/08/27/defensive-medicine-a-cure-worse-than-the-disease/#6a6c4e827c95

https://avalere.com/insights/us-healthcare-spending-projected-to-grow-5-5-annually-through-2027

https://www.statista.com/statistics/184914/prescription-drug-expenditures-in-the-us-since-1960/

https://www.prnewswire.com/news-releases/express-scripts-reduces-employers-annual-prescription-drug-spending-growth-rate-to-historic-low-in-2017-300594171.html

http://www.crfb.org/press-releases/fact-sheet-how-much-money-could-medicare-save-negotiating-prescription-drug-prices

https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html

https://nahu.org/media/1147/healthcarecost-driverswhitepaper.pdf

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3068890/

https://www.healthitoutcomes.com/doc/billion-wasted-annually-due-to-inefficient-communication-technology-0001

Shopper’s Guide to Navigating Discount Drug Programs

December 5, 2019/in Whitepapers /by Geoff Beglen

It’s no secret that the cost of pharmaceuticals in the US is soaring. According a report published by Health Affairs in January 2019, the cost of oral and injectable brand-name drugs has increased annually by 9 and 15 percent, respectively, between 2008 and 2016. The research concluded that the rising cost of generic and specialty drugs were driven mostly by new product entry while the rising costs of brand-name drugs were a result of existing drug price inflation.

In the face of soaring drug prices, consumers have found an ally in their local big box stores, such as Walgreens, Walmart, Kroger, Target, etc. Roughly 4 out of 10 Americans rely on these programs to find savings for their prescription drugs. Generic drugs are often the focus, though brand-name and specialty drugs are also offered. Recent data shows that these drugs account for 85 percent of the retail pharmacy medicines prescribed in the US.

Retailers are able to sell pharmaceuticals at such deep discounts because they buy in bulk or they use membership fees to offset costs. Some stores say they will lose money through their pharmacy programs, but expect to make up the difference through sales elsewhere in the store, especially with big ticket items like jewelry and electronics.

There are numerous differences among the programs offered by each retailer. Some pharmacies require a membership or an annual fee, while others require only a doctor’s prescription. Some memberships need to be renewed annually, while others are more open-ended. Learning the differences among each can be vital in finding the cheapest and most convenient retailer.

Generic medications included in these programs may even be cheaper than an insurance co-payment. For example, if there is a $10 co-pay, but the drug needed is offered by a pharmacy for $4, the consumer should be eligible for the cheaper price. Consumers should also ask the pharmacist how this coordinates with Medicaid and Medicare.

Consumers who prefer to shop at their local drug store should check and see if their corner pharmacy will match the price of the big box store.

When it comes to price matching medications, it’s important to do your homework. Determine which retailers offer the best value by asking what and who is covered and whether or not there is a membership fee. The savings can be significant.

Resources

https://www.consumerreports.org/drug-prices/drug-discount-programs-can-save-you-big-on-generics/

https://www.healthaffairs.org/doi/10.1377/hlthaff.2019.00520

2019 HSA Refresher: The Ins and Outs

March 13, 2019/in Employee Benefits, Individual, Whitepapers /by Cornerstone

If you have been in the insurance industry for a while, you know the basics and the advantages of Health Savings Accounts (HSAs). Individuals enrolled in a high deductible health plan (HDHP) are eligible for an HSA account, which enables them to save tax-free money for medical expenses. The popularity of HSA-HDHPs has increased significantly in the past 10 years. According to a report released by AHIP in April 2018, enrollment in HSA-HDHPs rose from 4.5 million in 2007 to 21.8 million in 2017, yielding an increase of 400 percent¹. As deductibles continue to rise and these numbers continue to grow, it is important to know the ins and outs of HSAs so that we can better advise our clients.

The 2019 Basics

Max contribution: $3,500 individual; $7,000 family
Catch-up contribution limits for ages 55+: $1,000
HDHP minimum deductible: $1,350 individual; $2,700 family
HDHP maximum out of pocket: $6,750 individual; $13,500 family

HSA Triple Tax Savings

Tax deductions on contributions to the account
Tax-free earnings on interest and investments and
Tax-free withdrawals when used for qualified expenses

Qualified Expenses

Qualified medical expenses are more than just copays, deductibles, and coinsurance. HSAs may also reimburse health insurance premiums while receiving federal or state unemployment, COBRA or state continuation premiums, qualified long-term care insurance (as indexed by calendar year and age), Medicare (other than a Medicare Supplement policy), and retiree premiums (once HSA owner and insured, if other than owner, are over age 65).

Contribution Rules

Owners: Owners of C-corporations and 2 percent or less owners of an S-corporation may contribute to an HSA on a pre-tax basis through payroll deduction. HSAs are also available to sole proprietors, partners, and more than 2 percent S-corporation owners to contribute to on an after tax basis with an above-the-line deduction. Owners’ spouse, parents, children, and grandchildren of a more than 2 percent S-corporation owner cannot contribute pre-tax. Like the owner, they must contribute post-tax and can then take an above-the-line deduction.

Contributions and tax benefits: Anyone can contribute to the account however the owner of the account is the individual who receives the tax deduction. This means a parent can contribute post tax to an HSA in their adult child’s name. The child gets the tax deduction on that contribution.

Married individuals who both attain age 55+: If both individuals are covered by a qualified HDHP plan, they can each make the $1,000 catch-up contribution; however they must open two separate HSA accounts in their own names to do so.

Adult child who stays on their parents plan: An adult child can stay on a parent’s health plan until age 26, even if they are not a full-time student, no longer live at home, not a tax dependent, or are married. The parent covering that child can own an HSA and contribute the full family maximum. However, if the child is not a tax dependent (other than the income limitation), the parent cannot use their HSA money for the child’s medical expenses, but the adult child is an HSA-eligible individual with family coverage, so they can set up their own HSA and contribute the full family maximum.

Employee with Medicare, spouse without: Oftentimes, employees stay on their employer’s health plan even though they have Medicare due to the fact that the spouse is not yet 65 and still needs health coverage. If the employer’s plan is a qualified HDHP, and the employee is enrolled in Medicare Part A or Part B, he cannot own or contribute to an HSA. However, if the spouse is covered under the same plan, he or she is eligible to set up an HSA in their own name, and because they technically have family coverage, they can contribute (post tax) the full family maximum plus the additional $1,000 catch up if they are over age 55. As a bonus, they can use their HSA funds for the employee’s qualified expenses. The over-age-65 employee could also contribute, post-tax, through payroll deduction in the HSA in the spouse’s name.

Proration rule for those who become enrolled in Medicare: Federal law states that those over age 65 who enroll in Social Security are automatically entitled to Medicare Part A. In February 2012, a ruling clarified that Americans who are receiving monthly Social Security benefits, and thereby automatically covered by Medicare benefits, cannot decline coverage. These individuals can contribute up to the pro-rated HSA maximum through April 15 of the following calendar year even if they are enrolled in Medicare.

For individuals who do not apply for Social Security, continue working past age 65, and delay their enrollment in age-based Medicare because they are covered by their employer group health plan, Medicare may be retroactive up to six months. In this situation, HSA account holders who apply for Medicare after turning age 65 may need to limit or discontinue their contributions much earlier in order to avoid making excess contributions.

IRA rollover rules: A one time, tax-free, trustee to trustee, irrevocable distribution from a Roth and/or traditional IRA may be made into an HSA. The rollover is limited to the annual HSA max contribution. In addition, the IRA must be in the same name as the HSA owner. SEP and Simple IRA transfers are not permitted.

For more information, contact Cornerstone today.

References

¹America’s Health Insurance Plans (AHIP) (April 2018) Health Savings Accounts and High Deductible Health Plans Grow as Valuable Financial Planning Tools. Retrieved from https://www.ahip.org/wp-content/uploads/2018/04/HSA_Report_4.12.18.pdf

The Importance of Wrap Documents

November 14, 2018/in Employee Benefits, Whitepapers /by Jennifer Agnello

Are you looking to provide even more value for your group clients?

By now most of you are familiar with a Summary Plan Description (SPD) issued for your clients’ medical plan. The SPD is one of the most important documents participants are entitled to automatically receive. This document must be provided and maintained by the plan administrator (typically the employer) and should be distributed automatically to all plan participants no later than 30 days after a written request. It outlines specific details of the health plan, such as a description of the employee benefits that are covered through the plan, participation rules, annual limits, election procedures, eligibility, employer contributions, and the plan year. It also summarizes claim filing procedures and plan sponsorship and administration.

Herein lies the issue. The Employee Retirement Income Security Act (ERISA) requires that the majority of health plans hold a Summary Plan Description. Only three exemptions exist in this ERISA regulation: 1) Indian Tribal Governments, 2) Church Plans, and 3) Governmental Entities subject to the Public Health Service Act. Chances are that the majority of your clients must comply.

Since ERISA not only applies to the medical insurance plan but to surgical, hospital, accident, HRA, FSA, dental, Rx, vision, life and AD&D, disability plans, and many voluntary plans, the health plan SPD does not cover all ERISA requirements for these additional benefits often written through various insurance companies. A written contract of insurance with an insurance company does not normally contain all of the rules required by ERISA and therefore is not a plan document. Estimates from the Department of Labor (who hold authority over employers offering these group benefit plans) show that three out of four plans audited have an ERISA violation. 70 percent of those audits result in monetary fines, many of which are significant, up to $110 per day, per affected individual for failure to comply.

Because most SPDs do not fully comply with ERISA, a wrap SPD is necessary. It is designed to “wrap” around all existing certificates of insurance and benefit plan booklets for each fully insured or self-funded plan and provides the information necessary to comply with ERISA’s reporting and disclosure requirements, HIPAA, and other federal laws. The wrap supplements the SPD with any additional ERISA required documentation, while also combining multiple benefits into a single plan for filing purposes. When a wrap document is used, the insurance policy or contract remains part of the plan document.

Therefore, the wrap and the insurance policy or contract together comprise the complete plan document and consequently meet the requirements of an ERISA plan document.

Various sources are available to prepare these wrap documents with prices ranging from $600 to $1,500. Contact your Cornerstone representative for more information.

If your clients do not currently have a wrap document in place, you have a chance to provide real value by keeping them compliant. Contact us today! Your E & O carrier will appreciate it!

What are Association Health Plans?

November 7, 2018/in Employee Benefits, Whitepapers /by Gregg Amato

The Trump Administration and the United States Department of Labor (DOL) announced new rules for Association Health Plans (AHP). The new rules allow insurance carriers to expand access to the market for fully insured plans beginning September 1, 2018, and on January 1, 2019, for self-funded plans.

What are AHPs?

AHPs are group health plans that employer groups and associations offer to provide health coverage for employees. These plans exist today, and existing plans may continue after the new rule takes effect. The new AHP rule brings additional plans into the market, allowing more small businesses and sole proprietors to join together to create an AHP by either purchasing large group or self-insuring coverage. Business owners with no employees and small businesses that have employees will have access to these plans, and AHPs will now be able to cross state lines. Many AHPs will most likely choose to self-insure, which further reduces regulatory burden since self-insured plans are not subject to state insurance regulations.

A small group is defined in Ohio as having less than 50 employees. Local business groups and industry groups nationally will be able to band together, which will allow the insurance risk to be spread out over a larger group. Spreading out the risk over larger pools gives small businesses access to health coverage at a lower premium, which was only afforded to large groups in the past.

Large group plan underwriting guidelines are much less restrictive than the small group and individual plan rules. Less restrictive coverage would likely attract healthier people and the combination of reduced benefits, healthier enrollment, and administrative costs being spread across a larger group would generally result in lower premiums for an AHP. AHPs as a large group will have better leverage to negotiate premiums as compared to small group and individuals that are set by the insurance industry.

AHP rules available to small groups:

For the sole purpose of obtaining health insurance
Same geographically located industry and businesses
Members of chambers of commerce and nationally affiliated trade industry groups
Sole proprietors and non-employer firms

The new rule would give small businesses access to coverage as an alternative to the ACA market.

Number of Businesses and Associations

According to the 2016 U.S. Census Bureau’s Annual Survey of Entrepreneurs, there were 5.6 million employer firms. Employer firms with less than 20 employees made up five million firms and there were 24.8 million non-employer firms. The number of non-employer firms added to the firms with less than 20 employees equals nearly 30 million firms.

In January of 2015 The Power of Associations states, “In 2013, there were 66,985,501 organizations on file with the IRS. This subsection includes chambers of commerce and the majority of the trade associations and professional societies operating in the United States today. Associations are found in every state and territory in the country.”

Considering the number of small firms along with the number of associations that exist in the U.S., the expansion of AHPs has the potential to impact a large number of people.

New Rules/Pre-Existing Conditions

The Affordable Care Act (ACA) requires AHPs that sell health insurance plans to small employers and individuals and small employers must meet the same standards that the ACA applied to these respective markets. The ACA outlined certain essential benefits that have to be included in health insurance plans, including preventive care, ambulatory services, emergency services, hospitalization, mental health services, maternity care, prescription drugs, rehabilitation, laboratory services, and pediatric care. AHPs are exempt from these regulations and may not cover some of these services.

AHP new rules:

Do not have to include the ACA’s 10 essential health benefits for plans in the individual and small group market, businesses with fewer than 50 employees
Allows different premium rates based on age, gender, and location; charges can vary by industry
Does not allow discrimination based on health status
Cannot deny coverage or charge more because of pre-existing
Cannot cancel coverage due to an employee’s illness
Can vary charges, higher rates for high-risk industries compared to low-risk industries
Allows dependents on the plan until they reach age 26
Cannot charge older applicants more than three times as much as younger applicants
Must cover at least 60 percent of average medical costs
Subject to the ACA’s risk adjustment program for small group and individual plans
Sole proprietors and non-employee firms can get coverage for their family
Does not change or affect any existing association health plans
Requires AHP to elect a governing body
Effective dates for the new rule are September 1, 2018, for fully insured association plans and January 1, 2019, for self-funded association plans

Summary

Providing health insurance as a small business owner can be costly when balancing between growing their business and attracting new talent. The new rules and expansion of AHPs provide small businesses with the opportunity to offer health insurance at lower premiums, giving them the same kind of flexibility that large companies have when selecting a health insurance plan. AHPs can lower health insurance premiums because they are exempt from covering the 10 essential health benefits required by the ACA and the law allows for more flexibility in the way AHP premiums are set. Even though AHPs will most likely have lower premiums, it is important to remember the benefits plan options may not be the same as those in other more expensive health plans. With many small businesses facing rising premiums, having access to a more affordable coverage alternative in AHPs is a viable solution

It is important to research and understand the options before purchasing any health insurance plan, including an AHP. Even though the selection process can be time consuming, the investment is worthwhile to ensure the right health insurance plan is placed. Working with an experienced health insurance broker or consultant can be beneficial, saving both time and money when navigating the selection process.

If you need additional information about AHPs, the experts at Cornerstone can help. We have extensive experience working with AHPs and with understanding the positive impact of the new rules. Please ask your local Cornerstone representative about the available AHP plans offered through our contracted health insurance carriers.

The Holy Grail of Advertising: The Importance of Referrals From Your Clients

September 19, 2018/in Employee Benefits, Individual, Whitepapers /by Geoff Beglen

It can’t be said enough: Referrals are one of the most important components of a successful inbound sales strategy. Nothing opens a door to a new prospect like a strong recommendation from a friend or relative. When a client thinks their broker is making a meaningful effort to serve their insurance needs, there is a strong likelihood they will share that experience with others.

Here are three ways you can generate referrals from a loyal client base:

Correspondence. Birthday cards, gifts, holiday cards, reminder emails, and other forms of intermittent correspondence with your clients can go a long way. Handwritten notes or well-written emails project a positive identity and foster goodwill. You can also add in a quick line at the end of your communications that says, “Do you know anyone who may benefit from my services? Here is my contact information…”

Private Events/Invitation Only. Ask prominent prospects and clients to a high-end venue like a country cub or the luxury box at a sporting event. By inviting both clients and prospects, you’ll even see your best clients begin to do your selling for you.

Take it one more step and use a little teamwork. These events are a great chance to ask everyone in your network for introductions to people who might get value out of your event. You’ll quickly find that people love the opportunity to get invitations for their friends and colleagues to an exclusive event.

The Point Of Sale. Every sales person has the objective of closing a sale when they enter a meeting. They should also make it a goal of obtaining at least one referral.

If you are hesitant about the process of asking for a referral, here are some opening lines to get you over that hurdle:

“If you like what I’m doing, don’t keep it a secret!” Though this sounds like throwaway line, it really works! The client may know a friend or relative that would benefit from your services. More often than not, they will be happy to provide you with a name.
“On the back of this card, can you provide the name of one person that you feel may benefit from my services?” This tactic is even better. After your client has given you a name, they may feel compelled to give them a heads up that you will be contacting them.
Or try the inductive approach. Begin by saying, “I was wondering if I could get your help with something…” When you do that, you’ll set yourself up for a productive chat and leave the other person feeling good about helping you.

Asking for a referral need not be an arduous and uncomfortable task. With the right approach, you can take advantage of your best sales ally: the referral.

At Cornerstone, we are advocates for your success. Contact us for additional guidance about the art of asking for a referral. Also, if you are not already using our Agency Services Program, learn more about how you never have to say no to a client!

Short-Term Health Insurance: A New, More Affordable Option

September 7, 2018/in Individual, Whitepapers /by Jennifer Agnello

Updated October 5, 2018.

Purchasing individual health insurance comes with many pressures. Those seeking coverage are often strapped with additional stressors such as loss of a job, loss of employer coverage, divorce, or other strains that negatively affect financial well being, leading to increased physical and emotional health risks. Many confusing questions go through a buyer’s mind: “Can I afford it?” “Does it cover my needs?” “I just don’t understand my buying options.”

Consumer studies have indicated that as a population, we are becoming better about making health care decisions. This may be because we have a greater stake in the game, higher premiums, higher deductibles, smaller networks, and fewer options. Though most of us receive health insurance benefits from our employers, there are still many who fall outside that category:

Individuals who cannot afford COBRA
Self-employed individuals that do not qualify for subsidies on Affordable Care Act (ACA) plans
Employees of smaller companies not providing coverage and part-time or seasonal workers
Students and/or children turning 26 and aging out of parents’ plans
Those between jobs or in their employer’s waiting period
Early retirees or spouses
Moving to a new state
Those whose providers are not “in-network”
Those going through a divorce
Those earning too much for Medicaid or too little/too much for government subsidies

A more affordable option for these circumstances may be short-term health insurance. In 2017, the average short-term premium was just $79 per month for a 30 year old. Also in 2017, individual medical plan rates rose at a national average of 21 percent. Short-term plans may fill a temporary gap in coverage and provide a more cost-effective option for those in these situations.

In October of 2017, President Trump signed an executive order directing federal agencies to draft regulations aimed at rolling back the former short-term medical restrictions. On February 20, 2018, Health and Human Services proposed the new rules and the final rule was issued on August 1, 2018. These new laws take place on October 2, 2018, but may be limited by final State rulings.

New federal regulations now allow up to 364-day short-term health insurance plans with the option to renew for up to 36 months. Many states have proposed their own limits to these federal regulations. Ohio and Kentucky, for example, allow up to 360 days, while Indiana allows up to 184 days and Kansas and Montana only up to 123 days. Each state has adopted varying levels on what they will allow and many states have yet to propose their own limits. This will be a state-by-state approach and it is important to understand the guidance and regulations based upon the state in which you reside. Individual plan buyers who are unable or unwilling to buy ACA compliant plans may soon be able to purchase longer-term plans with greater duration of coverage. Considering tax penalties will no longer be enforced for 2019, short-term plans are a viable option.

Short-term plans also offer financial advantages for brokers. These plans are not just an open enrollment period sale like the distant relatives in ACA. You can sell and receive commissions year round.

Be aware: These plans are not required to comply with the ACA, include the use of underwriting (pre-existing conditions are not covered and applicants may be declined), may not cover certain medical expenses, and may impose annual/lifetime maximums/limits. Additionally, termination of a short-term plan will not trigger a special enrollment period in the individual market and today short-term plans are not considered minimum essential coverage under ACA.

Many short-term plans come with additional perks and benefits such as wellness, telemedicine, etc.

Helping people during difficult times or transitions in their lives is a win-win situation. Providing options for those who formerly have had very limited choices is much appreciated by those in need. If you are looking for solutions and your clients fall into these categories, call Cornerstone today. We have several options to assist you in finding affordable solutions for your clients.