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By Josie Martinez, Senior Partner and Legal Counsel
EBS Capstone, A UBA Partner Firm
Many U.S. employers offer self-funded insurance plans, with most of them purchasing stop-loss coverage from insurance providers. Historically, most of these companies have been large employers. However, given the fact that self-funded companies could avoid many PPACA regulations, more companies, particularly those will less than 100 employees, are considering this alternative strategy. Popularity for self-funding comes at a time when employers, both small and large, are looking for more flexibility and lower costs while at the same time maintaining control in the design and financing of employee benefits. To further this cause, carriers are now providing more self-funding options for smaller groups in an effort to satisfy employers’ interests and provide their clients with creative solutions to control and lower costs.
Momentum is gaining and the industry could see a shift in the marketplace as smaller businesses avoid costly ACA requirements, such as the health insurance industry fee which will add 2 percent to premiums in 2014 and probably more in later years. While there are still some PPACA fees that companies, self-funded or not, cannot escape (i.e. Patient-Centered Outcome Research Fee, Transitional Reinsurance Program Fee), in many markets changes to the use of specific rating factors in the group market are driving the move to self-insurance as well. According to a recent CNBC article, nearly 80 million people received health benefits through self-insured plans last year — an all-time high statistic. This means more than 60 percent of covered employees nationally use this funding mechanism. The number of smaller companies using self-insured plans increased to 15 percent in 2012 and continues to escalate.
Granted, there are potential risks that must be considered when making the decision to switch to a self-funding program. In any given year, there can be large swings in costs due to high-cost claims, or unexpected frequency of claims. Evaluation of the risk/reward ratio should be conducted carefully so smaller employers purchase adequate protection. The employer also needs to be prepared to be more involved in the benefits offered by the plan as well as the administration of the plan. In addition, although self-funded plans still enjoy more benefit flexibility than fully insured plans, plans must still comply with the new “no-annual-or-lifetime-limit-on-essential-health-benefit” rule.
Obviously, self-funding will not work for every employer. In order for self-funding to be a viable option, it should be a multi-year commitment and strategy. Employers and their insurance advisors should consider the company’s benefit philosophy, risk tolerance, historical claims data and workforce demographics, among other things, in order to make an informed decision. The point is, what might not have seemed like a viable option in the past for smaller employers, is now a real possibility and potential option for a new set of thoughtful employers.
A brief roundup of HR news and trends, including new guidance on the reinsurance fee under PPACA.
Peter Freska, CEBS
Benefits Advisor
The LBL Group, A UBA Partner Firm
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I am constantly amazed when I hear that large employers (those with 100-plus employees, and especially those with 1,000-plus) do not know how they are going to handle health care reform yet. I recently read a post asking for information on how large employers are reacting to Health Care Reform. The responses to this post were very typical: adjust plans, reduce networks, change contributions and add additional cost controls like disease management, value based benefits or telemedicine. Or, what about charging for having a spouse with other plan options to come onto your employer based plan? Do these really help? Even having a spouse eligible for a plan presents a twist. Recall that under Health Care Reform, the definition of eligible dependents does not include a spouse. There is a reason for this: If a spouse is eligible then they cannot receive exchange subsidies.
So, what is an employer to do? Well, if they are a large employer – specifically a self-funded employer – they need to manage their plan; by this I mean the plan data. To do this a company must identify the real problems, and then apply real solutions. The key is to define near term cost-drivers. This is the crystal ball prediction that allows a plan to make the right changes at the right time. The typical model of census data along with medical and Rx has inadequate predictive power. Other data must be included to drive the predictability and manage near-term costs risk.
Why are employer based plans receiving double digit trends? The answers are simple: 1. Unknown cost drivers, and 2. Applying the wrong solution. In order to make a difference a plan must uncover the right issues and implement the right solutions. If employers are to make a difference, or if the Board of Directors or trustees of the plans are to really understand why their plans cost continue to rise, they must think about health care the same way they think of other parts of their business. Does the typical large business have an understanding of those who consume their products? They had better! Why should health care be different? Employers spend millions of dollars each year to take care of employees and their families.
Keep this in mind: With the full implementation of health care reform upon us, private health insurance will continue to bear the costs in the health care system. The cost control answer for businesses is not with the typical clinical analytics, but with business intelligence analytics. This type of process will help large employers reduce claims cost and flatten their health care costs over the next three years.
PPACA requires employers covered by the Fair Labor Standards Act to provide a notice about the upcoming health marketplaces (also called exchanges) to their employees. The notice is due Oct. 1, 2013. On Sept. 11, 2013 the Department of Labor (DOL) anno…
Theresa Pugh stopped at a store near Lord & Taylor after eating at the restaurant a few doors down. She picked herself up a supplemental Medicare plan from the Horizon Connect store.
Obesity now affects approximately one in three Americans, according to recent data.
By Josie Martinez, Senior Partner and Legal Counsel
EBS Capstone, A UBA Partner Firm
Add another item to the growing list of provisions of Health Care Reform (aka “Obamacare”) that will be delayed for an additional year: caps on out-of-pocket health care expenses (“OOP”). According to the law, health plans are required to cap the total amount consumers can be charged through deductibles, co-payments and co-insurance. This provision, a main consumer protection to control how much people will have to spend on health care, was supposed to limit total out-of-pocket costs in 2014 to $6,350 for individual policies and $12,700 for family policies. The Department of Labor quietly announced delays of these caps for some plans until 2015 which means anything goes next year.
According to the guidance, non-grandfathered group health plans will generally need to comply with the OOP maximums described above, unless the plan uses multiple claim payers (e.g., medical TPA and separate pharmacy benefit manager (“PBM”)). Plans that use multiple claim payers may apply the statutory OOP separately to the major medical coverage (that is, medical/surgical plus mental health and substance use disorder benefits) versus the nonmedical benefits, such as prescription drug coverage, thus effectively doubling the OOP max for the combined plan for the 2014 plan year.
That’s good news for some, bad news for others. Individuals with chronic diseases, such as cancer or multiple sclerosis, covered by such plans will be hurt by the delay as they continue to pay hefty out of pocket costs because the cap provision will not be implemented for another year. These individuals could, for example, be required to pay $6,350 for doctors’ services and/or hospital treatments, on top of $6,350 for prescription drugs – a major blow to those who need quality care the most.
The reason cited by federal officials for the delay is that many insurers and employers needed more time to comply because they used separate companies to help administer major medical coverage and drug benefits, with separate limits on out-of-pocket costs. In many cases, the companies have separate computer systems that cannot communicate with one another. Apparently, it comes down to technology, but the fallout of this setback is that some plans can double their caps next year. Administration officials have said that companies have until 2015 to insure that out of pocket spending maximums will include all types of spending, including prescription drugs.
“The single biggest problem in communication is the illusion that it has taken place”. – George
Bernard Shaw
“Effective employee communication” is definitely a buzzword in the human resources industry. We all intuitively know communication is a good thing, but how many of us actually practice it on a daily basis? And let’s face it: Pressing deadlines always seem to trump establishing positive communication in the workplace. However, when a project or other initiative fails
due to a communication breakdown, we are all the first to say, “I wish I had communicated that more effectively.”
So why does communication fall so low on the priority list? It may have to do with the fact that we may need some tools to know how to communicate effectively. As much as we think it’s intuitive, it actually is a skill that needs to consistently be cultivated.
I recently ran across a TLNT article, Good Workplace Communication? It Means Good
Workplace Performance, that provided three great tips to increase positive
communication:
When it comes to benefits, I can’t think of a more crucial area that demands effective communication. In a recent survey by Colonial Life, only 23 percent of employees think their employers communicate their benefits very effectively. United Benefit Advisors will be hosting a webinar, presented by Touchpoints, that will share tips to help you create an effective communication strategy, and most importantly, execute that strategy and measure
the results.
The webinar, How Effective Communication Happens: Benefits Style!, will take place on Thursday, Sept. 12 at 2 p.m. EDT. To receive the $149 discount for this webinar, enter the code “UBATP” when registering.
The confusing swirl of PPACA regulations present a great opportunity to impress and retain your employees by ensuring they understand your benefits offerings.
By Thomas Mangan
CEO, United Benefit Advisors
Whatever your view of the massive law that is The Affordable Care Act, there is no denying that it is having a big impact on the market. As we sifted through the enormous amounts of data that comprise the 2013 UBA Health Plan Survey, the reality of the law’s impact became clearer. In short, if you are a single employee without dependents who is mostly healthy, you likely saw your health care costs decrease. If you’re anyone else, you probably felt a punch below the belt.
On the positive side, for the first time in my 22-year career in the health insurance industry, this year we saw employers take back some of the premiums they have been asking employees to pay – a good sign the economy has improved and employers are concerned with attracting and retaining top talent. Unfortunately, dependents are being asked to pick up more of the tab, which could signal an increasing anti-family trend.
While employers covered 18 percent more of a single employee’s health insurance premium, or $934 per employee, this year, they asked employees with dependents to pick up 3 percent more of the family premium, $492 on average. The average worker, however, saw an overall increase in health care cost due to rising out-of-pocket costs, including higher in-network deductibles, in-network co-insurance and significantly higher out-of-pocket maximums.
In-network deductibles increased $91 to $1,852 for a single and $216 to $4,225 for a family. Out-of-pocket maximums (after the deductible) for in-network increased $152 to $3,641 for a single and $433 to $8,043 for a family – increasing more than 17 times from five years ago. The survey also shows that the average in-network co-insurance dropped from 90 percent to 80 percent, a significant decrease in coverage.
Other important trends from the survey show:
Data in the 2013 UBA Health Plan Survey are based on responses from 10,551 employers sponsoring 16,928 health plans nationwide. This unparalleled number of reported plans is nearly three times larger than the next two of the nation’s largest health plan benchmarking surveys, combined. The resulting volume of data provide employers of all sizes more detailed — and therefore more meaningful — benchmarks and trends than any other source.
For further information about the 2013 Health Plan Survey, request a copy online or contact a local UBA Partner for a customized benchmarking report.
Earlier this year, technology giant Intel Corp. began an experiment in health care delivery at its largest semiconductor manufacturing facility in Rio Rancho, N.M.