Good Neighbor Insurance (www.gninsurance.com and dev.gninsurance.com) is continuing to update our clients on the new health insurance laws. There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work. Many critical details of this new insurance law will be clarified in the months and years to come.
These six major coverage options are:
(1) Individual or family coverage (private health care plans)
(2) Employee/employer group option for small businesses (typically under 50 employees)
(3) Employee/employer group option for large businesses (typically larger than 50 employees)
(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-state/federal government and private insurance coverage combined)
(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards
(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military service
Q – I am hearing from some carriers that the Waiver Procedure for the limited medical plans, also may contain guidance that will waive the provision which mandates that Grandfathered Plan Status is lost if you change insurance carriers, have you heard any confirmation on this?
A – Not true, DOL reiterated that changing carriers will cause you to lose grandfathered status on their webinar earlier this week.
Q – A group has a health plan that includes optional benefits, (like supplemental accident, preventive care buy-up, enhanced diagnostic x-ray and lab benefit, etc.); if the group changes one of those optional benefits, does that cause loss of grandfather status? I’m guessing at this point, any change to any benefit, even outside of the core benefit plan is a trigger?
A – If the benefit is actually part of the health plan, then I would agree – they are reducing benefits and thus would loose their grandfathered status. If they are offered independent of the health plan, there would be no impact.
Q – We have a renewal to handle for a group that currently has two separate plans which, at the present time, both offer the same benefits. One is specifically for the owners and the other is for key employees only excluding all other employees. In order for the key employee plan to continue to carve-out, I understand they can make only minor changes and not change carriers. But how about the owners’ plan? I know that the owners’ plan would lose their grandfathered status if we switched carriers but would this change affect the other plan’s status in anyway?
A – The owners plan would loose grandfathered status and be subject to testing. It would not impact the other plan.
Q – When do client administrators need to send the Grandfather Plan memo to employees?
A – It should be distributed with the first open enrollment following September 23, 2010.
Q – If the carrier gives you a 15% increase and you don’t change your contribution, does that automatically make you non-grandfathered because you passed on the increase? In addition, what if your contribution is a flat dollar amount. If that dollar amount doesn’t change but you get an increase?
A – Plans are allowed to increase premiums, so as long as the contribution is not lowered, they will remain grandfathered. A defined contribution plan is not specifically discussed.
Q – In the minimum design requirements for Non-Grandfathered plans, is there allowed to be more than a $2,000 deductible option for employer groups? I have a group asking and I am not familiar with this provision.
A – This provision doesn’t come into play until 2014.
Q – We have a group with over 50 employees who pays 100% of employee cost. The dependent contribution is based off of employee compensation. They are planning on passing on some or most all of the increase for their December renewal to the dependent portion. They want to remain grandfathered. I advised that if they change the contribution on any of the tier’s more than 5% they lose their grandfathered status. The group has read material that it’s only if the employee portion contribution changes more than 5%. Who’s right?
A – The following information is from a legal analysis from Groom Law Group: “Decrease in Employer Contribution: A policy or plan will lose grandfather status if an employer (or employee association) decreases its contribution rate toward the cost of any tier of coverage (e.g., self or family) by more than 5% below the contribution rate on March 23, 2010.”
Q – I have a non-grandfathered health plan that will offer 2 levels of benefits. The core plan is a $3,000 deductible which everyone will get, and the employer will pay 99% of the employee premium, and 0% for dependents. Is there a problem if the employer also offers say a $1,500 deductible and allows any employee to choose that plan if they pay 100% of the difference?
A – As long as both plans are offered on a non-discriminatory basis, (i.e. everyone gets the same contribution and has the same waiting period), this is not a problem, even if the highly-compensated drift toward one of the two plans.
Q – Is there anything in this bill that non-profits do not have to comply with? Are they eligible for anything in the tax-credit part, even though they do not pay normal taxes?
A – The legislation is applicable to all plans, so if the non-profit has a plan either fully-insured or self-insured, the law is applicable.
The tax-credit is available to non-profits (a smaller tax credit) assuming they meet all of the other criteria.
Q – Does an employer who may qualify for the tax-credit have to apply for it, or do they just claim it at tax filing? Also can an employer who otherwise would be eligible for the Arizona State tax-credit program potentially receive both credits?
A – They just complete the information on tax form 8941. The tax-credits are not mutually exclusive.
Q – Is it acceptable for employers to provide the new set of HCR model notices to employees by email?
A – PPACA says that the employees must be notified, but does not specify HOW they must be notified. Other DOL items to be distributed require a 12 point font and that the recipient has easy access to a computer and the web. Assuming both of these are applied to the model notices, the presumption is that this is an acceptable means of distribution.
Q – Can the insurer can be requested to provide these model notices? I have an email from an insurance carrier that gives me the idea that it is the insurers’ responsibility?
A – While it would be great if the insurance carrier provides the model notices, it is the responsibility of the plan and the issuer. So, if the carrier does not, it is the plan sponsors responsibility as well. In addition, even if the carrier does give the notice to the plan sponsor, it is the plan that must make certain it is distributed in the approved manner to the appropriate parties, i.e. “in a prominent manner”.
Premium Tax/Tax Credit
Q – If the employer pays 100% or 50% of the employee premium, under the new bill is the employee now being taxed on the premium the employer is paying?
A – No.
Q – How does a non-profit implement the tax credit? They have done the preliminary 3 step and have determined they would benefit but since they don’t pay taxes, how do they get their money?
A – It will actually be part of their 2010 tax return when they file.
Q – When is the Summary of Material Modification Notice required?
A – If a group health plan or health insurance issuer makes any material modification in any of the terms of the plan or coverage involved that is not reflected in the most recently provided summary of benefits and coverage, the plan or issuer shall provide notice of such modification to enrollees not later than 60 days prior to the date on which such modification will become effective. The summary of Material Modifications is not a PPACA requirement. This requirement has been in existence for years.
Over the Counter Drugs – HSAs, FSAs, HRAs and Archer MSAs
PPACA will bring changes to what is considered a qualified medical expense for FSAs,
HSAs, HRAs and Archer MSAs.
Beginning January 1, 2011, OTC drugs will no longer be considered qualified medical expenses for any of those health accounts
o Insulin is the one exception to this rule
o For any other OTC drug, employees cannot use funds from any of those accounts, unless it is prescribed by a physician
HSAs, FSAs, HRAs and Archer MSAs
Currently, if employees use funds from an HSA or Archer MSA for nonqualified
medical expenses, they are subject to an excise tax (10 percent
for HSAs, 15 percent for MSAs). This tax increases to 20 percent on January 1, 2011.
Q – Do you have any more information on the 50% participation requirement that small businesses need to comply with? A client wants to know how the health reform is impacting this rule.
A – PPACA has nothing to do with the participation requirement – this is a carrier requirement and the carriers can continue to require at least 50% participation. However, in 2014, if the group has more than 50 ees, there may be a penalty to the employer if an employee seeks coverage in the Exchange instead of through the employers plan.
Q – Under last week’s Q & A regarding the mandate for coverage in 2014, why would the employer be penalized if the employee was able to obtain coverage from the exchange – the employee is covered per the mandate?
A – If the employee purchases through the Exchange and gets a tax credit or cost-sharing subsidy, the employer’s plan may be deemed “unaffordable” and the employer is penalized for each employee getting a tax credit or subsidy through the exchange.
Real Estate Sales Tax
Q – I received something that stated “Did you know that if you sell your house after 2012, you will pay a 3.8% tax on it? That’s $3,800 on a $100,000 home, etc. When did this happen? It’s in the healthcare bill”. Is this true, or bogus?
A – This is bogus. The additional 3.8% that they are referring to is the additional Medicare Contribution for individuals earning more than $200,000 and joint filers earning more than $250,000 on certain unearned income…(i.e. rents and royalties).
Q – Does an employer have to report what they were paying for benefits on the actual payroll stubs along with the W-2’s? Also, which model notice needs to be the prevalent one?
A – There is no requirements that the benefit costs appear on payroll stubs.
Regarding which model notice, the Age 26 language must be “prominent”.
Q – Do the group benefits (or individual) that are going to be required to be “reported” on someone’s W-2 form for health benefits, going to be considered part of their salary and subject to being taxed or not?
A – This is not taxable at this time.
Q – Currently an employer is required to pay 50% of the employee rate, is the percentage expected to change?
A – This is a carrier requirement, not a legislative issue.
Q – In 2014, what if an employer offers insurance to an employee and they refuse the coverage because they don’t want to pay the additional premium?
A – There is an individual mandate in 2014, so if they don’t purchase coverage somewhere, they will be penalized. If they go to the Exchange and buy coverage AND qualify for a tax credit or cost-sharing reduction, the employer would be penalized.
Q – A group I have has 2 group policies; 1 is for owners, and the other for management. In the owner’s policy, if they take a draw instead of a paycheck, will they have to claim their health premiums as income?
A – This is a question for the CPA.
Q – Companies with less than 50 employees don’t have to offer insurance to their employees, but many choose to set up group plans. I understand that the number designated as “small group” is going to change to companies employing over 100, so would that mean that companies with less than 100 employees would not have to offer insurance?
A – Employer penalties begin at 50 full-time employees (FTE) in 2014.
Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care and overseas health care information with him at all times when he travels (check out his diving travels at www.douggulleson.com). Keep our blog close by you, www.gntravelinsurance.com , for continual updates on the changes with the US health care system.