Good Neighbor Insurance (www.gninsurance.com and www.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-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 need some clarification on existing group coverage. I am trying to quote a group that renewed in April. They made changes to their plan at that time by increasing the deductible and adding an HSA option. They are a carve-out of management positions. They have 26 employees but only offer health insurance to 8. Will they have to now offer group coverage to all eligible employees? If so, when would that have to start?
A – They are now subject to 105(h) discrimination testing, so if they don’t pass, they will either need to offer coverage to the entire group or pay a penalty.
Q – Can you explain how the 105(h) discrimination testing can be measured? What factors and information are needed and how does one use this information to find out if discrimination is determined to exist?
A – The following information is necessary to run a Discrimination test under 105(h):
1. Date of hire
2. Date of birth
3. Hours if PT
4. Status (ft, pt, seasonal)
6. Shareholder and % of stock held
9. Collective Bargaining Arrangement
10. Non Resident Alien
This information determines the “control” group, then both the Eligibility test and the Benefits test must be performed on this group.
Q – If a company wants to keep grandfathered status for their medical and dental plans, and eliminates there FSA, will that cause the group to lose grandfathered status?
A – If a plan is not changed, grandfathered status is lost only if one of six changes occurs:
- Elimination of all or substantially all benefits to diagnose or treat a particular condition.
- Increase in a percentage cost-sharing requirement (e.g., raising an individual’s coinsurance requirement from 20% to 25%).
- Increase in a deductible or out-of-pocket maximum by an amount that exceeds medical inflation plus 15 percentage points.
- Increase in a copayment by an amount that exceeds medical inflation plus 15 percentage points (or, if greater, $5 plus medical inflation).
- Decrease in an employer’s contribution rate towards the cost of coverage by more than 5 percentage points.
- Imposition of annual limits on the dollar value of all benefits below specified amounts
Assuming none of these happen, eliminating a FSA would not cause a loss of grandfathered status.
Q – If the employer is contributing a specific amount (say $200) and the plan has a rate increase of more than 5%, because the employee’s contribution will go up by more than 5%, the plan will lose its grandfathered status…..is this true?
A – The test established in the regulation is that an employer can only decrease his/her contribution PERCENTAGE (not absolute dollar amount) by five points and retain grandfather status.
For example, if the employer contributes 70% of premium today, he or she must contribute at least 65% of premium to maintain grandfather status.
The current understanding (based on communications from EBSA and HHS) is yes, the plan would no longer be grandfathered.
High Risk Pool
Q – A dependent Spouse is currently covered under COBRA through May 2011 under the 65% discount and then one more month makes 18 months.
The spouse has Rheumatoid Arthritis, what should they do?
A) Apply now & get denials so in May or June the denials will be documented?
B) Is there a high risk pool for AZ yet? (90 days after signing)
A – A) In order to qualify for the High Risk Pool, this individual will need to go 6 months without creditable coverage.
B) Arizona is utilizing the Federal high risk pool at www.pcip.gov.
Patient Protection Model Disclosure
Q – If the plan does not need to select a PCP, etc. do they still need to send this notice out as well to stay “grandfathered”?
A – This notice is not necessary if selection of a PCP is not required.
Q – What are the penalties if a group does not pass discrimination testing?
A – $100 per day, per person who is discriminated against; to a maximum of the lesser of 10% of the total plan cost, or $500,000.
Q – I have a group that is a small company with 6 to 8 employees and no medical plan for those employees. The owner claims he will not HAVE to start a benefit plan under the new laws, and that he will not have to pay any penalties.
I know over 50 lives if you drop coverage there is a $2,000 per EE fee to pay the government.
What is the ruling for small groups who offer NO medical coverage?
A – There is no requirement for employers with less than 50 full-time employees to provide coverage or pay a penalty.
Q – A question has come up with a small group of about six employees. The employer does NOT provide health insurance to employees because ALL the employees are either covered by their spouse’s plan, or have individual coverage. At this time it appears that NONE of these employees will purchase from the exchange. Will this employer be subject to penalties? If so effective when, and how much?
A – They will not. Penalties only come into play on groups of 50+.
Q – If a plan renews their current benefits and maintains grandfathered status, is the preventive benefit effective on their first plan anniversary following September 23?
A – Grandfathered plans are not required to cover preventative at 100% as long as they maintain grandfathered status. All non-grandfathered plans must implement 100% coverage on preventative on the first day of the plan year following 9/23/10.
Q – I thought that 100% preventative benefit was automatically added on the plan’s anniversary?
A – Unless a carrier makes a determination to add it, the grandfathered plan has the right to voluntarily add any component of the legislation, but must do so 60 days in advance and must note their “file” that it was voluntary and they are still maintaining their grandfathered status.
Q – I have a new group that currently has no group plan in place, a total of 12 employees, and wishes to set-up a “Management Carve Out ” for the owner and 3 managers, and offer nothing to the line employees. Are there any restrictions, special rules, or requirements I should be aware of?
A – If there is not a “business” reason for doing the carve-out, they may be subject to penalties. The plan is now subject to the Highly Compensated Discrimination test 105(h).
Q – Any idea where I can get some kind of plan design for the bronze plan in 2014? I have a group with a $10,000 deductible plan with copays for PCP visits and drugs. I would think that is not rich enough to qualify.
A – Other than it must cover 60% of the average cost of essential benefits, nothing has been published.
Q – It is my understanding that starting in 2011 a company can no longer deduct the health insurance premiums paid out. I also understand that all employees will need to claim as income the part of their health insurance premium paid for by the company. Is this information correct?
A – No, neither piece is correct.
Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care and overseas health care, www.gninsurance.com , information with him at all times when he travels Keep our blog close by you, www.gntravelinsurance.com, for continual updates on the changes with the US health care system.