Tucker E-Updates, September 2011

News and Industry Insights, Keeping You "Well-Informed"

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About Tucker Administrators, Inc.

Tucker Administrators is a full-service TPA in Charlotte, NC. Founded in 1976, we provide a comprehensive portfolio of employee benefit products to serve the employer, broker and consultant community.

Why Tucker Administrators? Tucker Administrators is more than a claims payer. Our focus is on those factors that drive the total health risk management model, not just fixed costs. Large individual claims are the most expensive costs of a health plan. Our firm has the technology to focus on claims cost control. We use cutting-edge tools like predictive modeling, claims surveillance technology, wellness and clinically-based medical management with proven results that may slow or even reverse the rising trend of claims costs.

As an AWAC® Alliance member, we are one of a select number of TPAs in the US to use a system to screen every one of our self-funded clients' claims and prescription data using more than 80,000 clinician-produced algorithms. AWAC® has the capability to identify at-risk claimants before they become catastrophic, resulting in earlier diagnoses that are both life-saving and money-saving. Here is a list of our services:

Total Self-Funded Health Plan Services
Health Risk Assessment integrated with the group health plan
Wellness Programs integrated with the group health plan
On-Site Physician Programs
Regulatory Compliance Support
Group Employee Limited Self-Funded Plans
Group Employee Fully-Insured Health Plans
Group Employee Ancillary Plans
FSAs-Medical, Dependent Care and Transportation
Consolidated Billings Services

We can show you how to control plan costs while encouraging better health for your employees and their families. Call us at 704-525-9666, and visit our website at http://www.tuckeradministrators.com/

Useful Links

CMS
HHS
EBSA
Federal Register
Health Reform Official Website
HIPAA (Privacy) Office of Civil Rights
IRS
IRS Retirement Plans Navigator
North Carolina Dept. of Insurance
Retiree Drug Subsidy Program, CMS
South Carolina Dept. of Insurance
Tricare; Military Health System

US House of Representatives
US Senate

Standard Auto Mileage Rates are Increased For FSA

Because of the substantial increase in gasoline prices during the first half of 2011, the Internal Revenue Service has increased the mileage rates to apply to deductible transportation expenses for medical expense purposes and for determining the reimbursed amount of these expenses in an FSA medical spending account for the remainder of 2011, beginning on July 1, 2011.

Effective July 1, 2011 the standard mileage rate for medical expense purposes has been revised from 19 cents to 23.5 cents per mile.

These revised rates apply to deductible transportation expenses paid or incurred for medical expense purposes on or after July 1, 2011.

The standard mileage rate that became effective January 1, 2010 (19 cents per mile) continues to apply to deductible transportation expenses paid or incurred for medical expense purposes before July 1, 2011.

Summary of Benefits and Coverage Proposed Regulations Released

The IRS, Labor Department and HHS jointly released a notice of proposed rulemaking on the Summary of Benefits and Coverage and a uniform glossary on 8-17-2011. This rule implements disclosure rules required under Patient Protection and Affordable Care Act (PPACA).

According to the Fact Sheet released along with the proposed regulations, consumers today lack access to information in plain English to help them understand the coverage they have. The goal of this regulation is to provide clear, consistent and comparable information about health plan benefits and coverage. The regulation requires health plans to create two forms for plan participants:

An easy to understand Summary of Benefits and Coverage, and

A uniform glossary of terms commonly used in health plans, such as “deductible” and “co-pay.”

The proposed summary form and glossary were developed in cooperation with the National Association of Insurance Commissioners (NAIC) and a working group of interested parties.

The Summary of Benefits and Coverage will include a standardized health plan comparison tool known as “Coverage Examples,” similar to the Nutrition Facts label for packaged foods. The “Coverage Examples” will illustrate what the plan covers for three common benefit scenarios (having a baby, treating breast cancer, and managing diabetes.)

PPACA requires that the Summary of Benefits and Coverage must not exceed four pages in length and must not include print smaller than 12-point font. The proposed regulations interpret the four-page limitation as four double-sided pages.

Effective Date: The implementation date is March 23, 2012.

The proposed regulations, a news release, a fact sheet, the Summary of Benefits and Coverage Templates and instructions may all be accessed on the DOL EBSA website.

Important Information for Small Business Owners

The small business health care tax credit was included in the Affordable Care Act enacted last year. Small employers that pay at least half of the premiums for employee health insurance coverage under a qualifying arrangement may be eligible for the small business health care tax credit. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ 25 or fewer workers with average income of $50,000 or less.

Small employers that pay at least half of the premiums for employee health insurance coverage under a qualifying arrangement may be eligible for the small business health care tax credit.

Small employers face two important tax filing deadlines in coming weeks:

Corporations that file on a calendar year basis and requested an extension to file to September 15 can calculate the small employer health care credit on Form 8941 and claim it as part of the general business credit on Form 3800, which they would include with their corporate income tax return.

Sole proprietors who file Form 1040 and partners and S-corporation shareholders who report their income on Form 1040 and requested an extension have until October 17 to complete their returns. They would also use Form 8941 to calculate the small employer health care credit and claim it as a general business credit on Form 3800, reflected on line 53 of Form 1040.

In addition, tax-exempt organizations that file on a calendar year basis and requested an extension to file to November 15 can use Form 8941 and then claim the credit on Form 990-T, Line 44f.

The IRS’s new outreach effort shown on their website will remind employers about the upcoming extension deadlines and will also provide details on other important information about the credit, such as eligibility requirements and calculating the credit. This website also includes a YouTube Primer on the Health Care Credit, and a webinar on the Small Business Health Care Tax Credit.

Health Care Reform: Employer Mandate and Federal Subsidies-Part 1

Employers and consultants have concentrated most of their efforts on the plan design changes required to comply with the Patient Protection and Affordability Act (PPACA). However, a large component of the PPACA is the employer mandate and the large federal subsidies that are scheduled to become available in 2014. This article will be Part 1 of a two-part series that explores the law as it is currently written and its potential impact on health plans. Part 2 will follow in the October issue of Tucker E-Updates.

Prior to August 12th of this year, there were varying interpretations on eligibility for the federal subsidies due to unclear statutory language. The big unknown was whether family members would be eligible for the subsidies when the employee had access to “affordable” coverage through the employer-sponsored plan but the family coverage was “unaffordable.”

The Congressional Budget Office (CBO) estimates for the law were based on the assumption that only employees would be eligible for the subsidies when “unaffordable” coverage is offered. Some analysts estimate that if family members are also eligible for the subsidies when “unaffordable” coverage is offered, the cost of the subsidies will increase about $50 billion per year.

On August 12th, the Internal Revenue Service (IRS) released proposed regulations on the health premium tax credits that will become available to millions of Americans in 2014 who purchase coverage through Exchanges. In this regulation, the IRS answered the controversial question above that reduces the potential cost of the credits and increases the value of staying with the employer-sponsored plan. The family members will not be eligible for the tax credits when “affordable” coverage is available to the employee but not to the family. Please keep in mind the IRS officials stated that this is a proposed regulation and this answer could change.

Part 1 of this two-part series will provide an explanation of the employer mandate and the subsidies. Part 2 will follow with two early stage hypothetical examples to illustrate points.

The employer mandate and extensive federal subsidies in PPACA are the key components that will impact employer-sponsored coverage in 2014 and beyond. The mechanism through which the federal subsidies will be released is the Exchanges. Again, please note that the Exchanges may not function as planned in their current form, and as a result the subsidies may not be released as originally intended. The purpose of this article series is to provide a snapshot of how the Exchanges will function according to the legislative vision.

EMPLOYER MANDATE

Beginning in 2014, the Patient Protection and Affordable Care Act (PPACA) imposes financial penalties on large employers who do not provide health insurance coverage, as well as financial penalties on employers who provide coverage that is considered “unaffordable.”

The employer mandate is called “shared responsibility” under PPACA.

Which employers are required to provide coverage or pay a penalty tax? Employers with 50 or more full-time employees (or full-time equivalents) on business days during the preceding calendar year are liable for a penalty tax if the employer fails to offer full-time employees the opportunity to enroll in an employer-sponsored plan AND any full-time employee having enrolled in coverage through a State Exchange is certified to receive a premium tax credit or “cost-sharing reduction.”

The penalty tax is calculated on a monthly basis by multiplying 1/12 of $2,000 by the number of full-time employees less 30. Only one 30-employee reduction per controlled group of employers is allowed. After 2014, the $2,000 amount will be adjusted for inflation.

According to tax staff on the Senate Finance Committee who were involved in crafting the law, the statutory language is not clear as to whether a penalty applies to the employer if no coverage is offered to the family members. The Treasury Department is responsible for making this decision.

Which employers who provide coverage must pay a penalty tax? Employers with 50 or more full-time employees (of full-time equivalents) on business days during the preceding calendar year are liable for a penalty tax if the employer offers its full-time employees the opportunity to enroll in an employer-sponsored plan that is “unaffordable” AND any full-time employee having enrolled in coverage through a State Exchange is certified to receive a premium tax credit or “cost-sharing reduction.”

The penalty tax is equal to the product of the number of full-time employees receiving a premium tax credit or “cost-sharing reduction” for the purchase of health insurance through a state exchange for the month and 1/12 of $3,000 (i.e., $250 per month). After 2014, the $3,000 amount will adjusted for inflation. This penalty tax is not to exceed the penalty tax imposed if the employer failed to offer a plan (1/12 of $2000 times the total number of full-time employees less 30). In other words, this penalty tax is capped.

Does a penalty tax apply to employers who offer “unaffordable” coverage to family members? Presumably, no penalty tax would apply in this case since the family members are ineligible for a premium tax credit.

What is “unaffordable” coverage? Coverage is “unaffordable” if either one of the following two conditions is present.

1) The employee’s required contribution under an employer-sponsored plan exceeds 9.5% of the employee’s household income*, OR
2) The employer-sponsored plan pays less than 60% of the cost.

* Treasury has issued proposed guidance to provide a safe harbor permitting the use of W-2 wages instead of household income

SUBSIDIES

What are the subsidies? There are two types of subsidies that are required to become available in 2014: health premium tax credits and cost-sharing reductions. These subsidies are available to individuals with household income starting at 100% of the federal poverty level up to 400% of the federal poverty level. 400% of the federal poverty level in 2014 for a family of four is estimated to be approximately $91,000. Household income includes the income of the taxpayer and all individuals for whom the taxpayer can claim a personal exemption. However, Treasury has issued proposed guidance to provide a safe harbor permitting the use of W-2 wages instead of household income.Health premium tax credits operate on a sliding scale. The tax credit begins at 2% of household income for taxpayers at 100% of the federal poverty level and phases out at 9.5% of household income for those above 400% of the federal poverty level. For example, an individual at 100% of the federal poverty level would be expected to pay 2% of their household income for coverage; the premium tax credit would equal the balance of the cost of coverage for a “benchmark plan” (defined as the second-lowest-cost plan in the Exchange). No one would receive a credit that is larger than the amount they actually pay for their plan.

Household income includes the income of the taxpayer and all individuals for whom the taxpayer can claim a personal exemption. However, Treasury has issued proposed guidance to provide a safe harbor permitting the use of W-2 wages instead of household income.

Cost-sharing reductions lower the annual out-of-pocket expenditures for deductibles, coinsurance, copayments and similar charges. Cost-sharing reductions do not include premiums, balance billing amounts for non-network providers or spending for non-covered services. They phase out after household income exceeds 400% of the federal poverty level.

Who is eligible for federal subsidies? Subsidies are only available to individuals who purchase coverage on their own through an Exchange (the individual market). If an employer provides coverage through the group market Exchanges, no federal subsidies are available. Subsidies are not available to plan participants covered under employer-sponsored plans.

There are three primary conditions that must be met to be eligible for the subsidies.

1) Individuals enrolling in an Exchange through the individual market must have household income between 100% and 400% of the federal poverty level (FPL) ($22,350 - $89,400 for a family of four in 2011).

2) The individual must not be eligible for “affordable” employer-sponsored coverage.

3) Individuals must be enrolled in a “qualified health plan” through an Exchange.

Coverage is “affordable” under an employer-sponsored plan if the employee’s required contribution is less than 9.5% of the employee’s household income (possibly the proposed guidance showing W-2 wages instead), OR the plan sponsor pays 60% or more of the cost of coverage.

No Health Plan Offered - If the employer does not offer any health plan to its employees or their family, both the employees and their families will be able to receive the premium tax credits, provided the conditions above are met.

Health Plan Offered, But “Unaffordable” - If the employer offers a health plan, the family members will NOT be eligible for the tax credits when the plan is considered “affordable” for the employee but “unaffordable” for the family.

Individuals eligible for premium tax credits must still pay between 2% and 9.5% of their household income (possibly the proposed guidance showing W-2 wages instead) for coverage. The value of the subsidy significantly reduces as household income increases to 300% and 400% of the FPL.

Part 2 of this article will be in the October issue of Tucker E-Updates, and will go through several hypothetical examples using the current regulations.

The Treasury Fact Sheet released on August 12. 2011 can be seen here: http://www.treasury.gov/press-center/Documents/36BFactSheet.PDF

If you have any questions about this article, please call us any time at 704-525-9666.

COBRA Q&A: Revisiting the COBRA Subsidy

Question 1: I’ve heard that the COBRA Premium Reduction (Subsidy) ends on August 31, 2011, is this true?
Answer: Not necessarily, some individuals will still be eligible to receive the subsidy beyond August 31, 2011. The American Recovery and Reinvestment Act (ARRA) provided a COBRA premium reduction for eligible individuals who were involuntarily terminated from employment through the end of May 2010. Due to the statutory sunset, the COBRA premium reduction under ARRA is not available for individuals who experience involuntary terminations after May 31, 2010. However, individuals who qualified on or before May 31, 2010 may continue to pay reduced premiums for up to 15 months, as long as they are not eligible for another group health plan or Medicare even if their COBRA coverage did not start until a later date due to the terms of a severance arrangement, or the use of banked hours or other similar provision that delayed the start of their COBRA coverage. For example if an individual was involuntarily terminated on May 31, 2010 and due to the terms of a severance agreement their COBRA coverage did not start until December 1, 2010, they would still be eligible for the full 15 months of subsidy through February 29, 2012 as long as they are not eligible for another group health plan or Medicare.

Question 2: Is the COBRA Premium Reduction (Subsidy) still available to individuals who have lost their jobs?
Answer: The American Recovery and Reinvestment Act (ARRA) provided a COBRA premium reduction for eligible individuals who were involuntarily terminated from employment through the end of May 2010. Due to the statutory sunset, the COBRA premium reduction under ARRA is not available for individuals who experience involuntary terminations after May 31, 2010. However, individuals who qualified on or before May 31, 2010 may continue to pay reduced premiums for up to 15 months, as long as they are not eligible for another group health plan or Medicare.

Individuals who believe they have been incorrectly denied the subsidy may request the Employee Benefits Security Administration to review their denial and issue a determination within 15 business days.

Question 3: What can I do if I believe I am eligible for the premium reduction but my plan sponsor has denied my request for treatment as an "assistance eligible individual"?
Answer: If the plan determines that you are not eligible for the premium reduction, you can request an expedited review of the denial. The Department of Labor will handle requests related to private sector employer plans subject to ERISA's COBRA provisions. Applicants may either be the former employee or a member of the former employee's family who is eligible for COBRA continuation coverage or the COBRA premium assistance through an employment-based health plan. The Department of Health and Human Services will handle requests for Federal, State, and local governmental employees including public schools, public colleges and universities, or a police or fire department, as well as requests related to group health insurance coverage provided pursuant to state continuation coverage laws. The Departments are required to make a determination regarding your request within 15 business days after receiving your completed application for review. The Secretary of Labor may assess a penalty against a plan sponsor (and similarly, the Secretary of HHS against a health insurance issuer) of not more than $110 per day for a failure to comply with a determination within 10 days after the date of the receipt of the determination.

Note: Appeals to the Department of Labor must be submitted on the U.S. Department of Labor application form. The form is available atwww.dol.gov/COBRA/main.html and can be completed online or submitted by mail or fax as indicated in the instructions. If you believe you have been inappropriately denied eligibility for the premium reduction, you may wish to speak with an Employee Benefits Security Administration Benefits Advisor at 1.866.444.3272 before filing this form. Appeals to the Department of Health and Human Services must be submitted on the Centers for Medicare & Medicaid Services application form. The form is available at www.continuationcoverage.net and can be submitted by mail or fax as indicated in the instructions. For more information about the review of denials, individuals can also contact Maximus, a CMS-sponsored contractor, at 1.866.400.6689.

Question 4: I have been on COBRA with the 65% premium subsidy for almost 15 months, what should I do?
Answer: Those individuals who qualified for the premium reduction were only required to pay 35 percent of the COBRA premium otherwise due to the plan. This premium reduction is available for up to 15 months. If your COBRA continuation coverage lasts for more than 15 months, you will need to pay the full amount to continue your COBRA continuation coverage. If you are unsure when your 15 months of premium assistance ends or how much the new premium is, contact your plan right away so that you can make sure you pay the correct amount for the correct time period. If you do not make the full payment within the correct time period, your COBRA coverage can be canceled.

Question 5: What if I can not afford to pay the full premium for the remaining 3 months?
Answer: It is very important to pay the remaining 3 months if at all possible, as you lose some health coverage rights or options if your COBRA is terminated for non-payment. Individuals who exhaust their COBRA are eligible to obtain coverage through state high risk pools and also qualify for special enrollment in a spouse's plan. These rights are lost if an individual's COBRA is terminated for non-payment. (Note: If a person becomes eligible for coverage in a new employer's plan or spouse's plan, they lose eligibility for the subsidy and are required to notify their COBRA provider of their eligibility for the other coverage.)

If you have limited income and resources (assets), you may want to contact your state to determine if you are eligible for Medicaid or other programs that may assist you in obtaining assistance with health coverage.

Question 6: If I did not make the premium payment on time and my coverage was canceled what can I do?
Answer: You may want to contact your plan and ask if they will reinstate your coverage; however, if your coverage was terminated for not making the payment within the grace period, the plan is not required to reinstate your coverage. If you believe your coverage was canceled inappropriately, please contact an EBSA Benefits Advisor at 1.866.444.3272 for assistance.

If you have lost coverage, and are not eligible to enroll in a new employer's plan or a spouse's plan, you may want to contact your state department of insurance to get information about obtaining an individual policy. You may be able to cover your children under your state's Children's Health Insurance Program- call 1.877.KIDS.NOW (1.877.543.7669) or go to www.insurekidsnow.gov to find out about eligibility and enrollment.

Additionally, the Affordable Care Act provides that plans or issuers that make available coverage to dependent children must make such coverage available for children up to age 26. Because this provision has a varying applicability date, contact the plan to see if such coverage is available. The Affordable Care Act also established Pre-existing Condition Insurance Plans (PCIP) for those with pre-existing conditions. For information about how these plans work, go to www.healthcare.gov.

This Q&A can be found at: http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreduction.html

Grand Total of Health Plan Savings for Tucker Administrators' Self-funded Clients with AWAC:*

$2,246,835.76

The AWAC system reduces the overall cost of claims, but also manages all key aspects of care and cost containment resulting in better outcomes, lower overall cost of claims and healthier patients. Call us today at 704-525-9666 to learn more.

*As of August 31, 2011

Preventive Services Covered by Private Health Plans under the Affordable Care Act

The Patient Protections and Affordable Care Act (PPACA), or ACA as it is often called, requires private insurers (fully insured and self funded employers) with the exception of grandfathered plans to cover certain preventive services without any patient cost sharing. Public programs like Medicare or Medicaid have their own requirements. The reasoning for preventive service requirements is that health problems may be identified earlier, managed more effectively, and treated before they develop into more severe illnesses. This also could be a major factor that makes the plan more cost-effective. Despite long-standing recommendations for use of evidence-based preventive services for a wide range of health conditions, actual utilization varies substantially. Although a number of factors contribute to use of preventive services, out of-pocket costs in the form of copayments and deductibles can act as a barrier, keeping the covered member from using them.

Preventive Services Requirements
Under the ACA, private health plans must provide coverage for a array of preventive services without cost-sharing (such as copayments, deductibles, or co-insurance). The ACA requires private plans to provide coverage for services under four categories:

evidence-based screenings and counseling,
routine immunizations,
childhood preventive services, and
preventive services for women.

1. Evidence-based screenings and counseling: The services required to be covered without cost-sharing include screening for depression, diabetes, cholesterol, obesity, various cancers, HIV and sexually transmitted infections, as well as counseling for drug and tobacco use, healthy eating, and other common health concerns.

2. Routine Immunizations: Health plans must also provide coverage without cost-sharing for immunizations that are recommended and determined to be for routine use by the Advisory Committee on Immunization Practices, a federal entity comprised of immunization experts. These guidelines require coverage of immunizations for influenza, meningitis, tetanus, HPV, hepatitis A and B, measles, mumps, rubella, and varicella.

3. Preventive Services for Infants, Children, and Adolescents: The ACA provides specifically for the preventive health needs of children, requiring private insurers to cover without cost-sharing the preventive services recommended by the Health Resources and Services Administration’s (HRSA’s) Bright Futures Project, which provides evidence-informed recommendations to improve the health and wellbeing of infants, children, and adolescents. The preventive services to be covered for children and adolescents include the immunization and screening services described in the previous two categories, behavioral and developmental assessments, iron and fluoride supplements, and screening for autism, vision impairment, lipid disorders, tuberculosis, and certain genetic diseases.

4. Preventive Services for Women: In addition to the evidence-based screening, counseling, and routine immunizations services described above, the ACA authorizes the federal Health Resources and Services Administration (HRSA) to make additional coverage requirements for preventive services for women. Based on recommendations from a committee of the Institute of Medicine (IOM), federal regulations will require insurers to cover a range of women’s preventive services without cost-sharing, including annual well-woman visits, testing for STIs and HIV, support for breast feeding, and screening and counseling for domestic violence. The requirements also include all FDA-approved contraception methods (including sterilization procedures) as prescribed by a clinician, as well as patient education and counseling on contraception. The regulations propose that plans sponsored by certain religious employers be exempt from the contraception coverage requirements.

Cost-Sharing
So long as the preventive service is performed by an in-network provider, is not billed separately from the office visit, and is the main reason for the office visit, the visit and the preventive service will be covered by the plan without cost-sharing. The circumstances under which insurers may charge copayments and use other forms of cost-sharing include:

If the office visit and the preventive service are billed separately, the insurer may still impose cost-sharing for the office visit itself.
If the primary reason for the visit is not the preventive screening, patients may have to pay for the office visit.
If the service is performed by an out-of-network provider, insurers may charge patients for the office visit and the preventive service.

If the frequency with which plans should provide coverage for a given preventive service is not specified in the guidelines, insurers can use “reasonable judgment” based on established medical practices to make coverage decisions.

Who Must Comply
These requirements will apply to all private plans – including individual, small group, large group, and self-insured plans in which employers contract administrative services to a third party payer, with the exception of those plans that maintain “grandfathered” status.

In order to have been classified as “grandfathered,” plans must have been in existence prior to March 23, 2010 and cannot make significant changes to their coverage such as increasing patient cost-sharing, cutting benefits, or reducing employer contributions. Plans that lose their grandfather status must then abide by the preventive service requirements of the ACA. HHS expects 45% of large employer plans and 60% of small employer plans to relinquish their grandfathered status by 2013. Beginning August 1, 2012, non-grandfathered insurers will also be required to cover the additional services recommended for women’s preventive health care.

Econmic Impact
The precise effect of the new required preventive coverage on health insurance premiums is not yet known, because it will depend upon location of the services within the United States, the cost of the added utilization of preventive services and the effectiveness at reducing future costly illnesses.

Click Here for a Preventive Services Chart, created by the Kaiser Family Foundation

Call us today at (704)525-9666