Eligibility Revisited:
What Happens When Contractors Are Allowed On the Health Plan?

 The Department of Labor (DOL) is sharply increasing inspection & enforcement of worker classification as an employee or independent contractor.   DOL has agreements to share information with states & IRS (which also polices this issue aggressively) to spot situations where employers list people who fit the definition of “employee” as “independent contractors” to avoid paying benefits or other employment costs.   That may seem like just an HR issue.  However, when plan sponsors allow true independent contractors (such as truck owner-operators who deliver for a company or independent doctors on a hospital plan) onto the employer plan, it triggers the potential for three additional problems.

(1).  Allowing independent contractors on the employer-sponsored self-funded group health plan immediately transforms it to a Multiple Employer Welfare Arrangement (MEWA) because it is now covering employees of both the original employer, and "employee" of the individual truck owner/operator’s “company” or doctor’s “firm”. This can bring immediate shut-down by state officials for operating a MEWA and termination of stop-loss coverage.

(2). The contractor (that the employer wanted to help obtain healthcare coverage) will undergo IRS punitive financial treatment by denying the tax deductions of all of the contractor’s business expenses.  The IRS will state that the covered person (who is really an independent contractor) was identified as an “employee” and thus as an “employee” has no “business expenses” for as many years as the wrong identification was used.

(3). In addition to the consequences of sponsoring a MEWA discussed in (1), the employer/plan sponsor, may also be hit with current & back employment costs such as FICA and unemployment. 

Cross-checking data between agencies is easy and quickly points out these cases (because the truck owner or doctor lists himself as a separate independent contractor firm for business tax deduction reasons).   This issue highlights the importance of adhering to the plan document's definition of an employee. 

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

Comparative Effectiveness Research Fees:
What Is It and How Will It Impact the Group Health Plan?

Starting in 2012, the Patient Protection and Affordability Act (PPACA) mandates that an assessment be made on every group health plan sponsor and insurance issuer to fund research on finding better, more efficient health treatment options and communicating the results to the suppliers and consumers of health care. It is called Comparative Effectiveness Research (CER).  The implementation details of this mandate are expected to be published in the near future.

What is Comparative Effectiveness Research?
Comparative effectiveness research is a method to improve health outcomes by developing and disseminating evidence-based information to patients, providers, and health care decision-makers about the effectiveness of treatments relative to other options for medical treatments, services, procedures, drugs or other items or strategies that treat, manage, diagnose, or prevent illness or injury. Identifying the most effective and efficient interventions has the potential to reduce unnecessary treatments, which in turn, may help lower costs.

Traditional clinical research typically examines the effectiveness of one method, product, or service at a time. Comparative effectiveness research compares two or more different methods for preventing, diagnosing, and treating health conditions. For example, one comparative effectiveness study conducted a randomized trial for treatments of osteoarthritis of the knee and found that patients receiving surgery did not have better outcomes than those treated with medicine and physical therapy. Another study*, known as ALLHAT, compared diuretics to three newer and more costly blood-pressure lowering drugs, and found that diuretics worked best to lower blood pressure and prevent heart problems and strokes.
*Kaiser Family Foundation http://www.kff.org/healthreform/upload/7946.pdf

Once the research is performed, communicating the information to health care providers and the public and providing incentives for providers to use the research will be a crucial step in realizing the potential benefits of comparative effectiveness research

CER is not new, and has received some federal funding for over a decade.  However, the American Recovery and Reinvestment Act (ARRA) bolstered the funding significantly by allocating $1.1 billion. The Patient Protection and Affordability Act (PPACA) subsequently established the Patient-Centered Outcomes Research Institute specifically for CER, and will be funded in part by group health plans through the fee assessment. 

How Much is the Fee?
IRS Notice 2011-35 states that plans ending on or before September 30, 2012 will be assessed $1 multiplied by the average number of covered lives under the plan. Plan years ending on or after October 1, 2012 will be assessed $2 multiplied by the average number of covered lives. In 2014 and after, the amount of the fee will be indexed based on the increase in per capita national health expenditures, and published by the Department of Health and Human Services.  The fee will end for plans with policy years ending on or before September 30, 2019, or for calendar year plans, the fees apply 2012 through 2018.

Improving the quality of health care services and reducing health care costs are key components of the national health reform debate. Comparative effectiveness research is a component in achieving these goals.

Tucker Administrators will keep you updated on this issue, as more information becomes available.

Curtain Down on the CLASS Act

The CLASS Act (Community Living Assistance Services & Support Act) in the Patient Protection and Affordability Act (PPACA) that was to make long-term health care more affordable and accessible for most Americans has been abandoned, at least for now.

The Department of Health and Human Services (HHS) said that “After 19 months of analysis, they could not come up with a model for the so-called CLASS Act that keeps it voluntary and budget-neutral.”
 
However, CLASS is not totally gone.  It was not repealed.  It simply will not be implemented.  So, the authorization is still viable for something in the future that would classify as “CLASS-like”, like having a store credit to buy something similar in the future.  Technically, something new could pop up sometime as “law” within PPACA without a hearing or vote. 

 Happy Thanksgiving

Best Wishes from all of us at Tucker Administrators