Tucker E-Updates, October 2011
News and Industry Insights, Keeping You "Well-Informed"
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
Don't Forget Your Flu Shot
Note: All clients of Tucker Administrators' iHealth™ program receive this reminder.
The Centers for Disease Control recommends flu shots for everyone six months of age or older but stresses that the vaccine is especially important for certain groups, including:
• Pregnant women
• Children younger than five, especially those two and younger
• People 50 or older
• People of any age with certain chronic medical conditions
• People who live in nursing homes or other long-term care facilities
• People who live with or care for those at high risk for complications from the flu
Influenza is a serious illness that can lead to hospitalization and even death. Don’t take a chance with your health.
Group Health Plan Annual Enrollment Checklist
To ensure employees are making informed annual enrollment choices for themeselves and their families, below is a quick checklist that may be useful:
• Look for changes in the existing plan: Don’t automatically renew the option you had before unless you have reviewed the benefit plan and any corresponding employee premium contributions
• Does the wellness plan offer any incentives for participating
• If you have a choice of more than one health plan, compare the differences in benefits and price.
• Check to see if your current physicians and hospital are in the network of the plan you’re considering. Do not rely on a printed network directory. They are out of date as soon as they are printed. Call the physician's office or look up online.
• Review the drug benefit to determine out of pocket costs such as copays and coinsurance. To look for potential savings, find out if any of the prescription medications you are taking has a generic equivalent in the plan formulary.
• Add up your health spending from recent years to estimate what your costs might be for the coming year, such as office visits, prescriptions and any procedures you may be planning. Also, make a list of the premiums, out-of-pocket expenses and benefits under each plan.
• You may be able to contribute pre-tax dollars to a flexible spending account (FSA) for medical premiums and qualified, unreimbursed medical expenses.
Health Care Reform: Premium Tax Credits-Part 2
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This is the second of a two-part series covering the Patient Protection and Affordable Care Act (PPACA) employer mandate and the federal subsidies scheduled to become available in 2014. The September issue of Tucker E-Update contained Part 1, which covered an explanation of the employer mandate and the subsidies. In Part 2 below, we will look at hypothetical examples to show the potential value of the health premium tax credits.
Tax credits are available to qualified individuals offered (but not enrolled in) employer-sponsored insurance if (a) it is “unaffordable” (meaning that the self-only premium exceeds 9.5% of household income); or (b) it does not provide a minimum value (meaning it fails to cover 60% of total allowed costs).
Tax credits are not available to family members when the employer offers affordable coverage to the employee but does not offer affordable coverage to the employee’s family.
How the Premium Tax Credit Works
Eligibility
• Household income must be between 100% and 400% of the federal poverty level.
• Covered individuals must be enrolled in a “qualified health plan” through an Affordable Insurance Exchange.
• Covered individuals must be legally present in the United States and not incarcerated.
• Covered individuals must not be eligible for other qualifying coverage, such as Medicare, Medicaid, or affordable employer-sponsored coverage.
Credit Amount
• The credit amount is generally equal to the difference between the premium for the “benchmark plan” and the taxpayer’s “expected contribution.”
• The expected contribution is a specified percentage of the taxpayer’s household income. The percentage increases as income increases, from 2% of income for families at 100% of the federal poverty level (FPL) to 9.5% of income for families at 400% of FPL. (The actual amount a family pays for coverage will be less than the expected contribution if the family chooses a plan that is less expensive than the benchmark plan.)
• The benchmark plan is the second-lowest-cost plan that would cover the family at the “silver” level of coverage.
• The credit is capped at the premium for the plan the family chooses (so no one receives a credit that is larger than the amount they actually pay for their plan).
Special Rules
• The credit is advanceable, with advance payments made directly to the insurance company on the family’s behalf. The advance payments are then reconciled against the amount of the family’s actual premium tax credit, as calculated on the family’s federal income tax return. Any repayment due from the taxpayer is subject to a cap for taxpayers with incomes under 400% of FPL. The caps range from $600 for married taxpayers ($300 for single taxpayers) with household income under 200% of FPL to $2,500 for married taxpayers ($1,250 for single taxpayers) with household income above 300% but less than 400% of FPL.
• The proposed regulation provides that a taxpayer is not required to repay any portion of the advance payment if a family ends the year with household income below 100% of FPL after having received advance payments based on an initial Exchange determination of ineligibility for Medicaid.
Premium Tax Credit Calculation: Three Examples
Example 1: Family of Four with Income of $50,000, Purchases Benchmark Plan
The premium tax credit is generally set based on the benchmark plan. The family’s expected contribution is a percentage of the family’s household income.
• Income as a Percentage of FPL 224%
• Expected Family Contribution: $3,570
• Premium for Benchmark Plan: $9,000
• Premium Tax Credit: $5,430 ($9,000 - $3,570)
• Premium for Plan Family Chooses: $9,000
• Actual Family Contribution: $3,570
Example 2: Family of Four with Income of $50,000, Purchases Less Expensive Plan
If a family chooses a plan that is less expensive than the benchmark plan, the family will generally pay less, thereby creating an incentive to choose a less costly plan and reducing overall health care costs.
• Income as a Percentage of FPL 224%
• Expected Family Contribution: $3,570
• Premium for Benchmark Plan: $9,000
• Premium Tax Credit: $5,430 ($9,000 - $3,570)
• Premium for Plan Family Chooses: $7,500
• Actual Family Contribution: $2,070 ($7,500 - $5,430)
Example 3: Family of Four with Income of $50,000, Parents are between the ages of 55 and 64
Because premiums are generally higher for older individuals, the premium tax credit also is higher for these individuals.
• Income as a Percentage of FPL 224%
• Expected Family Contribution: $3,570
• Premium for Benchmark Plan: $14,000
• Premium Tax Credit: $10,430 ($14,000 - $3,570)
• Premium for Plan Family Chooses: $14,000
• Actual Family Contribution: $3,570
Tax credits are not available to family members when the employer offers affordable coverage to the employee but does not offer affordable coverage to the employee’s family. The family would weigh the costs and benefits of the employer-sponsored plan vs. the costs and benefits of the plans available through the Exchange.
Premium Conversion - Is it permissible for an employer to set up a premium conversion plan to help employees pay the Exchange premiums on a pre-tax basis when the employer no longer offers a plan? According to tax staff on the Senate Finance Committee, if an employer drops its employer-sponsored coverage and employees buy coverage in the Exchange, any amount that an employer provides to employees to purchase that coverage will be taxable to the employee (for both federal income and payroll tax purposes). Conversely, a premium conversion plan is an option if the employer offers a health plan through the Exchange.
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.
PPACA: What’s Scheduled for Implementation for 2012?
Before you know it, 2012 will be here. Below is a listing of new Patient Protection and Affordability Act (PPACA) provisions to be implemented in 2012. Implementation updates have been provided when published by a federal agency
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Accountable Care Organizations in Medicare
Allows providers organized such as accountable care organizations (ACOs) that voluntarily meet quality thresholds to share in the cost savings they achieve for the Medicare program. Implementation: January 1, 2012
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Implementation update: On April 7, 2011, the Department of Health and Human Services published a proposed rule in the Federal Register defining Accountable Care Organizations and set out requirements for governance, legal structure, transparency efforts and the incorporation of evidence-based medicine and quality efforts. HHS also released facts sheets for providers and consumers, as well as fact sheets on legal issues and quality scoring in ACOs. The Federal Trade Commission and Department of Justice issued a joint policy statement on antitrust issues related to ACOs. On May 20, 2011, CMS issued a request for applications for the Pioneer ACO Program, which is targeted at organizations that can demonstrate the improvements in quality and cost-savings of a mature ACO.
Medicare Advantage Plan Payments
Reduces rebates paid to Medicare Advantage plans and provides bonus payments to high–quality plans. Implementation: January 1, 2012
| On February 28, 2011, the Centers for Medicare and Medicaid Services issued a letter to Medicare Advantage plans announcing payment rates for 2012 that included changes included in the health reform law. On November 22, 2010, CMS announced a proposed rule updating Medicare Advantage plan payments. |
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Implementation update: On February 28, 2011, the Centers for Medicare and Medicaid Services issued a letter to Medicare Advantage plans announcing payment rates for 2012 that included changes included in the health reform law. On November 22, 2010, CMS announced a proposed rule updating Medicare Advantage plan payments.
Medicare Independence at Home Demonstration
Creates the Independence at Home demonstration program to provide high-need Medicare beneficiaries with primary care services in their home. Implementation: January 1, 2012
Medicare Provider Payment Changes
Adds a productivity adjustment to the market basket update for certain providers, resulting in lower rates than otherwise would have been paid. Implementation: Begins calendar, fiscal, or rate year 2012, as appropriate
Fraud and Abuse Prevention
Establishes procedures for screening, oversight, and reporting for providers and suppliers that participate in Medicare, Medicaid, and CHIP; requires additional entities to register under Medicare. Implementation: January 1, 2012
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Implementation update: On February 2, 2011, the Centers for Medicare and Medicaid Services issued a final rule implementing fraud and abuse prevention initiatives in Medicare, Medicaid, and CHIP. On March 23, 2011, CMS published a notice regarding the fee that new providers and providers updating their information would have to pay in order to fund fraud screening efforts.
Annual Fees on the Pharmaceutical Industry
Imposes new annual fees on the pharmaceutical manufacturing sector. Implementation: January 1, 2012
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Implementation Update: On August 15, 2011, the Internal Revenue Service issued temporary regulations that provide guidance on the annual fee imposed on pharmaceutical companies.
FSAs-Who Wants a Pay Raise?
Employee: I need a pay raise!” Employer: “I need to hold down my costs!” Conflicting interests? Not necessarily. A flexible spending account (FSA) actually does both. Although a flexible spending account (FSA) is not a new program, it is a benefit worth revisiting. An FSA puts more money in the employee’s paycheck. The plan allows employees to set aside part of their gross pay on a pre-tax basis for unreimbursed, qualified medical expenses and work-related day care. The result is a reduction in taxable income and an increase in take-home pay. But the other upside is that it lowers the employer’s bottom line as well. For every dollar an employee sets aside in an FSA, the employer saves about 7.65% in payroll taxes. Some business owners we talk to are not even aware that an FSA can actually help lower their payroll costs.
How it works:
Following the chart below, the employee’s salary is reduced from $1600 to $1,190 before taxes are taken out for items like health plan premiums, their medical spending account monthly deduction, and dependent care monthly deduction. Only then are the taxes applied. The employee ends up with take-home pay of $922.51, rather than the $800.95 without the FSA in place.
Implementation:
• Employer establishes a plan year
• Select the maximum amount employees can set aside for the medical spending account-the IRS has set the annual limit for dependent care at $5000
• Hire a TPA to administer the plan
• Obtain a plan document
• Provide educational materials and enrollment session
The TPA can assist the employer in establishing the appropriate dollar limits for the medical spending account, generate a plan document, and provide regulatory support, education materials and/or enrollment help.
Use It or Lose It
Many employees unnecessarily avoid the FSA because of the Use It or Lose It rule. The rule is, if you do not “spend down” your annual election by the end of the plan year, any remaining balance left will not be returned to you. However, with a little bit of planning, this situation can be avoided by making a list of known, anticipated qualified expenses that may be reimbursed through the FSA, such as deductibles, copays, eyeglasses, contacts, contact lens solutions, medications, LASIK surgery or orthodontia.
Pre-paid Benefit (Debit) Cards
The pre-paid benefit card eliminates the need for employees to pay cash for eligible services and wait for reimbursement for most purchases. The participant swipes the card and thereby accesses their funds electronically at the point of sale. The card may be used for unreimbursed medical expenses at discount stores, supermarkets, department stores, and pharmacies that can specifically identify FSA-eligible items at checkout. Most purchases are auto adjudicated electronically, so the participant does not need to send Tucker every receipt. However, participants are strongly advised to retain all their receipts.
Big Changes Coming in 2013
For those employees and dependents anticipating high dollar purchases that may be reimbursed through an FSA, there is a sense of urgency to select the appropriate annual election for the next plan year. Some employers allow $3,000, $4,000 or more as the plan
maximum. These high levels allow FSA-participating employees to cover more expenses for the higher cost items
| Effective January 1, 2013, the PPACA will limit the maximum annual election for a medical spending account to $2,500. |
like LASIK surgery or orthodontia. However, in 2013 that annual amount will be limited to $2500 through new regulations in the PPACA.
So, for those who currently have a high dollar limit on medical FSA annual elections, it may be helpful to take advantage of the higher cap now for high-end qualified medical expense items between now and December 31, 2012. Effective January 1, 2013, PPACA regulations will cap the maximum annual election at $2500.
Conclusion
The FSA is a win-win situation for employee and employer. Both receive tax relief. The more employee participation there is, the greater the tax savings for the employer. It complements the group health plan through tax savings on various out-of-pocket expenses not covered under the plan. It gives the working family tax savings on dependent day care. The FSA is easy and inexpensive to implement. The tax savings the employer receives from employees participating in the plan can be used to offset a plan’s modest administrative costs. Call us at 704-525-9666 to discuss this beneficial program.
