Proposed Rules on Communications, Affordability, HRAs

New proposed rules springing from the Patient Protection and Affordable Care Act (PPACA) would drastically change how companies communicate information about their employer-sponsored benefits.

The new guidance would require fully insured and self-insured plans to supply a summary of benefits and coverage (SBC) to employees no later than March 23, 2012, according to a report by CCH. The SBC would have to include easy-to-understand language, a comparison tool that would use three real-life examples (having a baby, treating breast cancer, managing diabetes) and a glossary of commonly used health care terms, such as “deductible” and “copay.”

The rules call for the SBC to be distributed with enrollment materials and upon request within seven days. In addition, any updates to the SBC would have to be distributed 60 days prior to the change, according to the law firm Ogletree Deakins. Employers who do not meet these requirements could face a fine of up to $1,000 per failure.

“Employers and administrators that already provide summary plan descriptions [SPDs] are understandably concerned about the duplications and additional costs associated with elements of the new SBC requirement,” the CCH report said.

The Employee Benefits Security Administration, the IRS and the Department of Health and Human Services (HHS) are accepting comments through Oct. 21, 2011, on how this new communication should be coordinated with SPDs and other enrollment materials.

Plan ‘Affordability’

Prior to the release of the proposed SBC rules, the IRS announced it would create new rules to make it easier for employers to determine if their health plans meet the affordability requirements under PPACA, according to a Workforce Management report. Under current rules, plans with single-coverage premium contributions that top 9.5 percent of a worker’s family income would be subject to an annual $3,000 penalty in 2014. The new rules would allow employers to base their calculations on wages instead of income, ensuring a more accurate picture of affordability, the IRS stated.

HRA Update

Meanwhile, the HHS loosened some of the PPACA rules on annual dollar limits as they apply to stand-alone health reimbursement accounts (HRAs). HHS announced that sponsors of stand-alone HRAs are exempt from the annual limit requirements on coverage of essential benefits ($750,000 in 2011, $1.25 million in 2012 and $2 million in 2013). However, the exemption disappears after 2014, according to Buck Consultants.


Employers in the Dark About Effects of Health Care Reform

More than a year after the passage of the Patient Protection and Affordable Care Act, U.S. employers remain uncertain about the lingering effects that the sweeping law will have on the employer-based model for benefits. A survey report by employee benefits brokerage and consulting firm, Health Care Reform Survey: What We Know and What’s Coming provides a baseline of employer views and highlights the continuing uncertainty.

Respondents to the August 2011 survey, fielded to the firm’s current and prospective clients and other businesses, included U.S. employers in all industry segments, most of which are East Coast-headquartered businesses offering comprehensive employee benefits to full-time workers.

The survey results are intended to represent what’s “on the minds of business and HR leaders” as the health care issue continues to be front and center on the public docket. Highlights of the results are presented below:

• 28 percent of respondents reported that health care reform added 6 percent to their 2011 benefits plan renewal costs, while 24 percent reported that reform added between 4 percent and 6 percent to their 2011 renewal costs.

• In thinking ahead to 2012, 32 percent of respondents expect minimal increases attributed to health care reform. However, the results were mixed, as 20 percent expected a larger increase related to reform.

• A good deal of concern remains about the short- and long-term impact of the law. Toward that end, 52 percent of respondents were concerned about their ability to offer benefits to their workers in the future. Yet uncertainty remained a constant when it comes to the law. Whether it’s the upcoming presidential election or court battles, 44 percent said it’s still too early to measure the impact of the law, while 32 percent believe that it will hurt their business. In the end, 40 percent of respondents believe that Congress or the courts will not alter or revoke the law, 36 percent believe changes might be made and 24 percent are unsure.

• In thinking ahead, close to 50 percent of respondents are planning to make plan design/coverage changes to their benefit plans to contend with the impact of health care reform.

• 2014 is when major pieces of the law will take effect. For example, the advent of state exchanges and penalties on employers do not offer coverage, or offer inadequate coverage, take effect. Perhaps because of the uncertainty of the law or a lack of appreciation for the magnitude for the 2014 changes, 56 percent of respondents have yet to begin to plan formally for its impact.

• By 2014, many employers will have to decide whether to continue to offer coverage or pay a penalty to the government. The issue has gained a good deal of attention as employers and plan sponsors have begun to calculate the cost of coverage vs. the cost of the penalty. Some 60 percent of respondents have indicated that they do not plan to eliminate coverage, while 28 percent are still evaluating the matter.

• In examining the issue of dropping coverage for workers, 96 percent of respondents said it is important to their business culture that they continue to offer benefits. Furthermore, 92 percent believe that if they did drop coverage, it would be received unfavorably by their employees.

• When thinking of the full impact of the law and areas of concern, 68 percent of respondents were concerned with its expected new costs, 60 percent indicated they were concerned with the many unknown aspects of the law, and 56 percent said they were concerned about costs that insurance companies might pass along.

• In spite of the overwhelming information available about the law and its near-term impact, when asked if they had enough information to make important business and benefits decisions, some 60 percent of respondents said they did not and 64 percent reported that their employees did not understand the changes related to the law.

• The law has forced organizations to engage senior leaders in examining its impact. Toward that end, 64 percent of respondents report that C-suite executives have been involved and engaged in making decisions related to the law. Yet only 28 percent report having created a formal committee or process to review the impact of the law on a continuing basis.

Experts: Do Not Rush into Reform Decisions

If one thing can be said about the recent health care reform law, it’s that it has generated a barrage of questions for employers.

Will companies drop health care coverage and instead pay the penalty under the Patient Protection and Affordable Care Act (PPACA)? Will they drive their employees into the new state exchanges? Will the Supreme Court rule that the law is unconstitutional, throwing part or all of the law out the window?

The answers, of course, remain unknown for now. In the meantime, employers may want to consider some facts from a number of experts and recent reports about the law’s possible impact on businesses and their workers.

End of Benefits? Not So Fast . . .
While conventional wisdom holds that many employers will drop their health benefits in 2014 when the major provisions of PPACA take effect, that decision wouldn’t make economic sense for most, according to a new report by the Urban Institute for the Robert Wood Johnson Foundation.

That’s because “employers who drop workers’ coverage but fail to increase the employees’ wages in order to maintain their overall compensation will inevitably lose these employees to competitors,” according to a report by National Public Radio.

The law states that employers with more than 50 workers who don’t offer benefits in 2014 would have to pay a penalty (ranging between $2,000 and $3,000 per worker). If a company drops coverage, it would need to pay the penalty in addition to boosting wages to offer a competitive overall compensation package. For many employers, that might cost more than sticking with a robust benefit package that will recruit and retain quality employees, the researchers noted.

Switching to Exchanges? Hold On . . .
The proposed state exchanges that would help employees find health care coverage on their own might seem to provide an easy way for companies to dump their health plans while still ensuring that their employees have some coverage.

The drawback of the exchanges, however, is they will reduce an employer’s ability to affect worker health and behavior, which ultimately have a significant impact on productivity, said Troyen A. Brennan, an executive vice president with CVS Caremark, in a recent CCH report.

“Do you stay in the driver’s seat and proactively manage the health and productivity of your workforce, or do you climb into the back seat and take your chances?” Brennan asked at a recent industry conference. “Absenteeism and productivity go to the bottom line.”

Court Rulings? Wait and See . . .
This month, the Supreme Court announced that it would start reviewing cases involving PPACA (likely in February or March). Recently, a federal appeals court in Washington, D.C., upheld a lower court’s ruling that the individual mandate created by the law is constitutional. Many observers have noted that until the high court makes a ruling, it’s anybody’s guess as to the long-term effects of PPACA.

News Briefs: NLRB Notices

The National Labor Relations Board (NLRB) has delayed the deadline for nonunion employers to post a notice about workers’ rights to unionize until Jan. 31, 2012. The NLRB had set an original Nov. 14 deadline but rolled it back after receiving a number of questions from businesses. The decision “was made in the interest of ensuring broad voluntary compliance,” according to a PLANSPONSOR report.

The IRS has issued new guidance on the business use of cell phones. If an employer provides cell phones to its workers for “noncompensatory business purposes,” the IRS will treat both business and personal use of such phones as a “working-condition fringe benefit” and will make the phones and phone use exempt from employees’ wages.

The Department of Labor plans to rework its proposal to change the definition of “fiduciary” as it relates to employer-sponsored plans. The agency decided to revisit its proposal after receiving feedback from the public and members of Congress. The new proposal is expected to be announced in early 2012.

A federal advisory panel has created guidelines on how the Department of Health and Human Services (HHS) should define “essential benefits” when setting up the new health insurance exchanges created by the health care reform law. The Institute of Medicine said HHS must consider both the cost and the effectiveness of the benefits, including what the average cost of coverage would be for a small employer in 2014. HHS has not said when it will announce the rules, but they are expected to come sometime in 2012.

The IRS has launched a new program to help employers sort out past worker classification problems. The Voluntary Classification Settlement Program (VCSP) will permit employers to solve compliance issues by making a minimal payment covering past payroll taxes instead of waiting for an audit by the IRS. The VCSP is designed to boost corporate tax compliance and reduce some administrative burdens for employers, the IRS said.

A new government website allows consumers to see if a health insurance company in their state has raised its rates. The site also lists why the company hiked the rates. Previously, only a few states individually listed rate increase information on their websites, according to Steve Larsen of the Department of Health and Human Services. The website can be viewed at:

Most U.S. Employers Opt for ‘Passive’ Open Enrollment

A large majority (71 percent) of U.S. employers conduct passive rather than active benefit enrollment practices, enabling employees to renew most of their plans automatically, according to a 2011 survey by HighRoads, a provider of benefit plan communication services.

Respondents ranged in size from U.S. organizations with fewer than 5,000 employees to those with more than 100,000 employees, although most respondents had more than 5,000 employees.

“On the face of it, passive enrollment is easier for both employees and employers, since employees can just ‘roll over’ their current elections—except for flexible spending accounts,” said Kim Buckey, summary plan description (SPD) practice lead at HighRoads. “But that can be a risky practice,” she added. “If participants can renew their coverage without examining their elections, they may end up with coverage that doesn’t truly meet their needs or that will cost them more than they can truly afford. It also becomes more critical that enrollment materials accurately describe benefits and any changes to them—and that SPDs are updated promptly to reflect that information.”

Active enrollment requires employees to make a proactive plan choice each open enrollment period, which makes it more likely that they will review any plan changes. Employees who don’t take action are penalized—typically by a default enrollment into the option with the most basic coverage or to no coverage.

“It is critical that employees carefully review their plan open enrollment materials each year, particularly in light of health care reform and changes their employers are making to be in compliance,” said Mary Andersen, founder of ERISA Diagnostics Inc., a benefits consulting firm. “Those changes might be additional coverage possibilities, such as covering children up to age 26, or it could be new limits in coverage related to spending accounts. Either way, employees need to understand their options and take responsibility for their own benefit choices.”

HRA: The Employer’s Tool

Although—or even because—they lack portability, the case for HRAs can be compelling in some circumstances, given that HRAs, which come with few requirements, provide a great deal more flexibility to employers than HSAs.

“Employers have more control over the money in an HRA,” said Domaszewicz. Because HRA funds do not belong to an employee, the employer retains any funds left in an HRA when an employee leaves the company. This is a particularly attractive feature for employers in industries, such as retail or fast food, with traditionally high turnover.

Moreover, an HRA can be an attractive option from a cash flow perspective because the “funds” attributed to the HRA “account” are notional in nature (tracked within the accounting system) but actually funded only when a claim is presented.

“Employers that choose an HRA tend to be more paternalistic and they find that adopting an HRA is easier,” said Domaszewicz. “Because only the employer is putting money in the HRA, the employer gets to make all the rules for the benefit plan.” For example, if an employer does not want to adopt the minimum deductible required for an HSA, it can adopt an HRA plan with a lower deductible. Alternatively, HRAs can be linked to plans with out-of-pocket maximums that are higher than the limit the government sets for HSAs.

“With an HRA, employers have more flexibility in terms of the deductibles they choose for the health benefit plan, and even whether they carve out pharmacy benefits,” said Elizabeth Wolff, a principal at Aon Hewitt in Chicago.

“There are places where HRAs are still a good choice,” added Aetna’s Riedl. “Implementing a plan with a deductible that’s not as high as you might see in an HSA-compatible plan might be an easier transition, initially, from richer designs.”

HSAs allow only preventive care to be outside the deductible and covered 100 percent on a first-dollar basis. But “If the employer wants to have certain benefits not subject to the deductible, if they want to steer people to designated high-value health care centers of excellence or have particular types of care covered at 100 percent, HRAs allow them to do so,” Riedl observed.

By Joanne Sammer and Stephen Miller

Sweating The Details: Health Reform Supporters Fret Over HHS Rules

PubliBehind the scenes, however, some worry that they are losing a few key battles to the insurance and business communities.

They point to a long-sought provision in the law that entitles patients to an external review if an insurer won’t pay for a medical service, but charge that recent regulations limit its effectiveness. One of their biggest gripes? It allows insurers to choose their own “external” reviewers.

“Advocates who have dealt with the external review process believe that it’s pretty clear that if [a reviewer] is being chosen by an employer [or insurer] it’s not independent,” said Timothy Jost, a professor at Washington and Lee University School of Law.

While consumers should be happy with some regulations, including one requiring health plans to summarize in simple language what their policies cover, Jost notes that other rules “feel like somebody from the Chamber of Commerce got to somebody in the administration.” He points to regulations that he believes are “more friendly” to employers and insurers than to individual consumers.

Erin Shields, a spokesperson for the Department of Health and Human Services, said the administration is balancing multiple interests as it implements the law. “The Affordable Care Act provides some of the most important protections for health care consumers in history,” Shields said. “As we implement these protections, we are working to ensure a balanced approach toward all stakeholders including patients, caregivers, doctors, hospitals, employers, and insurers to ensure that our system continues to provide world-class care effectively.”cly, consumer and patient advocates continue to cheer wildly for last year’s health care law.

By Mary Agnes Carey and Marilyn Werber Serafini

Ready, Set, Enroll: Employer Efforts Can Boost Morale, Compliance

Many employers and benefit managers with calendar-year plans are wading into the thick of enrollment season, filling their time with employee meetings and tracking the sign-ups. Enrollment, however, can be more than just presentations and forms — it can serve as a great opportunity to reconnect and communicate to employees the value of their compensation and benefits, experts say.

“In this difficult economic environment, there may be many reasons employee morale has not bounced back,” said Bill Dalicandro, vice president at Unum, in a recent report by the Society for Human Resource Management. “But our research shows that benefits education can be a highly effective, low-cost way to boost engagement.”

A study by Unum, however, suggests that many employers are missing the mark when it comes to enrollment communication. Data from the 2010 enrollment season show that nearly a third of workers said the benefit education materials from their employer was inadequate. Only about half of employees said they received printed materials about their benefits, the survey found. Slightly more than a third of poll respondents said their company sponsored some kind of question-and-answer session about their benefits.

To get the most out of enrollment, employers need to start with a plan, according to a recent article by Robert Ellerbrock of Constangy, Brooks & Smith, LLP. Ellerbrock suggests employers create checklists of all tasks and make sure they have enough time to train any staff members who would be responsible for answering employees’ questions.

Ellerbrock said employers should try to announce benefit meetings about three or four weeks in advance and should consider individual meetings, if that is possible. He warned employers about using electronic materials to promote benefit education. “Many employers find the idea of electronic enrollment appealing,” Ellerbrock wrote. “However, it is important to remember that providing benefit information electronically is subject to significant regulations.”

In addition to fostering morale and worker satisfaction, enrollment serves as a good time to distribute required employee notices.

Mary Bauman of the law firm Miller Johnson recently highlighted a number of notices that should be considered for an enrollment packet:

Women’s Health and Cancer Rights Act: This is an annual notice that can be issued as part of a summary plan description (SPD), as long as the SPD is reissued each year.

HIPAA: This notice, to be distributed every three years, explains an employee’s health information privacy rights.

CHIPRA: (Children’s Health Insurance Program Reauthorization Act). Employees have the right to enroll in an employer’s health plan if the participant becomes eligible for a state premium assistance subsidy under Medicaid or the CHIP.

PPACA Grandfathered Status: Employers with plans that are exempt from the Patient Protection and Affordable Care Act because they are grandfathered must notify participants of that exemption and must include contact information for questions.

Posted by UBA

COBRA Subsidy Ends — For Most

The federal COBRA subsidy officially ended on Aug. 31, but some employees might continue to receive the subsidy, depending on when their COBRA benefits kicked in.

Kaiser Health News noted in a recent report that the 65 percent subsidy was extended by Congress on several occasions, with the last extension covering employees laid off through May 31, 2010. The Department of Labor, however, recently noted that some employees who were let go after that date could still qualify to receive the subsidy.

For example, if a terminated employee was allowed to remain on the employer’s plan for a period of time, their subsidy eligibility would start only after the employer-sponsored coverage ended. Therefore, a worker could be laid off after May 31 but still have a portion of the maximum 15 months available for the subsidy.


Dutton to Continue on NAHU Legislative Council

UBA Board Member Ron Dutton of RJDutton Inc. has been invited to continue his participation on the NAHU Legislative Council. Dutton joined the council in 2010.

The Council, composed of 13 members nationwide, works to develop market-based solutions that improve the accessibility and affordability of employee benefits and insurance. The Council also guides grassroots efforts to advocate sound policy during the legislative and regulatory process, according to NAHU.

The Council also provides guidance to NAHU’s Board of Trustees and promotes issues among NAHU members and its chapters.