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Author Archive for Daniel Brown

Seniors Face Provider Accessibility Issues with Medicare Advantage Plans

As Seniors Get Sicker, They’re More Likely To Drop Medicare Advantage Plans

When Sol Shipotow enrolled in a new Medicare Advantage health plan earlier this year, he expected to keep the doctor who treats his serious eye condition.

“That turned out not to be so,” said Shipotow, 83, who lives in Bensalem, Pa.

Shipotow said he had to scramble to get back on a health plan he could afford and that his longtime eye specialist would accept. “You have to really understand your policy,” he said. “I thought it was the same coverage.”

Boosters say that privately run Medicare Advantage plans, which enroll about one-third of all people eligible for Medicare, offer good value. They strive to keep patients healthy by coordinating their medical care through cost-conscious networks of doctors and hospitals.

But some critics argue the plans can prove risky for seniors in poor or declining health, or those like Shipotow who need to see specialists, because they often face hurdles getting access.

A recent report by the Government Accountability Office, the auditing arm of Congress, adds new weight to criticisms that some health plans may leave sicker patients worse off.

The GAO report, released this spring, reviewed 126 Medicare Advantage plans and found that 35 of them had disproportionately high numbers of sicker people dropping out. Patients cited difficulty with access to “preferred doctors and hospitals” or other medical care, as the leading reasons for leaving.

“People who are sicker are much more likely to leave (Medicare Advantage plans) than people who are healthier,” James Cosgrove, director of the GAO’s health care analysis, said in explaining the research.

David Lipschutz, an attorney at the Center for Medicare Advocacy, says the GAO findings were alarming and should prompt tighter government oversight.

“A Medicare Advantage plan sponsor does not have an evergreen right to participate in and profit from the Medicare program, particularly if it is providing poor care,” Lipschutz says.

The GAO did not name the 35 health plans, though it urged federal health officials to consider a large exodus from a plan as a possible sign of substandard care. Most of the 35 health plans were relatively small, with 15,000 members or fewer, and had received poor scores on other government quality measures, the report said. Two dozen plans saw 1 in 5 patients leave in 2014, much higher turnover than normal, the GAO found.

Medicare Advantage plans now treat more than 19 million patients, and are expected to grow as record numbers of baby boomers reach retirement age.

Kristine Grow, a spokeswoman for America’s Health Insurance Plans, an industry trade group, says Medicare Advantage keeps expanding because most people who sign up are satisfied with the care they receive.

She says that patients in the GAO study mostly switched from one health plan to another because they got a better deal, either through cheaper or more inclusive coverage.

Grow says many Medicare Advantage plans offer members extra benefits not covered by standard Medicare, such as fitness club memberships or vision or dental care, and do a better job of coordinating medical care to keep people active and out of hospitals.

“We have to remember these are plans working hard to deliver the best care they can,” Grow says. Insurers compete vigorously for business and “want to keep members for the long term,” she adds.

Some seniors, wary of problems ahead, are choosing to go with traditional Medicare coverage. Pittsburgh resident Marcy Grupp says she mulled over proposals from Medicare Advantage plans but worried she might need orthopedic or other specialized health care and wanted the freedom to go to any doctor or hospital. She’s decided on standard Medicare coverage and paid for a “Medigap” policy to pick up any uncovered charges.

“Everything is already in place,” says Grupp, a former administrative assistant who turns 65 this month.

The GAO report on Medicare Advantage comes as federal officials are ramping up fines and other penalties against errant health plans.

In the first two months of this year, for instance, the federal Centers for Medicare & Medicaid Services fined 10 Medicare Advantage health plans a total of more than $4.1 million for alleged misconduct that “delayed or denied access” to covered benefits, mostly prescription drugs.

In some of these cases, health plans charged patients too much for drugs or failed to advise them of their right to appeal denials of medical services, according to government records. Industry watchers predict more penalties are to come.

Last month, CMS officials ended a 16-month ban on enrollment in Cigna Corp.’s Medicare Advantage plans. CMS took the action after citing Cigna for “widespread and systematic failures” to provide necessary medical care and prescription drugs, policies officials called a “serious threat to enrollee health and safety.”

A flurry of whistleblower lawsuits have surfaced, too. In late May, Freedom Health, a Florida Medicare Advantage insurer, agreed to pay nearly $32 million to settle allegations that it exaggerated how sick some patients were to boost profits, while getting rid of others who cost a lot to treat.


The Affordable Care Act Cadillac Tax

Scheduled to take effect in 2018, the “Cadillac Tax” is a 40% non-deductible excise tax on employer-sponsored health coverage that provides high-cost benefits.

On February 23, 2015, the Internal Revenue Service (IRS) issued a notice covering a number of issues concerning the Cadillac Tax, and requested comments on the possible approaches that could ultimately be incorporated into proposed regulations. No regulations have been issued to date.

What it is/fee duration Permanent, non-deductible, annual tax beginning in 2018 on high-cost employer-sponsored health coverage.
  • Reduce tax preferred treatment of employer provided health care
  • Reduce excess health care spending by employees and employers
  • Help finance the expansion of health coverage under the Patient Protection and Affordable Care Act (PPACA)
  • The tax is 40% of the cost of health coverage that exceeds predetermined threshold amounts.
  • Cost of coverage includes the total contributions paid by both the employer and employees, but not cost-sharing amounts such as deductibles, coinsurance and copays when care is received.
  • For planning purposes, the thresholds for high-cost plans are currently $10,200 for individual coverage, and $27,500 for family coverage.
  • These thresholds will be updated for 2018 when final regulations are issued and thereafter indexed for inflation in future years.
  • The thresholds will also be increased:
    • If the majority of covered employees are engaged in specified high-risk professions such as law enforcement and construction, and
    • For group demographics including age and gender.
  • For pre-65 retirees and individuals in high-risk professions, the threshold amounts are currently $11,850 for individual coverage and $30,950 for family coverage.
Who calculates and pays
  • Insured: Employers calculate and insurers pay
  • Self-funded: Employers calculate and “the person who administers the plan benefits” pays
  • HSAs and Archer MSAs: Employers calculate and employers pay
How a group health plan’s cost is determined
  • The tax is based on the total cost of each employee’s coverage above the threshold amount.
  • The cost includes contributions toward the cost of coverage made by employers and employees.
  • The statute states that costs of coverage will be calculated under rules similar to the rules for calculating COBRA premium.
How the tax will be paid Forms and instructions for paying the tax are not yet available.
Tax implications Cadillac Tax payments are not deductible for federal tax purposes.
Applicable types of coverage
  • Insured and self-insured group health plans (including behavioral, and prescription drug coverage)
  • Wellness programs that are group health plans (most wellness programs)
  • Health Flexible Spending Accounts (FSAs)
  • Health Savings Accounts (HSAs), employer and employee pre-tax contributions*
  • Health Reimbursement Accounts (HRAs)*
  • Archer Medical Savings Accounts (MSAs), all pre-tax contributions*
  • On-site medical clinics providing more than de minimis care*
  • Executive Physical Programs*
  • Pre-tax coverage for a specified disease or illness
  • Hospital indemnity or other fixed indemnity insurance
  • Federal/State/Local government-sponsored plans for its employees
  • Retiree coverage
  • Multi-employer (Taft-Hartley) plans
Excluded types of coverage
  • U.S.-issued expatriate plans for most categories of expatriates
  • Coverage for accident only, or disability income insurance, or any combination thereof
  • Supplemental liability insurance
  • Liability insurance, including general liability insurance and automobile liability insurance
  • Worker’s compensation or similar insurance
  • Automobile medical payment insurance
  • Credit-only insurance
  • Other insurance coverage as specified in regulations under which benefits for medical care are secondary or incidental to other insurance benefits
  • Long Term Care
  • Standalone dental and vision*
  • Coverage for the military sponsored by federal, state or local governments*
  • Employee Assistance Programs*
  • Employee After-Tax Contributions to HSAs and MSAs*
  • Coverage for a specified disease or illness and hospital indemnity or other fixed indemnity insurance if payment is not excluded from gross income

*As indicated by IRS notice issued on February 23, 2015 and subject to future regulatory clarification.

How it works: Examples based on current threshold amounts

Self-only coverage
A $12,000 individual plan would pay an excise tax of $720 per covered employee:
$12,000 – $10,200 = $1,800 above the $10,200 threshold
$1,800 x 40% = $720

Family coverage
A $32,000 family plan would pay an excise tax of $1,800 per covered employee:
$32,000 – $27,500 = $4,500 above the $27,500 threshold
$4,500 x 40% = $1,800

These charts show how the tax increases as the plan’s cost increases.

Self-only coverage

Plan Cost $11,000 $12,000 $13,000 $14,000 $15,000
Tax $320 $720 $1,120 $1,520 $1,920

Family coverage

Plan Cost $28,000 $30,000 $32,000 $34,000 $36,000
Tax $200 $1,000 $1,800 $2,600 $3,400

July 22, 2015 – Renewal and Other Information about Your Group Medical Insurance

With all the “news” and rumors about healthcare reform and the Affordable Care Act, it seems a perfect time to let our valued clients know what to expect in the months ahead and to remind you of some of the tasks that go with group benefits. We’re sorry that it’s long enough to cure the worst case of insomnia but we like to think that you keep this for reference. If not, we’re going to post it on the blog section of our revised website which we invite you to visit – www.summitagency.com.

2015 Renewals – First, the generally good news is that if you have a pre-ACA plan whether you are Grandfathered or not, you should be able to keep that for another year. However your rate could (yes, probably will) increase due to covered employees getting a year older, claims, trend and a closed “pool” of groups. Still the ACA-compliant plans can be more expensive than the older plans, because there is no gender rating, pre-existing conditions are covered immediately regardless of prior coverage, and the new group policies are guarantee issue at the “rack rate.”

By law, you will get your renewal 60 days prior to your group’s renewal date (12/1 now for most of our clients) although we will get renewals 70 – 75 days prior from Blue Cross (later for the other carriers).

We will analyze your options and email you our opinion and recommendations and even quotes from other carriers. Remember that if you have an “old” plan, your only change option is to an ACA Metallic plan whether you change carriers or stay with the one you now have. We will be help you through the process of deciding what to do about your benefits for the next year.
If you decide to change plans, all carriers are requiring that the paperwork be submitted 30 days PRIOR to your renewal.

Open Enrollment and Required Notices – Once you have settled on a plan and benefits, we will prepare Open Enrollment packets. Remember that there are federal fines for not distributing SBC’s (Summary of Benefits and Coverages which we send to you) at Open Enrollment and when an employee is hired.

In addition to the SBC, federal law now requires that you also give new employees a “Marketplace Model Notice” within 14 days of their being hired. The notice at https://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf basically tells your new employees that they “might” be eligible for a Marketplace (On Exchange) policy if the group plan is not “affordable” which means that the cost for the employee only premium cannot exceed 9.5% of their household income.

Enrollments – When a group is initially enrolled or when a new employee is hired, each employee who works at least 30 hours per week or who is on State Continuation or COBRA must complete an application, even if he or she is declining coverage.

New employees must be enrolled within 30 days of their insurance effective date. It’s a good idea to have new hires complete their enrollment forms immediately upon being hired, probably at the same time as their W-4’s so as not to miss their enrollment deadline. If you’d like for us to process the enrollment, fax or email a completed application for the employee. Then you’ll get a receipt for the transaction within 24 hours. If the 30 day deadline is near, please call to confirm that your request is processed. If you enroll an employee online at the carrier’s site, you should be able to see immediately when the system accepts the change.

If an employee gets married, has a child or adopts a child and wants to add the new dependent to your group medical plan, the company must be notified within 30 days of the event. Just because an insurance company pays a maternity claim, they will not add the child without being told to do so.

If an employee or dependents decline the coverage when first eligible, only a “life-changing event,” such as a spouse losing a job/benefits, a divorce, death, etc. would qualify the employee and/or dependents to enroll other than at Open Enrollment during what is now called a “Special Enrollment Period.”

If your spouse also works at your business, some carriers require that the spouse be covered as an employee rather than a dependent if he or she works at least 30 hours per week.

Remember that your new employees will be subject to some kind of waiting period which has already been set by your group – it can be the 1st (or 15th for some) of the month following the date of hire, 30 days or 60 days of employment. The 90-day waiting periods are no longer valid.

Terminating an Employee – Texas Senate Bill 51 has been a problem for some of our groups. When you terminate an employee from your plan, the employer is to pay the premium for the remainder of that month. Sounds simple, but what if the employee terminates on the last day of the month and you do not or cannot notify the carrier until the next day – a new month? What if you pay only 50% of the employee only premium – who pays the other 50% when the employee leaves without notice? The bulletin at this link from the Texas Association of Health Underwriters will explain much about the process: http://www.tahu.org/associations/1290/files/brochureERAlert072006.pdf. If you terminate an employee in the last 7 days of the month (can be the 1st or the 15th depending on your policy “month” with the insurance company), you must notify the insurance company within the first THREE BUSINESS days of the next month or you’ll owe all the premium for that next month. If you send us an email with the employee’s name and reason for the termination of the insurance (left employment, layoff, etc.), we’ll do the termination and send you a receipt. However, if it’s one of the last days, please contact Kathy or Daniel by phone to make certain that you meet the deadline. Remember too that you can terminate/add employees at the online employer portal for most of the carriers.

We will be glad to do the adds and terminations for you if you will email us a completed enrollment form or an email with a request to terminate an employee. We will ALWAYS send you a receipt or temporary ID card. If you send a request to us and do not hear back within one day, please check to make sure your request was received.

New this year – IRS forms – Since we now have the Individual Mandate for Minimum Essential Coverage, the IRS is requiring new forms (1095B for fully insured groups) that supply insurance information to the IRS who will match it to each covered person’s IRS return.
The good news is that the carriers are providing these forms for all fully insured plans. These will be sent to your employees by 1/31/16 and to the IRS by 2/28/16 for the 2015 tax year. The forms MUST include the social security numbers for covered individuals. Since the carriers are preparing and sending the forms, all you need to do is always secure social security numbers for your employees and covered dependents and keep their mailing address up to date with the carrier.

“Cadillac Tax” – The “Cadillac Tax” imposes an annual 40% excise tax on plans with annual premiums exceeding $10,200 for individuals or $27,500 for a family starting in 2018, to be paid by “plan sponsors.” The tax is not imposed on the total cost of the plan, but on the costs exceeding the threshold, which, after 2018, will adjust for inflation annually. The good news is that there appears to be a bi-partisan effort to eliminate or mitigate this tax. At the least, the threshold should increase to much more than the current levels.

ERISA – Another issue is that the Department of Labor is starting to audit for Summary Plan Descriptions and other ERISA required paperwork which the insurance companies do not provide. You know that ERISA, the Employee Retirement Income Security Act of 1974, is a federal law that regulates group-sponsored benefits, often called welfare benefit plans. But did you know that failure to comply with all of the requirements under ERISA often subject employers to severe penalties?
Besides requiring the provision of specific plan features and funding information, the federal ERISA law mandates that employers comply with strict requirements for disclosing plan information to all eligible employees. Using a “wrap document” to bundle benefits into one plan makes it much easier for employers to document benefits for legal compliance and to effectively communicate with employees. The attached article shows you some of the ERISA issues. The plan documents (Summary of Benefits and Coverages, SBC) from your group insurance company can be part of the SPD but is not enough by itself. We’ve personally experienced no client audits but have other agent friends who have had the DOL come calling.
Since compliance with ERISA requires legal work, our agency will refer you to several vendors for this paperwork if you’d like. The pricing will vary from $500 to $1000 per year for most groups. Beware of non-lawyer insurance agents who want to sell you insurance and do your legal work for “free.” What’s that saying about “the most expensive lawyer is a cheap (free) one?”

Group vs. Individual Medical Policies – Some of our group clients (those with fewer than 50 employees who are not required to offer health insurance under ACA) have expressed that they just want to pay for individual policies rather than providing a group plan. For years we’ve told you that was against state rules since any policy an employer paid for had to comply with small group rules in Texas. Now there is a federal fine if an employer pays for individual policies. See http://www.forbes.com/sites/gracemarieturner/2015/06/30/small-businesses-threatened-with-36500-irs-fines-for-helping-employees-with-health-costs/ which explains why I don’t recommend paying for individual policies for employees other than just giving everyone a raise and saying “no more health insurance from me.”

Participation Requirements – A group of 2-50 employees must enroll at least 75% of those employees NOT covered by another group plan. That means that you do not have to count employees covered by their spouse’s group plans or those covered by retiree plans among your “eligible” employees. Of course, all this applies only to employees who work at least 30 hours per week. A few carriers are now checking your participation against your TWC reports as a part of your renewal.

Employer Contributions – The insurance companies require that the employer contribute 50% of the employee premium as a minimum. There are no employer contributions required for dependents. However, the employer must contribute equally or fairly for all employees.

24-Hour Coverage – Be careful here. Group medical plans do NOT cover work-related injuries or illnesses for employees or owners. Some plans used to offer this coverage to cover just the business owner but no more. Owners, officers and partners are eligible for Workers’ Compensation but sometimes exclude themselves from coverage. If you have done so, you are not covered while performing work-related duties.
If you do not have Workers’ Compensation insurance on your employees, you are a non-subscriber to Workers’ Compensation, and you must file that you are in non-compliance with the Texas Workers’ Compensation Commission. Forms and information are available at http://www.tdi.texas.gov/wc/employer/cb007.html.

COBRA – Federal law mandates that groups with 20 or more full time equivalent employees (whether on your insurance or not) for more than 50% of usual business days in a calendar year must offer COBRA continuation to plan participants starting on January 1 of the next year. Part time employees are counted based on the hours they work: i.e., two half time employees would be the equivalent of one employee for COBRA purposes. Administering COBRA means that you must follow certain rules and procedures that are quite specific. Improper COBRA procedures can lead to fines and lawsuits. My recommendation is that a COBRA-eligible employer hire a COBRA administration service. This is an “Employer” law not an “Insurance” law so don’t look to your carriers to administer COBRA. Your insuring company might collect the COBRA premiums for free but that’s not the same as administering COBRA for a fee with all its required notices, proof of mailing of the notices, etc. COBRA beneficiaries can maintain their group benefits for 18 to 36 months depending on the qualifying event.

State Continuation – Almost all groups are subject to State Continuation, which lasts for up to 9 months for eligible employees or longer for dependents in some circumstances. Most groups of 20+ who offer COBRA must offer State Continuation at the end of any COBRA Benefit Period.

Medicare – Primary or Secondary? If your group has fewer than 20 employees (not just 20 insured employees), Medicare will be primary. If you have more than 20 employees, Medicare is secondary which is why the federal government has you complete a Medicare Secondary Payer form each year. Medicare saves money if your insurance company is primary at 20+ employees.
Medicare Part D Notices – Employer groups must provide a written disclosure notice to all Medicare eligible individuals annually who are covered under its prescription drug plan, prior to October 15th each year and at various times as stated in the regulations, including to a Medicare eligible individual when he/she joins the plan. This disclosure must be provided to Medicare eligible active working individuals and their dependents, Medicare eligible COBRA individuals and their dependents, Medicare eligible disabled individuals covered under your prescription drug plan and any retirees and their dependents.

Prescription drug coverage is creditable if the total expected paid claims for Medicare beneficiaries under the sponsor’s plan will be at least equal to the total expected paid claims for the same beneficiaries under the defined standard prescription drug coverage under Part D. For more information, consult http://www.cms.hhs.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/index.html?redirect=/CreditableCoverage.
Privacy – Remember all those “Privacy” notices you get in the mail from your bank and credit card companies? See the Privacy Notices posted at your doctor’s office? Well, small employers are not exempt from having a Privacy Policy relating to your employees and their information. Yes, I know, just another paper burden but the cost of not being HIPAA Privacy compliant could be high. Unless you’re a law firm, you probably don’t want to figure out what’s required of you by HIPAA but the Texas Workforce Commission has come to your aid with this information: http://www.twc.state.tx.us/news/efte/hipaa_basics.html. At the bottom of this TWC web page is a link that will take you to a sample privacy policy.
Group Long Term Disability – After health insurance, the next most important benefit is Long-Term Disability. What if you or one of your employees gets sick or injured (other than on the job) and cannot work? LTD plans are relatively inexpensive because claims are not that frequent. However, when a claim does happen, the benefits could enable your employee to pay the bills and keep the mortgage current.

If you have LTD for your company, make sure that the salaries are updated at least annually. Also, if the LTD premiums are deducted as a business expense and not included in the employees’ income, the benefits are taxable. If the LTD premiums are deducted as a business expense but the premiums are included in the employees’ W-2 income and taxed, the benefits are tax-free.
Other Benefits – Most employers offer a small group term life plan for their employees. The minimum is usually $10,000 with most small employers not offering more than $50,000, the maximum that an employee can be given before the premiums become taxable to the employee. It might not seem like much, and the employees might take it for granted, but even a small amount can make a big difference at the time of a death claim.

Dental insurance is another benefit option. Employees perceive this as a very valuable benefit because of the frequency of claims. The annual maximum benefit on most plans is $1000 per insured per year. A good fully insured dental plan is running right at $50 – $60 per employee per month at this point. Or, if the employer wants, we can offer a voluntary plan which is fully paid by the participating employees.

401(k) plans encourage employees to invest pre-tax dollars to grow for their retirement. Even small groups can offer such a plan since the annual administration fees can be as low as $200-$300.
Disclaimer – This memo is for general information only and is not intended to be legal or tax advice nor is it intended to supplant any information contained in an insurance company contract.

Thank You – Thanks for taking time to read this and apply it to your group. As always, please call if you have any questions or concerns. Your continued business is greatly appreciated as are the new clients that many of you have referred to us.

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