Archive | Insurance Company News – California

California seeks limits on small-business self-insurance trend

Critics say health insurers offering new type of self-insurance for firms with as few as 25 workers are gaming the system and may undermine a key goal of the federal Affordable Care Act.

Sensing a fresh threat to state and federal healthcare reforms, California insurance officials are seeking new limits on a controversial form of health coverage insurers are selling to small employers. At issue is a new type of self-insurance for small businesses with as few as 25 workers.

Self-insurance, in which employers pay medical providers for their workers’ care, has traditionally been used only by large employers that have the financial resources to pay for expensive medical claims. A Kaiser Family Foundation study found that 60% of U.S. workers with health coverage were in self-insured plans last year.

About 3 million Californians get health coverage through small businesses with fewer than 50 employees while 15 million are insured through larger employers, according to the California HealthCare Foundation. Small businesses are eager for new options since the average premium for employer coverage in California has increased 154% over the last decade, more than five times the 29% increase in the state’s overall inflation rate.

Critics said insurers such as Cigna Corp. are using these new plans to game the system and cherry-pick companies with healthier workers. They said this could undermine a key goal of the federal Affordable Care Act to lower premiums by pooling together more healthy and sick Americans into insurance exchanges. Premiums could continue to escalate without a diverse pool of consumers. That prospect has federal health officials weighing action against this practice as well.

*Self-insurance is attractive for many reasons, particularly the prospect of lower costs. It’s exempt from state insurance regulations such as mandated benefits, granting employers the flexibility to design their own benefit package and the opportunity to reap some of the savings from employee wellness programs. A federal law, the Employee Retirement Income Security Act, or ERISA, governs self-funded plans. Some aspects of the Affordable Care Act do apply to self-insurance, such as the elimination of caps on lifetime benefits and some preventive care at no cost.

Insurance officials say that they are responding to employer demands for more affordable coverage and that regulators shouldn’t interfere in the market. Mike Ferguson, chief operating officer at the Self-Insurance Industry Institute of America, a trade group, said there’s no evidence that insurers are targeting companies with healthier employees.

“We are concerned about regulators’ actions because self-insurance is arguably one segment of the healthcare market that is working well,” Ferguson said. “These companies are generally able to control costs better and offer more customized benefits.”

Now some insurers are chasing after much smaller customers with new plans designed to limit employer payouts for big claims using what’s called stop-loss policies. This guarantees that businesses won’t be responsible for anything over a certain amount per employee, perhaps as low as $10,000 or $20,000, with the rest paid by an insurer. Regulators and health-policy experts say this arrangement undercuts the notion of self-insurance since employers aren’t bearing much of the risk, and it allows companies to circumvent some state insurance rules.

California Insurance Commissioner Dave Jones will unveil proposed legislation next week that would bar insurers from selling stop-loss policies below a certain amount. The specific dollar figure is still under consideration, but some experts recommend a minimum of $40,000 per worker. This proposal would make these new self-insured plans less attractive for small employers because they would be on the hook for more employee medical bills.

“The goal of the legislation is to help ensure the success of the small group market as significant healthcare reforms are going into effect,” said Janice Rocco, California’s deputy insurance commissioner for health policy. “There’s a concern carriers are selling a product that’s not really appropriate for small groups.”

Officials in the Obama administration are keeping a close eye on developments in California and other states where insurers are aggressively selling these plans.

“We are working carefully to ensure that consumers in all markets have the protections guaranteed by the Affordable Care Act and will provide more clarity on the tools available to reinforce these protections soon,” a spokesman for the U.S. Department of Health and Human Services said.

Monday, the U.S. Supreme Court will begin hearing arguments over the constitutionality of the federal healthcare law and specifically its mandate that individuals purchase health insurance.

Anthem Blue Cross, California’s largest for-profit insurer and a unit of WellPoint Inc., began selling these self-insured plans to employers with as few as 35 workers March 1, down from its previous minimum of 250 employees. Assurant Inc., a New York-based insurer, is selling plans to companies in California and other states with as few as 10 workers.

Marc Neely, vice president for Cigna’s self-insured business in 14 Western states, said his sales to small businesses with as few as 25 people are growing at a double-digit rate because employers are fed up with annual rate hikes of 10% to 15% on their traditional plans. Neely said Cigna offers stop-loss coverage as low as $20,000 per employee. “We’re excited about California as a growth market for us,” Neely said.

Higher stop-loss amounts are more the norm. The average stop-loss policy for firms with fewer than 200 workers was $78,321 per employee last year, according to the Kaiser Family Foundation. Larger firms had stop-loss coverage of $208,280 per worker, on average.

Some other states have already taken action. Oregon and New York ban the sale of stop-loss insurance to employers with fewer than 50 people enrolled, making self-insurance unappealing. However, there is debate over states’ power in this area because the federal ERISA law generally bars state regulation of self-insured plans.

This issue has even split the insurance industry. For instance, Blue Shield of California supports the state’s bid for tougher rules. But that hasn’t stopped the company from following its rivals by introducing self-insured plans in December for companies with as few as 100 employees. Previously, the company wouldn’t go below 250 workers.

“It has the potential to take out the favorable risks and destabilize the fully insured market,” said David Joyner, Blue Shield’s senior vice president of large group and specialty benefits. “There is a risk of cherry-picking.”

Joyner said it’s “silly” for insurers to provide stop-loss coverage as low as $10,000 to $20,000 since that’s not how self-insurance typically works. But Blue Shield isn’t willing to completely cede the market to its rivals. “We definitely need to offer something because our competitors are,” Joyner said.

Self-insured plans have an immediate cost advantage since there’s no state tax on insurance premiums being passed along by an insurer. Starting in 2014, they will also avoid additional fees levied on health insurers to help pay for the federal healthcare law. The Self-Insurance Institute of America estimates companies can save 3% to 5% annually because of better claims management.

Small businesses switching to self-insurance do gain more insight into why their medical costs might be rising so fast because they have access to detailed claims data. (Employee information is protected under federal privacy law.) Under California law, insurers aren’t required to share those details with an employer on a traditional health plan. Cigna’s Neely said companies like the ability to see whether their employees’ use of healthcare is above average and to make changes in the benefit package to bring those costs in line.

 

Modified from a Los Angeles Times article

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Execs say California health care reform inevitable

Health care reform will happen in California regardless of whether the federal Affordable Care Act is upheld by the U.S. Supreme Court , Sacramento-area health care leaders said Friday.

Other panelists were Pat Brady, chief executive officer of Sutter Roseville Medical Center; Garry Maisel, president and chief executive officer of Western Health Advantage;  Ann Madden Rice, chief executive officer of UC Davis Medical Center; Darryl Cardoza, chief operating officer of Hill Physicians Medical Group; and Trish Rodriguez, senior vice president and hospital chief executive officer for Kaiser Permanente in South Sacramento and Elk Grove.

Everyone is affected by the rising cost of health care, including employers, Rodriguez noted. After wages, health care benefits are the second largest operating cost at Kaiser Permanente itself, she said.

Doctors, hospitals and health plans will have to work together to go the same direction, the executives said. And it will take shared resources to get there because trends in health care — regardless of the fate of the reform law — will mean more demands on the industry and lower reimbursements, speakers agreed.

The key will be a switch from a medical rescue system that fixes problems to a health care delivery system that keeps people healthy and provides more care in less-expensive outpatient settings, Cardoza said.

Money is a growing problem: more costs are coming and reimbursement will drop.

  • While more people will have coverage when health insurance exchanges start in 2014, Medi-Cal enrollment is expected to climb. The government health care program for the poor has one of the lowest rates in the nation and reimbursement from Medicare — the government health care program for seniors — is slated for huge cuts.
  • To make ends meet while serving more patients, all parts of the health care system will have to cut costs and be more efficient.

One unknown is the health of the millions of new patients who will get coverage in two years.

  • “We do know these people; they are accessing our health care system now through ERs,” said Rodriguez of Kaiser Permanente. “We have an opportunity to do it in a more controlled environment, and I’d make sure these individuals are seen in primary care physicians’ offices.”

There will have to be more doctors to make that happen.

“If you look at Massachusetts (where universal health care is already in place), it used to take 16 to 18 days for a non-urgent internal medicine appoint,” said Rice of UC Davis Medical Center. “It’s gone one up to six weeks.”

  •  Three-quarters of the counties in California have fewer than 60 primary-care doctors, she said. The UC Davis School of Medicine — and other medical schools — can churn out more doctors, but there aren’t enough residency spots to accommodate them, Rice said.

“The individual market will look nothing like it does today; the small group market will change, too, but not as much,” Maisel said of the industry in 2014.

  • “Now it’s business to business, through brokers. It’s going to be a business-to-consumer model.
  • The buying decision will no longer be at the employer level, but at the individual level.”

Contrary to perceptions that the cost of health care will go down in 2014, Maisel thinks they’ll go up in the short-term because of demand and slow changes to the delivery system.

  • “In 2014, a lot of individuals think they’ll suddenly go out and buy affordable health care,” he said. “I think there will be sticker shock.”

This article is modified from a Sacramento Business Journal Article published March 2, 2012

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Annual PCIP Member Claims Average $28,994 – Will this be the trend after 2014?

The Pre-existing Condition Insurance Plan (PCIP) — a new health insurance program for people with health problems — ended 2011 with 48,879 enrollees. The consumers who have enrolled have turned out to be far sicker than officials had anticipated: Enrollees are averaging about $29,000 in claims per year. That’s twice the average traditional state high risk pools have experienced in recent years, officials say. Many PCIP participants need treatment for conditions such as cancer, ischemic heart disease, degenerative bone diseases or hemophilia.

People who enroll in the PCIP program are not charged a higher premium because of their medical condition. Premiums may vary only on the basis of age, geographic area and tobacco use. The Affordable Care Act of 2010 (PPACA) requires health insurers to sell subsidized coverage on a guaranteed issue, mostly community-rated basis starting in 2014.

Officials say that other program features may contribute to high per-member medical costs. “Coverage related to the care or treatment of an enrollee’s pre-existing condition begins immediately upon the plan’s effective date, unlike other types of insurance coverage currently available in the individual market, which may impose pre-existing condition limits or exclusion periods,” officials say.

  “PCIP may attract individuals who have been recently diagnosed with a severe illness or condition that requires immediate care or treatment”.  “Additionally, people who may otherwise qualify for PCIP may postpone enrolling until they have an immediate need for coverage.”

*This article is modified from a Life Health Pro article by Elizabeth Festa

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PPACA-Based Age Rating Pinch Could Leave a Million More Uninsured

Whatever states do about health insurance prices for older and younger adults, one thing remains certain: it will be unlikely to please everyone.

If a state chooses to eliminate age rating in an attempt to be kinder to consumers ages 45-64, it could decrease premiums by about 13% (to $8,300) for people in that age group who earn more than 400% of the federal poverty level, and it could decrease the total uninsurance rate in that age group to 6.6%, from 7.6%, or by about a million people, the researchers say.

But eliminating age rating would increase rates by 22% for relatively high-income consumers ages 18 to 34 and increase the uninsurance rate for those consumers from 9.9% to 10.6%. Moreover, the overall uninsurance rate for nonelderly adults might increase from 26.2% to 27.2%, the researchers say.

Frederic Blavin and his colleagues at the Urban Institute in Washington, D.C., have published data on how efforts to keep or eliminate age-based pricing differences might affect U.S. residents. The researcher published their data, in Health Affairs, an academic journal that focuses on the finance and delivery of health care. The researchers discusse the choices states will have before them should the Patient Protection and Affordable Care Act of 2010 (PPACA) be implemented as written.

Mired in controversy, legal wrangling and political argument since its signing into law in 2010, PPACA faces a multiple-front effort to get the law repealed outright in Congress, as well as to have it overturned in the Supreme Court. Oral arguments before the Supreme Court over the constitutionality of PPACA’s individual mandate begin in March.

However, if PPACA survives these efforts to undo the law, and if PPACA is fully implemented on schedule (by 2014), it will create, among other thing, a Small Business Health Options Program (SHOP) exchange system for small businesses and another exchange system for individuals. Exchanges are no-frills online venues consumers can use to buy health insurance; each state must set up its own exchange by 2014 or let the federal government provide exchange services for its residents. The exchanges are supposed to help individuals meet new PPACA health insurance ownership requirements.

Individuals with incomes under 400% of the federal poverty level will be able to use new tax subsidies to buy coverage through the exchanges, and many small businesses will qualify for a 2-year health insurance purchase subsidy.

Insurers will have to see coverage on a guaranteed-issue, mostly community-rated basis, but the researchers point out that states will have the authority to let health insurers charge the oldest consumers in the individual market a three times what they charge the youngest adults.

States also will be able to choose whether to merge their individual and small group markets, and, until 2016, they will be able to decide whether a “small group” is an employer group with 50 or fewer workers or 100 or fewer workers.

The researchers used a simulation model they have developed to predict how various decisions might affect the cost of coverage and who has what type of coverage.

The researchers found that the choice of small-group cut-off has little effect on how the health insurance market performed in their simulations. Groups with 50 to 100 lives would, for example, have little incentive to buy coverage through an exchange, the researchers say.

Merging the individual and small group markets seems likely to lower individual market rates without having much effect on small group rates, the researchers report.

Merging the markets might cut prices about 10% for individuals who buy through an exchange and about 8% for individuals who coverage outside the exchange system while leaving small group prices unchanged, the researchers say.

Because merging the markets could lower prices for some without having a significant impact on the rates that others pay, that change could increase the percentage of insured U.S. residents from 90.2% to 90.6%, the researchers say.

 

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Obamacare architect: Expect steep increase in health care premiums

Medical insurance premiums in the United States are on the rise, the chief architect of President Barack Obama’s health care overhaul has told The Daily Caller.

Massachusetts Institute of Technology economist Jonathan Gruber, who also devised former Massachusetts Gov. Mitt Romney’s statewide health care reforms, is backtracking on an analysis he provided the White House in support of the 2010 Affordable Care Act, informing officials in three states that the price of insurance premiums will dramatically increase under the reforms.

In an email to The Daily Caller, Gruber framed this new reality in terms of the same human self-interest that some conservatives had warned in 2010 would ultimately rule the marketplace.

“The market was so discriminatory,” Gruber told TheDC, “that only the healthy bought non-group insurance and the sick just stayed [uninsured].”

“It is true that even after tax credits some individuals are ‘losers,’” he conceded, “in that they pay more than before [Obama’s] reform.”

Gruber, whom the Obama administration hired to provide an independent analysis of reforms, was widely criticized for failing to disclose the conflict of interest created by $392,600 in no-bid contracts the Department of Health and Human Services awarded him while he was advising the president’s policy advisers.

Gruber also received $566,310 during 2008 and 2009 from the National Institutes of Health to conduct a study on the Medicare Part D plan. (RELATED: Full coverage of the health reform law)

In 2011, officials in Wisconsin, Minnesota and Colorado ordered reports from Gruber which offer a drastically different portrait in 2012 from the one Obama painted just 17 months ago.

“As a consequence of the Affordable Care Act,” the president said in September 2010, ”premiums are going to be lower than they would be otherwise; health care costs overall are going to be lower than they would be otherwise.”

Gruber’s new reports are in direct contrast Obama’s words — and with claims Gruber himself made in 2009. Then, the economics professor said that based on figures provided by the independent Congressional Budget Office, “[health care] reform will significantly reduce, not increase, non-group premiums.”

During his presentation to Wisconsin officials in August 2011, Gruber revealed that while about 57 percent of those who get their insurance through the individual market will benefit in one way or another from the law’s subsides, an even larger majority of the individual market will end up paying drastically more overall.

“After the application of tax subsidies, 59 percent of the individual market will experience an average premium increase of 31 percent,” Gruber reported.

The reason for this is that an estimated 40 percent of Wisconsin residents who are covered by individual market insurance don’t meet the Affordable Care Act’s minimum coverage requirements. Under the Affordable Care Act, they will be required to purchase more expensive plans.

Asked for his own explanation for the expected health-insurance rate hikes, Gruber told TheDC that his reports “reflect the high cost of folding state high risk pools into the [federal government’s] exchange — without using the money the state was already spending to subsidize those high risk pools.”

Gruber’s Wisconsin presentation, previously available on the website of Wisconsin’s Office of Free Market Health Care, disappeared from the state government’s Web servers shortly after Wisconsin Gov. Scott Walker issued a Jan. 18 executive order scrapping the agency’s mission.

Minnesotans have already seen a 15 percent average rate increase because their state government is spending approximately $100 million to subsidize those high-risk pools. Gruber said they, too, will see a premium increase — even after subsidies are factored in.

In his presentation there in November, he estimated 32 percent of Minnesotans will face premiums hike similar to those of their neighbors in the Badger State.

In his Colorado analysis, which he delivered last month, Gruber wrote that while some may benefit from new tax credits folded into Obama’s health care overhaul, “13 percent of people will still face a premium increase even after the application of tax subsidies, and seven percent will see an increase of more than ten percent.”

Sally Pipes, president of the Pacific Research Institute in San Francisco, told TheDC that the health care law’s mandates will ultimately result in far greater costs across the board.

“If [instead] we change the tax code and allow a competitive market to build, and put doctors and patients in power, then that would really solve a lot of the problem,” Pipes said.

Pipes said she believes applying the Affordable Care Act, as written, will result in care “being rationed and more expensive.

South Carolina Republican Rep. Trey Gowdy, who chairs the House Subcommittee on Health Care, told TheDC that consumers are beginning to understand that the president’s 2010 promises are out of sync with reality.

“What a shock,” Gowdy said, feigning surprise. “Obamacare doesn’t lower costs, doesn’t increase coverage, and has turned into a wildly unpopular, labyrinthine government overreach.”

“’If you like your health insurance, you can keep it’ has morphed into ‘I, President Barack Obama, will decide what you need and make others pay for it.’”

White House deputy press secretary Jamie Smith was unable to immediately respond to a request for comment.

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An Rx? Pay More to Family Doctors

By CHRISTOPHER WEAVER And ANNA WILDE MATHEWS

The nation’s second-largest health insurer is shaking up its approach to paying doctors, putting a major investment behind the idea that spending more for better primary care can save money down the road.

The nation’s second-largest health insurer, WellPoint Inc., which insures some 34 million Americans, will offer primary-care doctors a fee increase with the possibility of additional payments, Christopher Weaver reports on Markets Hub.

Starting this summer, WellPoint Inc., which insures some 34 million Americans, will offer primary-care doctors a fee increase, typically of around 10%, with the possibility of additional payments that could boost what they get for treating the patients it covers by as much as 50%.

The new approach could pour an additional $1 billion or more into primary care, which WellPoint is betting will pay off in the form of fewer emergency-room visits and hospital stays.

“This will fundamentally change our relationship with primary-care physicians,” said Harlan Levine, WellPoint’s executive vice president of comprehensive health solutions.

Health-policy experts have long faulted the U.S. health-care system for placing too little value on traditional primary care, the front-line medical work that ranges from immunizing children to ensuring that diabetics get their blood-sugar tests. They also say that the current fee system, which sometimes fails to reward such services as planning outpatient care after a hospital stay, leads to bigger bills and worse results for patients.

Some doctors already are seeing some of the benefits that WellPoint is after. John Bender, a Fort Collins, Colo., physician whose practice is part of a pilot project involving WellPoint and six other insurers, cites a patient who was treated for a heart attack last February. She soon returned to the hospital, via an air-ambulance trip, for chest pain.

WellPoint flagged her case to Dr. Bender’s practice, Miramont Family Medicine. Doctors there took a closer look at her case and diagnosed an anxiety disorder. They referred her to their staff psychologist, started her on a low-fat diet and exercise regimen and controlled her blood pressure.

“She hasn’t visited the emergency room since,” said Dr. Bender, Miramont’s owner. “We create a tremendous amount of value.” As part of the pilot program, Miramont earned a roughly $100,000 bonus from the insurers last year, he said.

Primary-care doctors, such as pediatricians and family physicians, often make less than half of what top-paid specialists like orthopedic surgeons earn, and the idea of changing how they are paid has been around for years. Insurers and government agencies are experimenting with a variety of approaches. But WellPoint, with its network of about 100,000 primary-care doctors, could have a much broader influence.

The “scale is so much bolder than things we’ve seen,” said Paul Ginsburg, president of the Center for Studying Health System Change, a Washington nonprofit group. “This isn’t an experiment.”

In addition to its fee increase for visits, which will vary by market, WellPoint will offer primary-care doctors payments for services such as developing treatment plans for patients with chronic diseases. It says physicians will get a chance to make even more if they help pare the overall cost of patients’ care: a bonus amounting to as much as 20% to 30% of any savings they achieve.

WellPoint is also promising that it will give doctors data and staffing help to improve their practices. In return, those doctors will have to meet requirements including some form of 24-hour access for patients and keeping a registry to monitor chronic-disease care.

The insurer said the program, which will include only primary-care doctors who meet certain quality goals, could add as much as one or two percentage points to its primary-care spending, which now represents about 6% to 8% of the about $100 billion in claims it processes annually.

WellPoint officials said they think the company’s upfront investment in primary care could reduce its projected medical costs by as much as 20% by 2015 by improving overall patient health and reducing the need for costlier medical services.

Elizabeth Curran, who oversees the insurer’s national network programs, said Aetna wants to “make the appropriate investment to help support” doctors as they seek to improve their practices.

Several early medical-home pilot projects have shown signs of improved quality and patient satisfaction, researchers said. Some regional insurers, such as Maryland-based CareFirst BlueCross BlueShield, have moved ahead with broader programs.

Still, “we have no strong evidence of cost savings yet,” at least based on short-term results published so far, said Meredith Rosenthal, a Harvard researcher who studies health-care payment.

WellPoint said its savings projections are based largely on its own data from medical-home pilot projects.

One big question is whether higher payments from any one insurer can change the way doctors work, given that many patients will still have more-traditional coverage. Bruce Bagley, medical director for quality improvement at the American Academy of Family Physicians, said he welcomed the new efforts. But, he said, “if you only have 10% of your practice that you’re getting paid extra for, that’s not enough to get your attention.”

WellPoint pointed to its substantial market share of 15% to 46% of people with coverage in the 14 states it serves. It said it expects around 70% of the primary-care doctors in its network to join its new program by the end of 2014.

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How Defined Contribution Health Benefits Help Employers Recruit and Retain Employees

It costs a typical employer the equivalent of 6-9 months in salary each time they have to replace a salaried employee—that’s $20,000 to $30,000 for a $40,000 manager in recruiting and training expenses, along with the potential lost revenue from customers.

Employers can save approximately half of these expenses, $10,000 or more per replaced employee, with a health benefits plan that helps them recruit new employees and retain existing employees.

Defined contribution health benefits provide many advantages over traditional employer-sponsored benefits. Rather than paying the costs to provide a specific group health plan (a “defined benefit”), employers can fix their costs on a monthly basis by establishing a defined contribution health plan that gives employers and employees full control over healthcare costs – the employer’s costs are predictable and controllable, while employees are given full control over their health care dollars and choose a portable plan that meets their exact personal needs.

How do defined contribution health benefits work?

An employer gives each employee a fixed dollar amount (a “defined contribution”) that the employee chooses how to spend. Typically, employees are allowed to use the defined contribution to reimburse themselves for personal health insurance costs or other medical expenses such as doctor visits and prescription drugs.

Under the traditional approach to health benefits, the company selects and funds the same insurance plan for all employees in a one-size-fits-all approach.

Alternatively, in a defined contribution approach, the employer designates a fixed amount of money, the “defined contribution”, and employees purchase personal health insurance directly from any insurance company they choose, selecting products that specifically meet their family’s needs and budget.

What is a personal health policy?

A personal health policy, sometimes called an “individual” or “family” health insurance policy, covers you and your designated family members. You purchase a personal health policy through a licensed health insurance agent who is appointed to represent the insurance companies in your state.

Personal health policies now cost 1/3 to 1/2 the price of similar-benefit employer-sponsored coverage in 45 states. This is primarily because insurance carriers in 45 states are allowed to: (1) price based on age bands and (2) reject or charge more to applicants for personal policies with pre-existing conditions.

If you or a member of your family are rejected or charged more for a personal health policy because of a pre-existing medical condition, you typically become eligible for state-guaranteed (“HIPAA-guaranteed”) or federally-guaranteed (“PCIP”) personal health insurance.

How do businesses determine the amount of money allocated to employees?

Providing different levels of benefits to classes of employees is at the core of benefits compensation and is routinely done by major corporations.   With salary and other types of compensation, employers routinely compensate groups of employees differently. Field sales people are compensated differently than sales managers. Some employees get company cars, while others earn quarterly bonuses. Because health benefits are such an important part of compensation, why not provide benefits that vary by class of employee?

With defined contribution health benefits, businesses can create employee classes that offer benefits tailored to the company’s objectives, transforming a health benefit plan into a tool to find and keep great people.

For example, consider an electrical contracting company who struggled to hire and keep journeymen electricians in a very tight labor market. Instead of offering the same health plan to all employees, the company created separate classes for apprentices and journeymen and gave journeyman $350 more per month in their HRA. This large increase helps the company reduce attrition among journeyman. Plus, it creates a visible incentive for apprentices to complete the education required to become journeymen.

As there are no minimum or maximum contribution requirements, a business can design their defined contribution health plan to fulfill its exact recruiting and retention needs.

Conclusion

Recruiting and retaining key employees is essential to every business, and a company’s health benefit program is a key part of the compensation they offer to their employees. Due to the rising costs of traditional employer-sponsored health insurance, defined contribution health benefits are gaining popularity in the U.S. Rather than paying the costs to provide a specific group health plan (a “defined benefit”); employers might want to consider fixing their costs on a monthly basis by establishing a defined contribution health plan.

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The high risk of high-risk pools

When the health reform law’s high-risk insurance pools launched last summer, there was a lot worry that the new coverage option would be swamped by demand from uninsured individual. Then, there was worry about too little demand: The insurance pools saw anemic enrollment, with some states enrolling just a few dozen subscribers. And now, there’s a new worry: The high-risk pools attracted such expensive patients, with costly medical needs, that nearly a quarter are running short on cash.

Nine states have asked HHS for additional funds to continue running their Pre-Existing Condition Insurance Plans, the program meant to cover some who insurers have denied coverage between now and 2014, when insurers’ ability to discriminate on preexisting conditions ends. Two states, New Hampshire and California, have requested additional funds twice now, as their high-risk pool’s bills exceed expected costs.

Montana is among the states seeking more funds, and it points at the type of people who enrolled in the plan as the reason for it’s request. The Montana plan has 269 members, a $16 million budget and, via the Billings Gazette, not enough money:

The $16 million, issued in mid-2010 as part of the federal health reform law, was supposed to cover costs of the subsidized health insurance program through 2013 for as many as 400 people covered by the pool.

Yet initial cost estimates turned out to be too low, because the medical costs per covered customer are higher than expected, said Cecil Bykerk, executive director of Montana’s pool.

“Our numbers (for enrollment) were fairly accurate, but per-member, per-month claim costs have been much higher than the original assumptions that we used,” he said.

This isn’t exactly surprising: When the federal government created a new health insurance program catering to those who have had trouble obtaining insurance in the past, it makes sense that those who have very high medical costs would be first in line. It hasn’t helped that the premiums have proved relatively pricey: In Montana, the monthly premium for the high risk pool is as high as $681. Anyone who enrolls in a plan with that kind of premium likely expects to have relatively expensive medical costs in the near future.

 

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Group Health Shrinks as Individual Health Grows

The government is documenting what commercial health carriers and brokers have been saying for months: 2010 was a terrible year for group health plan enrollment.

Brokers, consultants and others said group plan case sizes fell that year as employers slashed head counts.

Analysts at the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) say in the latest National Health Expenditure Accounts report that group health enrollment fell by 2.6%, to 166 million.

The drop meant that 4.5 million lost employer-sponsored coverage than gained it.

The number of people with individual health coverage increased 3.6%, to 22 million, but that market is much smaller than the group market. The increase in individual health program enrollment translated into a net gain of only 800,000 covered lives.

Enrollment in Medicare increased 2.5%, to 47 million, and enrollment in Medicaid increased 5.8%, to 54 million.

Together, those programs and the Children’s Health Insurance Program (CHIP) now cover about 104 million people, or about one-third of the U.S. population.

The number of people who were uninsured increased 1.6%, to 47 million. The rate of increase in the number of uninsured people was down from 8.9% in 2009.

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IRS Puts W-2 Health Advice in a Nutshell

By

January 6, 2012

An Internal Revenue Service (IRS) has tried to boil the new tax Form W-2 health benefits cost reporting requirements down into terms that mortals without advanced accounting credentials can understand.

Wanda Valentine, a senior tax analyst at the IRS, writes about the new W-2 reporting requirements in an employer newsletter.

The Patient Protection and Affordable Care Act of 2010 (PPACA) requires the IRS to establish health benefits cost reporting requirements. Later, the IRS is supposed to set up a program to impose an excise tax on health benefits packages with costs that exceed a designated threshold.

Employers are supposed to report an employee’s health benefits cost in Box 12 on the W-2 using Code DD to identify the amount.

Benefits cost reporting is voluntary for the W-2 forms now going out, but reporting is supposed to become mandatory for issuers of 2012 W-2s.

Even in 2012, “the amount reported does not affect tax liability,” Valentine says.

The IRS tried clarify the new reporting rules earlier this week in IRS Notice 2012-9, a long, complicated batch of guidance.

“The amount reported on the Form W-2 should include both the portion paid by the employer and the portion paid by the employee,” Valentine says.

Valentine notes that, under current law, employers will always have to include some types of expenses and will never have to include others.

The IRS is developing guidance for handling a third batch of benefits expense categories. It will provide transitional relief allowing employers to keep those expenses out of the W-2 health benefits cost totals until guidance is available, Valentine says.

Categories that can always stay out of the health benefits cost total include the cost of:

  • Long-term care coverage.
  • Coverage for “HIPAA excepted benefits,” such as accident insurance and disability insurance.
  • Liability insurance.
  • Worker’s Compensation
  • Archer MSA amounts
  • Health Savings Accounts (HSAs)
  • Salary reductions for flexible spending accounts (FSAs)

Valentine says transitional relief treatment is available for:

  • Employers filing fewer than 250 Forms W-2 for the previous calendar year.
  • Multi-employer plans.
  • Health Reimbursement Arrangements.
  • Dental and vision plans that are not integrated into another group health plan.
  • Self-insured plans of employers not subject to COBRA continuation coverage or similar requirements.
  • Wellness benefits, employee assistance plans and on-site medical clinics, to the extent that the employer does not charge any amount to qualified beneficiaries for applicable COBRA continuation coverage or similar coverage.
  • Forms W-2 furnished to employees who terminate before the end of a calendar year and request a Form W-2 before the end of that year.
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