HMOs See Highest Rate Increases in Five Years

Posted by admin on January 3, 2011  |   No Comments »

An analysis by Aon Hewitt, the human capital consulting and outsourcing solutions business of Aon Corporation (NYSE: AON), indicates that HMO plans will have the highest premium increases in five years.

According to Aon Hewitt proprietary data, derived from its Hewitt Health Resource(TM) (HHR)-a website that captures HMO rate information for 160 large companies representing approximately 1 million participants-average HMO rates for 2011 increased 9.8 percent after plan changes, negotiations and terminations. This is the highest rate increase since 2006 (10 percent). Final rate increases were 9.4 percent and 9.0 percent in 2010 and 2009, respectively.

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Medical Loss Ratio Rules Will Affect 64 Million Covered By Group Plans

Posted by admin on January 15, 2011  |   No Comments »

CCH
An interim final regulation implementing medical loss ratio (MLR) provisions in the Patient Protection and Affordable Care Act (ACA) will affect almost 75 million individuals enrolled in comprehensive major medical coverage, including 24 million individuals covered by small employers and 40 million covered through large employer group health plans.

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2011 Compliance Flash

Posted by admin on January 20, 2011  |   No Comments »

CONEXIS

In this edition: Pre-tax transit benefits, the Child Care Tax Credit, the Small Business Health Care Tax Credit, and 2011 IRS plan limits.

Transit Benefit

The American Recovery and Reinvestment Act of 2009 (ARRA) included a provision that increased the maximum pre-tax benefit under a Section 132 transportation plan from $120 to $230 monthly. Unless Congress acts to extend this provision, the provision will expire at the end of the 2010 calendar year and the benefit will once again be capped at $120 monthly.

Many Section 132 plans require that participants purchase their transit passes or other media in advance. For these plans, it is critical that this information is communicated to the plan participants in advance of the ordering period for January passes.

Child and Dependent Care Tax Credit

The Child and Dependent Care Tax Credit (CDCTC) provides a credit of between 20 and 35 percent of up to $3,000 (or $6,000 for two or more children) of work-related dependent care expenses. The amount of credit available to a taxpayer is determined by the taxpayer’s adjusted gross income. Information regarding this credit is available on the IRS Web site at http://www.irs.gov/taxtopics/tc602.html

The amount of the credit available under the CDCTC was increased by The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), which is set to expire at the end of 2010. Unless Congress acts to extend EGTRRA, the provisions of the CDCTC will revert to their previous levels of between 20 and 30 percent of up to $2,400 for one qualifying individual and $4,800 for two or more qualifying individuals.

Small Business Health Care Tax Credit

The Patient Protection and Affordable Care Act of 2010 (PPACA – enacted March 23, 2010) created a credit to help small businesses and small tax-exempt organizations afford the cost of providing health care coverage to their employees.

The credit is worth up to 35 percent of a small business’ premium costs in 2010 (25 percent for eligible tax-exempt employers) and increases to 50 percent beginning January 1, 2014 (35 percent for eligible tax-exempt employers). To qualify for the credit, a qualifying employer must meet the following criteria:

• Must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.

• Must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).

• Must pay average annual wages below $50,000.

More information about the credit, including a guide to claiming the credit, is available on the IRS Web site at http://www.irs.gov/newsroom/article/0,,id=223666,00.html.

2011 IRS Plan Limits

The following table reflects the 2011 IRS plan limits for various benefit plans:

2011 IRS Plan Limits
Plan Year 2011 2010 2009
Transit and Vanpooling (combined) $120 $230 $120/230
Parking $230 $230 $230
Highly Compensated Employee – Section 414(g) $110,000 $110,000 $110,000
Key Employee – Section 416(i) $160,000 $160,000 $160,000
HSA Maximum Annual Contribution Limit (Self only) $3,050 $3,050 $3,000
HSA Maximum Annual Contribution Limit (Family) $6,150 $6,150 $5,950
HSA Catch-up Contribution Limit $1,000 $1,000 $1,000
HSA Minimum Annual Deductible (Self only) $1,200 $1,200 $1,150
HSA Minimum Annual Deductible (Family) $2,400 $2,400 $2,300
HSA Maximum Out-of-pocket (Self only) $5,950 $5,950 $5,800
HSA Maximum Out-of-pocket (Family) $11,900 $11,900 $11,600
Maximum Exclusion for Employer-provided Adoption Assistance $13,360 $13,170 $12,150
[1] $120 per month for January and February 2009; $230 per month for the remainder of 2009. The American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5 (Feb. 17, 2009) amended Code 132(f)(2) to make the monthly limit for transit passes and vanpooling temporarily the same as the monthly limit for parking. This change is effective only through December 2010.

[2] An employee is treated as being eligible for the entire calendar year as long as he or she is eligible during the last month of the calendar year. However, failure to maintain eligibility during the “testing period” will result in adverse tax consequences (including an additional excise tax). The testing period begins in December of the year in which the employee becomes eligible and ends the last day of December of the following year.

[3] The amount excludable from an employee’s gross income begins to phase out for taxpayers with modified adjusted gross income in excess of $182,180 and is completely phased out for taxpayers with a modified adjusted gross income of $222,180 or more.

[4] The amount excludable from an employee’s gross income begins to phase out for taxpayers with modified adjusted gross income in excess of $182,520 and is completely phased out for taxpayers with a modified adjusted gross income of $222,520 or more.

[5] The amount excludable from an employee’s gross income begins to phase out for taxpayers with modified adjusted gross income in excess of $185,210 and is completely phased out for taxpayers with a modified adjusted gross income of $225,210 or more.

COBRA News: Form 8928 – What Does this Mean for You?

Posted by admin on January 25, 2011  |   No Comments »

Discovery Benefits

Beginning with the 2010 Plan or taxable year, employers are now required to self-report their failures to comply with COBRA, HIPAA and other health plan regulations to the IRS on Form 8928 and pay excise taxes and penalties for these compliance failures. The form can be found on the IRS’ website www.irs.gov/pub/irs-pdf/i8928.pdf. Instruction for filling out the form can be found at www.irs.gov/pub/irs-pdf/i8928.pdf.

Excise Tax Amount

The excise tax varies based on the type of violation. The excise tax for COBRA violations and other group health plan failures is generally $100 per day per affected individual during the “noncompliance period.” The noncompliance period for COBRA violations starts on the date of the failure and continues until the earlier of the date the failure is corrected, or at the latest, the date that is six months after the maximum period of coverage that would apply to the qualified beneficiary. With respect to other health plan violations, the “noncompliance period” continues until the failure is corrected.

For COBRA, the excise tax is assessed per qualified beneficiary, but is limited to $200 for the total number of qualified beneficiaries in a family. The excise tax is assessed in addition to any ERISA penalties for late notices. There is also a per plan, per year limitation for violations due to reasonable cause and not to willful neglect that is the lesser of $500,000 or 10% of the aggregate paid by the employer in the prior year for group health plans. This cap applies to COBRA violations and to other health plan violations. There is a similar limitation for multiemployer plans.

Example: A COBRA election notice was due on 3/1/10 but was not provided until 5/10/10 (70 days late). There are 4 QBs in the coverage group (terminated employee, spouse, and 2 children). The possible excise tax amount is $200 x 70 days = $14,000.

Relief for Inadvertent Errors

1. Inadvertent Errors. With respect to COBRA and other applicable health plan requirements, the excise tax will not apply during any period that the responsible entity didn’t know of the failure, or by exercising reasonable diligence would not have known of the failure.

2. Grace Period for Correction. The tax also does not apply to cases where the failure was due to “reasonable cause” and not “willful neglect,” and was corrected within 30 days of the date the responsible entity knew or, by exercise of reasonable diligence, should have known of the failure. Form 8928 has a separate line to report that the failure was not discovered despite due diligence or was corrected within the correction period.

3. Definition of Correction. A failure is treated as corrected if the failure is retroactively undone to the extent possible, and the qualified beneficiary is placed in a financial position comparable to the position he or she would have been in had the failure not occurred.

The IRS may waive part or all of the excise tax to the extent that payment of the tax would be excessive relative to the failure involved. This applies only to failures due to reasonable cause and not due to willful neglect.

Compliance Suggestions

Plan sponsors should adopt and follow procedures for compliance with these laws. For example, many plan sponsors outsource a large portion of their COBRA administration. However, a COBRA compliance failure often originates because the employer has not notified the COBRA administrator that a qualifying event has occurred. A common example is where an employer fails to realize that an employee on a medical leave of absence that extends beyond the FMLA period has ceased to satisfy the service requirement to maintain eligibility and should be offered COBRA. Therefore, it is recommended that clients have COBRA procedures in place to ensure that proper notification is delivered to Discovery Benefits on a timely basis for all COBRA qualifying events.

Use of regular compliance procedures and checklists may be helpful in proving that a compliance failure was due to “reasonable cause” (e.g., human error in following an established procedure) rather than “willful neglect” (e.g., ignoring compliance obligations). When an error is discovered, the error should be corrected as soon as possible. Documentation of the correction should be retained in plan files.