This is the Employee Benefits Adviser category of the Broad REach Benefits blog. At Broad Reach Benefits, we focus on employers that have between 30 and 500 benefit eligible employees. We’re employee benefit specialists, not a big box brokerage firm or payroll company with a sales force peddling policies.
Health benefits costs are almost certainly going to rise in 2021. They’ve been trending upward for years—over 50% in the last decade, according to the Kaiser Family Foundation—and the current state of economic uncertainty over COVID-19 won’t slow things down. Realistically, after enduring months of business closures and managing exhausted workforces, many employers will be lucky to maintain uninterrupted operations.
That’s why it’s critical for employers to think about reducing health costs right now—figure out cost-effective benefits first so money can be shuffled as needed later. Having a solid plan going into 2021 will better position organizations facing limited budgets. Better yet, work with your advisor on a 3-5 year benefits strategy to control costs instead of playing the year-to-year renewal game.
Here are five basic cost-reduction strategies employers should explore:
1. Dig Into Health Costs
Employers don’t let themselves overpay for the materials they use during production, so why is health care any different? Employers should look into every health care figure they can, from overall premium costs to individual employee expenditures. Understanding where money goes can help focus cost-cutting efforts.
For instance, if employees are going to the emergency room for every health visit, employers know they must promote more health literacy among their workforce.
Speak with Broad Reach Benefits for details about digging into your health plan cost data.
2. Embrace Technology
The health care landscape of today is starkly different than the one of even a few years ago. Now, the name of the game is virtual health care or “telemedicine.” There are numerous ways for individuals to take charge of their health care without the hassle—and added cost—of in-person consultations.
For example, there is tech that can monitor glucose levels to help diabetic employees without test strips; there […]
The Internal Revenue Service (IRS) has released Rev. Proc. 2020-36, which contains the inflation adjusted amounts for 2021 used to determine whether employer-sponsored coverage is “affordable” for purposes of the Affordable Care Act’s (ACA) employer shared responsibility provisions and premium tax credit program. As shown in the table below, for plan years beginning in 2021, the affordability percentage for employer mandate purposes is indexed to 9.83%. Employer shared responsibility payments are also indexed.
|Description||Coverage not offered to 95% (or all but 5) of full-time employees.||Coverage offered, but unaffordable or is not minimum value.||Premium credits and affordability safe harbors.|
*Section 4980H(a) and (b) penalties 2021 are projected.
**No employer shared responsibility penalties were assessed for 2014.
Under the ACA, applicable large employers (ALEs) must offer affordable health insurance coverage to full-time employees. If the ALE does not offer affordable coverage, it may be subject to an employer shared responsibility payment. An ALE is an employer that employed 50 or more full-time equivalent employees on average in the prior calendar year. Coverage is considered affordable if the employee’s required contribution for self-only coverage on the employer’s lowest-cost, minimum value plan does not exceed 9.83% of the employee’s household income in 2021 (prior years shown above). An ALE may rely on one or more safe harbors in determining if coverage is affordable: W-2, Rate of Pay, and Federal Poverty Level.
If the employer’s coverage is not affordable under one of the safe harbors and a full-time employee is approved […]
In Rev. Proc. 2020-32, the IRS released the inflation adjusted amounts for 2020 relevant to HSAs and high deductible health plans (HDHPs). The table below summarizes those adjustments and other applicable limits.
|Annual HSA Contribution Limit
(employer and employee)
|Self-only: $3,600 Family: $7,200||Self-only: $3,550 Family: $7,100||Self-only: +$50 Family: +$100|
|HSA catch-up contributions
(age 55 or older)
|Minimum Annual HDHP Deductible||Self-only: $1,400 Family: $2,800||Self-only: $1,400 Family: $2,800||No change|
|Maximum Out-of-Pocket for HDHP
(deductibles, co-payment & other amounts except premiums)
|Self-only: $7,000 Family: $14,000||Self-only: $6,900 Family: $13,800||Self-only: +$100 Family: +$200|
Out-of-Pocket Limits Applicable to Non-Grandfathered Plans
The ACA’s out-of-pocket limits for in-network essential health benefits have also been announced and have increased for 2021.
|ACA Maximum Out-of-Pocket||Self-only: $8,550
Note that all non-grandfathered group health plans must contain an embedded individual out-of-pocket limit within family coverage, if the family out-of-pocket limit is above $8,550 (2021 plan years) or $8,150 (2020 plan years). Exceptions to the ACA’s out-of-pocket limit rule are available for certain small group plans eligible for transition relief (referred to as “Grandmothered” plans). A one-year extension of transition relief was announced on January 31, extending the transition relief to policy years beginning on or before October 1, 2021, provided that all policies end by December 31, 2022. (This transition relief has been extended each year since the initial announcement on November 14, 2013.)
Next Steps for Employers
As employers prepare for the 2021 plan year, they should keep in mind the following rules and ensure that any plan materials and participant communications reflect the new limits:
- HDHPs cannot have an embedded […]
Due to COVID-19 and state and local stay-at-home orders, utilization of group medical and dental insurance benefits is down. As a result, some carriers recently notified employers that they will be issued premium credits. When asking how these premium credits should be treated by the employer, we often compare then to the ACA’s medical loss ratio (MLR) rebates. While these premium credits are not MLR rebates, a similar decision must be made to determine whether they, like MLR rebates, are ERISA plan assets.
As background, the Affordable Care Act’s MLR rule requires health insurers to spend a certain percentage of premium dollars on claims or activities that improve health care quality, otherwise they must provide a rebate to employers. At the same time the U.S. Department of Health and Human Services issued the MLR rule, the U.S. Department of Labor (DOL) issued Technical Release 2011-04 (TR 2011-04), which clarifies how rebates should be treated under ERISA. Under ERISA, anyone who has control over plan assets, such as the plan sponsor, has fiduciary obligations and must act accordingly.
Clearly, the premium credits we are seeing are not subject to the MLR rule; however, a similar analysis applies. TR 2011-04 clarified that insurers must provide any MLR rebates to the policyholder of an ERISA plan. However, while the DOL’s analysis was focused on MLR rebates, it recognized that distributions from carriers can take a variety of forms, such as “refunds, dividends, excess surplus distributions, and premium rebates.” Regardless of the form or how the carrier describes them, to the extent that a carrier credit, rebate, dividend, or distribution is provided to a plan governed by ERISA, then the employer must always consider whether it is a “plan […]
On March 27, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act comes as a continued response to the Coronavirus 2019 (COVID-19) pandemic that is significantly impacting the United States. The Act is a $2.2 trillion economic package that is meant to stabilize individuals and employers, while the nation continues to experience shelter-in-place advisories/orders and hospitals report a surge of severely ill COVID-19 patients. The Act’s Paycheck Protection Program is retroactive to February 15, 2020, which is important for businesses that have been experiencing financial hardships starting in February.
Overview of CARES Act
The CARES Act amends several laws, as well as appropriates funds to assist individuals, families, and businesses that are experiencing financial difficulties due to COVID-19. There are loans available to small businesses for paycheck protection and loan forgiveness, and other assistance for individuals and businesses as it relates to unemployment insurance and tax relief. The Act supports the health care system by providing financial assistance for medical supplies and coverage. It also provides economic stabilization and assistance for severely distressed sectors (such as airlines), as well as additional COVID-19 relief funds, expanded telehealth and COVID-19 testing provisions, and emergency appropriations for COVID-19 health response and agency operations.
HSA and Telehealth Expansion
The CARES Act includes a new safe harbor under which high deductible health plans (HDHPs) can cover telehealth and other remote care before participants meet their deductibles (i.e., without cost-sharing). This temporary safe harbor applies for plan years beginning on or before December 31, 2021, unless extended. As a result of this safe harbor, no-cost telehealth may be provided for any reason–not just COVID-19 related issues–without disrupting HSA eligibility.
Prescription Drug Reimbursement under FSA/HRA/HSAs
The CARES Act […]
Congress Passes Families First Coronavirus Response Act
On March 18, Congress passed, and President Trump signed into law, the Families First Coronavirus Response Act(FFCRA). The FFCRA is a bipartisan effort to help employers and individuals alike in managing pay, benefits, and business considerations during the COVID-19 pandemic. The focus of this alert is the impact of FFCRA on employer-sponsored benefits and paid leave. The paid leave provisions of the Act apply to employers with less than 500 employees. They are effective within 15 days from date of enactment and expire at the end of 2020, unless extended.
Mandated Free Testing
FFCRA mandates free COVID-19 testing from all group health plans, including fully insured and self-funded plans, as well as grandfathered plans. All group health plans must waive cost-sharing, prior authorization requirements, and other medical management as it relates to COVID-19 testing. This includes provider office visits, urgent care, emergency room, and other healthcare visits that are for the purpose of evaluating or administering testing.
The FFCRA provides for up to 12 weeks of job-protected leave under the Family and Medical Leave Act (“FMLA”) for a “qualifying need related to a public health emergency.” These provisions generally apply to private-sector employers with under 500 employees and all government employers. (There are exceptions for employers with less than 50 employees if the required leave would jeopardize the viability of their business.) This new law expands the leave for employees who have been employed at least 30 days, overriding, for these purposes, FMLA’s general requirement that employees must be employed for at least 12 months to be covered. For these purposes, a “qualifying need” exists if an employee is unable to work or telework because he/she/they need to care […]
States and the federal government have issued (or re-issued) guidance for employers in response to the recent novel coronavirus disease 2019 (COVID-19) pandemic. As of March 14, 2020, the Centers for Disease Control and Prevention (CDC) has reported more than 2,000 cases from 49 states and Washington, DC. Agency guidance includes the following:
- Internal Revenue Service (IRS): High Deductible Health Plans and Expenses Related to COVID-19
- Centers for Medicare and Medicaid Services (CMS): FAQs on Essential Health Benefit Coverage and the Coronavirus
- Equal Employment Opportunity Commission (EEOC): Pandemic Preparedness in the Workplace and the Americans With Disabilities Act (ADA)
- S. Department of Labor (DOL): COVID-19 or Other Public Health Emergencies and the Family and Medical Leave Act Questions and Answers
We expect additional guidance in the coming weeks. There will likely be COVID-19 related legislation as well. On March 14, the House of Representatives passed the Families First Coronavirus Response Act (with adjustments on March 16) which includes emergency paid sick leave and job-protected paid family and medical leave. The Act will head to the Senate the week of March 16, where it’s expected to pass. The Act applies to employers with less than 500 employees, primarily because there are tax credits to assist employers in paying employees. In the meantime, below are highlights of state action and other guidance for employers related to COVID-19.
State Mandates and Related Guidance
Some states have begun directing insurance companies to eliminate cost-sharing for COVID-19 testing. These insurance mandates apply directly to fully insured group health plans; self-insured ERISA plans would not be subject to any state insurance mandates, although third party administrators may be making certain changes automatically unless the employer opts-out. Likewise, […]
On January 31, 2020 the Centers for Medicare & Medicaid Services (CMS) announced a one-year extension to the transition policy (originally announced November 14, 2013 and extended six times since) for individual and small group health plans that allows issuers to continue policies that do not meet ACA standards. The transition policy has been extended to policy years beginning on or before October 1, 2021, provided that all policies end by January 1, 2022. This means individuals and small businesses may be able to keep their non-ACA compliant coverage through the end of 2021, depending on the policy year. Carriers may have the option to implement policy years that are shorter than 12 months or allow early renewals with a January 1, 2021 start date in order to take full advantage of the extension.
The Affordable Care Act (ACA) includes key reforms that create new coverage standards for health insurance policies. For example, the ACA imposes modified community rating standards and requires individual and small group policies to cover a comprehensive set of benefits.
Millions of Americans received notices in late 2013 informing them that their health insurance plans were being canceled because they did not comply with the ACA’s reforms. Responding to pressure from consumers and Congress, on Nov. 14, 2013, President Obama announced a transition relief policy for 2014 for non-grandfathered coverage in the small group and individual health insurance markets. If permitted by their states, the transition policy gives health insurance issuers the option of renewing current policies for current enrollees without adopting all of the ACA’s market reforms.
Transition Relief Policy
Under the original transitional policy, health insurance coverage in the individual or small group market that was renewed for a policy year starting […]
Legal Alert- Congress Repeals Unrelated Business Income Tax for Tax-Exempt Entities Offering Qualified Transportation Fringe Benefits
Congress Repeals Unrelated Business Income Tax for Tax-Exempt Entities Offering Qualified Transportation Fringe Benefits
As part of the Further Consolidated Appropriations Act, 2020 (the “Act”), Congress repealed Section 512(a)(7) of the Internal Revenue Code of 1986 (the “Code”). This Code section was added as part of the Tax Cuts and Jobs Act of 2017 (the “TCJA”) and resulted in an unrelated business income tax (UBIT) liability when a tax-exempt entity provides qualified transportation benefits to employees. The repeal is effective retroactively to December 22, 2017, the date the TCJA was enacted. Tax-exempt entities who paid an UBIT on transportation benefits in the last two years should be able to obtain a refund.
About UBIT and Qualified Transportation Fringe Benefits
The UBIT on qualified transportation fringe benefits only affected tax-exempt entities. UBIT generally applies to income that is not related to an entity’s exempt purpose, so it was unclear why Congress targeted expenses related to providing parking or transportation for employees. Under the TCJA, tax-exempt entities offering qualified transportation fringe benefits to their employees were exposed to a 21% UBIT tax. The tax applied regardless of whether the employer was providing the benefits or whether employees were paying pre-tax.
Qualified transportation benefits include transit passes, parking, and commuter highway vehicle rides. Notably, the amount of the UBIT was based on the qualified transportation benefit expenditures instead of the entity’s income. As a result, tax-exempt entities were experiencing larger UBIT bills, even though employees may have been paying for the benefits themselves via salary reduction.
What the Repeal Does
Under the Act, the UBIT for tax-exempt entities who offered qualified transportation fringe benefits is retroactively repealed. This means that tax-exempt entities are no longer subject to UBIT on qualified transportation benefits and […]
Updated December 21 to reflect that the bill has been signed into law.
On December 20, 2019, the House and Senate, with the final signature from President Trump, passed a bipartisan legislative package of spending bills to avoid a government shutdown. This package of bills is collectively referred to as the Further Consolidated Appropriations Act, 2020 (the “Act”). The Act includes a permanent repeal of three Affordable Care Act (ACA) taxes: the tax on high-cost health plans (the so-called “Cadillac Tax”), the Health Insurance Tax (HIT tax), and the medical device tax. Overall, the repeal of these ACA taxes may result in at least $300 billion in lost revenue to the government; however, the bill brings relief to employers and consumers, who may have experienced tax payments, increased health premiums and other costs. The repeal of the HIT tax is effective as of January 1, 2021, and the medical device tax is repealed as of January 1, 2020. The Cadillac Tax was already delayed until 2022, and thus will never take effect. The Patient-Centered Outcomes Research Institute (PCORI) fee has also been extended to 2029 (i.e., it will apply to plan years ending on or before September 30, 2029).
PCORI Fee Extension
The PCORI fee is now extended to plan years ending on or before September 30, 2029. PCORI fee extensions have been discussed frequently and have been included in previously introduced bills, such as the Protecting Access to Information for Effective and Necessary Treatment and Services Act (PATIENTS Act) that was approved by the House Ways and Means Committee in June 2019. The amount due per life covered under a policy will be adjusted annually, as it has been previously. Insurers of fully insured health […]