Final Rule Issues Standards for Insurers and Marketplaces in 2016

By Linda Rowings, Chief Compliance Officer at United Benefit Advisors

Recently, the Centers for Medicare and Medicaid Services and the Department of Health and Human Services issued a Final Rule with standards for insurers and Marketplaces in 2016, covering topics such as transparency in health insurance rate increases, formulary drug lists, drug mail order opt out provisions, determination of minimum value, and benefits discrimination. Open enrollment for the 2016 benefit year will begin on November 1, 2015, and end on January 31, 2016.

The Final Rule reminds issuers that benefits are not Essential Health Benefits (EHBs) if the benefit design, or implementation of a benefit design, discriminates based on an individual’s age, expected length of life, present or predicted disability, degree of medical dependency, quality of life, or other health conditions. The agencies became aware of benefit designs that would discourage enrollment by older individuals or those with health conditions, which it noted were a violation of discrimination prohibitions. Three noted examples of potentially discriminatory practices include labeling a medically necessary benefit as a “pediatric service,” refusing to cover a single-table drug regimen or extended release regimen that is as effective as a multi-tablet regimen, without appropriate reason for the refusal, and placing most or all drugs that treat specific conditions on the highest cost tiers. For more information on EHBs, download UBA’s PPACA Advisor, “Essential Health Benefits, Minimum Essential Coverage, Minimum Value Coverage: What's the Difference?

Both fully insured and self-funded plans must pay a transitional reinsurance fee (TRF) for 2014 through 2016. For 2016, the annual contribution for the transitional reinsurance program is $27 per enrollee. The contribution was $44 per enrollee for 2015, and funds reinsurance to the individual market. The contribution is assessed to health insurers and self-insured group health plans providing major medical coverage, although some exceptions exist. Request UBA's "Frequently Asked Questions about the Transitional Reinsurance Fee (TRF)" for the answers to nearly 30 questions about filing, due dates, calculation methods, payment, submission and more.

The maximum annual limit on cost-sharing for 2016 has been set. The limit will be $6,850 for self-only coverage and $13,700 for coverage that is not self-only. For a reminder on the 2015 limits, request UBA’s 2015 Annual Limits Card.

For more information please contact your trusted KBI representative.

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The RFP vs. the Two Step Process — Choosing Group Health Insurance

By Terry Allard, CEBS, Sr. Benefits Advisor at The Wilson Agency
A UBA Partner Firm

Many employers look at employee benefits as a commodity, bidding out their plans annually -- and who can blame them? Rising health care costs coupled with a challenging economic environment have forced many human resources decision-makers to focus heavily on cost.

Organizations of all sizes struggle to find a balance between cost considerations and a strategy-based approach to benefit planning. Creating a competitive benefit plan, though, can directly affect employee acquisition, retention, productivity and training, all of which significantly impact employer costs.

When choosing group health insurance, companies often go about it in one of two ways: The Request for Proposal (RFP) approach or the Two Step Process.

The RFP Approach

In the past, a company would put out an RFP to many brokerage firms. Each broker would take that information and send out quote requests to various carriers. Brokers would then return with a list of potential options for the company that sent out the RFP.

There are several pitfalls that can occur with this type of selection process.

One concern with the RFP process is that the information used for this often lacks depth and only includes census, claim, and plan cost information. There is a shift of focus from your "total cost of risk" to your premium. A premium is a small portion of a company’s total risk. A premium does not take into account your company’s human resources department and how the different benefits will affect staff. After all, most companies will agree that their biggest assets go home at night.

Just focusing on the premium increases creates the potential of coverage deficiencies. It can actually have a detrimental effect on your company's ability to secure the best rates from a carrier. When an insurer receives multiple quote requests for the same company, it can create the appearance that the business is being “shopped.” Because of this, the willingness to work hard or negotiate on the quote may diminish. In addition, and perhaps more importantly once an insurer has established a rate for a given census/claim/plan/cost information set, each broker will receive the same quote, negating the potential benefit an employer was attempting to achieve by sending multiple brokers into the market. It actually limits the negotiation power of your advocate/broker.

It is possible to mitigate this appearance of shopping around by assigning each broker to a specific market segment or set of carriers. However, this is also not without risk. The likelihood of matching the brokers and carriers based on who has the best relationships with which carrier is highly unlikely. This puts the broker at a disadvantage by limiting the full range of their contacts, and puts your company at a disadvantage by not allowing the brokers to leverage the more aggressive quotes against one another.

The Two Step Process

I suggest that the ideal process for benefit advisor selection is only two steps. One, choose your advisor. Two, with the help of your advisor, select the carrier and benefits plan that provides you with the greatest value and return on your investment.

The best way to go about this selection process is through a structured evaluation of the two individual pieces. First, you want to evaluate what the advisor can bring to you.

There are several things to looks for:

  1. Follow through and accountability
  2. Quality and depth of support personnel
  3. Quality of service
  4. Ability to communicate clearly and concisely
  5. Scope of support services and solutions (e.g., technology, HR, compliance)
  6. Program design and innovation
  7. Market knowledge and relationships

Additionally, look for strategies for health risk management and total compensation, proactive approaches for controlling future costs, willingness to disclose total costs, and your company's personal rapport with the account team.

In a separate evaluation, you want to look at the carriers. They can be evaluated on a number of criteria as well.

  1. Financial strength and stability
  2. Coverage terms and conditions
  3. Provider networks
  4. Costs
  5. Customer service capabilities
  6. Available tools and resources to support employee communication, education, and engagement
  7. Knowledge of the buyer’s industry and business


Top 5 Questions About The “Cadillac” Tax

Courtesy of UBA Benefits 

The excise tax on high cost plans (also referred to as the Cadillac tax and the 4980I tax) is scheduled to take effect in 2018. To date, regulations have not been issued, so many of the details about how the tax will operate are unclear. (The regulatory agencies are responsible for interpreting the law, adding needed details, and reconciling any parts of the law that may be inconsistent.) Based upon how the law itself is written, this is what is known and expected.

1. How much is the tax?

The tax is 40% of the cost of health coverage that exceeds a threshold.

2. What is the threshold?

For 2018 the base threshold is $10,200 per year ($850 per month) for self-only coverage and $27,500 per year ($2,291.67 per month) for all other levels of coverage. Plans that cover “qualified retirees” or which primarily cover those in a “high-risk profession” are allowed an additional $1,650 per year for single coverage in 2018 and $3,450 per year for all other levels of coverage.

“High-risk profession” means law enforcement officers, firefighters, emergency medical technicians, paramedics, first-responders, longshoremen; individuals in the construction, mining, agriculture (but not food-processing), forestry, and fishing industries; those who install or repair electrical or telecommunications lines, and employees who retired from a high-risk profession if the employee was in a high-risk profession for at least 20 years.

It appears that the additional allowance will apply to each qualified retiree (but not to any active employees) in the plan. The additional allowance for high-risk professions will be available only if the plan primarily covers those in a high-risk profession; in that case, the additional allowance will be available to all plan participants.

3. Are there cost of living increases in the thresholds?

A3: Yes. Starting in 2019, the base thresholds and the adjustments for qualified retirees and those in high-risk professions will be increased by the Consumer Price Index for all Urban Consumers (CPI-U) – not medical inflation. In addition, if health inflation is higher than expected between now and 2018 (based on the cost of standard BlueCross/Blue Shield coverage under the federal employees’ health plan), the 2018 base amounts will be increased.

4. Are there adjustments for high cost areas of the country or for employers with a higher risk workforce?

There are no adjustments based on the part of the country in which the employer or employees are located.

There will be an adjustment allowed for age and gender for plans that are higher than the national average. Details on how that will work are not yet available.

Multiemployer plans may use the family threshold with all employees, even if the employee actually has single coverage.

5. What types of plans are subject to the tax?

The tax applies to “applicable employer-sponsored coverage,” which includes both insured and self-funded plans. The tax applies to grandfathered plans. It applies to all types of employers – private, government, church, and not-for profit. Retiree plans – even retiree-only plans – are subject to the tax. Multiemployer plans are subject to the tax. The tax applies to coverage provided to active employees, self-employed individuals covered by the group health plan, former employees (presumably including COBRA participants) and surviving spouses.

For more information about inclusions/exclusions, cost of coverage calculations, changes in coverage and more, download UBA’s PPACA Advisor: Highlights of the Excise Tax on High-Cost Plans (the “Cadillac Tax”).