Employees Embrace Choice

imagesA new survey of U.S. employers and employees by Liazon, a company that runs a private exchange, finds that 96 percent of employees said they’d prefer to choose their own benefits, even if many of them would no doubt appreciate a little help from experts. (Note: This survey was conducted online among employees and employers who use Liazon’s product).

For more on this article, please click here.

For a copy of the study and results, please click here.


Cadillac Tax

Moving on from the IRS reporting requirements that were front of mind during the 2015 fall open enrollment for group health plans, here at KTP, we believe that looking ahead the Cadillac Tax will be the hot topic for the 2016 enrollment season.

So, what exactly is the “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. Health insurance plans subject to the tax are those with premiums totaling more than $10,200 annually for an individual and $27,500 a year for families.

What is the purpose? The purpose of the Cadillac tax is to: reduce tax preferred treatment of employer provided healthcare, reduce excess health care spending by employees and employers, and help finance the expansion of health coverage under the Patient Protection and Affordable Care Act (PPACA).

What is the amount? The tax is 40% of the cost of health coverage that exceeds pre-determined threshold amounts.cadillac-tax

  • 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.
  • 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 is a group health plan’s cost 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 will the tax be paid? Forms and instructions for paying the tax are not yet available.

What are the tax implications? Cadillac Tax payments are not deductible for federal tax purposes.

What types of coverage are subject to the Cadillac Tax? The Cadillac tax applies to “applicable employer sponsored coverage.” Applicable employer-sponsored coverage is, with respect to any employee, coverage under any group health plan made available to the employee by the employer, which is excludable from the employee’s gross income under Code section 106. This includes:

  • 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

What types of coverage are NOT subject to the Tax? The Cadillac tax does not apply to coverage for long-term care and any coverage that is considered an “excepted benefit,” other than coverage for on-site medical clinics

  • US-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

UnitedHealth May Quit Obamacare

The largest U.S. health insurer warned Thursday that it may pull out of the Obamacare exchanges after 2016 –forcing more than a half million people to find other coverage – after low enrollment and high usage cost the company millions of dollars.

According to USA Today, the possible move by UnitedHealth Group raises new questions about the viability of President Obama’s signature health law and follows the departure of more than half of the non-profit insurance cooperatives this year. If UnitedHealth drops out, consumers would lose one of the lowest-cost plans available in much of the country, and some wonder how smaller insurers could fill the void.

UnitedHealth downgraded its earnings forecast, citing low growth projections for Obamacare enrollment and blaming the federal health care law for giving individuals too much flexibility to change plans.  People who purchase insurance through the public exchanges are typically heavy users of their plans, draining insurers’ profits, analysts say.

In a sharp reversal of its previously optimistic projections, UnitedHealth suspended marketing of its Obamacare exchange plans for 2016 — which the company has already committed to offer — to limit its exposure to additional losses.

“We see no data pointing to improvement” in the financial performance of public-exchange plans, UnitedHealth CEO Stephen Hemsley said on a conference call, though he added that “we remain hopeful” the market will recover.

For the full USA today article, please click here.

IHC Forum West – Favorite Session

We just got back from the IHC Forum West conference, and wow, was it a great success! While we may be a little biased (because KTP’s Barry Eyre was leading the discussion) our favorite session was #207 – Private Exchange Trends and Strategies for Retirees.

Thanks again to our expert panelists: Michael Cho, Chief Innovation Officer, Connecture; John Scatterday, Senior Vice President, Keenan; Rob Harkins, Practice Leader, Private Exchanges, Willis; Kelly Taylor, Health Plan Director, Las Vegas Metropolitan Police Department Employee Health & Welfare Trust.