A Bi-monthly publication from The Gardner Group August 2012 Reflections on Higher Limits for HSA Supreme Court Contributions Decision The US Internal Revenue Service announced the 2013 limits on contribution and out-of- Late in June, the Supreme pocket spending amounts for health savings Court of the United States accounts (HSAs) and for the high-deductible (SCOTUS) upheld the health plans (HDHPs) to which HSAs must be Affordable Care Act (ACA), linked. President Obama’s signature health care The higher rates reflect the cost-of-living reform law. As with adjustment and rounding rules of Internal SCOTUS opinions, the devil Revenue Code section 223. is in the details. Below is a comparison of the 2012 and 2013 limits: First, the Court decided that they could rule on the Contribution and Out-of-Pocket Limits for Health Savings Accounts and individual mandate penalty even though no one had for High Deductible Health Plans paid the penalty yet. The Anti-Injuction Act (AIA) prohibits challenges to a “tax” before it is paid. Chief Justice Roberts wrote that the intent of Congress was 2012 2013 Change to classify the consequence of not having health insurance as a “penalty” and not a “tax” and thus it HSA Contribution Limit Individual: $3,100 Individual: $3,250 Individual: +$150 (employer + employee) was exempt from the AIA. Family: $6,500 Family: $6,450 Family: +$200 Second, the Court ruled that the individual mandate, HSA catch-up contributions scheduled to take effect in 2014, is constitutional (age 55 or older)* $1,000 $1,000 No Change under Congress’ taxing authority even though it runs afoul of the Interstate Commerce Clause in the HDHP minimum deductible Individual: $1,200 Individual: $1,250 Individual: +$50 amounts Family: $2,400 Family: $2,500 Family: +$100 Constitution. The Court ruled the mandate “does not regulate existing commercial activity. It instead HDHP maximum out-of- compels individuals to become active in commerce by pocket amounts purchasing a product…” The Court ruled the mandate Individual: $6,050 Individual: $6,250 Individual: +$200 (deductibles, copayments Family: $12,100 Family: $12,500 Family: +$400 goes too far and could not survive under the and other amounts, but Interstate Commerce Clause. So the Court looked at not premiums) whether the mandate could survive as a tax and ruled * Catch-up contributions can be made any time during the year in which the HSA participant turns 55. that it could! It explained that the mandate functions -http://www.shrm.org like any other tax: it raises revenue; the IRS enforces it; and it does not carry criminal sanctions. While it appears the two rulings contradict each Employees Satisfied With Health other, think of them this way: Benefits • Congress enacted both the AIA and the ACA. Despite higher premiums and out-of-pocket costs for They have the ability to decide whether one health care benefits, U.S. workers’ satisfaction levels with statute applies to another. Thus the “penalty” employer-provided health care coverage has either risen survives the AIA. or remained the same compared to three years earlier, • Congress cannot decide how the Constitution according to a survey by the National Business Group on applies to a statute, only the Court can. The Health, a nonprofit association of large employers. Court ruled the “mandate” is permissible under the Constitution as a “tax” because Congress The survey, Perceptions of Health Benefits in a Recovering Economy, was has taxing authority. conducted from late May through early June 2012. A total of 1,545 employees at U.S. organizations with 2,000 or more employees responded to the survey. The third ruling dealt with Medicaid. The Court ruled ACA’s expansion of Medicaid is constitutional but the Among the survey highlights: provision allowing the federal government to revoke • 63 percent of respondents were very satisfied with their current health all Medicaid funding to states that choose not to coverage provided by their employer or union, although nearly two- implement the expansion was not. The Court ruled thirds had experienced higher premiums and out-of-pocket costs over this type of coercion was “a gun to the head” of the the past three years. states and thus unconstitutional. • Roughly one-third were more satisfied with their coverage compared to three years earlier. Only 12 percent were less satisfied and 53 percent While publicly overlooked by most, the expansion of said their satisfaction level had remained the same. Medicaid is the primary way ACA affords coverage for • 87 percent of employees rated health benefits as very important when people below 133% of the Federal Poverty Level (FPL). making a decision about accepting a new job or remaining with their If that coverage is not available, those individuals will employer be forced to buy private insurance or pay the penalty. • Roughly one in three were not confident in their ability to shop for health insurance on their own, and more than half were not confident The full impact of the decision is yet to be seen. The they could purchase the same or better quality insurance on their own. practical consequences of health care reform may not • While workers expressed satisfaction with their health benefits, a be known for years. For now, we will continue to wait majority (62 percent) were unable to estimate how much their for final regulations and help you implement ACA employers pay for their health benefits. provisions as required. -http://www.shrm.org
August 2012 Let Us Take Your Group to the Ball Game! Enter to win 20 Jacksonville Suns tickets for any remaining home games by simply “Liking” us on Facebook or “Following” us on LinkedIn between August 1st and August 8th. Follow the links below to get to our Facebook and LinkedIn Pages. The winner will be announced on August 9th. Good Luck! www.facebook.com/managingemployeebenefits www.linkedin.com/company/the-gardner-group---managing-employee-benefits Outcomes-Based Medical Loss Ratio Rebates Wellness Incentives The Patient Protection and Affordable Care Act of 2010 includes many provisions that are continuously being uncovered and defined. One such provision, the Medical Loss Ratio (MLR) provision, requires health insurers who A coalition of health care spend more than a specified percentage of premium dollars on categories of organizations has produced spending other than “clinical services and activities designed to improve the new guidance for the use of quality of healthcare” (claim payments and medical management costs) to outcomes-based incentives rebate a portion of the premium dollars collected to enrollees. The minimum in employer-sponsored medical loss ratio is 80% for the small group market and 85% for the large wellness programs. group market. This requirement first applied to health insurers for calendar Outcomes-based incentives year 2011 and, to the extent rebates are required, they will be paid before provide employees with a August 1, 2012.financial reward for meeting a specific health target—or apenalty may be imposed for failure to meet a health The MLR is not calculated at the individual plan or employee level, but basedstandard—rather than simply providing an incentive to on the collective experience of all plans in a certain, legally-defined grouping.participate in the program. Outcomes-based incentives are Employer plans are grouped together based generally on the legal entity thatexpected to become more common in the workplace as a issued the coverage (insurance company or HMO), the state where the policy isresult of provisions in the Patient Protection and Affordable issued and the appropriate market segment (large group, small group,Care Act that encourage their use. individual insurance). It is possible that an employer can have more than one plan within these groupings.The new guidance includes the following 10 suggestions foremployers using outcome-based incentives: So, what are employers required to do when they receive the rebate 1. Consider using the four biometric target categories of check? weight, cholesterol, blood pressure and tobacco use. First, employers must determine who paid the premiums for the health 2. Factor in potential financial and time burdens for insurance policy. If employees made premium contributions, the employer employees when determining the specific standard you must determine what portion of the rebate is attributable to participant are asking them to meet. contributions. The portion of the rebate attributable to participant 3. Consider whether the incentive design is likely to place contributions is usually based on the share or percentage of premiums paid by a greater economic burden on one race, ethnic group employees. or other category of employees. Second, the employer must decide how to use the participant’s share of the 4. Consider incentive designs that are reasonable goals rebate. There are basically three (3) ways outlined by the Department of (preferably individualized to the employee) rather than Labor: ideal targets applied rigidly to all employees. 5. Offer (as required by law) a reasonable alternative • The rebate can be paid to the participants standard to employees for whom it would be under a fair and equitable allocation method. unreasonably difficult to achieve a health standard due For example, an employee with family coverage, to a medical condition, or who have a medical reason who paid a larger share of premiums, would that makes it inadvisable for them to do so within the get a larger share of the rebate. The employer allotted time. can also conclude that only current participants are allowed to share in the 6. For employees with a medical condition that makes it rebate. Each employee that unreasonably difficult to achieve the health standard, receives a share of the or medically inadvisable to do so, consider deferring to rebate will recognize the views of the employee’s health care provider for additional taxable setting and achieving a reasonable alternative standard income. or providing a waiver. 7. Consider providing all employees with options for • The employer can apply the entire rebate toward future participant attaining the incentive, rather than only offering an premium payments (i.e. give a “premium holiday”). alternative standard to those with a medical circumstance. • The employer could use the rebate to provide enhanced benefits for participants. 8. Avoid using a reward or penalty that is so large it discourages health plan enrollment, denies coverage, The DOL suggests that the second and third options should be used only if or creates too heavy a financial penalty on individuals distributing payments to employees is not cost effective – for example, if the who do not satisfy an initial wellness standard. payments are de minimis or if they would give rise to tax consequences to the 9. Consider an incentive design that rewards for progress employee. To avoid having to establish a trust to hold the rebate, the toward the standard targets, instead of just rewarding employer should distribute the premium credit or enact the benefit employees who meet the goal. enhancement within three months after receipt of the rebate. 10. Consider strategies that help employees integrate The Minimum Loss Ratio (MLR) mandate contained in PPACA has created a healthy behaviors into their personal value framework myriad of compliance requirements for health insurers, health plans and by promoting individual choice, so they are more likely employers. Until the Individual Mandate becomes effective in 2014, the to sustain healthy behavior changes over time. calculation and distribution of rebate checks is potentially the most costly of Click here for access to the full article. the PPACA requirements to date. The Gardner Group recognizes the challenges faced in complying with PPACA and is monitoring legislation, interim rules and - By Stephen Miller, CEBS operational best practices to provide direction through these legislative - www.shrm.org nuances.