White Paper & CPA Guide
                      Consulting & Benefit Administration

Edward A. Lyon, JD, National Tax Attor...
Who is ClaimLinx?
ClaimLinx specializes in consulting and the benefit                                                     ...
   Our plan is considered “unfunded” under ERISA.
   Health Savings Accounts begin with high-                     Plans ...
In order for employers to get the maximum cost                                     employment tax savings add even more to...
What is the Implementation Process?
Employers who decide they would like to become a
ClaimLinx client and participate in t...
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A CPAs Guide- White Paper

  1. 1. White Paper & CPA Guide Consulting & Benefit Administration Edward A. Lyon, JD, National Tax Attorney & Consultant Christy A. Quigley, President, ClaimLinx Thomas J. Quigley, National Business Consultant Rave Reviews for ClaimLinx: “ClaimLinx has saved our company a lot of money” - Kelly DeGregorio - Kraft Electric “Excellent Service and Knowledge” - Don Cain - Biehn Company “We are a medium sized company dealing with the ever increasing affects brought on by a health carrier monopoly In order to contain our costs we searched and found a workable concept and solution to reduce our health care expenses. ClaimLinx introduced us to an innovative cost savings concept that we implemented in April 2006, with the assistance of their professional staff members. This method has reduced our health care costs, provided us with statistical reports to negotiate any future health carrier rate increases, while helping our employees understand the importance of being actively involved as consumers and making better health care decisions. We look forward to continuing our relationship with ClaimLinx. “ - Sharon Wray - Harrison Concrete “Our company has saved tens of thousands of dollars, ClaimLinx has made it easy and hassle free. ClaimLinx can provide the benefits that WE want, not what the insurance company suggests. We would highly recommend any company that wants to be smarter about buying health insurance talk with ClaimLinx.” - John Moore - Ohio Metal Products
  2. 2. Who is ClaimLinx? ClaimLinx specializes in consulting and the benefit The good news is you don’t have to feel that way administration of self-funded Medical Expense there is a solution! Employers who participate in Reimbursement Plans (MERP). Our services our Simple Option Solution (SOS) Program typically include determining savings projections, designing save 10-80% per year. Without cutting benefits, the benefit plan, processing claims, educating changing insurance carriers, or charging employees. members and paying providers. ClaimLinx was And employers can play a part in these savings by formed in 2004 by Christy A. Quigley. We are a understanding how it works. Cincinnati, Ohio-based company operating as a third party administrator in the State of Ohio. We A simple way of providing benefits is to only pay for coordinate the processing of claims for over 6,000 “benefits used” as opposed to “buying insurance.” members nationwide. Our team is committed to Insurers collect premiums to pay for claims, plus providing clients with unprecedented service given more for administration and profit. Nationwide, a by no other in the industry. Our employees strictly dollar of health insurance premium delivers just 85 adhere to all HIPAA regulations and guidelines as cents worth of benefits. What if employers could cut enforced by the federal government. We strongly out some of this premium and deliver benefits believe in the privacy of our clients, his/her directly? Now they can! ClaimLinx SOS Program employees and any individuals with whom we uses three proven steps to help employers contract for services. accomplish just that. Contact Erika DeStefano, National Sales Director at 1. Raise Deductibles: You insure your home—but edestefano@claimlinx.com or (513) 677-6262 or not for a $40 plumber bill. Who could afford the (800) 858-1772 to setup a consultation. coverage? You insure your car—but not for a $40 oil change. It would cost a fortune! So why Think it costs too much to stay healthy? insure employees for $40 office visits? Raising If you think it costs too much to stay healthy, we’ve health insurance deductibles works the same got bad news and we’ve got good news. The bad way, and cuts premiums up to 80%. news, of course, is that you’re right. Health care swallows nearly 16% of our gross national product, 2. Buy Back Benefits: Next, we add a Section 105 and topped $7,681 per person in 2008. medical expense reimbursement plan (MERP) available through the IRS to let employers Soaring health care premiums regularly make front- reimburse employees for medical costs incurred page news. The average family premium, which for themselves and their families. stood at $9,160 in 2003, will climb to $13,375 by 2009. How can employers afford to stay in the 3. Additional Options: Employers can implement game? What will they do when their employees’ other options such as alternate funding or health insurance costs more than their homes? putting employees on their spouse’s plan or writing individual plans for dependents. Not only does this shift risk away from the group plan, but can add significant savings. In addition, self- funding dental and vision provides even more Family Premium Costs savings. $14,000 $11,480 $12,100 $12,680$13,375 What are the current tax options? $12,000 $9,950 $10,880 Cutting insurance coverage is an obvious way for $10,000 $9, 160 reducing premiums. But cutting benefits creates $8,000 unhappy employees. ClaimLinx solution is to buy $6,000 back benefits for less than it costs to provide them $4,000 through insurance. Employers have several tax- $2,000 advantaged choices for replacing lost benefits: $0 2003 2004 2005 2006 2007 2008 2009 Source: Kaiser Employer Health Benefits (c) 2010, ClaimLinx, Inc. All rights reserved. Cl a mLinx i ClaimLinx LLC. 01/11/2010 2
  3. 3.  Our plan is considered “unfunded” under ERISA.  Health Savings Accounts begin with high- Plans with less than 100 participants file no deductible insurance policies. Employers or Summary Annual Report or Form 5500. employees then pre-fund savings accounts to cover unreimbursed costs. But this means We generally design employers’ plan to mirror the committing cash whether employees need it or benefits provided the prior year. These designs are not. Employees can take accounts with them to ensure that no benefits will be lost by moving the when they leave, which means employers may base plan to the new high-deductible policy. This commit health-care dollars that never get used ensures employees do not lose benefits and limits for their intended purpose. employer’s potential liability.  Flexible spending accounts (FSAs) let employees defer income into pretax accounts for Step 1 – Keep Same Carrier, Same Benefits out-of-pocket costs. But there’s little flexibility to change deferrals. Big-ticket expenses like braces for children’s teeth can exhaust accounts early in the year. And employees have to use 1. Raise Base Plan Deductible account balances by year’s end, or forfeit them.  Section 105 medical expense reimbursement Old Plan – High Premiums New Plan – Low Premiums plans let employers reimburse employees, as – $ 0 EE Deductible – $ 0 EE Deductible 20% EE coinsurance 20% EE Coinsurance needed, for medical expenses they incur for – – $ 20 EE Office Visits – – $ 20 EE Office Visits themselves, their spouses, and their – $5 Mil Policy Maximum dependents.1 This lets employers pay just $1 for $5,000 – HSA Base Plan $1 worth of benefits, when employees actually 35% Savings! need it. Same Benefits  Healthcare reimbursement accounts (HRAs) are Section 105 plans that let employers pre- fund employee spending accounts and carry (c) 2010, ClaimLinx, LLC. All rights reserved. balances from year to year. This means committing cash to the plan whether or not Buying back benefits through a MERP is financially employees actually need it for covered costs. a better option than pre-funding claims that may never occur. Why not pay for claims only when they We prefer the Section 105 plan to replace employee occur? ClaimLinx can show employers how to benefits because it offers the best combination of design a plan so their savings is more than their savings and flexibility. risk. How does the SOS Program work? Step 2 – Section 105 MERP Implementation The SOS Program allows employers to define who they want to cover, what to cover, and how much to spend:  Employers can’t discriminate in favor of highly 2. Buy Back Benefits compensated employees.2 But they can use a Add §105(b) to deliver benefits classification test, such as all participants in their Define Eligible Employees Define/Deliver Benefits group health plan,” to qualify participants.3 They  Must be nondiscriminatory  Define eligible expenses can exclude part-time, seasonal, short-term, and  May use “classification” test: – Copays, deductibles, Rx younger employees.4 Self-employed clients – “all participants in Employer’s – Diagnostic/testing group health plan” Dental/vision/chiropractic operating as sole proprietors can hire their  “Safe harbor” exclusions: – – “Any eligible expense under spouse and pay benefits through them.5 – Less than 25 hours/week IRC Section 213(d)”  Employers choose what to cover and how much – Less than 7 months/year Less than 3 years service to pay, up to the limits of Code Section 213(d).6 – – Age 25 or under Most clients choose simply to replace benefits under their old “first dollar” plans. (c) 2010, ClaimLinx, LLC. All rights reserved.  Clients can reimburse employees or pay health care providers directly.7 ClaimLinx LLC. 01/11/2010 3
  4. 4. In order for employers to get the maximum cost employment tax savings add even more to his savings, ClaimLinx can implement more options that bottom line. can provide same or better benefits for employees. These options are voluntary, but some such as Consultant/spouse/2 children vision and dental can be incorporated into an overall Case 1 25% federal tax financial strategy for the employer and the 6% state tax employee. These options provide instant cash flow 15.3% self-employment tax for the employer. Before After Step 3 – Additional Cost Savings $900/month premium $265/month premium – no deductible/out-of-pocket – $5000 out-of-pocket max – $15 co-pays – 80/20 drug co-pay – $10/$20/$40 drug card – 100% after o-o-p max $10,800 minimum pretax/year $8,180 maximum pretax/year 3. Additional Options – $2,700 federal savings – $2,045 federal tax savings – $ 648 state savings – $491 state tax savings – $ 0 SE tax savings – $1,252 SE tax savings  Alternate Funding – pull off spouses and dependents for lower individual rates $7,472 after-tax cost $4,392 after-tax cost   Institute a “Spousal 105” – redefine eligibility to avoid double-coverage; reimburse with 105 (include Medicare) Our next client, a Cincinnati-area manufacturer, paid $20,000 per month to insure 30 employees and their  Implement self-funded dental and self-funded vision programs to decrease premium expenses families. ClaimLinx raised deductibles and installed the Section 105 plan to buy back benefits. These steps saved $84,00 per year. (c) 2010, ClaimLinx, LLC. All rights reserved. How is administration handled? Case 2 Manufacturer The SOS program carves out part of the employers’ 10 Employees - single current major medical coverage and allows 20 Employees - with family ClaimLinx to be the employer’s third-party Before – per month After – per month administrator (TPA). ClaimLinx can deliver the $20,000 major medical $12,000 major medical same, or “better benefits” less expensively than the $ 1,000 105 reimbursement insurance carrier. This adds just one step for employees, and it’s no more difficult than claiming reimbursements under a flexible spending account. $20,000 total $13,000 total Specifically, employees must show two cards at the provider’s office and/or submit the “Explanation of $7,000/month Benefits” (EOB) they receive from their major- medical carrier. ClaimLinx determines coverage Savings under Section 105 plans and will reimburse health care providers and/or employees. Our enrollment presentations educate employees, includes why To summarize the SOS Program: employers adopted the SOS program and how  Keep the Same Carrier Claimlinx will manage it.  Provide the Same or Better Benefits  Save 10% to 80% on Costs How much can clients expect to save? Let’s look at two clients to see how much can be  Restructure Finance of Benefits saved. Our first, a self-employed consultant, paid  Create instant Cash Flow $900 per month to cover his family. ClaimLinx  Personal Administration for Employees replaced that expensive policy with a high-  Customized Flexible Benefit Design deductible plan from the same insurer. It meant up  Ongoing Member Education to $5,000 in out-of-pocket costs. But even if he hits that ceiling, he saves nearly $3,000. Self- ClaimLinx LLC. 01/11/2010 4
  5. 5. What is the Implementation Process? Employers who decide they would like to become a ClaimLinx client and participate in the SOS Program are taken slowly through the process. 1. Prequalification. The first meeting provides employers with an overview of the SOS Program and its benefits. Prior to the meeting ClaimLinx may collect the current health insurance bill, employee census, benefit summary and related health information. We use that data to customize a proposal and savings projection. 2. Presentation. The second meeting lets clients review the savings projection with key decision makers and outside advisors such as tax attorneys, financial planners and accountants. ClaimLinx also review the advantage of its consulting and administrative services. If employers want to move forward, they enter into a written agreement. If the employer doesn’t want to move forward we part friends and leave the door open to a time when they might feel more comfortable implementing the program. Plan installation services include complete plan documents; Summary Plan Descriptions; ERISA, HIPAA, FMLA, and COBRA compliance tools; and customized enrollment and administrative tools. Ongoing administration services include claims processing, monthly reports, claims analysis and consulting services. In addition to these service ClaimLinx provides: ClaimLinx  Refunds & Rebates 10260 Alliance Road  60+ years experience Suite 130  In-House Consulting Cincinnati, OH 45242  Live toll-free Customer Service Phone (513) 677-6262 or (800) 858-1772  Customized Benefit Designs Fax (513) 677-6263 or (800) 858-1913  Claims Analysis & Reporting www.claimlinx.com Let ClaimLinx show you how to save10% to 80% on providing benefits. 1 “Dependent” has the same meaning as in IRC §152. 2 IRC §105(h)(2) 3 Reg. §1.105-1(c)(2)(ii) 4 Reg. §1.105-1(c)(2)(iii) 5 Rev. Rul 71-588; PLR 9409006 6 IRC §105(b) 7 IRC §105(b) (“…amounts are paid, directly or indirectly….”) ClaimLinx LLC. 01/11/2010 5