Why You Should Be Benchmarking (and How Hierl Can Help)

As an employer, you have more than likely heard the term ‘benchmarking’ thrown around. It is becoming a critical tool in the development of competitive benefits programs, often helping drive down costs. At Hierl, we are strong advocates for benchmarking. Why? We believe good business decisions can only be made with accurate, meaningful information. Benchmarking is a fantastic way for us – and you – to measure where you stand in all aspects of your benefits against your industry’s standards and competitors. That’s why, in this installment of CenterStage, we interviewed our Executive Vice President, Scott Smeaton.

From an Employer's Eyes - The 3 Scenarios

“When we meet with a business that has not done benchmarking, we are sure to complete that process for them, showing them where they stand in their marketplace,” explained Scott. He emphasized that there are three scenarios that can happen once great advisors, such as those at Hierl, step in and get those results for the employer:

(1)The employer sees that everything around them has changed, they haven’t kept up with the times, and they’ve left money on the table.

(2)The employer is having a difficult time attracting and retaining key employees. With benchmarking, they can view where they should enhance their benefits to be more competitive in their marketplace.

With unemployment as low as it is, many businesses we meet with come from a third, different mindset:

(3) They want to look at their benefits from a total reward or total compensation strategy, where the benefits and the costs of providing benefits become part of a larger picture – time off, vacation, wages, etc.

These three approaches to benefits strategy are why, at Hierl, we strive to blend any and all concerns into a benefits plan strategically designed to get our clients where they need to be to compete for labor. “With a recent client of ours, they were specific about wanting their plans to be in the top 25% of all the plans out there – from a plan design perspective and from a premium cost-share perspective. Using benchmark, we were able to illustrate to this client what they needed to do to accomplish that goal specific to their industry and geographic location,” Scott explained. Benchmark is a powerful tool that can be in any employer’s toolbox, if only you partner with someone like Hierl.

He continued, “When we do our clients’ benchmarks, we take the results further than simply a generic comparison against their competitors. We look at our clients’ specific plan designs, analyzing their deductibles, their coinsurance, their out-of-pocket maximums, their prescription drug copays, and other specifics, as well as how much of the premium the employees must pay out of their paycheck to have coverage. We break down each into five competitive areas: national, regional, state, industry, and employers of similar size.”

Addressing Employers’ Fear of Cost

Some employers may not want to see the results because their current offering isn’t competitive, and it would cost money to adjust their programs to be closer to market. If getting closer to market to compete for labor is their goal, we work with them to create a three- to five-year plan to get there, making incremental adjustments each year. Another common finding is that employers are paying more of the premium than their competitors. Some acknowledge that’s what they want to be doing; others appreciate the information and adjust their cost share so they can reallocate those premium dollars to other benefits, wages, or expenses. This can be an eye-opener, and they likely would not have realized the difference without doing a benchmark test.

Another benefit of benchmarking is how we use the information to educate and engage employees, helping them understand the effort their employer is making to be competitive in the market and how fortunate they are to have the benefits they do compared to others. We use the data during employee meetings to drive the point home. The response is often amazing. We’ve had employees go to their employers and thank them after the employee meetings admitting that they didn’t realize how competitive their benefits are. This also highlights that their employer cares about its employees’ needs and wishes with their benefits, helping the employer retain their key talent.

Partner with Advisors that Listen

If your benefits program isn’t up-to-par – or you’re not even sure where it stands against others in your marketplace – then benchmarking is something you should seriously consider. Even more so, partner with advisors that will want to improve employee perception of your benefits as much as you do. Everyone at Hierl is extremely passionate about helping employers – large or small – identify what it takes to build a successful employee benefits program. To do that, we use the data and listen to the direction the employer wants to go, while also keeping in mind what the employees are looking for. Something we offer to our clients is to survey not only their company through benchmark but to also survey their employees, regarding how they feel and engage with their benefits. Every other year, we go in and do this test with our clients’ employees to ensure the benefits plans we design for our clients are fully comprehensive and hitting every mark. We’re not your traditional broker. We bring tools and resources to the conversation that make a difference. We’re driven to educate and improve both the employer and employee experience, driving down the overall cost of benefits at the same time.

To learn more about Hierl’s services or to begin your benchmark process, please contact our Executive Vice President, Scott Smeaton, at 920.921.5921 or ssmeaton@hierl.com.


Are you ready for self-funding? Three tools to help you decide

Switching to a self-funded plan can seem like a daunting prospect to many HR directors, but there are also many significant benefits to switching. Read on for three tools to help you decide if you’re ready to switch.


When your health plan is fully insured, it’s easy for your finance department to budget for the cost — you just pass on the health insurer’s annual renewal premium amount to them and that becomes the annual budget number. But you and your broker may have come to suspect that you are leaving money on the table by continuing on a fully insured basis, and you may want to test the self-funded waters.

By now, you may already know there are significant benefits to self-funding, but actually making the switch is a scary prospect for HR directors.

Before you can transition to a self-funded plan, you need to be financially stable and willing to take a bit of a risk. As a safeguard, you also need to familiarize yourself with the two forms of stop-loss insurance. One caps the impact on any one covered member’s claims (individual or specific stop loss), and the other caps your total annual claim liability (aggregate stop loss). Your broker can guide you on which stop loss levels and which stop-loss coverage periods are right for your population when transitioning from fully insured to self-funding.

Beyond these stop-loss safeguards, size will dictate how you pay. If you have fewer than 100 covered employees, you may be able to pay the same amount monthly, just as you do with your fully insured premium. This monthly payment equals projected claims plus an aggregate margin, a monthly administration fee and the stop loss charge. This eliminates unpredictable monthly payments for a small self-funded group.

However, for larger groups of over 100 employees, moving to self-funding will mean paying claims as they are processed (which means uneven claim payments), plus stop loss and administration.

To help you determine if you’re ready for self-funding, you may want to analyze your plan in a few different ways.

1. Look back: A look back analysis is just what it sounds like — a view of how your plan would have performed over the last couple years had you been self-funded, compared to how it did perform under a fully insured model. This should be an easy enough task for your broker to take on, especially if they have sought out self-funded quotes from claim administrators and stop-loss carriers on your behalf. In addition, they should know what your actual claims costs were. The result is that you’ll know whether you would have saved money or not.

2. Look forward: You may already know what your upcoming fully insured renewal looks like. But even if you don’t have hard numbers yet, you can work with your broker to determine a strong estimate of what your proposed premiums will be. Then, your broker should get a self-funded quote, which includes the expected and maximum claims, plus the administrative fees and stop-loss premiums. This is your expected self-funded costs for the upcoming policy period. Compare that estimate to your fully insured renewal costs. (Make sure the self-funded costs are on the same “incurred claims with runout” basis that the fully insured costs would be, for a fair apples-to-apples comparison.)
3. Probability. While the “look forward” analysis compares your fully insured costs to your expected self-funded costs, it is based on “expected” claims. The risky part of self-funding is that your actual claims will not ultimately materialize exactly as expected. There are some more sophisticated tools that combine group-specific data (such as your claims history, demographics and the proposed fixed costs) with a fairly large actuarial database to come up with thousands of possible outcomes.

By charting all of these outcomes, you can produce likelihood percentages of where your actual claims will come in at — versus the “expected” level, and versus the fully insured renewal rate. Not all brokers have this tool on hand, and as a result, there may be a cost associated with producing one. The output from this tool may appeal to your colleagues in the finance department.

Other considerations

During your analysis, you may want to set your self-funded policy year liability based on incurred claims (plus fixed costs), even though your actual paid claims within that policy year may be less due to the lag between when provider services occur and when you actually fund them. The lag is a cash-flow advantage but it does not represent a reduced claim liability.

Finally, don’t lose sight of the cost of high claimants, an important part of planning if you choose the self-funding route. Will your past high claimants continue into your renewal period? Are you aware of new high claimants on the horizon? Stop-loss carriers generally insure only “unknown risks,” not “known risks.” If a plan member has an expensive chronic condition, such as kidney failure, a stop loss carrier may “laser” that individual and set a higher individual stop-loss threshold. It’s important that you know what’s excluded and factor in any uncovered catastrophic claimants into your analysis.

In the end, it may turn out that self-funding is not a good fit, or possibly that this year is just not the year for it. But whether it is, or it isn’t, it is comforting to know that you’ve done your due diligence and have documentation supporting the decision you’ve reached.

SOURCE: DePaola, Raymond (5 October 2018) "Are you ready for self-funding? Three tools to help you decide" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/ready-for-self-funding-three-tools-to-help-you-decide


Oct. 15 Deadline Nears for Medicare Part D Coverage Notices

Are you ready for the Medicare Part D coverage notice deadline? Plan sponsors that offer prescription drug coverage must provide notices to Medicare-eligible individuals before October 15. Continue reading to learn more.


Plan sponsors that offer prescription drug coverage must provide notices of "creditable" or "non-creditable" coverage to Medicare-eligible individuals before each year's Medicare Part D annual enrollment period by Oct. 15.

Prescription drug coverage is creditable when it is at least actuarially equivalent to Medicare's standard Part D coverage and non-creditable when it does not provide, on average, as much coverage as Medicare's standard Part D plan.

The notice obligation is not limited to retirees and their dependents covered by the employers' plan, but also includes Medicare-eligible active employees and their dependents and Medicare-eligible COBRA participants and their dependents.

Background

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 requires group health plan sponsors that provide prescription drug coverage to disclose annually to individuals eligible for Medicare Part D whether the plan's coverage is creditable or non-creditable.

The Centers for Medicare & Medicaid Services (CMS) has provided a Creditable Coverage Simplified Determination method that plan sponsors can use to determine if a plan provides creditable coverage.

Disclosure of whether their prescription drug coverage is creditable allows individuals to make informed decisions about whether to remain in their current prescription drug plan or enroll in Medicare Part D during the Part D annual enrollment period.

Individuals who do not enroll in Medicare Part D during their initial enrollment period, and who subsequently go at least 63 consecutive days without creditable coverage (e.g., because they dropped their creditable coverage or have non-creditable coverage) generally will pay higher premiums if they enroll in a Medicare drug plan at a later date.

Who Must Receive the Notice?

The notice must be provided to all Medicare-eligible individuals who are covered under, or eligible for, the sponsor's prescription drug plan, regardless of whether the plan pays primary or secondary to Medicare. Thus, the notice obligation is not limited to retirees and their dependents but also includes Medicare-eligible active employees and their dependents and Medicare-eligible COBRA participants and their dependents.

Notice Requirements

The Medicare Part D annual enrollment period runs from Oct. 15 to Dec. 7. Each year, before the enrollment period begins (i.e., by Oct. 14), plan sponsors must notify Medicare-eligible individuals whether their prescription drug coverage is creditable or non-creditable. The Oct. 15 deadline applies to insured and self-funded plans, regardless of plan size, employer size or grandfathered status.

Part D eligible individuals must be given notices of the creditable or non-creditable status of their prescription drug coverage:

  • Before an individual's initial enrollment period for Part D.
  • Before the effective date of coverage for any Medicare-eligible individual who joins an employer plan.
  • Whenever prescription drug coverage ends or creditable coverage status changes.
  • Upon the individual's request.

According to CMS, the requirement to provide the notice prior to an individual's initial enrollment period will also be satisfied as long as the notice is provided to all plan participants each year before the beginning of the Medicare Part D annual enrollment period.

An EGWP exception

Employers that provide prescription drug coverage through a Medicare Part D Employer Group Waiver Plan (EGWP) are not required to provide the creditable coverage notice to individuals eligible for the EGWP.

The required notices may be provided in annual enrollment materials, separate mailings or electronically. Whether plan sponsors use the CMS model notices or other notices that meet prescribed standards, they must provide the required disclosures no later than Oct. 14, 2017.

Model notices that can be used to satisfy creditable/non-creditable coverage disclosure requirements are available in both English and Spanish on the CMS website.

Plan sponsors that choose not to use the model disclosure notices must provide notices that meet prescribed content standards. Notices of creditable/non-creditable coverage may be included in annual enrollment materials, sent in separate mailings or delivered electronically.

What if no prescription drug coverage is offered?

Because the notice informs individuals whether their prescription drug coverage is creditable or non-creditable, no notice is required when prescription drug coverage is not offered.

Plan sponsors may provide electronic notice to plan participants who have regular work-related computer access to the sponsor's electronic information system. However, plan sponsors that use this disclosure method must inform participants that they are responsible for providing notices to any Medicare-eligible dependents covered under the group health plan.

Electronic notice may also be provided to employees who do not have regular work-related computer access to the plan sponsor's electronic information system and to retirees or COBRA qualified beneficiaries, but only with a valid email address and their prior consent. Before individuals can effectively consent, they must be informed of the right to receive a paper copy, how to withdraw consent, how to update address information, and any hardware/software requirements to access and save the disclosure. In addition to emailing the notice to the individual, the sponsor must also post the notice (if not personalized) on its website.

Don't forget the disclosure to CMS

Plan sponsors that provide prescription drug coverage to Medicare-eligible individuals must also disclose to CMS annually whether the coverage is creditable or non-creditable. This disclosure must be made no more than 60 days after the beginning of each plan year—generally, by March 1. The CMS disclosure obligation applies to all plan sponsors that provide prescription drug coverage, even those that do not offer prescription drug coverage to retirees.

SOURCE: Chan, K.; Stover, R. (10 September 2018) "Oct. 15 Deadline Nears for Medicare Part D Coverage Notices" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/medicare-d-notice-deadline.aspx/


Assure Elite: Small Employers' New Favorite Healthcare Program

Employers of multi-generational employees often fret about the delicate and difficult balance of offering health coverage. The typical generalization is that younger employees tend to cost less to insure, while older employees cost more. The truth is, not every young employee is going to require less health coverage because they are presumed to be young and healthy. Likewise, not all older employees are going to cost an arm and a leg to insure. With each employer comes unique employees, and therefore, there is a need to have options to benefit and reward small employers and their employees alike – enter the Assure Elite program. In this installment of CenterStage, Tonya Bahr, a Benefits Advisor at Hierl Insurance, has highlighted the game-changing aspects of this unique healthcare program.

What Exactly is Assure Elite?

Assure Elite is a small employer focused healthcare program aimed at offering the best options for small employers who want to take control of their healthcare spending. “As a partnership between Hierl Insurance, Network Health and Agnesian Healthcare (SSM Health), employers can have peace of mind knowing their healthcare options are backed by three local companies who know healthcare expenses are out of hand in our community,” explained Tonya. Through this partnership, Hierl creates unique plan designs with deep discounts reflected in the premium costs, placing money back in the pockets of employers and employees. 

What sets Assure Elite apart is actualization, not generalization. Among other issues facing the modern healthcare scene, age of employees plays a large factor in coverage pricing. The tendency is to believe older employees will cost an employer more to insure due to a greater prone to injury, sickness and other ailments. On the other hand, younger employees are in better shape and theoretically removed from any costly health issues.

However, not always is this the case. By working with a partnership established around the goal of providing the most cost-effective and honest coverage for small employers, Assure Elite bases pricing on the overall health of the employee. Taking age out of the equation and replacing it with health ensures the proper coverage is received.

How Does the Program Work?

Assure Elite is a level-funded program, meaning premium is based on actual healthcare utilization rather than age. Healthier overall groups will pay less than a group who is unhealthy (or high users of healthcare). Being a level funded program, Assure Elite is a hybrid between a traditional, fully-insured medical plan and a partially self-funded plan. With a fully-insured plan, employers are paying a fixed monthly premium for coverage, meaning the amount only fluctuates when the number of employees on the plan changes. Often, employers are unaware they are overpaying in premium due to claims paid out by the insurance carrier are less than the premium paid in by the employer. With a partially self-funded plan, an employer still faces fixed costs, (much lower than a fully-insured plan), but also pays for medical claims as the employees incur expenses. Therefore, groups don’t overpay like they do on fully-insured plans because the cost of the claim is what the group’s actual expense is. Cash flow fluctuation can arise from this, and many smaller employers do not prefer this risk. A level funded plan like Assure Elite offers the best of both worlds: providing the fixed monthly premium costs of a fully-insured plan, but at the end of the year, offering the employer 50% of the balance back if the amount paid in is less than the amount paid out by the carrier. Many different options are available to choose from; both EPO and POS, as well as traditional and HDHPs. Employers can dual choice up to 4 plan options. Adherence generic prescriptions are $0 copay and office visits are only $10. Low cost, convenient virtual visits are available, as well. All plan options come with a wellness component offered through Agnesian’s Know & Go program, which includes health risk assessment questionnaires, biometric screenings, coaching, and an employee portal with educational materials, food and exercise trackers, online workshops, a blog, a mobile site and more – all at no additional charge.

How Do I Go About Getting a Quote?

The application process is completely pain-free. Base rates for Assure Elite are released after a current census statement, billing statement and wage and tax statement are received. Employers wishing to move forward with the process would go through medical underwriting to obtain final rates. This includes the completion of a three-page application covering basic demographic information and a brief medical questionnaire. Some groups choose to go through underwriting immediately rather than receiving base rates first, but each decision is unique to each employer. Despite remaining largely competitive for groups having 2 to 49 employees, discounts are still acquirable for group sizes up to 100.

To begin your journey toward optimal employee healthcare coverage, speak with Tonya at Hierl Insurance, Inc. With a passion for educating employees who may not understand their insurance, misuse their coverage and spend more than they need, Tonya is ready to assist in discovering cost-effective care without any missteps. You can reach her at 920.921.5921 or at tbahr@hierl.com.


COBRA liability in mergers and acquisitions

COBRA requires certain group plans to make health plan coverage available to certain individuals after a business reorganization. Continue reading to learn more.


The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires certain group health plans to make continuation coverage available to certain individuals who would otherwise lose group health plan coverage due to a qualifying event. Employers who go through business reorganizations, such as mergers and acquisitions (M&A), will need to know whether COBRA continuation coverage must be offered and whether the group health plan of the seller or buyer must provide COBRA continuation coverage.

General Rules

Under IRS regulations, if the seller and buyer negotiated their COBRA liability by contract as part of the sale, then the contract will determine who has an obligation to offer COBRA coverage.

See also: Get the Facts on COBRA Coverage – Who, When and How Long?

If the employer who is contractually responsible for providing COBRA coverage fails to perform or if the contract is silent on COBRA coverage obligations, then the seller's group health plan has the duty to offer COBRA coverage as long as the seller maintains a group health plan post-sale.

If the seller doesn't maintain a group health plan post-sale, then the answer depends on whether it's a stock sale or an asset sale.

In a stock sale, if the seller doesn't maintain a group health plan post-sale, then the buyer is responsible for offering COBRA coverage.

See also: What Is COBRA, and Does It Apply to My Business?

In an asset sale, if the seller doesn't maintain a group health plan post-sale and the group health plan's termination is connected with the asset sale, then the buyer is responsible for offering COBRA coverage if the buyer continues business operations associated with the assets purchased without interruption or substantial change.

For more information request our Compliance Advisor “COBRA Liability in Mergers and Acquisitions.”

SOURCE: Hsu, K (9 August 2018) "Cobra liability in mergers and acquisitions" (Web Blog Post). Retrieved from http://blog.ubabenefits.com/cobra-liability-in-mergers-and-acquisitions


How employers can manage the skyrocketing cost of specialty drugs

Since the 90's, the number of specialty medications, not to mention their costs, has grown exponentially. Continue reading to learn what employers can do to manage these costs.


In the past two decades, the number of specialty medications — which treat rare and complex diseases such as multiple sclerosis, pulmonary arterial hypertension, hepatitis C, HIV, cystic fibrosis, some types of cancer and hemophilia — has grown exponentially. In 1990, there were only 10 specialty drugs on the market. By 2015, that number had increased to 300 medications, and by the end of 2016 there were approximately 700 more specialty drugs in development.

These medications are usually very high cost, with some new biologic medications costing more than $750,000 a year. Why are the costs so high? There are a number of factors, including the facts that distribution networks are limited, these medications are complicated to develop and distribute, and there are few, if any, generic alternatives for these drugs.

See also: A Look at Drug Spending in the U.S.

The Pew Charitable Trusts found that although only 1% to 2% of Americans use specialty medications, they account for approximately 38% of total drug spending in the U.S.

So, how can employers better gain control over the cost of specialty medications? Because there are hundreds of specialty medications, there’s no single strategy for cost management that can be applied universally. To build an effective cost management strategy, employers need to first analyze employee use of specialty medications. The best strategy will approach specialty medication management by disease class and drug by drug.

However, there are key building blocks of a strategy that will both manage costs and ensure that employees have access to the medications they need. Here are six things employers can do.

Assess benefit plan design structure. Employers should consider how they are incenting employees to spend their benefit dollars appropriately and wisely. A multi-tiered medication formulary where employees pay less out of pocket for generic drugs and lower cost medications and more for costly medications is one approach that’s proven effective. To help employees afford these higher out-of-pocket costs, employers can promote manufacturer copay savings programs, which many drug makers offer.

Think about utilization management. This can include requiring prior authorization for high-cost specialty medications and step therapies (employees must start with lower cost therapies and can move up to more costly ones if those are not effective).

Consider a custom pharmacy network design. By narrowing the network of pharmacies that fill specialty medication prescriptions, employers can negotiate a better unit price. A freestanding specialty pharmacy or a pharmacy benefits manager can provide savings by optimizing discounts for both employers and employees.

Offer second opinion and other support services for rare and complex diseases. A newly diagnosed rare or complex disease patient will see, on average, seven different specialists over the course of eight years before getting a true diagnosis and appropriate treatment path. These programs aim to reduce that burden and ensure success with that treatment once it’s identified. A second opinion from a top specialist in the field provides an expert assessment of the diagnosis and recommendations on the most effective treatment protocol. This not only helps manage costs, it lowers the risk of misdiagnosis and inappropriate treatment. Additional case management services can include one-to-one counseling and, when the drug regimen requires, in-home nursing services to help patients better manage their disease and improve outcomes.

See also: Specialty Drugs and Health Care Costs

Offer site of care choices. Where specialty drugs are administered can have a significant impact on what they cost. Medications administered in an outpatient clinic at a hospital can cost five times as much as those that are injected or infused in a physician’s office or at the patient’s home. Offering services such as home infusion or injection delivered by nurses or incenting patients with lower copays when they receive their medications at their physician’s office can lower overall specialty drug costs.

Educate employees. When an employee or covered family member is diagnosed with a rare or complex condition that will require a higher level of care and the use of specialty medications, employers can connect employees with case managers or similar services that provide education about the condition and the medication, such as how to manage side effects or what alternative medications are available, which can increase employee adherence with the medication regimen.

SOURCE: Varn, M (8 August 2018) "How employers can manage the skyrocketing cost of specialty drugs" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/specialty-pharmaceuticals-and-how-employers-can-manage-cost


HSA How-To

Health Savings Accounts can be tricky, employees have the control, employers and insurance companies are there to guide them in the right direction. Here is a how to helping guide to assist your customers to the right HSA plan.


If an employer wants to offer employees pretax payroll deferrals to their health savings accounts, the employer needs to first create a Section 125 plan or cafeteria plan that allows HSA deferrals.

A cafeteria plan is the only way for employers to offer employees a choice between taxable and nontaxable benefits, “without the choice causing the benefits to become taxable,” the IRS says. “A plan offering only a choice between taxable benefits is not a Section 125 plan.”

Here are five things to know about HSAs and Section 125 plans.

1. A Section 125 plan is just one of several ways for employers to help employees with funding their HSAs.

Employers offering HDHPs face the choice of whether and how to help their employees with the funding of the employees’ HSAs. The options include the following:

  • Option 1 – Employee after-tax contributions.Employers are not required to help with the employees’ HSAs and may choose not to. In this case, employees may open HSAs on their own and receive the tax deduction on their personal income tax return. This option allows for income tax savings, but not payroll taxes. A variation on this option is for employers to allow for post-tax payroll deferral (basically, direct deposit of payroll funds into an HSA without treating the deposit any differently than other payroll which may also be directly deposited into an employee’s personal checking account).This does not change the tax or legal situation, but it does provide convenience for employees and will likely increase HSA participation and satisfaction.
  • Option 2 – Employee pretax payroll deferral.Employers can help employees fund their HSAs by allowing for HSA contributions via payroll deferral. This is inexpensive and can be accomplished by adding a Section 125 cafeteria plan with HSA deferrals as an option. Employers benefit by not having to pay payroll taxes on the employees’ HSA contributions. Employees save payroll taxes as well. Plus, HSA contributions are not counted as income for federal, and in most cases, state income taxes. Setting up automatic payments generally simplifies and improves employee savings.
  • Option 3 – Employer-funded contributions.Employers may make contributions to their employees’ HSAs without a Section 125 plan if the contributions are made directly. The contributions must be “comparable,” basically made fairly (with a lot of rules to follow). This type of contribution is tax deductible by the employer and not taxable to the employee (not subject to payroll taxes or federal income taxes and in most cases, not subject to state income taxes either).
  • Option 4 – Employer and employee pretax funding.Employers can combine options 2 and 3, where the employer makes a contribution to the employees’ HSAs and the employer allows employees to participate in a Section 125 plan and enabling them to defer a portion of their pay pretax into an HSA. This is a preferred approach for a successful HDHP and HSA program, as it ensures that employees get some money into their HSA through the employer contribution and allows for the best tax treatment to allow for employees to contribute more on their own through payroll deferral.
  • Options for more tax savings.Some employers go beyond these options to increase tax savings even more. Although a number of strategies exist to increase tax savings, using a limited-purpose FSA (or HRA) is a common one. Generally, FSAs are not allowed with HSAs; however, an exception exists for limited-purpose FSAs. Limited-purpose FSAs are FSAs limited to payments for preventive care, vision and dental care. This provides more tax savings and employees use the FSA to pay for the limited-purpose expenses (dental and vision) and save the HSA for other qualified medical expenses.

HRAs can also be used creatively in connection with HSA programs. The HRA cannot be a general account for reimbursement of qualified medical expenses, but careful planning can allow for a limited-purpose HRA, a postdeductible HRA, or other special types of HRAs.

2. There are several benefits for an employer using a Section 125 plan combined with an HSA.

  • Employees can make HSA contributions through payroll deferral on a pretax basis.
  • Employees may pay for their share of insurance premiums on a pretax basis.
  • Employers and employees save payroll taxes (7.65 percent each on FICA and FUTA for contributions).
  • Employers avoid the “comparability” rules for HSA contributions although employers are subject to the Section 125 plan rules.

3. The employer is responsible for administering the Section 125 plan.

For payroll deferral into an HSA through a Section 125 plan, the employer must reduce the employees’ pay by the amount of the deferral and contribute that money directly into the employees’ HSA.

The employer may do this administration itself or it may use a payroll service or another type of third-party administrator. In any case, the cost of the Section 125 plan itself and the ongoing administration are generally small and offset, if not entirely eliminated, by employer savings through reduced payroll taxes.

Another administrative element is the collection of Section 125/HSA payroll deferral election forms from employees. Employers that have offered Section 125 plans prior to introducing an HSA program are familiar with this process.

Unlike other Section 125 plan deferral elections, which only allow annual changes, the law allows for changes to the HSA deferral election as frequently as monthly.

Although frequent changes to the elections create a small administrative burden on the employer, the benefit to employees is significant. Employers are not required to offer changes more frequently than annually.

The full extent of the administrative rules for Section 125 plans is beyond the scope of this discussion.

4. Contributions to HSAs under Section 125 plans are subject to nondiscrimination rules.

A cafeteria plan must meet nondiscrimination rules. The rules are designed to ensure that the plan is not discriminatory in favor of highly compensated or key employees.

For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. Contributions that favor lower-paid employees are not prohibited.

The cafeteria plan must not: (1) discriminate in favor of highly compensated employees as to the ability to participate (eligibility test), (2) discriminate in favor of HCEs as to contributions or benefits paid (contributions and benefits test), and (3) discriminate in favor of HCEs as measured through a concentration test that looks at the contributions made by key employees (key employee concentration test). Violations generally do not result in plan disqualification, but instead may cause the value of the benefit to become taxable for the highly compensated employees or key employees.

The nondiscrimination rules predate the creation of HSAs and how the rules apply to HSA contributions is an area where additional government guidance would be welcome.

5. An employer needs a Section 125 plan to allow for HSA contributions through payroll deferral.

Can an employer allow for HSA contributions through payroll deferral without a Section 125 plan? No, not if the goal is to save payroll taxes. Employers can offer HSA payroll deferral on an after-tax basis without concern over the comparability rules or the Section 125 plan rules. Amounts contributed under this method are treated as income to the employee and are deductible on the employee’s personal income tax return. The lack of any special tax treatment for this approach makes it unattractive for most employers and with just a small additional investment of money and time, a Section 125 plan could be added allowing for pretax deferrals.

Here is an example: Waving Flags, Inc. does not offer health insurance or a Section 125 plan to its employees. Waving Flags does provide direct deposit services to its employees that provide it with their personal checking account number and bank routing number. Maggie, an employee of Waving Flags, Inc., approaches the human resources person and asks to have her direct deposit split into two payment streams with $100 per month being directly deposited to her HSA and the balance of her pay being deposited into her personal checking account. She provides Waving Flags the appropriate account and routing numbers and signs the proper election forms.

Waving Flags is not subject to the Section 125 nondiscrimination rules for pretax payroll deferral, nor is Waving Flags subject to the HSA comparability rules. Waving Flags is simply paying Maggie by making a direct deposit into her HSA. The $1,200 Maggie elects to have directly deposited to her HSA in this manner will be reflected in Box 1 of her IRS Form W-2 from Waving Flags as ordinary income. She will be subject to payroll taxes on the amount. She can claim an HSA deduction on line 25 of her IRS Form 1040 when she files her tax return.

Maggie benefits from this approach by setting up an automatic contribution to her HSA, which often improves the commitment to savings. Most HSA custodians will offer a similar system that HSA owners can set up on their own by having their HSA custodian automatically draw a certain amount from a personal checking account at periodic intervals. Employer involvement is not necessary. Individuals with online banking tools available to them may be able to set it from their personal checking account as well to push money periodically to an HSA.

SOURCE:
Westerman, P (2 July 2018) "HSA How-To" [Web Blog Post]. Retrieved from https://www.benefitspro.com/2018/01/01/hsa-how-to/


Lack Of Insurance Exposes Blind Spots In Vision Care

Vision problems are typically not life threatening but can impact the success of your everyday life. Vision care is a significant benefit that could change the lives of many families.


Every day, a school bus drops off as many as 45 children at a community eye clinic on Chicago’s South Side. Many of them are referred to the clinic after failing vision screenings at their public schools.

Clinicians and students from the Illinois College of Optometry give the children comprehensive eye exams, which feature refraction tests to determine a correct prescription for eyeglasses and dilation of their pupils to examine their eyes, including the optic nerve and retina.

No family pays out-of-pocket for the exam. The program bills insurance if the children have coverage, but about a third are uninsured. Operated in partnership with Chicago public schools, the program annually serves up to 7,000 children from birth through high school.

“Many of the kids we’re serving fall through the cracks,” said Dr. Sandra Block, a professor of optometry at the Illinois College of Optometry and medical director of the school-based vision clinics program. Many are low-income Hispanic and African-American children whose parents may not speak English or are immigrants who are not in the country legally.

Falling through the cracks is not an uncommon problem when it comes to vision care. According to a 2016 report from the National Academies of Sciences, Engineering and Medicine, as many as 16 million people in the United States have undiagnosed or uncorrected “refractive” errors that could be fixed with eyeglasses, contact lenses or surgery. And while insurance coverage for eye exams and corrective lenses clearly has improved, significant gaps remain.

The national academies’ report noted that impaired vision affects how people experience their world, including normal communication and social activities, independence and mobility. Not seeing clearly can hamper children’s academic achievement, social development and long-term health.

But when people must choose, vision care may lose out to more pressing medical concerns, said Block, who was on the committee that developed the report.

“Vision issues are not life-threatening,” she said. “People get through their day knowing they can’t see as well as they’d like.”

Insurance can make regular eye exams, glasses and treatment for medical problems such as cataracts more accessible and affordable. But comprehensive vision coverage is often achieved only through a patchwork of plans.

The Medicare program that provides coverage for millions of Americans age 65 and older doesn’t include routine eye exams, refraction testing or eyeglasses. Some tests are covered if you’re at high risk for a condition such as glaucoma, for example. And if you develop a vision-related medical condition such as cataracts, the program will cover your medical care.

But if you’re just a normal 70-year-old and you want to get your eyes examined, the program won’t cover it, said Dr. David Glasser, an ophthalmologist in Columbia, Md., who is a clinical spokesman for the American Academy of Ophthalmology. If you make an appointment because you’re experiencing troubling symptoms and get measured for eyeglasses while there, you’ll likely be charged anywhere from about $30 to $75, Glasser said.

There are a few exceptions. Medicare will pay for one pair of glasses or contact lenses following cataract surgery, for example. Some Medicare Advantage plans offer vision care.

Many commercial health insurance plans also exclude routine vision care from their coverage. Employers may offer workers a separate vision plan to fill in the gaps.

VSP Vision Care provides vision care plans to 60,000 employers and other clients, said Kate Renwick-Espinosa, the organization’s president. A typical plan provides coverage for a comprehensive eye exam once a year and an allowance toward standard eyeglasses or contact lenses, sometimes with a copayment. Also, individuals seeking plans make up a growing part of their business, she said.

Vision coverage for kids improved under the Affordable Care Act. The law requires most plans sold on the individual and small-group market to offer vision benefits for children younger than 19. That generally means that those plans cover a comprehensive eye exam, including refraction, every year, as well as a pair of glasses or contact lenses.

But since pediatric eye exams aren’t considered preventive care that must be covered without charging people anything out-of-pocket under the ACA, they’re subject to copays and the deductible.

Medicaid programs for low-income people also typically cover vision benefits for children and sometimes for adults as well, said Dr. Christopher Quinn, president of the American Optometric Association, a professional group.

But coverage alone isn’t enough. To bring down the number of people with undiagnosed or uncorrected vision, education is key to helping people understand the importance of eye health in maintaining good vision. Just as important, it can also reduce the impact of chronic conditions such as diabetes, the national academies’ report found.

“All health care providers need to at least ask vision questions when providing primary care,” said Block.

SOURCE:
Andrews M (13 JUNE 2018). "Lack Of Insurance Exposes Blind Spots In Vision Care" [Web Blog Post]. Retrieved from https://khn.org/news/lack-of-insurance-exposes-blind-spots-in-vision-care/


Benefit change could raise costs for patients getting drug copay assistance

Health plans may change with time. Know what to expect and how to respond with these tips on how to avoid unexpected changes.


Since Kristen Catton started taking the drug Gilenya two years ago, she’s had only one minor relapse of her multiple sclerosis, following a bout of the flu.

She can walk comfortably, see clearly and work part time as a nurse case manager at a hospital near her home in Columbus, Ohio. This is a big step forward; two drugs she previously tried failed to control her physical symptoms or prevent repeated flare-ups.

This year, Catton, 48, got a shock. Her health insurance plan changed the way it handles the payments that the drugmaker Novartis makes to help cover her prescription’s cost. Her copayment is roughly $3,800 a month, but Novartis helps reduce that out-of-pocket expense with payments to the health plan. The prescription costs about $90,000 a year.

Those Novartis payments no longer counted toward her family plan’s $8,800 annual pharmacy deductible. That meant once she hit the drugmaker’s payment cap for the copay assistance in April, she would have to pay the entire copayment herself until her pharmacy deductible was met.

Catton is one of a growing number of consumers taking expensive drugs who are discovering they are no longer insulated by copay assistance programs that help cover their costs. Through such programs, consumers typically owe nothing or have modest monthly copayments for pricey drugs because many drug manufacturers pay a patient’s portion of the cost to the health plan, which chips away at the consumer’s deductible and out-of-pocket maximum limits until the health plan starts paying the whole tab.

Under new “copay accumulator” programs, that no longer happens.

In these programs, the monthly copayments drug companies make don’t count toward patients’ plan deductibles or out-of-pocket maximums. Once patients hit the annual limit on a drugmaker’s copay assistance program, they’re on the hook for their entire monthly copayment until they reach their plan deductible and spending limits.

Catton put the $3,800 May copayment on a credit card. She knows her insurer will start paying the entire tab once she hits the pharmacy deductible. But, she said, she can’t afford to pay nearly $9,000 a year out-of-pocket for the foreseeable future.

“I’m talking to my doctor to see if I can I take it every other day,” she said. “I guess I’m winging it until I can figure out what to do.”

Drug copay assistance programs have long been controversial.

Proponents say that in an age of increasingly high deductibles and coinsurance charges, such help is the only way some patients can afford crucial medications.

But opponents say the programs increase drug spending on expensive brand-name drugs by discouraging people from using more cost-effective alternatives.

Switching to a cheaper drug may not be an option, said Bari Talente, executive vice president for advocacy at the National Multiple Sclerosis Society.

“Generally the multiple sclerosis drugs are not substitutable,” she said. “Most have different mechanisms of action, different administration and different side effect profiles.” Generics, when they’re available, are pricey too, typically costing $60,000 or more annually, she said.

Most MS drug annual copay assistance limits, if they have them, are between $9,000 and $12,000, Talente said.

Employers argue that the drug copayment programs are an attempt to circumvent their efforts to manage health care costs. For example, employers may try to discourage the use of a specialty drug when there’s a lower-cost drug available by requiring higher patient cost sharing.

There’s also the issue of fairness.

“From an employer perspective, everyone under the plan has to be treated the same,” said Brian Marcotte, president and CEO of the National Business Group on Health (NBGH), which represents large employers.

If someone needs medical care such as surgery, for example, that person doesn’t get help covering his deductible, while the person with the expensive drug might, he said.

According to an NBGH survey of about 140 multistate employers with at least 5,000 workers, 17 percent reported they have a copay accumulator program in place this year, Marcotte said. Fifty-six percent reported they’re considering them for 2019 or 2020.

If there is no comparable drug available, drug copayment programs may have a role to play if they can be structured so that participating patients are paying some amount toward their deductible, Marcotte said. But, he said, assistance programs for drugs that are available from more than source, such as a brand drug that is also available as a generic, shouldn’t be allowed.

In 2016, 20 percent of prescriptions for brand-name drugs used a drug copay assistance coupon, according to an analysis by researchers at the USC Schaeffer Center for Health Policy and Economics. Among the top 200 drugs based on spending in 2014, the study found that 132 were brand-name drugs, and 90 of them offered copay coupons. Fifty-one percent of the drugs with copay coupons had no substitute at all or only another brand drug as a close therapeutic substitute, the analysis found.

Advocates for people with HIV and AIDS say copay accumulators are cropping up in their patients’ plans and beginning to cause patients trouble. Drugs to treat HIV typically don’t have generic alternatives.

The biggest impact for the community their organizations serve may be for PrEP, a daily pill that helps prevent HIV infection, said Carl Schmid, deputy executive director at the AIDS Institute, an advocacy group. A 30-day supply of PrEP (brand-name Truvada) can cost nearly $2,000. Drug manufacturer Gilead offers a copay assistance program that covers up to $3,600 annually in copay assistance, with no limit on how much is paid per month.

“They’re at risk for HIV, they know it and want to protect themselves,” Schmid said. “It’s a public health issue.”

Earlier this month, the AIDS Institute was among 60 HIV organizations that sent letters to state attorneys general and insurance commissioners across the country asking them to investigate this practice, which has emerged in employer and marketplace plans this year.

Compounding advocates’ concerns is the fact that these coverage changes are frequently not communicated clearly to patients, Schmid said. They are typically buried deep in the plan documents and don’t appear in the user-friendly summary of benefits and coverage that consumers receive from their health plan.

“How is a patient to know?” Schmid asks. They learn of the change only when they get a big bill midway through the year. “And then they’re stuck.”

SOURCE:
Andrews M (25 MAY 2018). [Web Blog Post]. Retrieved from address https://khn.org/news/benefit-change-could-raise-costs-for-patients-getting-drug-copay-assistance/


Bettering Health Plan Management Through Modern Healthcare Technology

Taking advantage of modern technology is part of the reason why Hierl excels in providing the best results for our clients. In this installment of CenterStage, we asked our Executive Vice President, Scott Smeaton, to give an in-depth overview of how we use our technological resources to create customized, high-quality, low-cost health plans for our clients.

Technology and Data

There are three steps to developing plans for our clients, when using technology and data. The first step is to identify the client’s cost drivers within their health program(s). For example, we may look at a client’s claims data and find their highest dollar claims are musculoskeletal – such as hip and knee replacements – identifying whether health plan members are going to the higher cost, lower quality provider. These are becoming much more prevalent and are among most plans top cost drivers. With the technology at Hierl, we can import our client’s data – medical and prescription claims and health screening results from wellness – and aggregate it into one technology platform. Doing so, will help keep our clients’ members updated on physician requests and advice.

Competitive Advantage

The second step beyond identifying our client’s cost drivers is to implement management programs and plan designs to address their health plan issues. This kind of technology is newer to the healthcare industry. It can be a great resource and tool that larger employers can use to their advantage. Think about Netflix. They analyze their viewer’s behaviors and apply predictive modeling in a way that they know what their viewers like to watch and when they want to watch it, incorporating those preferences into the ads their customers see. That kind of technology is coming to healthcare, allowing us to look at all claims and behaviors and predict where the next large claim will come from. This helps plan administrators fully understand what’s driving their health plan costs and do something about it through plan design changes, provider relations and contracting, member incentives, and member education and engagement.

Employee Betterment

After identifying areas that can be improved upon and creating a plan to address these cost drivers as discussed above, our third and final step is to create a communication program that will engage and educate employees. Our goal is to help employees understand that, within a healthcare system, there are some providers who perform better than others and cost less. When we give employees the tools and resources they need to be better healthcare consumers, everyone wins. Employer sponsored health plans have lower overall costs. This means their employees and their families lower their out-of-pocket costs, save healthcare dollars for the future, and have better outcomes. Not to mention that a happier, healthier employee is also a more productive employee at work and in the community. Hierl accomplishes this with our “Why Matters” program, which is a custom designed, year-round member education and communication program using a variety of mediums to reach our clients’ members. Through Why Matters, Hierl builds a custom (intranet) and mobile app for our clients to access basic information about their benefits 24/7. Think of it as a homepage to one of your favorite websites that you bookmark in your browser. This is where your members go to research, make decisions, educate themselves on your benefit offerings and how to be a better healthcare consumer. Based on the cost drivers identified through the process above we build out a 12-month calendar of communication materials specifically addressing the areas we’ve identified as a concern and can be delivered via paper, email, mobile app, etc.

Hierl strives to bring our clients the best possible solutions that result in high-quality, low-cost benefits. If you think your company needs to take this step toward improvement, please contact Scott Smeaton at 920.921.5921 or send him an email at ssmeaton@hierl.com.