IRS Releases Private Letter Ruling Regarding Section 213(d) Medical Care Expenses

A private letter ruling regarding DNA collection kits was recently released by the Internal Revenue Service (IRS). This letter addresses whether the price of these kits should qualify as Section 213(d) medical care expenses. Read this blog post from UBA to learn more.


The Internal Revenue Service (IRS) released a private letter ruling (Letter) regarding whether the price of a DNA collection kit – specifically services and reports related to a person’s health that are generated from analyzing the collected DNA – qualify as Section 213(d) medical care expenses.

Health services such as genotyping are medical care under Section 213(d) while reports that provide general information are not medical care. The IRS concluded that the DNA collection kit’s price must be allocated between health services that are medical care, such as genotyping, and the non-medical services, such as reports that provide general or ancestry information.

SOURCE: Hsu, K. (24 September 2019) "IRS Releases Private Letter Ruling Regarding Section 213(d) Medical Care Expenses" (Web Blog Post). Retrieved from http://blog.ubabenefits.com/irs-releases-private-letter-ruling-regarding-section-213d-medical-care-expenses


4 pitfalls of paid leave and how clients can avoid them

In efforts to better attract and retain talent, employers are boosting their current benefit offerings by adding paid leave options. Read this blog post for 4 common pitfalls of paid leave and how employers can avoid them.


PaidLeave.5.2.19.pngSmart employers are boosting their benefits packages with paid family leave — the most coveted work perk among all generations. In today’s low unemployment environment, paid leave benefits can be a huge differentiator in attracting and retaining talent.

But some employers are getting themselves into trouble in the process, facing accusations of gender discrimination or improper use of leave.

Here are four potential pitfalls of paid leave, and how employers can avoid them.

1. Be careful what you call “maternity leave.”

Employers have long been granting leave for new moms in the form of disability coverage. In fact, the top cause of short term disability is pregnancy. Disability insurance usually grants new moms six to eight weeks of paid leave to recover from childbirth.

Because this coverage applies to the medical condition of recovering from childbirth, it shouldn’t be lumped in with bonding leave.

Guidance from the Equal Employment Opportunity Commission says leave granted for new moms for bonding must also be extended to new dads, so separating disability leave from bonding leave is crucial to avoiding gender discrimination.

2. Don’t make gender assumptions.

The amount of bonding time for new parents after birth, adoption or fostering must be granted equally for men and women. Companies that don’t provide the same amount of paid leave for men and women may find themselves in a discrimination lawsuit.

It’s not just the time away from work that matters, but also the return-to-work support provided. If new moms are granted temporary or modified work schedules to ease the transition back to work, new dads must also have access to this.

Some companies may choose to differentiate the amount of leave and return-to-work support for primary or secondary caregivers. That’s compliant as long as assumptions aren’t made on which gender is the primary or secondary caregiver.

The best way to avoid potential gender discrimination pitfalls is to keep all parental bonding and related return-to-work policies gender neutral.

3. Avoid assuming the length of disability.

Be careful about assuming the length of time a new mom is disabled, or recovering medically, after birth. Typical coverage policies allot six to eight weeks of recovery for a normal pregnancy, so assuming a new mom may be out for 10 weeks might be overestimating the medical recovery time, and under-representing the bonding time, which must be gender neutral.

4. Keep up with federal, state and local laws.

Mandated leave laws are ever-evolving, so employers should consistently cross-check their policies with state and local laws. For instance, do local paid leave laws treat adoption the same as birth? Are multistate employers compliant? What if an employee lives in one state but works in another: Which state’s leave policies take precedence?

Partnering with a paid leave service provider can mitigate the risk of improperly administering leave. Paid leave experts can help answer questions, review guidelines and provide information regarding job-protecting medical or family leave.

They can also help flag potential pitfalls, ensuring leave requests from all areas of your company are managed uniformly and in accordance with state and federal laws, including the EEOC.

SOURCE: Bennett, A. (12 September 2019) "4 pitfalls of paid leave and how clients can avoid them" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/list/4-pitfalls-of-paid-leave-and-how-clients-can-avoid-them


Key elements to consider when researching financial wellness programs

Have you implemented a financial wellness program? With financial wellness programs becoming a staple employee benefit, organizations find themselves implementing programs that only offer a few tools or resources. Read the following blog post for key elements to consider when researching financial wellness programs.


Financial wellness programs are becoming a staple in the employee benefit universe. But what should a successful financial wellness program encompass? As a rapidly growing industry, we often lack a consistent definition for financial wellness. This leads to organizations believing they have implemented a financial wellness program, when they may only be offering a few tools like education or counseling.

I define financial wellness as the process by which an individual can efficiently and accurately assess their financial posture, identify personal goals, and be motivated to gain the necessary knowledge and resources to create behavioral change. Behavioral change will result in improved emotional and mental well-being, along with short- and long-term financial stability.

As the administrator of your company’s benefits, you are responsible for bringing the best possible solution to your employees. That’s a tough ask, given the growing number of service providers. So, what is the most efficient and effective way to assess financial wellness services to determine which solution best fits your organizational needs? Ask yourself these questions:

Does the platform offer a personal assessment of each employee’s current financial situation and help them identify their financial goals? If the answer is yes: Does the assessment return quantifiable and qualifiable data unique to each individual employee?

Does the platform address 100% of your employee base, including the least sophisticated employees at various levels of employment? Much of your ROI from a financial wellness program does not come from your top performers. It comes from creating behavioral changes within your employees who need the most financial guidance.

Does the platform integrate the various components to provide a personalized roadmap for each employee? It should connect program elements like personal assessments, educational resources, tools, feedback and solutions to ensure the employee is presented with a cohesive, comprehensive plan to attack and improve their financial situation.

Does the platform offer solutions for short-term financial challenges like cash flow issues, as well as long-term financial challenges associated with saving and planning? A major return on your investment comes from reduced employee stress, which is substantially driven by short-term needs versus long-term objectives. The program must help employees deal with current financial challenges before they can focus on their longer-term vision.

About 78% of U.S. workers live paycheck to paycheck to make ends meet, according to data from CareerBuilder.com. The need for financial wellness is clear, but there are consistent pillars that must be addressed in any successful financial wellness program to affect change: spend, save, borrow and plan. When evaluating financial wellness programs, it’s important that these dots all connect if you are truly going to motivate behavioral change and recognize the ROI of a comprehensive financial wellness program.

SOURCE: Kilby, D. (13 September 2019) "Key elements to consider when researching financial wellness programs" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/opinion/key-considerations-for-employee-financial-wellness-programs


Treasury, DOL, and HHS Issue FAQs on Enforcement of Final 2020 Benefit and Parameters Rule

The Treasury, Department of Labor (DOL) and Department of Health and Human Services (HHS) recently released FAQs regarding the enforcement of the final 2020 benefit and parameters rule. Read the following blog post from UBA for more information.


On August 26, 2019, the Treasury, Department of Labor (DOL), and the Department of Health and Human Services (HHS) (collectively, the Departments) issued FAQs About Affordable Care Act Implementation Part 40 (FAQs) regarding enforcement of the final rule.

Under the FAQs released after the final rule was published, the Departments will not initiate an enforcement action if an issuer or group health plan excludes the value of drug manufacturers’ coupons from the annual limitation on cost-sharing, until the final 2021 benefit payment and parameters rule is issued and effective.

SOURCE: Hsu, K. (6 September 2019) "Treasury, DOL, and HHS Issue FAQs on Enforcement of Final 2020 Benefit and Parameters Rule" (Web Blog Post). Retrieved from http://blog.ubabenefits.com/treasury-dol-and-hhs-issue-faqs-on-enforcement-of-final-2020-benefit-and-parameters-rule


Compliance Recap - August 2019

August was a relatively quiet month in the employee benefits world.

The Department of Labor (DOL) issued its updated Medicaid / CHIP Model Notice. The Centers for Medicare and Medicaid Services (CMS) revised its Medicare Secondary Payer User Guide and changed reporting requirements regarding prescription drug coverage beginning January 1, 2020.

The Treasury, DOL, and Department of Health and Human Services (HHS) issued FAQs regarding enforcement of the Final 2020 Benefit and Parameters Rule. The Internal Revenue Service (IRS) released a private letter ruling addressing whether certain expenses qualify as Section 213(d) medical care expenses.

The DOL issued an advisory opinion addressing whether intermittent Family and Medical Leave Act (FMLA) leave can be taken to attend special education meetings for an employee’s children.

UBA Updates

UBA updated or revised existing guidance:

DOL Issues Updated Medicaid / CHIP Model Notice

The Department of Labor (DOL) issued an updated Premium Assistance Under Medicaid and the Children’s Health Insurance Program (CHIP) Model Notice. Employers should distribute the updated model notice before the start of the plan year if they have any employees in a state listed in the notice.

See the UBA Sample Open Enrollment Notices Packet for the updated model notice.

CMS Requires Prescription Drug Coverage Reporting under Section 111 MSP Reporting

The Centers for Medicare and Medicaid Services (CMS) revised its Section 111 Medicare Secondary Payer (MSP) User Guide and issued FAQs that require responsible reporting entities (RREs) to submit primary prescription drug coverage information as part of their Section 111 MSP Mandatory reporting requirements effective January 1, 2020.

The RRE for reporting primary prescription drug coverage is the entity that has direct responsibility for processing and paying prescription drug claims. In most cases, the RRE will be the insurer or TPA. For example, if the plan sponsor contracts with a third party such as a pharmacy benefits manager (PBM) to administer prescription drug coverage, then the third party or PBM is considered the RRE for prescription drug reporting purposes. However, for self-funded plans that are self-administered, the RRE will usually be the plan administrator.

Treasury, DOL, and HHS Issue FAQs on Enforcement of Final 2020 Benefit and Parameters Rule

On August 26, 2019, the Treasury, Department of Labor (DOL), and the Department of Health and Human Services (HHS) (collectively, the Departments) issued FAQs About Affordable Care Act Implementation Part 40 (FAQs) regarding enforcement of the final rule.

Under the FAQs released after the final rule was published, the Departments will not initiate an enforcement action if an issuer or group health plan excludes the value of drug manufacturers’ coupons from the annual limitation on cost sharing, until the final 2021 benefit payment and parameters rule is issued and effective.

Read more about the FAQs.

IRS Releases Private Letter Ruling Regarding Section 213(d) Medical Care Expenses

The Internal Revenue Service (IRS) released a private letter ruling (Letter) regarding whether the price of a DNA collection kit – specifically services and reports related to a person’s health that are generated from analyzing the collected DNA – qualify as Section 213(d) medical care expenses.

Health services such as genotyping are medical care under Section 213(d) while reports that provide general information are not medical care. The IRS concluded that the DNA collection kit’s price must be allocated between health services that are medical care, such as genotyping, and the non-medical services, such as reports that provide general or ancestry information.

DOL Issues Advisory Opinion on FMLA

The Department of Labor (DOL) issued an advisory opinion regarding whether an employee may take intermittent leave under the Family and Medical Leave Act (FMLA) to attend special education meetings with a speech pathologist, school psychologist, and occupational therapist to discuss the employee’s children’s individualized education programs.

The DOL concluded that the employee’s attendance at the meetings is “care for a family member . . . with a serious health condition” under FMLA and is a qualifying reason for taking intermittent FMLA leave. 

Question of the Month

  1. Under the ACA, if an employer’s size grows, when does the employer need to offer coverage and report on coverage offered?
  2. If the employer employs an average of at least 50 full-time or full-time equivalent employees during calendar year 2019, then it would make offers of coverage in 2020, and report in 2021 on its offers of coverage made in 2020.

The applicable large employer determination is a three-year cycle. For example, an employer’s size, calculated at the conclusion of 2019, determines its obligations for 2020, which it reports on in 2021.

If 2019 is the first time that a company is an applicable large employer, then the company will have until April 1, 2020, to offer coverage. If the company has individuals who are currently full-time employees and the company offers a group health plan, then the company must offer coverage to those full-time employees on January 1, 2020.

8/31/2019


A 401(k) plan administrators’ guide to the recent IRS revenue ruling

A new ruling was recently released by the IRS. This new ruling provides 401(k) plan administrators with helpful guidance on reporting and withholding from 401(k) plan distributions. Continue reading this blog post from Employee Benefits News for more information on this new ruling.


The IRS recently issued revenue ruling 2019-19. The revenue ruling provides 401(k) plan administrators with helpful guidance on how to report and withhold from 401(k) plan distributions when a plan participant actually receives the distribution but for some reason, does not cash the check.

Unfortunately, this new guidance does not provide answers to the complex issues that 401(k) plan administrators face when the plan must make a distribution, but the plan participant is missing.

Let’s hope revenue ruling 2019-19 is just the first in a series of much-needed guidance from the IRS and the Department of Labor about how 401(k) plan administrators should handle the increasingly common administrative issues related to uncashed checks and missing plan participants.

There are many situations in which a 401(k) plan must make a distribution to a plan participant. For example, plans must distribute small benefit cash outs (e.g., account balances that are $1,000 or less) or required minimum distributions to plan participants who reach age 70 and a half. This may come as a surprise, but plan participants fail to actually cash these checks with some regularity.

In the ruling, the IRS confirmed that 401(k) plan administrators should withhold taxes on a 401(k) plan distribution and report the distribution on a Form 1099-R in the year the check is distributed to the participant, even if the participant does not cash the check until a later year.

Similarly, the participant needs to include the plan distribution as taxable income in the year in which the plan makes the distribution even if the participant fails to cash the check until a later year. While this guidance is not surprising, it does provide clarity to 401(k) plan administrators as to how they must withhold and report normal course and required plan distributions. In particular, 401(k) plan administrators should not reverse the tax withholding or reporting of the distribution when the participant receives the distribution and simply does not cash the check until a later year.

Unfortunately, this new IRS guidance has limited use because the ruling uses an example that specifically concedes that the plan participant actually received the plan distribution check, but simply failed to cash it. What should 401(k) plan administrators do when the participant may not have received the distribution check at all (e.g., a check is returned for an invalid address) or the plan itself does not have current contact information for the participant?

Retirement plan administrators have an ERISA fiduciary obligation to implement a diligent and prudent process to find missing plan participants and to take additional steps to make sure participants actually receive plan distributions. Uncashed 401(k) plan distribution checks are still retirement plan assets which means the 401(k) plan administrator is still subject to ERISA fiduciary standards of care, prudence and diligence related to those amounts. As a result, the IRS and DOL have increased their focus on uncashed checks and missing participants in retirement plan audits.

Plan administrators would be well-served by establishing and implementing a consistent process to stay on top of any missing plan participants or uncashed checks and taking steps to locate those participants and properly address uncashed checks. Plan administrators should also carefully document the steps that they take in this regard. The IRS and DOL have currently provided limited guidance on the steps a 401(k) plan administrator can take to locate missing participants, but more guidance is needed — let’s hope revenue ruling 2019-19 is just the beginning.

This article originally appeared on the Foley & Lardner website. The information in this legal alert is for educational purposes only and should not be taken as specific legal advice.

SOURCE: Dreyfus Bardunias, K. (6 September 2019) "A 401(k) plan administrators’ guide to the recent IRS revenue ruling" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/401k-administrators-guide-to-the-irs-revenue-ruling-2019-19


8 renewal considerations for 2020

Plan administrators have a lot to consider during open enrollment season. How are you preparing for 2020 open enrollment? Read the following blog post from Employee Benefit News for eight things to consider for renewals.


The triumphant return of the Affordable Care Act premium tax (the health insurer provider fee).

This tax of about 4% is under Congressional moratorium for 2019 and returns for 2020. Thus, fully insured January 2020 medical, dental and vision renewals will be about 4% higher than they would have been otherwise. Of note, this tax does not apply to most self-funded contracts, including so-called level-funded arrangements. Thus, if your plans are presently fully insured, now may be a good time to re-evaluate the pricing of self-funded plans.

Ensure your renewal timeline includes all vendor decision deadlines.

As the benefits landscape continues to shift and more companies are carving out certain plan components, including the pharmacy benefit manager, you may be surprised with how early these vendors need decisions in order to accommodate benefit changes and plan amendments. Check your contracts and ask your consultant. Further, it seems that our HRIS and benefit administration platforms are ironically asking for earlier and earlier decisions, even with the technology seemingly improving.

Amending your health plan for the new HSA-eligible expenses.

In July of this year, the U.S. Treasury loosened the definition of preventive care expenses for individuals with certain conditions.

While these regulations took effect immediately, they won’t impact your health plan until your health plan documents are amended. Has your insurer or third-party administrator automatically already made this amendment? Or, will it occur automatically with your renewal? Or is it optional? If your answer begins with “I would assume…,” double-check.

Amending your health plan for the new prescription drug coupon regulations.

As we discussed in July of this year, these regulations go into effect when plans renew in 2020. In short, plans can only prevent coupons from discounting plan accumulators (e.g., deductible, out-of-pocket maximum) if there is a “medically advisable” generic equivalent.

If your plan is fully insured, what action is your insurer taking? Does it seem compliant? If your plan is self-funded, what are your options? If you can keep the accumulator program and make it compliant, is there enough projected program savings to justify keeping this program?

Is your group life plan in compliance with the Section 79 nondiscrimination rules?

A benefit myth that floats around from time to time is that the first $50,000 in group term life insurance benefits is always non-taxable. But, that’s only true if the plan passes the Section 79 nondiscrimination rules. Generally, as long as there isn’t discrimination in eligibility terms and the benefit is either a flat benefit or a salary multiple (e.g., $100,000 flat, 1 x salary to $250,000), the plan passes testing. Ask your attorney, accountant, and benefits consultant about this testing. If you have two or more classes for life insurance, the benefit is probably discriminatory. If you fail the testing, it’s not the end of the world. It just means that you’ll likely need to tax your Section 79-defined “key employees” on the entire benefit, not just the amount in excess of $50,000.

Is your group life maximum benefit higher than the guaranteed issue amount?

Surprisingly, I still routinely see plans where the employer-paid benefit maximum exceeds the guaranteed issue amount. Thus, certain highly compensated employees must undergo and pass medical underwriting in order to secure the full employer-paid benefit. What often happens is that, as benefit managers turnover, this nuance is lost and new hires are not told they need to go through underwriting in order to secure the promised benefit. Thus, for example, an employee may think he or she has $650,000 in benefit, while he or she only contractually has $450,000. What this means is the employer is unknowingly self-funding the delta — in this example, $200,000. See the problem?

Please pick up your group life insurance certificate and confirm that the entire employer-paid benefit is guaranteed issue. If it is not, negotiate, change carriers, or lower the benefit.

Double-check that you haven’t unintentionally disqualified participant health savings accounts (HSAs).

As we discussed last December, unintentional disqualification is not difficult.

First, ensure that the deductibles are equal to or greater than the 2020 IRS HSA statutory minimums and the out-of-pocket maximums are equal to or less than the 2020 IRS HSA statutory maximums. Remember that the IRS HSA maximum out-of-pocket limits are not the same as the Affordable Care Act (ACA) out-of-pocket maximum limits. (Note to Congress – can we please align these limits?)

Also, remember that in order for a family deductible to have a compliantly embedded single deductible, the embedded single deductible must be equal to or greater than the statutory minimum family deductible.

Complicating matters, also ensure that no individual in the family plan can be subject to an out-of-pocket maximum greater than the ACA statutory individual out-of-pocket maximum.

Finally, did you generously introduce any new standalone benefits for 2020, like a telemedicine program, that Treasury would consider “other health coverage”? If yes, there’s still time to reverse course before 2020. Talk with your tax advisor, attorney, and benefits consultant.

Once all decisions are made, spend some time with your existing Wrap Document and Wrap Summary Plan Description.

For employers using these documents, it’s easy to forget to make annual amendments. And, it’s easy to forget, depending on the preparer, how much detail is often in these documents. For example, if your vision vendor changes or even if your vision vendor’s address changes, an amendment is likely in order. Ask your attorney, benefits consultant, and third party administrators for help.

SOURCE: Pace, Z. (Accessed 9 September 2019) "8 renewal considerations for 2020" (Web Blog Post). Retrieved from https://www.benefitnews.com/list/healthcare-renewal-considerations-for-2020


The case for expanding wellness beyond the physical

New data from Optum and the National Business Group on Health is revealing how wellness programs affect job performance. Will addressing mental health, financial wellness and substance abuse in the workplace help employees feel fulfilled both personally and professionally? Read this blog post from Employee Benefits Advisor to learn more about expanding wellness programs.


Client's wellness programs that only focus on physical fitness may need to rethink their approach.

By expanding wellness offerings to include programs that support workers’ mental and financial wellness, employer clients can increase the overall wellbeing of their workforce. Newly released data from Optum and the National Business Group on Health shows that employees who are offered programs that address most or all of the five aspects of wellbeing — physical, mental, financial, social and community — are significantly more likely to say their job performance is excellent, have a positive impression of their employer, and recommend their company as a place to work.

Over the last decade, workplace wellness initiatives have evolved beyond health risk assessments, physical fitness and nutrition programs. Many programs now include resources to address mental health, financial wellness and substance abuse.

“[Employers] must commit to looking beyond clinical health outcomes,” says Chuck Gillespie, CEO of the National Wellness Institute, speaking at a webcast from the International Foundation of Employee Benefit Plans. “You want employees to be fulfilled both personally and professionally.”

Even though some clients address financial, social and community health, most still focus on physical and mental health.

However, there are benefit trends that address wellness beyond physical fitness. The emergence of financial wellness benefits — such as early pay access, student loan assistance and retirement saving plans — may help employees feel less stressed and more financially secure, which has shown to improve overall health.

But having a good wellness program in place isn’t enough — employers also have to make sure that the offerings are inclusive and personalized, and that the programs have successful participation and engagement rates.

“These programs need to be adapted to who you are,” Gillespie says. “Customization has to be a key factor of what you’re looking at, because everybody is not going to fit inside your box.”

Effective wellness programs use both health and wellness data points and best practices, while keeping an eye on developing trends. Multi-dimensional wellness — looking at aspects such as social and community — can help companies understand the needs of their employees better.

“Employers need to better recognize personal choices, and if the employees are in an environment where they are functioning optimally,” Gillespie says. “Smokers hang out with smokers; the cultural foods that you eat with family may not be nutritious; is there social isolation; do you contribute to your community. [Most benefits] are work-oriented, but for most people, their life is their home life. It’s important to look at the degrees of which you feel positive and enthusiastic about your work and life.”

SOURCE: Nedlund, E. (15 August, 2019) "The case for expanding wellness beyond the physical" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/news/the-case-for-expanding-wellness-beyond-the-physical


15 states where $1M in retirement savings lasts the longest

According to GOBankingRates data, employees with $1 million in retirement savings can make it last for more than 20 years in Mississippi, Arkansas, Oklahoma and Missouri. Read below to understand what better retirement choices can do for your future.


Employees with $1 million in retirement savings can make it stretch for more than 20 years in Mississippi, Arkansas, Oklahoma and Missouri, according to GOBankingRates data in an article from Business Insider. Retirees in New Mexico, Tennessee, Michigan and Kansas can also live on a similar amount of savings, data shows. Retirees with $1 million can expect their savings to last in average span of 19 years, GOBankingRates estimates.

Less choice could mean better retirement outcomes
The amount of income that seniors can replace in retirement is a good measure to determine whether there is a looming retirement crisis in the U.S., according to retirement expert Mark Miller in this article from Morningstar. However, it is hard to make generalizations, he explains. “I think it varies tremendously, depending which demographic group you’re looking at, you can do it generationally or otherwise,” Miller says.

Retirement requires a shift in thinking
As retirees needs change, they should be ready to adjust their mindset and modify their investment strategies, an expert in Kiplinger writes. Retirees should focus more on preservation and distribution after the accumulation phase, the expert writes. “In retirement, it’s important to think of your savings as income rather than a lump sum. It’s not all about achieving maximum return on investment anymore," the expert says. "It’s about how you can get the maximum return from your portfolio and into your pocket."

Employees nearing retirement? 12 features to look for in their next home
Seniors who intend to move to a new home in retirement should consider a property that offers low yard maintenance, a single-story open floor plan and easy access to loved ones and essential amenities, according to a Forbes article. They should ensure that the new house is cheap to maintain and won’t trigger a hefty tax bill, says one expert. “If those costs are low, it can be a great investment.”

SOURCE: Peralta, P. (15 August, 2019) "15 states where $1M in retirement savings lasts the longest"(Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/news/states-where-retirement-savings-will-last-the-longest


Employers shouldn’t fear expansion of Medicare

A new survey from the National Business Group on Health found that 55 percent of large employers support a Medicare expansion that's limited to older Americans. In this article from Employee Benefit Advisor, Nison discusses the potential benefits and downfalls of an expansion to Medicare.


Like a significant chunk of American voters, a majority of large employers want to expand Medicare. Just not too much.

A new survey of 147 large employers from the National Business Group on Health found that 55% of them support a Medicare expansion that’s limited to older Americans. Only 23% think eligibility should drop to age 50, however, and 45% don’t think it should expand at all. A majority believe that a broader “Medicare for All” plan would increase health costs.

The same survey also highlights why employers should consider coming around on health reform that reduces their role in the system. The growth in health costs has outpaced inflation and wage growth for years, and the surveyed businesses expect it to rise 5% to $15,375 for each employee next year.

About 70% of those costs will fall on the companies, which plan to try everything from boosting virtual health services to investing in health concierges to rein them in, according to the survey.

History suggests that their best efforts might not amount to much.

Employer-sponsored insurance is America’s single largest source of health coverage. That’s mostly true because the IRS exempted employer health benefits from taxes in 1943, a move that created the federal government’s single biggest tax expenditure. Large companies derive some benefit from the current system because they can provide a significant tax-free benefit that helps them compete for talent and pay people less. But it comes with significant drawbacks. Employers have to devote substantial resources to providing healthcare and controlling costs. Many of them have no particular expertise or advantage in doing so.

The results are mixed. Yes, individuals with private insurance are generally satisfied with the quality of their coverage. They’re not nearly as happy about the cost as deductibles rise. The U.S. pays more than any other developed country for healthcare and medicines and receives worse results on a variety of metrics.

Employers pay particularly high prices and spend heavily on plans that have higher overhead than public alternatives. A recent RAND study found that employer-sponsored plans paid hospitals at 241% of Medicare rates in 2017. Employers are already effectively subsidizing public programs, not to mention the profitability of insurers, health care providers and drugmakers.

It’s not entirely their fault. The American system inherently fragments negotiating power, which gives providers a significant advantage and makes it difficult for even the largest employers to get a good deal. Turning a larger piece of healthcare over to the government would free companies to focus more time and resources on their actual business instead of on navigating the world’s most expensive and convoluted healthcare market.

Big businesses most likely fear big Medicare expansion in large part because it would lead to a significant tax increase. But looking at any tax increase as an enemy is a mistake. Those taxes represent a trade-off; they would replace some or all of the billions of dollars that employers are currently spending on care. Depending on what taxes are imposed and whether the public plan is able to control costs better than the current system — and it could hardly do worse — many employers could come out ahead.

There are a lot of unknowns when it comes to Medicare for All and plans that move the country in that direction. Employers are right to be skeptical until they know more, but the results could well shake out in their favor, and they shouldn’t be so quick to discount the approach.

SOURCE: Nisen, M. (15 August 2019)"Employers shouldn’t fear expansion of Medicare" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/articles/employers-shouldnt-fear-expansion-of-medicare