Presentation on theme: "COBRA Consolidated Omnibus Budget Reconciliation Act Amended by: The American Recovery & Reinvestment Act 0f 2009 Presented by: Richard Herzberg Executive."— Presentation transcript:
COBRA Consolidated Omnibus Budget Reconciliation Act Amended by: The American Recovery & Reinvestment Act 0f 2009 Presented by: Richard Herzberg Executive Vice President TFA Benefits
Premium Assistance Assistance Eligible Individuals (AEI) who pay 35% of COBRA premium are treated as having paid the full COBRA premium The 35% cannot be paid by the Employer The Federal government will subsidize the remaining 65% of COBRA premium Premium assistance available for up to 9 months
Subsidy The 65% employer payment is reimbursed from the employers liability to deposit payroll taxes and federal income taxes withheld from employees compensation Credit on its IRS Form 941 quarterly employment tax return Credit can be withheld from deposit and reconciled on quarterly 941
Who is an Assistance Eligible Individual? Eligible for COBRA between Sept 1, 08 – Dec 31, 09 Elects COBRA When originally offered Special election period (new election under ARRA) Must Be - COBRA eligible due to involuntary termination Other than gross misconduct AEI may be a covered employee, spouse or dependent child if qualified by reason of employees involuntary termination
Special Election Period An employee who involuntary lost coverage between September 08 and now who did not accept COBRA when originally offered has a new special election period The special election period is 60 days from the date the plan administrator provides the former employee (spouse and dependants) notification of the special election period.
When Does Coverage Begin? Subsidy Begins March 1, 2009 For groups using calendar months as the period of coverage (most groups) Coverage Ends: Date AEI is eligible for other coverage Nine months from the first day the subsidy applies The end of maximum COBRA period
Penalty To AEI For Over Staying Their Welcome! 110% of subsidy provided for the AEI after the date AEI became eligible for other coverage COBRA Premiums Can Be Less Than Full Insurance Premium Employer subsidy would be based on 65% of the lower premium and the employee would have to pay the difference
63-Day Break In Coverage Rule for Pre- existing Conditions Rule does not apply to a coverage break due to non-acceptance of initial COBRA offer when Special Election is accepted
High Income Clause High Income over $145k Single ($125 phase out) over $290k Joint Return ($250 phase out) Two Options Waive subsidy Take subsidy and repay the subsidy as additional tax for the year subsidy was taken Note – waiving is permanent. Need to consider whether the individual might qualify in 09 even if not eligible in 08.
Administrators Requirements Beginning March 1 st – ensuring AEI pays only the 35% required Not practical (since notices just released) If full premium is paid by AEI then Refund 65% to the AEI within 60 days Apply to future payments within 180 days Administrator must provide notices regarding the subsidies to all current COBRA beneficiaries and those who were eligible for special enrollment
Subsidy does not apply to FSA COBRA is not retroactive to original COBRA eligible date The end of the subsidy does not end COBRA (eligible for longer period of coverage)
Plan Enrollment Option Can (if employer allows) elect different coverage that the AEI had at the time of the QE COBRA premium cannot exceed current coverage premium Must be available to active employees Election period not less than 90 days
What needs to be done now Identify all potential AEIs Identify all COBRA QBs who meet the subsidy requirements Adopt waiver forms for High Income When available from Sec. of Treasury Develop and provide notices required by ARRA Model from Dept. of Labor is now available Determine whether to implement the special coverage option
COBRA Consolidated Omnibus Budget Reconciliation Act Amended by: The American Recovery & Reinvestment Act 0f 2009
HRA Consumer Driven Health Plan With The Employer Having Increased Control
Agenda 1. Health Insurance Marketplace 2. Coverage Options 3. How HRAs Work 4. Advantage to Employer 5. Advantage to Employee
Employer and Employee Health Insurance Costs Since 1999, employment-based health insurance premiums have increased 120%, compared to cumulative inflation of 44% and cumulative wage growth of 29% during the same period The average employee contribution to company- provided health insurance has increased more than 120% since 2000 Average out-of-pocket costs for deductibles, co- payments for medications, and co-insurance for physician and hospital visits rose 115% during the same period The Henry J. Kaiser Family Foundation. Employee Health Benefits: 2008 Annual Survey. September 2008.
Health Plan Options Traditional Insurance Deductible / Co-insurance / Stop Loss PPO (Preferred Provider Organization Network of providers with a negotiated discounts Out of network option for employees HMO (Health Maintenance Organization) Smaller network with negotiated discounts No out of network coverage
Health Plan Options Consumer Driven Health Plans (CDHP) Health Savings Accounts (HSA) Health Reimbursement Arrangements (HRA) Flexible Spending Accounts (FSA) Also known as cafeteria plans and 125s
Consumer Directed Health Plans (CDHP) Health Savings Accounts With HSA qualified plans, employees determine how to best utilize the benefits above the deductible level and whether to use their HSA funds or save for the future Health Reimbursement Arrangements With HRA plans, employers determine what coverage they want to reimburse for employee eligible health care expenses Flexible Spending Accounts Allows an employee to pay for sections 213d expenses with employee money on a pre-tax basis
Qualified High Deductible Health Plan Health Insurance Health Savings Account Then you can establish
Health Reimbursement Arrangement Any Health Plan (if desired) Then you can pair with
HRA is not a product; its a strategy What is it? Employer-funded plan that reimburse employees for incurred medical expenses that are not covered by the company's insurance plan HRAs are among the most flexible insurance products on the market. These federally approved accounts may be tied to high deductible insurance plans, or they may be offered on their own HRAs are similar to Flexible Spending Accounts (FSA); however, while an FSA is an add-on to your already existing medical coverage, an HRA is your medical coverage The goal is to create informed and confident consumers capable of making value-based healthcare decisions
HRA Employer Benefits Control Cost of HealthCare Tax AdvantagesCash FlowRetention HRA contribution tax deductible to employer and not taxable to the employee Employers save on premiums Promise to pay; no cash up front Employer only pays select 213d expenses Funds not portable Employers investment creates employee loyalty Employers may stimulate retention with a plan which allows employees to keep funds (not required)
Health Spending In The US Population
HRA Employee Benefits Lower premium cost Lower out of pocket cost for health care claims* Benefits of HRA non-taxable to the employee Better understanding of the value of their health insurance * Depending on plan design chosen by the employer
Carryover With an HRA, unused fund amounts may be carried over from year to year. This differs from a Flexible Spending Account which maintains the use-it-or- lose-it rule The employer has full discretion over how the carryover is managed. You may choose to allow the employee to keep all unused funds for use in later years, keep only a portion of unused funds, or forfeit all remaining unused funds after the Plan year is complete.
Reimbursement All requests for reimbursement under an HRA must be substantiated. The most common means of substantiation is the Explanation of Benefits (EOB) statement provided by the employees health insurance provider after a medical expense has been incurred.
Rules Coordination with a Flexible Spending Account An employer may choose to offer a Flexible Spending Account Plan (FSA) in conjunction with an HRA Combining an FSA with an HRA allows employees to bridge the gap between the employer sponsored HRA and the health insurance plan In a situation where an incurred medical expense could be reimbursed from either the FSA or HRA, the employer or plan administrator will determine the ordering rules which determine which account the expense shall be reimbursed from first
COBRA HRAs are subject to COBRA Employees experiencing a qualified event must be given the opportunity for continued participation in the HRA offered by the employer.
TraditionalHRAHSA Plan Design Any type (except HSA) At least $100 deductible* Non-HSA planHSA - Qualified HDHP Consumer ContributionsNo Yes - Pre-Tax Employer ContributionsYesYes (required)Yes (optional) Funds Available Day OneN/AOnly as deposited Qualified ExpensesN/A Reimburse 213d expenses as defined by employer or carrier Section 213d (Internal Revenue Code) Tax Free WithdrawalN/A Yes For qualified expenses as defined by HRA document Yes For qualified expenses Consumer ForfeitureN/AYes - upon terminationNo Consumer PortabilityN/ANoYes Interest BearingN/ANoYes Balance at Risk from InvestmentN/ANoYes Expense SubstantiationN/AEmployer/Health planConsumer Tax Treatment ContributionN/ANot subject to Federal Income Tax or FICA tax Important differences between Traditional plans without HRAs and plans with HRAs and/or HSAs attached.
Optima Healths - HRA An Integrated Health Plan and HRA Model
Employer Flexibility to Customize HRA Simplicity and Service of a Fully Integrated Experience Choice of Benefit Plans with First-Dollar Preventive Care (priced 24% to 45% below popular Optima plans) Optima Design HRA Optima Design HRA offers employers a fully integrated health plan and HRA funding option combined with flexibility needed to design the HRA to achieve their goals
Employee dollars first Employer / Employee cost share as eligible claims incurred to the HRA contribution cap Employer dollars first OR HRA reimburses for deductible expenses only in core plans Optima Design HRA Flexibility to design the HRA funding Employer decides the HRA contribution amount
Easy online access account information (claims and payment and balances) Employers can monitor expenditures and balances online for better expenditure predictability Integrated claims feeds satisfy substantiation requirements Optima Design HRA
Service of a Fully-Integrated Experience Veteran of HRA administration Operational strengths & flexibility simplify the customer experience--making for seamless claims processing. Currently administers 2,300 groups and 51,000 accounts of HRA business across the country. Optima Design HRA
All Other Benefits Subject to Deductible, Then Coinsurance Optima Design PlusOptima Design Vantage Two core in-network deductible options $1500 individual / $3000 family OR $3000 individual / $6000 family Two core in-network co-insurance options after deductible 100% OR 80% First dollar preventive care coverage Total of 2 medical and 2 behavioral health office visits at standard co-pay, no deductible Traditional Rx benefit with co-pay tiers outside of the deductible Optima Design HRA Choice of Benefit Plans with First-Dollar Preventive Care OR