Should Medicare Eligibility Be Expanded?

It’s a Hot Topic and One We’ll Hear More About in the Months Ahead

Whether it’s Medicare at 50, a Buy-In Option or Medicare for All, there is little doubt that the debate on expanding Medicare will be a centerpiece issue as the 2020 primary season intensifies. Prior to the Democratic debates, some of these proposals were receiving strong support among Democrats and even a few Republicans. As the conversation has continued and some of the issues have been analyzed, support has weakened – primarily due to costs.

While Senator Bernie Sanders estimates the cost of his plan at $1.38 trillion per year, other studies have published numbers in excess of $30 trillion over 10 years. Expectations of provider reimbursement rates far below what private plans currently pay have experts cautioning that hospitals will close their doors and drug companies will lose much of their funding for research and development.

Employers Provide Better Benefits
After helping employers provide high quality health benefits for more than 5 decades, we are confident that workers enjoy far better medical care and customer service than they will experience in a Medicare for All or other Government sponsored system. Add concerns over longer wait times and the government’s ability to potentially reject certain treatments and Americans could face a system similar to those that currently encourage people from other countries to seek quality medical treatment in the U.S. We’re equipped to help our clients control future healthcare costs and retain the flexibility their plans provide. To learn more, give us a call at your convenience.

Tell Us How You Feel!

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MA Paid Family Medical Leave Payroll Deductions to Begin October 1st

MA PFML is a statewide program that gives eligible employees paid time off for family and medical leave beginning January 1, 2021. PFML will provide employees up to 12 weeks of paid family leave and 20 weeks of paid medical leave or up to 26 weeks of leave to care for a family member who is a service member. All Massachusetts employers with one or more employees are subject to the PFML law. Employers must submit contributions on behalf of employees. After a three-month delay in implementation, employer deductions under PFML will begin October 1, 2019 which will represent the first quarter of payroll withholdings. These withholdings, and in some cases employer payments, will be remitted to the Department of Family and Medical Leave (DFML) via MassTaxConnect 30 days following the conclusion of each calendar quarter and will begin with the first payment made on or after Oct. 1, 2019. Contribution percentages depend on your average number of covered individuals from the last calendar year. Employers with fewer than 25 employees do not have to contribute to the employer portion of PFML. Employers with 25 or more employees must pay an employer contribution amount. 1099-MISC contractors may be considered covered individuals. See the link below for help in determining who is a covered individual for PFML purposes.

The DFML has released the revised allocation of PFML contribution rates beginning October 1, 2019. Employers must begin withholding and paying Massachusetts family and medical leave contributions at an initial rate of 0.75% (up from 0.63%) of each employee’s wages up to the 2019 Social Security wage base of $132,900. Based on the new rate of 0.75%, 0.62% funds medical leave and 0.13% funds family leave. Employers with 25 or more employees may withhold up to 40% of the medical leave portion of the contribution from employees’ wages. Employers with 25 or more employees are required to fund the remaining 60% of the medical leave contribution, however they are not required to contribute to the family leave portion, although they may choice to do so. See the link below to access the DFML’s calculator tool for help in determining your contribution amount.

Important Dates:
September 30, 2019 — Employers and covered business entities are required to post a notice and provide written notice to their current workforce. A sample poster and tips on crafting your written notice can be found here.

October 1, 2019 — Payroll withholdings begin. MA PFML has created a tool to help you estimate the number of your covered individuals. The tool can be accessed here. Help in determining your contribution can be found here.

December 20, 2019 — Deadline to file for a private plan exemption for first quarter contributions.

January 31, 2020 — First quarterly contribution payment due through MassTaxConnect.

The DFML’s website has a lot of valuable information, tools and webinars that you may find helpful in answering most of your questions regarding PFML. A link to the Department’s website can be found here.

Which Welfare Plans Must File Form 5500?

Funded Plans:
All  “funded” welfare plans covered by ERISA must file a Form 5500. A “funded” plan is one where funds are set aside in a custodial account or trust fund for the exclusive benefit of plan participants. The type of Form 5500 (Form 5500 vs. Form 5500-SF) filed is determined by the number of plan participants in a funded welfare plan. In other words, all funded welfare plans must file a Form 5500, regardless of the number of plan participants. Self-insured welfare plans that hold funds in a trust fund (such as, a “Voluntary Employees’ Beneficiary Association”) or hold employee contributions in a separately maintained fund, makes them funded and subject to annual Form 5500 filings.

UnFunded Plans:
Most welfare plans covered under ERISA, however, are not funded. The greater majority of welfare plans are either fully-insured or partially insured through a stop-loss insurance policy. The Department of Labor (DOL) has an exception for unfunded and insured welfare plans. If a welfare plan covers fewer than 100 participants at the beginning of a plan year and is unfunded and/or insured, then the plan sponsor is not required to file a Form 5500. Also, a plan sponsor does not need to file a Form 5500 for a self-insured welfare plan if the plan has less than 100 participants at the beginning of the plan year and is not funded.

Filing the 5500 for a Self-Funded Plan:
If a plan sponsor of a self-insured welfare plan simply funds the plan out of their general assets and covers less than 100 participants, then no Form 5500 filing is required. When a welfare plan does cover 100 or more participants at the beginning of the plan year, the plan sponsor must file a Form 5500 regardless of how the plan is funded or what insurance arrangement is in place. 

5500 Schedules:
Schedule A – Insurance Information (Required for a fully-insured welfare benefit plan or a self-funded plan that is under a Trust Arrangement.)

  • Schedule A must be completed if any benefits under an employee benefit plan are provided by an insurance company, insurance servicer, or other similar organization. This includes investment contracts with insurance companies.
  • Insurance premiums, broker commissions and year-end enrollment information are reported on Schedule A.
  • Self-insured plans are required to attach Schedule A for stop-loss coverage ONLY IF the plan itself is the named policyholder of the stop-loss policy. Typically, a plan is the policyholder of a stop-loss policy only when it is funded through a trust.

Schedule C – Service Provider Information (Required only for a FUNDED welfare benefit plan i.e., has a trust that pays service providers)

  • Schedule C must be completed if a service provider was paid $5,000 or more in compensation, directly or indirectly from the plan, or an accountant or enrolled actuary was terminated during the reporting year.
  • Schedule C is NOT required for payments made by the EMPLOYER for plan-related expenses. Schedule C is required only when payments are made from the PLAN. Because the employer makes all payments to service providers for an unfunded plan, a Schedule C is typically required only for funded plans. If the provider allocated services to the Plan Sponsor who in turn funded via general assets and a trust IS NOT in place, then the Schedule C is not applicable to be reported in the Form 5500 report.

What if you filed a Schedule you didn’t need to file?
There is no penalty for oversharing information with the IRS regarding your plan. The bigger question is why you would if you don’t have to?

Wrap Up:

  • All “funded” welfare plans must file a Form 5500;
  • All unfunded (self-insured) and/or insured welfare plans must file a Form 5500 IF the plan covers 100 or more plan participants as of the beginning of the plan year.

Plan sponsors need to understand when to file a Form 5500 for a welfare plan. The penalties ($1,100 per day) for not filing are severe and worth noting. The DOL has also learned how to find out if a plan sponsor is not filing a Form 5500 for a welfare plan. If your organization sponsors any kind of retirement plan, the DOL may send you a letter asking for your welfare plan filing. If your organization may be in this situation, take the time now to review your welfare plan filing obligation.

Funded Plan All funded plans (funds set aside in a trust or custodial account for the exclusive benefit of the plan’s participants) must file Form 5500 regardless of size.
Unfunded Plan Insured plans or self-funded plans that are unfunded (benefits paid as needed directly from the general assets of the employer or employee organization that sponsors the plan).

Unfunded plans that have 100 or more participants at the beginning of the plan year must file Form 5500.  Unfunded plans with less than 100 participants at the beginning of the plan year are not required to file.

Schedule A Schedule C
For Fully-Insured (premium-based) insurance policies.

Schedule A for stop-loss policy is to be included if the plan is funded via a trust ERISA Plan.

Only to report fees of $5,000 or more paid out of trust fund assets to entities for services provided to the Plan.
Includes the total premiums within policy period plus participants (covered persons). Includes the fees paid out of the trust’s plan assets to service providers for legal, marketing, etc.
Commissions, bonus or other sources of revenue from the Carrier to Broker are to be noted. Broker’s commissions are not reportable on a Schedule C. However if the broker’s fees were paid out of trust fund assets, then those would be reported on the Schedule C.

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How HR Can Lower Healthcare Costs Without Reducing Coverage

This article was published on August 30, 2019 on the HR Daily Advisor written by Eileen Clark, Senior Vice President of Human Resources, ELAP Services.

Large employers currently pay about $500 more in healthcare costs per employee than they did just a year ago—money every company would love to have back. With healthcare costs increasing yearly, many HR departments are struggling to contain healthcare spending, which has become the largest cost to many companies outside of payroll.

The escalating healthcare costs not only cut into every budget, including HR’s, but also hurt the business’s benefits package—a vital offering in today’s tight labor market—and its ability to retain and recruit employees.

While decoding healthcare’s black box to lower costs might seem impossible or overwhelming, a reference-based pricing model can help self-insured businesses and HR professionals lower healthcare costs without reducing quality of coverage.

How Reference-Based Pricing Supports the Business

Reference-based pricing is a bottom-up approach to containing healthcare costs that offers price protection against variable and inflated charges. Based on the actual cost it takes to deliver a medical service or the Medicare reimbursement rate plus a reasonable profit, reference-based pricing enables businesses to audit and rein in costs. Under the right reference-based pricing model, employers can reduce their total healthcare costs by up to 30%, while employees pay less in out-of-pocket costs.

The model helps HR lift a burden off employees and the CFO. Its cost savings can be allocated back into the business, giving the CFO some breathing room, or into employees’ pockets, either directly or as funding for employee initiatives. Reference-based pricing has empowered companies to lower deductibles for members, raise contributions to employees’ 401(k) plans, increase year-end bonus pools for employees, and more.

By moving to this transparent healthcare model, HR enables employees, the heartbeat of every organization, to take back their health plans and provides them with the flexibility and transparency to go to any doctor or specialist they want. Because reference-based pricing isn’t tied to certain providers, there’s no in-network or out-of-network doctors.

Preparing for Reference-Based Pricing

Before implementing reference-based pricing, there are a few boxes to tick on the checklist.

Self-funded. The first is that reference-based pricing is for self-funded employers only. It’s best for companies with over 100 employees and as many as 3,000, but sometimes, companies with as few as 70 employees can take advantage of this payment model.

Cost-savings analysis. Determine how much reference-based pricing can save the company by conducting an analysis beforehand. This data can help convince the CFO and other stakeholders to support a move to the model.

Broker selection. It’s also important to identify a broker experienced in reference-based pricing. This person will be an important guide and asset for implementing the new model. For one, he or she will know all the right questions to ask to ensure that reference-based pricing is a fit for your company and understand the details related to forming your benefits package, including pharmacy, vision, dental, and more. With the right broker, you’ll have better control over which benefits you provide and for how much.

TPA partner. Another important partner to identify is a third-party administrator (TPA) that has experience administering reference-based pricing. The TPA will handle the claim logistics and ensure your employees have the support they need.

Stop-loss insurance. Lastly, to protect the plan and its members’ assets, select a stop-loss partner that understands the cost savings reference-based pricing provides and will extend coverage at appropriately reduced premiums. Your stop-loss insurance should minimize risk while optimizing the cost of coverage.

The Importance of Education in Reference-Based Pricing

Like many HR initiatives, employee education is key to the successful adoption of reference-based pricing. This isn’t just teaching employees about their new plan—it’s also about educating them on how the healthcare system stands today and how they can be smart healthcare consumers. Reference-based pricing addresses these issues, and an understanding of that helps employee adoption.

Education also helps combat negative impressions of reference-based pricing. A reference-based pricing model gives employees the flexibility to go to any doctor or facility while saving them money on healthcare.

Another misconception about reference-based pricing is that because hospitals are receiving a reduced payment, it’s more common to be billed for the difference, but even with a large healthcare provider, you still receive “balance bills” or “surprise bills.” The difference is how unexpected charges are managed. A good reference-based pricing solution provider will have a methodology for addressing balance bills that provides personalized support and advocacy for members.

Becoming the ‘White Knight’

HR often struggles to be appreciated as a function that directly contributes to revenue. Instead, we’re depicted as the department that always spends.

But reference-based pricing presents an opportunity to positively influence our company’s bottom line and put money back into employees’ pockets. By introducing an innovative solution that addresses high healthcare costs and advocates for employees, HR becomes a problem-solver.

As healthcare costs continue rising with no end in sight, reference-based pricing offers a cost-saving solution with far-reaching benefits. It’s worth a closer look.

Support for Caregivers

According to a new Harvard University study, 73% of employees surveyed are caring for a child, parent or friend. More importantly, 80% of those admit that caregiving has had a negative impact on their productivity at work and kept them from doing their best work. Employers are beginning to take a more proactive role in helping employees balance these priorities by shaping their benefit programs to accommodate their needs. We’ll take a closer look at some of the steps being taken in our next newsletter.

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Walmart Woos High-Schoolers

studentloansA recent announcement stated that by year end, Walmart will triple the number of employees taking advantage of company-provided tuition benefits. With 25,000 high school students among their 1.3 million U.S. employees, the company expects to help many avoid the hefty cost of higher education. Disney, Discover and MGM Resorts International are just a few large employers offering free tuition for college or certificate programs in order to attract talented young people.

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Fewer Spouses Covered on Employee Benefit Plans

This article was published on August 5, 2019 on IFEBP.org written by Lois Gleason, CEBS.

More and more employers are seeking cost savings by discouraging or blocking employees from enrolling a spouse in the employer’s health plan. Here’s what you need to know about the growing trend of spousal carve-outs:

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Image Source: IFEPB.org

Employers often use one of the following four methods to reduce the number of spouses they cover:

  1. Charging employees more to cover spouses who have access to employer-sponsored coverage through their own jobs.
  2. Charging employees more to cover spouses whether or not they have access to other coverage.
  3. Choosing not to cover any spouses who have access to their own employer-sponsored coverage.
  4. Choosing not to offer coverage for any spouses under any circumstances.

Recent survey data reveals a clear trend:

  • The 2018 International Foundation Employee Benefits Survey showed that 20.1% of responding health plan sponsors imposed spousal surcharges or exclusions.
  • The June 2019 PWC Health and Well-being Touchstone Survey results showed that 38% of survey respondents apply a spousal surcharge if the spouse has access to coverage through another employer. The median surcharge is $100 per month.
  • The December 2018 issue of AYCO Compensation & Benefits Digest reported that just over 25% of its survey participants are imposing a spousal surcharge in 2019. The most commonly used surcharge amount is $100 per month.
  • The 22nd Annual Willis Towers Watson Best Practices in Health Care Employer Survey shows that 27% of companies used a spousal surcharge in 2017.

At least three factors are driving this spousal carve-outs trend:

  1. Plan sponsors are looking for new ways to stem the rising tide of health care benefit costs.
  2. Employees, especially those on single-only coverage, may view spousal surcharges as a more equitable way for an employer to allocate health benefit costs among single and married employees.
  3. As more plans impose surcharges or exclusions, plans that cover spouses without a surcharge could be at risk for adverse selection.

In an effort to save costs, health plan sponsors are increasingly nudging (or pushing) spouses of employees to obtain coverage somewhere else.

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