Medical plans are the core of any business’ benefit program.
Though medical cost increases have slowed somewhat, this rate of increase is enough to cause an employer to question whether it’s getting its money’s worth out of its current health plan. This worry, along with the desire to secure quality coverage for employees, can prompt an employer to consider shopping around for a new health plan, or new health plan carrier.
An initial question to ask is how the current health plan is performing. Have employees voiced concerns or complaints about the plan’s provider network or coverage provisions? What type of feedback have employees provided about the carrier’s customer service and promptness and accuracy of claims payment? How have premium costs increased, compared with the expectations you had when first contracting with the carrier?
Another consideration is whether the plan’s design and features fit your long-term benefits strategies. For example, if you are considering moving toward a consumer-directed approach to health care, does the plan design support this? Does the carrier offer High Deductible Health Plan (HDHP) and Health Savings Account (HSA) products, along with health education and decision-making support tools?
If the answers to these questions indicate that a search for a new plan or carrier should be undertaken, research is key to finding the right replacement. Among the issues to consider in evaluating options include the following:
– the quality and range of the provider network, including access to specialists and the discounts applied for network use
- the presence of disease management programs for chronic conditions and case management programs for catastrophic illnesses and events, both of which can have a huge impact on a plan’s claims costs
- the plan’s premium cost relative to its co-payment/co-insurance/deductible levels, and how these fit with your goals for balancing the company’s and employees’ financial contributions to coverage
- whether the plan has sought and received accreditation from any of the national health plan accreditation organizations (e.g., URAC and the National Committee for Quality Assurance)
– the carrier’s financial strength, record of complaints, and presence in your company’s market segment (e.g., small employer market, association/nonprofit market)
– the carrier’s reputation for customer service
– the carrier’s use of technology for employee self-service (e.g., can employees check on the status of claims or find information about plan provisions on their own? can they readily locate up-to-date provider lists?)
– the extent to which the carrier uses technology to simplify any employer administrative tasks, and to enable the employer to identify and understand utilization patterns and cost-drivers and
– the carrier’s loss ratio, fees charged for administration, and fee guarantees.
As your broker, we can help you organize, prioritize, and evaluate the information that is critical to making the best choice for your company. The large investment that most companies and employees make for health care, and the importance of quality results, makes a careful search worthwhile.
Partially Self Funded
Fully- insured health insurance
In the traditional fully-insured plan, the employer pays a monthly premium to an insurance carrier to provide benefits and pay claims for its employees. Benefits are confined to that carrier’s products, giving the employer little flexibility to offer a plan tailored to its own employees. The employer also has limited ability to control rising insurance premiums. If there is any profit left over (the difference between premiums paid and claims covered) the insurance company keeps it.
Partially Self-funded plans
Under the self-funded benefit plan approach, the employer enjoys much greater plan design flexibility, cost controls and cash flow improvements by self-insuring the expected costs (those costs that are easy to budget) and allowing an insurance company to assume the unknown risk (those costs that are virtually impossible to budget). Any funds ear-marked for claims that are not spent by the plan are retained by the employer – instead of becoming the insurance company’s profits.
In most self-funding scenarios, the employer selects a Third Party Administrator (TPA) to handle plan administration and purchases two insurance contracts. The first contract, known as Specific Stop Loss Coverage, stipulates that the employer will pay for all covered health care expenses for each individual up to a specified dollar limit. Covered expenses over this dollar limit (deductible) are paid by the re-insurance company up to the plan maximum. The second contract, known as Aggregate Stop Loss Coverage, sets a dollar limit (stop loss point) of overall claims for which the employer is responsible. Covered expenses over this dollar amount (attachment point) are paid by the re-insurance company.
Is Self-funding right for your company?
Self-funding makes sense in most cases if:
– You are looking for a way to contain your health care costs.
– You want more flexibiltiy in designing levels of coverage for your employees.
– You want timely information and reports about your plan.
CEBP can help you determine if partially self-funding fits your company and then assist you in plan design and implementation.
Level Funded, or Hybrid, Plans are a form of self-funding that function very similarly to Fully-insured policies. The employer pays a set monthly amount and is not liable for any further expenses. However, unlike a Fully-insured policy, the employer retains any unspent claim funds. This approach allows even small employers (with as few as 2 covered employees) to establish a monthly health plan budget and take advantage of the economic benefits of self-funding that many large employers have enjoyed for years.
Here is how level funding works:
An employer pays a set amount each month during the twelve-month plan year to fund the plan the monthly payment is determined for each employer based on a thorough underwriting review.
Part of the monthly payment is used to pay the fixed costs, e.g., stop-loss insurance premiums, administration fees, etc., and part is used to fund expected claims up to the employer’s funding limit.
Unlike Fully-insured plans, if claims do not exceed the amount funded by the employer, the unspent claim funds are retained in the employer’s claim account.
In any given month, if actual claims exceed the cumulative amount funded by the employer for the year-to-date, stop-loss insurance funds the claims that exceed the employer’s funding limit.
Claims Funding & Stop-Loss Coverage
Level funding offers an employer a potential savings if actual paid claims are less than the claim funding level. More importantly, stop-loss coverage protects the plan when cumulative claims exceed the employer’s funding limit in any given month. For example:
If the employer’s monthly claim funding limit is $40,000 a month and total claims payments for the first two months of the year total $90,000, the stop-loss carrier will fund the $10,000 in excess of the employer’s funding limit.
Through month three the employer will have funded a total of $120,000 (i.e., three months at $40,000). If total claims payments for the plan total only $110,000, then $10,000 will be returned to the stop-loss carrier.
At the end of the plan year, the employer will have funded no more than the $480,000 funding limit (12 months at $40,000). If claims payments are less than $480,000, the employer will retain the funds. If claims exceed $480,000, the stop-loss insurance carrier will have funded claims in excess of the employer’s annual funding limit.
A Hybrid or Level Funded plan is easy to set up and simple for the employer to operate. Each month, the employer updates any enrollment changes that have occurred and makes the set payment to the plan administrator. All claims are actually paid out of the employer claims funding account – even those that the stop-loss insurer funds. The stop-loss insurer transfers any funds that might be required to the employer’s claims funding account.
The Plan Administrator does the following:
– Bills the employer monthly
– Provides ID cards, a plan document, and summary plan descriptions for employees
– Handles all claims processing and produces checks to pay claims
– Provides customer service for all inquiries or questions from the covered persons, providers, and the employer’s authorized staff
– Offers 24/7 access to detailed information about benefits, eligibility, and claim status on the administrator’s website for covered persons and authorized staff
Advantages for Small Employers
Level-funding is designed to allow employers with as few as 2 employees enrolled in their health plans to consider this unique self-funded approach. With level-funding, a set monthly funding level is established that can be budgeted – much like a premium. This approach allows smaller businesses to take advantage of the economics of self-funding. For example, state premium taxes are not assessed on claim payments, and if claims do not reach the funding limit, the employer, rather than an insurance company, retains the excess funds. Often the fixed costs of operating a self-funded plan are lower than the fixed costs that are included in a group health insurance premium.
Pmec and MVP plans
Add PMEC and MVP to your Affordable Care Act (ACA) Glossary
As your business explores strategies to comply with health care reform, two acronyms – PMEC and MVP – are critical to know and understand. Each refers to a specific type of group health insurance plan, and while both offer employers options to avoid ACA penalties, they have very different meanings and insurance protection for employees.
A brief refresher on Employer Mandate penalties
The “Sub A” annual excise tax penalty of $2,160 is assessed on an Applicable Large Employer’s (50 or more full time equivalents in 2016 in 2016) entire count of full-time employees (minus the first 30) if the ALE does not provide a group health insurance plan to enough of its full-time employees and dependents, and at least one full-time employee buys subsidized health insurance through the Marketplace. “Enough” equates to 95% of it’s full-time employees and dependents. This is often referred to as the “sledgehammer” penalty.
The “Sub B” annual excise tax penalty of $3,240 is assessed for each individual full-time employee who buys subsidized health insurance through the Marketplace due to the ALE’s health plan not meeting Minimum Value (60% actuarial value) or Affordability (single coverage that does not exceed 9.66% of an employee’s household income) requirements. This is often referred to as the “tack hammer” penalty.
Minimum Essential Coverage
PMEC is the acronym for Preventative Minimum Essential Coverage and includes preventive care and wellness benefits only. Employers can offer self-funded, low-cost MEC plans and satisfy the employer mandate to offer a group plan, thus avoiding the $2,160 penalty, but remaining open to the $3,240 penalty. MEC plans also satisfy the individual mandate for employees. Thus, MEC plans are technically “ACA-compliant,” but they offer no protection to employees in the case of a catastrophic health event.
Minimum Value Plans
MVP is the acronym for Minimum Value Plan, and refers to a comprehensive health insurance plan with at least 60% actuarial value, meaning that on average it pays at least 60% of the costs of claims submitted by policyholders in the group. In ACA terms, plans with 60% actuarial value are referred to as Bronze Plans, 70% value as Silver, 80% as Gold, and 90% as Platinum.
Employers that offer “affordable” Minimum Value Plans to their full-time workers can avoid the $3,240 penalty. In general, if the employer has offered health coverage that is affordable and provides Minimum Value, an employee will not be eligible for a subsidy even if the employee rejects the offer of coverage and instead enrolls in coverage through a Marketplace or enrolls in Medicare or Medicaid.
Offering a health plan which includes both MEC and MVP options to eligible full time employees is the lowest cost option for employers wanting to avoid the ACA Employer Mandate penalties. We can help you design a program which is tailored to your particular situation.
Businesses can use ancillary products as a great way to retain a high moral workforce. These products can be tied in with your Medical Plan or stand alone as their own plans. They can be employer paid or voluntary (partially or entirely paid by the employee).
Types of Ancillary Products that a business can offer their employees:
– Critical Illness
– Cancer Indemnity
– Gap Coverage
– Hospitalization Indemnity
As with all of the products that we offer, our ancillary products come from several carriers to ensure that we can find the best plans at the best prices for our clients. You probably have been solicited to directly from some of these companies, but by using a dedicated broker, you can be sure that you are getting the exact benefits that you want, without buying anything that is unnecessary or useless.
High Deductible Health Plans & Health Savings Accounts
Health Savings Accounts (HSAs) provide a tax-advantaged way to save for and pay for your and your family’s health care expenses. With a HSA, you set funds aside to pay for health care expenses that are not covered by your health care plan. You receive a tax deduction for amounts you contribute to the HSA, and amounts you withdraw to pay for qualified health care expenses are also free of tax. HSA account funds are invested, giving the HSA growth potential beyond the amount of the contributions you make. Amounts remaining in a HSA at the end of the year carry forward for use in subsequent years.
In order to be eligible to open a HSA, you need to be covered by a High Deductible Health Plan (HDHP) and, generally, have no other health plan. The HDHP can be the coverage you have through your employer, or a policy that you’ve obtained on your own. A HDHP is defined as a plan with a minimum deductible of $1,400 for individual coverage/$2,800 for family coverage, and annual out-of-pocket maximums of $7,000 individual/$14,000 family (these amounts are for 2021 and are indexed annually for inflation). The plan can include coverage for preventive care that is not subject to the deductible, and still qualify as a HDHP.
You may contribute to the annual maximum amount as determined by the IRS, regardless of your plan’s deductible. The maximum for 2021 is $3,600 for individuals and $7,200 for families (these amounts are also indexed annually for inflation). Individuals who are age 55 or older are permitted to make extra “catch-up” contributions of $1,000 (until they enroll in Medicare).
You may contribute the annual maximum amount determined by the IRS, regardless of when your coverage begins, if you maintain coverage for the 12 month period beyond the calendar year in which you first became eligible. For example – if you begin individual coverage in November 2021, you may still contribute $3,600 for 2021 when you maintain coverage through the end of 2022.
Because the premium cost for a HDHP will be less than that for a plan with a lower deductible, you can use the amount you save on your health plan premium to contribute to a HSA. Then, you can make additional contributions, if desired, up to the maximum amounts described above.
For what can you use your HSA funds? HSAs were created to pay for health care expenses, and so long as a withdrawal is used for a medical care expense, it will be free of tax. “Medical care” is defined by Sec. 213 of the IRS Tax Code, and includes the types of health care services and supplies that you would expect: physician and hospital services, lab tests, prescription drugs, dental and vision expenses, and the like. A handy guideline as to what is considered a medical care expense is IRS Publication 502. A HSA cannot be used to pay the premium for the HDHP (unless you are on COBRA, or are receiving unemployment benefits).
Some key points regarding distributions from your HSA include:
– You can use your money tax-free at any time for eligible medical expenses.
– If you are under age 65 and use your money for non-eligible expenses, you will be subject to income tax and a 20% tax penalty.
– When you turn 65, you can use the money for non-eligible expenses, subject to income tax, but without the 20% tax penalty.
The philosophy behind HSAs urges individuals to take more charge of, and to be more responsible for, how their health care dollars are spent. For example, instead of paying hefty premiums for extensive health care coverage you may not want or need, you buy a lower cost health plan with a higher deductible. This HDHP still will protect you from the cost of catastrophic health care expenses. However, because it does not provide first-dollar coverage for most care, you face decisions similar to those you make in other purchasing situations: Do I really need these services? If so, am I getting value and quality for the price I pay? In other words, for non-emergency situations, the HSA encourages you to shop around before spending your health care dollars
Hra – Health Reimbursement Arrangement
Health Reimbursement Arrangements (HRAs) are one of Health Insurance’s most misunderstood tools for an Employer to use. The recent changes in law have only highlighted some of the misuses of the HRA as a reimbursing tool for Insurance Premiums.
HRA’s are a much more effective (and legal) tool to be used in concert with a Medical Plan. Employers and employees alike can share in the savings of using a High Deductible/High Out of Pocket plan, and can take some of that savings to use for those who happen to have some medical utilization throughout the plan’s year. HRAs are not the best fit for each group, but when used in the correct situation, they are the perfect solution for an employer to save on insurance costs without raising the utilization expenses for their employees.
You can save thousands a year with a good HRA strategy. As your broker, we would sit down before the plan starts to pinpoint the exact dollar amounts that would be needed in the worst case scenarios, the expected savings and the potential benefits of a long term Heath Reimbursement Arrangement strategy.
Executive Benefits can be a wide range of things. We can help with insurance products that will help you recruit and keep the employees that are most valuable to your business.
Key Man Life Insurance
Every business has at least one person that keeps the business running for a profit. These are the people who are top sales associates, the experts in your field, have all of the contacts or keep all of your clients/employees happy. These “key men” have a value to every business and can devastate the bottom line if they were to unexpectedly pass away. To help protect your business, you can buy Key Man Life Insurance, which can give you time to restructure or hire and train a replacement to all of the vital employees in your workforce. To attract new talent, these policy’s can also split the death benefit to be paid to the employee’s family.
Unlike Medical Plans, Ancillary products can be written in a carveout plan, allowing access only once an employee reaches an Executive class of employment. These products encourage employees to work hard to reach the executive level while attracting the talent your need for executive roles from the competition.
All companies should have a plan for a change in ownership. Most have agreements in place to accommodate for the unexpected loss of an owner, popularly known as Buy-Sell agreements. When considering this for your business, what do you need to consider?
– Value of the Business?
- Will my family want to or be able to take my part in the company?
- What possible taxes will everyone have to pay if I don’t have an agreement in place?
- How would I or my fellow owners afford to fund the Buy-Sell Agreement?
If you don’t have a solid answer to any of these considerations, you need to sit down with someone who can help. We not only help with the set up and finalization of agreements, but offer life insurance that will fund Buy-Sells to take the burden off of you and your family.