A Cobra Exemption…

Employers who had fewer than twenty full-time employees on fifty percent of the business days in the previous calendar year are exempt from the federal requirements of COBRA. Based on your company size, you may need to annually review your need to comply with COBRA in each calendar year.

All full-time and part-time employees are counted when determining if an employer had at least twenty employees in the previous calendar year. Part-time employees are counted as fractions of full-time employees based on the number of hours worked by full-time employees in that business. For example, if a full-time employee normally works a 6-hour day, then two part-time employees working three hours a day equal one full-time employee. Additional guidance and rules apply.

— Claim Problems —

Insurance carrier claim processors all too often look for reasons to deny a claim. At TransparentRx the mindset is different. We look for ways to get claims paid; thereby, satisfying your employees with the outcome. We don’t win every dispute, but we are successful much of the time. We encourage you or your employees to contact your broker if you’re experiencing claim difficulties.

— Dropping Coverage in Anticipation of Divorce —

Q: If an employee drops coverage on his spouse during open enrollment and the reason he is dropping her is in anticipation of a divorce, what are the requirements of the plan offering her COBRA coverage? Are there employer obligations regarding dropping the spouse’s coverage?

A: Yes. If coverage is reduced or eliminated in anticipation of a COBRA qualifying event, and the individual whose coverage was previously terminated or reduced is considered eligible for COBRA at least as of the qualifying event, the spouse must be offered the coverage, effective at least from the date of the qualifying event, which in this case is the divorce.

The final COBRA rules note that if an employee cancels a spouse’s coverage in anticipation of divorce or legal separation, “Upon receiving notice of divorce or legal separation, a plan is required to make COBRA continuation coverage available, effective on the date of the divorce or legal separation (but not for any period before the date of the divorce or legal separation).

— Small Business Health Care Tax Credits —

The new health reform law gives a tax credit to certain small employers beginning with the 2010 tax year. To be eligible for the credit, an employer must be a “qualified employer”. This means you must:

1. Provide qualified health insurance to employees.
2. Employ fewer than 25 full-time equivalent employees (FTE).
3. Have average annual wages of less than $50,000 per full-time equivalent employee.
4. Contribute a uniform percentage (not less than 50%) of the cost of single coverage.

The maximum credit is 35% of the employer’s share of the premium cost in 2010-2013. Employers with more than 10 FTEs and/or average wages in excess of $25,000 begin to proportionally lose the tax credit.

In 2014 the tax credit is 50% and can be claimed for any two years. In 2014 and beyond, the tax credit is contingent upon dropping existing coverage and purchasing group coverage from a newly created exchange (government created purchasing co-op).

TransparentRx thinks it is important for employers to study and understand this section of the code, since some planning opportunities exist that could help them qualify for the maximum credit available. The availability of the Small Employer Tax Credit may encourage some employers to proceed with additional layoffs or terminations and to halt any plans to add employees in order to maximize their tax credit.

Below is a link to the IRS Website regarding the Small Business Tax Credit:

In a RFP the Whole is Greater than the Sum of its Parts

Gestalt theory suggests that the “whole is greater than the sum of its parts.” In other words, each individual working part of a team, a piece of equipment or even a contract is less significant than the results achieved when these parts are combined for one well-defined goal.  Plan sponsors and their agents tend to take the opposite approach when evaluating PBM proposals.  There are three key areas for improvement most plans sponsors can take advantage of in their RFP process: designevaluation and compensation.

In most RFP processes conducted by brokers or HR generalist consultants, they simply send out the request, get the top three bids and ask you, the payor, to select the vendor with the lowest price points.  The big problem here is that in most cases the price points for which your decision is based are often perceived and not real.  In fact the prices are often trivial!  As a payor your questions should be…

1.  On whose behalf is my agent negotiating with other PBMs; mine or their own?
2.  What are my actual costs?
3.  Based upon my key performance factors, is this really the best deal?
Perhaps you have experienced this situation.  You believe the deal with your broker consultant is great because you don’t compensate them directly.  Further yet you believe the consultant will always work in your best interest.  Is it feasible to believe that in a capitalistic society when someone else is footing the bill a sales-based organization is more loyal to the non-paying party?  Maybe you believe so personally I don’t. 
Early renewal is a logical alternative to conducting an arduous RFP process.  It is very tempting to use an incumbent broker or consultant for the entire RFP process.  However, it is very challenging, at best, to distinguish the difference between your existing consultant and the PBM due to what I consider conflicts of interests.  Identify 8 -10 key performance factors and focus on these during your evaluation process.  Don’t be impressed by 50 page RFPs.  They often contain requests for information that are commonplace in the industry and simply waste everyone’s time.  You’ll understand why in bit. 
Your consultant will seek bids from vendors other than the one promoted in their coalition.  However, they will only receive a “management fee” if you select their program.  Many plan sponsors would be surprised to learn the actual costs of their PBM program.  You are “footing the bill” regardless of what you’ve been told.  Your consultant’s “management fee” is being factored back into the cost of your plan whether you know it or not.
Ultimately, you want the plan that will produce the lowest net cost, not the highest rebates.  If a consultant offers you an unusually low fee or no fee to conduct your procurement, ask yourself whose interests they truly represent.  I suggest you use an independent firm focused on getting the “right” arrangement for you from whichever PBM is the best fit.

Service is an Attitude…Tips for Evaluating Brokers

In discussions with clients, we hear that their customers continue to expect more and more of them. In the benefit area, good service, technical expertise, and problem resolution have become the minimum standard that employers expect from their brokers.

There are thousands of insurance sales people in this country. All can sell health insurance products and services to your firm. With that number of “suppliers” to choose from, how do you select the best organization to which you will entrust your employee benefits?

Be assured, TransparentRx, LLC is committed to customer service for our clients and the employees of our clients. Competitors have said, “When it comes to service, we are just like TransparentRx.” We are proud of the comparison but encourage you to dig a little deeper.

How should you evaluate the service attitude of one insurance agency vs. another? Open-ended questions are one of the best ways to get an in-depth look at someone’s service attitude. Some questions you might ask:

  • What is the best way for my employee to resolve a claim problem?
  • Are employees encouraged to call the agency for personal assistance or to call the insurance company themselves?
  • What is the “problem resolution process” in your agency?
A well thought out process is like a well-oiled machine; things get done and that’s what you want. With written ISO 9002 type procedures, problem resolution becomes routine and successful most of the time.
  • Tell me about your staff.
  • One person can only do so much; depth of staff is critical to an agency’s “service attitude”. What is your “commitment to service”?
  • Is it written, verbal, or off the cuff? A written Commitment to Clients is one benchmark that an agency takes service seriously.
  • Can I have a copy of your mission statement?
  • Does the agency mission statement talk about growth and new sales or… focus on an attitude of service?
  • What is your hiring process for service personnel?
  • How do they uncover the “service attitude” of prospective employees… interviews, personality testing, references, or has it not been thought out?
  • What do I do if I have a question about COBRA?
COBRA is benefit related and is your largest unfunded and uninsured liability. Does the broker embrace your COBRA problems as his or her own or are you handed off like a hot potato?

Q. An insured employee did not enroll her spouse for the new plan year at open enrollment. She and her spouse were separated at the time, but the divorce was not yet final. The spouse is furious that his coverage was dropped without his knowledge. What is the employer’s obligation to him?

A. If coverage is reduced or eliminated in anticipation of an event, the reduction or elimination is disregarded in determining whether the event causes a loss of coverage. For example, if an employer eliminates coverage in anticipation of an employee’s termination, or if an employee cancels the coverage of his or her spouse in anticipation of a divorce or legal separation, that loss of coverage is disregarded for purposes of COBRA. That is, the individual whose coverage was terminated in anticipation of a qualifying event is still considered eligible for COBRA and must be offered the coverage, effective at least from the date of the qualifying event.

The final rules note that if an employee cancels a spouse’s coverage in anticipation of a divorce or legal separation, “Upon receiving notice of the divorce or legal separation, a plan is required to make COBRA continuation coverage available, effective on the date of the divorce or legal separation (but not for any period before the date of the divorce or legal separation).”

Alternatively, the plan can treat the qualified beneficiary’s use of the plan’s health services as a constructive election of COBRA continuation coverage and, if it so notifies the qualified beneficiary prior to the use of services, can require payment for COBRA continuation coverage.

Targeted for Termination? You be the Judge

In some states insurers are limited by law in their ability to increase rates or cancel group health insurance contracts that are not profitable for them. These laws protect employers with 2 to 50 employees.

Insurers are able to enforce contractual provisions and enforcement could include cancellation of coverage. Is it possible that insurers have begun an effort to become more profitable by cancelling high risk groups that do not abide by all of the agreed upon contractual language? Two popular insurance companies have recently begun performing “eligibility audits” in an effort to determine if contract terms are being honored by employers. It may be a coincidence that the groups chosen for audit were groups known to have high claims and who were unprofitable for the insurer.

One insurance company sent a letter to the employer asking for a great deal of confidential payroll information. Normally the broker would be copied on such a communication; however, this was not the case in this instance. The letter stated that coverage would be cancelled if the requested information wasn’t received by a specific date. The business owner intended to provide the requested information but misplaced the letter by mistake. Several days after the deadline, a cancellation letter was received from the insurer. There was no follow up letter or second request sent. Health insurance coverage was cancelled for 23 employees and families, many of whom have serious medical conditions. While this may be an isolated incident, it may also be the start of a new tactic insurers are using to deal with some of the more difficult regulations they face. Time will tell.

The 51-500 employee market is somewhat different in that there are no rate caps to which carriers must abide. There is no need for a carrier to cancel a contract like in the smaller case market. Carriers simply raise rates to the breaking point for an employer. The employer will change carriers or dramatically modify benefits. Either way, the carriers profitability problem gets resolved.

The lesson to be learned is that informational requests by your insurer must be taken seriously and acted upon promptly in order to protect you and your employees from a similar outcome. Act on the request immediately by bringing your broker/consultant into the loop right away. They’ll help you navigate through in the “world of health insurance.”

Does your company provide insured short and long-term disability benefits? Have you updated the insurance company on the earnings of your employees recently? Do you increase the maximum benefits periodically to provide adequate coverage for your higher paid employees?

In the rush to get products out the door and to pay the bills, reporting salary increases to your carrier may not be a very high priority. Reporting salary increases when they occur or at least annually assures that maximum benefits will be paid to a disabled employee. This will also eliminate retroactive premium requests from the carrier.

The value of rigorous and regular eligibility audits has continued to prove itself to TransparentRx throughout the years. An eligibility audit is simply verifying that all employees and dependents associated with your company are enrolled or not enrolled appropriately in your benefit plans.

The audit can save money now and it can reduce liability for an employer. Saving money now refers to premium dollars being spent on dependents that should not be covered on your plan. The dependent may be ineligible according to the terms of your contract or the employee may no longer desire coverage for the dependent. The audit may also uncover situations where an employee is not paying the correct contributions for coverage elected. Insurance carriers are very strict about refunding premiums for employees or dependents that were enrolled in error, yet a mistake can result in thousands of dollars in overpaid premiums.

There is a great deal of risk shifted to an employer when non-eligible individuals are on the health insurance plan. It is a common belief that if an employer is paying the premium for someone, they are covered for medical expenses up to the policy limits. This is not the case. Individuals are covered if they meet the eligibility requirements of the plan. Frequently, small claims never get challenged. Inappropriate enrollment is most often discovered when there is large claims to be paid. In that case, the insurer can retroactively terminate someone and not be held responsible for the claims. If this happens, fingers most often point to the offending employer for payment of the claim.

The solution is a regular enrollment audit that compares an employer’s desired coverage with the actual enrollment with consideration for insurance company eligibility rules. Twice yearly is not too often and the process gets easier each time it is done. Of course the audit should look at payroll records to be certain the correct deductions are being charged.