Month: September 2014

Question: Can we still provide executive physicals or is that now considered discriminatory? Answer: There are existing regulations under the Internal Revenue Code Section 105(h) nondiscrimination rules that allow benefits for “medical diagnostic procedures” to be paid to highly compensated employees without giving the same benefit to the non-highly compensated employee group. Under 26 CFR … Continued

On August 22, 2014, the Departments of Health and Human Services (HHS), Labor, and Treasury released an interim final rule and a proposed rule that provide some new accommodations to employers that have religious objections to covering contraception under their group health plans. The agencies also released a fact sheet on the rules and an alternate form that religious organizations (like religious hospitals, universities and charities) may use.

The Patient Protection and Affordable Care Act (PPACA) requires non-grandfathered health insurance carriers and employer-sponsored group health plans to cover preventive services without cost sharing.

This includes women’s preventive health services, including all forms of contraceptives that have been approved by the Food and Drug Administration. (This includes sterilization; there is no requirement that abortion be covered.) This requirement is an issue for both for-profit and non-profit organizations that have a religious objection to covering some or all types of contraception.

HHS has attempted to accommodate the concerns of non-profit religious organizations by completely exempting “religious employers” (essentially, churches) that have religious objections to covering contraceptives from the requirement. HHS also created a process under which “eligible organizations” (non-profits that are religious organizations and that have a religious objection to providing all or some contraceptives) are not required to directly cover, arrange, or pay for contraceptive coverage for their employees or students. Instead, these eligible organizations must provide a copy of a self-certification form to their insurer or third party administrator (TPA). The insurer or TPA then must provide or arrange for coverage for contraceptives at no cost to the women or the organization. It was assumed that the insurers would save enough money from fewer maternity claims to cover the cost of contraceptive coverage. The TPA for a self-funded plan is responsible for contracting with an insurer to provide the coverage; the insurer then is to deduct the cost of coverage from fees that it would otherwise owe a federally facilitated exchange.

Some eligible religious organizations felt that completing the form amounted to sanctioning this coverage and have filed lawsuits. To respond to those objections, HHS has created an alternative process. Under the new process these organizations may simply notify HHS that they have a religious objection to providing coverage for some or all types of contraception, and HHS will take care of coordinating coverage with the insurer or TPA. HHS has provided a model notification form.

The agencies did not originally offer a similar accommodation to for-profit organizations, on the assumption that for-profit corporations could not hold religious beliefs. However, in the Hobby Lobby case, the U.S. Supreme Court found that “closely held” for-profit employers could hold religious beliefs that covering contraception could violate. To comply with that decision, the agencies have issued a proposed rule that would allow a closely held for-profit organization to qualify as an “eligible organization” and obtain the same exemption as a non-profit religious organization. To prove its objection, under the proposal the for-profit organization would need to take a valid action in accordance with its governing structure under state law (such as a Board resolution) to state its religious objection to providing contraceptive coverage.

The proposed regulation has asked for comments on how to define a “closely held” corporation. One option would be to define it in terms of a maximum number of owners, such as fewer than 100 or 45.

Another option would be to define it in terms of minimum fraction of ownership owned by a set number of owners, such as at least 50% owned by five or fewer individuals.

For further information about health care reform compliance, visit UBA’s PPACA Advisor Resource Center.

By Mathew Augustine, GPHR, REBC
CEO, Hanna Global Solutions

The advent of state insurance exchanges last year has promoted a paradigm shift in the distribution and sales of insurance programs as part of employee benefit programs. Individuals using their ‘own’ funds to pick from virtual ‘store shelves’ of a wide range of insurance products is not an experience limited to employees of large corporations supported by big technology and service operations anymore. Consumers are making ‘purchase’ decisions as opposed to employees making ‘enrollment’ decisions; choice is being driven from ‘lowest price’ to ‘highest value’; decisions are moving away from employers preselecting a set of comprehensive plans on behalf of their employees, to employees putting together a portfolio of insurance products to suit their specific situation.

Many have compared this paradigm shift to the change that happened in pension plans from defined benefit to defined contribution. This one is even more significant. An employee can make some default decisions (or employers can decide for them) when it comes to 401(k) plans, at the time of enrollment, and then later change fund selections and rebalance their portfolio at any time during the year. This is not the case when it comes to insurance products in an employee benefit portfolio – you have to choose your portfolio at the time of enrollment and are stuck with it for a year until the next open enrollment window.

This places a lot of responsibility on advisors and employers to educate employees and communicate all the benefits and programs that are being made available. It takes the responsibility of employee benefits communication up a level. Classic marketing discipline must be applied to do this right. It is useful to consider the four P’s of marketing – product, place, price and promotion.

Product: A full variety of insurance products can be put together. If offered a range of medical plans, these plans must be complemented by supplemental plans such as critical illness and accident plans so that those choosing high deductible plans can gain protection against catastrophic situations. A young, healthy person should be able to select a low cost, high deductible plan design and redirect the premium savings to a health savings account (HSA) to build a fund for later years of higher utilization.

Place: These products must be offered in an easy to understand, easy to select ‘shelf’. Only those products that are eligible to a person must be presented to him or her, with clear ‘labeling’ of product features and price. That person should also be able to make comparisons among options available, without being limited in their options or decisions being made for them based on some broad generalities.

Price: The benefits manager in a company takes on the role of a product portfolio manager with the responsibility to set the right product-price mix. Use of the defined contribution model of employee cost sharing, with the right combination of options for employees to use their employer contributions, can help realize an employer’s benefit strategy, and help employees make decisions that are appropriate to their family situation and risk tolerance.

Promotion: Clear communication of the benefits program has always been a significant contributor to the level of satisfaction that employees have of their benefits program. The range of options presented, the independent decision making by employees on their choices, and additional products available, all make communication more challenging and necessary. Add to this the compliance overheads of statutory notices and plan documents, the proper promotion of benefit programs requires a professional marketing approach.

The good news is that this marketing approach, if executed well, will deliver results in multiple areas – employee satisfaction, cost control, regulatory compliance, and employee engagement. It is time for HR and employee benefits teams in companies to develop marketing in their skillsets or employ full-time product management or marketing communications specialists to market their employee benefits portfolio.

Download a complimentary copy of the UBA white paper, “A Business Case for Benefits Communications,” from http://bit.ly/1gJR3GE.