Two Minute Drill

Did You Receive an MLR Rebate Check from Your Insurance Carrier?

Wondering What to Do With It?

To comply with provisions of healthcare reform, insurance carriers and health plans have to provide rebates to policyholders if their medical loss ratio – the percentage of premiums spent on reimbursement for medical services and related health care quality activities – does not meet the minimum standards for a given plan year as defined in the Affordable Care Act.

Some employers will be receiving checks this month. If you receive a check and are wondering what to do with it, refer to our primer summarizing key points that may help guide you.

Example Rebate Check

Example Rebate Check

For those of you who want to drill into more technical details go to: http://www.dol.gov/ebsa/pdf/tr11-04.pdf

The IRS guidance on tax implications of the rebates can be found at: http://www.irs.gov/uac/Medical-Loss-Ratio-(MLR)-FAQs

Swedish Retail Giant IKEA – Raising the Bar for US Retailers?

According to an article in The Huffington Post today, Ikea plans to increase the minimum wage for all employees of its US stores, and in doing so, will likely raise the bar for other American retailers.

Well known for their “ready-to-assemble furniture and home goods” Ikea plans to tie wages to MIT’s “Living Wage Calculator.” The calculator tool estimates the base salary a worker needs to make in order to live in a particular geographic area.

The article says that this move by Ikea will boost the average minimum wage to $10.76, a 17% increase, and also means about half of the store’s 13,650 employees will be getting a raise. Rob Olson, Chief Financial Officer and acting president of Ikea US says the rates will go into effect Jan 1, 2015. Olson also told The Huffington Post, “It’s all centered around the Ikea vision, which is to create a better everyday life for the many people.”

Using a living wage calculator to determine salaries based on geographic location seems to be a first for major American retailers. The new minimum wage will vary from $9 to just over $13 among Ikea’s 38 retail stores, plus several distribution and service centers and one manufacturing plant based here in the US.

Olson says the new wage structure is part of Ikea’s effort to attract employees by making its pay and benefits plan more appealing. The company recently expanded its benefits package by increasing the employer match on its 401k plan and launching a separate retirement account for employees that have been with the company for at least five years.

IKEA GIVES HALF ITS US WORKERS A 17% RAISE

The company has decided to focus solely on the co-worker, rather than follow the lead of the competition – other US retailers. Bold move. The article goes on to point out, however, that Ikea is not the only retailer to raise wages across the board for its employees. Gap Inc. announced earlier this year that it would raise wages affecting more than two thirds of its 90,000 workers.

As the article points out, this will undoubtedly become a talking point as the national debate heats up over increasing the federal minimum wage, currently $7.25 per hour. It hasn’t been raised since 2009. Olson asserts that Ikea’s decision should not be read as an endorsement of any legislative proposals regarding minimum wage.

Read the full article, Ikea To Raise Minimum Wage For U.S. Workers With Tie To Living Wage Calculator

Wondering How Long You Can Keep Your Pre-2014 Plan?

The answer: Probably at least through 2017. The time table for small employers still offering a health plan issued prior to 2014 (and technically doesn’t comply with all the provisions of the Affordable Care Act) could extend well into 2017.

In March, the Obama administration released guidance extending the renewal of health insurance policies that don’t meet all the ACA standards through October 1, 2016. This means that health policies that exist today, but do not comply with ACA provisions that went into effect in 2014, can be maintained through 2017.

It’s up to the individual states and respective insurance companies to adopt the extension.  Those states (all but a handful) that have chosen to allow carriers to renew non-compliant policies for policy years starting after January 1 of this year are likely to adopt the extension.

To read more about this extension go to The Extended “Fix” for Cancelled Health Insurance Policies: Latest State Action on the The Commonwealth Fund Blog.

June 12 Post - Map

Getting ahead of ACA Strategies

The IRS is trying to keep employers in the group health market. The new ruling is somewhat complicated. What a big surprise, huh?

The IRS is saying that the ACA requires that plan sponsors ensure that there are no limits on the mandatory essential health benefits ACA requires, also known as “lifetime maximums.” If a group plan does not guarantee that the insured has all the essential health benefits required by ACA, then the plan is not qualified.

This article seems to be based on a premise that the plan sponsor, in this case, the employer, has no idea what the insured actually has. Therefore, if a benefit is issued, but th member does not have the ACA essential health benefits, then the plan does not qualify and is subject to tax.

But, if the plan sponsor does guarantee that the insured does possess the ACA minimum benefits, then the group sponsor is compliant.

The administration does not want employers simply giving money to employees to pay claims. This will get them further, rather than closer, to achieving their goal that Americans have coverage that will not run out due to lifetime limits.

To read the entire article, read IRS Bars Employers From Dumping Workers Into Health Exchanges.

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Lawsuit filed by patients against narrow network of major PPO – isolated or bellwether?

Something’s gotta give…….. and apparently it is.

Patients want to receive quality care from familiar providers on a timely basis at lower costs.

Doctors and hospitals want to maintain and increase current levels of reimbursement.

Insurance companies needing to comply with the new ACA requirements and control costs are squeezing provider reimbursement rates and eliminating those providers that won’t accept lower rates.

With all this going on employers and their employees are more concerned than ever about cost, coverage, and access to doctors and hospitals. Some feel cornered and are starting to take action.

A lawsuit was recently filed by some new customers of a major California PPO. The outcome of the suit, and others like it that are to follow, could signal how things will take shape down the road in terms of reliable and continued access to a given doctor or hospital at any point in time.

According to the suit filed against Blue Shield of California, the customers did their homework before signing on with one of Blue Shield’s narrow network products. Before purchasing their plans they checked the insurance carrier’s website directory and called the insurance carrier, the respective treating providers, and the providers from whom they would be seeking treatment to confirm participation in the specific network. Later they came to find out that those providers were either dropped from the network without notice or were never considered in the network at all.

In layman’s terms the lawsuit appears to center on a combination of misrepresentation, false advertising, and lack of good faith effort to communicate changes as it pertains to provider network composition and how services will be covered.

We’ll report back on anything significant as this story plays.  In the meantime look for a series of posts from us highlighting pragmatic and creative approaches taken by some engaged employers to maintain employee and dependent access to key providers without increasing costs. If you have something you’d like us to address or have your own story to share please drop us a line.

You can read more about the California lawsuit in When a PPO isn’t.”

Repair, Not Repeal.

That is the conundrum now over Obamacare, or the Affordable Care Act (ACA). It appears Americans are coalescing around the idea of fixing or repairing the unpopular parts of ACA rather than repealing it. So far, the law has been rolled out with the following popular and unpopular components:

Popular

  • children stay on parents plans to age 26
  • elimination of pre-existing condition clauses
  • guarantee issue for individual policies
  • free “wellness” programs
  • subsidies based on income

Unpopular

  • individual mandate
  • emerging “narrow networks” trend
  • employer taxes (still largely unknown to the population at large)

So does repair mean…

  • richer subsidies?
  • elimination of the individual AND employer mandate?
  • regulation of carriers to offer more robust choices?
  • elimination of employer taxes?
  • repeal of the “cadillac” tax?

Reading the law and seeing how the financing of it is projected, it seems more unpopular items need to be implemented. The law’s taxes, mandates and medicare cost reductions will not be popular, but are essential. If you see another way of stabilizing this law over the long run, please let me know. Perhaps a single payer system? Maybe Google will come to the rescue.

To read more on this topic, Americans want to Fix, Not Repeal Obamacare, or Politifact’s Truth-o-Meter on Which is more unpopular: Obamacare or repealing Obamacare?

Big Pharma Companies Prescribe Higher Prices

An article about big pharma companies and their pricing policies show a trend toward sharply rising drug prices. It doesn’t seem likely that it will slow down any time soon. I warn you – there’s tons of details to consider when it comes to pharmaceutical drug costs. Here are some key takeaways:

  • Big Pharma is in a period of intense consolidation
  • The cost of brand-named drugs is soaring
  • Starting prices of new drugs are escalating
  • More concentration in a therapeutic area = higher prices
  • Generic drugs now make up 86% of all medicines used in the U.S. but that hasn’t reduced total spending on prescription drugs
  • The economics of prescription drugs are unique compared to other major markets
  • Turf wars between drug makers are driving costs higher
  • Rising prices of brand-named drugs is roughly equal to losses due to patent expirations

If you or your employees are concerned about the rising cost of drugs, stay tuned…you’ll see more about this hot topic from us.

To read the entire article, read Big Pharma’s Favorite Prescription: Higher Prices as seen on BusinessWeek.com

Employers are on the hunt! Says a new survey…

Seems like everyone wants to know what’s on the minds of employers and what they are thinking about insurance. A new survey conducted by Wells Fargo Insurance interviewed 70 employers across the U.S. Results show that as employers and their employees face higher costs, deductibles and copays the employers are searching for ways to control costs and help employees improve their health.

The survey findings also show the top three employer product innovations this year include:

  • Accountable Care Organizations (ACO’s)
  • increased wellness programs
  • narrow provider network offerings

47% of survey respondents say they will develop their own private proprietary exchange by 2015.

Read the full article at Wall Street Journal online, Survey: Cost of Healthcare Claims Continue to Rise; Interest in Private Exchanges Increases

Are you an employer? What are you thinking about insurance?

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