Life Events

Beyond the options offered by the annual open enrollment period, health insurance subscribers may be unaware that a number of significant life events—a marriage or divorce, loss of eligibility under another plan, a child’s birth or adoption or placement for adoption—can also trigger a “special enrollment” opportunity outside their annual open enrollment period. This special enrollment window applies only to the individual(s) and event in question and can’t be used to make other plan changes.

Newly Acquired Dependents

Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), coverage for a newborn child begins on the day of birth. You can also add coverage for a child while in the process of adoption once you have assumed full or partial financial responsibility for the child. In either case, you must notify the insurer within 30 days.

Coverage of a new spouse begins the first day of the month following the enrollment request. Covered individuals must notify insurers within 30 days to attain coverage for a new spouse. As with any new plan member, those individuals over age 19 who are eligible for a special enrollment period may be subject to preexisting condition exclusions, but prior creditable coverage can reduce or eliminate the exclusion period.

Loss of Other Coverage

Another sort of special enrollment opportunity arises when an employee who previously declined coverage through an employer’s group plan loses coverage from another source. This situation can arise because of a divorce or legal separation, the death of a spouse, or the loss of insurance through a spouse’s job loss. Under these circumstances employees can enroll in an offered plan under the same terms as any new employee. The employee can also apply for coverage of his or her spouse and dependents.

There are, however, some very important conditions to keep in mind. The employee must request enrollment within 30 days of loss of coverage and must have officially waived coverage at the time it was offered. Both employers and employees should keep the latter in mind because health plans have the right to require a copy of the waiver the employee signed when coverage was originally declined. An employee who hasn’t completed and signed a waiver of benefits may not qualify for a special enrollment opportunity later. Additionally, the California Health and Safety code requires employers to provide notice to employees of this requirement and the potential consequences of failing to complete the waiver.

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The following information is provided by Banyan Administrators:

Another component of the Health Care Reform Act signed into law on 3/23/2010 is that beginning with the 2011 tax year, employers must report the aggregate cost of applicable employer-sponsored health insurance coverage on employees W-2 forms.  General information about this requirement has been provided, however, the Department of Labor (DOL) has not yet issued Interim Final Rules on this provision of the Health Care Reform Act.

1. When does an employer have to be ready to be in compliance with this new reporting requirement?

Employers must be prepared to accurately report this information on an employee’s 2011 W-2 form as early as February, 2011.  Although employers will be sending most of the 2011 W-2 forms to the employees in January, 2012, if an employee terminates employment in 2011, they do have the right to request an early 2011 W-2 form.  Employers must be prepared for this possibility.

2. How is “applicable employer-sponsored health insurance coverage” defined?

The “applicable employer-sponsored health insurance coverage” is more than just the employer’s health plan.  The requirement includes:

• Medical plans;
• Prescription drug plans;
• Health Reimbursement Accounts
• Executive physicals;
• On-site clinics if they provide more than de minimus care;
• Medicare supplemental policies; and
• Employee assistance programs (EAP).

Typically, dental and vision plans are not included if they are “stand alone” plans.  For example, most employers will have a separate dental or vision plan with, perhaps, a different insurance carrier than their medical plan.  However, an employer might sponsor a medical plan that has a separate rider that provides a benefit for routine vision exams.  In the latter case, the cost for the vision rider should be factored into the cost/value.

Other benefits in which an employer might be making a contribution on behalf of an employee, such as flexible spending accounts, health savings accounts, specific disease or hospital/fixed indemnity plans, are excluded from the reporting requirement.

3. How does an employer calculate the cost/value for the “applicable employer-sponsored health insurance coverage”?

For medical plans and prescription drug plans an employer should use the fully-insured monthly rates charged by their medical and prescription drug carriers.  Employers with self-funded plans should use the rates developed for COBRA participants (minus the 2% administrative fee).

This is an area in which further guidance is needed from the DOL, through issuance of Interim Final Rules, and from the IRS.  For example, how should the cost/value be calculated for an employee whose coverage starts or stops mid-month?  For fully-insured plans the expectation is that cost/value will be calculated based on the amount of monthly premium payments made by the employer to the insurance carrier for the employee.  For self-funded plans, however, the calculation may be more difficult.  Will the cost/value be prorated based on the number of days for the month and calculated on a per day basis, or, will the calculation be based on a cut-off date for the month?  For example, if an employee has coverage for more than half of the month, should the employer add that month’s COBRA rate to the employee’s calculation?  If the employee had the coverage for less than half the month, the employer should not add that month to the employee’s calculation?   We will provide further guidance when updates from the DOL or IRS are released.

4.  How does an employer calculate the cost/value for an on-site clinic or an EAP?

Once again, this is an area in which further guidance is needed.  Most employers with an on-site clinic have probably never calculated the cost/value of that benefit to its employees.  Even if the employer had calculated the cost/value of that benefit, at this time, there is no guarantee that the methodology would be acceptable.

An employer paying a premium rate to an EAP vendor would use that premium to calculate the cost/value.  However, recent years have seen a trend in EAP services being provided to an employer as a value-added service by a different vendor, typically, the life or disability insurance company.  Guidance will be needed as to how to determine the cost/value in these situations.

5. Will the employee be taxed on the cost/value of the employer-sponsored health insurance?

No.  The reporting of the cost/value of the employer-sponsored health insurance is for informational purposes only and the employee, at this time, will not have to pay tax on the amount reported.

6. What are the reasons for this reporting change?

The reasons for this new W-2 reporting requirement have never been clearly defined. However, the assumption is that there are 3 probable reasons for this change.

• Disclosure – Employers will now be reporting to the employees the actual cost/value of the health insurance.    Previously, most employees did not have this information unless the employer sent communication materials such as benefit statements.

• Individual Mandate – In 2014, all U.S. citizens will have to have health insurance or pay a penalty.  How an individual is going to document having coverage is still unclear – perhaps the W-2 will be the vehicle used for documentation.

• “Cadillac Tax” – Beginning in 2018, employer-sponsored health plans with aggregate values exceeding $10,200 for individual coverage and $27,500 for family coverage will be subject to the “Cadillac Tax”.  How will the IRS know which employer-sponsored health plans are subject to this Cadillac Tax?  Most likely from the amounts reported on the W-2 forms.  If subject, then the Plan will be taxed.  The employee will not be taxed, at least not directly.

7. What do I need to do now?

• Develop an implementation strategy with your Payroll department and/or your Payroll administrator by February, 2011.

• Determine how and if you can calculate the cost/value for all the plans subject to reporting on the W-2 form.

• You may want to consider preparing a communication piece for your employees to, first, alert them of the inclusion of the new information on the W-2 so that they will see the amount you pay for health insurance coverage for them and, secondly, to assure them that they are not being directly taxed on this amount in 2011.  For future tax years, there is no expectation that the employee will be directly taxed on this amount however that is always subject to change.  Your Payroll department and/or Payroll administrator may already be drafting communication pieces on your behalf. 
 
If you have any questions on this or any new health care reform regulation, please consult with a member of your Banyan Consulting team.

The old idiom with the words, “two is company,” was reinforced at a recent CalCPA member event. A ProtectPlus staff member was chatting with an accountant who described himself as a sole practitioner while mentioning that he had an assistant. He subscribed to ProtectPlus as a sole practitioner, he said, because the person who helped him already had medical coverage through her spouse’s employer, and she wanted to keep that coverage.

Alerted to a possible misunderstanding, the ProtectPlus representative responded by pointing out that under ProtectPlus rules even if his employee waived coverage, the accountant qualified for the lower premiums of firms with 2 to 14 employees. In addition, if the firm ever moved to another carrier, it would not be subject to underwriting to qualify for coverage. Moreover, simply having that employee on staff is enough to qualify for the lower rates as long as the employee is working a minimum of 20 or 30 hours a week. Even if the employee waives the benefit—whether because he or she has other group insurance coverage or a Kaiser plan—the CPA still qualifies for coverage at the two-member firm rate.

ProtectPlus subscribers should keep in mind that the same rules apply to a CPA sole practitioner who employs his or her spouse. As long as the spouse works at least 20 hours per week and is compensated as an employee, the CPA firm is defined as a group of two. The CPA can purchase a ProtectPlus policy at the lower rate, forego underwriting, and choose whether to include the spouse as a dependent on his or her policy, or cover the spouse as an employee under their own policy. However, in firms where the only other employee is the spouse, the Trust requires documentation (W-2, payroll records, income tax returns, etc.).

For CalCPA members—especially sole practitioners and small firms—one of the greatest benefits of the Group Insurance Plans is access to high quality medical insurance at prices that are competitive to those usually offered to large firms. While true sole practitioners are subject to underwriting, the ProtectPlus policies available to them will for the most part be miles ahead of anything they can purchase on the individual market. And even those who don’t qualify for coverage due to their medical history may qualify for a ProtectPlus HIPAA option. For more information please contact Banyan Administrators (877) 480-7923.

The following information is from the IRS Web site, IRS.gov:

IR-2010-38, April 1, 2010

WASHINGTON ― Many small businesses and tax-exempt organizations that provide health insurance coverage to their employees now qualify for a special tax credit, according to the Internal Revenue Service.

Included in the health care reform legislation, the Patient Protection and Affordable Care Act, approved by Congress and signed by President Obama on March 23, the credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.

“This credit provides a real boost to eligible small businesses by helping them afford health coverage for their employees,” said IRS Commissioner Doug Shulman. “We urge small businesses and tax-exempt employers to look closely at this important tax break — which is already effective — to see if they qualify.”

The maximum credit is 35 percent of premiums paid in 2010 by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. In 2014, this maximum credit increases to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible employers that are tax-exempt organizations.

The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ low and moderate income workers. It is generally available to employers that have fewer than 25 full-time equivalent (FTE) employees paying wages averaging less than $50,000 per employee per year. Because the eligibility formula is based in part on the number of FTEs, not the number of employees, many businesses will qualify even if they employ more than 25 individual workers.

The maximum credit goes to smaller employers — those with 10 or fewer FTEs — paying annual average wages of $25,000 or less.

Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt employers, the IRS will provide further information on how to claim the credit.

The IRS will use postcards to reach out to millions of small businesses that may qualify for the credit. The postcards will encourage small business owners to take advantage of the credit if they qualify.

More information about the credit, including tax tips, guides and answers to frequently asked questions, is now available on the IRS Web site, IRS.gov.

[Information Source]  [Image Source]

About this Change
Susan Young, executive director of the Group Insurance Trust commented,

In light of Seabury’s long service to the Trust, deciding to move our account wasn’t easy. However, in seeking the best possible service for our members, we wanted to take advantage of Banyan’s skills.

Starting November 1, 2009, Banyan will be responsible for the following:

• Customer service
• Billing
• Payment processing
• Record-keeping
• Marketing support
• Receiving and accounting for participant contributions
• Maintaining records of eligible participants
• Preparing financial reports for GIT staff and trustees
• Banyan will also process all enrollment and change applications
• Maintain an interface with Anthem Blue Cross
• Help new firms and new employees set up their accounts, and manage employee eligibility

For many ProtectPlus members, of course, the primary and often the only point of contact with the plan administrator is when they call or email with a question. Banyan brings to this customer service role a history of serving 220 organizations and group plans beginning in 1994, including other MEWAs (Multiple Employer Welfare Arrangements) in its home state of Pennsylvania that have similar needs and concerns as the Group Insurance Trust. Scott Fair, executive vice president of Banyan, is very clear about “how important customer service interactions are in presenting the face of an organization.”

Banyan Customer Service Center
The Banyan customer service center is staffed by Banyan representatives—all  are licensed brokers—who are there to answer your questions whether by phone or email. Moving all these services to a higher level, Banyan brings with it a high degree of technological sophistication, so that relevant information will be more quickly and easily accessible. For a benefits  administrator this can mean resolving an eligibility issue online, and for Trust staff, the ability to monitor plan performance more closely.

More Advanced Technology
“Banyan has the ability to track data and follow member questions in a way  that ensures questions and concerns are resolved in a timely fashion,” says Judy Graziani, director of marketing. “Additionally, the Banyan customer service system can quickly identify a returning caller, access historical case notes, and provide prompt assistance whether for a new or existing service inquiry. No more need to provide annoying repetition of the details of an on-going issue.”

Judy Graziani notes,

Another great feature of the Banyan system is that it gathers data on issues that arise frequently. This information will allow the Trust to make more informed decisions regarding plan benefits and service issues.

Improved Services
Fair emphasizes a number of new and/or improved services that will be implemented over the coming months including “both online, multi-media presentations and mailings to help members understand their choices.” Stressing his firm’s technical capacities, he also mentions that they will  be creating more online capabilities.

For instance, Banyan will be introducing web services that allow a benefits manager to access and update the firm’s account, and firms will even have the ability to transfer some of these responsibilities to individual employees if it so desires. As an added benefit to human resource departments, Banyan has contracted with the Bureau of National Affairs to make available a host of online reference and legal materials to participating ProtectPlus firms at no extra charge.

Starting November 2
You can contact Banyan Administrators with any questions regarding eligibility, billing, or customer service issues. In addition, Banyan Administrators customer service representatives will be available to answer any questions;

Customer Service: (877) 480-7923
Fax (877) 237-4519, or
Email: cpaprotectplus@banyan-llc.com.

Mailing Address:
Banyan Administrators, LLC, Program Manager for the CalCPA ProtectPlus Programs
1215 Manor Drive, Suite 200,
Mechanicsburg , PA 17055.

The release went on to say that the Trust’s risk-adjusted capital position “remains favorable,” and is built upon “its historically positive operating results.” This gives a tremendous boost to all the GIT plans, affirming that they are as reliable as they are valuable.

Extended Rate Guarantee
On the heels of this good news, the Trust has announced that it will guarantee current 2009 premium rates for any newly enrolling firms through December 31, 2010. In terms of cost, there will never be a better time to switch to ProtectPlus than now. As CalCPA members you have available a variety of high quality health insurance plans that are already  competitively priced. By acting now, you and your employees can maintain current 2009 rates throughout 2010. Add to this the fact that ProtectPlus rate actions have averaged 7 percent over the past six years, which is significantly below average annual rate increases industry-wide,  and you should have all the incentives you need to enroll now.

Coordinating Benefits
ProtectPlus subscribers will occasionally receive a letter and questionnaire from Anthem Blue Cross asking if you have any other health coverage. For those who do, please be aware that the questionnaire will be used to determine what portion of your bills should be paid by ProtectPlus  and what portion by the other insurer. It is very important that you respond to this letter whether or not you have other coverage. If you have no other health insurance, you can simply call (800) 227-3641 and let Anthem know. If you do have other insurance, fill out the form and return it. In either case, do not delay because claims will not be processed until the form is returned or Anthem has been advised that no other coverage exists.

This article was written by Connie Chuang and Gage C. Dungy, attorneys with the labor and employment law firm of Liebert Cassidy Whitmore.

Qualified Individuals on COBRA/Cal-COBRA Can Now Receive a 65% Federal  Subsidy for Health Insurance Premiums for up to Nine Months.

Employees who were involuntarily terminated between September 1, 2008, through December 31, 2009, will be eligible for a 65% federal subsidy of their COBRA/Cal-COBRA health insurance premium payments.

For example, an employee who normally pays $1000/month in health insurance premiums under COBRA/Cal-COBRA, would only be required to pay $350/month (35%) because the other $650 (65%) would be covered by this federal subsidy.

The federal subsidy ends after one of the following circumstances occurs (whichever comes first):

• Nine months after the first receipt of the subsidy;
• The employee becomes eligible for coverage on another employer’s plan (or Medicare); or
• The maximum period of COBRA/Cal-COBRA coverage ends.

The subsidy plan became effective on the day the federal stimulus package was signed into law.  However, for individuals whose health insurance premium payments are paid on a monthly basis, the plan becomes effective on March 1, 2009.  Although the time period for qualification dates back to September 1, 2008, the federal subsidy does not apply retroactively before the effective date of the law.

Covered Individuals with High Annual Incomes Do Not Qualify for the Federal Subsidy.

Covered individuals who have a modified adjusted gross income (AGI) of $125,000 per year (or $250,000 AGI for joint filers) will only receive a phased-out portion of the 65% subsidy.  The subsidy will not be available at all to covered individuals with $145,000 AGI (or $290,000 AGI for joint filers).

Although these “high income” individuals will not be screened before receiving the federal COBRA subsidy, they will be liable to pay-back any federal subsidies received that they were not eligible for as part of their federal income tax return for the covered year.  As a result, “high income” individuals may want to opt-out of receiving this federal subsidy to avoid any federal income tax consequences.

Employers Can Also Allow Covered Individuals to Switch Health Insurance Coverage.

The new provisions also permit an employer, at its option, to allow covered individuals who were involuntarily terminated to enroll in different health care coverage plans provided to other current employees so long as the premium for the different coverage is not higher.

The new health care coverage cannot be coverage that provides only dental, vision, a health flexible spending account, or coverage for treatment that is furnished in an on-site facility maintained by the employer.

You need to know how various parts of Medicare work, how they relate to the supplemental insurance policies (Medigap) and how they interact with your workplace group insurance plan.

In addition, understanding the relationship between Medicare and your group health policy becomes more important and more complicated if your spouse is covered under your plan at work. HIPAA, COBRA and CalCOBRA provisions may determine the availability of his or her coverage.Making a mistake in your coverage can be costly.  Frequently individuals neglect to enroll in the coverage they need only to discover this fact when confronted with large unpaid medical bills. It’s equally common to see people maintaining expensive policies that provide few benefits because they duplicate Medicare coverage.

Unfortunately the rules that govern Medicare can not be reduced to a few memorable rules of thumb. Since a large number of personal variables produce an even larger number of potential scenarios, it’s up to you to work out your options.

Variables to consider include the size of the firm in which you work, whether you will continue to work or not, whether your spouse is covered under your employer’s health plan, and whether you have experienced a disability before the age of 65. The table below summarizes these relationships, but further explanation is necessary.