Posts Tagged ‘Mike Beck’

Employers Need To Be Prepared For The Cadillac Tax

Tuesday, November 18th, 2014

The post below is a guest blog from Mike Beck who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.

cadillac taxWhile most employers are focused on managing through 2015 and the upcoming employer mandate, the Cadillac Tax will present another significant challenge for many in 2018 and deserves attention.

The Cadillac Tax is an excise tax on health coverage deemed to be high cost.  The tax begins in 2018, and levies a 40 percent excise on the value of health insurance benefits exceeding the threshold of $10,200 for individual coverage and $27,500 for family coverage (indexed to inflation) on an annual basis. The thresholds increase for individuals in high-risk professions e.g. police officers/fireman and for employers that have a disproportionately older population.

While these thresholds seem high for some, when most evaluate their current premium and apply three years of  a trend increase to it, it is easy to see how in  2018 many employers will be  close to hitting or even exceeding the thresholds.  Industry estimates show that nearly 50% of employers will be impacted in 2018.  Making matters worse, it is not just the cost of health insurance that goes into the calculation.  Employer or employee contributions to a health flexible spending accounts must be included as well as employer contributions health savings accounts and health reimbursement accounts (HRAs).

The outcome is that employers will likely have to reduce the value of the plan they are offering, reduce the limit of their Flexible Spending Account, and eliminate any employer contributions to an H.S.A. or a combination of these tactics in an effort to avoid the tax.

The tax will apply to employers regardless of plan funding (fully insured or self insured) and is scheduled to begin in 2018 and go into perpetuity.  The tax is non deductible for employers so many employers may experience an increased tax burden due to the loss of deductibility.  The Congressional Budget Office estimates the tax will raise $80 billion between 2014 and 2023.

Employer reaction has been mixed with many taking a wait and see attitude and delaying a decision as long as possible.  In a recent survey of 333 large employers by the National Business Coalition on Health and the Benz Corp, according to the results, “the Cadillac Tax is currently not driving major benefit change.”  Of the employers surveyed, 30 percent have not made any decisions around their course of action with 46 percent of employers keeping benefit coverage the same.

Since the inception of the Affordable Care Act (ACA) there has been wide talk that the Cadillac Tax would be repealed.  Pundits proclaimed that large employers and unions would not stand for it.  As the ACA marches on, the Cadillac Tax is becoming more and more of a reality.  Congress is counting on the tax to be a major source of revenue so repealing the Tax could be unlikely.  There is a possibility that the Cadillac Tax could be redesigned or some form of compromise reached.  The long term impact to employees will most likely be reduced benefits and higher out of pocket costs which may create morale and retention issues.

Employers need to plan now and estimate what the potential costs of the Cadillac Tax to be for their organization and determine a strategy moving forward.



In An Environment Of Uncertainty, Prepare To Comply With The ACA

Thursday, August 14th, 2014

The post below is a guest blog from Mike Beck who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.

hcw 8 14In the last few weeks, there’s been multiple Affordable Care Act (ACA) developments, ultimately impacting large employers with 50 or more employees. How and when will they occur is another story, and it is easy to see why some employers are perplexed. Predicating what the ACA will look like a year from now is very difficult with some saying the employer mandate may be delayed again. Let’s review the recent events and how they are contradictory in many ways.

On July 22, the United States Court of Appeals for the District of Columbia Circuit concluded that PPACA’s subsidies should only be available to individuals purchasing health insurance in exchanges operated by a state – calling into question all the subsidies that have been obtained to date through the Federal exchange. Hours later in Richmond, Va., the United States Court of Appeals for the Fourth Circuit decided that legislative intent was to make tax subsidies available to individuals purchasing health insurance through a federally funded exchange or a state-based exchange if the state failed to create one. These two conflicting rulings are likely to go to the Supreme Court. For now, subsidies/tax credits will continue to be granted on the Federal Exchange. If the D.C. Circuit’s decision is upheld, it could strike a serious blow to the employer mandate since receiving a subsidy is a primary trigger of the employer mandate.

On July 24, the IRS published draft forms for the Code 6056 employer Minimum Essential Coverage reporting and disclosure requirement to the IRS and to individuals. This reporting requirement has multiple purposes as it allows the IRS to enforce the employer mandate, enforce the individual mandate, and confirm eligibility for premium tax credits for coverage purchased through an Exchange. This reporting along with the associated forms take effect in 2015 and are due in January 2016.

So in the same week, we witnessed a decision by an appeals court that called into question the viability of the Employer Mandate and suggested a possible delay, and then actions by the IRS which seem to indicate the Employer Mandate is moving forward as scheduled.

Regardless, large employers need to be prepared to comply with the employer mandate in 2015 and the associated reporting requirements. This should include a review of current payroll and HRIS systems to ensure they will be able to meet the new reporting requirements. The safe play is to assume that the employer mandate will go into effect without another delay, and if a delay occurs, organizations will have more breathing room to implement.

Slower Growth in Healthcare Spending: Will Employers See Improved Medical Renewals as a Result?

Tuesday, July 31st, 2012

The post below is a guest blog from Mike Beck, GBA who serves as Principal, Health & Welfare Consultant  for CAI’s employee benefits partner, HCW Employee Benefit Services.

PriceWaterhouseCoopers recently released the results of their 2013 PwC Health Research Institute report.  The report finds that the expected increase in cost of medical services also known as “medical trend” is expected to be 7.5% which is consistent with 2012 figures.  Medical trend is a primary metric in helping insurers and employers estimate future plan costs.

According to PwC, four factors lowering or “deflating” trend include:

  1. Reduced costs of medical supplies and equipment cost being driven by market competition over the past two years;
  2. Alternative forms of primary care such convenience clinics and telemedicine ;
  3. Initiatives by many states to enforce price transparency of insurers;
  4. More brand name drugs coming off patent which are resulting in lower cost generic alternatives.

Two factors responsible for an uptick in trend is an expected increase in healthcare services utilization.  Most experts believe as the American economy turns around we will see increased healthcare utilization due to a pent up demand of care that has been put off during the recession.  Additionally, medical advances are resulting in costlier treatments and doctors are now able to prolong life and treat diseases more effectively with new and improved techniques that come with a high price tag.

While each employer groups circumstances are unique, in general, the premium increases being passed on by insurers in 2012 seem to be more favorable than the past two years.  The slower spending nationally for healthcare services has been reflected in the decreased utilization in services, which translates into lower claims costs.  An additional wild card in the mix is the highly competitive landscape between the large commercial carriers.  The majority of health insurers are working very hard to grow their market share heading into 2014.  The result of this has been competitive pricing and competitive renewals in many cases.

It is important to understand how medical trend directly impacts your renewal and what trend your specific carrier is utilizing.  More importantly, employers should continue to work as aggressively as possible to manage their costs through a combination of plan design, wellness, incentives and communication. That’s exactly what we help our clients do at Hill, Chesson & Woody – contact us today to help your business contain costs.

Healthcare Reform Likely to Encourage Employers to Consider Self Funding

Tuesday, December 20th, 2011

The post below is a guest blog from Mike Beck who serves as the Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.

Provisions of the Patient Protection and Affordable Care Act (PPACA) are causing shifts in the marketplace on all sides of the issue. Insurance carriers, employers, providers and consumers are each reacting to the government’s regulations that are designed to get everyone insured, control costs and improve health outcomes.

Three specific provisions of reform — medical loss ratio, the modified community rating and guaranteed issue of medical plans — will encourage organizations to consider a move away from fully insured funding to self insurance. Currently, only 13 percent of organizations with less than 100 employees fund their employee health plans in a self funded manner.

Because healthcare reform is reducing competition in the market place, an environment of rising healthcare costs is being fostered. Since reinsurance carriers are not bound by loss ratios or modified community ratings, employers with healthy employee demographics that shift from a fully insured medical plan to a self funded plan potentially will be able to improve their cost position and have more plan design flexibility.

Based on the current PPACA regulations, we believe more small employers will explore self funding as an option. Taking into consideration your organization’s demographics, risk tolerance and goals for self funding is a necessary step that will ultimately determine if this type of funding is a viable option to stem the tide of healthcare reform.

For more information or to discuss your organization’s funding type, please call Hill, Chesson & Woody at (919) 403-1986.