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Naphtali Carlson qualifies for the Leading Producer Round Table

(Washington, DC) -- The Leading Producers Round Table (LPRT) of the National Association of Health Underwriters (NAHU) is proud to announce that Naphtali Carlson of Texas Best Insurance Group, LLC has qualified to receive the association’s prestigious Soaring Eagle Award.

Attention Employers with More than 100 Employees!!

Are you concerned about the Affordable Care Act penalties and how it will affect your bottom line?

We are providing solutions for business owners with these types of companies and others with similar type workforces:

Restaurants, construction companies, landscape companies, hospitality businesses, nursing homes and more!

Draft Instructions for IRS Reporting on Individual and Employer Mandates

On Thu, Jul 24, 2014, the IRS posted draft versions of the forms that large employers will use to report employer mandate compliance and the forms that self-funded employers will use report information about the coverage they offer. They published instructions for the forms on Thu, Aug 28 as well as revised draft forms for the employee health statements. Final versions of the forms and instructions should be published later this year.

Employers offering self-funded health plans and applicable large employers are required to report in early 2016 for the 2015 calendar year.

BCBS: Transitional Policy for Small Groups (2-50)

Recently, federal and state agencies approved an extension of guidance from November 2013 that allows Blue Cross and Blue Shield of Texas BCBSTX the option to renew, for an additional two years, non-grandfathered small group 2-50 plans that do not meet Affordable Care Act ACA requirements.

This extension is for policy years beginning on or before Oct. 1, 2013. Non-grandfathered plans are considered those issued after March 23, 2010, but prior to Jan. 1, 2014.

Groups renewing September through December 2014 will receive the Transitional Policy option in their Renewal Exhibit. Should a group elect to remain in their current policy, no further action will be required. However, if the group chooses to move to a new, ACA metallic benefit plans, the required paperwork will be requested in advance of the renewal effective date to ensure enough time is provided for processing.

The paperwork date requirements are being finalized and will be shared with you as soon as they are available. Additionally, the timeline requirements will be emphasized in future communications to group employers.


Story By: Scott Kilpatrick |

Q&A about Contributions for Plans with Per-Member Rates

The Q&A below addresses how an employer should handle employee contributions and coverage continuation amounts when the medical carrier invoices premium using per-member rates.

Important: The content contained within this article does not constitute legal or tax advice and everything is subject to change.

What are possible scenarios for an employer, under a per member basis, to share the cost of insurance with its employees and avoid any discrimination issues?

The short answer is that until the issuance of the regulations, we cannot ascertain how the IRS will be deeming a plan to be discriminatory. We can provide general guidance regarding what we believe will be acceptable; however, once the final regulations are issued this analysis will need to be reviewed.

Under the Affordable Care Act (“ACA”), some fully insured group health plans will be required to comply with many of the same nondiscrimination rules relating to compensation that have, until now, applied only to self-funded plans. These rules will apply to non-grandfathered (i.e. a plan in existence on March 23, 2010 that has not made significant changes in cost or benefits since that date) plans.

In general, the nondiscrimination rules prohibit a plan from discriminating in favor of highly compensated individuals. The nondiscrimination rules were set to be effective for non-grandfathered fully insured plans for plan years beginning on or after September 23, 2010, but have been suspended until regulations are issued providing guidance on how discrimination will be determined. See Notice 2011-1. Once the regulations are issued, employers will have time to comply with the regulations before the penalty provision takes effect. However, after the compliance date, if it is determined that an employer has a discriminatory fully insured group health plan, the employer will face an excise tax of $100/day/participant or beneficiary deemed to have been discriminated against.

The best guidance for employers at this time is to ensure that any cost sharing scenario that is implemented does not cause their group health plan to be discriminatory because it favors highly compensated employees. It is anticipated that any cost sharing that does not result in the employer paying more of the premium for officers of the company, for example, than rank and file employees will be non-discriminatory. Therefore, any scenario which has all employees paying 50% of the total premium should be fine under the ACA—even where underwriting criteria causes differences in pricing based on age, etc. This type of cost sharing would also be permitted under the rules relating to HIPAA, GINA, the ADA and the ADEA because each employee is responsible for paying the same cost percentage and no distinctions are being made on the basis of age.

In addition, it is permissible for an employer to choose to subsidize lower paid employees to help avoid the affordability penalty because the discrimination rules under the Internal Revenue Code will examine only whether highly compensated employees are receiving better benefits or prices.

Can an employer set employee contributions using illustrative composite rates when the employer is billed on a per-member basis?

Yes, this would be the recommended practice. Although the ACA provides for billing on a per-member basis, there is a disconnect between what is permissible under the ACA and what is permissible under GINA, HIPAA, the ADA and the ADEA. If an employer considers the per-member basis cost in determining what portion of the cost to pay, the employer could be violating GINA, HIPAA, the ADA and the ADEA. In determining the per-member basis cost, the insurance company takes into consideration the individual’s age. If the employer bases its contributions on the per-member billings, it is basing its contributions on the individual’s age, which exposes the employer to claims of discrimination. Therefore, it is recommended that employers  compute average rates and pay a percentage of the computed averages.

Would an employer who pays 50% of the computed composite rates violate its contractual obligation with the carrier to pay a minimum of 50% of the employee rate? Could or would a carrier terminate a small group for violating this requirement on this basis? Should the employer be concerned about this?

The answer here is dependent on how the “employee rate” is defined under the terms of the contract. If “employee rate” is defined as the cost of the employee’s insurance based on the employee’s individual health factors, then the employer would probably be in violation of the contract.

However, as previously stated, the employer is prohibited by GINA, HIPAA, the ADA and the ADEA from taking age into consideration when making its contribution to the group health plan. The employer should discuss this issue with its contact at the insurance company and ensure that the definition of “employee rate” is broad enough to enable an employer to base its contributions on a composite basis.

If an employer uses composite rates to set the contribution rates for active employees, can they use the same composite rates to set COBRA rates?

The COBRA rates will follow what the employer uses for its contribution rates. Therefore, the recommendation is that the employer contributes a percentage of the illustrative composite rate for its contribution and use the same illustrative rate for COBRA premiums.

An employer who chooses to charge COBRA participants using the per-member rated premium billed by the carrier should not have an issue with discrimination as long as the employer can show that the employee is paying the amount that is attributable to the cost of insurance for each.

We are still waiting on guidance from the IRS as to how COBRA will be affected by the nondiscrimination rules.

Can an employer set employee contributions as a percentage of salary or as escalating dollar amounts by salary range where higher wage earners have to pay more?

As long as the result is that the higher wage earners are required to pay more, this would probably be permissible under the nondiscrimination rules relating to group health plans. However, this could violate the ADEA or other discrimination laws if it has the effect of causing older employees to pay more for their benefits.

An employer pays 50% of the computed employee only composite rate. Under this structure, a 19 year old employee’s required contribution for employee only coverage is more than the member rate for his age that is billed by the carrier. Can the employer collect a contribution that exceeds the rate billed for his age? If the employee terminates employment and takes COBRA, what rate should the employer use for billing—the member age rate or the employee only composite rate?

The key to the answer to your question is to ensure that the policies are being issued under a master group contract, rather than just individual policies that the employer is assisting its employees in purchasing. If these are just individual policies, then there are different considerations that would need to be addressed. However, for this question, I’m assuming that the policies are part of a group health plan governed by a master group contract.

If the coverage for each employee is part of a master group contract then the insurance company is only underwriting the individual rates (and providing them on a per-member basis) in order to arrive at the group premium amount. This means that although the employer is receiving the per-member rates, the true cost to the employee is 50% of the composite rate because the total premium is the true policy cost to the employer. This is true because the employer is prohibited from taking into consideration age when determining what contribution it will make and using the per-member cost takes these factors into consideration.

Therefore, if the 19 year old elects COBRA coverage his cost is the composite cost +2% because that is his actual cost for coverage under the employer’s master group contract.

How should illustrative composite rates be developed for the purpose of setting employer and employee contributions?

The employer is responsible for the composite rates they use and should seek help from a qualified adviser (broker). Ultimately, the employer is responsible for ensuring that the offer of coverage is fair and not in violation with discrimination laws.

A composite rate computation method that is consistent with standard industry practices should be sufficient. The method would have to be objective and consistent. Acceptable methods would include any method authorized or promoted by the carrier and/or any method that is proportional or equivalent to the methods used by other carriers participating in the same market.


Story By: Scott Kilpatrick |