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Keeping it Under Wraps: What the Networks Don’t Advertise

It’s 2018, and the importance of cost-containment is at an all-time high. Everywhere you look in the self-funded industry is a vendor trying to help health plans control costs; as can be expected, some methods are effective and maximize savings, whereas others…well…not so much.

Join The Phia Group’s legal team as they discuss wrap networks – both in theory and in practice – and what alternatives might be available to modern self-funded health plans.

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Freedom Blue: Idaho’s Challenge to the ACA Gets Serious

By: Brady Bizarro, Esq.

You may recall that, in our January webinar, we mentioned some of the efforts to roll back the Affordable Care Act (“ACA”) at the federal and state levels. Some states were considering proposing (and some actually did propose) their own individual health insurance mandate. Others, like Massachusetts, were considering applying for waivers to their Medicaid programs to permit them to reduce the number of benefits covered in an effort to save money. None of these actions have been as bold as what it taking place in the state of Idaho.

In early January, Governor Butch Otter signed an executive order that would let health insurers in his state sell new plans to market that do not comply with ACA rules. The order would permit the creation of a separate health insurance marketplace where pre-ACA rules would govern. Specifically, the Department of Insurance (“DOI”) announced that insurers would be able to:

  • Carve out benefits, such as maternity care;
  • Restore co-pays for preventive care, such as colonoscopies;
  • Limit annual claims to $1 million before moving high-cost patients onto the state’s exchange;
  • Deny coverage for pre-existing conditions (though somewhat limited); and
  • Charge individuals more because of a history or high risk of expensive medical conditions.

Despite many protestations from both sides of the political aisle, including analysis by legal experts that this move is likely unconstitutional, the Trump administration has remained silent on these developments so far. On February 14th, the state’s largest insurer, Blue Cross of Idaho, announced that it will sell five “state-based” plans according to the guidance issued by the DOI. These plans, known as “Freedom Blue,” will be much cheaper than ACA plans, as much as 30 to 50 percent less.

What is important to note here is that Idaho is responding (albeit in its own way) to a recognized, serious problem with the current state of the ACA: many lower to middle class residents who earn too much money to qualify for ACA subsidies are dropping out of the market because they cannot afford their premiums. In Idaho, approximately 110,000 have done just that. Combined with the effective repeal of the individual mandate, this spells potential disaster for state exchanges because those healthy individuals who pay full price are leaving sicker individuals reliant on subsidies in the risk pool. This is not a sustainable situation, and Idaho’s bold reaction is an attempt to lower prices to keep its risk pool healthy. It is unclear how the new Secretary of Health and Human Services, Alex Azar, will respond, but finding ways to stabilize risk pools will be extremely important in 2018, or else we should expect more states to flaunt federal rules and test the administration.


Empowering Plans: P30 - Fireside Chat with The President

This is it!  Our first Empowering Plans guest, and it’s a doozy.  In this episode none other than the Self-Insurance Institute of America’s CEO and President, Michael Ferguson, sits down with Adam, Ron and Brady to discuss everything – from past wins and losses, to plans for 2018.  From conflicts within the industry, to threats from beyond… Mike doesn’t hold back, and you – like we – get to enjoy the results.

Click here to check out the podcast!   (Make sure you subscribe to our YouTube and iTunes Channels!)


Employer Mandate Enforcement: IRS Turning Up The Heat

By: Patrick Ouellete, Esq.

The Employer Shared Responsibility Provision of the Affordable Care Act (ACA) continues to serve as a polarizing topic among employers and ACA supporters as the Internal Revenue Service (IRS) moves forward with its compliance efforts. Regardless of disposition, however, applicable large employers (ALEs) should take note of IRS enforcement trends to date in 2018.

Employers that have 50 or more full-time equivalent employees must offer coverage that meets minimum value and affordability standards, as defined by the ACA. Those that do not meet these reporting requirements (also called the Employer Mandate) are to be assessed penalties by the IRS.

Each Employer Shared Responsibility Payment (ESRP), or tax penalty, is assessed based on whether an ALE offered minimum essential coverage to at least 95 percent of its full-time employees (and their dependents) and the number of employees who were offered (or not offered) coverage. An ALE member that owes the payment of $2,000 for each full-time employee (after excluding the first 30 full-time employees) would pay $166.67 monthly (i.e. 1/12 of $2,000) per month per full-time employee. The $2,000 amount is indexed for inflation:

  • For calendar year 2015, the adjusted $2,000 amount is $2,080    
  • For calendar year 2016, the adjusted $2,000 amount is $2,160
  • For calendar year 2017, the adjusted $2,000 amount is $2,260

The Congressional Budget Office and Joint Committee on Taxation estimated back in 2014 that penalty payments by employers would total $139 billion from 2015 to 2024. It will bear watching whether those numbers come to fruition. The IRS noted in a November 2017 FAQ that non-compliant ALEs would retroactively be assessed employer shared responsibility payments that have accrued dating back to 2015. Following through with its promise, the IRS has already begun to send out IRS Letter 226J notices to employers to notify them of ESRP liabilities relating to ACA information filings for the 2015 tax year. The IRS provided a FAQ to ALE recipients in January 2018 as to how to understand and respond to these letters, which may be a good start for those unfamiliar with Employer Mandate and ESRP regulations.

These recent IRS sample letters and FAQs reinforce the reality that employer responsibilities related to the ACA’s Employer Mandate do not appear to be going away any time soon. ALEs would be wise to have their proverbial documentation ducks in a row in the instance they receive an IRS Letter 226J notice. Employer groups in the self-funded health insurance industry should to stay up to date on IRS announcements to best understand the agency’s enforcement plans. It is incumbent upon these groups to review its applicable Forms 1094-C and 1095-C documentation and have a potential response strategy in place.


The DOL’s Proposed Rule … A Sleeper Provision for Self-Funding?

By: Jen McCormick, Esq.

On January 5, 2018, the Department of Labor (DOL) responded with a proposed regulation which would extend the circumstances in which an association may function as an “employer” under ERISA, and would alter the way in which it would be regulated.  The proposed regulations make two important modifications: (1) create a unique dual status for working owners and (2) modifies the interpretation of the commonality of interest requirements.   The “dual status” requirement would permit a working owner or sole proprietor to function as both the employer for purposes of joining the association and as the employee for purposes of being covered by the plan.  The “commonality of interest” requirement would allow formation of an association for the purpose of offering health insurance. The rule does not impose prohibitions on forming new associations (or specify size limitations), but it does provide formal organizational requirements for associations. While it may seem this rule will not have a major impact on self-funding, these two changes will expand the pool of employers who may be eligible to create, join or establish a self-funded.   This could create new opportunities.


Even the best Plans can backfire!

By: Chris Aguiar, Esq.

As we saw last week, you cannot add the Patriots’ winning the Super Bowl to the list of absolutes in life (despite what my New England brethren might tell you).  After death and taxes, few things are a given.  Something similar can be said, that success is not a given, in the world of subrogation/reimbursement. 

Last week, I had the pleasure of traveling to Kansas City, Kansas to testify on behalf of a client in a Preliminary Injunction Hearing in Federal District Court as we attempted to obtain a Temporary Restraining Order, a court proceeding to officially freeze the ability of an attorney or his client from spending money to which the Plan asserts an equitable lien by agreement.   We spent weeks preparing, researching, committing facts to memory, and rehearsing examinations so that we could put our client in the best position to succeed.  Unfortunately, the Judge had other Plans.  Despite having witnesses from Kansas and beyond ready to testify – the Judge did not allow any testimony to be heard.

In the end, we were ultimately able to secure everything we needed for our client, but it's notable that something as simple (and typically predicable) as the procedure that a hearing will follow was entirely up to the discretion of the Judge that day.  The Judge seemed to have an agenda, and there would be no deviating from it.  We ended up on the right side of that agenda, but what if the alternative had been true –a significant risk given that Kansas qualifies as an anti-subrogation state.  It’s very important in subrogation cases to consider all options.  In many cases there is no doubt that the Plan’s rights are strong, but enforcement often comes at a significant cost.  Unfortunately, in the world of Health Subrogation where Plan expenses appear to be limitless while tort reform and other factors allow auto policies to be limited to, in many cases, less than $100,000.00, the cost of enforcing the rights of the Plan in full can leave the Plan worse off than it started.   That can even be true when things go exactly right – imagine when a Judge decides to throw a wrench into “the Plan”!


Empowering Plans Segment 29 - Disruption or Not?

In this episode, our hosts discuss the recent announcement that Amazon, Berkshire Hathaway and JPMorgan are looking to collaborate on “health care.”  Is this just a new way to supply medical goods, deliver care, or handle the entire exchange (including enrollment and payment)?  How can broker/advisors, plan administrators, and other members of the industry benefit from this change?  And who should be most concerned?  This and more await you in “Empowering Plans.”

Click here to check out the podcast!   (Make sure you subscribe to our YouTube and iTunes Channels!)


Your Plan isn’t a Cadillac …Yet
By: Kelly Dempsey, Esq.

On January 22, 2018 the House and the Senate passed a continuing resolution that impacts three taxes imposed by The Affordable Care Act (ACA). The most notable in the self-funded industry is the ACA’s High Cost Employer-Sponsored Health Coverage Excise Tax (“Cadillac Tax”). The Cadillac Tax was originally set to begin in 2018, but has been delayed (again) for an additional two years putting the start date at January 1, 2022. The Cadillac Tax is a 40% excise tax on employer-sponsored health coverage that provides high-cost benefits.

Similar to the prior legislation passed in December 2015, this new legislation also:

1.    Suspends the ACA Health Insurance Provider Tax for 2019; and
2.    Delays the ACA Medical Device Tax until 2020.

The ACA Health Insurance Provider Tax is applicable for fully-insured plans and is effective for 2018. With this legislation, the tax will pick back up in 2020.

The ACA Medical Device Tax is applicable to medical device manufacturers and importers and imposes a 2.3% levy on the sales of commonly used medical devices (defibrillators, pacemakers, artificial joints, heart stents, etc.).

The three delays together cost an approximate $31 billion.

On a positive note, the continued resolution extends the Children’s Health Insurance Program (CHIP) for an additional six years.

While 2022 seems far away, employers should still be mindful that the Cadillac Tax has not been fully repealed and the possibility still exists that it could one day take effect. This is important because wellness programs and on-site clinics have grown tremendously in popularity over the past several years. Both wellness programs and on-site clinics would be included in the Cadillac Tax calculations – meaning employers would likely be dis-incentivized to continue these programs. For now it is too early to start planning for changes - this is just one more item keep on the back burner (just don’t turn the burner off).


Plan on Saving by Saving Your Plan – Applying Lessons Learned to Create the Perfect Plan Document

Many of you are familiar with the plan drafting conundrum: multiple options are available for plan document verbiage on a given topic, but your client either can’t decide, can’t tell the difference, or simply doesn’t have a preference. In response to Phia Document Management (PDM) user requests, we have simplified the plan document checklist by creating a new template with fewer variables, called the Flagship.

Unlike our traditional major medical template where the user is given ten variables for which workers’ compensation exclusion to choose, the Flagship template incorporates The Phia Group’s “best practices” approach to plan drafting; there must always be variables when drafting a plan document, but far fewer in the Flagship, making the user experience a more streamlined and intuitive one.

Join The Phia Group’s legal team as they explain the Flagship template, differences from the existing template, and why the Flagship may be right for you.

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Empowering Plans Segment 28 - Game-changers
This week, our hosts discuss Adam’s recent travels and review events.  We are not alone in our attitudes and desires to change the industry for the better, and now we have proof of that fact!  What ideas and concepts were shared with Adam, and how can we add fuel to the fire?

Click here to check out the podcast!   (Make sure you subscribe to our YouTube and iTunes Channels!)