After Supreme Court Ruling, ACA is Here to Stay
The U.S. Supreme Court's June 25 decision to uphold federal subsidies for the Affordable Care Act means, as Employee Benefit News puts it, the ACA is "here to stay." With that uncertainty out of the picture, businesses should now be focusing on complying with the Act's regulations.
The next ACA concerns for business include:
- A change to the definition of "small business" – organizations with up to 100 employees will now be classified as small businesses, a distinction which used to be reserved for those with up to 49 employees.
- The "Cadillac" tax – an excise tax on high-value healthcare plans that is scheduled to take effect Jan. 1, 2018 (see story below).
SCOTUS decision returns adviser focus to ACA compliance, Employee Benefit Advisor, June 25, 2015
SCOTUS ruling on ACA subsidies 'a call to action' for employers, EBN, June 25, 2015
Is the "Cadillac Tax" in Your Company's Future?
A big piece of the Affordable Care Act begins in 2018; a 40 percent excise tax on the cost of health insurance coverage above a certain threshold – also known as the "Cadillac tax."
You might be thinking, "I can't afford to offer my employees 'Cadillac' benefits, so I don't have to worry." Think again.
The "Cadillac" nickname doesn't refer to your employees' benefits; it refers to the cost of their insurance. Thanks to a number of factors (claims, base rates, inflation), you might be liable for this excise tax!
For 2018, employers will have to pay a 40 percent tax on the cost of health plan coverage exceeding $10,200 for self-only coverage or $27,500 for self-plus (spouse or family) coverage. If your health plan is self-funded, you’re entirely responsible for this payment. If you're fully insured, your insurance carrier is responsible, but expect rate hikes to account for this cost.
What can you do to avoid paying this tax? First, look at the coverage you offer your employees. You may be able to reduce coverage enough by raising deductibles to avoid the tax.
But most companies will have to reduce utilization and claims expenses, as well – and that means keeping your employees as healthy as possible. Employee wellness and disease management programs can have a real effect on claims, but it takes time.
Now is the time to implement a wellness and/or disease management program for your company's employees. You may not see results right away, but you and your employees will be on the right health – and tax – track!
Cadillac tax: A huge car wreck for employers?, EBN, July 22, 2015
Cadillac tax hurricane preparation: After-tax HSA contributions, EBN, July 7, 2015
Marriage Equality Ruling Simplifies – and Complicates – Benefit Administration
The U.S. Supreme Court's June 26 ruling legalizing gay marriage across the United States will simplify one aspect of benefits administration – if your company offers opposite-sex spousal benefits, you'll now have to offer same-sex spousal benefits, including healthcare coverage.
The decision complicates another area of benefit administration, however: If your company currently offers health benefits to same-sex cohabiting couples, should you stop this practice? Employers started offering domestic partner benefits to same-sex couples because they couldn't get married; now that they have that right, should same-sex couples be forced to marry to qualify for benefits?
It's a sticky legal situation, because some states don't protect homosexual employees from discrimination, and forcing an employee to marry his or her same-sex partner would, in effect, be "outing" him or her, and exposing your employee and his or her partner to the risk of being fired.
On the other hand, if your company continues to offer benefits to domestic partners of the same sex, employees living in an opposite-sex domestic partnership situation who aren't eligible for benefits could sue for reverse discrimination.
Gay marriage ruling may lead to health insurance risk, CBS Moneywatch, June 29, 2015
Supreme Court's decision on same-sex marriage expected to boost health coverage, NPR, June 29, 2015
What employers need to know about Supreme Court gay marriage ruling, Wall Street Journal, June 26, 2015
Gain Control with Self-Funding
As health insurance costs have climbed steadily upward, many large employers – and some mid-sized employers – have moved to self-funding their health plans, which can provide substantial cost savings.
Cost isn't the only factor that makes self-funding an attractive choice for more and more companies. Self-funded health plans give you, the employer, maximum control over the plan design, as well as utilization data and by extension, the health behavior of your employees. Employee Benefit Adviser calls this "the only proven method of truly bending the health care cost curve." Contact NIHP for questions you have on self-funding.
Opportunities in self-funding in response to the ACA, Re-Solutions, 2015
Self-funding and the management of risk, Spring Consulting Group, January 2014
Self-Funding – more than just about savings, Employers Resource Association, July 10, 2015
Can Your Employees Tell the Difference Between an FSA and an HSA?
Despite the similarity of their acronyms, an FSA and an HSA are quite different, and your employees might not have taken the time to learn one from the other. Here are some of the differences:
A Health Savings Account plan is comprised of two parts:
- High-deductible health insurance policy, to cover preventive care and protect employees from large medical bills, and
- Health Savings Account (HSA) to help pay the deductible and put away money tax-free to pay for medical care
These two pieces are inseparable: You must have an IRS-qualified high-deductible health insurance policy to establish a Health Savings Account. (You can have a high-deductible health insurance policy without an HSA, but not an HSA without a high-deductible plan.)
The HSA functions quite a bit like another popular benefit, the Flex Spending Account (FSA) for healthcare or childcare – funds are taken out of the employee's paycheck before taxes and can only be used for approved expenses.
But don't let your employees confuse an HSA and an FSA, or they could be giving up some very valuable benefits!
HSAs are NOT "use it or lose it"
Any money put into an FSA must be spent for goods or services during that calendar year. That's why we tend to see a lot of advertising from optical shops and dental clinics in November and December – they are reminding FSA account holders to use up their current year's funds.
Money put into a HSA, however, stays in that account until it is spent. It is a true "savings account" for healthcare expenses, and there is no time limit to use the funds.
HSAs are investments
Like your employees' retirement accounts, HSA funds can be invested and, with care, can be a really good way to save for healthcare costs in retirement.
The Employee Benefit Research Institute (EBRI) has calculated that a couple retiring at age 65 today will need nearly $300,000 to cover their healthcare costs in retirement.
A report from UMB Healthcare Services projects that a 40-year-old employee earning $80,000 who starts to maximize his or her HSA contributions and earns a 5 percent return will have more than $306,000 by age 65.
For 2015, the IRS allows HSA contributions of up to $3,350 for individuals and $6,650 for family coverage, plus a $1,000 catch-up for people over 55 years old.
HSAs have tax benefits
Your employees can make tax-deductible contributions to an HSA for the previous year until the tax deadline, April 15.
The UMB report notes that while 401(k) investments and withdrawals are tax deferred, they are not taxed in an HSA.
HSA members can hold onto their qualified healthcare expense receipts and cash them in for a tax-free payout at any time in the future. And after age 65, HSA members can withdraw money from their HSA for any type of purchase – not just medical expenses – without a penalty.
Few investors grasp long-term potential of HSAs, PlanAdvisor, July 6, 2015
Seven things employers and employees don't know about HSAs, Employee Benefit Advisor, July 2015
PATIENT FOCUSED HEALTHCARE APPS
Several new smart phone apps can help your employees with the basics of good health care.
Family Drug Guide – The app helps patients better understand pricing of drugs, get specific drug information, and manage their medications as a whole. Cost is $4.99
Child Health Tracker – A useful app for tracking a child's health information especially for new parents, as users can input a wealth of health information about their children, from demographics to medications. Cost is $2.99
Do you have a healthcare-specific app you'd like to recommend to our readers? Let us know!
A Quick Review of Last Issue's "Quick Poll"
In the May 2015 issue of E to E we asked readers, "Have you begun preparing for the required IRS 1094C and 1095C reporting yet?" Specific survey results are noted in the chart, below.
July Quick Poll – Vote
Will the Supreme Court ruling on marriage equality cause you to make any changes in your healthcare benefits?
(Click a response to vote. Answers are strictly anonymous.)
Then, visit the
NIHP website to view this issue's quick poll results.