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Health and Benefits

Pharmacy Benefit Management and Prescription Formulary

Selection of a pharmacy benefit manager (PBM) and management of the prescription formulary are important elements of the cost containment strategy in a self-insured health plan.

Cost of Prescription Medications

Prescription medications represent a large percentage of the total cost of employer-sponsored health insurance.  In self-insured plans, prescriptions are often responsible for 30% or more of total claims costs.  However, there are strategies available to minimize these expenses without sacrificing the level of care expected by the plan sponsor and plan participants.

Prescription medications generally fall into three classifications:

1. Brand Name

Brand name medications are expensive because the original manufacturers desire to recoup the cost of research and development, as well as the cost of marketing efforts.  They are often prescribed due to name recognition, even when more cost-effective generic equivalents are available.  Original manufacturers are often granted exclusive production and marketing rights for a certain period of time in order to recoup the expenses of bringing the medication to market.  This exclusivity eliminates competition which would otherwise reduce the cost to consumers.

2. Generics

Generic medications are lower-cost alternatives that are functionally equivalent to brand name medications.  Generics are less expensive because they are produced by manufacturers who did not participate in the original research, development and marketing efforts, and therefore do not carry the associated cost burden.  Generics can often be substituted for brand name medications at the counter when requested by the insured.  Generics may not be available for newer medications, or when the prescribing physician includes “dispense as prescribed”, or equivalent language, in the prescription.

3. Specialty

The term “specialty” refers to a range of medications that may have any of the following characteristics: derived from living cells, treat potentially debilitating or fatal conditions, treat rare diseases, injectable or infusible, have unique storage and/or shipment requirements, not commonly stocked in pharmacies.  Specialty medications may be either brand name or generic and are often very expensive.

While profit is the primary motivator for progress and innovation in the pharmaceutical field, it can lead to situations where the cost of medication becomes misaligned with its clinical value.  Many medications are available at a range of prices and there may be no clinical difference between the most expensive version and another that is available at a fraction of the cost.

Where no clinical difference between two medications exists, any extra money spent on a more expensive version is money that is wasted by the plan sponsor and plan participant.  Careful review of the medications being utilized by plan participants can reveal opportunities for cost containment through provision of more economical substitutes.

Pharmacy Benefit Manager

The pharmacy benefit manager (PBM) performs the administrative functions that a commercial insurer would perform in a fully-insured health plan with respect to prescription medication access.  These functions include drafting the prescription formulary document, negotiating medication costs with manufacturers, confirming coverage, and processing claims.

PBMs generate revenue through spread pricing, manufacturer rebates and administrative fees.  Spread pricing means that the PBM charges the plan sponsor a markup over the price it pays the manufacturer.  This generally leads to the utilization of higher cost medications.  Low administrative fees may signal that the PBM generates its revenue by retaining more of the rebates it receives from manufacturers.  Though it may be possible for the PBM to pass all rebates back to the plan sponsor by charging higher administration fees, this is not necessarily in the plan sponsor’s interest.  When the PBM shares in rebate revenue, they are incentivized to consistently negotiate the best rebate terms with manufacturers.

Where the PBM relies on static administrative fee income regardless of performance, the PBM may not work as diligently to negotiate rebate terms on the plan sponsor’s behalf.  Incentives can also become misaligned where the PBM focuses primarily on potential rebate revenue without regard for ultimate cost of medication to the plan sponsor or plan participant.  These factors should all be considered when evaluating PBM vendors.

Prescription Formulary

The prescription formulary is the plan specific document that lists the medications that are covered under the health insurance plan and the pricing structure that applies to them.  The formulary is a function of the PBM that is chosen to administer pharmacy benefits.  The formulary generally classifies medications into four tiers.  The pricing structure and cost-sharing between the plan sponsor and plan participant depends upon the tier to which the subject medication belongs.

  • Tier 1 – Generics: Generally, the most cost-effective option, where available.
  • Tier 2 – Preferred Brands: Brand name medications available at favorable pricing.
  • Tier 3 – Non-Preferred Brands: Brand name medications available at less favorable pricing.
  • Tier 4 – Specialty: Generally, the most expensive category of medications.

Plan sponsors often choose a broad default formulary offered by the PBM in hopes that the majority of medications desired by plan participants will be covered.  While this may appear to be the safest route to provide a smooth experience for plan participants, it often leads to wasteful spending by both plan sponsors and plan participants.  By working actively with PBM’s to remove high cost medications from the formulary and providing avenues for plan participants to access more economical equivalents, wasteful spending can be drastically reduced.

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Compliance Update Health and Benefits

IRS Releases PCORI Fee Guidelines

The Patient Protection and Affordable Care Act, otherwise known as Obamacare, added sections 4375 and 4376 to the Internal Revenue Code.  Section 4375 imposes a fee “on each specified health insurance policy” for each policy year ending after September 30, 2012.  Section 4376 imposes a fee on “any applicable self-insured health plan” for each plan year ending after September 30, 2012.  The fee imposed by sections 4375 and 4376 was intended to fund the Patient-Centered Outcomes Research Trust Fund and are known by the acronym PCORI.

The PCORI fee was scheduled to expire for policy and plan years ending after September 30, 2019.  However, in December, 2019, Congress passed the Further Consolidated Appropriations Act, 2020, which extended the termination dates of the PCORI fee to September 30, 2029.  So, those who were looking forward to their PCORI fee obligation terminating are still on the hook.

How Much is the PCORI Fee and Who Pays?

The PCORI fee is imposed on “each specified health insurance policy” and on “any applicable self-insured health plan”.  The term “specified health insurance policy” is defined in section 4375(c)(1) as:

. . . any accident or health insurance policy (including a policy under a group health plan) issued with respect to individuals residing in the United States.

Further, section 4375(b) provides that the fee shall be paid by the issuer of the policy.

The term “applicable self-insured health plan” is defined section 4376(c) as:

            . . . any plan for providing accident or health coverage if —

(1) any portion of such coverage is provided other than through an insurance policy, and

(2) such plan is established or maintained –

A. by 1 or more employers for the benefit of their employees or former employees,

B. by 1 or more employee organizations for the benefit of their members or former members,

C. jointly by 1 or more employers and 1 or more employee organizations for the benefit of employees or former employees,

D. by a voluntary employees’ beneficiary association described in section 501(c)(9),

E. by any organization described in section 501(c)(6), or

F. . . . by a multiple employer welfare arrangement . . .

Section 4376(b)(1) provides that the fee shall be paid by the plan sponsor, and section 4376(b)(2) defines the term “plan sponsor” as including (A) “the employer in the case of a plan established or maintained by a single employer”, (B) “the employee organization in the case of a plan established or maintained by an employee organization” and (C) “any association, committee, joint board of trustees or other similar group of representatives who establish or maintain the plan”.

The amount of the fee was initially $2.00 times the average number of lives covered under the policy or the plan.  Both section 4375 and section 4376 provided for an annual increase in the fee.

Notice 2020-44

As stated above, the PCORI obligation originally did not apply for policy or plan years ending after September 30, 2019.  However, in December, 2019, Congress extended the termination date to September 30, 2029.  The IRS recognized that this may have imposed an undue burden on some issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans who had not anticipated the need to determine the number of covered lives for any period after September 30, 2019.  As a result, on June 8, 2020, the IRS issued Notice 2020-44.

What Does Notice 2020-44 Provide?

Notice 2020-44 provides a transition rule for issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans.  It provides four methods for issuers of specified health insurance policies to use in calculating the number of covered lives:

  1. the actual count method;
  2. the snapshot method;
  3. the member months method; and
  4. the state form method.

In addition, an issuer can use any other reasonable method.

Likewise, Notice 2020-44 provides that a plan sponsor of an applicable self-insured health plan may use any one of three methods to calculate the number of covered lives:

  1. the actual count method;
  2. the snapshot method; and
  3. the Form 5500 method.

In addition, a plan sponsor can use any other reasonable method.

Notice 2020-44 also provides the dollar amount that must be used to calculate the fee imposed by section 4375 and section 4376.  For policy and plan years ending on or after October 1, 2019, and before October 1, 2020, the applicable dollar amount is $2.54 per covered life.

The IRS anticipates issuing treasury regulations to reflect the extension of the PCORI obligation.

Categories
Health and Benefits

Considerations for Self-Funded Health Plans in Light of the COVID-19 Crisis

The COVID-19 pandemic has caused a major disruption to the US economy.  Businesses are struggling to cope.  If your business has a self-funded health plan, here are some things that you need to think about:

1. Plan Amendments

The recent legislation passed by Congress requires employers to cover the full cost of testing for the coronavirus.  If your plan requires cost-sharing with your employees, then you need to amend your plan document.  In addition, you may have to contact your stop-loss carrier.  It has been reported that most stop-loss carriers understand the need for the plan amendment and have agreed to not raise premiums or change other features of their policy.

2. Claims Reserves

A counter-intuitive effect of our current health crisis is that, for many employers, healthcare costs have declined.  The reason is that many hospitals and doctors have limited their practice to treating COVID-19 cases.  As a result, annual physicals and other diagnostic tests have been cancelled.  In addition, patients who are not suffering from COVID-19 symptoms are afraid to go to the doctor or emergency rooms.  However, this reprieve will not last forever.  Once “shelter-in-place” orders are lifted and doctors and hospitals have the capacity to treat patients other than COVID-19 patients, employees and their dependents will once again go to the doctor.  You should continue to make your monthly payments, as required by your TPA, and be mindful of claims that are incurred but not reported.  You do not want to face unexpected costs once the economy ramps up again.

3. Risk Group

You need to understand the make-up of your employee group.  If your employees tend to be older or sicker, you can expect their healthcare costs to increase.  So far, there has been no legislation requiring plans to cover the cost of treatment for COVID-19 without cost sharing.  However, it is possible that that could make its way into future legislation.  You want to make sure that you have planned for any additional costs.

4. Telemedicine

One thing that we have learned from the crisis is the value of telemedicine.  Many patients are turning to telemedicine when they are unable to see their doctors.  If your plan document does not cover telemedicine or you do not have a relationship with a provider, you will want to address those issues.

5. COBRA

Many employers that have laid off or furloughed employees have agreed to pay some or all of the cost of COBRA.  Before you agree to subsidize COBRA costs, make sure that you recognize the full extent of those costs.

The full impact of the COVID-19 crisis on self-funded health plans may not be known for many months.  However, what we do know is that, in order to safeguard your business, you need to prepare for whatever may come.  A healthcare professional from RMC can help you be ready for this or any future health crisis.

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Health and Benefits

What Does the CARES Act Say About “Balance Billing”?

What is Balance Billing?

Everybody knows about “balance billing”, even if they have never heard the term.  “Balance billing” refers to the bill that a patient gets from a medical provider for the difference between the provider’s charge and the amount paid by insurance.  Whether a patient gets a bill and the amount of the bill may depend upon whether the medical provider is “in-network” or “out-of-network”.

Balance Billing and the CARES Act

Politicians and academics have been talking about this problem for years.  However, nobody has been able to do anything about it.  Until now – at least in part.  The CARES Act provides $100 billion in relief aid for hospitals and other medical providers.  As a condition of receiving money from this fund, a provider is required to sign an agreement attesting to the receipt of the money and agreeing to certain terms and conditions.  Among those terms and conditions is the following, which appears on the Department of Health and Human Services website:

The Secretary has concluded that the COVID-19 public health emergency has caused many healthcare providers to have capacity restraints.  As a result, patients that would ordinarily be able to choose to receive all care from in-network healthcare providers may no longer be able to receive such care in-network.  Accordingly, for all care for a presumptive or actual case of COVID-19, Recipient certifies that it will not seek to collect from the patient out-of-pocket expenses in an amount greater than what the patient would have otherwise been required to pay if the care had been provided by an in-network Recipient.

In addition, a spokesperson for the Department said:

The intent of the terms and conditions was to bar balance billing for actual or presumptive COVID-19.

Conclusion

Like any government pronouncement, this one is racked with ambiguity.  For example, it should be easy to identify an actual COVID-19 patient.  But, who is a “presumptive COVID-19 patient”?  This and many other questions will have to be answered by further guidance.  However, this may be an important step forward in ending “balance billing”.

If you are interested in learning more about balance billing and other health insurance solutions for your business, contact RMC Group.

 

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Health and Benefits Technical Memorandum

Coronavirus Aid, Relief and Economic Security Act [Technical Memorandum]

On Friday, March 27, 2020, President Trump signed the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) into law.  The CARES Act is a wide-ranging piece of legislation that impacts almost every aspect of American life.  This article will discuss some of its effects on healthcare.

1. Covid-19 Testing

The Families First Coronavirus Response Act (“FFCRA”) requires group and individual health plans, whether fully-insured or self-insured, to cover the full cost of testing for the Coronavirus.  The FFRCA eliminated deductibles, co-pays and coinsurance in connection with Coronavirus testing.  The problem with the FFRCA was that it was limited to FDA-approved tests.  The CARES Act expands the type of tests, which a health plan is required to cover to include tests that:

  • have been submitted to the FDA for approval;
  • have been developed or authorized by a state; or
  • have been determined by the Department of Health and Human Services to be appropriate for the purpose.
2. Coverage of Covid-19 Vaccines

While the FFCRA requires that health plans cover the cost of testing for the Coronavirus, it does not require that health plans cover the cost of any item or service designed to prevent Covid-19, such as a vaccine.  The CARES Act requires health plans to cover the full cost of any item or service that is intended to prevent or mitigate Covid-19 and that is:

  • an evidence-based item or service that has a rating of A or B in the current recommendations of the U.S. Preventive Services Task Force; or
  • an immunization that has a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention with respect to the individual involved.

A health plan is required to cover the cost of such item or service 15 days after one of the foregoing conditions has been met.

3. Cost of Testing

The CARES Act sets the price that a health plan is required to pay for Covid-19 testing as:

  • the price negotiated between the plan and provider; or
  • if the plan and provider have not negotiated a price, then the price listed by the provider on its public website.

A provider can be charged a fine of $300 per day for failure to list the price on its public website.

4. High-Deductible Health Plans

The CARES Act provides that a high-deductible health plan can pay the full cost of telehealth services without cost-sharing, even if the participant has not met the plan’s deductible for the year.  In addition, the participant can continue to fund an HSA.  This provision is effective for plan years beginning before December 31, 2021.

The CARES Act is not likely to be the final piece of legislation enacted by Congress to fight the Coronavirus pandemic.  We will keep you posted about future developments.  If you have any questions about the CARES Act or how it impacts your health plan, please contact RMC Group.

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Health and Benefits

Out-of-Pocket Maximum: How It Could Help You Save on Medical Expenses

Healthcare is getting more expensive.

The most recent Large Employers Health Care Strategy and Plan Design Survey predicts a 5% increase in overall costs over the course of this year, resulting in an average cost of $15,375 per employee. Employees are expected to shoulder nearly 30% of that burden in the form of premiums, deductibles, copays, and coinsurance.

These expenses are how you can manage your costs and maintain the overall affordability of your plan. However, there needs to be some protection in place so that employees don’t end up taking on too much of the burden of care.

Out-of-pocket maximums provide that protection. The more you understand it, the more effectively you can control your employees’ healthcare costs.

[content_band bg_color=”#e8f4f8″ border=”all”] [container] [custom_headline style=”margin: 0; 0; 0; 0;” type=”center” level=”h4″ looks_like=”h4″ accent=”true”]Key Takeaways[/custom_headline]

  • An out-of-pocket maximum is the most a covered person can pay each year for covered services
  • Premiums do not count toward out-of-pocket maximums, but copays and coinsurance do
  • When a covered person hits the out-of-pocket maximum, the insurance company pays all healthcare expenses for the rest of the year
  • Out-of-pocket maximum is not the same as a deductible, which is the amount that a covered person has to pay before insurance starts contributing
  • A lower out-of-pocket maximum can help employees reduce their annual healthcare spending[/container] [/content_band]
What Is an Out-of-Pocket Maximum?

An out-of-pocket maximum is the most that an employee can be required to pay for health care in a given year, not including monthly premiums.

Without it, they could be on the hook for astronomical amounts if they need costly treatment, like open-heart surgery ($324,000) or bone marrow transplant (up to $676,800).

The Affordable Care Act (ACA) imposes limits on an employee’s out-of-pocket-maximum. In 2020, those limits are $8,150 for an individual and $16,300 for a family plan.

A plan subject to the ACA may not have out-of-pocket maximums any higher than these federal limits.

However, you can offer plans with lower out-of-pocket maximums.

What Counts Toward Out-of-Pocket Maximums?

Generally, costs such as deductibles, copayments, coinsurance, and any other expense paid by the employee counts towards the out-of-pocket maximum. However, out-of-pocket maximums only apply to costs paid for “essential health benefits.”

They include:

  1. Preventive and wellness care
  2. Outpatient services
  3. Pediatric care, including dental and vision care (adult dental and vision are not considered essential)
  4. Prescription medication
  5. Behavioral health and substance use disorder treatment
  6. Emergency services
  7. Hospitalization
  8. Maternity and newborn care
  9. Rehabilitative services and devices
  10. Laboratory testing

While costs paid by an employee in connection with any of these services will generally count towards their out-of-pocket maximum, an insurance company may impose higher out-of-pocket maximums for non-emergency care treatment by out-of-network providers.

Your employees should always check whether or not the provider is in-network in order to maximize the amount that counts against their out-of-pocket maximum.

What Doesn’t Count?

Not everything counts toward the employee’s out-of-pocket maximum. Remember, monthly insurance premiums paid by the employee do not count toward their out-of-pocket maximum.

In addition, costs associated with non-essential health benefits, which may not be covered under your health plan, do not count towards the out-of-pocket maximum.

That includes costs related to:

  • Services from outside your provider network, including balance billing charges
  • Elective services like cosmetic surgery
  • Non-essential health benefits, including adult vision and dental care

For example…

Let’s say your employee elects to have cosmetic surgery and has already paid $200 in copays and coinsurance this year, and the plan’s out-of-pocket maximum is $5,000.

If they pay $5,500 for a rhinoplasty (aka, nose job) none of the cost paid by the employee will count towards their out-of-pocket maximum.

They will still have $4,800 in covered services left to pay before hitting their out-of-pocket maximum.

What Happens When Your Employee Hits Their Out-of-Pocket Maximum?

Once the out-of-pocket maximum is reached on covered expenses, the insurance company takes over paying the full amount for those services. This lasts until the end of the coverage year.

Out of Pocket Maximum Healthcare.gov
Image via Healthcare.gov

Be aware: even after an employee hits the plan’s out-of-pocket maximum, an insurance company won’t pay for services that aren’t covered by the policy. An employee must make sure that expenses are covered ahead of time. Otherwise, they could end up with thousands more in medical bills.

Out-of-Pocket Maximum, Deductible, and Coinsurance: Compared
Out-of-Pocket Maximum versus Deductible

Many people confuse out-of-pocket maximums with deductibles.

Here’s the difference:

  • An out-of-pocket maximum is the total amount that a covered person will pay per year under a certain policy
  • A deductible is the amount that a covered person will pay before the insurance coverage activates for that year

Deductibles can be confusing because certain services may be exempt. Many plans, including those sold through the Federal Marketplace, will cover routine and preventive care even before you’ve met your deductible. Check with your insurance company to find out which services fall into this category.

Your plan may also have separate deductibles. If you have a family plan, you may also have individual deductibles for each covered person as well as an overall family deductible.

Deductible, Coinsurance, and Out-of-Pocket Maximum: How They Work Together

After a covered person pays their deductible, the insurance policy pays a certain percentage of covered healthcare expenses. The covered person pays the remainder, which is called the coinsurance amount.

Here’s an example:

Let’s say you go in for a $5,000 surgery.

Your deductible is $2,000 and your coinsurance is 20%.

You pay your $2,000 deductible and $3,000 is left.

Of that, your insurer pays 80%, leaving you with the remaining 20%, or $600. That $600 is your coinsurance.

When you hit your out-of-pocket maximum, your insurer can’t charge you coinsurance for the rest of the year.

Conclusion

When looking for health insurance, HR managers, CFOs, and business owners must take into consideration deductibles, coinsurance and out-of-pocket maximums.

Lowering out-of-pocket maximums may result in higher premiums. However, they may also help your employees get the most out of their health insurance plans.

Do you know what the out-of-pocket maximum is on your health plan?

Leave a comment below or contact us today.

Categories
Business Insurance Health and Benefits Technical Memorandum

What Employers Should Know About Labor Department’s Guidance On Families First Coronavirus Response Act

On March 24, 2020, the Department of Labor (DOL) issued an FAQ to provide guidance for the Families First Coronavirus Response Act (the “Act”). This is their first effort at answering some questions.

What do we know from this guidance?
1) Paid Leave Provisions Begin April 1st

The Act’s paid leave provisions are effective April 1, 2020, and will extend to December 31, 2020.

This is slightly interesting in that the Act says it will become effective April 2, 2020. The FAQ provides no explanation for why the DOL changed the effective date of the Act’s provisions.

It says the relevant date for making this determination is the date that an employee requests leave under the Act.

So, for example, if, on the date that Jim asks for leave under the Act, the employer has 505 employees, Jim is not eligible for paid leave under the Act.

However, if, a week later, when John asks for leave, the employer has 495 employees, then John is eligible for leave under the Act.

2) Independent contractors are not covered under the Act

If an employer has multiple locations, employees in all locations are considered when tallying the total number.

However, if a corporation has an ownership interest in another corporation, the corporations are generally treated as separate entities, unless they are considered joint employers under the Fair Labor Standards Act.

3) The Act Only Applies For Businesses With Under 500 Employees

The FAQ makes clear that the Act does not apply to employers with more than 500 employees.

4) Fewer Than 50 Employees May Be Exempt

Employers with fewer than 50 employees may be exempt from the requirements of the Act. The criteria for the exemption will be addressed in the regulations.

5) Part-Time Employees Are Entitled To Benefits

A part-time employee is entitled to be paid for the average number of hours worked. You calculate their paid leave period based upon the number of hours that the employee is normally scheduled to work. If the normal hours are unknown or the employee’s hours fluctuate, then you can use a 6-month average.

6) Sick Pay and Overtime Are Included, With Capped Hours

When calculating sick pay, overtime hours are included. However, the amount of hours are capped at 80. So, if an employee is scheduled to work 50 hours in one week, you can pay for 50 hours for that week. But, the employee can only be paid for 30 hours the next week.

7) Family And Medical Leave Sick Pay Is Calculated Differently

The payment rates for paid sick leave and family and medical leave under the Act are different. So, it is important for you to determine under which part of the Act the employee seeks to qualify. An employee receiving sick pay is entitled to full pay with a cap of $511 per day. An employee taking family and medical leave is entitled to two-thirds of normal pay.

8) Benefits Are Not Retroactive

The Act is not retroactive. However, it provides a new and separate benefit. So, an employee who took sick pay before April 1, 2020, is still eligible to take sick pay under the Act after April 1, 2020.

We will provide more information as it becomes available from the Department of Labor.

Not sure how these changes affect your company?

Leave a comment below or contact us with your questions.

Categories
Health and Benefits

How Layoffs Impact Employee Benefits Plans During Coronavirus COVID19

While the Coronavirus pandemic is a public health crisis, it’s also having a significant negative impact on business.

With many states under “shelter-in-place” orders, businesses deemed “non-essential” are unable to operate at full scale.

As an employer, how will you react to the disruption of your normal business operations?

One option may be to consider reducing hours of employees or laying them off. But, such actions have consequences, specifically for your employee benefit plan.

Here are some of the issues.

If an employee is laid off or has his hours reduced, what impact does that have on health insurance?

If you offer health coverage then you most likely require contributions from your employees. In many cases, those contributions are made through payroll deductions and often through a cafeteria plan.

You have to decide whether you will pick up the entire cost of the plan during a temporary furlough or reduction in hours and, if not, how will you collect the employee’s portion of the cost if there is no payroll to withhold?

You must review your plan document and any insurance policy issued to the plan, whether it’s a fully-insured or self-funded plan with stop-loss insurance.

The plan document will determine whether a furloughed employee, or one whose hours have been reduced, is still eligible for coverage.

You may have to amend your plan.

In addition, review any insurance policy issued to the plan to determine whether a furloughed employee or one whose hours have been cut is still covered. You may have to ask your insurance company to amend the policy.

What about employees who are terminated?

A termination of employment is a qualifying event under the Consolidated Omnibus Budget Reconciliation Act (COBRA). A reduction in hours may also be a qualifying event, depending upon the scope of the reduction.

If the action taken constitutes a qualifying event under COBRA, then you must provide the required notice and opportunity to elect coverage under COBRA.

How is paid leave handled?

Any action you take may implicate the employee’s right to paid or unpaid leave.

Check your sick leave or PTO policy.

A furloughed employee may be able to take advantage of paid leave during a furlough. In addition, the Families First Coronavirus Relief Act expanded an employee’s right to Family and Medical Leave.

You will have to check whether a furloughed employee will be entitled to claim the right to payment under that legislation.

What about highly compensated employees?

Any action you take cannot be discriminatory by job function. This means that more generous benefits cannot be offered to highly-compensated employees.

Conclusion

It’s clear that the Coronavirus pandemic will have consequences well beyond the health of your employees.

If your business is considering furloughing or laying off employees, it’s important to first get clear about how your existing policies, procedures, and employee benefit plan documents will respond.

This will dictate how benefits are extended to those employees for a period of time afterward.

Is your businesses planning on reducing your staff as a result of COVID-19?

Drop a comment below or contact us with any questions regarding your health plan and any insurance policy issued to the plan.

Categories
Health and Benefits

Case Study: Narrow Network

How a narrow network enabled an assisted living facility in the rural South to increase healthcare access while saving costs

Is it possible for narrow network providers to actually increase access to healthcare coverage? In some cases, cost savings aren’t the only reason for employers to choose a narrow network. Under served, rural areas may slip through the cracks in wide networks. What can an employer do to ensure that employees in remote areas get the coverage they need? Specialized, locally-oriented narrow network care could be the answer.

The Problem

An assisted living facility in rural Florida, located outside Naples on the fringes of the Everglades, was having trouble finding a healthcare network that would cover its 250+ employees spread across multiple rural counties. These areas were under served by two major networks.

Wide networks aren’t always universal networks

It’s easy to mistake wide networks for universal networks.

For this facility, local health care providers were not included in the major networks. This meant that, in order for an employee to get needed care, they had to decide between a local out-of-network provider at increased cost or traveling a great distance to visit an in-network provider.

The Solution
How did a narrow network solve this rural facility’s healthcare problem?

With the help of a Naples-based healthcare system, the employer thought outside-the-box and put together a narrow network of healthcare providers.  This narrow network was comprised of local providers exclusively; the employees were now able to get in-network coverage from local primary care providers and avoid out-of-network costs.

What did a narrow network accomplish?

The employees were able to benefit from easy access to local healthcare providers, who guaranteed high-quality care at preferred rates. This meant that the covered employees enjoyed better care for less.

By guaranteeing a steady flow of local clients, the facility negotiated preferential rates with the providers, which allowed them to reduce costs compared to those of wide network providers.

Conclusion

According to a study by the Kaiser Family Foundation, only six percent of small-to-medium firms offer a narrow network healthcare plan to employees. That number is not much higher for larger firms. While there are challenges, choosing a narrow network can significantly reduce your overall insurance costs. Plus, if you do business in some of the more remote parts of the country, narrow networks can help employees get coverage they wouldn’t otherwise be able to access.

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Health and Benefits

Case Study: Risk Segmentation

How a Midwestern firm used creative risk segmentation to provide health insurance coverage for an employee with chronic illness

The Problem

A Midwestern company with 100 employees across seven locations discovered that an employee in their Northeast office was disqualified from coverage under their new self-funded health plan. As a result, the company had to consider returning to a more costly fully-insured health plan for all employees.

The company did not discover this problem until it was able to analyze health data from their self-insured plan, which wasn’t available under their prior fully-insured carrier.

What is risk segmentation?

One way for companies to deal with higher risks is to segment groups into risk tiers and charge different premiums for each tier.

The Solution
How did the company implement risk segmentation?

By adopting a risk segmentation strategy, the Midwestern company was able to segment its Northeast office onto a fully-insured plan that covered the high-risk employee. Meanwhile, employees at the other six locations remained on the company’s self-insured health plan.

By removing the 16 employees in their Northeast office, the company had enough employees to meet the legal requirements to maintain a self-funded health plan.

As an added bonus, risk segmentation helped the company achieve significant savings.  By creatively structuring its self-funded health plan and segmenting out the Northeast location, the company realized greater underwriting profit. This savings went straight to the company’s bottom line.

Is risk segmentation right for your business?

To assess a self-insured health plan or risk segmentation is right for you, contact an RMC professional today.