Health and Benefits

Employer Challenges with Medicare-Eligible Employees

An increasing number of employers are facing Medicare-related health insurance issues, and these issues are expected to only become more prevalent in the coming years. Here is an overview of the issues from the underlying causes to how employers might navigate them.

Medicare-Related Health Insurance Challenges Are Increasing

Two trends are contributing to the overall increase in Medicare-related health insurance challenges for employers.

First, older Americans are simply working longer.  While this isn’t a new trend, the Bureau of Labor Statistics projects that this trend will continue, with about one-third of seniors age 65 to 74 expected to be working in 2029. Even among seniors age 75 and older, the BLS expects more than 10 percent of the demographic to be working at the end of the decade.

Second, the Social Security full retirement age can be higher than the eligibility age for Medicare.  While a person can retire and begin receiving reduced Social Security benefits at age 62, the earliest full retirement age is 66 and for people born after 1960, it is 67.  In addition, benefits increase if an employee works beyond their full retirement age, maxing out at age 70.  This means that there could be a two-year gap, where an employee becomes eligible for Medicare at age 65, but will not be fully eligible for Social Security until age 67. Many people may choose to work beyond their Medicare eligibility birthdate as a result.

The result is that Medicare-related health insurance challenges are not something that employers can afford to ignore. Many employers are already facing with these issues, and those that aren’t will probably face them soon.

Medicare is a Four-Part Health Insurance Plan for Seniors

Medicare is, of course, the nationally subsidized health insurance plan that is available to those 65 and older.  The program consists of four main parts:

  • Part A: Generally, covers stays in hospitals, skilled nursing facilities and certain at-home care. Most enrollees aren’t charged a premium.
  • Part B: This usually covers doctor’s visits, outpatient exams, and tests. Premiums are usually charged.
  • Part C: Medicare Advantage plans are offered as alternatives to “standard” Medicare plans, and they may have different rules and out-of-pocket expenses. These plans are offered by approved private insurers, which charge premiums.
  • Part D: This part covers prescription drugs. These plans are offered by private insurers, which charge premiums.

Because Medicare Part A is premium-free, many employees who have access to employer-sponsored plans may choose to enroll in this part of Medicare alone.  Instead, they may rely on their employer-sponsored plan to cover office visits, outpatient services, and diagnostic testing.

Medicare Eligibility Begins at Age 65

A person becomes eligible for Medicare at age 65 and can enroll during the three months before the month in which they turn 65, the month in which they turn 65 or the three months after they turn 65.  When a person enrolls after their 65th birthday, coverage may apply retroactively for up to six months.

A person who does not enroll (or prove equivalent coverage) when first eligible for Medicare may have to pay a penalty if they enroll later.

Working May Impact an Employee’s Decision to Enroll in Medicare

Working part- or full-time does not affect Medicare eligibility, but it may impact an employee’s decision whether to enroll in Medicare.  The decision to enroll depends on an employer’s size and an employee’s coverage needs.

An eligible person working for an employer with fewer than 20 employees is required to enroll in Medicare coverage or face higher premiums later. An eligible person working for an employer with 20 or more employees can forgo Medicare coverage, as long as they have equivalent or better coverage through their employer or through their spouse’s employer.

Whether an eligible employee chooses to enroll in Medicare is a personal decision that depends on personal health, family coverage needs, employer-sponsored plan features, income level, and other factors. Many employees may elect to, at least, enroll in the free Medicare Part A coverage.  However, some will delay Medicare enrollment altogether.

Medicare Can Overlap with Employer-Provided Health Insurance

When an employee is both enrolled in Medicare and covered by their employer’s plan, one will provide primary coverage and the other will be secondary. Whether Medicare is primary or secondary depends upon the size of the employer.

When an employer has fewer than 20 employees, Medicare pays first and the employer’s plan pays second.  When an employer has 20 or more employees, the employer’s plan pays first and Medicare pays second.

Medicare Isn’t Compatible with Health Savings Accounts

Employees who are covered by a high-deductible health plan (HDHP) can contribute to a health savings account (HSA).  However, an employee may not contribute to an HSA, if they are enrolled in Medicare.  As a result, an employee’s decision whether to enroll in Medicare may depend upon the value they attach to the ability to make future contributions to an HSA.

Navigating Medicare Issues and Self-Funded Plans

Whether a Medicare-eligible employee enrolls in Medicare or stays in their employer’s health plan is a difficult decision for an employee.  However, it is also a challenge for employers that want to mitigate increasing healthcare costs by adopting a self-funded health plan.  Whether a self-funded health plan option is viable for a particular employer may depend upon the mix of an employer’s employees.  There is not a one-size-fits-all solution. Instead, each situation must be taken on a case-by-case basis and should be navigated with expert guidance.

RMC can provide the expert guidance that an employer needs with a consultative risk management approach.  RMC’s Medicare consulting services provides businesses with a clear path to a successful self-funded health plan transition.

To speak with a knowledgeable consultant at RMC, contact us today. One of our representatives will be happy to assist you and your business.

Compliance Update Health and Benefits

The United States Supreme Court Decides the Rutledge Case

In a previous article, we told you about a case that was argued in the United States Supreme Court on October 6, 2020.  That case, Rutledge, Attorney General of Arkansas v. Pharmaceutical Care Management Association, was decided by the Court in a unanimous opinion issued on December 10, 2020.

What Was The Case About?

To refresh your recollection, the State of Arkansas had passed a law, known as Act 900, regulating the price at which pharmacy benefit managers (PBMs) are required to reimburse pharmacies for prescription drugs.  While invisible to most plan participants, PBMs are an important part of most employer healthcare plans.

A PBM is an intermediary between a healthcare plan and a pharmacy.  When a plan participant goes to a pharmacy to fill a prescription, the participant may or may not have a co-pay.  Whether the participant has a co-pay or not, the participant expects that the cost of the prescription will be mostly paid by the plan.  Ultimately, the participant is right.  However, it is not the plan that makes a payment to the pharmacy.  The plan’s PBM pays the pharmacy, and the plan reimburses the PBM.

The problem that Act 900 sought to address is that the amount paid to the pharmacy by the PBM may bear no relation to either the amount paid by the pharmacy to acquire the prescription drug or the amount paid by the plan to the PBM.  The PBM enters into a contract with the pharmacy pursuant to which the PBM agrees to reimburse the pharmacy according to rates set by the PBM and known as the maximum allowable cost (MAC).  The PBM also enters into a contract with the plan pursuant to which the plan agrees to reimburse the PBM at a certain amount.  The difference between the MAC for a particular drug and the amount paid by the plan represents profit for the PBM.  However, in certain cases, it may only be the PBM that is making a profit.  That is because the MAC may be less than the pharmacy’s acquisition cost.  And, if that happens too often, a pharmacy may be forced out of business.

Act 900 attempted to resolve this problem by requiring PBMs to periodically update their MACs to ensure that the MAC for a particular prescription drug equaled the pharmacy’s acquisition cost.  In addition, Act 900 provided an appeal procedure whereby a pharmacy could challenge a PBM’s MAC when it was below the pharmacy’s acquisition cost.  Finally, Act 900 provided that a pharmacy could refuse to deliver a prescription drug to a plan participant if the PBM’s reimbursement rate was less than the pharmacy’s acquisition cost.

This case began when the Pharmaceutical Care Management Association (Association), a trade association of the some of the largest PBMs, sued the State of Arkansas in federal district court.  The Association claimed that Act 900 was preempted by the Employee Retirement Income Security Act of 1974 (ERISA) and, as a result, unenforceable.  The Association won in the District Court, and the District Court’s judgment was affirmed by the United States Court of Appeals for the Eighth Circuit.  The State filed a Petition for a Writ of Certiorari, which the Supreme Court granted.

The Supreme Court Finds No ERISA Preemption

In an opinion written by Justice Sotomayor, the Court reviewed the law of ERISA preemption.  It said that ERISA preempts any state law that relates to an employee benefit plan.  Further, a state law relates to an employee benefit plan if it has a connection with or reference to such plan.

The Court found that the purpose of ERISA was “to make the benefits promised by an employer more secure by mandating certain oversight systems and other standard procedures”.  It accomplished this by ensuring that an employer would not be subject to the differing rules and regulations of the various states.  “ERISA is therefore primarily concerned with preempting laws that require providers to structure benefit plans in particular ways, such as by requiring payment of specific benefits.”

Not every state law that affects an ERISA plan is preempted.  “This is especially so if a law merely affects costs.”  The Court discussed its earlier decision in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Company, in which the Court held that a New York law that imposed a surcharge on hospital billing rates for plans other than Blue Cross Blue Shield plans was not preempted by ERISA.  In discussing the Travelers case, Justice Sotomayor wrote that:

Plans that bought insurance from the Blues therefore paid less for New York hospital services than plans that did not.  This Court presumed that the surcharges would be passed on to insurance buyers, including ERISA plans, which in turn would incentivize ERISA plans to choose the Blues over other alternatives in New York.  Nevertheless, the Court held that such an “indirect economic influence” did not create an impermissible connection between the New York law and ERISA plans because it did not “bind plan administrators to any particular choice.”

In Rutledge, the Court said that it is required to follow the holding of Travelers.

Act 900 is merely a form of cost regulation.  It requires PBMs to reimburse pharmacies for prescription drugs at a rate equal to or higher than the pharmacy’s acquisition cost.  PBMs may well pass those increased costs on to plans, meaning that ERISA plans may pay more for prescription-drug benefits in Arkansas than in, say, Arizona.  But “cost uniformity was almost certainly not an object of pre-emption.”

The Court also found that Act 900 does not refer to ERISA plans.  The reason that Act 900 does not refer to ERISA plans is that it is equally applicable to non-ERISA plans.  Since Act 900 does not have an impermissible connection to ERISA plans and does not refer to ERISA plans, it is not related to ERISA plans and is not preempted.

What Will Be The Impact of Rutledge?

This depends on whom you ask.  The State of Arkansas, as well as the over 30 other states with similar laws, will be pleased.  The states can now regulate the reimbursement rates that pharmacies are paid for prescription drugs to ensure that no pharmacy is forced to close because the MAC is less than the pharmacy’s acquisition cost.  The pharmacies are happy because, in states with such laws, they will no longer be forced to sell prescription drugs for less than cost.

On the other hand, the PBMs are not pleased.  Obviously, this could reduce their profit margins if they are required to increase their MACs.  The impact on prescription drug plans is less clear.  One of the arguments made by the Association before the Supreme Court is that PBMs will be forced to pass on increased costs to healthcare plans.  This will increase the cost of prescription drugs to the plans.  This may force plans to increase co-pays or eliminate certain coverages.  However, the Court’s role in this case was not to judge the wisdom of Act 900.  It was simply to determine whether it was preempted by ERISA.  And, since cost regulation does not relate to an ERISA plan, it found that Act 900 is not preempted by ERISA.

Health and Benefits

A Supreme Court Case That May Impact Prescription Drug

On Tuesday morning, October 6, 2020, the United States Supreme Court heard oral arguments in the case Rutledge v. Pharmaceutical Care Management Association.

What is This Case About?

The case involves a challenge to an Arkansas law known as Act 900.  The law was enacted by the State of Arkansas in 2015 to regulate the amounts that a Pharmacy Benefit Manager (PBM) must pay to a pharmacy when an individual covered under a health plan purchases prescription drugs.  The law was challenged by a trade association of PBMs as a violation of the Employee Retirement Income Security Act of 1974 (ERISA).  While the ERISA issues may be of great academic interest to ERISA lawyers, the case may have a more practical effect on individual consumers.

What is a Pharmacy Benefit Manager?

A PBM is a third-party intermediary between employers that sponsor group health plans that include a prescription drug benefit and retail pharmacies that sell prescription drugs to plan participants.  They are usually engaged by an insurance company to administer a plan’s drug benefits, and their goal is to reduce the cost of prescription drugs to the insurance company.  When a plan participant goes to a pharmacy, it is the PBM that determines how much the pharmacy will be paid for the medication.  That amount is known as the Maximum Allowable Cost (MAC).

In addition, it is often the PBM that reimburses the pharmacy for the difference between the MAC and the co-pay paid by the plan participant.  The PBM is then reimbursed by the insurance company for the amounts that it paid the pharmacy.  A PBM may also be paid an administrative fee or a portion of the difference between the MAC and the amount that the insurance company is willing to pay for the medication.

What Was Act 900 Intended to Accomplish?

A pharmacy does not purchase prescription drugs from a PBM.  It purchases medication from a wholesaler.  The problem that the legislation was intended to address is that, sometimes, the MAC is less than the amount that the pharmacy has to pay its wholesaler for a particular prescription drug.

As a result, Arkansas, like many other states, enacted legislation regulating the MAC that a PBM must pay to a pharmacy; requiring that a PBM set its MAC in an amount that is at least equal to the pharmacy’s purchase price.  The proponents of the legislation argue that many small, independent pharmacies have been forced out of business because their acquisition costs for prescription drugs often exceeded the MAC paid by the PBM.

How Did the Lawsuit Get Started?

The lawsuit was filed by the Pharmaceutical Care Management Association (PCMA), a trade association of PBMs.  The PCMA alleged that the Arkansas statute violates ERISA.  ERISA is a federal law that regulates employee benefit plans and seeks to protect employees.  ERISA contains a preemption provision that precludes states from enacting laws that also seek to regulate employee benefit plans.  Of course, the PCMA was not motivated solely by loyalty to federal law.  It claimed that the law eliminates an incentive used by PBMs to reduce the cost of prescription drugs.

It also likely reduces the profits earned by PBMs and increases the regulatory burden.  The state, of course, argued the opposite.  It claimed the law would protect consumers by preserving smaller, independent pharmacies and providing greater access to less profitable drugs.  The PCMA won in the district court as well as in the U.S. Circuit Court of Appeals for the Eighth Circuit.

How Will the Supreme Court Rule?

It is, of course, impossible to predict what will happen in the Supreme Court.  As of October 6, 2020, when the case was argued, the Court had only eight members.  This means that, if the Justices split, 4–4, the decision of the Appeals Court will be upheld, and Act 900 will be overturned.

In addition, similar laws of many other states would suffer the same consequence.  While each side may have presented its case as important for consumers, the issue is much more esoteric.  The issue is ERISA preemption, which has a long and confusing history.  Justices may react differently to that issue than they would if the case were simply presented as pro- or anti-consumer.

For further information or for assistance with your health and prescription drug benefit plans, contact RMC Group.

Health and Benefits

How Do You Get More of Your Employees to Use Telehealth?

Healthcare has evolved dramatically in recent years, making it easier than ever for people to receive the care they need — without even leaving the house.

Telehealth is a modern service that offers access to doctors, specialists, and therapists at any time through phone calls or video chats. It’s an increasingly common addition to healthcare plans offered by employers.

From an employer perspective, partnering with a telehealth provider is worth considering for many reasons:

  • Telemedicine helps reduce employer costs, especially for self-funded plans.
  • Access to quality care is quick and easy, especially in areas without other adequate medical care options.
  • Telehealth helps reduce employee absenteeism.
  • Additional health benefits can help you attract and retain talent.

While telehealth is not appropriate for all medical needs, it can be a valuable tool for employers and employees alike to control the cost of maintaining good health.

Common Uses for Telehealth Services

When an employer adds or transitions to telehealth coverage, the employer must communicate its benefits to employees through printed brochures and online benefits explanations. The material should list the ways in which telemedicine can be an effective alternative to a traditional doctor visit.

Limited Primary Care

While telehealth cannot replace a primary care physician, it can be helpful when an employee is unable to schedule an appointment for themselves or their family.  In many cases, the employee will be able to discuss symptoms with a telehealth provider and get an initial diagnosis.

Follow-Up Care

In addition, prescriptions can often be refilled through telehealth.  Doctors frequently require follow-up visits after surgeries or other treatments. If a patient has no complications, telehealth is much more convenient than an office visit.

Physical and Behavioral Health

Medical care, such as physical therapy or mental health therapy, can easily be accomplished through telehealth.  Patients can follow guided prompts or discussions with medical professionals without having to be in an office in person.

Transportation Limitations

A common obstacle in addressing health issues is inadequate transportation. An employee may not be able to get to a doctor’s office.  Telehealth appointments are available anywhere they have access to a computer and/or telephone.

Set Goals to Increase Usage

Managers can and should track the usage of telehealth by their employees and set goals for future use. The metrics used can include:

  • Total amount of money saved by the company
  • Total number of telehealth consultations by employees each month
  • Utilization rate, which is the number of consultations divided by the total number of primary care physician consultations plus the number of telehealth consultations

To meet your company’s goals for telehealth use, you must design a telehealth plan that will interest employees. Consider plans that require no out-of-pocket payments or consultation fees.

Then, implement a communication strategy so employees are fully aware of their benefits. This outreach campaign can include:

  • Emails scheduled regularly to remind employees of the value of telehealth services
  • Links to the telehealth provider’s website as well as appropriate contact phone numbers
  • Flyers posted in employee break rooms and bathrooms
  • Messaging that is appropriate for common seasonal issues, such as allergies or the flu
  • Testimonials from a “telehealth champion,” or someone in the company that appreciates telehealth

It’s important to note that telehealth may not be suitable for an emergency.  In all communication with employees, you should make it clear that, if an employee or family member needs immediate care, they should go to an emergency room.

Finally, offer assistance with enrollment. Employees will appreciate information outlining the steps necessary to take part in the program. Make internet access available to help employees complete any applications — and participate in telehealth appointments.

Criteria for Selecting Providers

For employees to feel comfortable with a transition to digital healthcare, you must select a telehealth provider that has a user-friendly platform and a proven record of success. If the process is frustrating, employees will prefer more costly in-person options.

An ideal provider should offer participants a fast, easy, and seamless experience. There should be numerous ways for employees to schedule telehealth appointments. Younger employees are often more comfortable with virtual channels, while older employees may feel more comfortable speaking directly to a person.

Employees should be able to connect with a telehealth service provider via:

  • Mobile app
  • Website
  • Online chat
  • Phone

Providers should be able to demonstrate a focus on patient satisfaction through metrics as well. When comparing services, HR managers can request information on the expected ROI of the telehealth service. Ensure that the provider has a utilization rate of at least 25%. If the utilization rate is lower, it may indicate concerns with the platform.

Sometimes, providers will increase costs when utilization rises.  If this is the case, make sure that the ROI increases as well. Otherwise, you may not realize the cost savings expected from adding telehealth.

Consider using a provider with a fee structure that is more attractive to employees. For instance, look for plans that charge employees on a monthly basis for unlimited use. If there is a charge every time a patient seeks a consultation, utilization rates may remain low.

Modernize with Telehealth

The transition from a traditional healthcare plan to telehealth for employees can be smooth and effective. Managers should work with service providers that are able to demonstrate a proven track record for ROI and utilization rates through a user-friendly platform.

Do not presume that employees will naturally adopt telehealth practices without a targeted outreach campaign to educate them on the appropriate uses and benefits. Keep the tone of all communications — whether through email, flyers, or in-person meetings — positive and supportive.

Remind employees that telehealth is a powerful and affordable tool for managing their health in a way that benefits everyone — but only when they enroll and use it.

Health and Benefits

Attracting and Retaining Talent Through an Employee Benefits Package

Top candidates look for more than a competitive salary when deciding whether to accept a job offer.  Benefits packages are a significant part of the decision-making process for 63% of job candidates, according to a study by Glassdoor.

By offering a generous benefits package, human resource executives and managers can use benefits to attract and retain employees.

To create a comprehensive package that sets the company apart from the competition, it may be necessary to change your benefits, customize options, or create a targeted outreach strategy for communicating offers.

Inventory Your Benefit Offerings

To enhance a recruitment strategy by focusing on benefits, you first must determine if your package is sufficient to attract and retain the employees you seek. By taking an inventory of our current offerings, you may discover that adding desired benefits is more affordable than you might have anticipated.

Glassdoor has reported that health, dental, and vision insurance are among the most important benefits to potential employees.  A robust and attractive benefits package may also include:

  • Life insurance, including permanent insurance and term insurance
  • Accidental death & dismemberment (AD&D) insurance
  • Short-term disability insurance
  • Long-term disability insurance
  • Hospital indemnity insurance
  • Critical illness insurance
  • Cancer insurance

By having multiple benefits options, you can customize a benefits package for a particular employee. This way, an employee receives the benefits he or she wants, not simply what a broker wants to provide.

Consider Additional Benefits

A strong insurance program is only one component of a comprehensive offering. FlexJobs notes that eight out of 10 parents said flexibility and work-life balance were the most important factors when looking at new opportunities.

To that end, craft your human resource strategy with team-focused wellness programs and behavioral health programs, including:

  • Flexible hours
  • Paid maternity and paternity leave
  • Unlimited time off
  • Free or discounted daycare services
  • Free or discounted yoga classes
  • Free or discounted in-office snacks and drinks
  • Free or discounted gym memberships or an on-site/near-site gym
  • Work-from-home options
  • Student loan assistance

To round out a comprehensive package, retirement benefits such as a 401(k) or profit-sharing plan should also be considered.

Share Benefits Before the Job Offer

A mistake that employers often make is failing to fully outline benefits packages, even when they are attractive and well thought out. Information should be provided well before a job offer is made so candidates can make an informed decision.

Update Glassdoor

Your company’s Glassdoor profile should contain all benefit information so that a potential employee can see what you are offering. In the past, only employees could provide this information, which resulted in misinformation or out-of-date details. Now, Glassdoor allows employers to directly update their employee benefits package information online. Take advantage of this feature to communicate your current offerings to candidates.

Build a Benefits Portal

If your company has a career portal on its website, be sure to include a link to a benefits section. This way, candidates will be able to see all benefits on demand, enabling them to come prepared with questions during the interview process.

Provide a Printout

When scheduling interviews, start the conversation about benefits. Have a printout prepared that outlines an average total compensation statement with a section on the benefits you provide. It’s often difficult for candidates to understand how expensive benefits can be for a company without seeing the actual cost on paper.

Include a Dialogue Within the Interview

Make sure to discuss benefits as part of the interview process. This topic is often overlooked when discussing job responsibilities and company culture. By including benefits as part of the interview, managers can answer questions and share company values with candidates.

Enhance the Employee Handbook

To retain and engage existing employees, enhance the employee handbook with in-depth information about the benefits package. This handbook should be shared at annual performance reviews as well as any general meetings discussing company-wide news.

Make sure the employee handbook contains the same detailed cost analysis you provide candidates. Employees often forget the actual cost and value of their benefits packages. The expense of insurance and other benefits should be a part of any conversation about compensation.

Survey Employees to Evolve

To provide the benefits that are the most meaningful to current and future employees, it may be helpful to survey existing team members to better understand what offerings motivate them. Managers may be surprised to learn that flexible schedules — such as four 10-hour shifts weekly rather than the traditional five-day workweek — may be as important to employees as raises.

When integrating less expensive or free benefits, you can shift resources to more insurance coverage and other programs employees care about.

Finally, in order to improve your recruitment and retention strategy, remember to keep the perspective of employees and candidates as a priority. If it is difficult to upload a resume through your website or communicate with the human resources team, having a comprehensive compensation package including robust benefits offerings may make less of a difference.

Once you know what matters most to the people you want to hire, be sure to communicate your strategy with any recruiters you use.  These efforts to improve benefits will reflect well on your company, improving employee morale and facilitating interest from more qualified candidates in the future.

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
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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.


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.

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.

Health and Benefits

4 Reasons You Might Want to Choose a Self-Funded Health Plan

Business owners need to look after their employees, and part of that is providing good health coverage. When starting your search for a plan, however, the variety of options available could leave you overwhelmed. What option is the most cost-effective, giving you the most coverage for your dollar? The answer for your business could be a self-funded option.

Some employers might not even know self-funding is an option, opting instead for a traditional fully-insured plan that could end up costing them more down the line. Here, we’ll go over just what self-funded employee healthcare means, and some of the ways it can save you money.

What is Self-Funded Health Coverage?

Self-funding is when the employer assumes financial responsibility for the costs of healthcare claims incurred by their employees. Instead of a fixed premium paid to an insurance provider every month, employers collect a premium from their employees and earmark that money for medical expenses. This money is usually set up as a trust, and employers also contribute funds. If no or few employees file claims, this reduces employee health insurance costs.

Instead of insurance companies, self-funded plans rely on third-party administrators (TPAs) to process insurance claims. TPAs can also handle:

  • Collecting premiums
  • Reviewing claims
  • Contracting for PPO services
  • Providing overall service for the employee’s chosen plan

Until recently, it was mostly larger businesses with 1,000 employees or more that took the self-funded option, as they were financially solvent enough to assume the risk of large healthcare costs. However the market has changed, and now the cost of fully-funded plans for some employers have raised making self-funded plans more obtainable.

With self-funded plans, employers pay certain fixed costs per month, while other costs vary depending on the amount of coverage employees use at a time. Overall, this can result in lower healthcare costs for the business owner than those of a traditional plan. As of 2018, over 38% of private sector businesses were offering at least one self-funded healthcare plan, according to the Employee Benefits Research Institute (EBRI).

While it has lower employee insurance costs, self-funding also carries a higher risk since you’re assuming the liability for insurance costs that a provider would normally take on. Many employers worry about what would happen if they self-fund and encounter an unforeseen, catastrophic claim. To protect themselves, self-funded employers often buy stop-loss insurance. Stop-loss coverage pays the employee’s medical costs when they top a certain predetermined amount.

4 Ways Self-Funded Health Insurance Can Help You Save

Now that we know what self-funded coverage is, let’s look at how it could save you some money. In addition to being cost-effective, self-funding also allows for greater flexibility in the type of plan you use, as it can be tailored to your employees. That brings us to our first point:

You Can Design Your Own Plan

Traditional, fully-insured plans are considered a one-size-fits-all option. With self-funded plans, you can design your employees’ healthcare coverage based on their needs, so you don’t end up paying for coverage you know you won’t use.

Employers also aren’t required to pre-pay for coverage the way they would with a traditional plan, and they retain control of the invested funds instead of the insurance provider. That lets them maximize their interest income from their healthcare trust.

You Can Be Flexible In What You Offer

Depending on the needs of your employees, you can offer options like free generic prescriptions, mail-order prescription services, and other benefits. You can choose from a range of wellness options like screenings, checkups, and chronic disease management as well, choosing only what your employees need and will use. You aren’t required to contract with a certain provider if they don’t offer the right coverage.

Self-funded healthcare plans are also experience rated, meaning risk is calculated based on the individuals actually covered under the plan. Traditional healthcare plans are community rated, meaning the entire demographic gets lumped together and a premium charge is dictated based on the entire group’s statistical risk.

You Can Free Up Cash Flow

If your employees don’t file any claims—or file fewer than anticipated—that money goes back into the business’s pocket. Instead of paying a lump sum upfront the way you would with a traditional plan, payments to cover healthcare expenses are doled out as needed. That gives greater control of cash flow to the business owner and a higher possibility of saving money since the cost of providing benefits to employees can be lower than a traditional plan.

Reduced Taxes On Premiums

Self-funded healthcare plans aren’t subject to tax liability payments on premiums. Premium tax is typically 2 to 3% of the total premium cost, and an insurance company includes that cost in the premiums that it charges.  By self-funding, you avoid paying the company’s premium tax, and you end up saving that same amount of money. With a self-funded plan, tax on premiums is typically only collected with excess loss coverage, and that amount is usually very small.

If you choose to go with a self-funded plan, you’ll also be exempt from the charges insurance providers place on traditional plans, such as retention charges and risk charges.

Summing It Up

The advantages of self-funded health plans can be plentiful, but you should be mindful of the cost. If you think you can cover the costs of typical claims as well as stop-loss insurance, then a self funded plan could be the right choice for you. The lack of taxes as well as exemption from some regulations will put more money back into the business when it comes to healthcare costs.

When making your decision, you should keep in mind that self-funded insurance plans are required to adhere to certain regulations, including:

  • Employee Retirement Income Security Act (ERISA)
  • Health Insurance Portability and Accountability Act (HIPAA)
  • Consolidated Omnibus Budget Reconciliation Act (COBRA)
  • Americans with Disabilities Act (ADA)
  • Pregnancy Discrimination Act
  • Age Discrimination in Employment Act
  • Civil Rights Act

With a little extra work, a self-funded healthcare plan could be the best thing for you and your employees. To learn more about a self-funded plan or to get one started for your business, contact an RMC health specialist today.

Press Release

Robert Myers Joins RMC Group As Health & Benefits Consultant

RMC Group is pleased to announce that Robert Myers has joined the company as a Health and Benefits Consultant. Robert is responsible for building relationships and soliciting new business for the health division of RMC Group.

“From day one I was impressed with the caliber of people at RMC Group as well as the company’s ability to deliver value to its clients. I’m excited to be a part of a dynamic organization that provides deep intellectual capacity, industry–specific expertise, and global experience,” Robert said.

Robert brings over 10 years of experience in the health and benefits industry to RMC Group.  He holds both Life and Health (Florida 2-15) and Property and Casualty (Florida 2-20) licenses.

Robert graduated from the University of South Florida with a degree in finance.  He brings substantial education and work experience to RMC Group.

Ryan Mitchell, President of RMC UK, commented, “I am pleased to announce the appointment of Robert Myers as our new Health and Benefits Consultant. Robert’s appointment signals RMC’s continuing commitment to build on the strong foundation of our health and employee benefits business. Robert brings extensive experience in the health and benefits industry and a strong track record of focusing on customer solutions. I look forward to working with him.”

Risk Management

Every Room in Your Client’s House

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How well do you know your clients?

Have you been through every room of their house?

Imagine your client’s business is a house.

Each room represents some aspect of a company, like…

  • Their operations
  • The finances
  • The management
  • Employees
  • And even insurance

Not every CPA or even the business owners themselves have the time or even the expertise to make sure that every room is in order.

This leaves the door open…

  • To catch lost opportunities
  • To catch cash flow issues
  • And to beat competitors that are going to try to come in with better strategies

Now let’s face it, everyone loves coming home to an orderly house.

Is your client’s house in order?

A great way to protect yourself and your client’s relationship is with better housekeeping.

One way to do this is by using the risk analysis process.

Now this does sound complex, BUT I’ll explain how you can do this with very little experience at absolutely no cost to you or your clients.

A risk analysis begins with the property and casualty insurance review.

This is where every traditional insurance coverage is reviewed. This includes your

  • Work comp
  • GL (general liability)
  • Property
  • And any other commercial policies that your client may have

Many times these clients are exposed or financial strapped because of the design of their insurance program.

This page by page review will give a detailed summary and it will highlight areas of improvement and give recommendations.

Your client can use these suggestions and take them directly to their current provider to get an immediate benefit if there are changes that are needed.

Phase two of the risk analysis is a deeper dive that looks at the entire company as a whole.

We’re going to look at…

  • The employee benefits program
  • The ownership structure of the company
  • The operations of the company outside of just property and casualty insurance

Phase two will provide alternative options and strategies that may benefit

  • The business owners
  • The business itself
  • And the employees of the business…

…By providing better benefits, programs, and opportunity.

Think of the risk analysis as a spring cleaning for your clients.

If you have a client in mind and would like to get their housekeeping in order, you can take advantage of this complimentary service as a CPA partner of RMC.

To get started, just leave me a comment below and we’ll reach out.