A Bi-monthly publication from The Gardner Group August 2012

Higher Limits for HSA Contributions

The US Internal Revenue Service announcedthe 2013 limits on contribution and out-of-pocket spending amounts for health savingsaccounts (HSAs) and for the high-deductiblehealth plans (HDHPs) to which HSAs must belinked.

The higher rates reflect the cost-of-livingadjustment and rounding rules of InternalRevenue Code section 223.

Below is a comparison of the 2012 and 2013 limits:

* Catch-up contributions can be made any time during the year in which the HSA participant turns 55.

-http://www.shrm.org

Contribution and Out-of-Pocket Limits for Health Savings Accounts and for High Deductible Health Plans

2012 2013 Change

HSA Contribution Limit (employer + employee) Individual: $3,100

Family: $6,500Individual: $3,250

Family: $6,450Individual: +$150

Family: +$200

HSA catch-up contributions (age 55 or older)* $1,000 $1,000 No Change

HDHP minimum deductible amounts

Individual: $1,200Family: $2,400

Individual: $1,250Family: $2,500

Individual: +$50Family: +$100

HDHP maximum out-of-pocket amounts (deductibles, copayments and other amounts, but not premiums)

Individual: $6,050Family: $12,100

Individual: $6,250Family: $12,500

Individual: +$200Family: +$400

Reflections on Supreme Court

DecisionLate in June, the SupremeCourt of the United States(SCOTUS) upheld theAffordable Care Act (ACA),President Obama’ssignature health carereform law. As withSCOTUS opinions, the devilis in the details.

First, the Court decided that they could rule on theindividual mandate penalty even though no one hadpaid the penalty yet. The Anti-Injuction Act (AIA)prohibits challenges to a “tax” before it is paid. ChiefJustice Roberts wrote that the intent of Congress wasto classify the consequence of not having healthinsurance as a “penalty” and not a “tax” and thus itwas exempt from the AIA.

Second, the Court ruled that the individual mandate,scheduled to take effect in 2014, is constitutionalunder Congress’ taxing authority even though it runsafoul of the Interstate Commerce Clause in theConstitution. The Court ruled the mandate “does notregulate existing commercial activity. It insteadcompels individuals to become active in commerce bypurchasing a product…” The Court ruled the mandategoes too far and could not survive under theInterstate Commerce Clause. So the Court looked atwhether the mandate could survive as a tax and ruledthat it could! It explained that the mandate functionslike any other tax: it raises revenue; the IRS enforcesit; and it does not carry criminal sanctions.

While it appears the two rulings contradict eachother, think of them this way:

• Congress enacted both the AIA and the ACA.They have the ability to decide whether onestatute applies to another. Thus the “penalty”survives the AIA.

• Congress cannot decide how the Constitutionapplies to a statute, only the Court can. TheCourt ruled the “mandate” is permissible underthe Constitution as a “tax” because Congresshas taxing authority.

The third ruling dealt with Medicaid. The Court ruledACA’s expansion of Medicaid is constitutional but theprovision allowing the federal government to revokeall Medicaid funding to states that choose not toimplement the expansion was not. The Court ruledthis type of coercion was “a gun to the head” of thestates and thus unconstitutional.

While publicly overlooked by most, the expansion ofMedicaid is the primary way ACA affords coverage forpeople below 133% of the Federal Poverty Level (FPL).If that coverage is not available, those individuals willbe forced to buy private insurance or pay the penalty.

The full impact of the decision is yet to be seen. Thepractical consequences of health care reform may notbe known for years. For now, we will continue to waitfor final regulations and help you implement ACAprovisions as required.

Employees Satisfied With Health Benefits

Despite higher premiums and out-of-pocket costs for health care benefits, U.S. workers’ satisfaction levels with employer-provided health care coverage has either risen or remained the same compared to three years earlier, according to a survey by the National Business Group on Health, a nonprofit association of large employers.

The survey, Perceptions of Health Benefits in a Recovering Economy, was conducted from late May through early June 2012. A total of 1,545 employees at U.S. organizations with 2,000 or more employees responded to the survey.

Among the survey highlights:• 63 percent of respondents were very satisfied with their current health

coverage provided by their employer or union, although nearly two-thirds had experienced higher premiums and out-of-pocket costs over the past three years.

• Roughly one-third were more satisfied with their coverage compared to three years earlier. Only 12 percent were less satisfied and 53 percent said their satisfaction level had remained the same.

• 87 percent of employees rated health benefits as very important when making a decision about accepting a new job or remaining with their employer

• Roughly one in three were not confident in their ability to shop for health insurance on their own, and more than half were not confident they could purchase the same or better quality insurance on their own.

• While workers expressed satisfaction with their health benefits, a majority (62 percent) were unable to estimate how much their employers pay for their health benefits.

-http://www.shrm.org

August 2012

Outcomes-Based Wellness Incentives

A coalition of health careorganizations has producednew guidance for the use ofoutcomes-based incentivesin employer-sponsoredwellness programs.

Outcomes-based incentivesprovide employees with a

financial reward for meeting a specific health target—or apenalty may be imposed for failure to meet a healthstandard—rather than simply providing an incentive toparticipate in the program. Outcomes-based incentives areexpected to become more common in the workplace as aresult of provisions in the Patient Protection and AffordableCare Act that encourage their use.

The new guidance includes the following 10 suggestions foremployers using outcome-based incentives:

1. Consider using the four biometric target categories ofweight, cholesterol, blood pressure and tobacco use.

2. Factor in potential financial and time burdens foremployees when determining the specific standard youare asking them to meet.

3. Consider whether the incentive design is likely to placea greater economic burden on one race, ethnic groupor other category of employees.

4. Consider incentive designs that are reasonable goals(preferably individualized to the employee) rather thanideal targets applied rigidly to all employees.

5. Offer (as required by law) a reasonable alternativestandard to employees for whom it would beunreasonably difficult to achieve a health standard dueto a medical condition, or who have a medical reasonthat makes it inadvisable for them to do so within theallotted time.

6. For employees with a medical condition that makes itunreasonably difficult to achieve the health standard,or medically inadvisable to do so, consider deferring tothe views of the employee’s health care provider forsetting and achieving a reasonable alternative standardor providing a waiver.

7. Consider providing all employees with options forattaining the incentive, rather than only offering analternative standard to those with a medicalcircumstance.

8. Avoid using a reward or penalty that is so large itdiscourages health plan enrollment, denies coverage,or creates too heavy a financial penalty on individualswho do not satisfy an initial wellness standard.

9. Consider an incentive design that rewards for progresstoward the standard targets, instead of just rewardingemployees who meet the goal.

10. Consider strategies that help employees integratehealthy behaviors into their personal value frameworkby promoting individual choice, so they are more likelyto sustain healthy behavior changes over time.

Click here for access to the full article.

- By Stephen Miller, CEBS- www.shrm.org

Medical Loss Ratio RebatesThe Patient Protection and Affordable Care Act of 2010 includes manyprovisions that are continuously being uncovered and defined. One suchprovision, the Medical Loss Ratio (MLR) provision, requires health insurers whospend more than a specified percentage of premium dollars on categories ofspending other than “clinical services and activities designed to improve thequality of healthcare” (claim payments and medical management costs) torebate a portion of the premium dollars collected to enrollees. The minimummedical loss ratio is 80% for the small group market and 85% for the largegroup market. This requirement first applied to health insurers for calendaryear 2011 and, to the extent rebates are required, they will be paid beforeAugust 1, 2012.

The MLR is not calculated at the individual plan or employee level, but basedon the collective experience of all plans in a certain, legally-defined grouping.Employer plans are grouped together based generally on the legal entity thatissued the coverage (insurance company or HMO), the state where the policy isissued and the appropriate market segment (large group, small group,individual insurance). It is possible that an employer can have more than oneplan within these groupings.

So, what are employers required to do when they receive the rebate check?

First, employers must determine who paid the premiums for the healthinsurance policy. If employees made premium contributions, the employermust determine what portion of the rebate is attributable to participantcontributions. The portion of the rebate attributable to participantcontributions is usually based on the share or percentage of premiums paid byemployees.

Second, the employer must decide how to use the participant’s share of therebate. There are basically three (3) ways outlined by the Department ofLabor:

• The rebate can be paid to the participantsunder a fair and equitable allocation method.For example, an employee with family coverage,who paid a larger share of premiums, wouldget a larger share of the rebate. The employercan also conclude that only currentparticipants are allowed to share in therebate. Each employee thatreceives a share of therebate will recognizeadditional taxableincome.

• The employer can apply the entire rebate toward future participantpremium payments (i.e. give a “premium holiday”).

• The employer could use the rebate to provide enhanced benefits forparticipants.

The DOL suggests that the second and third options should be used only ifdistributing payments to employees is not cost effective – for example, if thepayments are de minimis or if they would give rise to tax consequences to theemployee. To avoid having to establish a trust to hold the rebate, theemployer should distribute the premium credit or enact the benefitenhancement within three months after receipt of the rebate.

The Minimum Loss Ratio (MLR) mandate contained in PPACA has created amyriad of compliance requirements for health insurers, health plans andemployers. Until the Individual Mandate becomes effective in 2014, thecalculation and distribution of rebate checks is potentially the most costly ofthe PPACA requirements to date. The Gardner Group recognizes the challengesfaced in complying with PPACA and is monitoring legislation, interim rules andoperational best practices to provide direction through these legislativenuances.

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