Employee Benefit Update: Metallic Tiers and the ACA

Metallic Tiers ACAAs we get closer and closer to the full implementation of PPACA (by the way, that is in January, 2014), more and more changes in health insurance and health care will be forthcoming.  One universal change is that most Americans will be required to get health insurance.  The health insurance plans will be based on metallic coverage levels.  All plans, including the ones people are on currently, will be converted to one of the following four metallic tiers – Bronze, Silver, Gold, and Platinum plans.

The difference among these metallic tiers is based around the plans “actuarial” value.  Actuarial value is defined as the amount a plan will cover before the insured must reach into their own pocket to pay for co-insurance, deductibles and co-payments.  PPACA sets the structure and the plans offered by the insurance carriers will fit within one of the tiers:

Bronze – plans typically see as having the most cost sharing on behalf of individuals including high deductibles, co-pays and co-insurance.  These plans are set at an actuarial value of 60%

Silver – A high deductible that falls in the $2,000 individual and $4,000 family structure with an actuarial value of 70%

Gold – A co-pay plus deductible plan seen with a $500 deductible based HMO plan falls into the 80% actuarial range.

Platinum – plans that represent the lowest co-pays and extensive first dollar coverage.  Benefits similar to that of a $20 Co-pay HMO plan and represent an actuarial value of 90%.

All metallic tiered plans will have a +/- 2% swing in actuarial value depending on deductible and maximum out-of-pocket limits imposed.

The Metallic Tiers will incorporate essential health benefits as defined the US Department of Health and Human Services.  These benefits include Ambulatory, Emergency Services, Hospitalization, Maternity and newborn care, Mental Health and Substance abuse, Prescription Drug, Rehabilitative and habitative services, lab services, preventative and wellness services, and pediatric services including Dental and vision care.  There are particular cost sharing requirements such as maximum out-of-pocket expenses and maximum allowed deductibles ($2,000 individual and $4,000 family) that must be satisfied as part of the plans as well.

In a nutshell, a Silver Plan enrollee would pay approximately 30% of their health care cost as the plan would cover approximately 70% of the plan costs. Most Americans will be required to get at least a bronze-level plan, unless claiming an exemption for religious or hardship reasons or face penalties.

One additional kicker, all states must pay for the cost of state-mandated benefits in qualified health plans that are in excess of the essential health benefits built into the metallic tier plans.  States such as Massachusetts, which is a notoriously generous state in terms of benefit mandates (to the tune of 11-14% of your premium dollars going to Massachusetts Insurance Mandates); will have to prepare to fund the costs of the mandate benefits.

As your health insurance plan renewal comes up in early 2014 and beyond, you will see a slew of changes from the requirements of the census form required to quote your business, to determination of the metallic tier your current plan falls into and the changes required to meet the 10 essential health benefits.

More than ever, it is crucial to work closely with Spring on everything PPACA.  The myriad of changes and complexities of PPACA need the attention and experience to properly position you and your company as 2014 draws near.

 The information contained in this notice is general in nature and is not offered as legal advice

Image Credit: Mark Herpel via flickr

Healthcare Reform’s Impact on Workplace Wellness Programs

Workplace Wellness ProgramOver the past few years, we have witnessed much confusion and uncertainty surrounding the Affordable Care Act (ACA) and its accompanying rules and regulations. Thankfully, one area of the ACA that has been ruled on and somewhat finalized recently are the guidelines for workplace wellness programs.

In late May, a joint effort between the U.S. Departments of Health and Human Services, Labor and Treasury resulted in a set of guidelines that employers can now use in designing and modifying their workplace wellness programs. These guidelines cover programs that offer a reasonable chance of improving a participant’s health or preventing disease and are included in health plans that start on or after January 1, 2014.

The ruling defined the types of wellness programs that employers are permitted to offer their employees, while leaving out a great deal of detail in hopes that employers will creatively design plans that fit their workforce best.

Wellness programs are quickly becoming a staple in any employee benefit package. In fact, in recent a Kaiser Family Foundation survey, found that 41% of employers with more than 200 workers have some sort of wellness program in place for their employees.

Workplace wellness programs are paying off in a number of ways for employers. A Harvard study on workplace wellness programs showed that they lower the cost of health care to an employer, as well as the cost of absenteeism, rather significantly. In addition to the financial benefits, wellness programs can also influence employee morale and productivity.

The following is a run-down of the types of wellness programs employers can offer under these new rules:

Participatory Wellness Programs

Participatory wellness programs reward participants based on their activity in some sort of program that is unrelated to their specific health status or improvement. Essentially, you are paid to just sign-up regardless of the outcome.

Probably the most common example of a participatory wellness program is offering employees discounts on a gym membership. Rewards for participatory wellness programs usually are given in the form of a monetary gift such as rewards or discounts.

A key rule for participatory wellness programs is they must be available to all similarly situated individuals.

Health-Contingent Wellness Programs

The new rules focus on defining health-contingent wellness programs and the various provisions that go along with them. There are two types of health-contingent programs set out in the rules: activity-only and outcome-based.

Activity-Only Wellness Programs

Activity-only wellness programs reward individuals that aim to achieve a specific health goal. The reward is given based on their taking the steps to achieve the goal, but is NOT based on actual achievement of the goal.

These types of wellness programs are completely effort-based. A good example of an activity-only program would be creating a heart-healthy walking program that is aimed at lowering participant cholesterol levels. A reward would be granted to anyone that participated in the program and not just the individuals that actually lowered their cholesterol.

Outcome-Based

Outcome-based programs are those that reward individuals for achieving and/or maintaining a specific health goal. These types of plans usually require an initial measurement related to the goal and then progress is monitored and measured.

In keeping with the activity-only cholesterol-lowering program example, in an outcome-based program, an individual’s cholesterol level would be measured upon joining the program and a reward would be given based on a specific reduction over a defined period of time.

Considerations for Health-Contingent Programs

Under these new rules, the maximum reward for employee participation in health-contingent wellness programs has increased from 20-30% of the cost of their health coverage. While this may be a generous incentive to drive participation, some employers have called for increases in this amount to match the tobacco use incentive maximum.

The maximum reward for employees that participate in health-contingent programs aimed at preventing or reducing tobacco use has increased to 50% of the cost of their health coverage.

Health-contingent programs must be offered to all employees at least once a year and there must be an option for reasonable alternatives to the established plan if an individual is medically unable to participate in a health-contingent wellness rewards program. Because of this provision, these individuals will be able to work with their physician and/or employer to create alternative means to qualify for the reward.

The option for a reasonable alternative to a wellness program must be disclosed to all employees at the time that the plan is explained to them. Also, reasonable alternatives do not have to be designed up front and can be handled on a case-by-case basis.

Setting Up Your Own Wellness Program

There has never been a better time to start thinking about implementing a wellness plan for your employees or redesigning your current program to ensure compliance. Fortunately, you don’t have to do it alone.

Our employee benefits team has a vast amount of experience in developing wellness strategy, designing wellness programs to fit your organization’s needs, and helping employers implement and measure wellness ROI. Our team is comprised of industry experts that can help you navigate the daily changes of the ACA to ensure your wellness programs and all of your employee benefits, are compliant.

Contact us today to get the discussion started about your workplace wellness program.

Contact Our Wellness Team

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PPACA’s Cadillac Tax – Start Planning Now!

There is an estimated 30-33 million people who will be covered under the health care reform law (PPACA). How to pay for these people is a real concern. Additionally, depending on the immigration bill, an additional 8-10 million people may be eligible to receive partially or fully subsidized insurance. There are upwards of twenty obvious and not so obvious taxes in PPACA. Preliminary effects of the additional taxes and rating changes look to add 8-16 percent onto already high health insurance premiums.

You’ll Also Like: The “Not So Hidden” Costs of Health Care Reform

PPACAOne tax in particular I want to outline is the “Cadillac” tax coming into effect in 2018. You are probably thinking, why talk about something seemingly so far in the future? Well the tax is an onerous one and proper planning is in order to address this before 2018.

The Cadillac Tax is a non deductible PPACA tax levied on businesses for employer and employee contributions towards health insurance plans they offer their staff and families starting in 2018.

In addition, the tax takes into account all employer and employee contributions towards flexible spending accounts, employer contributions for Health Savings Accounts (HSA) and finally, employer contributions for Health Reimbursement Accounts (HRA). Calculation excludes insured, stand-alone dental and vision coverage. The thresholds for the tax are $10,200 for individuals and $27,500 for families. Therefore, if your Health Insurance plan, FSA (if any), HRA (employer portion if applicable) and HSA (employer portion if applicable) is above the threshold, the employer will be subject to the 40% tax per dollar above the threshold for each employee. Yes, you read this right, the EMPLOYER will be subject to paying the tax.

Armed with this information I put together a quick analysis and used a basic HMO $25 co-pay plan and ran the numbers. I was surprised, or maybe not too surprised to find that many of our clients would hit the threshold at or around 2018.

There are a few reasons why health plans in the Northeast as more expensive than ones seen around the country. We have excellent care in the Northeast with highly regarded physicians and facilities with world-class reputations. As a result, we pay more for that care. Additionally, there are a slew of mandated benefits that impact all our rates in Massachusetts to the tune of 10% or more annually. In a nutshell, our health insurance plans are expensive.

To combat the tax in 2018, there are a few strategies that need to be investigated. From down grading to a consumer directed high deductible plan to reviewing a health savings account.

In addition, there has to be an investment on behalf of all employees/ subscribers and families to take a more active role in their health (through wellness plans), their health care and ultimately their health insurance since all contributions of health insurance plans and flexible spending plans are part of the mix as well as employer portions of HRA and HSA funding. Some thoughts involve moving employees below the 30 hour minimum weekly work hour threshold. This is a real issue if businesses shift full-time employees to part-time status. This will water down the employer funded insurance ranks and potentially force more people into the increasingly expensive individual market.

As things stand now, an estimated 60% of companies nationally may be subject to the tax in 2018. This concerns all involved. Therefore, there are efforts underway to lessen the effects of the Cadillac Tax or repeal the Cadillac Tax all together. Either way, it is essential that businesses continue to plan ahead for 2018 and become an engaged, enlightened health care and insurance consumer. The time is now!

Image Credit: 401(K) 2013

Preventing Employee Discomfort: The Impact on Healthcare Costs and Worker Productivity

In these challenging economic times, companies need to find ways to get more for less. For HR managers, this means decreasing group healthcare costs while increasing employee productivity.

Many wellness programs are geared towards achieving such a goal through improving employee diet, exercise, and stress management. But wellness programs often fall short in one specific area that has a concrete impact on the bottom line – the discomfort that employees develop and experience at their desks from musculoskeletal disorders (MSDs).

Although this issue may sound like the responsibility of a Health & Safety team, the reality is that MSDs, such as back pain and repetitive strain, are one of the leading contributors to group health costs.

What’s harder to track – but equally devastating – is that MSDs cause the often-overlooked phenomenon of presenteeism: employees afflicted with pain who arrive at work, but are anything but productive.

By adding a simple and achievable discomfort prevention initiative to your overall wellness program, you can significantly reduce overall healthcare costs while boosting worker productivity across the organization.

The Impact of MSDs on Group Healthcare Costs

worker productivityIf you aren’t feeling back or other MSD-related pain, chances are the person in the next cubicle is. According to a study in The Journal of the American Medical Association (JAMA), 52.7% of the 28,902 people surveyed had experienced MSD pain over the course of the previous two weeks.1

Research by Remedy Interactive, a health and safety software company, reinforces these results; however, they measure “discomfort” – the point at which intervention can prevent MSDs. 41.9% of Remedy Interactive’s 500,000 person user base, which is 17 times larger than JAMA’s sample, experienced constant or frequent work-related discomfort2 before working with Remedy Interactive software.

Coupled with the intangible pain comes tangible (and expensive) healthcare costs. Research published in The Burden of Musculoskeletal Diseases in the United States indicates that, according to a trajectory of rising healthcare costs, companies will be spending almost $720 billion on MSDs in 2012.3

Think of Maria Wilson, an executive who spends countless hours toting her laptop to various meetings, working from coffee shops and airplanes, and then working into the late night hours from her home office. Because she consistently sits in an uncomfortable position, she develops back pain. Maria uses her group health plan to pay for a doctor’s visit, a pain killer prescription, then both physical therapy and chiropractic treatments – all without filing a workers’ compensation claim. The Health & Safety team might never know about Maria’s pain, and her costs might not be included in their calculation of work-related injury costs. Instead those costs come down to the bottom line for which you are held accountable.

It’s likely that others in her company have – or will – follow the same route. According to the National Pharmaceutical Council4, back/neck pain is the second highest driver of medical and pharmacy bills (next to cancer).

The Case for MSD Prevention

By using a wellness-based approach of assessing and preventing behavior that often leads to MSDs in employees, companies can cut their employee discomfort in half5. This drastic reduction in employee discomfort leads to increased employee engagement, and can result in up to 20% fewer days of missed work6 and the potential for up to 27% reduced absenteeism.7

Consider the case of a technology company that recently struggled with group health costs. Steps were taken to help employees that reported discomfort – but this system relied on the employees to take the initiative to report their discomfort before they received assistance. At that point, many of them had already sought treatment through their private medical insurance plan.

To resolve this situation, the company implemented an initiative that used software to provide proactive communications and a personal discomfort assessment. Now employees can automatically report discomfort and complete a self-assessment, and receive automated personalized feedback with tips for preventing or improving their work-related discomfort.

The majority of the employees were able to resolve their own discomfort. For those employees unable to improve their own situation, the program provided management with the data necessary to intervene efficiently and effectively. Specifically, 53% of the employee population that had been experiencing constant or frequent discomfort shifted their rate to rarely or never experiencing discomfort. The company realized a 64% reduction in lost workdays.8

Conclusion

Companies can no longer afford the high costs of MSD pain, both in dollars and inefficiencies. Considering the current financial landscape – where costs need to be contained yet productivity needs to increase – weaving discomfort prevention into wellness isn’t only smart, it’s imperative.

  • 1. “Lost Productive Time and Cost Due to Common Pain Conditions in the US Workforce,” The Journal of the American Medical Association, November 2003.
  • 2. OES data collected by Remedy Interactive from 2005-2009.
  • 3. The Burden of Musculoskeletal Diseases in the United States -Copyright 2008.
  • 4. “Cold Case Files,” IntraSpectives, Spring, 2008.
  • 5. OES data collected by Remedy Interactive for a technology company, 2006-2009.
  • 6. “Driving Business ResultsThrough Continuous Engagement”, WatsonWyatt’sWorkUSA Report, 2008/2009.
  • 7. “Employee Engagement: What’s Your Engagement Ratio?”, Gallup, Inc., 2008.
  • 8. Remedy Interactive, Ibid.

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Wellness ROI: A Big Business

wellness roiAn increasing number of employers understand the advantages of wellness programs, especially the consequences of not having one and are therefore doing what it takes to implement them in their company. In fact, health cost guru Dr. Dee Edington notes, “our system now does not incentivize anyone to get preventive care except for the employer.” The employer is the only one who benefits from healthy people.” There is no doubt that employers benefit with fewer absences from work, reduced presenteeism, less workers’ comp claims, fewer disabilities, and most of all lower overall dollars spent on healthcare. Not to mention that a culture of wellness breeds positive lifestyle changes that not only affect and benefit the individual, but also the entire population.

Let’s face it – the sick cost money and the more complex your illness is, the more expensive it is to treat it. Considering the advantages a wellness program has to offer, employers should be doing something. However, there is always a BUT! The million dollar question is “how much am I going to save?” That’s where many employers are skeptical.

On the contrary, research clearly demonstrates that by supporting wellness efforts within the company and integrating it with the other programs they run, employers are realizing a significant return on investment (ROI). Investing in prevention and wellness has measurable, direct and indirect returns on investments, such as:

  • 26.5% lower health costs
  • 25.3% fewer sick days
  • 40.7% reduction in workers’ comp costs
  • 24.2% lower disability management costs

Thus, with a nominal initial investment, the cumulative effect can be as much as a 5.8X ROI, that typically starts to materialize after two years. In fact, according to a policy paper “Workplace Health Promotion” commissioned by Partnership for Prevention, December 2008, most comprehensive corporate wellness programs, over a three-year period produce an ROI ranging for about $1.40 – $4.70 for every $1 invested.

Overall, eighty-three percent of employers who incorporate wellness programs experience returns on their investment.

wellness roi

For nine reputable companies, the chart above demonstrates the ROI they achieved in their lifestyle programs. On the low end, Unum Life experienced a $1.81 return per dollar invested in wellness, compared to Coors on the high end at a $6.15 return. On average, a $4.14 return per dollar invested is significant savings that should not be ignored.

Of course, the level of savings achieved is directly correlated to the robustness of the wellness program being implemented. A comprehensive wellness program integrates all components and wraps incentives around it to improve participation and motivate people to make healthy choices because they have skin in the game.

An added dimension to wellness programs that incorporate medical and prescription drug claims data and use the analytics to make it a more predictive process, pose an increased savings opportunity. Research supports that at least 25-40% of all health claims are avoidable through prevention, early detection, and the reduction of modifiable risk factors.

Determining the ROI your wellness program is generating is 100% dependent on establishing and tracking appropriate measurements. To evaluate the effectiveness of the program, you will need to establish measurable baseline factors – biometrics, participation, satisfaction, behavior changes, turnover, morale, absenteeism, and productivity (to name a few)- with outcomes measured at regularly scheduled intervals of time. Be sure to standardize your ROI calculation methodology across all wellness components. For example, you will need to adjust for participation in a fitness program that produces a ROI of 3:1 and participation in an Employee Assistance Program (EAP) that produces 2:1, thus, what would be the total ROI for both components, the sum, average, or some other relationship? There is no right answer, and that’s why calculating welness ROI is big business. Well thought out wellness programs will lend themselves to savings, so let the data empower you and the numbers direct you and your program!

Sources:

  • 1. Proof Positive: An Analysis of the Cost-Effectiveness of Worksite Wellness, Sixth Edition, 2007
  • 2. Employee Health & Productivity Management Programs: The Use of Incentives, ERISA Industry Committee (ERIC), the National Association of Manufacturers (NAM) and IncentOne Inc.

via flickrImage credit: Anne Hornyak