Employers – Must Read

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Kaiser Changing Policy on Employee Terminations Effective August 1

8/3/2014 update – More details from Kaiser:

Kaiser Permanente’s subscriber termination policy will be enforced effective August 1, 2014. Small groups can no longer retroactively terminate subscribers or dependents prior to the month we receive the request. As a result, all subscriber terminations will be effective in the month we receive the request unless a future termination date is requested.

For example, if you request to terminate a subscriber’s coverage beginning August 1, we must receive the request no later than August 31. A termination request received in August cannot be made effective retroactively to July 1 or June 1.

You can still add subscribers or dependents and have the coverage effective retroactively up to two months prior to the current month. For example, you have until August 31 to add members with a coverage effective date of June 1.

To learn more about what the policy means for your business, take a look our Q&A on retroactive subscriber termination or consult the Small Group Administrative Handbook. And you can always use online services to quickly and securely manage your group’s enrollments, terminations, and more.

Please feel free to contact Allpointe with any questions.


Beginning in August, it is more critical than ever that employers promptly report employees who are no longer eligible for health benefits.  Please use Allpointe’s secure web form to report terminations within 14 days of an employee’s last day at work (or otherwise becoming ineligible for coverage – example: dropping to part-time hours).  This is not unique to Kaiser — we expect that all other carriers will follow suit and tighten up their practice on retroactive terminations.

From Kaiser’s Policy Updates:

Subscriber terminations — Effective August 1, 2014, all subscriber terminations will be effective in the month that we receive the termination request, unless you request that the termination be effective in a future month. We will no longer retroactively terminate subscribers prior to the month we receive the request to terminate. For example, if you want the subscriber’s coverage to be terminated beginning August 1, we must receive the request to terminate no later than August 31. A termination request received in August cannot be made effective retroactively back to July 1 or June 1.

San Francisco HCSO and the ACA – questions answered, more raised

The SF Office of Labor Standards and Enforcement has issued some answers to FAQ’s from employers and employees.  Covered Employers are still required to make required contributions on behalf of employees. But the use of Health Reimbursement Arrangements (HRA’s) could create problems for both employer and employee.

Oh, and the required Health Care Expenditure rate is going up in 2014:

$2.44/hour worked for large employers (100+ employees)

$1.63/hour worked for small/medium employers (20-99 employees)


New Taxes on your Small Group Health Plan – Coming in 2014

The Affordable Care Act created a number of new fees and taxes, to help subsidize tax credits to individuals and families, and to help stabilize the new guarantee-issue individual market.

There are four new taxes that will hit small group health plans in 2014. Most insurance companies have simply built these new taxes into their 2014 rates and they will be realized by small employers upon their 2014 renewal.

However, Blue Shield of CA has elected to break out two of the taxes, totaling 3.6% of monthly premiums, and add them as new line items beginning with your January 2014 invoice – even if your Blue Shield renewal date is later in the year.

Explanation of the Health Insurer Tax and Transitional Reinsurance Tax

Sample Blue Shield letter to small group clients, to be mailed later this week.


Small group carriers offering “early renewal” December 1. Good idea?

Almost all small group medical carriers are offering the option for small businesses to change their current plan year renewal date to December 1, 2013.  The idea is to renew at then-current rates, buying themselves up to 11 months of time, before the full effects of the Affordable Care Act kick in.

Is this a good idea?

Small businesses are being asked to make this decision with limited information. Even businesses with plans scheduled to renew January 1, 2014 don’t yet know what their 2014 rates will be. Kaiser is requiring small business clients to submit an Intent to Renew Early no later than this Friday, August 30.  Any small business that thinks they may want to renew their Kaiser plan early, or simply wants more time to decide should complete this form before Friday. It is not binding (Kaiser will require a final decision by the beginning of October). Please also refer to Kaiser’s FAQ on early renewal.

Pay somewhat higher rates now, to postpone even higher rates?

Yes, this is the crux of it. Depending on your plan, carrier and demographics, carriers are offering the “opportunity” to end your current 12-month contract early, and pay higher rates beginning December 1, 2013. For groups with anniversary dates in the first half of the calendar year, the likely early-renewal rate increase would be 4% to 15%.  Please contact your Allpointe broker  if you have questions about your specific plan, and what early renewal rates are offered.

Some guidance for small business owners

We have spent countless hours over the past several years following the developments of the Affordable Care Act.  Bradley Vaccaro recently was certified by the National Association of Health Underwriters as a PPACA Professional. We fully expect the changes coming in 2014 to vary widely in how they affect our clients. Some are likely to benefit and see lower-than-expected rates in 2014. Others could be looking at significant year over year rate jumps, and could benefit from an early renewal. Here is our best guidance on which category your business falls into:

Most Likely to Benefit from Early Renewal

  • Anniversary date in early 2014. In general, we don’t think it makes sense for clients who renewed in June, 2013 or later to renew again in December.  Pay higher rates starting December 1 for 7+ months to push off next year’s rates by a few months?  Probably not a net gain. We think the businesses most likely to benefit from early renewal have anniversary dates of January 1, or at least Q1 2014.
  • Very healthy groups with a low RAF.  Beginning in 2014, small groups will move to community rating, meaning rates will be determined by age and geography only. The Risk Adjustment Factor (RAF) will be eliminated.  Effectively all groups will have a 1.00 RAF — which means that groups who currently have a .90 RAF (very healthy and/or larger groups) are going to see rates rise just to get to the same level of parity as everyone else.
  • Disproportionate number of employees in specific age ranges.  Small groups currently have very wide “age bands” — rates are the same for all employees in the same age band.  Under 30, 30-39, 40-49, etc.  In 2014, all small groups will move to premiums determined by the actual age of each employee.  If your group happens to have a disproportionate number of employees aged 36-39 and 46-49, their rates could increase more significantly than most others.
  • Large percentage of employees under age 40.  Beginning with 2014 plan renewals, rates will be somewhat “compressed,” as the ACA requires no more than a 3:1 ratio of the highest rates for oldest employees to the lowest rates for youngest employees.  That is, if the cost for a 25-year old employee is $250/month, your 64-year old employee cannot be more than $750/month. Overall, we expect this to mean larger increases for the younger employees.
  • High level of participation in one of Anthem Blue Cross’ Generic Rx-only PPO plans. These plans have been a great value and are popular for their low deductibles and moderate costs. But “generic Rx-only” won’t meet minimum requirements in 2014, and we expect these plans to be eliminated at your 2014 renewal.
  • High participation in high-deductible PPO plans.  The Affordable Care Act expressly required small group plans to have a maximum deductible of $2,000 for a single employee ($4,000 for a family). This has been amended to allow a handful of higher deductible options at the Bronze (possibly Silver) tier of new plans in 2014. HSA-compatible plans will survive, but we expect there to be only a few plan options available with deductibles higher than $2,000 annually for a single employee.  Lower deductibles generally mean higher premiums.

Least likely to benefit from early renewal (could even benefit from new structure in 2014)

  • If you said, “That’s not us,” to most or all of the points above.
  • One or more employees that have a single child enrolled as a dependent.  Currently, it doesn’t matter if you have one child or five — the premiums for any number of children on a small group plan are the same.  In 2014, each dependent will have his/her own cost, based on their age.
  • Groups that would like to offer multiple carrier plans.  The new Covered California small business exchange (SHOP) will make it easy for employers to offer Blue Shield, Health Net and Kaiser alongside each other, without concern about how many employees choose which carrier. We expect some groups to consider switching to the small group exchange on January 1, 2014.
  • Groups that can’t stand paper forms.  Don’t jump into the small business exchange just for this reason, but online plan comparison, open enrollment, and new hire onboarding is expected as part of the rollout from Covered California, bringing small groups on par with their bigger competitors.
  • Groups that qualify for the Small Business Tax Credit.  The credit jumps from 35% to 50% in 2014 — but only if you buy your small business plan through the SHOP. Because the credit phases out for businesses that have close to 25 employees and average wages approaching $50,000/year, it is our experience that most urban California clients do not qualify.  But some do, especially non-profits and businesses with 10 or fewer employees.

There may be some ancillary challenges to renewing early, such as having to run another open enrollment period in November. And your dental, vision, life, disability, and Flex plans may or may not allow a change to your plan anniversary with those carriers.  But please begin looking at your demographics, and seeing where your business stands against this list.  And do not hesitate to call 888-992-2244 or email to discuss your options.

What To Do With This Blue Shield Rebate Check?

Small businesses and individuals will be receiving a rebate from Blue Shield by August 1st.  Employers, please review the details here, about valid ways to return these refunded premiums to your employees.  Reducing the cost of future insurance coverage is a legitimate use of the rebate.

From Blue Shield:

Medical Loss Ratio Rebates and Notifications

Last month, we informed you that Blue Shield reported its 2012 Medical Loss Ratio (MLR) by market segment to the Department of Health and Human Services (HHS). We are now sharing our rebate information with you.

Blue Shield did not meet the MLR thresholds for the following market segments:

  • Individual and Family plans regulated by the Department of Insurance (DOI)
    The MLR threshold for this market segment is 80%. Blue Shield reported an MLR of 78.0%. The Individual and Family plan MLR was 2% below the 80% threshold. As a result certain subscribers will receive premium rebates by August 1, 2013. The 2% of premium revenue equals $13.3 million that will be returned to 226,034 Individual and Family plan subscribers who were enrolled in the Blue Shield Life plans that did not meet the MLR threshold. The average rebate amount per subscriber is about $59.
  • Small Business plans (50 or fewer employees) regulated by the Department of Managed Health Care (DMHC)
    The MLR threshold for this market segment is 80%. Blue Shield reported an MLR of 76.6%. The Small Business MLR was 3.4% below the 80% threshold. As a result, certain subscribers will receive dues rebates by August 1, 2013. The 3.4% of dues revenue equals $24.5 million that will be returned to 29,232 Small Business policyholders who were enrolled in the Blue Shield plans that did not meet the MLR threshold. The average rebate amount per Small Business policyholder is about $827.

Rebates coming to small business from Anthem and Blue Shield of California

Chad Terhune of the LA Times reports that Anthem Blue Cross and Blue Shield of California will be required to issue rebates to small businesses this August, for failing to meet the minimum 80% medical loss ratio threshold in 2012, as required under the Affordable Care Act.

Blue Shield of California insures 29,000 small businesses in California, while Anthem Blue Cross is the largest small business insurer in the state, covering 45,000 small businesses.  Your Allpointe broker will be contacting you once specific dollar amounts are released.

Say Goodbye to the 90-day Waiting Period

Beginning in 2014, the Affordable Care Act will require a maximum 90-day waiting period for new hires to join a group medical plan.  California has taken this a step further: Governor Brown signed AB 1083 into law near the end of 2012, reducing that maximum waiting period further — to 60 days.  Let’s take that a step further, as the practical application for small business effectively makes the maximum waiting period one month or 30 days.  Why is this?  Well, currently every carrier for small groups uses a “first of the month following completion of the waiting period” as the eligibility date for a new hire.

If new employee Jane Smith begins work on March 15, 2014 and her employer has a 60-day waiting period, her effective date in the current system would be … June 1, 2014.  Seventy-seven days after her date of hire, or 17 days beyond the maximum waiting period.

We expect the carriers to adapt their plan contracts upon plan renewals in 2014, to help small employers adapt to the new requirements.  Kaiser Permanente officials have stated they will offer three waiting period options for plans that renew on or after January 1, 2014:

  • First of the month following date of hire
  • First of the month following 30-day waiting period
  • NEW: Sixty days following date of hire (partial months to be prorated)

We expect other carriers to offer the same or similar options.

Many of our small group clients in competitive industries already have a first of the month following date of hire policy, but others will need to prepare and adapt.

Dept. of Labor: HRA’s can not be used to reimburse individual health premiums

12/02/13 UPDATE: A colleague forwarded us the best summary we have seen addressing the various types of tax-advantaged plans that employers have used in the past to help employees pay for the cost of medical coverage. The link is a .pdf download from the American Benefits Council, prepared by Morey Crowell.


The use of Health Reimbursement Arrangements (HRA’s) to provide employees with a defined employer contribution for the purchase of individual health insurance has always been a grey area, but the Department of Labor has now made it black and white.  In response to FAQ’s on the implementation of the Affordable Care Act, the DOL, HHS and IRS have stated that this will not be allowed.

This practice, while extremely tax efficient for both the employer and employees, already created some legal compliance questions with respect to ERISA and HIPAA rules.  This new guidance from the Departments indicates that employers will no longer have the option to use this type of defined contribution for employees to purchase individual health coverage.

An excellent white paper from the State Health Access data Assistance Center addresses a closely related issue – whether the use of Section 125 cafeteria plans are allowable to help employees purchase individual plans on a pre-tax basis.  Short answer: before PPACA, sometimes.  After PPACA, almost never.