S&S Benefits.....Opinion, Hearsay & News Review

The latest data from the BLS shows that benefits costs account for 30% of employees’ total wages. Wages and salaries averaged $19.81 per hour worked, while benefits averaged $8.32 per hour worked.

Reliance Standard has entered into the employer stop-loss market for self-funded health insurance benefits plans for groups as small as 50 lives with effective dates beginning on January 1, 2012. According to an industry analyst, the self-funded market has grown by 11% over the last five years, while the fully insured market has declined by a proportionate amount. We have noticed that more insurance carriers are showing an interest in the small group self-funded market as the number of employers seeking to escape insurance carriers has increased.

According to Limra, 47% of employers offer long-term disability insurance and 37% of those offering LTD paid the premium for their employees, down from 49% in 2002. Voluntary programs now make up one-half of all employer long term disability offerings, up from 41% in 2002. It should be noted that many employers prefer that LTD be a voluntary program since employees are not taxed on the benefit if they pay the premium.

The IRS has recently issued a notice which solicits comments about a potential “safe harbor” for determining whether an employer’s health insurance coverage is affordable in 2014 under PPACA. Coverage is deemed to be not providing affordable coverage if it doesn’t pay at least 60% of total costs allowed under the HHS determination of essential health benefits (not yet fully defined).Coverage is also unaffordable under PPACA if the cost of self-only coverage exceeds 9.5% of the employee’s household income. How employers are to determine the household income has yet to be determined. It should also be pointed out that an employee’s wages would normally be determined by Box 1 of form W-2, but that box does not include certain salary reductions, such as pre-tax contributions to a health plan or elective deferrals to a 401(k) plan, that significantly reduce wages. The penalty for the unaffordable coverage applies to employers who have over 50 full-time equivalent employees (to be defined as 30 hours per week). If one employee enters the exchange and receives a premium tax credit for doing so due to un-affordability, the employer will pay a $3,000 annual penalty for each employee. There is a discrepancy in this penalty, since most thought the penalty would only apply for those entering the exchange, but others have pointed out that the law reads that the penalty will apply to each full-time employee the employer employs. We should also note that the affordability requirement only applies to self-only coverage, which may lead employers to drop family coverage. The contrast for not offering health coverage is that the employer pays a $2,000 annual penalty on the number of full-time employees who don’t have coverage (minus the first 30 employees). The fines are applied monthly at 1/12 of the total amount, but it has yet to be determined if the fines apply as determined retroactively, or proactively. Now that we are all clear on this, let’s take the next step in planning. Meanwhile, the administration can’t figure out why employers are not hiring.

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While the administration is moving forward with large parts of PPACA, one part of the law has been shelved at least temporarily by HHS. The CLASS (Community Living Assistance Services and Supports) program was to provide a voluntary long term care program through employers. Staff for the program has been cut, including the lead actuary. The central design flaw was that the program needed large numbers of healthy people to sign up to fund the benefits for a smaller group of beneficiaries that would sign up simply because they would need the benefit.  Premiums from CLASS were supposed to support PPACA, since benefits were not to be available under CLASS for several more years. Not that we are going to miss this part of Obamacare, but the dismissal of this part of the law shows just how arbitrarily HHS gets to act under PPACA.

The Obama administration has decided not to ask a federal appeals court in Atlanta for further review of a ruling striking down the individual mandate centerpiece of PPACA.  This sets up the next step of going to the Supreme Court, since the ruling in Atlanta is different from the ruling in Court of Appeals in Cincinnati. The Supreme Court begins meeting next month, but it may take some time before they decided if and when they will hear the case.

The 2011 Kaiser Health Plan Survey is out. Annual average premiums for employer sponsored family health coverage increased 9% to $15,073. Employees now pay $4,129, or 27% of the cost of family coverage.