by Vermonters for Health Care Freedom
Vermonters for Health Care Freedom is continuing our newsletter series on the Federal and Vermont State Exchanges. Our aim is to provide information to our client businesses and newsletter recipients, to help you wade through the morass of the Vermont Exchange, known as “Vermont Health Connect”, and also to keep you updated on related happenings at the federal level.
We are grateful for the support we continue to receive from tax consultants and health insurance agents all across the state, who have been providing expert advice and service to Vermont small businesses and individuals for over 20 years. In this issue we are including information from some of these contributors.
From a small business tax practitioner: “As a tax practitioner and a health care consumer, I am appalled (but not surprised) at the lack of information and/or misinformation that is floating around. I won’t go into details here but we know a lot of people are not paying attention to what is going on and will be unpleasantly surprised when they do find out. I use myself as an example. My family hit the “aggregate” deductible of $5,000 on our MVP HSA qualified HDHP plan. Adding the premiums, our medical care has cost $18,360 this year. Looking at the (roughly) equivalent 2014 Silver HDHP plan, if I had the same events in 2014 that occurred in 2013, our total costs including the new premium of $1,204.31/month would be $25,491. That is more than a 41% increase.
From a Licensed Employee Benefits Specialist:
Why Use a Broker (Employee Benefits Specialist) Instead of a “Navigator”?
1. Most Qualified: Yes, there is a fee to use a broker, but it is well worth the cost. It is critical to have the best advice for your small business and your specific situation. With the huge complexity of rules and regulations governing the Exchange, small employers need personalized service, and the assurance that all regulatory bases are covered. There are still federal regulations on the books that are not affected by the Exchange and must be adhered to. Brokers are intimately aware of all of these and are well trained to solve an employer’s problems. Who else is more qualified than a broker to work with employers, employees and individuals to help you manage this process and enroll in a health insurance plan that best fits your needs and those of your employees?
2. Navigators: Navigators have had only experience in enrollment with various welfare plans, such as Medicaid, VHAP, Dr. Dynasaur and Catamount. They will receive only 20 hours of training on ObamaCare. They are only allowed to educate and enroll members, as opposed to brokers (Employee Benefits Specialists) who are by law, allowed to make recommendations based on a client’s particular circumstances and desires, and have been doing since group medical plans came into the marketplace in 1944.
3. Regulated: Brokers are required to be licensed by the state, to meet certain regulations and are monitored by the State of Vermont’s Financial Department. Navigators are not licensed and the only monitoring they are subject to is that from their employer.
4. Continued Education: There are continuing education requirements for the brokers every 2 years in order to be relicensed. The education objectives are to remain up to date on the newest laws, products, servicing and regulations.
5. Reaching the Objective: The main objective of brokers is to work with the group to meet the fringe benefit needs of employers and employees. If this is accomplished, only then will the broker continue to be compensated for their expertise. Brokers, not Navigators, have this responsibility and have obtained the expertise needed to achieve this objective.
6. Multi-State Employees: Which state exchanges apply to employees? Employees need to know which state exchanges they have options to enroll in. An Employee Benefits Specialist has the expertise to present these options and to make such recommendations. Navigators do not.
7. Fiduciary Requirement: Brokers have a fiduciary relationship with the client whereas a navigator’s fiduciary relationship is with their employer. This means the broker legally represents their client whereas navigators legally represent the State of Vermont. This is the law.
8. E & O Coverage: Brokers are required by law to have an errors and omissions insurance policy to protect their clients, as opposed to navigators not having such coverage.
Not all the provisions of Vermont’s version of ObamaCare have been released by the state but of those released, here are the key provisions listed below:
1. Broker Services: The state has developed a broker program, which will allow brokers to continue providing services to groups and individuals. The services provided are enrollment and ongoing servicing.
2. Fixed Broker Fee: The state’s broker program requires no more or less than a $20 monthly fee, per enrolled employee, for the 2014 calendar year. It is expected that $7 of the $20 will be reimbursed from the $2,000,000 the federal government has provided the state for such a purpose. The collection of the fees would be handled by a state appointed administrator, who will include the fees on the employer’s group medical invoice, along with total premiums and employee contributions.
3. Volatile Program: There will be many ongoing changes to ObamaCare, which would affect whatever decisions employers now make. The major decision now and in the future is whether or not to offer a group medical plan. As you can see from the number of issues noted in this article, the variables are numerous, which results in a highly financially volatile situation. Such volatility will influence an employer’s decision to offer a plan from one year to the next.
4. Cost Evaluator: How can an employer decide on whether or not to offer a group medical plan, given the array of variables? In the most efficient method of obtaining the maximum cost effective option by taking into considering all the variables, such as present and proposed contributions, tax exemptions, Small Employer Tax Subsidy, Catamount Assessment, federal subsidy and plan selection. Brokers have available a cost evaluation program taking these variables into consideration, which would provide the employee the information needed to maximize their cost.
5. Out-Of-Pocket Maximums: The second major issue to the employer and the employees is the material increase in out-of-pocket maximums (OOPMs). At the present time, the average small group enrollee has an OOPM of, approximately, $2,500 single ($5,000 two-person/family). Under ObamaCare, it is $5,000 ($10,000 two-person/family). All of the Exchange’s OOPM amounts are more than $5,000, except for the Platinum plan, which costs 40% more than the present $2,500 single OOPM plans. Employers are finding it difficult to work around this increased employee liability. Why the mainstream press has not picked this up is baffling to many employers.
So, which plan is the most efficient for the average group? Given the selection of ten Blue Cross/Shield and ten MVP Healthcare plans (each having 7 Standardized plans of equal benefits); the most efficient for the average group is the Bronze HDHP, which has a single person OOPM of $6,250. This single maximum out-of-pocket is 150% more than the present small group plan average single OOPM! Most of the employers and employees believe the Bronze HDHD plan is the most attractive because of the HSA tax exemptions and lower OOPM (exposure). In summary, the average employer and employee are given the choice between a High Deductible Health Plan with 250% higher OOPM, or the same OOPM (Platinum Plan) with a 22% higher premium. The result is that employees will be paying more for their medical coverage either through premium, OOPM or both! Now, remind me again why we are getting ObamaCare!
6. Deductible Carry-Over: The state has indicated there is no Deductible Carry-Over benefit on the ObamaCare plans. This benefit is being provided presently under most group plans. The benefit is when part or all of a person’s deductible has been met in the last three months of the calendar year and is applied to the next year’s deductible. An example of not having this benefit under ObamaCare is as follows: John has a family plan and is enrolled in the Bronze HDHP. John is the only family person incurring claims in October, November and December of 2014; no other family member has met any part of the 2014 deductible, and John’s total claims equal or more than his $4,000 deductible. John then had an additional $4,000 in new claims applied to his new deductible in January 2015. John will have to pay the $4,000 December and $4,000 January deductibles, equaling $8,000. If there were a deductible carry-over benefit, John would only have to pay the $4,000 once. This additional $4,000 is a burden to John and his family. In addition, John is also required to meet the balance of the OOPMs, which is $17,000 total for both years (excluding the $4,000 deductibles), and the premiums of $24,436.32, total for both years (excluding any rate increase in the second year, subsidies or employer contributions).
7. Increased State Funding: The state stated they expect 25% to 33% of the small employers to stop offering a group medical plan. Many expect the range is higher and in the 50 to 80% range. If the state is paying from 40% to 100% for individuals in the 0% -400% Federal Poverty Level, where are the funds coming from?
8. State Administration Cost: What is the total cost of administration of the Exchange? The state has 80 employees in their VHC office and it is growing fast. The ultimate number of employees will be ever increasing. At the same time these people do not handle invoicing, membership adjustments or claims adjudication. These services will be provided by another administrator to handle invoicing and memberships, another (BCBS and MVP) for claims adjudication and still another for computer networking and programming. Is this an administrative? cost savings to those purchasing medical coverage?
9. Providers: Have you looked around lately at access to medical providers? Medical providers are exiting the state like sailors jumping a sinking ship. UVM’s survey of 24% of primary care and 38% of specialist doctors leaving the state appears to be coming to fruition. Individuals will increasingly use out-of-state providers to obtain the highest level of care and to evade the long “waiting lines”. The state officials will then have no choice but to stem the flow of the more expensive out-of-state provider cost and low patient counts by implementing a combination of increased premiums, reduced or excluded coverage, increased out-of-pocket maximum. Canadians will no longer come to Vermont for their medical care needs!
10. Rate Structure: Many believe the ObamaCare rate structure is 6% lower than what the actual claim will be for 2014, and this was before the states made BCBS and MVP lower their rates by 4.3% and 5.3%, respectively. What happens if BCBS and MVP lose money? Will the reserves of these companies be enough to pay all the claims incurred but not paid? After the companies filed their rates, the state forced Blue Cross/Shield’s and MVP Healthcare filed rates to be reduced by 4.3% and 5.3%, respectively, stating these amounts would have only increased their reserves, which they could not allow! What will happen should the reserves not be adequate to cover the liability? Say for example that each company loses 8% of premium. Will the state allow these not-for-profit companies to add this 8% lose to the next year’s premiums along with estimated 8% medical inflation? (Medical inflation has average 8% a year, since the state passed Act 52 in 1992.) This will be a 16% total increase in premiums! Employers and employees will not be able to shop for competitive options, since the state has refused the private sector from offering competitive options. Vermont is the only state to have not allowed this option!
11. Source of Subsidy: The Federal Subsidy is not guaranteed and will fluctuate. How is the state going to fund the exchange programs when that happens?
12. Provider Reimbursement: The state has said they are going to reimburse providers in 2017, when the single payer system becomes effective, at 105% of the Medicare profiles. When this occurs, how many more providers will leave the state, reducing the quality of care?
13. Catastrophic Plan: The Catastrophic plan has a deductible and out-of-pocket maximum of $6,250 for the single and $12,500 for the 2-person/family. It is a “stacked” deductible. This plan has the following underwriting requirements:
- Only for non-group enrollments;
- Not eligible for any subsidy;
- Must either be under age 30 or the single premium be more than 8% of
- household income;
- Must be certified as exempt by the state, which means the state has the final say in your decision to elect his option, even if you meet the stated qualifications; and,
- When purchased under the age 30 provisions, coverage will terminate the first of the month of the 31st birthday.
14. COBRA & VIPER: (Continuation of Coverage): There are no changes to COBRA or VIPER (COBRA is Federal law for groups having > 20 employees and VIPER is state law for groups having < 20 employees). There is one exception, which is the rule under Special Enrollments for,“losing coverage through no fault”. See this link for more information. https://www.ehealthinsurance.com/affordable-care-act/news/obamacare-countdown-step-5-2
15. Dental & Vision: Dependents under the age of 22 are covered. Under ObamaCare, this coverage must be at least preventive but one of the Pre-paid health services administrators has indicated this coverage will be comprehensive. When the Summary of Benefits and Coverage forms are released, it will define if the coverage is preventive or comprehensive. There will be a rider for Adult care, which will not be part of any subsidy. There will be no orthodontics under the dependent care base plan or the adult rider. There will not be vision care available for adults.
16. Employee Choices: Employees will be able to choose from any of the Blue Cross/Shield and MVP Healthcare options, which will result in many employers changing their contribution method to that of a fixed dollar amount. The employer can restrict carrier offering to one, but not the carrier’s options for the employees. The employer can offer more that one contribution amount for HDHP’s vs. non-HDHP’s or, one contribution amount for each of the options. (Note that this is the present rule and that this rule may change in the future.) The Catastrophic Plan is only available on a non-group basis and has no subsidies.
17. Employer Contribution: There is an ObamaCare law requiring employers to only use “class and membership type tiers”, when developing their contribution policy. [Pub. L. 111-148; Section 10101(d); PHS Act s2716 s105 (h)(2), a.k.a. Requirements Prohibiting Discrimination in Favor of Highly Compensated Individuals in Insured Group Health Plans]. This law was effective September 23, 2010 and is discussed in Internal Revenue Bulletin 2010-41 and Internal Revenue Notice 2010-63, October 12, 2010. This law was placed on “Delay” in December 2010 (Notice 2011-1). If this law is taken off “delay”, it may affect your contribution policy. Presently, under the ObamaCare law, employers can make contribution designs, with no penalties. The only other laws which could cause financial penalties, which may or may not apply to a particular group plan, are the requirements under Catamount Assessment and Cafeteria Plan testing. The Catamount Assessment tax is calculated quarterly and is submitted to the state, along with the unemployment taxes. (See Above, “Penalty for 2 – 50 Employers for Not Offering a Plan”) The Cafeteria Plan testing is done on an annual basis and if the plan passes the 4 Safe Harbor provisions test, the employees can make pre-tax contributions to the plans noted in the Cafeteria Plan Document.
18. Initial Open Enrollment: Employees must enroll online (paper applications will be available) no sooner than October 1, with the enrollment deadline of December 15 and payment deadline of December 16, to obtain the effective date of January 1, 2014. The deadline is November 30 when receipt of an identification card is desired by January 1. The effective dates for enrollments will be the first of the month, following enrollment, when enrollment is completed by the 15th of the enrollment month. Enrollments will be accepted until March 31, 2014, with any non-coverage penalties pro- rata. Partial enrollments can be saved online and enrollments can be changed prior to the effective date.
19. Medicaid & Dr. Dynasaur: There will be directions in the Internet link to apply for these benefits.
20. Annual Open Enrollment: Employers offering plans with annual renewals from February 1, 2013 through December 1, 2013, will be required to enroll in ObamaCare when their contract expires in 2014. All individual plans will be required to enroll in ObamaCare effective January 1, 2014. All groups and individuals will have a January 1 annual open enrollment, once all the employer plans have expired in 2014. This means, should a person not enroll when first eligible or when there is a Special Open Enrollment due to a Qualifying Event, they can only enroll on the January 1 annual enrollment date. (Exceptions considered) Should an employer decide to offer a Service Waiting Period longer than the 90-day maximum under the law (There are no financial penalties for non-compliance, for Small Group Plans) and an employee applies for coverage; the state could delay the effective date until the next Annual Open Enrollment date of January 1.
21. Qualifying Events: The number of Qualifying Events will be expanded and exceptions considered.
22. Employee Notice Of Group Medical Plan Offering: All employers are required to provide by October 1, to all employees, a Notice of intent to or not to offer a group medical plan, effective January 1, 2014. Please feel free to contact your broker for assistance in developing a notice for your employees.
23. Employer Penalty for Not Offering a Plan (2 – 50 ees): Employers will face the Vermont Catamount Assessment law that remains in place with the penalty of $476.47/yr/person if they don’t offer group health insurance plan to full-time employees. (The 30 hour employees are only counted in determining the 2 – 50 small group class.) There may or may not be an increase in this penalty, should an employer decide not to offer a group medical plan.
24. Federal Subsidy – Advanced Premium Tax Credit (APTC): If an employer requires an employee to contribute to a single membership and it is more than 9 1/2% of their household income, the employee could qualify for a federal subsidy through non-group enrollment. The subsidy is available for those in the range of 134 – 400% of the federal poverty level. (0 – 133% covers Medicaid and Dr. Dynasaur enrollees) Subsidies are only available to those enrolled in a non-group plan. No employee is required to enroll in a group plan and could enroll in a non-group plan but should this occur, there are no subsidies available. To receive this credit, the employee must be enrolled in a non-group plan. An employee has the option to refuse the group’s plan offering and enroll in a non-group plan but if this is elected, there are no subsidies available.
25. Group Underwriting: The following are the group underwriting requirements:
- Minimum Participation: There must be a minimum of 2 employees enrolling. There are restrictions as to who can be considered an employee under companies that are not “C” corporations;
- Employer Contribution: Presently, there are no financial penalties under ObamaCare, if the employee doesn’t contribute. If an employer has one other employee enrolling, other employees have an increased probability of being eligible for a subsidy on a non-group basis, by being able to obtain the “9 ½%” qualifying amount. (HD – Is this answered? KC: Can an employer offer a group plan and contribute nothing? What would be the point?)
- Hours per Week: The federal law defines a full time employee as working 30 hours per week but there are no ObamaCare financial penalties for non-compliance.
- Service Waiting Period: The federal law requires a maximum of 90 days for a Service Waiting Period, but there are no ObamaCare financial penalties for non-compliance;
- Group Offering: An employer is not required to offer a group medical plan(s) to their employees;
- Dependent Enrollment: Presently, employees must enroll in a group plan, if the spouse and/or child(ren) desire enrollment. Under ObamaCare, this is not the case. Under ObamaCare, a spouse and/or child(ren) can enroll in a group plan without the employee enrolling; and
- Employer Application Forms: There is only 1 application required for the employer to notify the state of their decision to offer a group program. The information needed on the form are names, social security numbers and employee contributions.
26. Insurance Administrator’s Role: The carriers, BCS and MVP, will only be responsible for claims adjudication and benefit/claims customer service.
27. Medicare Entitlements: Group plans will be primary to Medicare, unless they are under 20 employees and the Claims Administrator (BCS or MVP) submits the requirements to Center for Medicare Services (CMS) for a Single Employer Exemption (SEE). If the SEE is granted by CMS, the group plan will be secondary. If an individual is enrolled in a group of > 100 and is totaling disabled, Medicare could be primary. Group plans with < 20 employee will not have the option to select a Medicare Carve-Out or Medicare Supplement plan, at substantially lower premiums. Individuals now enrolled in these options will be required to elect from the same options as those not eligible for Medicare. Most employees moving from a Carve-Out or Medicare Supplement option will now be required to pay materially larger premium, with a materially larger out-of-pocket maximum. These individuals should explore the non-group Medicare Supplement option.
28. Small Employer Tax Subsidy: In 2014, there is a Small Employer Tax Subsidy available to employers with up to 25 employees. Your accountant may apply for this credit for this 2013 and the 2014 tax years.
29. State’s Role: The state will be responsible for the invoicing, membership changes and membership questions. They are also responsible to select a to-be-named billing administrator.
It was announced this week by Governor Shumlin that Anya Rader Wallack, the former Green Mountain Care Board chair will now chair the SIM/Duals Core Team. SIM/Duals Core Team is mostly about payment reform to doctors and hospitals. To be very clear this will further forces physicians to leave Vermont and hospitals to restrict access to care.
According to a WCAX TV story, Ms. Wallack has been volunteering her time to the state since leaving her $160,000 a year salary and $40,000 worth of benefits position, and moving to Rhode Island. Her company has now been offered a consulting position at $100,000 for 500 hours of work (quarter time) without the job being put out to bid. VHCF believes the Governor missed the transparency test and that there should have been competitive bidding by process. Further, VHCF agrees with the commentary by John McClaughry reprinted below.
This week’s big personnel news was that Gov Shumlin has contracted with his departing Green Mountain Care Board chair Anya Rader Wallack, for up to $100 thousand dollars worth of professional work on a federal grant called the State Innovation Model.
I’m not going to complain about the money paid to Rader Wallack. It will come out of the astonishing $45 million dollars the Obama Administration awarded to Vermont. Here’s what the task is, according to Rader Wallack:
“I describe it as an expansion and integration of payment models that move away from fee-for-service, so it’s an acceleration of what we’re already doing under payment reform expanding it to additional providers, and then also an expansion of new care management models, through provider organizations that are willing to take on the task of sort of reorganizing how they provide care to specific populations that have chronic illnesses or are high-needs or high-cost.”
All this, she says, is to achieve the “:triple aim” of “improving quality of health care, improving patient experience and reducing the cost of care.”
Here’s my problem. During enactment of Act 48 in 2011, everyone working for Gov. Shumlin told anyone who would listen that “yes, we know how to create single payer health care, with all its intricate and revolutionary features. Trust us!”
Now the leading person who told us all that will spend $45 million dollars to actually figure it out. Give me a break!