Risky Business

Alternative Group Benefits: Another Option for Employers Coping with Rising Healthcare Costs

By Jessica Morgan, Benefits Consultant

Every American is painfully aware of the impact of skyrocketing health insurance costs. Rising premiums, higher deductibles, larger co-pays, reduced benefits—both employers and employees are feeling the pinch as they look for plans that are affordable for everyone.

That’s why HRAs—Health Reimbursement Arrangements—are a welcome addition to the range of options that employers can offer their workforce. HRAs allow employers to give tax-free dollars to their employees, who then can use the money to purchase their own health insurance as well as pay for other eligible medical expenses. While HRA plans may not be the panacea for all the “ills” of the health insurance dilemma, they represent significant progress from the point where we were even just a few years ago when I first began to tackle this problem.

Then, in January 2002, fresh out of college, I was hired to administer a group health plan for my parents’ company. Though I knew little about health insurance, I learned quickly that the premiums we were paying were too expensive for both the company and our employees. After doing extensive research and reading numerous Internal Revenue Service (IRS) publications relating to health care, I uncovered one solution for the family business: a High Deductible Health Care (HDHC) plan. The high deductible encourages employees to make healthier lifestyle choices and spend their medical dollars more prudently while also allowing them to save for future medical expenses in their Health Savings Account (HSA), funds that they can take with them if they change jobs. The HDHC is good for employers also: Under the plan, our premiums were reduced by about half.

Not stopping there, we also began to offer HRAs as an alternative to our HDHC Group plan. Our hybrid benefits package gave employees a choice: Those who felt more comfortable remaining on the traditional HDHC group plan did so, while employees who wanted greater economy, portability, and freedom of choice opted for the HRA. We structured the packages so that employees choosing either plan received the same amount in benefits. The plans’ common denominator is that both increase employees’ awareness of how they spend their health dollars, thus encouraging them to live a healthier lifestyle because, quite simply, it saves them money to do so.

In 2007 The Wall Street Journal took note of our success and wrote a cover story on our creative benefits packages. Increasingly, employers asked me to assist them in designing an HRA or a hybrid plan for their businesses, even though I was not then an insurance agent. But after years of administering (and participating in) an HRA/Group Plan hybrid, I decided to change my career path and obtained a health insurance license, allowing me to use what I had learned to assist other small businesses.

However, finding an agency that provided both group and individual health insurance and that was sufficiently forward-thinking to consider these newer options was more difficult than I had anticipated. Surprisingly, I found that many agents in the mainstream insurance industry know little about HRAs, particularly those plans in which employees can access a broad range of products from different providers.

After pitching dozens of insurance agencies on employer-based hybrid health care plans, I finally found an agency willing and able to offer these cutting-edge health insurance solutions: Setnor Byer Insurance & Risk, which recognized the advantages of hybrid plans and was excited about offering their clients and prospects an even fuller range of cost-saving options.

Setnor Byer, with almost 30 years of experience in the insurance industry, can help employers expand their benefits offerings, promote wellness in their workforce, and reduce health insurance costs for both the company and its employees. With dozens of plan structures available, Setnor Byer’s insurance professionals will help you choose the right one so that your employees— and your business—remain healthy.

Here’s to wellness.

For more information about these and other types of healthcare insurance policies, contact the professionals at Setnor Byer Insurance & Risk by calling 954.382.4350 or visiting www.setnorbyer.com.

COBRA's New Look: The American Recovery and Reinvestment Act's Premium Reduction Provisions

By Martin Salcedo, Esq.
The Human Equation, Inc.

How does the American Recovery and Reinvestment Act of 2009 (ARRA) change the way an organization deals with the Consolidated Omnibus Budget Reconciliation Act (COBRA)?

COBRA is the federal law that gives workers who lose their jobs, and thus their health benefits, the right to continue group health coverage under their former employer’s health plan. As originally enacted, employees electing COBRA continuation benefits are required to pay the entire premium for their health insurance. Although the cost was ordinarily higher than what the employee paid while employed (because the employer was no longer contributing to the premium), it was typically cheaper than the cost of individually obtaining private health insurance coverage.

Unfortunately, the increasing number of people losing their jobs during the current financial crisis has left larger numbers of people without employer-provided health insurance, thereby resulting in increased reliance on COBRA. However, since individuals insured under COBRA are, for the most part, unemployed, maintaining their health insurance, despite the lower price, has become cost prohibitive. Thus, more and more people are left uninsured.

In response to this trend, Congress passed the American Recovery and Reinvestment Act of 2009 to, in part, preserve and improve affordable health care. Signed by President Obama on February 17, 2009, the ARRA effectively reduces an individual’s cost of maintaining health care under COBRA.

Under the ARRA, “assistance eligible individuals” are required to pay only 35 percent of their COBRA premiums—the remaining 65 percent of the premium is subsidized by the government. The subsidy comes in the form of a credit taken against the employer’s employment taxes, and is claimed by the employer who paid the 65 percent share of the COBRA premium by filing the January 2009 revision of the IRS Form 941 (Employer’s Quarterly Federal Tax Return). If the payroll tax credit amount is greater than the taxes due, the Secretary of the Treasury will directly reimburse the employer. Under this scheme, assistance eligible individuals will not receive any payments.

The premium reduction provisions of the ARRA apply only to assistance eligible individuals, which are defined as employees or members of their families, who:

• are eligible for COBRA continuation coverage at any time between September 1, 2008 and December 31, 2009;

• elect COBRA coverage; and
• are eligible for COBRA as a result of the employee’s involuntary termination between September 1, 2008 and December 31, 2009.

Those qualifying as assistance eligible individuals are entitled to the premium reduction beginning on or after February 17, 2009.

Given the timing and applicability of the ARRA (it retroactively applies to individuals involuntarily terminated as of September 1, 2008, but it was not enacted until February 17, 2009), many individuals did not elect COBRA benefits at the time of their involuntary termination because they did not become aware of the ARRA’s premium reduction provisions until after their opportunity to elect COBRA benefits had expired. Such individuals would not be considered assistance eligible individuals because they did not elect COBRA coverage. To remedy this situation, the ARRA includes a provision providing assistance eligible individuals with a new opportunity to elect COBRA benefits.

Under this provision, individuals involuntarily terminated from September 1, 2008 through February 16, 2009, who did not elect COBRA when it was first offered or who did elect COBRA but are no longer enrolled (for example because they were unable to continue paying the premium) have a new election opportunity. This new election period begins on February 17, 2009 and ends 60 days after the COBRA benefits plan provides the required notice to such employees.

The premium reduction for an individual can last up to nine months. However, it will end earlier if the individual becomes eligible for Medicare or another group health plan (such as a plan sponsored by a new employer or a spouse’s employer), or if the individual reaches the end of the maximum COBRA coverage period. Individuals receiving the premium reduction must notify their plans if they become eligible for coverage under another group health plan or Medicare.

The ARRA’s premium reduction provisions are subject to income limits. If an individual’s modified adjusted gross income for the tax year in which the premium assistance is received exceeds $145,000 (or $290,000 for joint filers), then the amount of the premium reduction received during the tax year must be repaid. For taxpayers with adjusted gross income between $125,000 and $145,000 (or $250,000 and $290,000 for joint filers) the amount of the premium reduction that must be repaid is reduced proportionately.

Plan administrators must provide notice about the premium reduction to individuals who have a COBRA qualifying event during the period from September 1, 2008 through December 31, 2009. The notice(s) must include the following information:

• the forms necessary for establishing eligibility for the premium reduction;
• contact information for the plan administrator or other person maintaining relevant information in connection with the premium reduction;
• a description of the second election period (if applicable to the individual);
• a description of the requirement that the assistance eligible individual notify the plan when he or she becomes eligible for coverage under another group health plan or Medicare, and the penalty for failing to do so;
• a description of the right to receive the premium reduction and the conditions for entitlement; and
• if offered by the employer, a description of the option to enroll in a different coverage option available under the plan.

Individuals who are denied eligibility for the premium reduction (whether by their plan, employer, or insurer) may request an expedited review of the denial by the U.S. Department of Labor. Under the ARRA, the Department of Labor must make a determination within 15 business days of receipt of a completed request for review.

As with any new law, the precise impact of the legislation may not be felt for some time. Moreover, given the lack of history to learn from, there are bound to be some issues in the manner in which the ARRA’s provisions are implemented and maintained.

Absent further legislation, COBRA will presumably return to its pre-ARRA state once individuals are no longer entitled to premium reductions (i.e., nine months after December 31, 2009). However, a considerable amount of time remains between now and then. Thus, employers must become comfortable with the ARRA’s amendments to COBRA, and must tap all the necessary resources to ensure compliance.

To learn more about COBRA, as well as the ARRA’s changes to COBRA, click here to purchase The Human Equation’s Complying with COBRA Online Training course. 

 

May I Install Hurricane Shutters? A Loaded Question for Condominium Association Boards

By Martin Salcedo, Esq.
Setnor Byer Insurance & Risk

In the State of Florida, what right does a condominium board have to prohibit a unit owner from installing hurricane shutters?

When determining a condominium board’s right to limit or otherwise restrict a unit owner from undertaking a specific activity, the usual starting place is the condominium’s documents, such as the declaration or the bylaws. This is because condominium associations are generally left to their own devices when it comes to directing the manner in which they govern themselves. However, in the context of installing hurricane shutters, the Florida legislature believed legislative intervention was necessary.

By virtue of their location, condominium communities may be susceptible to various risks that may not exist in other geographic areas. In Florida, it is the risk of hurricanes that ordinarily take center stage.

Florida’s expansive coastline is reason enough to place hurricane damage at the top of the list of risk exposures. The extensive, and ever increasing, residential development along the coast serves to increase the concern. Moreover, the reluctance of an already diminished pool of insurance companies to sell affordable wind insurance policies to coastal residents without hurricane shutters, as well as the increasing difficulty experienced by many unit owners seeking board approval to install hurricane shutters, underscored the need for legislation.

Thus, in the context of hurricane shutter installation, Florida’s Condominium Act (the body of statutes governing Florida condominiums), rather than a condominium’s documents, controls the process.

Specifically, the Condominium Act requires each condominium board to adopt hurricane shutter specifications for each building, which shall include “color, style, and other factors deemed relevant by the board.” Moreover, the Act provides that notwithstanding any provisions to the contrary in a condominium’s documents, “if approval is required by the documents, a board shall not refuse to approve the installation of hurricane shutters by a unit owner conforming to the specifications adopted by the board.”

By implementing an express policy, and requiring adherence thereto, condominium boards are unable to rely on arbitrary, inconsistent, or unknown standards when considering a request to install hurricane shutters, thereby removing unreasonable obstacles often encountered by unit owners seeking to protect their property from potentially devastating hurricane losses.

In addition to protecting a unit owner’s right to install hurricane shutters, the Condominium Act also protects unit owners from being double-billed in the event they choose to protect their unit from hurricane damage. Thus, if a condominium association decides to install hurricane shutters for the entire community, the cost of which is to be borne by the entire community via an assessment, then those who have previously installed their own hurricane protection shall receive a credit equal to the pro rata portion of the assessed installation cost assigned to each unit. Without such a credit, unit owners would essentially be charged twice for electing to install hurricane shutters on their own.

Clearly, the State of Florida has a vested interest in reducing the risk of damage caused by hurricanes. Protecting the rights of unit owners to install their own hurricane shutters, and eliminating the potential financial penalties that such owners were previously susceptible to, ensures the State’s interests are protected in this regard.

And, since the legislature made protecting these rights a priority, prudence demands that condominium boards do the same. Any board decision denying a unit owner’s request to install hurricane shutters should be viewed cautiously. Otherwise, the board may find itself on the wrong side of a lawsuit.

To learn more about unit owners' rights and condominium boards' obligations, check out our catalog of State of Florida approved Condominium Management courses.