Will Spousal Surcharges and Exclusions stick around after 2014?

You probably have clients who have researched implementing a spousal surcharge or exclusion. You may have some who have already done so for the 2011 or 2012 plan year. Spousal carve outs have grown exponentially over the past few years as an important way to offset rising health care costs. It’s likely that we’ll see them continue to grow in popularity… unless PPACA is interpreted as making them illegal. 

A debate arose in our office recently. Because we care about our partners, we have strong opinions about health care topics and how the PPACA legislation will play out for your clients. This time, the debate was about spousal exclusions and surcharges, and whether or not they’ll last after 2014. Our dependent audit team has seen a sharp escalation in the number of verifications for spousal exclusions and surcharges, which piqued the interest of our CHROME Compass consultants.

Spousal “carve out” is one way that employers are addressing the rising costs of health care coverage, and the trend is well documented, both in trade publications and the general media. In the fall, the Society for Human Resource Management featured an article on the renewed interest in the “working spouse” provision. The CNN Money blog had a post about it this time last year as provision on 2012 plans that employees should get used to seeing. Entrepreneur magazine outlined spousal exclusion as a good option to keep the rest of the benefits plan robust.

Most commentators note that excluding or mandating a surcharge for working spouses with other access is not going to be good for every company. As you know from working with your clients, each employer is different, and plan specifications must be carefully crafted to best serve the company’s needs. Companies need to have a plan for verifying working spouses before implementing the provision. Articles rightly advise that employers need to question if savings will counter additional administrative burden or business disruption.

So, while many are discussing the rising popularity and what types of companies could benefit from it, few people seem to be talking about the potential legality of spousal carve out or how long the provision will be permitted to last after 2014. That was the subject of our office debate this week.

Some members of our team believe that an explicit interpretation of PPACA disallows spousal exclusion. PPACA requires that coverage is offered to employees and their dependents… regardless of access elsewhere. The intent of the law appears to end spousal exclusion entirely, and when the health care reform law comes into full effect in 2014, spousal exclusions may be penalized or eliminated. Additionally, while working spouse provisions are ERISA-compliant and legal under most federal laws, they may not be compliant with state marital discrimination laws.

Another faction in our office points out that legislative intent does not necessary mandate how the final law is interpreted and how it will play out in reality. Legal contests don’t always make provisions like this go away, and, even if the legislative intent is clear, loopholes are guaranteed. To date, the mechanism for penalty if an employer excludes spouses with access to other coverage is yet undetermined. We first assumed that there may be a $2000 or $3000 penalty for exclusion, following the tradition of the other penalties built into PPACA. That is not yet outlined, so, if anything, it’s becoming more possible that this provision would fall under nondiscrimination testing.

Surcharges, as opposed to exclusions, seem to have a stronger argument under PPACA, although there still is not enough guidance to confidently answer either one. Studies show that $600-$1,200 in annual charges for spouses with access elsewhere, on top of premium costs, may incentivize spouses to engage their own employers’ plans. As a bonus, those who remain on the plan contribute increased premium revenue.

Our debate wasn’t officially resolved, but these are the questions we’re bringing to our partners and our clients. Where do you stand on these cost reduction strategies for your clients’ next plan year? If you’re recommending a spousal exclusion or surcharge, how are you verifying them?

This article was first featured in the April 24th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

Increasing the Adoption Rate of an HDHP

High deductible health plans can lower health risks, reduce total medical costs and increase employee engagement in benefits. Why, then, are they sometimes so hard to implement? Let’s take a look at one company’s successful conversion to a high deductible plan and see what tools they employed to facilitate the change.

Recent reports show that health care costs will “only” rise by 9.9% this year. After running our CHROME Compass analysis, a recent client realized that maintaining their same plan for the 2011 renewal would result in health care costs increases by 21%. Changing their carrier and keeping the same plan options would still cause the national food production company to see an 11% increase in health care costs. A high deductible health plan could offer significant savings, but this food production company had offered a high deductible health plan in 2010 and had achieved low conversion. Leadership knew that this plan could be better for both the company and their employees, but they were having a hard time making employees see the benefit.

After walking through the options with their consultant and one of our CHROME Navigator counselors, the company’s leadership team decided to modify their contribution strategy, changing carriers and offering three main plans for the 2011 year:

The first plan had a $250 deductible, the most expensive coverage option for the food production company. This was a plan they’d offered previously and, in 2010, it had the highest enrollment. For 2011, the company increased the employee contribution.

The second plan was a more middle-ground option, with a $500 deductible. Only about twenty percent of employees with coverage chose this plan in 2010, but the plan still had higher enrollment than the high deductible health plan at that time. Leadership increased employee premium costs slightly in 2011.

These changes facilitated employee movement toward the final plan, a high deductible health plan that that allowed the company to optimize their investments in employee benefits. In order to make the high deductible health plan a good value for employees, as well as the employer, the food production company reduced the deductible for the plan. They also increased the employer contribution to the high deductible plan for 2011, and introduced two new employer-paid benefits for employees who enrolled in the high deductible plan:  an accident plan and the ContinuousHealth Complete Card. 

The cornerstone benefit of the CH Complete Card is unlimited telemedicine access for employees (and their entire families) through a unique discount medical plan without a co-pay or consulting fee. With this inexpensive card, employees get faster access to critical assistance and increase their productivity, while the company was able to provide a much-needed benefit at a cost significantly less than traditional office visits. The card also offers a fitness discount and either travel assistance or pet health discounts, benefits that show high satisfaction levels for employees with minimal cost to the employer.

Because the CH Complete Card plan isn’t insurance, the card was a supplement to the high deductible plan that controlled costs and encouraged employee migration to the consumer option. This allowed the food production company to continue offering valuable benefits despite health care inflation.

By the end of enrollment, it was clear that the incentives made it hard for employees to want any other plan: enrollment for the $250 deductible plan decreased by 54%, and the $500 deductible went down by 16%. The high deductible health plan tripled its enrollment for 2011, and, even with the new employer-paid benefits, the strategy reduced overall health care costs by one percent.

The key for this employer’s conversion to the high deductible plan was making the plan as attractive as possible to their employees. The employees, most of whom had minimal understanding of their benefits, were interested in the tangible CH Complete Card offered with the high deductible plan, and since the CH Complete Card is a fairly new product, we wanted you to see one way that a consultant partner used it to benefit her client.

Let us know if you’re interested in more information or the statistics of this conversion.

This article was first featured in the April 17th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

It may be accessible, but is it useful?

The engagement of internet-accessible employee benefits tools continues to grow exponentially. Some firms have begun touting “web only” solutions as a viable alternative to more traditional approaches to employee engagement. As a leading provider of technology solutions for group benefit needs and with all the interest in online enrollment and HR administration tools, we thought it would be interesting to research how accessible web-based platforms really are for employees.  How much are your clients (and their employees) really using these platforms? Is the focus on web-based tools truly driving efficiency or is it also creating barriers for employees who have low levels of comfort with and access to technology? ContinuousHealth recently tracked employee and employer login data for our entire employee benefits technology suite of systems. Prior to pulling the data, we had certain predispositions about the results: As a technology company, we know that not everyone is comfortable working with software that they do not use regularly.  We refer to these types of systems as “single transaction platforms.” For these types of systems, we assumed employee web access would be fairly low, and employer access would be moderate to high. While we are proud of our systems, we realize many of our clients never walk through the technology, but those who do find it helpful and, in the words of one consultant, “slick.” But what is the real level of web access to our systems?  Who is really logging in, and how can we make our products better, knowing those results?

As we began to review the data across the several platforms we offer, using the employee and employer access from your clients’ projects, the results surprised us. First of all, let us be clear, ContinuousHealth has always been of the mindset that “all access” is achieved (like a brand marketing campaign) by using nearly every available medium and mode to reach employees. For both compliance and effectiveness reasons, HR applications can’t settle for 80% response rates. For us, web access has always been an “and” option as opposed to an “or” option. Having said that, let’s look at web access across a variety of platforms and needs.  

Employees and internet accessibility

We first took a look at employee access of our benefits administration platform, individual insurance coverage system and our dependent verification technology. Across all client platforms, we show fairly low levels of access by employees.

Only 17% of the employees going through dependent audits log into the website, and just 5% actually upload documents to the portal to move forward in completing the process. You may have heard of dependent audit companies that advertise a web-only verification. They state that “98% of people have access to the internet.” That may be true of companies with a predominantly white collar workforce, but we find that, even among that population, most people don’t have the ability to turn a hard copy document, such as a marriage certificate, into a soft copy document. Our employee login data shows that internet access is still not the best way to identify ineligible dependents with minimal business disruption - especially if you want to reach high penetration rates. By offering an all-access platform, we typically see response rates in the 97-98% range. Achieving this consistently with a web only solution is next to impossible without a high degree of HR involvement.

In our benefits administration and individual coverage technology, 39% of all system logins are employees logging in to enroll or complete surveys for assistance with individual medical insurance. This is a good bit higher than we predicted, and it’s an argument toward the need for online enrollment options. 3-5% of all errors in enrollment are caused by manual keying in of enrollment requests, and this can be reduced by allowing employees access to the system.  The fairly high number of employee logins shows that online enrollment is accessible and a highly utilized option, viable for moving most companies to either an online employee or enroller-assisted option.

Employers and internet accessibility

The data showed, though that most vital is employer accessibility to technology.

For our benefits administration and individual coverage technologies, we found that 46% of all logins were employers logging in. This includes assisting employees with the technology, reviewing enrollment, and viewing statistics. The number is much higher than expected.

Employers also have access to our dependent verification technology, a system that we pride ourselves in for our intentional user-friendly, “single transaction” technology. We recognize that employers may not be logging in every day, so the system shouldn’t be software that you must learn. Instead, it should be user-friendly enough that employers can understand the first time logging in. That said, although we built our system with ease of access in mind, we were still surprised to see how many of our employers, your clients, are accessing it—80% of the employers who are going through dependent audits with us have logged in to the website, either to review statistics or download reports.

The details

Substantial money invested in giving employees access to web applications for human resources administration will only pay out if employees really do utilize these systems. Employees should receive non-web based communications and resources in addition to any internet access. Any time you’re trying to get employees to do just one thing, in this case provide documents or manage benefits, you have to offer options beyond online accessibility.

Enroller-assisted online portals are good options, and crucial to the success of human resources technology is quality access for employers. As employers manage their employees, for large and small companies alike, it is vital that the employer feels connected to the data, and, thus, to their employees.

For your clients

Rest assured – options that are exclusively manual and paper-based are bad. There are too many employees with access to the web to be tied down to old ways of doing business. But when you evaluate new approaches, keep an eye on reaching everyone.  

You know better than we do what your clients need, but these are the important questions to ask, and important adoption data to know, as you consider the next steps as their advisor.

This article was first featured in the April 10th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

Median vs. Mean in Health Care Expenditures

During the Supreme Court's oral arguments back in March regarding the constitutionality of health care reform's “individual mandate," our interest was piqued by one exchange in particular, distinct from the many quotes that pundits and political commentators seized upon. The comment was relavent regardless of the final ruling, and we thought it worth reviewing today.

In response to Solicitor General Donald Verrilli, Supreme Court Justice Samuel Alito stated:

“You can correct me if these figures are wrong, but it appears to me that the CBO has estimated that the average premium for a single insurance policy in the non-group market would be roughly $5,800 in—in 2016. Respondents—the economists have supported—the Respondents estimate that a young, healthy individual targeted by the mandate on average consumes about $854 in health services each year.”

Justice Alito indicated the “average” health care expenditure as “about $854.” Most things we see in ACA are based on the average—penalties, actuarial value, etc. But, in the case of health care expenditures, this “average” isn’t as average as it seems.
For the purposes of health care expenditure, the median expense tends to be a more useful indicator, as the majority of health care expenses are incurred by a small minority of the population. Specifically, as you can see from the chart included here, in 2009, the top 5% of health care spenders accounted for almost 50% of all health care spending.

The average person’s health care expense would probably be closer to the median than the mean. Medical Expenditure Panel Survey (MEPS) data from 2009 for individuals age 18-44 indicated a median expense of $932 and a mean expense of $3,285. So, while Justice Alito stated the $854 dollars was an average (or mean) value, if he was talking about the group ages 18-44, it appears it was more likely a median value.

While the distinction between median and mean health care expenditures is important in understanding health care overall, it is of particular importance to plan sponsors. When determining plan design, plan sponsors should carefully consider how their population is affected both in aggregate and at the granular level. Certain plan design aspects affect the 5% high utilizers more heavily than the rest of the population. Should the overall compensation strategy around health insurance benefits be tailored to benefit the 5% or the 95%? Both could be viable strategies, but be sure, with your clients, that it is an intentional strategy.

This article was first featured in the April 3rd edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

The Indexing Implications of the 2012 Federal Poverty Level Guidelines

A little-discussed portion of PPACA is the indexing of the affordability measurement. Under PPACA, for an employer’s plan to be affordable, the employee cost of the single coverage cannot exceed 9.5% of an employee’s household income (AGHI). In the initial years following 2014, this percentage will be adjusted to reflect the excess of the rate of premium growth over income growth for the prior year as determined by the Secretary of Health and Human Services.

On January 26, 2012, the Department of Health and Human Services published the 2012 Federal Poverty Guidelines (FPL). At that time, the single guideline rose to $11,170, which is up 2.57% over the 2011 single guideline.  That’s a 464.1% growth in the rate of change.

This could have profound ramifications for the indexing of the 9.5% affordability threshold.

As you advise your clients on plan strategy, you may be able to look to the FPL growth as an indicator of income growth. The FPL is a simplified version of the federal poverty thresholds set by the Census Bureau and is used mainly for administrative purposes, such as determining financial eligibility for subsidies in the State Insurance Exchanges. The poverty thresholds set by the Census Bureau act as the starting point for the FPL calculation, with adjustments made based on the prior year’s Consumer Price Index for Urban Consumers (CPI-U).

On January 25, 2012 the Federal Reserve issued a release stating a long term goal of 2% inflation annually, “as measured by the annual change in the price index for personal consumption expenditures” (the CPI-U). In 2010 and 2011 the FPL increased 0% and 0.55% respectively. The recent increase of 2.57% more closely aligns with the Fed’s stated inflation goal.

Regardless, the cost of insurance is increasing at a faster rate than income. In the absence of indexing, more individuals would become eligible for subsidies on the exchange every year.  That, in turn, would cause stress on the viability of the exchanges. With the provision in place, as income growth increases more slowly than premium cost, the affordability percentage will adjust to reflect the excess.

The Supreme Court will issue rulings soon. Regardless of the outcome, it's vital that we understand the consequences and the details of this legislation, and how it may affect your clients. We will continue to work hard to lead the way through PPACA, including the indexing of the affordability measurement.

Jennifer Riley, PHR

CHROME Consultant

www.continuoushealth.com

This article was first featured in the March 27th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

All Dependent Eligibility Audits Are Not Created Equal

Response Rate is Crucial

As employers seek out money saving options in their health care plans, dependent eligibility verification audits have grown in popularity. Recent national studies show that 74% percent of employers plan to do a dependent audit in 2012, up from 69% in 2011. And there’s good reason to do so:  the 10-14 week process identifies bottom-line savings of 3-5% of annual health expenses without changes to carrier or plan design. 

More often than not, employers contract with third party companies in order to ensure that the audits run smoothly and securely, since verification is typically too time-consuming to do in-house. All dependent eligibility audits, however, are not created equal.  

As the Director of Operations for dependent audit at ContinuousHealth, I can tell you that horror stories abound. Clients often come to us saying that they attempted a project internally and overwhelmed their understaffed Human Resources department. Other clients say they used a third party and their Human Resources department was still bombarded because the communications weren’t clear. They cite experiences from other firms saying that employees were treated like criminals when they truly didn’t understand what constituted a dependent.

And, overwhelmingly, we hear about companies that drag verification on for months but still can’t get as much as 30% of the population to comply.

As Eric always says, “If the ship misses the harbor, rarely is it the harbor’s fault.” High response rates are a critical success factor for dependent audits. A dependent verification is not rocket science.* It should be based on a solid employee approach, one that educates and assists employees to complete, with multiple access points (mail, web, fax, phone and email) and hard-to-ignore communications. There needs to be consistent coordination between HR and a dedicated audit Account Manager, with the ability for the employer to track real time statistics. And above all, the external communication and contact with the employee must be such that response rates are driven into the 90% range.  The only thing that’s going to give your client credibility at the end of this is that the project was very, very thorough.

When we began doing these projects in 2008, at the request of one of our other advisor partners, we found 3 root causes of ineligibles:  lack of awareness of what constitutes a dependent (on family coverage; call this person “family”), timing (recently or not-so-recently divorced), and fraud.  We made a conscious decision to approach each employee as though his ineligible dependents are the result of a lack of awareness. This “Compassionate Compliance” approach has evolved into the leading method for high response/low disruption projects. In a project where the issue is a lack of awareness of the definition of a dependent, can you really trust the results if 10-20% of your population doesn’t respond?  The entire integrity of the project is compromised.  We’ve had clients who said that if fewer than 90% responded, they wouldn’t even drop the self-identified ineligibles. 

A dependent audit should not be an exercise in kicking undereducated or lazy people off the plan. If you do it right, you should be getting a 97% response rate consistently. We recently had a client finish the project in 8 weeks with a 99% response rate, another in 14 weeks with 100% (both had savings higher than a 3:1 return on investment). These results are feasible with the right audit company. 

It’s possible to design an audit where you find 20% ineligible, but we don’t think that’s the goal of most employers. When we initially designed our audit, we approached it with a marketing mindset: what does it take to get everyone to respond? Our job is to do the most thorough project we can, generating maximum compliance and minimal business disruption. We never want anyone to lose coverage because they were unaware of the verification.

Our company was one of the first to market with this product. We offer the industry’s leading response rate as well as the highest return on investment guarantee. If you’re like most of our consultant partners, you’re suggesting a dependent audit or ongoing eligibility maintenance to your clients this year.  There is a difference in the firm you choose and the approach they take. We would be honored if you would choose ContinuousHealth.

Kelly Hudson
Director of Operations
ContinuousHealth, LLC
http://www.continuoushealth.com

This article was first featured in the March 20th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

Client Quote

“For the first time ever, I understand what the future holds for health care, and it’s not what I thought. There might be other reasons that I won’t want to grow by 120 units next year, but now that I have this data, health care reform isn’t one of them.”

CEO of a major children’s apparel company, after undergoing a CHROME Compass analysis