Verifying Working Spouse Policies

Recently, we’ve gotten several questions from consultant partners about the best ways to implement and verify their clients’ spousal exclusions and surcharges. Disallowing or charging extra for spouses who have access elsewhere is a good way to make sure employers can continue to offer compensation by way of rich benefits right now.

The questions we’ve been asked are good ones. How do you best implement a working spouse policy?  What about those spouses who have access, but there are no employer dollars going toward the premium? Or those with some employer dollars, but a plan that is still so much more expensive as to be unaffordable? How do you care for potentially key employees while still identifying the savings on the plan?

You’ve also asked questions about how to best verify spouses. Once the basic requirements are outlined, how do you verify spousal access to other coverage? Will that become an undue burden on the HR team?

Over our four year history of verifying dependent eligibility for employers, we have dozens of working spouse verifications under our belt—we may have even verified a plan for one of your clients. Here, you’ll find three client case studies outlining some best practices and significant learnings. Let’s review.

Client A: Spousal Surcharge

Operational Goal:

To implement new spousal surcharge as cost saving option in the wake of health care reform.

Business Challenge:

As a brand new auto-manufacturing plant, Client A had a benefit program that was appropriately rich for its industry but significantly better than the majority of other employers in the region. Client A wanted to set the stage as a caring and responsible company in the way it treats its employees without becoming the default insurer for the area.

Implementation:

Client A determined that it would offer coverage to working spouses with a spousal surcharge. Spouses with access elsewhere who enroll in Client A’s coverage must pay $46 per pay period, which served to push spouses toward their own coverage while still offering the option to be on the client’s plan if the spouse’s employer plan was more expensive.

Spouses can have coverage without a surcharge if...

• they are not employed.
• they are also employed by Client A
• they don’t have access to medical benefits at their employer.

Verification:

ContinuousHealth’s DA² dependent verification. The audit identifies ineligible dependents as well as informing on spousal coverage using proprietary software.

A spousal affidavit included in each audit packet required sign off from the employee, the spouse and the spouse’s employer. That reduces the likelihood of confusion or fraud, since the spouse’s employer is answering questions about current coverage rather than the spouse. ContinuousHealth also suggested requiring the second page of the tax return to generate more accurate representation of spouse unemployment/employment status.

Results:

As a fully-insured plan, cost savings are greatest when ineligible dependents resulted in tier changes.

• 21.8% of those who were in EE+Spouse tier changed to EE Only
• 14% of those in EE+Children changed to EE Only
• 5.3% of those in Family  moved to EE Only

With those tier changes, Client A saw extended savings of $635,000, in addition to any increased plan dollars from the spousal surcharge. After the success of the project, the client decided to integrate the ContinuousHealth software to verify both dependent eligibility and spousal exclusion in-house. This ensured HIPAA-compliance and streamlined the enrollment process.

Client B: Spousal Exclusion with Monetary Limit

Operational Goal:

To implement a spousal exclusion in order to continue to offer an affordable and rich benefits plan.

Business Challenge

As a well-respected leader in the grain industry, Client B is very focused on providing just business practices, including having a compliant plan, and on treating employees well.

Implementation:

Client B’s consultant walked the client through best options and they decided to offer coverage for working spouses if the employer’s coverage was more expensive than being on Client B’s plan. This would apply only to traditional major medical coverage, which also serves to encourage adoption of the new consumer plan.

Spouses can have coverage if...

• they don’t have access to major medical at their employer.
• they have access, but the least expensive single plan offered costs the spouse more than $190 per month.
• they are also employed by Client B.
• they are unemployed.
• they are on secondary coverage and are enrolled in their own employer’s coverage with no contributions to an HSA.

Verification:

ContinuousHealth’s DA2 dependent verification. The audit identifies ineligible dependents as well as informing on spousal coverage using proprietary software. A spousal affidavit included in each audit packet requires the employee, the spouse and the spouse’s employer’s signature and proprietary technology notes all results.

Results:

The audit identified 9.2% of dependents on group plan as ineligible for coverage, a first year savings of $658, 000. That represents 3.8% of Client B’s total annual budget for health care. Spousal verification identified that 11.3% of spouses are only eligible for secondary coverage and about 8% are only eligible for dental and vision, based on the response of the spouses’ employers.

Rather than burdening Human Resources with the project after the initial verification ended, Client B decided to continue using ContinuousHealth to verify dependent eligibility and spousal exclusion. Ongoing costs are minimal compared to an initial project, and the transition to ongoing was seamless.

Client C: Spousal Exclusion with Employer Premium Percentage Limit

Operational Goal:

To find a third party solution for current spousal exclusion practices.

Business Challenge:

The Architecture and Planning company had tried to do a dependent verification last year with a well-known audit company, but Client C had been displeased

Implementation:

Client C had a policy in place that offered coverage for working spouses only if the employer portion of spouse’s premium was low.

Spouses can have coverage if...

• they are not employed.
• they don’t have access to group coverage at their employer.
• they have access, but the spouse’s employer’s group plan requires that the spouse contribute more than 50% of total annual premium.

Verification:

ContinuousHealth’s DA2 dependent verification. Client C was interested in feedback about ContinuousHealth’s responsiveness and educate/assist approach, something it had not found in the last firm. The process would identify ineligible dependents while streamlining the current working spouse verification. A spousal affidavit included in each audit packet requires the employee, the spouse and the spouse’s employer’s sign off.

Results:

The audit identified 7.70% of dependents on the group plan as ineligible for coverage. Despite the recent verification with the other audit company, 4.4% of the dependents were self-identified as ineligible once the plan requirements were outlined to them with the offer of amnesty. Employees opted out 8.4% of the spouses on the plan after reviewing the spousal carve out requirement, even though these were known requirements that had been in effect for over one year.

After the success of the project, Client C decided to continue using ContinuousHealth to verify both dependent eligibility and spousal exclusion on an ongoing basis.

If you’re working to implement a working spouse policy for one of your clients, let us know if we can help. We would love to talk through the options with you and help you serve your client through that transition.

This article was first featured in the May 15th 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.

Why do 45% of those who turn to the individual market not buy?

In April, the Commonwealth Fund released the details of their survey which found 25% of working-age adults experienced a gap in coverage in 2011.  The report detailed that 45% of those who go to the individual market during a gap fail to engage a plan. On top of all that, the report concluded that the Affordable Care Act will be the answer to these issues in their entirety.  But how realistic is that conclusion, and what do these numbers really mean? 

According to the Commonwealth Fund survey report, “Gaps in Health Insurance:  Why So Many Americans Experience Breaks in Coverage and How the Affordable Care Act Will Help,” nearly half of working-age adults who experience a gap in coverage and turn to the individual market don’t end up purchasing coverage on that market. In the past, much has been made about the difficulty most individuals have in getting coverage in the individual market. People are denied access because of pre-existing health conditions. This survey points to a different cause. What is it?

The short answer?  PRICE.  People have no idea how much health care (or health insurance) really costs.  In the individual market, the true cost is no longer obscured by employer-subsidies… and when people are exposed to the real cost, sticker shock abounds.

The two main issues

So what will happen when health care reform comes into full effect in 2014? Currently, there are two main problems that cause people to refrain from purchasing in the individual market.

For some, it is access.  They are denied coverage because of a preexisting condition, or their condition is excluded from coverage when the plan is written on the individual market. That group makes up, according to this survey, about 19%. 

PPACA promises to solve the problem for the first 19%.  In 2014, no one will be denied coverage because of a preexisting condition or have a plan written for them that excludes their condition. But those measures will require everyone’s cost of health insurance to go up: someone has to pay for those benefits, after all.

For the majority of the rest, it’s affordability.  Of the remaining 81% who do not engage coverage on the individual market, 73% didn’t buy because of price.  Cost is the most often cited reason for not purchasing coverage.

So solving the problem for the 19% will drive up the costs for the other 73%, a group who is already price-sensitive. The United States Court of Appeals for the Eleventh Circuit has noted that guaranteed-issue provisions may result in a 27–30% increase for the individual market. It’s also guaranteed that at least some of the access-averted 19% would then become price-conscious and remain uninsured.  What is the greatest good for the greatest number of people? By fixing the minority issue, we may make the majority issue even worse.

The high risk pool

Before the prohibition on medical underwriting goes into effect in 2014, PPACA created an interim solution to improve access in the individual market. The preexisting condition insurance plans (PCIPs) provision went into effect immediately (it actually started in July 2010, after the legislation passed March 2010), and they offer transitional coverage for high risk participants who have chronic health problems. Initial estimates predicted that total enrollment in the federal high-risk pool program would grow from roughly 400,000 in 2011 to about 600,000 or 700,000 in 2013.

It was clear early on that the program had lower participation than expected. Despite the offering that basically allowed anyone coverage, provided they had a preexisting condition and had been without coverage for six months or more, to date there are only around 50,000 covered by PCIPs. That’s 0.1% of the total uninsured, and only about 10% of the initial engagement estimates.

The Affordable Care Act initially mandated that the PCIPs offer premiums on par with state market rates, and they’re allowed to offer rates based on age by up to a 4:1 ratio. Even so, the most likely culprit deterring people from the high risk pool were the high cost of premiums and expensive out-of-pocket costs. The funding for the pools is low, as well, funded with numbers that would only cover about 9% of the estimated high risk individuals. Even after dropping coverage costs and increasing the marketing efforts to make sure people are aware of this option, engagement remains low.  The Commonwealth Fund report sums it up well: “While awareness of the PCIP program is widespread, enrollment is low.”

The game changer

The health care reform legislation does have one ingredient that changes everything.  The Affordable Care Act has a solution for both the issue of access and that of affordability.

The biggest advantage that employer-provided group insurance has that the individual market lacks right now is tax credits. PPACA creates tax credits for individuals in the form of subsidies.  Once this new system of tax credits comes into play in 2014, it has the potential to solve both problems, since all will have access, and the individual tax credits could make individual health care more affordable for those price-sensitive seventy-three percenters.

What else?

There are other fine points associated with the failure to buy on the individual market.

Current tax incentives for group coverage make employers want to offer more insurance coverage than is sometimes necessary, so people are often over-insured. As they come to the individual market, they’re looking for options that they’re accustomed to but unable to find.

People are also not well educated about their benefits, so as they enter the individual market, the options are overwhelming. “The individual market for most Americans is neither affordable nor easy to navigate” (Commonwealth Fund Report). In the study, 60% of those attempting to navigate the individual market found it difficult to compare benefits between plans. Individuals who buy less insurance consume less health care, but people need education about which options are important for them.

The future of the individual market

It remains to be seen how all of these factors will play out for the uninsured, once 2014 arrives. Forty-six states have engaged federal grant money for research and creation of state-based exchanges (click the link for an interesting map about it). All major carriers have begun mapping out a plan for their private exchanges. Over the past 10 years, the number of individuals on employer-sponsored plans has dropped by 5.3% while the overall non-elderly population has grown by 10.8%.

Without healthcare reform, the individual market has already been growing as a result of the shifting marketplace. PPACA will only accelerate this shift. What role will the individual market play over the next few years, and how will this influence the decisions you help your clients make about their benefits plans?

This article was first featured in the May 1st 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.

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.