COBRACOBRAConsolidated Omnibus Budget Reconciliation Act

Amended by:

The American Recovery & Reinvestment Act 0f 2009

Presented by:Richard Herzberg

Executive Vice PresidentTFA Benefits

Premium Assistance◦ Assistance Eligible Individuals (AEI) who pay 35%

of COBRA premium are treated as having paid the full COBRA premium The 35% cannot be paid by the Employer

◦ The Federal government will subsidize the remaining 65% of COBRA premium

◦ Premium assistance available for up to 9 months

Subsidy◦ The 65% employer payment is reimbursed from

the employer’s liability to deposit payroll taxes and federal income taxes withheld from employees’ compensation Credit on its IRS Form 941 quarterly employment tax

return Credit can be withheld from deposit and reconciled

on quarterly 941

Who is an Assistance Eligible Individual?◦ Eligible for COBRA between Sept 1, 08 – Dec 31, 09◦ Elects COBRA

When originally offered Special election period (new election under ARRA) Must Be - COBRA eligible due to involuntary

termination Other than gross misconduct

◦ AEI may be a covered employee, spouse or dependent child if qualified by reason of employee’s involuntary termination

Special Election Period◦ An employee who involuntary lost coverage

between September 08 and now who did not accept COBRA when originally offered has a new special election period The special election period is 60 days from the date

the plan administrator provides the former employee (spouse and dependants) notification of the special election period.

When Does Coverage Begin?◦ Subsidy Begins March 1, 2009

For groups using calendar months as the period of coverage (most groups)

◦ Coverage Ends: Date AEI is “eligible” for other coverage Nine months from the first day the subsidy applies The end of “maximum” COBRA period

Penalty To AEI For Over Staying Their Welcome!◦ 110% of subsidy provided for the AEI after the date

AEI became eligible for other coverage

COBRA Premiums Can Be Less Than Full Insurance Premium◦ Employer subsidy would be based on 65% of the

lower premium and the employee would have to pay the difference

63-Day Break In Coverage Rule for Pre-existing Conditions◦ Rule does not apply to a coverage break due to

non-acceptance of initial COBRA offer when “Special Election” is accepted

High Income Clause

◦ “High Income” over $145k Single ($125 phase out)

◦ over $290k Joint Return ($250 phase out)

◦ Two Options Waive subsidy Take subsidy and repay the subsidy as additional tax for

the year subsidy was taken Note – waiving is permanent. Need to consider whether

the individual might qualify in 09 even if not eligible in 08.

Administrator’s Requirements◦ Beginning March 1st – ensuring AEI pays only the

35% required Not practical (since notices just released) If full premium is paid by AEI then

Refund 65% to the AEI within 60 days Apply to future payments within 180 days

◦ Administrator must provide notices regarding the subsidies to all current COBRA beneficiaries and those who were eligible for “special enrollment”

Subsidy does not apply to FSA COBRA is not retroactive to original COBRA

eligible date The end of the subsidy does not end COBRA

(eligible for longer period of coverage)

Plan Enrollment Option◦ Can (if employer allows) elect different coverage

that the AEI had at the time of the QE

◦ COBRA premium cannot exceed current coverage premium

◦ Must be available to active employees

◦ Election period not less than 90 days

What needs to be done now◦ Identify all potential AEIs◦ Identify all COBRA QBs who meet the subsidy

requirements◦ Adopt waiver forms for High Income

When available from Sec. of Treasury◦ Develop and provide notices required by ARRA

Model from Dept. of Labor is now available◦ Determine whether to implement the special

coverage option

COBRACOBRAConsolidated Omnibus Budget Reconciliation Act

Amended by:

The American Recovery & Reinvestment Act 0f 2009

HRA Consumer Driven Health Plan

With The Employer Having Increased Control

1. Health Insurance Marketplace2. Coverage Options3. How HRA’s Work4. Advantage to Employer5. Advantage to Employee

Since 1999, employment-based health insurance premiums have increased 120%, compared to cumulative inflation of 44% and cumulative wage growth of 29% during the same period

The average employee contribution to company-provided health insurance has increased more than 120% since 2000

Average out-of-pocket costs for deductibles, co-payments for medications, and co-insurance for physician and hospital visits rose 115% during the same period

• The Henry J. Kaiser Family Foundation. Employee Health Benefits: 2008 Annual Survey. September 2008.

Traditional Insurance◦ Deductible / Co-insurance / Stop Loss

PPO (Preferred Provider Organization◦ Network of providers with a negotiated discounts◦ Out of network option for employees

HMO (Health Maintenance Organization)◦ Smaller network with negotiated discounts◦ No out of network coverage

Consumer Driven Health Plans (CDHP)◦ Health Savings Accounts (HSA)◦ Health Reimbursement Arrangements (HRA)◦ Flexible Spending Accounts (FSA)

Also known as cafeteria plans and 125’s

Health Savings Accounts◦ With HSA qualified plans, employees determine

how to best utilize the benefits above the deductible level and whether to use their HSA funds or save for the future

Health Reimbursement Arrangements◦ With HRA plans, employers determine what

coverage they want to reimburse for employee eligible health care expenses

Flexible Spending Accounts◦ Allows an employee to pay for sections 213d expenses

with employee money on a pre-tax basis

Qualified High Deductible Health PlanHealth Insurance

Health Savings Account

Then you can establish

Health Reimbursement Arrangement

Any Health Plan (if desired)

Then you can pair with

What is it?◦ Employer-funded plan that reimburse employees for

incurred medical expenses that are not covered by the company's insurance plan

◦ HRAs are among the most flexible insurance products on the market. These federally approved accounts may be tied to high deductible insurance plans, or they may be offered on their own

◦ HRAs are similar to Flexible Spending Accounts (FSA); however, while an FSA is an add-on to your already existing medical coverage, an HRA is your medical coverage

The goal is to create informed and confident consumers capable of making value-based healthcare decisions

Control Cost ofHealthCare

Tax Advantages Cash Flow Retention

• HRA contribution tax deductible to employer and not taxable to the employee

• Employer’s save on premiums

• Promise to pay; no cash up front

• Employer only pays select 213d expenses

• Funds not portable

• Employers “investment” creates employee loyalty

• Employers may stimulate retention with a plan which allows employees to keep funds (not required)

Lower premium cost Lower out of pocket cost for health care

claims* Benefits of HRA non-taxable to the

employee Better understanding of the value of their

health insurance

* Depending on plan design chosen by the employer

With an HRA, unused fund amounts may be carried

over from year to year. This differs from a Flexible Spending Account which maintains the “use-it-or-lose-it” rule

  The employer has full discretion over how the

carryover is managed. ◦ You may choose to allow the employee to keep all

unused funds for use in later years, keep only a portion of unused funds, or forfeit all remaining unused funds after the Plan year is complete.

All requests for reimbursement under an HRA must be substantiated. ◦ The most common means of substantiation is the

Explanation of Benefits (EOB) statement provided by the employees’ health insurance provider after a medical expense has been incurred.

 

Coordination with a Flexible Spending Account

◦ An employer may choose to offer a Flexible Spending Account Plan (FSA) in conjunction with an HRA

◦ Combining an FSA with an HRA allows employees to bridge the gap between the employer sponsored HRA and the health insurance plan

In a situation where an incurred medical expense could be reimbursed from either the FSA or HRA, the employer or plan administrator will determine the “ordering rules” which determine which account the expense shall be reimbursed from first

HRAs are subject to COBRA◦ Employees experiencing a qualified event must

be given the opportunity for continued participation in the HRA offered by the employer. 

Traditional HRA HSA

Plan DesignAny type

(except HSA)

• At least $100 deductible*

• Non-HSA planHSA - Qualified HDHP

Consumer Contributions No No Yes - Pre-Tax

Employer Contributions Yes Yes (required) Yes (optional)

Funds Available Day One N/A Only as deposited Only as deposited

Qualified Expenses N/AReimburse 213d expenses as defined by employer or carrier

Section 213d (Internal Revenue Code)

Tax Free Withdrawal N/A

YesFor qualified expenses as defined by HRA document

YesFor qualified expenses

Consumer Forfeiture N/A Yes - upon termination No

Consumer Portability N/A No Yes

Interest Bearing N/A No Yes

Balance at Risk from Investment

N/A No Yes

Expense Substantiation N/A Employer/Health plan Consumer

Tax Treatment Contribution N/A Not subject to Federal Income Tax or FICA tax

Not subject to Federal Income Tax or FICA tax

Important differences between Traditional plans without HRA’s and plans with HRA’s and/or HSA’s attached.

An Integrated Health Plan and HRA Model

Employer Flexibility to Customize HRA

Simplicity and Service of a Fully Integrated

Experience

Choice of Benefit Plans with

First-Dollar Preventive Care

(priced 24% to 45% below popular Optima plans)

Optima Design HRA offers employers a fully integrated health plan and HRA funding option combined with flexibility needed to design the HRA to achieve their goals

Employee dollars

first

Employer / Employeecost share

as eligible claimsincurred to

the HRA contribution cap

Employer dollars first

OR OR

HRA reimburses for deductible expenses only in core plans

Flexibility to design the HRA funding◦ Employer decides the HRA contribution amount

Easy online access account information (claims and payment and balances)

Employers can monitor expenditures and balances online for better expenditure predictability

Integrated claims feeds satisfy substantiation requirements

Optima Design HRA

Service of a Fully-Integrated Experience

◦ Veteran of HRA administration◦ Operational strengths & flexibility simplify the customer

experience--making for seamless claims processing.◦ Currently administers 2,300 groups and 51,000 accounts of

HRA business across the country.

Optima Design HRA

All Other Benefits Subject to Deductible, Then Coinsurance

Optima Design PlusOptima Design Vantage

• Two core in-network deductible options

• $1500 individual / $3000 family OR $3000 individual / $6000 family

• Two core in-network co-insurance options after deductible

• 100% OR 80%

• First dollar preventive care coverage

• Total of 2 medical and 2 behavioral health office visits at standard co-pay, no deductible

• Traditional Rx benefit with co-pay tiers outside of the deductible

Choice of Benefit Plans with First-Dollar Preventive Care

OR