Employees Are in the Dark About Disability Coverage

Workplace enrollment in disability coverage lags behind other types of coverage, according to a study by Lincoln Financial. Only 30% of employees say they know a lot about disability insurance. Ninety-five percent say they are more likely to enroll in benefits that they are familiar with and educated about.

Sixty-seven percent of employees who are offered disability insurance enroll; 81% enroll in life insurance; and 90% enroll in dental insurance. The one-third of employees who don’t enroll in disability coverage say that it’s unnecessary right now. However, just 18% are very confident that they could cover expenses if they experienced a serious illness or injury. About half of American employees say cancer is their top health concern.

Eric Reisenwitz of Lincoln Financial said, “Disability insurance can seem abstract. Many don’t fully understand the protection it can provide. But the ability to earn an income is often the primary source of financial security for an individual or family. We insure our homes, our cars, and ourselves. Why wouldn’t we insure our income? Employees need more education to truly get the most of benefits offered through the workplace, May is Disability Insurance Awareness Month — an excellent time to help employees understand the value of this coverage, which is often right at their fingertips.”

ACA’s employer mandate goes into effect for some businesses

Businesses with 100 or more full-time employees must offer health insurance to at least 70% of those employees this year or face a tax penalty under the Affordable Care Act. New reporting requirements also take effect this year, and some consultants are offering training sessions. American City Business Journals/Portland, Ore./Health Care Inc. Northwest blog (12/29)

How To Prepare for the Employer Shared Responsibility (ESR) Provisions

BePreparedPaychex released a checklist for business owners to prepare for the IRS year-end reporting for the Employer Shared Responsibility (ESR) provision. Under the Affordable Care Act (ACA), ESR provisions are in place to determine if full-time employees are offered adequate and affordable health care coverage.

Businesses with 100 or more full-time employees (including full-time equivalents) may be subject to ESR penalty assessments beginning in January 2016 for the tax year 2015. Businesses with 50 to 99 full-time employees in 2014 (including full-time equivalents) may be eligible for relief from ESR penalties for the year 2015, but only if they meet specific qualifications. They still have to complete IRS year-end reporting requirements to certify their eligibility for they exemption.  While the tax filing is not required until early 2016, it is important to act now.

Below is a checklist to help guide business owners through IRS year-end reporting:

• Prepare now to avoid playing catch-up later: It is critical to have at least 12 months of payroll information tracked as businesses are expected to use historical hours and wages – by month – for every employee to determine the following: whether you are considered an applicable large employer (ALE), which employees are considered full-time based on 30 hours per week, not 40, and whether the coverage you offer to full-time employees is considered adequate and affordable. For more information and tips on tracking employees’ hours, click here.

• Determine if you are an applicable large employer (ALE): ALEs in 2015 have had 50 or more full-time employees (including full-time equivalents) in calendar year 2014. Full-time employees work an average of 30 hours per week, or 130 hours per month in the calendar year. To calculate the number of full-time equivalent employees, use the hours of service for all employees  who were not full-time employees (including seasonal workers) in any given month (capped at 120 hours per employee) divided by 120. Click here for more information.

• Determine your full-time employees: Hours can be measured on a monthly basis during the calendar year or throughout a pre-determined look-back period. You must give every employee who was full-time for at least one month during the calendar year this form: IRS Form 1095-C. For help determining your employees’ status, click here.

• Review your plan coverage: ACA Section 6056 requires ALEs to file information returns with the IRS and provide statements to their full-time employees about their health insurance coverage. This includes information about medical coverage offered to full-time employees on a monthly basis throughout the calendar year. ALEs must determine and report that the coverage they offer meets the minimum actuarial value standards, as well as affordability requirements, outlined in the ESR provisions. Click here.

• Complete and submit forms 1094-C and 1095-C: These IRS forms provide certification as to whether you have allowed full-time employees to enroll in insurance that provides Minimum Essential Coverage at a minium-actuarial-value of 60% for each month of the year. They employer files these forms with the IRS: Form 1094-C and Form 1095-C. Employers must also give this form to their full-time employees: Form 1095-C t. You can find draft instructions for forms at http://www.irs.gov/Forms-&-Pubs.

• Be on time: Year-end reporting timelines are similar to W-2 forms. You have to file forms 1094-C and 1095-C with the IRS no later than February 28 or, if filing electronically, by March 31. You have to give Form 1095-C to full-time employees by January 31.

Understanding and complying with these new health care reform requirements may be overwhelming for business owners to handle on their own. With this in mind, beginning in tax year 2015, Paychex will offer IRS year-end reporting assistance through its Employer Shared Responsibility Services to help ease the burden of these new requirements.

How businesses should prepare for coming ACA requirements

Companies with 100 or more full-time-equivalent employees will have to comply with more Affordable Care Act provisions in 2015, such as tracking and reporting the number of employees with access to health plans. Businesses subject to the ACA should ensure they have appropriate measurement systems in place, identify their excise penalty tax risk, evaluate data collection and reporting systems, and ensure record-keeping systems can withstand an audit. BenefitsPro.com (12/8)

Private Health Insurance Exchange

Beginning in February, CaliforniaChoice is offering employers the ability to provide their employees with two metal tiers. The tiered-choice option offers employees greater access to health plans, benefits, doctors, specialists and hospitals. Available tiered-choice options include platinum and gold, gold and silver, or silver and bronze metal tiers. Each metal tier available through CaliforniaChoice also offers employees access to both full and limited provider networks. For more information, visit www.calchoice.com.

Law Limits Self-Insured Plans for Small Employers

legal settlementA new law in California, CA SB 161, limits the ability of small employers (under 100 employees) to self-insure their health benefits. Beginning January 1, 2014, insurers cannot issue stop loss insurance with deductibles below $35,000 to groups with one to 100 employees.

The attachment point increases to $40,000 in 2016. (The attachment point is the amount of claim dollars a company will be responsible for paying before the stop loss carrier reimburses any payouts). Also under the law, stop-loss policy cannot exclude any employee or dependent who is eligible for coverage under the employer’s self-funded group health plan.

These restrictions do not apply to stop-loss policies that were in effect for small employers before September 1, 2013. These policies may be renewed or reissued, or a stop-loss policy may be issued by another stop-loss insurer to maintain continuity of stop loss coverage. Also, SB 161 does not affect the ongoing operations of certain multiple employer welfare arrangements if they comply with small group health reforms.

Confused Workers Face Crucial Decisions During Open Enrollment

While open enrollment season is closing in, the knowledge gap is widening among workers, which may result in inadequate or financially risky benefit choices, according to an Aflac survey Seventy-one percent of American workers only sometimes or rarely understand the changes to their policies each year, yet 90% choose the same coverage every year. Thirty-seven percent say it will be harder to understand everything in their policy this year.

Workers will contend with three major factors this enrollment period:

1. Employers’ increasing adoption of high-deductible health plans.
2. Scaled down benefit plans.
3. Increasing premiums.

The survey also reveals the following about employees:

• 50% say that $25 is the maximum monthly increase to their health insurance premium that they are able to cover.
• 83% are only willing to spend up to $1,000 for their health insurance deductible each year.
• 40% will have to cut expenses elsewhere to cover the difference if monthly premiums increase.
• 20% will trade down on their benefit package, accepting decreased coverage to get a lower premium.
• 46% have less than $1,000 in savings for medical expenses.

Sixty-eight percent of employees say they have made mistakes during open enrollment. Fifty-four percent of workers waste up to $750 because of benefit mistakes they have made during open enrollment. Additionally, 74% of workers only sometimes, rarely, or never understand everything covered by their health care policy.

In order to avoid mistakes, employees need to educate themselves about what their insurance plans actually cover and carefully review policy changes each year.

Aflac offers these tips:

• Prepare: Be aware of annual insurance policy changes and compare your new benefit package to your policy from the year before. Make sure that all of the health insurance costs you’re responsible for are within your budget. Also, review the deductibles and other out-of-pocket costs for health care services and pharmacy purchases you’ll be responsible for paying to ensure your plan offers the coverage you need.

• Don’t make assumptions: If your company hasn’t made any material changes to its health insurance plan since health care reform legislation was passed in 2010, it may be exempt, for now, from offering widely discussed essential health benefits, including free preventive services. Ask your HR manager if your policy options changed to include new benefits made available by health care reform.

Check your spouse’s benefit package: Your employer doesn’t have to offer insurance to your spouse and as costs increase, more companies are cutting this option. Even if your employer does offer your spouse insurance, the company is not obligated to pay anything toward the premium. If your spouse has access to employer-sponsored health insurance through his or her job, it may make the most financial sense to purchase two individual policies as opposed to one family policy.

Consider supplemental coverage, but don’t double up: Health care reform legislation requires plans in the individual and small group markets to offer essential health benefits like pediatric vision care and dental and chronic disease management services. Check all aspects of your major medical plan so you know what is covered and what isn’t. Consider supplemental insurance, such as accident, hospital or critical illness plans to help reduce rising health care expenses.

Examine premium costs carefully: Cheaper isn’t always better, since plans with the lowest monthly premiums likely mean you’ll pay more in co-insurance and get less coverage.

For more information, visit AflacWorkForcesReport.com.

Consumers Want Tax-Free Insurance Premiums, Just Like Businesses

Forty-seven percent of Americans surveyed by HealthPocket said individual health insurance premiums should be tax-free, just as they are when employers buy it for their workers.

Bruce Telkamp, CEO of HealthPocket said, “With the administration’s decision to delay the employer mandate, more employed people will enter a reformed individual market in 2014. They will experience an unfavorable tax environment compared with coverage paid by their employer.”

Those buying insurance on their own can’t take advantage of the same tax advantages that businesses get. However, the self-employed can treat themselves as employers by deducting health insurance premiums from taxable income under the following circumstances:
They made a profit for the year, and they were not eligible to enroll in a health plan provided by a former employer, spouse’s employer, or former spouse’s employer.
For others, privately purchased health insurance is paid with after-tax dollars except for any premium amount that exceeds 10% of adjusted gross income for the year. For more information, visitwww.HealthPocket.com.

Less than Half of Small Businesses Offer Benefits

Only 47% of small businesses (2-99 employees) in the United States offer benefits, the lowest level in two decades of LIMRA research. According to the U.S. Census Bureau, 98% of businesses in the U.S. have fewer than 100 employees, accounting for approximately 35% of the U.S. workforce. Kim Landry, a research analyst with LIMRA said, “The weak economy caused a lot of small firms to close, while the new firms cropping up to replace them are less likely to offer benefits. Many small businesses are also hesitant to add new benefits until the economy improves.”

LIMRA’s study found that 78% of small businesses in the U.S. are family-owned. Family-owned firms experienced a sharper decline in benefit penetration between 2005 and 2012 than did non-family-owned firms, with only 40% offering insurance benefits in 2012 compared with 47% in 2005.

One quarter of small businesses are female-owned. These firms tend to be smaller, produce lower revenue than male-owned firms, and less likely to offer insurance benefits (37% versus 50% of male-owned small businesses).

Among small businesses that do offer insurance benefits to their employees, medical and prescription drug plans are by far the most popular, and tend to be the first benefits that companies bring on board, Landry noted, “These benefits provide an opportunity for small business owners to get coverage not only for their employees, but also for themselves and their families. We also found dental and vision coverage to be common offerings among small businesses, as these products tend to be very popular with employees.”

LIMRA found that life insurance is frequently offered by small firms, whose preference for this benefit is most likely associated with its low cost and ease of administration. However, products, such as long-term disability, short-term disability, and accident insurance have fairly low penetration rates among small businesses, leaving employees vulnerable to a variety of financial risks. For More information, visitwww.limra.com.

Small Businesses Have Not Decided How to Respond to Health Reform

Sixty-five percent of small business owners have not decided how they will manage their healthcare costs over the next 12 months. Of the remaining, 13% plan to rebid their policy; 8% plan to reduce benefits to employees; and 14% plan to ask employees to pay a greater share. Barry Sloane of The Small Business Authority said, “Small- and medium-sized business owners are delaying any response or reaction to ObamaCare, despite the fact that it might not be in their best interest to be paralyzed at the moment.” For more information, visit http://www.thesba.com.

Last Updated 12/01/2021

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