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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