Small Employers Can Reimburse for Medicare Part B, D Premiums1

Small Employers Can Reimburse for Medicare Part B, D Premiums

Once your older workers reach the age of eligibility for Medicare, under current law you can help them pay for Part B and D premiums with a Medicare Premium Reimbursement Arrangement. These types of arrangements became legal after legislation was signed into law in 2013 to help employers provide benefits to their Medicare-eligible staff.

But the issue surfaced again recently when the Trump administration came out with new guidance for health reimbursement arrangements that paves the way for employers to set up HRAs to reimburse staff for health premiums in their personal (not company group) health plans.

Anybody who is about to turn 65 has a six-month period to sign up for basic Medicare, but if they want additional coverage they can pay for Medicare supplemental coverage such as Parts B and D.

Part B covers two types of services:

Medically necessary services: Services or supplies that are needed to diagnose or treat your medical condition and that meet accepted standards of medical practice.

Preventive services: Health care to prevent illness (like the flu) or detect it at an early stage, when treatment is most likely to work best.

Part D, meanwhile, covers prescription drug costs.

The dilemma for employers has often been whether to keep the Medicare-eligible employee on the company health plan or cut them free on Medicare.

Smaller employers – those with 20 full-time-equivalent employees – have the option to open a Medicare Premium Reimbursement Arrangement for those employees if they are coming off a group health plan and into Medicare.

For small employers, it’s legal to set up an arrangement like that, as long as doing so is at the employee’s discretion. Employers are not allowed to push an employee into a Medicare Premium Reimbursement Arrangement in order to get them off the company’s health plan.

The good news for employers is that they often can reimburse their employees in full for Part B and D, as well as Medicare Supplement, and still pay less than they would pay in group employee premiums alone.

On top of that, the employee gets a lower deductible and overall out-of-pocket experience with less, if any, premium contribution.

What you need to know

Here’s what you should know if you’re considering one of these arrangements:

A Medicare reimbursement arrangement is one where the employer reimburses some or all of Medicare part B or D premiums for employees, as long as the employer’s payment plan is integrated with the group’s health plan.

To be integrated with the group health plan:

  • The employer must offer a minimum-value group health plan,
  • The employee must be enrolled in Medicare Parts A and B,
  • The plan must only available to employees enrolled in Medicare Parts A and B, or D, and
  • The reimbursement is limited to Medicare Parts B or D, including Medigap premiums.

Note: Certain employers are subject to Medicare Secondary Payer rules that prohibit incentives to the Medicare-eligible population

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IRS Eases Access to Chronic Disease Treatment

IRS Eases Access to Chronic Disease Treatment

New guidance from the IRS will help people enrolled in high-deductible health plans get coverage for pharmaceuticals to treat a number of chronic conditions.

Under the guidance, medicinal coverage for patients with HDHPs that have certain chronic conditions – like asthma, heart disease, diabetes, hypertension and more – will be classified as preventative health services, which must be covered free with no cost-sharing under the Affordable Care Act.

The background

The guidance, which takes effect immediately, is the result of a June 24 executive order issued by President Trump directing the IRS to find ways to expand the use of health savings accounts and their attached HDHPs to pay for medical care that helps maintain health status for individuals with chronic conditions.

The executive order was in response to a number of reports that have shown that people with HDHPs will often skip getting the medications they need or take less than they should because they cannot afford to foot the full cost of the medication even before they meet their deductible.

This can lead to worse issues like heart attacks and strokes, which then require more and even costlier care, according to the guidance.

The latest move is a significant step that should greatly reduce the cost burden on individuals with chronic conditions, as many of the medications they need to treat their diseases can be extremely expensive.

The IRS, the Treasury Department and the Department of Health and Human Services have listed 13 services that can now be covered without a deductible, and have promised to review add or subtract services from the list on a periodic basis, according to the guidance.

Here is the full list of the treatments, and the conditions they are for:

Angiotensin-converting enzyme (ACE) inhibitors – Congestive heart failure, diabetes, and/or coronary artery disease.

Anti-resorptive therapy – Osteoporosis and/or osteopenia.

Beta-blockers – Congestive heart failure and/or coronary artery disease.

Blood pressure monitor – Hypertension.

Inhaled corticosteroids – Asthma.

Insulin- and other glucose-lowering agents – Diabetes.

Retinopathy screening – Diabetes.

Peak-flow meter – Asthma.

Glucometer – Diabetes.

Hemoglobin A1c testing – Diabetes.

International Normalized Ratio testing – Liver disease and/or bleeding disorders.

Low-density lipoprotein testing – Heart disease.

Selective serotonin reuptake inhibitors – Depression.

Statins – Heart disease and/or diabetes.

The items above were chosen because they are low-cost, proven methods for preventing chronic conditions from worsening or preventing the patient from developing secondary conditions that require further and more expensive treatment.

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Adult Children & The Cost of Caring For A Parent

There are about 10 million adults over the age of 50 in the United States who provide care for their aging parents. This group must also be planning for their own retirement and the task of being a primary caregiver can negatively affect saving efforts. A recent study from MetLife looked at the impact of caregiving on adult children and their future financial status.

During the past 15 years, the number of adult children providing primary financial or personal care for their parents has increased more than three times. About 25 percent of all adult children in the country today are the main care providers for their parents. The same number is almost equal to the number of non-working adult children who help their parents.

According to MetLife’s survey, the level of care provided by adult children to parents is about the same between male and female. However, men are more likely to provide financial assistance, and women tend to provide more personal care. The cumulative amount of lost Social Security benefits, pensions and wages among these adult caregivers is around $3 trillion.

The total amount of lost money from reduced hours at work or leaving the workforce early to care for an aging parent is about $143,000 for the average woman. The estimated loss of becoming a caregiver is about $131,000 in Social Security benefits and $50,000 in pension funds. For men, lost wages from leaving the workforce early or reducing hours totaled to about $89,000 on average. The average Social Security income loss is about $144,000, and loss of pension funds is around $50,000.

Because of stress, adult children who provide the majority of an aging parent’s care are more prone to serious chronic illnesses. They should strive to lessen the physical, emotional and financial burdens of caring for a parent. Here are some helpful tips:

    • If other family members are willing to help, set up a plan to divide expenses.
    • Use coupons, prescription discount cards and other saving aids when making purchases.
    • Research local community services and outreach programs for seniors.
    • Look for faith-based services and aid programs.
    • Buy any supplies that are used in large quantities in bulk.

Adult caregivers can save hundreds of dollars every year by employing these simple steps. AARP also recommends making individual care a top priority. Adults who care for their parents should eat well, get enough sleep and exercise. Mental health services and yoga or meditation classes are helpful in reducing stress. Joining a support group for other adult caregivers can also help. To learn more about this topic, please call Mike Braun with Franklin Benefits Group LLC at 610-427-8122.

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Read Our September 2016 Newsletter

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Does Medicare Cover Long-term Care?

Many Americans are grossly underinsured against the risk of devastating long-term care costs. According to the 2016 annual Cost of Care Survey from Genworth, the average cost for a semi-private room in a long-term care skilled nursing facility is $82,125 and rising while the average assisted living facility costs $43,539 per year, on average. Both are enough to swallow most or all of the income produced by many pensions and other sources of retirement income.

Medicare Generally Does Not Cover Long Term Care Costs

The vast majority of long term care expenses are not covered under Medicare. Instead, long term care costs for chronic conditions not related to a very recent hospitalization and must be funded either via private long term care insurance or paid for out of pocket.

What Nursing and Rehab Care Does Medicare Cover?

Medicare will only pay for nursing home, rehab facility or custodial care under the very limited circumstances:

    • You have been admitted to a Medicare-certified nursing facility within 30 days of a hospitalization
    • You were hospitalized for not less than three days
    • You require skilled care, and not just custodial care and assistance with activities of daily living, such as assistance with bathing, dressing, toileting and feeding yourself. Examples of skilled care include specialized physical therapy or other types of therapy requiring the attention of licensed professionals.

Even if you meet all three conditions, Medicare will only cover your costs for a limited period of time. And the longer you remain in the nursing facility, the more you will have to pay out of pocket. For the first 20 days, Medicare will cover 100 percent of your costs. But for days 21 through 100, you must pay $140 per day out of pocket for long term care costs directly related to your prior hospitalization.

After day 100, you must pay all nursing home/long term care costs out of pocket.
To put things in perspective, only 20 percent of all nursing home stays last for less than three months, according to data from the American Association for Long Term Care Insurance. The average nursing home stay was 2.3 years for men, and 2.6 years for women. 24 percent of all nursing home stays last three years or longer, and 12 percent last for longer than five years.

Long term care costs aren’t limited to skilled nursing homes. Most long term care insurance policies cover a broad continuum of care, from in-home care and assistance to adult day care facilities to assisted living facilities – none of which are covered under Medicare.

Long term care insurance may also cover hospice care, as well. Every company has different specific benefits and exclusions.

America’s poorest may receive some coverage via Medicaid – after spending their liquid assets down to poverty level. Generally, states will allow families receiving Medicaid benefits to keep their homes, but when the beneficiary dies, the state Medicaid recovery program will put a lien on the home and other assets, effectively seizing them and preventing you from passing these assets along to your heirs and loved ones until the state recovers what it paid out in Medicaid benefits on your behalf.

The extremely wealthy, of course, can absorb the costs of long-term care.

But for most of us in the middle, some form of long term care insurance is necessary to protect retirement nest eggs and incomes against the risk of being consumed by high costs for long term or nursing home care. However, do not rely solely on Medicare to cover long term care or nursing home expenses.

If you have any questions, please call Mike Braun of Franklin Benefits Group LLC at 610-427-8122 or mikebraun@franklinbenefitsgroup.com.

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Important ACA Reporting Requirements for Self-Insured Plan Sponsors

If you are a self-insured employer or other organization that provides minimum essential coverage (as defined in Internal Revenue Code Section 5000A(f) to any individual during the calendar year, you have some reporting responsibilities to the Internal Revenue Service. Furthermore, if you file 250 information returns or more during the calendar year with the IRS, you must report this information electronically, not later than March 31st(February 28thif you file manually rather than electronically.

What To Report
Here’s what you must deliver to the IRS:

Name and taxpayer ID number of each individual you are covering, his or her legal responsible individual, including a parent, spouse or primary insured. If you cannot obtain the taxpayer ID number of the individual in question, after reasonable effort to do so, you may substitute the date of birth.

You must also report the number of months in which you provided this coverage for one day or more. See Section 1.6055-1(e) of the regulations.

Reporting Procedures
Reporting entities should file single Form 1095-B with the IRS for all individuals covered, along with a 1094-B transmittal form. Entities filing 250 returns or more must use the Affordable Care Act Information Returns (AIR) Program to transmit these documents electronically.
Those filing fewer than 250 returns have the option of filing them manually, though as noted above, manual filers must complete their filing by February 28th, rather than March 31st.
Any entity that files a Form 1095-B must also provide the same information noted on the 1095-B to the individual designated as the responsible party via mail, unless this individual specifically consents to receive the information electronically. You can obtain this consent on paper or via electronic means, but if the consent is on paper you must obtain an electronic confirmation of consent in addition to the paper consent.
Special Considerations for Self-Insured Employers
Employers who choose to sponsor self-insured group health plans must comply with all information reporting requirements for providers of minimum essential coverage. This is true without regard to their status as applicable large employers (ALEs) under the shared responsibility provisions of the Affordable Care Act. Therefore, even smaller companies with fewer than 50 full-time equivalents must meet all the same reporting requirements as larger employees.
Those entities that are designated applicable large employers, however, have another requirement: They must combine their reporting on a single information form: Form 1094-C, as well as a transmittal form, Form 1094-B.
Penalties for Non-Compliance
If you fail to file an information return, the general penalty is $100 for each missed return, up to a maximum of $1.5 million for each calendar year.
If your deadline for the return is after December 31, 2015, however, your penalty is increased to $250 for each return you failed to file, up to an annual maximum (calendar year) of $3 million.
If you fail to issue a correct payee statement, the penalty is $100 for those due on or prior to December 31, 2015, up to a total penalty of $1.5 million per calendar year.
For returns due after December 31, 2015, however, the penalty per statement increases to $250, up to a total maximum penalty of $3 million per year.
For more information, please call our office.

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ACA’s Individual Mandate Penalty “Sharply Increases” In 2016.

National Journal  (11/6, Subscription Publication) reports that the ACA’s penalty for going without health coverage “sharply increases” in 2016 to “$695 per adult and $347.50 per child, or 2.5 percent of a household’s income—whichever is higher.” Whether it spurs people to get covered, however, “depends on whether or not uninsured Americans, or those thinking about leaving the exchanges, know about the individual mandate and its steep fee increase.” The article notes a Kaiser Family Foundation poll released last week “showed that only 15 percent of uninsured Americans knew when open enrollment was, compared to just 17 percent of the general public.” Additionally, “for some it still might be cheaper to pay the fee” than sign up for coverage.

 

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Mike Braun

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Its time for Open Enrollment

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Understanding Medicare Part D Coverage and Enrollment Options

Understanding Medicare Part D Coverage and Enrollment Options

There are two ways to get prescription drug coverage through Medicare. One way is with Part C coverage, which is available through a PPO or HMO plan. These plans offer the same benefits as Part A and Part B coverage as well. Part D coverage is used separately from Original Medicare or PFFS plans and a few other types. A Part D plan only covers prescription drugs. Participants can enroll in Part D plans by mail, by phone or online. If a person is enrolled in a Medicare Advantage plan or Part C and enrolls in Part D, that individual will be removed from Part C coverage and returned to Original Medicare.

What Part D Covers
Every prescription drug plan from Medicare has a list of covered drugs. Prescription drugs are placed in separate tiers based on their prices. Low-tier drugs usually cost less than drugs in higher tiers. There may be instances where a prescriber insists that a patient use a high-tier drug instead of a low-tier alternative. If this is the case, it may be possible to ask for an exception and have a lower copay obligation. Formularies may change each year based on Medicare’s guidelines. When changes involve a currently used drug, the plan must provide written notice of the change 60 days before the change takes place. Notification may be made by direct contact or when a patient requests a refill of the affected drug.

Part D Cost and Enrollment
There is an annual deductible that must be met. In addition to this, policyholders pay a premium and any coinsurance costs. There may also be costs for extra help, late enrollment and coverage gaps. Drug plans vary in price depending on the plan, whether the patient uses in-network pharmacies, the drugs used and whether the patient receives extra help. While plan participants do not have to enroll in Medicare again every year, there are certain time frames when initial enrollment and changes are permitted.

Part D with Other Coverage
Some people have existing plans with companies other than Medicare. When there is an existing plan with another company, it is best to consider the benefits of both before switching. For government health insurance such as VA benefits, federal employee benefits, Tricare or Indian health benefits, it is best to keep federal coverage. Contact any programs used such as food stamps, HUD or SSI to see how Medicare works with benefits.

People who are newly eligible for Medicare should start planning their enrollment as soon as possible. It is important to be aware of the open enrollment period where changes and initial enrollment are allowed. To learn more about Medicare Part D plans and what options are best for individual needs, please call us.  My contact information is below.

Michael Braun

610-427-8122

mikebraun@franklinbenefitsgroup.com

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IRS Announces 2016 Contribution Limits for HSAs

The Internal Revenue Service (IRS) has released the allowable contribution limits for health savings accounts (HSAs) for tax year 2016. The announcement also includes the new caps on out-of-pocket costs for high-deductible health plans.

Taxpayers must be enrolled in a high-deductible health plan (HDHP) in order to qualify to contribute to an HSA, which allows taxpayers to set aside money for possible medical expenses on a tax-deferred basis. Qualified taxpayers can contribute money to an HSA and deduct contributions. Withdrawals from HSAs to pay qualified health expenses are tax-free.

The new IRS release, Revenue Procedure 2015-30 establishes the new HAS contribution and out of pocket and deductible limitations – adjusted for inflation for the new calendar year. Here are the highlights:

Total HAS contribution limits (combining employer and employee contributions)

  • There has been no change in individual contribution limits, which remain steady at $3,350 for 2016.
  • HSA contribution limits for families will increase by $100, to a maximum of $6,750.

 

Out of pocket limits for HDHPs

The total out of pocket expense caps, including deductibles, co-payments and everything else the plan charges except premiums,  have been increased for all plans.

  • Individual caps on out-of-pocket expenses are increasing by $100, to $6,550 for 2016.
  • For family plans, the maximum out-of-pocket expense for 2016 are increasing by $200, to $13,100.

Allowable catch-up contributions for those taxpayers age 55 or older who qualify to contribute to an HSA are unchanged at $1,000. The minimum allowable deductibles are likewise unchanged for 2016:

The lowest allowable deductible for an individual in an HDHP is $1,300; for a family the smallest allowable deductible is $2,600 for the year 2016.

The increases reflect the government’s modest assessment of cost of living increases over the last 12 months. The revisions are made under IRC Section 223’s annual cost-of-living adjustment and rounding rules.

Nonqualified Withdrawal Penalties

While health savings accounts provide a powerful incentive for taxpayers to save for future health expenses, the IRS imposes a substantial penalty for anyone under age 65 who is not permanently and totally disabled who makes a withdrawal to pay for a non-qualified expenses:

Withdrawals made by those under 65 for nonqualified expenses are taxable as ordinary income. There is an additional penalty of 20 percent for nonqualified expenses.

For tax years 2015 and 2016, there was a divergence in the ACA’s definition of out of pocket limits for HDHPs and the IRS’s calculation of out of pocket limits, which it makes for the purposes of defining which high-deductible health plans qualify their participants to make contributions to health savings accounts.

For 2015, individual plans with out of pocket limits of $6,450 and family plans with out of pocket limits of $12,900 made the grade.
For 2016, those limits increase to $6,550 and $13,100, respectively.

Recommendations

Any sponsors of high-deductible health plans should take note of these current and pending limits and update any and all plan and enrollment materials.

For more information, see IRS Revenue Procedure 2015-30.

For a review of your plan, please contact Mike Braun

mikebraun@franklinbenefitsgroup.com

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