Benefits Outsourcing

Holmes Murphy Launches Healthy Insurance Pool (HIP) in DFW

When we sit down with the leadership of our clients and their HR/Benefit departments, we usually get heads nodding when we share that 40-50% of Americans born after 2000 will have  diabetes.   There are plenty of peer-reviewed  case studies to show that leading companies who invest in establishing a culture of health and accountability in the right way experience returns that go far beyond the expense side of the ledger.

Uncle Sam Says Audit Dependents

This post is a must read for any plan sponsor who does client work with the federal government and submits employee benefit related expenses associated with contractors on the job.   I want to thank Dependent Audit Eligbility veteran, Brennan Clipp, for sharing with me an internal memorandum obtained  from the Federal Government's Deparment of Defense ("DOD").   Even if an employer  might not contract directly with DOD, we can be certain other government agencies issuing awarding contracts on large public works projects will follow similar protocol.   In fairness to our U.S. government, they are simply saying that reimbursement for the cost of fringe benefits are allowable from contractors and dependents of those contractors, as long as the dependent adheres to the eligibility under the plan.   Further, "contractor's that fail to implement sufficient procedures to identify and exclude health benefit costs associated with ineligible dependents are in noncompliance with FAR 31.201-6 and CAS 405.   They are recommending that contractors put in audit and process procedures to protect against ineligible dependents.  

As is a common practice for plan sponsors who do a lot of design and build  work for  the Federal Government, reimbursement is often a part of contract reimbursement sought for employee benefit expenses related to contractors and their dependents covered under an employee benefit plan.   The irony here is that the left hand of government recently gave us expensive health insurance legislation and the right hand of government is warning against seeking reimbursement of those expenses for [ineligible] contractor benefits.      

The Memo we obtained here  esentially warns a plan sponsor against submitting any healthcare related expenses associated with ineligible employees or dependents who do not strictly adhere to the eligibility guidelines under the ERISA plan.   Ms. Clipp's firm warns against an employer taking on this project themselves or leaving it to a service provider that does not follow evidence based guidelines for verification.   When done correctly, ineligible dependents can average between 12-18% disenrollment.   This does not come as a surprise with unemployment hovering near 10% and escalating healthcare costs.   Finally, an ongoing audit process can ensure ineligible insured's do not creep back onto the plan when the guard goes down.    Another reason for doing a dependent audit stems from the ERISA fiduciary obligation implicit to other eligible enrollees under the plan.  

There are a number of high-quality speciality firms and important cultural and senior management issues to address internally before human resources should launch.   The notion of eligibilty management as a cost saving tool is not new, but the federal government's validation of a dependent audit as a cost savings mechanism was strong enough to provoke this notice out to field auditors of the Federal Governement.  

  If you're not sure of the Top DOD contractos ... here's the list of the top 100:

http://en.wikipedia.org/wiki/List_of_United_States_defense_contractors

Pre-Existing Conditions on Endangered Species List

Dear Health Plan Sponsor: "My name is Pre-Existing Condition and soon I will become extinct.   We will look back in the annals of employee benefit text books and find I was used to deny coverage for those that needed it under health insurance plans."

Yes, it is true.   Our dear friend Mr. Pre-Existing Condition will soon become as extinct as the Do Do bird.   While I understand arguments against nasty insurance companies and employer-sponsored health plans denying coverage for someone who needs it, the pre-existing condition exclusion was purposefully used to help protect a risk pool from individuals jumping on and off an insurance plan in favor of using the   benefit only when the individual was sick.

Employers who self-fund their health plans have two paths they can elect to take.   The first path is to amend your health plan as the regulations require.   You must start by eliminating pre-ex for those under age 19, then open things up for those under age 26, subject to grandfather provisions.   By the first day of the 2014 plan year, you will be required to remove them entirely.   I have attached our health reform advisory practice guidance on how to repeal for enrollees under age 19 if you follow this first approach.

The second approach (which many progressive employers have already done) amends your health plan to remove pre-existing conditions entirely.   If you are in the camp that is afraid of the cost impact to your health plan, you can have your benefits consultant or health plan run the numbers to find out how many claims you are denying due to pre-existing conditions.   When you eliminate enrollees under HMO plans, those who send in HIPAA credible coverage notices without a 63 day break, consider new requirements for those un-grandfathered plans under age 26 and add back in the administration costs and goodwill lost ... my opinion is you will find the "pre-ex juice just ain't worth the squeeze."   This rationale is admittedly harder to make for a small business owner than a larger plan that can absorb a few outliers.   But if you use your health plan as a recruiting tool, it can make sense to clean out the closet and get rid of Mr. Preexisting Condition before the government puts him on the endangered species list ... right next to the DoDo bird.

Eliminate Pre-Existing Condition Exclusions on Enrollees Under Age 19 What's the Requirement?

All plans subject to the health reform requirements, including grandfathered plans, must remove preexisting condition limitations on enrollees who are under 19 years old.

What's the Deadline? First day of the first plan year that begins on or after September 23, 2010.   We believe "plan year" means the ERISA plan year, not the insurance contract year.

What's the Issue? Pre-existing condition restrictions are a dying pony.   Many plans no longer contain these restrictions.   For those that do, they must be amended to remove the restrictions as applied to individuals under age 19 and, by the first day of the 2014 plan year, remove them entirely.   Note that the obligation to remove the restriction for individuals under age 19 is not limited to dependent children; it applies to employees under age 19 as well.   Note also that exclusions that apply regardless of when the condition arose relative to the date of coverage are not pre-existing condition exclusions (for example, a plan provision excluding coverage for bariatric surgery is not a pre-existing condition exclusion, because it applies regardless of when the condition arose).

What Should You Do? Plans that currently apply a pre-existing condition exclusion to enrollees will need to be amended to remove the applicability of the restriction to enrollees under age 19. Ideally the amendment should be made prior to the beginning of the coming plan year.

Notice/Plan Amendment Obligation: Plans currently have an obligation to provide a General Notice of Pre-Existing Condition Restriction to enrollees prior to the date coverage begins. Plans should review this notice and modify it to make clear that it does not apply to enrollees under age 19. Amend the plan, ideally prior to the beginning of the coming plan year, to conform any pre-existing condition restriction to this requirement.

It's Time to Nudge our Employees

The science of behavioral economics is readily available for deployment in the workplace.   If we play a role in the health and retirement options available to our employees, we are "Choice Architects".   Listen to Professor Thaler describe the concept of "Nudge" and what it means to be a "Choice Architect". Since Nudge: Improving Decisions About Health, Wealth, and Happiness exploded onto the scene this summer, politicians in the United States and United Kingdom have embraced the book's belief that with a gentle guidance from designers, employers, or even the government, people can make better decisions independently. The work of coauthors Richard Thaler, the Ralph and Dorothy Keller Distinguished Service Professor of Behavioral Science and Economics in the Chicago Graduate School of Business, and Cass Sunstein, the Harry Kalven Jr. Visiting Law Professor, has become part of the political conversation around the world, finding allies on all sides of the political spectrum.

The key may be that the central idea in Nudge does not fall neatly into any political camp. Instead, it requires what Thaler calls "libertarian paternalism," a phrase that, he admits, sounds like an oxymoron. "By 'libertarianism,' we mean protecting people's right to choose," Thaler says. "By 'paternalism,' we mean caring about people's outcomes. We want to devise policies that will make people better off–choices that they themselves think are better."

http://www.youtube.com/watch?v=-poue9NaMRQ

If video does not appear in your browser click link: http://www.uchicago.edu/features/20081006_nudge.shtml

Source:   University of Chicago - Graduate School of Business (P. Houlihan)