Carter's Benefits

eNewsletter Volume 3, Issue 6 June 2010

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Recent News

Right on the heels of last months newsletter, I have prepared a 2nd one for June rather quickly. There was a lot to cover. Here is a list of what you may have missed. These are some of the recent news articles to hit my desk.

  1. IRS publishes 2011 HSA contribution limits
  2. Small Business could benefit from Tax Credits in Healthcare Law
  3. Most Large Employers face Cadillac Tax, study shows
  4. Insurance Industry Says Health Law's Failure to Address Cost Drivers Will Cause Premium Hikes
  5. Experts Predict Some Businesses Will Turn To Self-Funding To Avoid Ramifications of New Health Law
  6. New York Unveils Statewide Cancer Map
  7. HHS Inspector General: The Quality Police Are Coming

The second part of this months newsletter we look at the Health Insurance Exchanges which go live in 2014.

IRS publishes 2011 HSA contribution limits

Available at

The IRS has released the 2011 cost-of-living adjusted HSA contribution limits and HDHP minimum deductibles and out-of-pocket maximums. All remain unchanged from the 2010 amounts.

HSA Contribution Limits. The 2011 annual HSA contribution limit for individuals with self-only HDHP coverage remains $3,050, and the limit for individuals with family HDHP coverage remains $6,150.

HDHP Minimum Required Deductibles. The 2011 minimum annual deductible for self-only HDHP coverage remains $1,200 and for family HDHP coverage remains $2,400.

HDHP Out-of-Pocket Maximum. The 2011 maximum limit on out-of-pocket expenses (including items such as deductibles, co-payments, and co-insurance, but not premiums) for self-only HDHP coverage remain $5,950, and the limit for family HDHP coverage remains $11,900.

The catch-up contribution limit (for HSA-eligible individuals who are age 55 or older), which is set by statute, also remains at $1,000 for 2011

Even though IRS has not changed contribution limits for 2011, HSAs will be subject to changes in 2011 as a result of recent health care reform legislation, including an increase in the additional tax (from 10% to 20%) on taxable, nonmedical distributions and a restriction that allows over-the-counter drugs and medicines (other than insulin) to be reimbursed tax-free only with a prescription.

Small Businesses Could Benefit From Tax Credits In Health care Law.

Columnist Michelle Andrews writes in the Washington Post (6/1), "If you own a small business and are struggling to pay for employees' health insurance, the new health-care law could provide quick financial help. The smallest businesses could get temporary tax credits that effectively pay for up to 35 percent of their premium contributions," and "slightly larger businesses could get smaller credits." Beginning in 2010, "businesses with 10 or fewer employees...and average annual wages of less than $25,000 will be eligible for the full 35 percent credit. ... Above those thresholds, the credit gradually decreases until it's completely phased out for companies with at least 25 full-time workers and average wages of $50,000 or more." But, "critics say the credit is too complicated and doesn't solve the underlying problem for small business owners: the rising cost of insurance."

Most large employers face Cadillac tax, study shows 

Unless health care costs can be mitigated, more than 60 percent of large employers’ health plans will be affected by a federal excise tax that will go into effect in 2018, according to new analysis from benefit consultant Towers Watson. (continue reading online)

Insurance Industry Says Health Law's Failure To Address Cost Drivers Will Cause Premium Hikes.

The cover story in Iowa's Prairie Business Magazine (5/10, Schuster) reports that hospitals and other health providers say the new healthcare reform legislation "begins to address low Medicare reimbursement rates in North Dakota and South Dakota and reduces uncompensated care for hospitals." But "detractors say the legislation does little to curb rising health care costs and worry that it will cause insurance premiums to rise. ... 'This package does not reform health care, it reforms the funding of health care,'" said Texas Association of Health Underwriters President Rusty Rice. "If we are going to reform health care, we need to reform the cost structure, look at what is driving up costs and see why we aren't doing a good enough job controlling costs," Rice added.

        In a separate story, Prairie Business Magazine (5/10, Schuster) adds that insurance companies similarly "argue that the costly legislation won't have the intended effect of lowering health care premiums and may actually lead to higher insurance costs." Rice commented, "If I do the math, it will cost me a lot more to have insurance than to pay the penalty. If I have a medical problem, I can just go and pick up a plan when I need it." The legislation will "help some individuals and businesses who do not have insurance," says BlueCross BlueShield of North Dakota President Paul von Ebers. But for "everyone else it will raise health insurance costs."

Experts Predict Some Businesses Will Turn To Self-Funding To Avoid Ramifications Of New Health Law.

North Bay (CA) Business Journal (5/10, Verel) reports that as they consider provisions of the new health reform law, "larger businesses are pondering whether self-funding may be an attractive alternative in place of paying an insurer to provide employee benefits," according to human resources experts. A "self-funded employer or plan reserves money in a trust fund, rather than pay for an insurance provider, and uses that money to process claims. With a self-funding mechanism, which many employers use for workers' compensation funds, an employer can keep any profits derived from the employees to offset future expenses," explained Victor McKnight, an insurance broker for Sitzman Morris & Lavis and past president of the North Coast Association of Health Underwriters. McKnight said self-fund could "particularly benefit" a company "if it has few claims."

New York Unveils Statewide Cancer Map.

The New York Times (5/11, A18, Hakim) reports that "New York unveiled what it billed as the nation's first comprehensive statewide cancer map, which became available Monday on the Web site of the State Department of Health." It "allows users to see the count of incidences of various types of cancer in different census blocks, which can number in the thousands of people in New York City or fewer than a hundred in upstate counties." The Times points out that "the creation of the map was opposed by both the department and the American Cancer Society when it was proposed two years ago, according to a review of state records, amid concerns that its unfiltered data could be misinterpreted."

        The AP (5/11, Gormley) reports that "just before state officials released the website to the public Monday, they listed a long line of cautions not to draw conclusions from the data." For instance, "patients' ages aren't listed, there is no accounting for risk factors like smoking or family history, the cases are only new incidents when they are diagnosed and don't consider the time a tumor may have been developing, and the community data is based on the 2000 Census. A group of cases also could reflect a good local screening program, the location of nursing homes, or regional trends such as smoking, officials said."

        Americans Living In Cities With Large Populations May Have Higher Overall Well-Being. ABC World News (5/10, story 11, 0:20, Sawyer) reported, "A Gallup study finds overall well-being in America is highest in cities of a million or more." Data indicate that people who live among large populations have "lower rates of heart disease, cancer, and depression and greater optimism about the future than cousins in the smaller towns."

HHS Inspector General: The Quality Police Are Coming

Because of the new emphasis on linking health care provider compensation to quality, compliance teams will have to think more about quality measurement. ... Click here to read more.


General Design

  • State Exchanges with Federal Fallback. Each state must establish an Exchange that is a governmental agency or nonprofit entity by 1/1/14 to offer
    qualified health plans to individuals and small employers. Provides for the federal government (either directly or through an agreement with a non-profit
    entity) to implement an Exchange in states that either elect not to establish their own Exchange, or states for which HHS determines, by 1/1/13, that the
    state will not have an operational Exchange by 1/1/14.
  • Voluntary Exchanges. Exchanges will be voluntary, with insurers allowed to sell coverage, and individuals and employers allowed to purchase coverage,
  • in the outside market. There is no penalty for switching to minimum essential coverage outside of an Exchange.
  • Small Business Health Options (SHOP) Exchange. Requires states to establish an Exchange for the individual market and a Small Business Health
    Options (SHOP) Exchange for the small group market, with flexibility to establish a single Exchange for both markets.
  • Each state Exchange will certify health plans as qualified health plans (QHPs).
  • HHS Responsibilities. Requires HHS to:
    • Establish criteria for the certification of QHPs. (PPACA § 1311(c))
    • Develop a rating system to rate QHPs offered through an Exchange. (See row below)
    • Develop an enrollee satisfaction survey system to evaluate enrollee satisfaction with participating plans.
    • Continue to operate, maintain and update the Internet Portal developed by HHS by 7/1/10 and make available a model template for Internet portals that
      state Exchanges can use.
    • Require Exchanges to provide for enrollment periods. (PPACA § 1311(c)(6))
    • Audit Exchanges annually; also allows HHS to investigate Exchanges and implement other financial integrity provisions. (PPACA §§
      1311(b),1312(d)(3), 1313)

Exchange Functions

Requires Exchanges to:

  • Offer qualified health benefits plans. Allows states to require additional benefits, but if they do so, they must assume the costs incurred by such additional
  • Offer limited scope pediatric dental benefit plans.
  • Implement certification procedures and policies.
  • Provide a toll-free telephone hotline for Exchange assistance.
  • Develop an Internet website for standardized comparative information on plans.
  • Provide public ratings of the participating Exchange plans (see explanation above).
  • Use a standard format for presenting health plan options in the Exchange, including the use of the uniform outline of coverage established under the new
    PHSA § 2715.
  • Inform individuals of eligibility requirements for Medicaid and CHIP, and if, through screening of Exchange applications, the Exchange identifies individuals
    who are eligible for such programs, to enroll such individuals in Medicaid or CHIP.
  • Make a calculator available to determine individuals’ cost of coverage, taking into account any tax credits they may qualify for.
  • Grant certifications that individuals are exempt from the individual mandate requirement because there are no affordable plans available in the Exchange
    or the individual meets other mandate exemptions.
  • Grant certifications of exemptions from the individual mandate for those who meet affordability or other exemptions.
  • Notify employers and the Treasury of such exemptions and of information on employees who were determined eligible to enroll in the Exchange.
  • Establish the Navigator program (described in the “Public Education/Outreach” row below).
  • Be self-sustaining by 1/1/15.
  • Consult with stakeholders, including consumers, representatives of small business and self-employed individuals, state Medicaid offices, those with
    experience in facilitating health plan enrollment and advocates for enrolling hard-to-reach populations.
  • Publish on an Internet website the average costs of licensing, regulatory fees and other payments required by the Exchange, as well as the administrative
    costs of the Exchange.
  • Account for expenditures. (PPACA §§ 1311(d), 1313)

Standards for Participating Health Plans

Benefits Requirements
Participating plans must agree to offer at least one QHP in the Silver level and at least one plan in the Gold level in each Exchange in which it operates.
(PPACA § 1301(a)(1)(C)(ii))

Public Education / Outreach

  • Open Enrollment. Requires Exchanges to provide for:
    • An initial open enrollment period (requires HHS to make a determination as to the date of the initial OEP by 7/1/12)
    • Annual open enrollment periods (for years following the initial OEP)
    • Special enrollment periods under HIPAA (IRC § 9801) and other SEPs "under circumstances similar to SEPs under Medicare Part D." [Note: These
      SEPs are different from those required in the general guaranteed issue requirement, which provide for SEPs provided under ERISA § 603 (COBRA)].
    • Special monthly enrollment periods for Indians. (PPACA § 1311(c)(6))
  • Role of Agents/Brokers. States can allow, under HHS procedures, insurance agents and brokers to help individuals and employers enroll and apply for
    tax credits. (PPACA § 1312(e))
  • Navigators. Exchanges will award grants to entities to increase public awareness and education about QHP choices, with impartial information and
    • Such entities could include trade/industry/professional associations, fishing/ranching/farming organizations, community groups, chambers of
      commerce, unions, resource partners of the Small Business Administration and other licensed insurance agents and brokers that demonstrate they
      have existing relationships (or could readily establish relationships) with employers, employees, consumers or self-employed individuals likely to be
      qualified for Exchange coverage. No health insurer or entity receiving direct consideration from a QHP-offering insurer is eligible to be a Navigator.
    • Duties for Navigators include: conducting public education activities; distributing fair and impartial information about QHPs and subsidy availability;
      facilitating Exchange enrollment; referring individuals to offices of health insurance consumer assistance or other appropriate state agencies regarding
      grievances, complaints or questions about their health plans, coverage, and providing culturally and linguistically appropriate information. (PPACA §§
      1311(i), 10104(h))
  • Coordination with Medicaid and CHIP. By an unspecified date, requires HHS to develop a single form that will allow individuals to apply for enrollment in
    Medicaid, CHIP or Exchange subsidies and receive a determination of eligibility. Exchanges are required to inform individuals of eligibility requirements for
    Medicaid and CHIP. If an Exchange determines that such individuals are eligible for any such program, Exchanges are required to enroll such individuals in
    such program. (PPACA §§ 1311, 1413)

Exchange Eligibility

  • Individuals
    Any legal resident not incarcerated. (PPACA § 1312(f))
  • Employers
    • Available to small group market, which the bill defines as 1-100 workers, with the option for states to define the market as 1-50 until 1/1/16, at which time
      employers with up to 100 employees must be allowed to purchase coverage through the Exchange. (PPACA § 1304(b))
    • Starting in 2017, states may allow employers with >100 employees to participate in the Exchange at the discretion of HHS. (PPACA § 1312(f))
    • Employees will have a choice of carriers within a level of coverage (Bronze, Silver, Gold or Platinum) chosen by the employer. (PPACA § 1312(a)(2))
    • Members of Congress and congressional staff may only be offered health plans created by the PPACA or offered through an Exchange. (PPACA
      § 1312(d))
  • Medicaid/ CHIP Enrollees
  • See Medicaid and CHIP sections below
  • A QHP must be certified by each Exchange in which it operates.
  • A QHP must provide the essential benefits package, including providing essential benefits and meeting cost-sharing and actuarial value requirements.
  • A QHP must be offered by a health insurer that:
    • Is licensed and in good standing.
    • Agrees to offer at least one QHP in the Silver level and at least one plan in the Gold level in each Exchange in which it operates.
    • Agrees to charge the same premium for the same plan whether offered in or out of an Exchange.
  • Complies with regulations HHS establishes under PPACA § 1311(d) and any other requirements an Exchange may establish.
Benefit Design - Essential Benefits Package
  • Essential Benefits Package. Services must include:
    1. Ambulatory patient services;
    2. Emergency services;
    3. Hospitalization;
    4. Maternity and newborn care;
    5. Mental health and substance abuse disorder services “including behavioral health treatments”;
    6. Prescription drugs;
    7. Rehabilitative and habilitative services and devices;
    8. Laboratory services;
    9. Preventive and wellness services and chronic disease management; and
    10. Pediatric services, including oral and vision care.
  • Must meet emergency coverage requirements (e.g., does not require prior authorization and charges the same cost-sharing for out-of-network emergency
    services as in-network).
  • Scope Equal to “Typical Employer Plan.” The scope of these essential benefits will be equal to the scope of benefits provided under a “typical
    employer plan” – according to HHS. To inform the decision, DOL will conduct a survey of employer plans, including multiemployer plans. Certification will
    be conducted by the CMS Actuary.
  • Definition of Benefits. In defining the essential benefits, requires HHS to:
    1. Make sure all benefits are given equal importance and emphasis.
    2. Not make coverage decisions, rate determinations or incentive programs or structure benefits that discriminate against anyone based on age,
      disability or expected lifespan.
    3. Take into account the diverse health care needs of the population.
    4. Make sure that essential benefits are not involuntarily denied to anyone on the basis of age or expected lifespan or disability, medical dependency or
      quality of life.
    5. Periodically review and update essential health benefits.
  • Cost-Sharing
    • Limits cost-sharing (deductible, coinsurance, copayments, etc.) to Health Savings Account (HSA) cost-sharing limits in 2014 and then indexed
      annually to per capita premium increases measured after 2013.
    • Small group employer plans. Limits deductibles to $2,000/single, $4000/family.
    • Indexing
      • These limits can be raised by the maximum amount of reimbursement which is reasonably available to a participant under a flexible spending
        arrangement (FSA).
      • Indexes the individual limits annually to per capita premium increases measured after 2013. For any other plans, the limits will be indexed to double the individual increase. (PPACA § 1302)
Levels of Coverage
  • Qualified Health Plans (QHP) must meet one of the 4 specified actuarial value tiers (determined by standard population, not plan’s actual population):
    • Bronze. Coverage of 60% actuarial value
    • Silver. Coverage of 70% actuarial value
    • Gold. Coverage of 80% actuarial value
    • Platinum. Coverage of 90% actuarial value
  • Requires Exchange-participating plans to offer at least one QHP in the Silver level and at least one plan in the Gold level.
  • Employer HSA contributions may be taken into account when determining actuarial value.
  • Catastrophic Plans. QHP may also be a catastrophic plan under certain circumstances.
    • Eligibility. Makes this plan available only in the individual market to individuals under age 30 and individuals who have received certification that they
      are exempt from the coverage mandate by reason of affordability or hardship.
    • Benefit Design
      • Covers 3 primary care visits regardless of deductible.
      • Covers essential health benefits after deductible is met.
      • Sets deductible at HDHP limit indexed to per capita premium increases after 2013.
  • Requires all QHPs to offer the same plans to children only (under 21). (PPACA § 1302(d))

* This information has been provided by Blue Cross and Blue Shield of Texas. Adapted from the document BCBSA Detailed Reform Summary" revised April 22, 2010.

Next Month I will take a closer look at the Health Insurance Exchanges. I will go into deeper discussion of the coverage levels and options.

How does Carter's Benefits help ?
Carter's Benefits has immediately begun to notify clients of the changes as they occur. We will continue to stay on top of the changes as they are ever evolving. In a consultative role, Eddie Carter has begun hosting live seminars to update employers and Human Resource Managers on these changes. If you would like to host a meeting with your local community or civic organization, please contact me for details.

Eddie Carter,
Benefit Consultant



If you have questions or would like more information please give us a call or send us an email.  Our email address is Questions@CartersBenefits.Com

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