Carter's Benefits

eNewsletter Volume 5, Issue 01 January 2012

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Deductibles Reset

Each year this time, I receive a few phone calls asking about the deductible for medical insurance. Most plans have a calendar year deductible and they reset every January 1st. I like to remind everyone to expect their deductibles to reset and to begin planning on funding their Health Savings Accounts for 2012 if they are on a qualified high deductible health plan.

Recent News

  1. IRS Posts W-2 Health Reporting Guidance.
  2. Berwick out Tavenner in.
  3. Berwick Says As Much As 30% Of Health Spending Is "Waste."
  4. HHS Alters Rule On Health Insurance Refunds.
  5. Texas Seeks To Delay Implementing Insurance Rebates Under ACA.
  6. HHS Issues Rules On Health Insurance Co-Ops.
  7. Final Rules Established For Medical-Loss Ratios.
  8. Wyden And Ryan Introduce Two-Tiered Bipartisan Medicare Reform Plan.
  9. HHS To Give States "Broad Latitude" On Healthcare Benefit Standards.
  10. Survey Finds Continued Confusion About Health Insurance Options.

IRS Posts W-2 Health Reporting Guidance.
The Internal Revenue Service (IRS) has given more advice about how employers, benefit plan administrators and others should go about applying the new Form W-2 health benefits cost reporting requirements.

Employers do have to include the cost of any supplemental health benefits, such as cancer insurance, that they pay for, but they do not have to include the cost of supplemental health benefits that the employees pay for with after-tax dollars, IRS officials say in IRS Notice 2012-9.

IRS also has spelled out the reporting rules for flexible spending accounts (FSAs).

The W-2 reporting requirements were created by Section 6051(a)(14) of the Patient Protection and Affordable Care Act of 2010 (PPACA).

Employers use Form W-2 to record payments to employees.

PPACA is supposed to add a Cadillac plan tax in 2018. The 40% tax will apply to health plan value over a specified threshold.

To implement the provision, and to give federal policymakers more information about expenditures on group health benefits, the IRS is asking for voluntary reports on group health expenditures on the 2011 W-2 and will be requiring employers to provide group health expenditure reports on the 2012 W-2.

Benefits advisors have wondered how hospital indemnity insurance, critical illness insurance, FSAs and other health benefits other than plain vanilla major medical coverage might fit into the new reporting system.

Officials say in the answer to the 37th question that employers must include the cost of fixed indemnity coverage in the health benefits cost total reported on the W-2.

"An employer is required to include in the aggregate reportable cost reported on Form W-2 the cost of coverage provided under hospital indemnity or other fixed indemnity insurance, or the cost of coverage only for a specified disease or illness, if the employer makes any contribution to the cost of coverage that is excludable under Section 106 [of the Internal Revenue Code (IRC)] or if the employee purchases the policy on a pre-tax basis under [an IRC] Section 125 cafeteria plan," officials say.

In response to the 38th question, officials say an employer need not report the cost of hospital indemnity or other fixed indemnity coverage "if those benefits are offered as independent, noncoordinated benefits and if the payment for those benefits is includable in the employee’s gross income."

"To the extent the employer merely provides the opportunity for employees to purchase an independent, noncoordinated fixed indemnity policy and the employee pays the full amount of the premium with after-tax dollars, the cost of coverage provided under that policy is not required to be reported on Form W-2," officials say.

The Employers Council on Flexible Compensation (ECFC), Washington, and other groups have been asking the IRS for guidance on FSAs and other health accounts.

The 19th question in the new guidance relates to a health FSA offered through an IRC Section 125 cafeteria plan.

"Is the amount of the health FSA required to be included in the aggregate reportable cost reported on Form W-2?" a member of the public asks.

An employer must include the amount of the health FSA in the health total reported on the W-2, "but only if the amount of the health FSA for the plan year exceeds the salary reduction elected by the employee for the plan year," officials say. "The amount of a health FSA for a cafeteria plan year equals the amount of salary reduction ... elected by the employee for the plan year, plus the amount of any optional employer flex credits ... that the employee elects to apply to the health FSA."

The IRS gives three examples of how to apply the FSA rules.
from January 02, 2012 article on

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Berwick To Resign As CMS Head.
Politico (11/24, Feder, Haberkorn) reported that Don Berwick, whose "recess appointment was to expire at the end of the year," will "step aside as the head of the Centers for Medicare and Medicaid on Dec. 2 -- a final recognition of the reality that President Barack Obama's first choice to lead the agency will never be confirmed by the Senate." On Wednesday, "the administration said the president will soon nominate Berwick's deputy, Marilyn Tavenner, to succeed him."

In a front-page story, the Boston Globe (11/24, A1, Calvan) reported, "During his 17-month tenure at the federal Centers for Medicare and Medicaid Services, Berwick, 65, began rolling out some of the most comprehensive changes to the federal government's medical delivery system, which serves one out of every three Americans, including a majority of the country's seniors." The piece notes that he "is a leading advocate of so-called accountable care organizations, a key part of last year's federal health legislation intended to transform delivery of care by eliminating costly 'fee-for-service' physician and hospital payments and replacing them with incentives for efficient, quality care."

Obama Formally Nominates Tavenner To Become CMS Administrator.
CQ (12/2, Reichard, Subscription Publication) reports, "The White House announced late Thursday that President Obama has formally nominated Marilyn Tavenner to become administrator of the Centers for Medicare and Medicaid Services." Tavenner will assume the position of "acting CMS administrator Dec. 5."

Cantor Says He "Could Absolutely Work With" Tavenner. In an interview with Sarah Kliff from the Washington Post (12/2) "Wonkblog," House Majority Leader Eric Cantor said, "I could absolutely work with" Marilyn Tavenner. Cantor said, "Obviously she's operating within a context, within the structure of a law that I didn't support, but I do think she will bring to the job a perspective of the American health care system that has made it so great, a system that's based on the private sector." The blog points out that "Cantor's warm embrace of Tavenner is a marked change from the reception from Republicans of current Medicare head Don Berwick."

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Berwick Says As Much As 30% Of Health Spending Is "Waste."
The New York Times (12/4, Pear, Subscription Publication) reports that Donald Berwick, in an interview on his last day as head of the Centers for Medicare and Medicaid Services, said "20 percent to 30 percent of health spending is 'waste' that yields no benefit to patients, and that some of the needless spending is a result of onerous, archaic regulations enforced by his agency." Berwick "listed five reasons for what he described as the 'extremely high level of waste.' They are overtreatment of patients, the failure to coordinate care, the administrative complexity of the healthcare system, burdensome rules and fraud."

The Hill (12/5, Baker) reports in its "Healthwatch" blog, "Berwick came to the job with a passion for delivery-system reform, and in roughly 18 months as CMS administrator he oversaw an aggressive push to implement pieces of healthcare reform that matched his vision." Sen. Tom Harkin (D-IA) remarked, "This is a missed opportunity to have someone who really understands the healthcare system, who understands quality of care rather than volume of care, which has been his hallmark. I'm just so sorry to see this end like this."

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HHS Alters Rule On Health Insurance Refunds.
The Wall Street Journal (12/3, Radnofsky, Subscription Publication) reports HHS altered a component of the new healthcare law that requires insurance companies to spend a certain percentage of income from premiums on medical care. Providers not doing so must issue refunds to consumers. On Friday, HHS revised the rule to state that such refunds would be tax-free.

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Texas Seeks To Delay Implementing Insurance Rebates Under ACA.
The Dallas (TX) Morning News (12/9, Garrett) reports, "Texas wants to delay a federal rule that requires health insurers to devote at least 80 percent of their premium revenue to medical care, or pay back the difference to consumers." Instead the state "would eliminate just over half of the $482 million in rebates that policyholders could receive over the next three years," so that "in the individual health insurance market...the average rebate under the state's proposal would be $297 per customer over three years, instead of $645." Texas argues that to implement the full rebate "'would negatively impact competition and consumer choice' by driving some companies out of the market." Meanwhile, "consumer groups...are urging US Health and Human Services Secretary Kathleen Sebelius to deny Texas' request."

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HHS Issues Rules On Health Insurance Co-Ops.
CQ (12/9, Reichard, Subscription Publication) reports, "The Department of Health and Human Services issued a final rule Thursday to establish at least one health insurance cooperative in every state by providing loans from a $3.8 billion federal fund created by the health care law to provide start-up money and fund capital reserves." So far co-ops "make up a little more than 1 percent of the private insurance market. ... But the 'Consumer Operated and Oriented Plans,' as they are known under the health care law...will have visibility in the marketplace created under that measure because they will be offered in new state-based exchanges."

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Final Rules Established For Medical-Loss Ratios.
The New York Times (12/13, Japsen) reports in its "Prescriptions" blog on final rules regarding medical-loss ratios, which say that "if an insurance company is not spending $4 of every $5 of a consumer's premium on medical care, a health plan subscriber will not only get a rebate beginning next year, but it will be tax free." Marilyn Tavenner, acting administrator for the Centers for Medicare & Medicaid Services, remarked, "If your insurance company doesn't spend enough of your premium dollars on medical care or quality improvement this year, they'll have to give you rebates next year," which "will bring costs down and give insurance companies the incentive to focus on what matters for patients ­- high quality health care."

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Wyden And Ryan Introduce Two-Tiered Bipartisan Medicare Reform Plan.
The New York Times (12/15, Pear, Subscription Publication) reports Sen. Ron Wyden (D-OR) and Rep. Paul Ryan (R-WI) "unveiled a bipartisan plan on Wednesday to revamp Medicare and make a fixed federal contribution to the cost of coverage for each beneficiary. ... Just as important as the details of their proposal was the fact that the two were working together on an issue that both parties have exploited for political advantage." According to the Times, "The new Wyden-Ryan proposal, by blurring the contrast between the parties on this issue, could make it more difficult for Democrats to win the argument."

According to the Washington Post (12/15, Montgomery), "Seniors would still receive a set amount of money from the government to buy insurance, as they would under the Medicare proposal Ryan included in the budget blueprint that passed the House last year. But the new approach would let that subsidy, known as premium support, rise or fall along with the actual cost of the policies -- creating more protection for seniors and saving potentially far less in the budget." The Post adds, "In recent days...Mitt Romney has embraced the Ryan privatization plan," while Newt Gingrich "has offered qualified support." Ryan is quoted as saying, "We want to demonstrate that there is an emerging consensus developing on how to preserve Medicare."

Politico (12/14, Haberkorn) said Wyden "insists the plan would be designed in ways that would preserve the safety net for the elderly. 'I will never do anything to shred that or weaken it or harm [Medicare] in any way,' the Oregon Democrat said." Politico adds, "The plan has the potential to be a political firecracker, but its most significant change -- keeping traditional Medicare as an option -- eliminates the greatest political assault lobbed at Ryan's plan: that it would 'end Medicare.'"

Ryan's home-state Milwaukee Journal Sentinel (12/15, Gilbert) says the plan "draws from Ryan's hugely controversial proposal passed by the House earlier this year to turn Medicare from a fee-for-service government insurance program into a premium subsidy for seniors to buy private coverage," but "unlike that plan, this new proposal keeps a traditional Medicare policy as an option for seniors who want it. 'The issue has become extremely partisan lately, and what we're trying to do is rebuild a bipartisan consensus,' said Ryan, who was jointly interviewed with Wyden Wednesday night." Wyden adds, "I believe there's a window here for trying to bring progressive folks and conservative folks together."

Bloomberg News (12/15, Wayne) reports, "Under their proposal, people turning 65 beginning in 2022 would choose from two health-care coverage plans:" either "the existing system," or "a system of regulated private insurance plans, which the two lawmakers likened to the choices available to members of Congress."

The Wall Street Journal (12/15, Radnofsky, Weisman, Subscription Publication) reports Wyden and Ryan said in a statement: "The more the national conversation about the future of Medicare deteriorates into partisan attacks that our opponents will 'cut Medicare' versus superficial campaign pledges to 'make no changes' to a 45-year-old program, the harder it gets to have a serious debate about the best way to ensure that seniors can rely on a strengthened Medicare program for decades to come."

Richard McGregor, in the Financial Times (12/15, Subscription Publication), argues that the President has been on the defensive in regards to Medicare reform, and that he would do well to propose structural changes of his own. Also covering the story are The Hill (12/15, Baker) "Healthwatch" blog, the National Journal (12/15, Staff, Subscription Publication), and the Los Angeles Times (12/15, Levey) reports.

Wyden And Ryan also outline their plan in an op-ed for the Wall Street Journal (12/15, Subscription Publication) titled, "A Bipartisan Way Forward On Medicare: Allowing Private Plans To Compete With Traditional Medicare Will Help Lower Costs And Spur Innovation."

WSJournal Hails Wyden-Ryan Plan. The Wall Street Journal (12/15, Subscription Publication), in an editorial titled, "The Wyden-Ryan Breakthrough: A Better, Bipartisan Medicare Future," praises the plan as an alternative to ideas put forth by President Obama. The Journal notes that the plan includes a provision allowing smaller businesses to get tax breaks for providing defined-contribution coverage.

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HHS To Give States "Broad Latitude" On Healthcare Benefit Standards.
The Washington Post (12/17, Aizenman) reported that HHS "will give states broad latitude to define the minimum benefits that many health insurance policies will be required to offer under the 2010 healthcare law, officials announced Friday." The plan "sparked criticism from interest groups on all sides of the issue. Consumer advocates worried that millions of Americans could end up with insurance substantially less comprehensive than the law's drafters intended," while "employers and insurers warned of an opposite scenario: A state could make the benefits package so comprehensive that the resulting plans would be prohibitively expensive." The law "leaves it to the discretion" of HHS Secretary Sebelius "to determine whether to specify precisely which procedures and services should be covered and to what extent insurers can limit the frequency of their use."

The New York Times (12/17, Pear, Subscription Publication) said Friday's decision "would allow significant variations in benefits from state to state, much like the current differences in state Medicaid programs and the Children's Health Insurance Program." The Wall Street Journal (12/17, Radnofsky, Subscription Publication) reports Sebelius said, "As we've acknowledged many times, coverage that works in Florida may not work in Nebraska."

The AP (12/19) reports that the law's requirement that the federal government "set a basic benefits package for private insurance" is "tricky territory for the administration as it tries to avoid the 'big brother' label on health care." But the proposal Friday from HHS Secretary Kathleen Sebelius "allows states to retain some leeway," for example letting each state "pick a benefits package from several federally approved options." Sebelius said, "The proposal we're putting forward today reflects our commitment to giving states the flexibility they need." According to the AP, "initial state reaction was positive."

Politico (12/19, Millman) reports the HHS guidance "would ensure that families and small businesses who buy their own coverage have access to health plans that offer comprehensive, affordable benefits," HHS Secretary Kathleen Sebelius said on Friday. "At the same time, we want to give the states the flexibility to choose an essential health benefits package right for them."

Bloomberg News (12/17, Wayne) also quoted Secretary Sebelius as saying, "Our approach will protect consumers and give states the flexibility to design coverage options that meet their unique needs." According to Neil Trautwein of the National Retail Federation, "lobbyists will focus efforts on trying to persuade states to adopt narrow packages of required benefits." Trautwein noted that the decision "shifts the argument back to the state arena where insurance has always been regulated."

CQ Healthbeat (12/17, Bristol, Subscription Publication) quoted HHS Assistant Secretary for Planning and Evaluation Sherry Glied as saying that the approach "recognizes that issuers make a holistic approach in constructing a package of benefits" that "balance consumer needs for comprehensiveness and affordability." Some groups, however, were unenthusiastic about the decision. Carl Schmid of The AIDS Institute said, "We were looking for some federal protections, for a federal floor to the benefit design. It looks like we're not going to get that and we're still going to get the state patchwork of care." Schmid added that HHS had "also failed to provide any guidance on copays, deductibles and premiums, 'which is important, extremely important.'"

Researcher Says Mandated Health Insurance Should Be Replaced By Tax Levies Or Credits. In an op-ed in the Wall Street Journal (12/19, A17, Subscription Publication) John C. Goodman, CEO of the National Center for Policy Analysis, writes that instead of Obama's healthcare mandate, those people currently uninsured should pay about a quarter of the average money spent on healthcare by insured Americans in additional taxes annually, or else let all currently insured people get that amount in tax breaks and deny the uninsured the tax savings. He adds that there are three problems that must be addressed before such a plan could be implemented -- the disparity in health insurance subsidizing based on class, the lack of link between tax breaks and tax levies, and the lack of subsidy for people who buy their own insurance rather than get it through an employer.

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Survey Finds Continued Confusion About Health Insurance Options.
The Insurance & Financial Advisor (12/30, Brockway) reports that a survey conducted by Aetna has revealed that "more than half of adults ... are confused about health insurance when choosing which plan to purchase." The survey of 1,000 insured adults found that "participants had trouble understanding the total cost of a health insurance plan such as premiums and out-of pocket expenses (32%); the differences between plan types such as preferred provider organizations (PPOs) and health maintenance organizations (HMOs) (30%); which providers are in network (26%); and whether referrals are needed (24%)." A previously released HHS report cited several probable factors for confusion, "including the difficulty of predicting health care services, billing from multiple providers and the variety of insurance benefit structures."

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How does Carter's Benefits help ?
We continue to stay on top of changes in this industry. 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, Consultant 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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