Health Plan Rebates in 2021 to Be Second Highest on Record

May 25, 2021

Group health plan insurers are expected to pay out $618 million in rebates to plan sponsors for the 2020 policy year after seeing use of health care services plummet during the COVID-19 pandemic.

That’s according to a Kaiser Family Foundation estimate in April, which also projects that insurers will pay out $1.5 billion in rebates to enrollees in the individual market.

The total $2.1 billion estimated payout this year is second only to the $2.5 billion insurers paid out in 2020 since the Affordable Care Act took effect and started requiring these rebates. Small and large group health plans received $689 million in rebates in 2020.

The ACA requires insurance companies that cover individuals and small businesses to spend at least 80% of their premium income on health care claims and quality improvement, leaving the remaining 20% for administration, marketing and profit. If they spend less than 80%, the shortfall has to be returned to policyholders in the form of a rebate.

The threshold for large group health plans is 85%. This threshold is called the medical loss ratio (MLR).

The rebates that will be paid in 2021 are based on a three-year MLR average loss ratio (2020, 2019 and 2018). Rebates this year will be paid to sponsors who had group health policies in effect in 2020, and only to those who were in plans that failed to spend enough on medical services. Many plans spend more than the MLR cap on medical services and do not have to pay.

There are two main drivers of larger rebates this year:

There was a significant drop in health care utilization in 2020 — The pandemic depressed the use of medical services as many people who would normally have gone to the doctor for ailments chose to stay home to avoid the risk of contracting COVID-19.

Also, hospitals cancelled elective care early in the pandemic and when COVID-19 cases were cresting, so that they could free up resources for coronavirus patients and reduce the virus’s likelihood of transmission. In fact, an analysis by the Peterson-KFF Health System Tracker found that health care spending fell slightly in 2020, making it the first year on record to see spending decline.

Insurers in the individual market had record profits in 2018 and 2019 — The Kaiser Family Foundation earlier reported that individual market insurers were very profitable in 2018 and 2019, even though the individual mandate penalty was eliminated in 2018 and insurers had been reducing their rates the previous few years.

How to handle rebates

Health insurers may pay MLR rebates either in the form of a premium credit (for employers that are still using the insurer) or as a lump-sum payment. More than 90% of group plan rebates come as a lump sum.

Once an employer receives this money, it is their responsibility to distribute the rebate to plan beneficiaries appropriately within 90 days, or risk triggering ERISA trust issues.

How the employer distributes the check will depend on how much their employees contribute to the plan, if at all. Here are the basic rules for employers handling their MLR rebate checks:

If you paid 100% of the premiums, the rebate is not a plan asset and you can retain the entire rebate amount and use it as you wish.
If the premiums were paid partly by you and partly by the participants, the percentage of the rebate equal to the percentage of the cost paid by participants must be distributed to the employees.

If you have to distribute funds to the plan participants, the Department of Labor provides a few options (if the plan document or policy does not already prescribe how they should be distributed):

The funds can be used to reduce your portion of the annual premium for the subsequent policy year for all staff who were covered by all of your group health plans.
The funds can be used to reduce your portion of the annual premium for the subsequent policy year for only those workers covered by the group health policy on which the rebate was based.
You can provide a cash refund to subscribers who were covered by the group health policy on which the rebate is based.

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How to Create a Flextime Policy

by Inoventive Solutions

May 18, 2021

With so many people having been relegated to remote work during the COVID-19 pandemic, many employers are now wrestling with how to proceed as it starts to wane. Many companies are considering implementing hybrid, flextime work schedules after seeing success with remote work.

Flextime is the use of flexible schedules in which employees spend a portion of their workday on the worksite, and the rest from home or another location. For example, a flextime schedule might require an employee to work on-site from 8 am to 2 pm, and complete the rest of the workday from another location.

Unfortunately, there is little legal guidance on the use of flextime schedules. Even the federal Fair Labor Standards Act, which governs minimum wage and overtime pay for most employees, does not address flexible work schedules.

Alternative work arrangements are a matter of agreement between the employer and the employee.

Flextime considerations

If you decide that you want to extend flextime to one or more of your employees, you should start by drafting an official company policy on exactly how it works. It’s always good to get it down on paper.

Take your time to make sure you have all angles covered, including ensuring that you don’t run afoul of wage and hour laws in the process.

Among other considerations, you should address the following three issues when crafting your flextime policy:

Which employees are eligible for flextime (management, sales or others);
What hours employees are required to work on-site; and
Whether prior approval is required from management or human resources.

Once you’ve written out your policy, it may be a good idea to pass it by your legal counsel to ensure you comply with all relevant wage and hour laws. When approved, include the new flextime policy in your company’s employee handbook, so that it is received by all employees who are or may become eligible for the alternative work schedule.

Benefits of flexible hours

Through the availability of smartphones and wireless internet, the amount of work employees can complete off-site has grown significantly. Utilizing available technology for this purpose can increase productivity, and even expand the geographic area in which a business operates.

Employees working remotely can also better attend to family and personal matters, improving their work-life balance and in some cases reducing the need for a leave of absence. They also don’t have to waste time commuting, which for some can be more than two hours or more on the road every day.

Creating a virtual workplace that allows a company to offer a flextime schedule can result in a number of significant benefits, including:

Saving money on work space;
Retaining valuable employees;
Bringing on outside project teams;
Expanding visibility; and
Increasing efficiency and productivity.

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Vision Coverage Can Reduce Overall Health Care Costs

by Inoventive Solutions

May 11, 2021

Research has found that employers who offered their workers stand-alone vision benefits experienced $5.8 billion in cost savings in the aggregate over four years due to reduced health care costs, avoided productivity losses, and lower turnover rates.

That’s because individuals who receive an annual comprehensive eye exam are more likely to enter the health care system earlier for treatment of serious health conditions, thereby significantly reducing their long-term cost of care.

Additionally, people are more likely to get an annual comprehensive eye test than a routine physical, according to the study by HCMS Group, a human capital risk management firm that analyzes data to help employers reduce waste in health benefits.

While not mandatory under the Affordable Care Act for adults, you may consider vision coverage for your employees as it may help decrease your overall health insurance outlays in the future.

The ACA requires that pediatric vision care coverage be embedded in medical benefits for children up to age 19 in group health plans purchased by employers with 100 or fewer employees.

The ACA’s vision care requirement for kids has exposed a gap in coverage for adults that is prompting an uptick in interest in voluntary vision benefits.

According to the “2020-2021 WorkForces Report” by the life insurer Aflac, 67% of U.S. employers surveyed offered voluntary vision benefits in 2020.

And nearly eight out of 10 employees said they would enroll in vision benefits if they were offered by their employer.

Early detection

The main reason vision benefits can help with early detection of illnesses is that comprehensive eye exams provide the only possible non-invasive view of blood vessels and the optic nerve.

As a result, eye doctors can detect early signs of chronic diseases before any other health care provider.

Eye doctors were the first to identify in patients signs of:

Diabetes (34% of the time) — The HCMS study estimates savings of $3,120 per employee due to early identification of diabetes.
High blood pressure (39% of the time) — The study estimates savings of $2,223 per employee due to early identification of high blood pressure.
High cholesterol (62% of the time) — The study estimates savings of $1,360 per employee due to early identification of high cholesterol.

The case for vision insurance

Vision insurance policies typically cover routine eye tests and other procedures, and provide specified dollar amounts or discounts for the purchase of eyeglasses and contact lenses. Some vision insurance policies also offer discounts on refractive surgery, such as LASIK and PRK.

Vision insurance only supplements regular health insurance. Regular health insurance plans pay for eye injuries or ocular disease.

Vision insurance, on the other hand, is a wellness benefit designed to reduce your costs for routine, preventative eye care such as eye exams, eyewear and other services.

With the prospect of reduced health care costs among your employees, which in turn would reflect well in your health insurance premiums, if you have not considered vision benefits before, it may be time to take a second look.

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Health Plans Dropping Out-of-Pocket Cost Waivers for COVID-19 Treatment

by Inoventive Solutions

May 4, 2021

As the light at the end of the pandemic tunnel gets brighter, more health insurers are ceasing to offer cost-sharing waivers for COVID-19 treatment.

After legislation was enacted in 2020 that required health insurance companies to cover COVID-19 tests and vaccines, many insurers voluntarily waived all deductibles, copayments and other costs for insured patients who fell ill with COVID-19 and needed hospital care, doctor visits, medications or other treatment.

Not all health insurers extended these waivers to their enrollees, but many did.

Insurers are still required to provide free COVID-19 testing and vaccinations to their enrollees. That’s because federal guidance requires them to waive such costs.

Also, guidance issued in February after President Joe Biden assumed office, reinforced the Trump administration rule about waiving cost-sharing for testing. Biden’s guidance took an extra step, saying that it applies even in situations in which an asymptomatic person wants a test before traveling or seeing a relative.

Almost 90% of individual and group health plans enrollees were in plans that waived cost-sharing for COVID-19 treatment, according to the Peterson-KFF Health System Tracker.

What insurers are now doing

However, starting in late 2020, more and more insurers have quietly been dropping those waivers. For example:

UnitedHealthcare started curtailing its waivers in November.
Anthem stopped its cost-sharing waivers on Jan. 31.
Cigna stopped offering cost-sharing waivers for COVID-19 treatment on Feb. 15.
Aetna ceased offering deductible-free inpatient COVID-19 treatment waivers on Feb. 28.

Not all insurers are doing this though. Blue Cross and Blue Shield of Minnesota extended eligibility for telehealth benefits and COVID-19 treatment waivers through the end of 2021. Humana, meanwhile, has left the cost-sharing waiver in place for Medicare Advantage members, but dropped it on Jan. 1 for those in job-based group plans.

A study by the Peterson Center on Healthcare and the Kaiser Family Foundation released in November 2020, found that 88% of Americans who have health coverage — including employer-sponsored health plans and individual plans purchased on exchanges — had policies that waived cost-sharing for COVID-19 treatment.

Despite the fact that vaccines are rolling out quickly across the country and in light of a significant percentage of people who are hesitant to get vaccinated for COVID-19, the coronavirus is expected to be a presence in society for some time to come. And that means people will contract it and get sick.

There are also concerns about mutant strains that have developed in South Africa and Brazil, and possibly in India during the massive outbreak in April.

The takeaway

You may want to check with your group health plans to see if they have waived any cost-sharing for COVID treatment, and have since dropped or are planning to drop it.

You should meet with your employees or send them a memo explaining any impending changes for them if they have a health plan that is ending or has ended waivers.