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Pandemic Spurs Supplemental Benefits Uptake Among Workers

A new study has found that in response to the COVID-19 pandemic nearly half of U.S. workers added one new supplemental health-related benefit on top of their group health coverage.

The 2021 “Aflac WorkForces Report” found that 44% of employees bought one additional benefit, with life insurance policies seeing the biggest uptake. The fact that so many workers decided to boost their supplemental health benefits reflects the profound effect the pandemic has had on people and how it has opened their eyes to the fragility of life.

“Anxieties over the past year brought questions about health coverage ― especially about whether current coverage is enough for workers and their families,” Aflac wrote in its report. “The survey found that employees sought ways to help offset the financial burdens they experienced, including through supplemental insurance.”

Interestingly, the largest uptake of these benefits was among millennial workers.

With the pandemic still not over and more people having seen the effects on friends, family and acquaintances, the report predicts that the trend will continue.

The most popular additional benefits

The percentages of workers who have purchased a voluntary benefit since the pandemic started:

  • Life insurance: 22% overall and 34% of millennial workers.
  • Critical illness insurance: 16% overall and 23% of millennial workers.
  • Mental health resources: 14% overall and 21% of millennial workers.
  • Hospital insurance: 14% overall and 21% of millennial workers.
  • Accident insurance: 12% overall and 19% of millennial workers.
  • Disability insurance: 10% overall and 16% of millennial workers.
  • Cancer insurance: 4% overall and 6% of millennial workers.

Overall views of supplemental benefits have also improved since the pandemic started. The survey found that:

  • One-third of employees say supplemental insurance is more important now due to the pandemic.
  • 51% of all American workers view supplemental benefits as a core component of a comprehensive benefits program.
  • 90% of employees believe the need for supplemental insurance is increasing.
  • 48% employees (and 63% of millennials) are highly interested in purchasing supplemental insurance to help cover the financial costs related to COVID-19 or other pandemics.

The takeaway

In light of these findings, it’s more important than ever that employers offer more than group health coverage and provide their workers with a slate of voluntary benefit offerings, many of which do not cost the employer much extra.

In fact, the study found that 70% of employers believe supplemental insurance helps them recruit employees and 75% say it helps with retention.

But keep in mind that may employees believe they already have enough coverage to meet their needs. Open enrollment is a prime time to educate them about the health-related expenses that group health insurance doesn’t cover, such as death benefits and long-term care.

One way you can put together a slate of offerings that your workforce needs and is interested in, is to conduct a study of your staff to see which options they would most prefer.  

And finally: Introduce your benefits consultant (in person or virtually) prior to or at the start of open enrollment. That way, employees become familiar with them and can be more comfortable asking questions about the various coverages they can choose from.

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Large Employers Must File ACA Forms, Not the Insurers

One mistake more and more employers are making is failing to file the required Affordable Care Act tax-related forms with the IRS.

If you are what’s considered an “applicable large employer” (ALE) under the ACA, you are required to file with the IRS forms 1094 and 1095, often separately and before your annual tax returns are due.

Under the ACA, employers with 50 or more full-time and “full-time equivalent” workers are considered an ALE and are required to provide affordable health insurance to their staff that also covers 10 essential benefits as prescribed by the law. This is what’s known as “the employer mandate.”

Filing these documents is not the responsibility of your health insurer as it’s you that’s arranging the employer-sponsored health insurance for your staff. Be aware that you can face penalties if you:

  • Don’t file the forms in a timely manner,
  • Make mistakes when filing the forms, or
  • Fail to file the forms altogether.

The IRS requires these forms to ensure that ALEs are providing health coverage to their employees and that the employer is complying with the employer mandate portion of the ACA.

The forms

  • Form 1095-C — This is basically the W-2 reporting form for health insurance. The form tells the IRS which employers are providing coverage and which employees are getting coverage through their employers.
  • Form 1094-C — This form provides information about health insurance coverage that the employer provides.

Here are the deadlines you need to be aware of:

  • Jan. 31, 2022 — Individual statements (Form 1094 C) for 2021 must be furnished to employees by this date.
  • Feb. 28, 2022 — If filing paper returns, Forms 1094 C and 1095 C must be filed by this date.
  • March 31, 2022 — If filing electronically, Forms 1094 C and 1095 C must be filed by this date.

Penalties

The general potential late/incorrect ACA reporting penalties are $280 for the late/incorrect Forms 1095-C furnished to employees, and $280 for the late/incorrect Forms 1094-C and copies of the Forms 1095-C filed with the IRS.

That comes to a total potential general ACA reporting penalty of $560 per employee when factoring in both the late/incorrect Form 1095-C furnished to the employee and the late/incorrect copy of that Form 1095-C filed with the IRS.

The maximum penalty for a calendar year will not exceed $3,392,000 for late/incorrect furnishing or filing.

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New Issues for 2022 Group Plan Open Enrollment

Employers are entering the second year of open enrollment taking place during the COVID-19 pandemic, which is still having an outsized impact on the process and which has changed the face of health insurance.

There are a number of issues that will have an effect on health plans, including regulations and laws affecting coverage that were born out of the pandemic. Mercer LLC recently published a list of compliance-related priorities that health plan administrators and sponsors have to consider, including:

Legal and regulatory changes

Health plan transparency in coverage rules takes effect on Jan. 1, 2022. Newly introduced regulations require hospitals to publish their standard prices, and for negotiated rates between health plans and providers to be made transparent too.

Employers will need to communicate these changes to their employees, particularly rules that require health plans to provide enrollees with out-of-pocket estimates for upcoming procedures.

Also, the No Surprises Act, which will prohibit surprise bills for certain out-of-network services, takes effect at the start of 2022 for providers and group health plans. Employers need to meet with their plan administrator to make sure that their plans are in compliance with these new regulations.

COVID-19 issues

The pandemic will continue casting its shadow over health insurance and open enrollment.

Legislation passed last year requires health plans to cover additional services such as mental health and telehealth until the end of this year. Whether your plan offerings will keep providing those enhanced benefits or not, you’ll need to communicate that to plan participants and include it in your plan documents.

You should also confirm that your group plans comply with COVID-19 testing and vaccine coverage requirements in the Family First Coronavirus Response Act, the CARES Act and any state laws.

Gender and family planning issues

Employers should review their benefit eligibility rules after the Supreme Court in 2020 ruled that Title VII of the 1965 Civil Rights Act protects LEGBTW employees from discrimination in benefits.

You should ensure that benefits offered to opposite-sex spouses are the same as are offered to same-sex spouses.

Mental health parity

All health plans have to prepare a comparative analysis of their medical and surgical benefits and mental health and substance abuse treatment benefits to demonstrate that treatment limitations are applied comparably. This job does not fall on the employer, but you should make sure your plan has prepared the analysis or is working on it.

This is part of new laws that require health plans to offer similar benefit coverage for mental health and substance abuse treatment as they do for other medical and surgical procedures and services.

HSA, HRA and FSA revisions

The CARES Act temporarily authorized employers to allow employees with health savings accounts, health reimbursement arrangements and flexible spending accounts to make mid-year changes to how much they deposit in those accounts.

It also authorized them to permit employees to roll over unused amounts in their health and dependent-care flexible spending arrangements from 2020 to 2021 and from 2021 to 2022.

Employers that opted to allow their employees to make these changes and roll over funds, have to communicate to their employees that these changes come to an end on Dec. 31 this year.

There were also some permanent changes made by the CARES Act, including reinstating over-the-counter medical products as eligible expenses for HSAs, certain HRAs and FSAs without a prescription.

These accounts may now allow certain menstrual care products, such as tampons, pads, liners and cups, as eligible medical expenses. These are retroactive benefits to Jan. 1, 2020.

Make sure to notify your staff of these changes. You can tell them that if they have receipts for eligible expenses that date back to then, they can submit them for reimbursement.

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Uncategorized

Group Plan Affordability Level Set for 2022

The IRS has announced the new affordability requirement test percentage that group health plans must comply with to conform to the Affordable Care Act.

Starting in 2022, the cost of self-only group plans offered to workers by employers that are required to comply with the ACA, must not exceed 9.61% of each employee’s household income.

Under the ACA, “applicable large employers (ALEs)” — that is, those with 50 or more full-time employees (FTEs) — are required to provide health insurance that covers 10 essential benefits and that must be considered “affordable,” meaning that the employee’s share of premiums may not exceed a certain level (currently set at 9.83%). The affordability threshold must apply to the least expensive plan that an employer offers its workers.

The threshold has been reduced from the 2021 level because premiums for employer-sponsored health coverage increased at a lower rate than national income growth this year. That was largely the result of a large reduction in non-emergency health care services as many people stayed away from hospitals when COVID-19 cases were surging.

With this in mind, you will need to balance out any potential premium rate hikes with the affordability level for employees and make sure that you offer at least one plan with premium contribution levels that will satisfy the new threshold. Some employers may need to boost their contributions in order to avoid penalties.

Example: The lowest-paid worker at Company A earns $25,987 per year. To meet the affordability requirement, the worker would have to pay no more than $2,497 a year in premium (or $208 a month).

ALEs with a large low-wage workforce might decide to utilize the federal poverty line affordability safe harbor to automatically meet the ACA affordability standard, which requires offering a medical plan option in 2022 that costs FTEs no more than $103.14 per month.

Failing to offer a plan that meets the affordability requirement to 95% of your full-time employees can trigger penalties of $4,060 for 2022 per FTE receiving subsidized coverage through an exchange. That’s the full-year penalty and the actual penalty prorated depending on how many months an employee received subsidized coverage.

The penalty is triggered for each employee that declines non-compliant coverage and receives subsidized coverage on a public health insurance exchange.

Since most employers don’t know their employees’ household incomes, they can use three ways to satisfy the requirement by ensuring that the premium outlay for the cheapest plan won’t exceed 9.61% of:

  • The employee’s W-2 wages, as reported in Box 1 (at the start of 2022).
  • The employee’s rate of pay, which is the hourly wage rate multiplied by 130 hours per month (at the start of 2022).
  • The individual federal poverty level, which is published by the Department of Health and Human Services in January of every year. If using this method, an employee’s premium contribution cannot be more than $104.52 per month.


Out-of-pocket maximums

The IRS also sets out-of-pocket maximum cost-sharing levels for every year. This limit covers plan deductibles, copayments and percentage-of-cost co-sharing payments. It does not cover premiums.

The new out-of-pocket limits for 2022 are as follows:

  • Self-only plans — $8,700, up from $8,550 in 2021.
  • Family plans — $17,400, up from $17,100 in 2021.
  • Self-only health savings account-qualified high-deductible health plans — $7,050, up from $7,000 in 2021.
  • Family HSA-qualified HDHPs — $14,100, up from $14,000 in 2021.
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