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‘Family Glitch’ Fixed by Regulations That Took Effect for 2023

by Inoventive Solutions
January 31, 2023

Thanks to new regulations that took effect Jan. 1, it will be easier for dependents of an employee with employer-sponsored family health coverage to seek out coverage and subsidies on the Marketplace if they are in a plan that is deemed unaffordable under the Affordable Care Act.

The new rules, issued by the Department of Treasury and the IRS, are aimed at fixing what’s become known as the “family glitch,” which is tied to the affordability test of employer-sponsored coverage.

The ACA affordability threshold for employer-sponsored coverage is 9.12% of income for 2023, meaning that if an employee is spending more than that for their portion of the premium, the coverage would be deemed unaffordable and they would be eligible to seek out coverage on an exchange and qualify for subsidies.

Under the family glitch, affordability of employer-sponsored coverage for a family member of an employee was determined by the affordability test for self-only coverage. And because of ACA rules, even if the family coverage was more than 9.12% of household income for the worker’s family members, they would be ineligible for premium credits (or subsidized coverage) on the government-run exchange.

Some 5.1 million individuals are affected by the family glitch, according to the Kaiser Family Foundation. It estimates that 85% of them in 2022 were enrolled in employer-sponsored plans and paying more than they would if they qualified for subsidies on the exchange.

Another study estimated that these individuals could be spending on average 15.8% of their income on their employer-sponsored coverage.

Example of the family glitch:

An employer pays 100% of the $7,500 premium for an employee’s self-only coverage, but doesn’t pay anything towards the individual’s family members’ coverage, which is an additional $8,500 per year.

As a result, the worker’s dependents would be considered to be enrolled in affordable employer-sponsored coverage, which would prevent them from qualifying for tax credits on the exchange.

The new rules

Under the new rules, the worker’s required premium contributions for self-only and family coverage would be compared to the affordability threshold of 9.12% of their household income.

If the employer offers multiple plans, the affordability test is applied to the lowest-cost plan, regardless of if the employee chooses a plan that costs them more than 9.12% of household income.

If the cost of self-only coverage is considered affordable, but the family coverage not, the employee would not be eligible to apply for subsidized coverage on an exchange, but their dependents would be.

In your communications with your staff, it may be a good idea to let them know of this new rule as it could allow some of them with family coverage to secure subsidies for their dependents on the Marketplace and pay less in premium for the coverage.

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As Health Care Costs Bite, Here’s How You Can Help Your Workers

by Inoventive Solutions
January 26, 2023

Recent studies have highlighted an alarming trend in American health care: More and more people are struggling with medical bills and many are delaying care due to high costs.

The most recent poll by Gallup found that 38% of those surveyed said they or a family member had delayed care in 2022 due to high costs. That’s up from 26% in 2020 and 2021. The rapid increase occurred in a year where inflation was at a 40-year high.

Last year’s spike in delayed care was the largest over one year since Gallup first began tracking these data more than two decades ago and it illustrates the breadth of the problem, which likely stretches into the ranks of your own employees.

Even if you are providing them with a robust plan, there are often out-of-pocket cost-sharing and deductibles to contend with. For employees in high-deductible health plans, the costs can be steep.

What you can do

Fortunately, there are steps you can take to help them reduce their out-of-pocket expenses for health care:

Emphasize the importance of preventative care — The best way to prevent or stave off major health issues is through preventative care, such as going to routine checkups and having blood work done as recommended. The COVID-19 pandemic worsened the problem of delayed care and health care providers and patients are still catching up on all that missed care.

But it’s not just regular checkups. Many people are not getting regular care for chronic conditions. Many preventative services are covered with no out-of-pocket cost-sharing, but checkups usually are not.

Depending on the type of plan an employee has, routine and preventative care costs can add up. Some experts suggest creating a cash-assistance fund for workers who may struggle with the costs of those visits.

Highlight digital tools — Digital tools are growing in number, from apps and telehealth options to those that can help your employees manage chronic conditions.

Many insurers and/or providers have apps to help people access care and manage their health. The apps will notify patients when it’s time for checkups or other routine services. These portals typically include telehealth options, which can be a less expensive way to meet with their doctor or a specialist.

On top of that, there are digital tools to help people monitor and manage chronic conditions, like high blood pressure and diabetes — and even rate genetic conditions. They are an inexpensive way to keep a look out for symptoms and changes in vitals that may require a visit with their doctor. Your workers should ask their doctor about any tools that they can be using.

Don’t cut back on health benefits — With the rising health insurance premiums, it may be tempting to offer high-deductible health plans with even higher deductibles. This may keep your premiums where they are compared to the prior year, but it saddles your employees with the potential for even more out-of-pocket expenses.

Urge any employees in HDHPs to sock away funds in their attached health savings accounts for future medical expenses. These accounts are funded with pre-tax dollars and can be saved up for future use. Funds are not taxed when withdrawn, either.

HSAs are portable if the employee changes jobs, and the funds can be invested, much like a 401(k) plan.

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More Employers Offer Flexible Spending Accounts

by Inoventive Solutions
January 19, 2023

As health insurance and treatment costs rise and recognizing the potential for tax savings and other benefits, more employers have started offering flexible savings accounts to their employees.

FSAs are also an important way to enable employees who are not enrolled in high-deductible health plans with attached health savings accounts to save money over the year for medical and related expenses.

A study by the National Business Group on Health predicts that 66% of employers will be offering FSAs to their employees in 2023, up from about 60% in 2018 and 52% in 2015 and making for an increase of 27% in less than a decade.

The study predicts that uptake will continue growing as employers look for ways to help their employees put aside funds for medical services, pharmaceuticals, copays, coinsurance and other medical items.

Also, the total amount saved in these vehicles was $30.7 billion in 2020, up 8.7% from the year prior, according to medical equipment supplier AvaCare Medical. The average amount of money placed into FSAs has increased every year since 2015, reaching an average of $2,400 in 2022, according to the IRS and the Bureau of Labor Statistics.

While they have always offered tax savings and other benefits for individuals and businesses, the increasing popularity of FSAs is likely due to the rising cost of health care.

Contributions

Participating employees can contribute up to $3,050 in 2023, up $200 from 2022. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax. The limit only applies to how much an employee can contribute to their account.

If the plan allows, the employer may also contribute to an employee’s FSA.

Employer contributions (including non-cashable flex credits) generally cannot exceed $500 per plan year for the health FSA to maintain excepted benefit status. That means that the maximum health FSA available in 2023 will be limited to $3,550 ($3,050 maximum employee contribution + $500 maximum employer contribution).

Another important note: Health FSA eligibility cannot be broader than the major medical plan eligibility to maintain excepted benefit status, under the Affordable Care Act. That means that a health FSA should never be available to an employee who is not also eligible for a major medical plan.

Carryover

Under the law, enrollees must use up the funds they set aside during the year or forfeit the remainder, unless their employer allows part of the funds to be carried over.

Also, if a cafeteria plan permits health FSA carryovers, the maximum amount that a participant can carry over from the 2023 to the 2024 plan year is $610, up $40 from the maximum carryover amount from 2022 to 2023.

Some employers may provide a two-and-a-half-month grace period during which employees can use their remaining funds.

Regardless of what you decide in terms of allowing carryovers, you should clearly inform your workforce of your current carryover limit and any changes in 2023. That way, you give your staff the ability to avoid forfeiting as much as possible at the end of the year.

What FSA funds can be spent on

Some of the qualified medical expenses that are not covered by health insurance, and for which employees can pay using FSA funds, are:

  • Copays
  • Deductibles
  • Dental and vision care services
  • Eyeglasses and hearing aids
  • Chiropractic and acupuncture
  • Physical therapy
  • Other medical devices
  • Prescription drugs
  • Over-the-counter medications.
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Besides Health Insurance and 401(k)s, These Are the Benefits Employees Value Most

by Inoventive Solutions
January 10, 2023

Besides health insurance and a 401(k) plan, other benefits that employees value highly are generous paid time off and flexible or remote work, according to a new survey.

But for the first time, the annual study by employee benefits provider Unum found that the younger generations are not on the same page with their older peers when it comes to what they value most in their benefits package.

“A multi-generational workforce is a huge benefit for companies,” said Liz Ahmed, executive vice president of People and Communications at Unum. “With the diversity of background, experiences, and thought employees bring, employers need to make sure there’s something in their benefits package for everyone’s different stage of life.”

Although the generations differ in their top three priorities, when opened to the top five, there is one common denominator: emergency savings.

Emergency savings

Sixty-four percent of employees surveyed said they do not have access to an emergency savings option through their employer. This benefit ranks third for boomers (25%), third for Gen X (32%) and second for Gen Z (37%).

Emergency savings plans can help prepare your employees for unexpected expenses — without dipping into retirement funds or using credit cards.

Employer-sponsored emergency savings accounts help workers save for financial emergencies by automatically deducting an amount from each paycheck and depositing it into a separate account. If they need to cover a bill or cash gets tight, they can draw from this fund to bridge a financial gap.

Also, with mental health support and resources high on the list for younger workers, employers may consider tapping an employee assistance program. EAPs are voluntary, work-based programs that offer free and confidential assessments, short-term counseling, referrals and follow-up services to employees who have personal and/or work-related problems.

You can use the following list as a general guidepost if you are considering adding voluntary benefits to your employee offerings.

These are the top 15 non-insurance benefits for U.S. workers:

  • Generous paid time off program
  • Flexible/remote work options
  • Paid family leave (for childcare or caring for an adult family member)
  • Mental health resources/support
  • Emergency savings
  • Professional development
  • Financial planning resources
  • Fitness or healthy-lifestyle incentives
  • ID theft prevention
  • Gym membership or onsite fitness center
  • Student loan repayment benefits
  • Pet-friendly offices
  • Personalized health coaching
  • Sabbatical leave
  • Dedicated volunteer hours.

A final thought

There are so many voluntary benefits to choose from that it’s important that you opt for ones that your employees actually want. A good way to gauge their interest is to conduct your own survey by asking them which benefits they would like to see and offering them a list to choose from.

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Insurance Considerations as Americans Work Past Retirement Age

by Inoventive Solutions
January 3, 2023

Americans are eligible to sign up for Medicare when they turn 65, but more of us are staying in the workforce longer than ever before. In fact, the average retirement age has increased three years in the last three decades.

There are a number of issues that Medicare-eligible workers face that your human resources staff may be asked about, such as:

  • Penalties for late Medicare enrollment,
  • Whether the employer plan is the primary or secondary payer of claims, and
  • How Medicare eligibility affects health savings accounts.

The following are considerations for employers faced with workers nearing 65.

Discontinuing group health coverage

If you plan to discontinue coverage for employees who are turning 65, you should communicate with them well ahead of the time they need to sign up for Medicare.

It’s important they understand that they will be dropped from your group health plan and that they have a seven-month window to sign up for Medicare (during the three months prior to the month they turn 65, the month they turn 65, and the three months after turning 65).

If they fail to sign up during this time, they will face a mandatory 10% penalty on all future Medicare Part B premiums for every year they are late in signing up.

Keeping them on the group plan

If you decide to keep them on the company’s plan, how you handle their insurance depends on your size:

Fewer than 20 employees — Employees who work for these firms will need to enroll in Medicare when they turn 65. Medicare will be the primary payer of health insurance claims for these workers under the law.

The group health insurance is the secondary payer.

How it works:

Let’s say your employee has foot surgery:

  • Medicare pays first up to the limits of its coverage.
  • The group health insurance only pays if there are costs Medicare didn’t cover.

20 or more employees — If your organization has with 20 or more workers, the group plan will be the primary coverage as long as they are actively employed. These employees can generally delay signing up for Medicare Part B. They will also not be subject to penalties for not signing up when they turn 65.

That said, workers who are still on your plan should sign up for Original Medicare Part A (hospital insurance) when they are first eligible. Medicare Part A, which is premium-free, provides secondary coverage of hospital expenses that may not be covered by your group plan.

Once they stop working and are no longer on the company’s health plan, your employees have eight months to sign up for Medicare Part B. They can at that time opt for Original Medicare, Medicare Advantage or a Medicare supplement plan.

If they fail to sign up for Medicare Part B after eight months of losing their employer coverage, they will be subject to a premium penalty for the rest of their lives.

Ideally, workers should enroll in Part B at least a month before they stop working or their coverage ends, so they don’t have a gap in coverage.

Health savings accounts

If your firm has fewer than 20 employees, workers who are 65 or older can no longer contribute to an HSA as they are not compatible with Medicare.

At larger organizations where the employer’s health plan is the primary coverage, employees enrolled in an HSA-compatible, high-deductible health plan can delay enrolling in Medicare and continue contributing funds to their HSA.

Employees who are 65 or older should stop making contributions to their HSA six months before they enroll in Medicare or before they apply for Social Security benefits if they are still working. That’s because people who apply for Social Security benefits are automatically enrolled in Medicare.

Those who fail to stop making HSA contributions in that period may face tax penalties.

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