Author: Site Staff

Health insurance premiums for the program that covers federal employees and retirees will increase an average of 7.3 percent next year, according to the U.S. Office of Personnel Management.

The increase for the Federal Employee Health Benefits Program—the nation’s largest group plan that covers about 8 million people—is about the same as this year.

Like the private sector, the federal program also will expand coverage next year to meet mandates in the new health reform law. Those enhancements will boost premiums an average of 1.7 percent and are included in the overall 7.3 percent increase, the agency says. That is in line with increases that private sector employers are expecting as a result of the health reform law.

The requirements include extending coverage to employees’ adult children up to age 26 and full coverage of preventive care and services.

The average 7.3 percent premium increase for federal employees, though, is somewhat less than increases private sector employers are expecting. A Hewitt Associates Inc. analysis has projected an 8.8 percent average increase in 2011 based on a study of health plans sponsored by 325 large employers.

An Office of Personnel Management question-and-answer sheet says the federal program “uses private-market competition and consumer choice to provide comprehensive benefits at an affordable cost to enrollees and the government.” In addition, the agency said, “We use firm negotiations with health carriers to keep cost increases as reasonable as possible.”

Next year, just over 200 health plans will be offered to federal employees and retirees, about the same as this year. Many plans, though, operate only in specific geographic areas.

Federal employees, who can make their 2011 health plan selections between Nov. 8 and Dec. 13, on average pay 30 percent of the premium, while the federal government picks up the remaining 70 percent.  

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Federal regulators have provided an initial list of health care services that are excluded from a program to partially reimburse employers for claims by early retirees and their dependents.

The Department of Health and Human Services released the excluded-service list September 29, calling it only a “general guide” and saying additional guidance may be issued as the program is implemented.

Under the Early Retiree Reimbursement Program established as part of the health care reform law, the federal government will reimburse employers for claims incurred by retirees at least age 55 and not yet eligible for Medicare as well as their dependents, regardless of age.

After a participant incurs $15,000 in health care claims in a plan year, the government will reimburse early retiree health care plan sponsors for 80 percent of claims up to $90,000.

The reimbursement applies to claims incurred June 1 or later. In general, the reimbursement must be used to reduce employers’ and/or retirees’ health care costs.

However, certain health care services that are not covered by Medicare will not be credited toward the $15,000 threshold or reimbursed under the program, HHS said.

Some of the excluded services are:
• Custodial care, such as personal care by individuals who are not medically trained.
• Routine foot care, such as orthopedic shoes.
• Personal comfort items, such as a television in a hospital room.
• Hearing aids and auditory implants.
• Cosmetic surgery, except when required to quickly repair an accidental injury or improve function of a malformed body part.
• Routine dental service.
• In vitro fertilization and artificial insemination.
• Abortions, except if the pregnancy resulted from rape or incest or endangers the woman’s life.

Currently, more than 2,000 organizations have been approved for the program to which
Congress allocated $5 billion. The Employee Benefit Research Institute in Washington has estimated that the money will run out next year.  

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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New York awarded a combined $109 million in health information technology grants to promote medical homes to 11 hospitals, health information exchanges and other health care organizations, the state’s health department announced.

The grants will focus on coordination of mental health, long-term care and home health care, according to a news release. The New York City Health and Hospitals Corp. received a $10 million grant for a project that focuses on schizophrenia patients.

The term “medical home” broadly refers to improvements in primary care and the coordination of specialty medical care through a team approach that engages patients to take control of their health.

New York Presbyterian Hospital’s project to work with patients with depression and diabetes was awarded $10.8 million. The Long Island Patient Information Exchange, which includes 1,096 mental health providers, was awarded $20 million for a project to work with schizophrenia and other psychotic disorders among patients.

The grants were awarded through New York’s Health Care Efficiency and Affordability law and the Federal State Health Reform Partnership, the release said.  

Filed by Melanie Evans of Modern Healthcare, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Only a small percentage of employees contribute to Roth 401(k) plans, with participation related directly to their age, according to an analysis.

In an examination of 20 Roth 401(k) plans with just over 500,000 eligible participants, Hewitt Associates Inc. found that 16.6 percent of employees age 20 through 29 made contributions, as did 9.4 percent of employees age 30 through 39.

By contrast, 6 percent of employees age 40 through 49 made contributions as did 4.2 percent of those age 50 through 59, and 2.6 percent of employees age 60 and older.

That finding, Lincolnshire, Illinois-based Hewitt Associates noted, “is consistent with the premise that younger workers will benefit more from Roth contributions.”

Unlike traditional 401(k) contributions, which are made with pretax dollars and then taxed when withdrawn, Roth 401(k) contributions are made with after-tax dollars and investment earnings can be withdrawn tax-free. Investment earnings, though, cannot be withdrawn tax-free until five years after an employee made the first contribution and after he or she reaches age 59½.

For young employees, the tax advantages of Roth 401(k) contributions may be far greater than pretax contributions to standard 401(k) plans. Young employees could accumulate decades of investment gains on their Roth contributions and never be taxed on those gains.

The analysis also found that participation increases steadily in the years after adoption of a Roth 401(k) plan. For example, an average of 7 percent of employees made contributions one year after the plan was adopted, while 15 percent of employees made contributions three years after the feature was added, according to the analysis.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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One of the first big pieces of health care reform legislation kicks in this month, when adult children up to age 26 must be covered by employed parents’ health insurance, regardless of student status. Previously, only dependents in college typically remained on their parents’ insurance plans after age 18, unless state law mandated coverage for older children who were not in school.

“This change is effective for plan years or plans that start on or after September 23, but many new plan years won’t start until January 1,” said Sarah Bassler Millar, a partner in the employee benefits and executive compensation practice group at Philadelphia-based law firm Drinker Biddle.

Some adult children already are being covered. In April, 66 health insurers agreed to a Department of Health and Human Services request to begin early enrollment of adult dependents who would have aged out of their existing coverage between April and either September 23 or a later starting date for a parent’s employer’s 2011 plan year. The agency wanted to prevent the cost and inconvenience of dropping adult children, providing interim COBRA coverage and then re-enrolling them.

“Some insurers gave employers a choice, while others just did it,” said Tracy Watts, a principal in the health and benefits practice at Mercer, a New York-based HR consulting firm. But many “self-insured employers said no. They said they didn’t have the budget for it.”

To comply with the eligibility expansion, employers must provide written notice of a 30-day open enrollment period for employees’ adult children. This “may take employers by surprise since typical open enrollment is two weeks,” Watts said. “So they should start a little earlier.”

Although eligibility expansion seems straightforward, the definition of a child raises questions. Many firms had extended dependent status to grandchildren, nieces and nephews based on residency with an employee. “The new law doesn’t allow that,” Millar said. “Advocacy groups are asking for clarification. It’s not clear that we’ll get clarity by January 1.” 

Filed by Workforce Management contributor Bridget Mintz Testa. To comment, e-mail editors@workforce.com.