Author: Site Staff

Employees who want to pay for over-the-counter medications using their health care flexible spending account will need a prescription to do so effective January 1, 2011, according to new Internal Revenue Service rules.

The rules issued September 3 involve a section of the health care reform law that sharply restricts FSA reimbursements for over-the-counter medications such as nonprescription pain relievers, cold medicines, antacids and allergy medications.

What was not clear, though, was whether a doctor’s note was enough or whether a prescription was required for an FSA to reimburse over-the-counter purchases, said Sharon Cohen, an attorney with Towers Watson & Co. in Arlington, Virginia.

In the notice, the IRS says a prescription is required for over-the-counter reimbursements. It defines a prescription as a “written or electronic order for a medicine or drug that meets the legal requirements of a prescription in the state in which a medical expense is incurred and that is issued by an individual who is legally authorized to issue a prescription in that state.”

The IRS also resolved uncertainty involving the new over-the-counter restriction on what are known as “grace period” FSAs. Under rules the IRS issued in 2005, unused contributions made to FSAs in the current year can be rolled over to pay for expenses incurred during the first 2½ months in the following year. The new IRS rules say over-the-counter reimbursements are banned for grace-period FSAs and FSAs without grace periods effective January 1, 2011, said Mark Berggren, benefits outsourcing counsel with Hewitt Associates Inc. in Lincolnshire, Illinois.

It isn’t known what percentage of expenses reimbursed through FSAs involve over-the-counter medications.

In 2010, an average of 20 percent of eligible employees made FSA contributions, according to Hewitt Associates, while contributions averaged $1,535 per employee among employers with at least 500 workers in 2009, according to Mercer in New York.

The health care reform law’s restrictions on reimbursing over-the-counter expenses from FSAs is the first of two major provisions affecting FSAs to take effect. The other provision will cap pretax contributions to FSAs at $2,500 effective January 1, 2013.

Under prior law, there was no annual limit on FSA contributions, though employers typically imposed annual limits ranging from $4,000 to $5,000.

Congress imposed the new limits to raise revenue to help pay for other provisions in the reform law that will expand coverage, such as new federal insurance premium subsidies for the lower-income uninsured, beginning in 2014.  

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

 

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Average annual premiums for employer-sponsored health insurance grew just 3 percent this year for family coverage, but employees’ share of those costs surged 14 percent, according to a survey released Thursday, September 2.

The 12th annual Kaiser Family Foundation/Health Research & Educational Trust “Employer Health Benefits” survey found that employee contributions for single coverage grew 15 percent, compared with the 5 percent increase in annual employer premiums.

As a result, employees paid an average of $3,997 toward the $13,770 cost of family coverage and $899 toward the $5,059 cost of single coverage this year. By comparison, employees last year paid an average $3,515 toward the $13,275 cost of family coverage and $779 toward the $4,824 cost of single coverage.

Since 1999, the share of health care premiums paid by employees has increased 159 percent, while the cost of employer-sponsored health care benefits has grown 138 percent, according to the study.

Drew Altman, president and CEO of the Washington-based Henry J. Kaiser Family Foundation, attributed the recent surge in employee health care coverage contributions largely to the recession, saying that many employers—Kaiser included—are asking employees to take on a greater share of the health care cost burden so their firms can continue to afford to offer the coverage and perhaps avoid layoffs.

“I think it is a recession survival tactic,” he said during a Thursday news conference in Washington.

“The continued economic downturn is leading to more burden for employees in terms of what they have to pay for their health insurance,” Gary Claxton, vice president and director of the Health Care Marketplace Project at KFF, said during the news conference.

Because significant cost-sharing still is permitted under the Patient Protection and Affordable Care Act, Claxton said he expects the trend of greater health benefit cost-sharing with employees will continue in the next few years.

The survey, however, was unable to gauge the effects of PPACA on employer-sponsored health benefit costs because much of it was conducted before the reform measure became law earlier this year, he said.

While employee contributions to the cost of coverage grew significantly, the scope of that coverage eroded somewhat, Altman noted.

In particular, the percentage of employees enrolled in plans with deductibles of $1,000 or more grew to 27 percent this year from 22 percent last year, while the percentage with deductibles of $2,000 or more for single coverage grew to 10 percent this year from 7 percent last year.

“Insurance in this country is gradually changing, becoming less comprehensive, so that what workers get today is less comprehensive than what their parents got,” Altman said.

In a first during the 2010 survey, respondents were asked whether they review performance indicators on health plans’ clinical and service quality. While 34 percent of employers with 200 or more employees said they reviewed such performance indicators, only 5 percent of small employers did so.

Megan McHugh, director of research at HRET, described the numbers as “troubling.”
“Employers are not holding health plans accountable for the quality of care” their employees are receiving, McHugh said. “Firms might simply be choosing health plans based on price.”

Among other significant survey findings:
• The percentage of firms offering health care coverage grew to 69 percent in 2010 from 60 percent in 2009. The increase was the greatest among firms with three to nine workers, growing to 59 percent from 46 percent last year. While on the surface this appears to be good news, researchers said the increase was an aberration that could be attributed to the fact that only firms still in business were interviewed, and that most of those that went out of business during the recession did not offer health care coverage.

• Although preferred provider organization plans still dominate the market with 58 percent of employees enrolled in them, the percentage of employees enrolled in high-deductible health plans has grown to 13 percent in 2010 from 8 percent in 2009. Meanwhile, enrollment in health maintenance organizations shrunk slightly to 19 percent from 20 percent in 2009, while point-of-service plan enrollment fell to 8 percent from 10 percent in 2009, and traditional indemnity plan enrollment held steady at 1 percent.

• Large employers were more likely to offer high-deductible health plans, with 34 percent of firms with 1,000 or more workers offering them, compared with 21 percent of those with 200 to 999 workers and 15 percent of those with three to 199 workers. HDHPs include health plans with a deductible of at least $1,000 for single coverage and $2,000 for family coverage offered with a health reimbursement arrangement, as well as HDHPs that meet federal requirements to permit an enrollee to establish and contribute to a health savings account.

• The percentage of firms with 200 or more active workers offering retiree health benefits dropped to 28 percent in 2010 from 30 percent in 2009.

• Thirty-one percent of employers with 50 or more workers made changes to their mental health benefits in response to the Mental Health Parity and Addiction Equity Act. Of those, 66 percent eliminated limits on coverage, 16 percent increased utilization management of mental health benefits and 5 percent dropped mental health coverage entirely. Twenty-three percent of those employers made other changes that were not specified in the survey.

The survey was conducted between January and May and included responses from 3,143 randomly selected nonfederal public and private employers with three or more workers.  

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

 

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Approximately 500 striking Coca-Cola Enterprises Inc. workers in Washington state will have their health benefits restored when they return to work Wednesday, September 1, and contract talks resume, a company spokesman said.

However, the Atlanta-based soft drink company maintains it was within its legal rights to suspend the workers’ health benefits during the work stoppage, which began August 24. The company spokesman also said Monday, August 30, that when health benefits are restored, workers’ contributions will be prorated to reflect the temporary lapse in coverage.

Meanwhile, lawyers for the striking workers filed a motion for a temporary restraining order in U.S. District Court for the Western District of Washington in Seattle seeking to force Coca-Cola to restore health benefits retroactively.

Attorneys from the law offices of Schwerin Campbell Barnard Iglitzin & Lavitt also filed a lawsuit against Coca-Cola on Friday, asserting that the company violated the Employee Retirement Income Security Act when it terminated health benefits for the 500 striking workers.

Despite the resumption of contract talks, the workers plan to pursue their litigation, said Dmitri Iglitzin, a partner in the Seattle-based firm.

Although the Coca-Cola spokesman said the company had not yet been served with the suit or the motion for a temporary restraining order, the company believes the litigation has no merit, he said.  

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

 

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More than one-third of large U.K. employers say they are likely to reduce pension benefits when rules requiring them to automatically enroll employees go into effect in October 2012, according to a survey released Tuesday, August 31.

The survey by the London-based Association of Consulting Actuaries found that 41 percent of employers said they are “likely” or “highly likely” to reduce future pension benefits due to the automatic enrollment law.

The association surveyed 210 large employers—companies with more than 1,000 employees—during July and August.

According to the study, 16 percent of employers said they would be “highly likely” and 25 percent said they would be “likely” to review existing pension benefits to mitigate the increased cost of higher plan membership caused by automatic enrollment.

The U.K. government rules requiring that all employees automatically be enrolled in workplace pensions are expected to increase membership of employer-sponsored pensions by 35 to 40 percent, according to survey respondents.

Under the rules that go into effect in October 2012 for larger employers, employees would automatically be enrolled but also could opt out of their employer’s pension plan.

By 2017, automatic enrollment will apply to companies of all sizes. The rules were first announced in 2006.

While 75 percent of employers surveyed said they supported the principle, 70 percent also said the automatic enrollment regulations “appeared complex.”

In June, the recently elected U.K. coalition government said it was conducting a review to determine how best to support the implementation of automatic enrollment into company pension plans. Interested parties have until September 30 to offer feedback to the U.K. Department for Work and Pensions.

More than half of the respondents to the ACA survey said they believe the government should delay implementation of rules.  

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

 

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Nearly two-thirds of employers say they intend to make health care plan design changes to shift more costs to employees in 2011, according to a survey released Wednesday, August 27.

The Aon Consulting survey found that 65 percent of respondents plan to increase cost-sharing through actions such as boosting deductibles, co-payments, co-insurance or out-of-pocket limits.

In addition, 57 percent said they expect to boost health care plan premiums paid by employees.

Those changes come amid major increases in health care plan costs. Just over one-third of respondents said their group health care costs rose at least 5 percent but less than 10 percent this year, while 18 percent said costs climbed at least 10 percent but less than 15 percent. Twenty-four percent, though, said cost increases were less than 5 percent, while 5 percent said cost increases were at least 15 percent but less than 20 percent.

The survey also details how expensive COBRA health care continuation coverage has become. For example, this year the median monthly COBRA premium charged for single coverage in a preferred provider organization plan was $449, while the median monthly premium for family coverage was $1,310.

Through legislation passed in 2009 and later extended and expanded, the federal government pays 65 percent of the COBRA premium for employees who are involuntarily terminated. But that subsidy is available only to employees laid off through May 31.

A total of 1,079 individuals participated in the survey, including 44 percent at employers with 500 to 5,000 employees, 38 percent at employers with fewer than 500 employees and 18 percent at employers with more than 5,000 employees.

A summary of the “2010 Benefits Survey” and information on how to obtain the full survey is available at http://aon.mediaroom.com. 

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

 

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