Group 20 Fed Regs & Taxation Of ER-sponsored GI

Question 1

Federal laws governing group health plans

ERISA

Answer 1

1. For almost all benefit plans sponsored by employers
2. Reporting and disclosure
   
   2. 1 file an annual report with the IRS (form 5500)
   3. 2 provide participants with summary plan description (SPD)
3. Fiduciary standards
4. Civil enforcement and preemption
5. Claims procedures
   
   5. 1 requires plan to have procedures to resolve dispute claims
   6. 2 ensure claims are resolved in a timely fashion

Question 2

Federal laws governing group health plans

Group health plan portability

Answer 2

1. Consolidated omnibus budget reconciliation act (COBRA)
   1.1 individual may keep group coverage for a period of time after employment ends, or after qualifying events
   1.2 examples of qualifying events: termination of employment, EE’s divorce, and the EE’s dependent child aging-out
   2 HIPPA
   2.1 limits preexisting condition exclusions
   2.2 ACA demanded HIPPA to prohibit preexisting condition exclusion for any participant below age of 19 - this ban will apply to all plan participants in 2014
   2.3 nondiscrimination: group plans cannot base eligibility nor participant premiums on: health status, medical condition, claims experience, genetic info

Question 3

Federal laws governing group health plans

Other laws

Answer 3

1. Family and Medical leave act (FMLA)
2. Mental Health parity act
3. Medicare secondary payer (MSP) rules
4. Newborns’ and Mothers’ health protection act
5. Women’s health and cancer right act
6. Michelle’s law
7. Genetic information nondiscrimination act

Question 4

Taxation of group insurance benefits

1. Health coverage
2. Group term life insurance
3. DI
4. LTC

Answer 4

1. Health coverage
   
   1. 1 ER is entitled to a current tax deduction for the expenses
   2. 2 the favorable tax treatment applies to insured as well as self-insured plans
   3. 3 if a self-insured plan discriminates in favor of highly compensated EEs (HCEs), then benefits provided to the HCEs lose their tax-favored status
2. Group term life insurance
   
   2. 1 ER is entitled to a deduction for expenses
   3. 2 the amount that may be provided tax free is limited
      2: 3 coverage for spouses and dependent’s taxed as compensation to the EE
3. Disability insurance
   
   3. 1 if premium is treated as taxable compensation, the proceeds paid to disabled individuals would not be taxable (vice versa)
   4. 2 the employer’s expenses generally are deductible
4. Qualified long term care insurance - the same tax-favored treatment as health insurance

Question 5

Taxation of group insurance benefits

Cafeteria plans

Answer 5

1. Offers EEs a choice between taxable and non taxable forms of compensation
2. Allow EEs to contribute toward the cost of coverage on a pre-tax basis
3. Cafeteria plans must comply with detailed requirements
   
   3. 1 the plan must be in writing; nondiscrimination rules for highly compensated and key EEs; EEs are generally permitted to make their elections only once per year, but in some cases a mid-year change may be allowed; only certain non taxable benefits may be available
4. Flexible spending arrangement (FSAs) - any amount not used each year is forfeited

Question 6

Small group rate filings

1. NAIC model laws
2. Case characteristics
3. Classes of business
4. The index rate

Answer 6

1. Most state small group laws based on NAIC model laws
   
   1. 1 applies to small ERs of 2-50 EEs issued by health insurers and HMOs
2. Allowed case characteristics: age, gender, area, family composition, group size, industry
   
   2. 1 the max spread between lowest and highest factors for industry = 15%
   3. 2 the maximum spread for group size = 20%
   4. 3 ACA limits rating characteristics to:
      
      2. 3.1 plan design, provider network, age family composition, geographic area, tobacco use
3. Classes of business
   
   3. 1 carrier may classify small ER business in up to 9 classes
   4. 2 20% rating differential allowed between blocks
   5. 3 under ACA, all small group business will be treated as one class for rating
4. The index rate
   
   4. 1 avg of the base (lowest) premium rate and the highest rate
   5. 2 within a class, premiums cannot vary from index > 25%
      
      4. 2.1 ACA: small group business rated on a pooled rate basis, without variation in rates except for allowable case and plan characteristics
   6. 3 rate increase limit = 15% annually + % change in the new business rate + adjustment due to change in coverage or case characteristics