Did the IRS just reverse its recent reduction in Health Savings Account contributions?

Yes it did. In our March 8, 2018 Question and Answer of the Week we alerted you to a $50 reduction in the maximum allowable contribution to an HSA account with family coverage; from $6,900 to $6,850.

In response to stakeholder concerns about unanticipated financial and administrative burdens, the IRS has reversed itself and has just published this announcement restoring the maximum allowable contribution to an HSA account with family coverage to $6,900.

The maximum contribution for accounts with self-only coverage remains unchanged at $3,450.

Does my California resident life/health license allow me to write business in other states?

Yes, provided you obtain a non-resident license from that state. From time to time, you may have a client whose business is based outside California. Or perhaps you would like to start pursuing business in other states. In order to write business in another state you will need to obtain a non-resident license for that state for yourself, and if desired, for your agency.

Fortunately, California has reciprocity with many states. This means that, provided your California life/health license is current and in good standing, you do not need to take the license education class and pass the license test for each state. You just need to apply (and pay) for a non-resident license for yourself and your agency. You’ll need to secure a non-resident license for your agency if you intend to market your agency in that state or be paid through your agency for business written in that state.

To make this convenient, most states have signed on with the National Producer Insurance Registry (NIPR) which is an organization that facilitates cross-state licensing. NIPR’s web site allows you to apply for and renew non-resident licenses. We have developed this step-by-step guide to apply for your non-resident license. We hope you find it helpful.

Can the allowable maximum contribution to a Health Savings Account decrease?

Yes. And it just did. On March 5, 2018, the IRS announced that for 2018, the maximum allowable contribution to an HSA account with family coverage decreased $50. Previously the IRS had set the maximum contribution at $6,900, it is now $6,850. The maximum contribution for accounts with self-only coverage remains unchanged at $3,450.

This article from the Society for Human Resource Management explains that the IRS took this unusual step after calculating how the tax reform legislation recently enacted impacts inflation adjustments to HSA contribution maximums. Benefits brokers and agents should consider passing this information on to their clients who have high-deductible HSA-compatible plans in place.

Is there a dental plan that provides coverage after the annual maximum has been met?

Most of us would answer that question with a “no.” There is good news, however, Humana’s small group dental plans include an “extended annual maximum” feature which pays 30% of the negotiated rate even if the member hits their annual maximum; and there is no cap. Extended annual maximum is superior to the “rollover” features offered by other carriers because it does not require the member to accrue unused amounts before it can be used. Even if a member incurs substantial costs early in the plan year (well before they’ve accrued unused benefit amounts), the extended annual maximum feature kicks in immediately, so members are never without coverage. To learn more, contact your Claremont sales representative at info@claremontcompanies.com or 800.696.4543.

How should I advise my clients regarding their benefits compliance obligations?

Brokers and agents take different approaches to helping clients with their benefits compliance obligations. Some become a virtual extension of the client’s team, working closely with them to handle most of the notification and reporting requirements. Others provide clients with an outside source for compliance consulting; paying for none, some or all this expense.

Regardless of which approach you take, realize that clients, particularly smaller firms, often look to their benefits professional as an advisor in this area and will place their first call to you. As you consider how you will handle benefits compliance questions, we thought it would be helpful to provide this benefits compliance reference document created by HR Service, Inc., a firm that specializes in providing outsourced benefits compliance and human resource management. Feel free to follow the link and take an online risk assessment (for your firm or for one of your clients).

Should you wish to subscribe to HR Service, Inc.’s Compliance Basics or Compliance Basics Plus services, the cost ranges from $10 to $15 per month per employer group. Be sure to mention that you were referred by Claremont Insurance Services.

Can I electronically submit new groups to Covered California for Small Business?

Yes. Covered California for Small Business (CCSB) has just launched the ability to submit new groups directly from EaseCentral. This efficient, new service allows brokers and agents to save time and money.

As the only general agent to help test this new electronic capability, Claremont Insurance Services is an expert in how it works and how it can benefit brokers, agents, and their clients. To help benefits professionals take advantage of this new integration, Claremont has launched eQuote-to-Enrollment, a no-cost service that allows brokers and agents to offer an online quoting, plan selection, and application process that saves time, increases accuracy, and leads to faster approvals.

Can an employer offer small group medical coverage to a contract (1099) worker?

Typically insurers will allow a business to offer small group coverage only to owners or employees, however, there is one carrier that Claremont represents and the only one we know of, that permits a business to offer coverage to contract workers who are not on the payroll.

UnitedHealthcare allows businesses to offer coverage to 1099 workers. We know of many business types that rely on “1099” workers. This unique feature of UnitedHealthcare’s products can be a useful benefit for businesses looking to attract and retain valuable contributors who are not employees. Group benefits brokers should consider discussing this feature with clients and prospects. It may lead to more individuals being covered or to more businesses offering coverage.

How will carriers implement collection of the Health Insurer Tax?

The Health Insurance Providers Fee, more commonly known as the Health Insurer Tax (HIT) was one of several taxes mandated by the Affordable Care Act (ACA). Insurers are obligated to add the HIT to every sold policy and forward the funds to the federal government. The HIT, adds 2-3% to the cost of each policy according to most experts. In December 2015, Congress approved a one-year suspension of the HIT starting January 2017. If Congress does not renew that suspension, starting January 1, 2018 the HIT will be charged on all policies. This leads to the question: How will carriers implement collection of the HIT?

In the individual market where all plans start on January 1^st, it is anticipated that carriers will build the HIT into the rate. Likewise, in the group market, for those groups whose plan years start January 1, 2018, it is anticipated that carriers will build the HIT into the rate. As a result, rates for January will increase 2-3% in addition to any rate actions taken by the carriers.

However, for groups that renew after January, the method of collecting the HIT is more complicated. Carriers had to set rates for these groups in 2017 and by law cannot change rates during the plan year. If they can’t increase rates starting January 2018, how do they start collecting the HIT? The carriers we’ve spoken to are handling it this way:

When setting their 2017 rates, carriers anticipated that HIT would need to be collected for premium months starting January 2018 and continuing through the end of the group’s plan year. They calculated the total tax for those plan year months in 2018, divided the total tax by 12 and added the result to the monthly base rate for the full plan year. In short, they amortized the tax over the entire plan year.

So groups with any anniversary except January have been paying the tax since the beginning of their plan year, but only what’s owed for the months in 2018 that are in their plan year. It’s really the only way carriers could implement the collection given the requirement that they cannot change rates once a contract is in place.

Resources
America’s Health Insurance Plans analysis regarding the Health Insurer Tax.

Why do ancillary carriers need more information than medical carriers in order to provide a proposal in the small group market?

The short answer is that medical carriers, in accordance with the law (AB1083/AB1672), are permitted to set rates for small group members based on only two factors, age and employer location, while ancillary carriers are not constrained by these laws and can rate small group members on many different factors. These factors can include:

• Member age
• Member location
• Employer location
• Nature of business or SIC
• Employer contribution
• Current rates and benefits
• Claims experience
• Salary (for certain lines such as disability)

It is possible to limit the amount of information provided to an ancillary carrier by considering an “off the shelf” product such as Reliance Standard’s SmartChoice dental plans, in which case you’ll only need to provide a few data points, however, if your client wants any customization the carrier will likely ask for more information.

Ancillary carriers have good reason for requesting more data. Less data about a group and its members leads to greater uncertainty, which translates into higher cost and at a certain point, a refusal to provide a proposal. However, the more a carrier knows about a group and its members, the tighter their underwriting department can set rates in the proposal and the less likely those rates are to change once the carrier receives all applications and documentation.

The bottom line regarding ancillary proposals: more information means more competitive and better quality proposals and a much lower chance of unpleasant surprises.

How soon after employing a 20th employee must an employer transition to (federal) COBRA from Cal-COBRA?

California employers must offer Cal-COBRA continuation coverage to qualified beneficiaries if the business employed 2-19 employees on more than 50% of working days during the previous calendar year. Cal-Cobra is administered by the insurance carrier for fully-insured plans.

Likewise, all employers must offer COBRA continuation coverage (often referred to as “federal COBRA”) to qualified beneficiaries if the business employed more than 19 employees on more than 50% of working days during the previous calendar year. The employer must administer COBRA, though many engage a firm that specializes in COBRA administration to do so.

Much like the ACA’s Applicable Large Employer (ALE) determination, COBRA uses a look-back to determine if the employer must offer COBRA, Cal-COBRA or no COBRA. It can be summed up as: “your employee count last year determines your COBRA status for next year.” Today’s question relates to a business that has just brought on their 20^th employee. At what time do they transition to COBRA from Cal-COBRA? As with many things, the answer depends…

For example, on January 1, 2018, the employer will look back at the composition of their workforce during 2017 and if that 20^th employee caused them to have 20 or more employees on more than 50% of working days during 2017, then they will transition to COBRA from Cal-COBRA on January 1, 2018, for the entirety of 2018.

If however, that 20^th employee was added in December 2017 for example, then it’s likely the business did not have 20 or more employees on more than 50% of working days during 2017 and when the employer does the look-back analysis on January 1, 2018 they will conclude that Cal-COBRA is the appropriate continuation coverage to offer.

Employers who determine in early January that their COBRA status has changed based on the look back analysis should immediately report that change to the carrier. The carrier will then either start or stop administering Cal-COBRA as determined by the employer’s report. Keep in mind that an employer’s COBRA status is determined early in January every year and is not tied to the employer’s plan year.

Resources
Department of Labor – “An Employer’s Guide to…COBRA” is an excellent reference for brokers and employers.

Willis: This in-depth Q & A regarding COBRA continuation coverage is very helpful. See question #16 for a discussion of when an employer must offer COBRA.