Fiscal Year PPO vs. Calendar Year HDHP: Big Disadvantages? (My First Post)

[Guest Peng]

Hi - my first post.

I apologize if this isn't the right forum.

I've had a long day of internet research & phone calls after discovering $2000 of new medical charges today that I wasn't expecting for 2013.

Background:

I work as a professional engineer for a small company with 11 employees.

Our HR department & medical plans are through some other company.

Our health plans are Aetna.

In late-August every year, we have an "opt-in" to one of about eight medical benefit plans including:

*6 PPO plans (which operate Oct 1 - Sept 30)

*2 HDHP plans (which operate Jan 1 - Dec 31)

Regardless of the plan selected, it becomes effective on October 1st.

Myself & a few others have switched plans a few times... and it seems we get penalized for the switch:

Case 1: A person has a PPO plan and decides to switch to a HDHP plan.

On October 1st, the new HDHP plan starts with a deductible at $0. A person may pay $400 towards their $1000 deductible.

On January 1st, the HDHP plan year re-starts with the deductible back at $0.

Essentially, it appears that the employee had to incur a "mini-year" of three months.

This does not seem fair as the first months of most plan years will be full pay into the deductible.

Case 2: A person has a HDHP plan and decides to switch to a PPO.

On October 1st, the new PPO plan starts with a deductible at $0.

Thus, the HDHP plan only lasted 9 months... not 12.

In Case 1, a person could seemingly be paying into three plans over two calendar years. PPO for 9 months, HDHP for 3 months, HDHP for 12 months.

In Case 2, a person could seemingly be paying into two plans over one calendar year. HDHP for 9 months, PPO for 3 months.

If this logic is correct, an employee loses out every time they wish to switch between plans.

Additionally, the set-up seems to usher people towards the PPO plans (which have much higher premiums).

Questions:

1. Do these conditions actually exist? Are my cases possible?

2. Does this seem fair that an employee should have 9-month and 3-month "mini-years" where they are paying straight into deductibles, every time they switch plans?

3. Is there anything I can do about this? (My pregnant wife is a stay-at-a-home mom and is partially-paralyzed... we've had a rough year and $2000 more in charges is not something we want right now.)

Thanks to anybody that could move this to the right forum and/or answer questions.

Mike in Atlanta, Georgia

[GBurns]

I have a problem with your statement that your medical plan is through another company.

Is this a PEO arrangement or is it a controlled group?

If it is a PEO, is the arrangement a MEWA and did your company adopt this arrangement with Board Resolution etc?

Aside from trying to understand if you have a legitimate arrangement in the first place, I have some other questions.

How do you pay your premiums? Is it done on a pre-tax basis?

If it is done on a pre-tax basis, Who is the sponsor of the section 125 cafeteria plan under which this is done?

If your premiums are paid pre-tax through a section 125 plan, changes such as you out line are not usually allowed.

You did not indicate whether or not there was any change in premium (either employer or employee share).

Is there a change in premiums?

[Guest Peng]

Thanks for the reply.

My company doesn't have a lot of employees and my understanding was that we got some HR company (they are called TriiNet) to help in providing things like HR/payroll/benefits.

I spoke with representatives from both Aetna & TriiNet yesterday on the phone.

The lady from TriiNet did mention some things about "Section 125" and that it was completely acceptable for our enrollment/opt-in date to be October 1st even though HDHP plans run Jan 1-Dec 31.

On our earning statements, the following are listed below "BEFORE TAX DEDUCTIONS":

Aetna PPO

Aetna Dental

401k/Roth

HSA Aetna

Premiums increased drastically for employees this year, coinciding with October 1st plan changes.

[As an aside: My company's contribution towards benefits, $405.50 per 2-week period did not change, 0% increase, so the 30% overall plan increase [from $528 per 2-week period to $692.50 per 2-week period] resulted in the employee's portion MORE than doubling, from $122.50 per 2-week period to $287.00 per 2-week period. This is for a HDHP2000 plan, $4000 family deductible, Georgia.]

Anyways, my big problem is that premiums change 9 months into (on Oct.1st) a 12-month HDHP plan year (Jan 01-Dec 31).

We have some people that switch from their PPO plans to HDHP plans and then incur this little/separate 3-month HDHP plan year from Oct 01-Dec 31 (which is obviously full pay into that plan)... and then on Jan 1st, they can finally start a new typical 12-month plan year for that HDHP. And if they don't like it next October 1st, they'll basically forfeit the last 3 months of the plan if they switch back to a PPO, starting October 1st.

It just seems like an employee could possibly be paying into TWO plan deductibles in a ONE-year span.

Does this seem fair?

[GBurns]

The problem is really not paying into 2 plan deductibles as much as it is most likely violating the section 125 rules by changing the employee salary reduction election absent an eligible event.

Have a look at the permitted changes at www.changeofstatus.com

Then there is the issue of the changing the salary reduction amount without the explicit signature of the employee. How and when are the authorizations signed?

You also did not indicate the plan sponsor of this section 125 plan.

[Guest Peng]

The premiums change effective October 1st, each year.

The employees can retain their current plan or select a new plan, effective on that October 1st.

I have an HDHP plan, which runs on a calendar year of Jan1-Dec31.

My big issue is two-fold:

1. If I switch from PPO-to-HDHP or HDHP-to-PPO, I may only get a 3-month year (HDHP Oct1-Dec31) or a 9-month year (Jan1-Sept30) from my HDHP, before a new plan or plan year starts.

2. Since the premiums change for Oct.1st, I basically find out that my premiums are changing 9 of 12 months through my HDHP plan year. I have to accept the premium change (by re-electing the same plan) or choose a new plan (which becomes effective on Oct 1st, even when my current HDHP plan is only 9 of 12 months through.)

My actual case for this (calendar) year:

We had met the $4000 DED for our HDHP 2000 around July. After that point, we were on a prescription co-pay and a 10% of other claims. This was nice... we have a LOT of medical issues (my wife is pregnant AND disabled). Knowing we had a baby on the way for 2014, for our Oct.1 enrollment date, we switched to the $6000 DED, with $4000 annual premiums. (A $10,000 total year 2014 cost).

The other option would have been to staying in the $4000 DED plan we've had... but that jumped to $7000 premiums. (A $11,000 total year 2014 cost).

Again... this was a decision we make for our calendar year 2014 plan, because of the future child birth.

But this also resulted in my HDHP for THIS year switching from $4000 DED to $6000 DED on October 1st.

In mid-Oct, my wife had a scare and needed medical attention. So now... this costs us an extra $2000 out-of-pocket because of a decision we wanted to make for 2014. [and when considering premiums, our previous plan would have cost us $1750 in premiums for Oct-Dec AND covered the $2500 of medical claims at 90%. (i.e. Previous plan would have cost $1750 + $250... for remainder of 2013). But because we made the switch to the new plan... the plan we wanted for our 2014 baby... we pay less premiums, $1000 for OCT-DEC, but have this $2000 bill that we now have to pay. (i.e. New plan costs us $1000 + $2000+... for remainder of 2013).

It frustrates me greatly.

We should be able to make a decision for ONE upcoming plan year... not for the latter 3-months of the current CALENDAR year and that same decision for ONLY the first 9-months of next calendar year.

And it will be like this every year....

(As for the other items you mention: "plan sponsor" and "section 125 plan"... I don't really understand these things. My small company, call us ABC, is signed up with this other company (TriiNet) to receive medical benefits from Aetna. I don't know anything about the legalities or agreements between our management and their company. I'm just a regular employee.)

Again... I really, really, really appreciate all the time you've spent reading.

I'm so frustrated and really have no idea who I can talk to about this.