leevena

DAHO, I would say that the answer to your is yes it does work, but you/employer need to work at making it successful. A cafeteria plan provides an employer with a great deal of flexibility and opportunity to achieve their "benefit objectives." My personal belief is that most employers go into a cafeteria plan with good intentions, but fail to understand the level of strategy, work, and commitment that is needed to make it truly successful. My suggestion would be to start with your company's benefit plan objective(s), and see how a cafeteria may/may not help you achieve those objectives. If you do not have any objective(s) you should get one right away. Once you have objective(s) in place for your benefit offering, then you can consider what benefits to include and how to fund them. Remeber, the cafeteria plan is optional, because depending on your objective(s), it may not work for you. Good luck.

I would like to respectfully disagree with the concept that this could be group insurance. If the employer is offering individual plans as stated, and not a "group plan" as defined by their state, then it is not a group plan. Rrdennis06 stated that "The firm doesn't have a group plan and each individual needs to get benefits on their own." I am assuming that the employer is providing some level of $ reimbursement to the employees for the coverage that THE EMPLOYEE SECURED. If this is true, then the employer is not "discriminating" agains rrdennis06 because the employer has not "given benefits", rather, they are reimbursing employees who have went out and got their own medical plan. You may, and I am not an attorney, but you may have an issue with the other employees being given $ for their plans and not you. But again, I have no idea. Just because an employer promises to look into a group plan, does not require that employer to actually implement one for the employees. Company sponsored benefits are completely optional to the employer. One more thing. I don't know where you live, but I would venture a guess that your state does have programs available that you were unaware of, such as a high risk pool. You may want to do some checking on what options are available. The employer and private (individual) markets are not the only source of coverage.

Don. Don't know the answer, it's just something they have been doing for years.

Good point Don. I actually forgot to mention that. The practice can actually go beyond what you stated. As with a laser that pinpoints one specific thing, so does this for Stop Loss. The carrier can actually laser the risk out of the plan completely.

Wow, you have many questions in this post, all of which can be complicated. Let me start with some easy responses, which are general in nature. A self-funded group can structure their benefit plan as they see fit. For example, the benefit plan could make certain expenses (HIV) ineligible, or limit the benefit amount. (If you do this, you may want to have an alternative option available, such as a HMO, where the employees can go for full coverage) I would start with your stop-loss carrier. They can provide you with the issues that need to be addressed, from which you can make your decisions. You should also bring into the discussion your benefits attorney. Beyond the usual administrative and benefit legal issues, you may be facing disgruntled employees/insureds who will be affected by this decision. As a side note, you may want to consider an aggressive Disease Management or Wellness program for this group. These programs can help identify employees/dependents at risk and bring in strategies to help minimize utilzation and costs.

SHaddon posed the question "can an employer charge the early retiree more than the insurance company is charging the employer for the same employee." From prior posts this appears to be an insured product, for the large group market (51+) in California. Since it is a fully insured product, with the carrier offering one rate for both active and retiree, I would suggest the employer is wrong in charging a higher cost to the retiree. Seems to me a half decent lawyer would have a field day with this. We all recognize that the cost of retiree coverage is higher than active, and it is unusual that the carrier would offer the same benefit level, at the same cost, to the retirees. So either the carrier has blended the rates to recognize the additional risk, or the carrier is not aware. My suggestion would be for more research, specifically answering the following questions; 1) is this a fully-insured plan?, 2) does the carrier recognize this sub-group of retirees as eligible?, 3) does the rating formula blend the active/early retiree risk together for a blended rate?, and 4) how did the employer determine that the early retirees could be charged more than the active? Good luck.

JSimmons. I have searched and reviewed a few of Harry Beker's documents on line and cannot find anything that confirms your comments. I did find a document developed by the Employee Benefit Research Institute (ERBI) dated October 2003, that clearly states the employer cannot go after the over spent funds. The link is http://www.ebri.org/pdf/publications/facts/1003fact.pdf please see the 5th bullet point. It states that, "However, because of the uniform reimbursement requirement, if an employee uses the entire amount in the FSA before the end of the calendar year and leaves employment with that employer, he or she does not have to reimburse the employer the difference between what was contributed, up to that point, and the amount used." Again, I am not an expert in this benefit plan, but did I read something incorrectly? Or was there a change made after October of 2003?

J Simmons. I do not pretend to be an expert about these plans, but if you look at IRS Regulation section 1.125-2, Q&A Answer 7(b)2, it states that the employer cannot ask for the money back. It even goes so far as to say the employer cannot even accept the money. The health fsa must be available at all times during the participants coverage period. This is off-set by the year end use it or lose it rule.

I can only comment on the FSA part of the question. Whether you ignore it or not, is up to you. My suggestion would be to send them a polite letter informing them that you are under no legal requirement to reimburse them. I would also include a comment that the IRS does put the employer at risk for such incidents. Good luck.

The employer cannot require you to repay the money. Now, you may run into problems, and depending on the amount you may end up paying it back. For example, what if they inititate legal action and you determine it's cheaper to pay then to defend. But the bottom line is the employer cannot require re-payment.

You probably cannot cover this individual because he is classified as "temporary", not full-time. Check your health plan definition of an eligible employee, is usually excludes "temporary" employees. As for state regulation, you don't mention your state. Also, since you are under 20 lives, and I suspect you have a fully insured health plan approved by your state, whatever the documents say about this situation will follow state regs.

Sorry, not allowed. These fees are insurance premiums, nor are they for medically necessary expenses.

SHaddon, I agree with QDROphile. The employee can drop their health coverage, and the deductions must continue.

TXCafe--have the ineligible owners "bonus" themselves additional monies, take it home, put it in their personal checking accounts, and then write a check to the HSA. Yes, it is taxable as income, but the write it off as a HSA contribution.

You will have a very difficult time justifying either expense. There is a significant difference between medical necessity and convienence. Your statement seemed to answer the question when you stated that both the SUV and running board were "suggested" to the patient/enrollee. Unless there is something else to this, I would not suggest it is not an eligible expense.

KJohnson brings up a good point, for which I do not know the correct answer. The extra dollars can be run through the 125, but I do not know for sure about the MERP. I feel confident that the MERP is ok, but not 100% confident. Regardless of the tax issue, what the employer is doing is not illegal, and has been done by other companies in the past. Now that I know it is a larger group, I do have some additional comments about the downside to the employer. Assuming that group is experience-rated or some form of alternative funded, this could cause some negative effects for the group. As the size of the group decreases, the credibility of the group's claim experience decreases. This could lead to additional costs, or lost of experience rating. But that being said, I would hope that the group has already explored this possibility and calculated what the effect would be on their costs.

Perfectly legal, and has been done by companies for years. As for whether there is a drawback for an employer to do this, it depends. I don't know which state this group is located, nor the underwriting guidelines, so I cannot say for sure. What I would ask is, "will the employers' healthplan be negatively impacted as he shrinks the enrollment?" Usually the answer is no, but not sure. As for the upside, the employer can fix their cost to these employees at the contribution amount and not have to worry about future rate increases. Hope this helps.

Being a smaller sized employer, say under 10, is difficult situation. The costs for administration of a HRA plan tend to be relatively high compared to the cost of the actual plan. A couple of thoughts/comments. An owner/company can self administer an HRA. The downside is you need to make sure you do it correctly, such as adjudicate claims, construct the benefit design, identify which expenses would be covered, issue the correct documents, etc. There is no need for a 3rd party verification. So the question I would ask the owner/company is "do you know what is required and can you do it properly"? Usually the answer is no. Since I do not know any of the particulars for either of these groups ( the 1 person group and the 2 person group) you might want to consider a HSA instead. There are pros and cons about this approach also. Good luck.

Since they voluntarily deleted the grandchild it appears as though they will need to wait until open enrollment. I don't have all the details, but there may be other types of coverages or services available to this child. States have various options available. Check out the NAHU website, under the Consumer Information, Healthcare Data Base for some tips.

It sounds as if there are two issues being discussed in the replys. The question being asked by JGARBER is if the non-custodial parent, who has an HSA family contract, can fund the HSA account up to the family amount. NAMEALREADYINUSE is correct. If the insured has a family contract, then they can contribute up to the family amount. The question/issue raised by JANETM is another one altogether. She is stating which plan is primary and which is secondary.

Yes. The regulations allow a person to contribute to someone else's account.

A couple of thoughts on this. I worked for a group model HMO years ago and we had the same policy in place for usage of our own providers. However, we were not reimbursed, rather, the provider group never collected the copays. HRA could be set-up, but it might be more effort/cost than it's worth, depending on the size of the group. I guess it depends on the group size and amount of transactions. As for why the carrier is doing this, and I am not aware of which carrier is in effect, I am guessing that it has to do with the underwriting and actuarial assumptions that have gone into the rating. 401Chaos has made some good points about this in his reply. Carriers develop rates for plans based on certain assumptions, including out-of-pockets costs and usage. When you eliminate the out-of-pocket costs, you increase the usage, thus driving up the claim cost. With the advent of consumer driven plans, carriers have seen some of their high deductible plans being used with HSA or HRA funds. BS of CA actually went so far as to eliminate commissions for brokers who did this. Good luck.

No. To be eligible, she must have a qualified HDHP, the PPO you mentioned.

Have you tried using an outside service for this? I am of the opinion that it is usually in the best interest of an employer to administer their own plan. There are a variety of issues that arise when you administer your own plan, such as who will do the testing, how will you keep up with the legal changes, how do you administer the plan effectively, legally and effeciently, etc. It seems to me that it will be well worth your time and effort to have an outside organization do it. Just my thoughts.

Since the Pensacola plan is being terminated because the business is going away, then there would not be a requriement that they be offered COBRA.