Health & Welfare Plans Newsletter

August 9, 2016

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[Guidance Overview]

Health Care Reform -- The Gift That Keeps on Giving: Section 1557 Nondiscrimination Rules
"Covered plan sponsors must ensure that their group health plans do not discriminate based on any section 1557 protected status in terms of health coverage, claim denials, or cost sharing limits.... [If] a plan contains a blanket exclusion of coverage for transgender services, that exclusion must be removed. These changes should be made in time to be communicated during 2017 open enrollment meetings."
Wilkins Finston Friedman Law Group LLP

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[Guidance Overview]

We Received an Exchange Subsidy Notice -- Now What?
"The IRS is not expected to start assessing play-or-pay penalties until after its receipt of employees' individual tax returns for 2016 and employer information returns (i.e., Forms 1094-C and 1095-C). Since the details of the IRS penalty assessment and appeal processes have yet to be revealed, there is no guarantee that successfully appealing the HHS subsidy determination will automatically avoid the imposition of the penalty tax by the IRS. However, if you are an applicable large employer, the HHS appeal process affords you an opportunity to establish an administrative record of the correct facts."
Benefits Bryan Cave

Employers Expect Health Care Costs to Increase 5.0%
"[N]early nine in 10 (88%) employers identified managing pharmacy spending generally for high-cost specialty drugs specifically as their top priority over the next three years. Planned actions include: [1] Ensuring appropriate utilization.... [2] Addressing specialty pharmacy spending that occurs through the medical benefit plan.... [3] Differentiating benefit coverage to influence site of care."
Willis Towers Watson

How Common Procedures Became 20 Percent Cheaper for Many Californians
"[U]nder reference pricing, CalPERS patients flocked to lower-priced hospitals and outpatient surgical centers. Prices and total spending for the procedures plummeted. For knee and hip replacements, lower-priced hospitals saw their market share increase by 28 percent. As higher-priced ones lost market share, many chose to reduce their prices. Prices for the procedures fell by an average of more than 20 percent, saving CalPERS and its patients $6 million over two years."
The New York Times; subscription may be required

Personal Info of 3.3 Million Health Insurance Customers at Risk After Massive Breach
"Personal information for 3.3 million health insurance customers was compromised when a server for a company that creates ID cards for payers was accessed without authorization. The company, Albany, New York-based Newkirk Products Inc., announced the breach on [August 5]. Newkirk creates ID cards for more than 10 health insurance companies both directly and through its relationship as a service provider to Birmingham, Alabama-based DST Health Solutions Inc."
FierceHealthcare

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Obamacare Appears to Be Making People Healthier
"A few recent studies suggest that people have become less likely to have medical debt or to postpone care because of cost. They are also more likely to have a regular doctor and to be getting preventive health services like vaccines and cancer screenings. A new study ... offers another way of looking at the issue. Low-income people in Arkansas and Kentucky, which expanded Medicaid insurance to everyone below a certain income threshold, appear to be healthier than their peers in Texas, which did not expand."
The New York Times; subscription may be required

GAO Report: Medicaid 'Innovation' Waivers Should Expand, Not Restrict Health Coverage
"Under the ACA, states can use 1332 Medicaid waivers starting in 2017 to tinker with some of the law's core provisions, including the individual mandate, employer penalties, rules governing exchanges and covered benefits, as well as premium tax credits. However, the GAO report states that as a practical matter, proposals cannot upend the need for the IRS and the federal exchange, HealthCare.gov, to administer a consistent program across states, one that does not unduly burden the government to make state-specific IT changes, for example."
American Journal of Managed Care

[Opinion]

Risk Adjustment Gone Wrong
"Risk adjustment requires an insurer to report on the health risk of its members, and to do that it needs good data. Plans that played the game better from the start set a high priority on collecting and reporting on that information.... The dominant pre-ACA players had more years of member data, and mature analytics capabilities, to help them maximize their risk scoring. This has created a serious penalty for new entrants in the first few years which CMS has not addressed."
The Health Care Blog

Benefits in General

Transparency, Decision Support Are Next Wave in Benefits Self-Service
"As benefits self-service platforms become more sophisticated regarding decision-making support, employers should focus on finding and working with vendors that can take them in this new direction.... For example, will the actual system require modifications and workarounds to get it running alongside your overall HR systems? With so many new players entering the self-service technology market, employers should be looking for a partner that is financially sound and capable of meeting their needs for the next three to five years."
Society for Human Resource Management [SHRM]

Executive Compensation and Nonqualified Plans

[Guidance Overview]

IRS Proposed Regs Update 409A Rules for Nonqualified Plans
"The IRS has made payment schedules more flexible, allows offers of stock rights to prospective employees and relaxes some administrative requirements. Accelerating a payment after a plan termination is permitted only if the employer terminates and liquidates all plans in the same category. The IRS is proposing to strengthen the proposed anti-abuse rule for income inclusion."
Willis Towers Watson

409A Audit Could Be Coming to Your Company
"[A]necdotal evidence ... suggests that in other than very large companies, the primary target plans have been in order: [1] Nonqualified defined benefit pension plans that do not have the same formula as a broad-based DB plan in which the covered executives also participate; [2] Other nonqualified DB plans that simply make up for IRS limits (415 and 401(a)(17)); [3] Deferred compensation plans that look different from the company's 401(k) plans; and [4] 401(k) mirror plans. In other words, the target seems to be executive retirement plans."
Benefits and Compensation with John Lowell

ISS Releases 2017 Policy Survey
"Through its annual policy survey, Institutional Shareholder Services (ISS) seeks feedback from institutional investors, public companies, corporate directors and the consulting and legal communities on emerging trends in corporate governance and executive compensation and other matters as part of its policy formulation process. The policy survey often provides an advance read on where ISS is heading on a particular issue."
Meridian Compensation Partners, LLC

CEO Compensation Decreased in 2015
"[Total direct] compensation for CEOs in the S&P 500 ... declined from a median of $10.6 million in 2014 to $10.3 million in 2015. This decrease -- the first in at least five years -- is primarily attributable to lower short-term incentives ... The past five years witnessed an inverse usage of long-term incentive vehicles as the prevalence of stock options among S&P 500 companies shrank to 57% in 2015 from 72% in 2011. Over the same period, performance share usage increased from 76% to 87% and time-vesting shares remained steady at 59%."
Mercer

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Lois Baker, J.D., President  loisbaker@benefitslink.com
David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
Holly Horton, Business Manager  hollyhorton@benefitslink.com

BenefitsLink Health & Welfare Plans Newsletter, ISSN no. 1536-9595. Copyright 2016 BenefitsLink.com, Inc. All materials contained in this newsletter are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of BenefitsLink.com, Inc., or in the case of third party materials, the owner of that content. You may not alter or remove any trademark, copyright or other notice from copies of the content.

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