Lost productivity due to employees becoming disabled is an issue of great cost for employers. Economic, demographic and societal trends have led to an increasingly mobile, diverse and older workforce. In addition, increased stress in the workplace and the home are taking a toll on overall employee health, productivity and safety. The result is higher health care and disability costs that have a measurable impact on employers and the employee benefits packages that they offer. These trends and costs are expected to continue to interact with and influence the marketplace, so making appropriate benefit choices remains important for employers.
Studies show that working-age adults are more likely to suffer from lengthy disabilities in any given year than they are to die. Unless it is offered through their employer, most adults have little, if any, disability insurance coverage.
What is group disability insurance?
Group disability insurance provides income protection for employees as well as cost-saving management strategies for employers. For employers, lost time on the job due to a disability can significantly impact workplace productivity and profitability. However, disability insurance provides partial replacement of lost income for employees while also covering overtime and costs of hiring replacements. Most employers offer salary continuation plans. Many states also mandate temporary disability insurance that requires employers to provide benefits equivalent those working in non-statutory states.
Is group disability insurance really necessary?
Lost time and medical costs are on the rise, and the risk of disability is greater than most employers and employees realize. Consider these statistics:
- Over 36 million Americans are classified as disabled
- Three in ten workers entering the workforce today will become disabled before retiring
- An illness or accident will keep one in five workers from working for at least a year sometime during his or her career
- Americans have a 50 percent chance of becoming disabled for 90 days or more between the ages of 35 and 65
- Disabilities affect one-fifth of Americans (over 60 million people)
- A disabling injury occurs every eight seconds at work
The possibility of becoming disabled very real for working Americans, and so are the financial consequences and costs associated with employee absence. The population is aging, which also translates to rising benefit utilization and cost. Beyond that, unscheduled absences disrupt workflow and increase cost, while human resource pressures are impacting the ability to dedicate adequate time and attention to situations where working time is lost.
The Department of Health and Human Services (“HHS”) has recently made two important announcements relating to the determination of whether an employee is eligible for a premium subsidy under the Affordable Care Act (“ACA”). (Under ACA, an employer will only incur a potential penalty for failing to offer a group health plan that is both affordable and provides minimum value if an employee enrolls in a health plan offered through an Exchange and obtains a premium subsidy.)
First, HHS announced that it has hired a third-party contractor to conduct an employer verification study whereby the contractor will be calling employers and asking if the health plan offered to their employees is both affordable and provides minimum value. The retention of the third party contractor to conduct this inquiry stems from the requirement that an Exchange must normally access an “electronic data source” to make such a determination. However, because there are no electronic data sources yet available, the law directs the Exchange to contact the employer directly and ask if the employer is offering a plan that is both affordable and provides minimum value. This verification process will occur in at least the 38 states where the Federally-facilitated Exchanges operate between the months of April and June of this year.
An Exchange is also required to notify an employer if and when an employee of the employer (1) enrolls in an Exchange plan, and (2) is found eligible to access a premium subsidy. To that end, HHS issued a model notice that the Federal Exchanges will send to employers (click here for the model notice). To the extent that an employer offered a plan that was both affordable and provides minimum value, but the Exchange did not discover that fact during the verification process, the employer will now have an opportunity to contact the Exchange to provide such information. The Exchange may then reconsider its initial determination as to an employee’s eligibility for a premium subsidy. (If, however, the employer is not offering a plan that was both affordable and provides minimum value, the employer may be subject to a penalty as to the employer shared responsibility mandate.) Accordingly, self-insured employers should be cognizant that they may want to respond to these notices in an effort to avoid paying a penalty tied to the employer mandate.
It is thus important that you and your team are aware of this new approach by the Federal Government, and that you respond to these notices in a timely fashion to avoid penalties.
Please do not hesitate to contact any member of the Allied Account Management Team with any questions.
On April 12, 2016, the Internal Revenue Service (IRS) released (new guidance on the percentages used to determine that is considered “affordable” health coverage.
Under the Affordable Care Act (ACA), the affordability of an employer’s plan may be assessed for the employer shared responsibility penalty, the individual mandate and the premium tax credit. The affordability test varies for each provision.
For plan years beginning in 2017, the ACA’s affordability contribution percentages will be adjusted to the following percentages:
- 9.69 percent under the employer shared responsibility rules (up from 9.66 percent in 2016). The shared responsibility rules, or pay or play rules, require applicable large employers (those that employ 50 full-time employees or full-time equivalents) to offer coverage that does not exceed 9.69 percent of an employee’s household income for the year.
- 9.69 percent under the premium tax credit eligibility rules (up from 9.66 percent in 2016). If employees’ required contributions exceed 9.69 percent, those employees could be eligible for a premium tax credit through the Marketplace.
- 8.16 percent under an exemption from the individual mandate (up from 8.13 percent in 2016). Individuals that lack access to affordable, minimum value coverage are exempt from the individual mandate.
Failing to meet any of these requirements could trigger significant financial penalties for your business. Remember that these percentages only apply to self-only coverage, and do not include any additional costs for family coverage.
If you offer multiple health coverage options, the affordability test applies to the lowest cost option that also satisfies the minimum value requirement set by the ACA.
These new percentages are effective for taxable years and plan years beginning after Dec. 31, 2016.
The Department of Health and Human Services’ (HHS) Office for Civil Rights (OCR) released an updated audit protocol that health plan sponsors and business associates can use to prepare for Phase 2 of the HIPAA audit program.
The OCR audit protocol is organized around modules, each representing separate elements of privacy, security and breach notification. The protocol identifies approximately 180 areas for potential audit inquiry.
The updated OCR audit protocol identifies “key activities” (HIPAA standards) and provides information on the legal requirements for each standard, as well as potential audit inquiries related to the HIPAA requirements. More information about the audit protocol can be found here.
HIPAA’s Security Risk Assessment (SRA) Tool can also be used to perform and document an organization’s security risk analysis. The SRA Tool can be downloaded here.
Even if your organization is not selected for a Phase 2 audit, it is important to self-audit your business to ensure compliance, since the OCR will likely continue its enforcement efforts after Phase 2 audits are complete.
This spring, Exchanges will begin notifying employers that they may be subject to ACA penalties if any of their employees are deemed eligible for health insurance subsidies through an Exchange. Employers who receive these notices will have 90 days to file an appeal if they feel the eligibility determination was made in error.
Information on how to file an appeal request in the federally-facilitated Exchanges, as well as some state-based Exchanges, is available at www.healthcare.gov/. Exchanges may require appeals to be filed on paper only, as the requirement for Exchanges to accept appeals online has been delayed.