For Employers, Obamacare was just the first Act

By Bill Hill


The Affordable Care Act is almost fully implemented now and it looks as if no relief is forthcoming.  The second half of the show is just beginning as agencies write controlling regulations.  By the time the new Congress implements any repeal or reform, the new ERISA (Employee Retirement Income Security Act) regulations will begin.

For most employers, offering a health plan is nothing more than choosing a plan and paying premiums.  Even though ERISA has always imposed notification requirements on employers, most employers were simply not aware of the additional duties.  But once an employer decides to offer a group insurance plan to employees, they take on the responsibility of a plan sponsor and MUST follow the regulations or face penalties.  Since many employers had a waiver from reporting requirements, fines were typically rare.  Beginning in 2019, every plan sponsor will be required to file Form 5500 reporting information about their plan and confirming compliance with the regulations.

Last June, the Department of Labor (DOL) issued final regulations to Form 5500 filings for small firms.  These regulations re-enact a filing requirement which was suspended several years ago. This time however, the DOL is looking for substantially more information. They have created an entirely new schedule asking the plan sponsor to acknowledge they are providing all the required notices to employees at the prescribed times.  Schedule J will ask if you have given employees the following documents:

  • Summary Plan Description
  • Summary of Material Modification
  • Summary of Benefits and Coverage
  • COBRA -continuation of coverage
  • HIPPA -protection of personal information
  • Mental Health Parity
  • Women’s Health & Cancer
  • Newborns & Mothers Health
  • Affordable Care Act
  • GINA -Genetic nondiscrimination
  • Michelle’s Law
  • Medicare Part D
  • Notice of waiver from annual limits (Mini Med Notice)


These documents are typically distributed at the initial enrollment, during open enrollment and upon request. Since there are always modifications to the laws, the documents must also be kept current.  

Normal reaction time to group health insurance regulations has proven to be very slow and rightly so since the regulations in recent years have been changed before final implementation.  This should not be the case with Form 5500.  The DOL may not have required small employers to file Form 5500 but the requirement to distribute the plan notices above has always existed.  If your plan files for the first time in 2019, the DOL will know very quickly if your plan should have filed in 2018.  There is no statute of limitation on penalties for failures.

There has been a change in focus at the DOL, the warning signs are all around.  Some of recent changes:

  • Carriers have changed applications asking about ERISA compliance
  • DOL budget request for 2017 list “vigorous enforcement” as the first effort out of six listed to obtain compliance.  
  • DOL recently increases the fine for failure to file 5500 from $1,100 to $2,063 per day.  This increase is attributed to inflation.

The DOL knows almost all employers are out of compliance, there are approximately 7.5 million businesses in the US and there were only about 54,000 5500’s filed.  The DOL rightly assumes a good number of plans are out of compliance.

There are many services available to plan sponsors to help with compliance, some of them will even take responsibility in event of an audit.  If you are the fiduciary of a plan, this could be the worst possible time to watch and to see what happens.  If you wait until the end of the second act to find out how much the show cost, you will find it very expensive.

Mary Cody-Hill promoted to VP of Operations

Mary’s recent promotion acknowledged work she has undertaken for the past two years as the Affordable Care Act has required more and more time to administer.  Health insurance eligibility and administration rules have changed every year for the last five years and clients are looking for more assistance to navigate the process and ensure accessibility of coverage.  Visor found it necessary to add the position to create and manage the processes to accommodate client’s needs.  This is a welcome relief to firm consultants who will now have more time to focus on employee benefit strategies and carrier negotiations for clients.


Increase in Department of Labor audit activities

As we start the New Year, I want to alert you to a trend I see developing in the Employee Benefits Security Administration at the Department of Labor (DOL). The government is on a hunt for money to pay for the Affordable Care Act (ACA) and, while the fines from the ACA don’t fully kick in for another couple years, there is one law that applies to all health plans and that has been largely ignored by employers and the DOL — until now. Employee Retirement Income Security Act (ERISA) applies to every employer that offers a group health plan, regardless of size, and the DOL knows that almost all employers are non-compliant. We have seen more audits in the last 2 years than over the previous 26 years. This anecdotal experience seems to be supported by the reports that the DOL is hiring a large number of new agents. Continued…

Intelligence Report on the Affordable Care Act

Hello from the Visor Benefits “Accountable Care Act Frontlines,”

As you can imagine, the closer we get to January 1 the busier things get for us and for our clients, as employers try to figure out how to handle the inevitable rate increases.

We have developed clients all across the US and although dealing with multiple state regulations can be challenging, one of the advantages is that we have an early warning system that alerts us to activities in various states and allows us to anticipate trends that could affect consumers across the country. Carriers usually implement similar procedures nationwide to gain economic efficiencies and they are typically aided by the National Association of Insurance Commissioners (NAIC) who coordinate for their mutual benefit when implementing policy. Continued…

Patient Protection and Affordable Care Act(PPACA) Summary Benefits of Coverage | Annual Notices

This will be the first of many notices Visor sends out to assist in the transitions you will need to make as the Patient Protection and Accountable Care Act(PPACA) becomes fully implemented. Many have delayed taking any action to comply with provisions of the new law for several reasons; “It will be repealed.” or “The insurance company will take care of it.”, are a couple of the responses I frequently hear. I admit that the sheer volume and complexity of PPACA would make anyone apprehensive. The deadlines for compliance are upon us and there will be many changes over the next 14 months. Continued…

Inside Perspective on Healthcare Reform

By Bill Hill

Remember the Klaxon horn sound from the movies, the familiar awoooga? It provided a clear message to passengers that your ship was about to hit an object. It is now sounding from the great Northwest, warning the rest of the country that forcing insurance companies to ignore established actuarial protocols will result in higher rates and bankruptcy.

One of the advantages Visor gains by writing business nationally is perspective. Working in many different states and experiencing first-hand the reaction to the different stages of “reform” allows us to give early warnings for clients to prepare for what is ahead. Continued…

St. Louis Business Journal Health Reform Seminar- 7/25/2012

Q&A Part 4

Thank you to everyone I invited for attending. Thirty minutes to discuss such a monumental law change was a disservice to the topic.  I know most that attended were there to learn about some of the implications of the new law and not about the new Medicaid funding scheme.  Hopefully, you found some value in the material my staff handed out and it will give you some ideas on how to solve your health insurance crisis in 2014.

I am working on a new seminar that will focus exclusively on provisions of the law and possible solutions.  Please keep posted as I will be making a formal announcement once speakers are confirmed.

For those those that are interested, the YouTube video is the part of the Question and Answer session where I try to explain some of the cost implications of PPACA.

The Bronze Trap

By Bill Hill

While we wait on the Supreme Court to decide the final outcome of Obamacare, everyone would do well to remember how and why we got into the healthcare financing problem in the first place.  There are no solutions that can fix the problem when the reimbursement or provider payment process provides incentive for utilization. The current healthcare delivery system is basically an open credit line for providers. 

All of the parties involved in any medical care transaction have no interest in limiting the amounts paid out to providers.  Insurance companies make money on cash flow, not risk.  The more money flowing through their books, the more money they make.  Providers limit their practices to the specialties that make the most money per event and hope to offset low payments from government paid plans.  Policyholders are uninformed about the cost of care and have no incentive to manage the utilization.  Employers are the most abused in this social contract as they are forced to fund the system and administer it for free.

The above is just a partial list of reasons why inflation on medical insurance premiums has reached a crescendo in employer budgets.  Medical insurance decisions now come at the expense of someone’s job.  If any vestiges of the Obamacare’s mandated plan designs survive, every employer will find themselves eventually subject to the substantial fines from the government. 

Of the four plan designs allowed under Obamacare, the minimum plan design that can be offered by an employer is the Bronze Plan. This plan can offer a maximum deductible of $2000 and a 50% coinsurance. The Bronze Plan will also have an “actuarial value” of 60% which is going to be determined by some little understood calculation yet to be determined.  The maximum potential expense will also be subject to the poverty guidelines that determine whether an employee qualifies for assistance.

With over twenty years of experience, I can tell you that the most predictable decision for any employer managing a group health plan is to increase the deductible and coinsurance when the premiums become financially unbearable.  Under Obamacare, the employer is left with no recourse other than to maintain the Bronze level of benefits despite the cost.  Once an employer plan exceeds the minimum out of pocket for the employees or breeches the “actuarial value”, the government will impose a monthly penalty for every employee that applies and receives assistance.  So not only will the employer be forced to pay the increased cost of the plan but also pay the $3,000 fine per employee that receives assistance!

Many employers are still under some illusion that they are going to continue to offer their current group medical insurance plans after Obamacare is fully implemented. Unfortunately, it has not occurred to most that insurance companies can only make profit on 15% of group medical premiums and 20% on individual products.  The one question that employers should be asking themselves is: Will insurance companies make more profit on a $400 per month premium or a $1,000 per month premium?

Plan accordingly, dump your group health plan and implement a Defined Contribution Plan before you are forced to do it later when it cost you more.



Putting the ‘Insurance’ Back in Health Insurance

….What can be done?

Reforming the system involves, first and foremost, encouraging people to buy insurance for themselves, by eliminating the tax-code discrimination against individually purchased health insurance…..
Comment:  Good article explaining some of the negative impacts of insurance regulations.  The tax code discrimination the journalist mentions is in reference to purchasing individual health insurance without an employer sponsored Cafeteria plan.  Individual health plans purchased through a BetterFits program are pre-tax deducted. 
The good news here is the acknowledgement of a strategy to reform the health insurance finance system. 

Higher Prices Charged By Hospitals, Other Providers, Drove Health Spending During Downturn

…..The findings are based on about 3 billion claims paid by Aetna, Humana and UnitedHealthcare on behalf of 33 million people with job-based insurance nationwide.  The data represent about 20 percent of the people with insurance nationally, but do not include spending for people who are on Medicare, Medicaid or those who buy their own policies.

The report shows that people with job-based insurance “are paying more and getting less,” says Chapin White, a senior researcher at the Center for Studying Health System Change, a nonpartisan think tank in Washington. He did not work on the report……

Comment:  The ugly truth is that as the baby boomers make their way through the age bell curve, they will send every group health plan into a death spiral.  This is a term that the industry uses to describe what happens when there are more people in the old/sick category than there are in the young/healthy category.   As the claims increase and the premiums go up, the young/healthy people find less expensive options leaving the old/sick people behind exascerbating the effect of claims on the premiums until the plan cannot charge enough money to cover the claims and finally collapses. 

One of the major reasons group health plans are now more costly than individual health policies is because the median age of the baby boomers is 57.  There simply are not enough people employed on the younger side of the curve to offset the expenses of those in the age category where poor lifestyle choices manifest themselves.  As this median age approaches 65, the claims and premiums will increase exponentially.

If you think of the nation as one big company with a group health plan, the nation’s plan is in a death spiral.  There has never been a group health plan survive a death spiral.  Some have bought time by restructuring(Healthcare Reform) but the end is always the same.  The plan collapses and leaves those with health conditions uninsured.  In this case, most will end up on Medicaid.  

As employers try to hire new(younger) employees, those internet savvy employees will opt to purchase substantially cheaper individual coverage instead of joining the group health plan.  The employer will gladly facilitate the purchase as it will cost them less which will just expedite the demise of the employer group health plan.  Start saving money today and call Visor about implementing a BetterFits program.  It will never be too late but at least you won’t have to regret not calling sooner.