Grandfathered Health Plans

[VolAgent]

Leased employees. I move my employees from my books to yours. I still manage them and control them, but you pay them. You use your EIN and the IRS sees them as your employee for most purposes.

 

[ABC]

The employer cannot pass on more than a 5% increase to the employee and stay grandfathered.
It does not matter if true medical inflation is 20%.

ABC, perhaps you are misunderstanding me. If premiums go up by say 20% b/c of medical inflation, then yes, the plan can pass on those costs to the employee and still remain 'grandfathered', assuming of course it doesn't reduce benefits, etc. What it cannot do is shift a greater percentage of those costs onto the employee, either through increased deductibles (above a certain allowed increased), increased co-insurance (not at all), increased co-pays (above a certain allowed amount), or increased percentage of the premium paid for by the employee (by more than a 5% shift)

If you are operating under the assumption that employee premiums on an absolute basis can only increase by 5% (in addition to all the requirements being met) to remain grandfathered, I would suggest you re-read the regulations.

 

[HealthGuy]

Vol Agent: Thanks for the explanation but I still don't follow you.

 

[VolAgent]

Simple, they are no longer my employee in the eyes of the IRS. Therefore, if one of them goes into an exchange plan, I don't have to pay the penalty. So, I can provide a rich plan to my key employees without providing it to the rank and file. Also, if one of the rank and file goes into the exchange, I'm not paying a penalty for my managers on the group plan. I just have to pay the PEO enough to cover the costs of the employee plus the fine. Additionally, if the employee goes into an exchange plan, it won't mess up any tax credits or deductions I might be getting through my business.

Again, it is just a thought I've had. There very well could be some flaws with it.

 

[ABC]

I go up against PEO plans every year. Sometimes I win and sometime I lose.

PEO plans will not be the answer. The problem with them is adverse selection which is very similar to association plan. After about 7 years all the healthy people jump off and only the sick people are left on the plan.

There are some PEO plan out there that are very competitive but they have weak networks and once they are forced into an unlimited benefit model those plan could be in trouble.

The admin fees on PEO plans can be very high. I saw one case where they were paying around $1,200 an employee per year.
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Interesting

Simple, they are no longer my employee in the eyes of the IRS. Therefore, if one of them goes into an exchange plan, I don't have to pay the penalty. So, I can provide a rich plan to my key employees without providing it to the rank and file. Also, if one of the rank and file goes into the exchange, I'm not paying a penalty for my managers on the group plan. I just have to pay the PEO enough to cover the costs of the employee plus the fine. Additionally, if the employee goes into an exchange plan, it won't mess up any tax credits or deductions I might be getting through my business.

Again, it is just a thought I've had. There very well could be some flaws with it.

 

[HealthGuy]

Thanks VOL and ABC for pimping out the thread further. I'm learning here.

 

[nycagent]

The employer cannot pass on more than a 5% increase to the employee and stay grandfathered.
It does not matter if true medical inflation is 20%.

I do not know where you are getting this advice from, but if you are using this to guide your clients, I urge you to re-read the regulations, because it is absolutely incorrect.

Premium increases in and of themselves do not impact grandfathered status. Only cost shifting/benefit reduction does.

go to Questions and Answers: Keeping the Health Plan You Have: The Affordable Care Act and ?Grandfathered? Health Plans

for the source documentation.

 

[ABC]

Fact Sheet: Keeping the Health Plan You Have: The Affordable Care Act and ?Grandfathered? Health Plans

"Cannot Significantly Lower Employer Contributions. Many employers pay a portion of their employees' premium for insurance and this is usually deducted from their paychecks. Grandfathered plans cannot decrease the percent of premiums the employer pays by more than 5 percentage points (for example, decrease their own share and increase the workers' share of premium from 15% to 25%)."

There ya go NY!

 

[VolAgent]

I go up against PEO plans every year. Sometimes I win and sometime I lose.

PEO plans will not be the answer. The problem with them is adverse selection which is very similar to association plan. After about 7 years all the healthy people jump off and only the sick people are left on the plan.

There are some PEO plan out there that are very competitive but they have weak networks and once they are forced into an unlimited benefit model those plan could be in trouble.

The admin fees on PEO plans can be very high. I saw one case where they were paying around $1,200 an employee per year.
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Interesting

I think you misunderstood what I wrote. First, the PEO is not going to provide insurance to the employees. It is going to house them and pay the fine for not providing "government approved" coverage. There is no adverse selection as there is no insurance.

Second, I know of several PEOs in the area that are extremely competitive.

Now I agree, PEO health insurance can blow up in your face, but I'm suggesting just the opposite. Put the employees in the PEO so you don't have to offer them the coverage you offer your key employees.

 

[Dave020]

Fact Sheet: Keeping the Health Plan You Have: The Affordable Care Act and ?Grandfathered? Health Plans

"Cannot Significantly Lower Employer Contributions. Many employers pay a portion of their employees' premium for insurance and this is usually deducted from their paychecks. Grandfathered plans cannot decrease the percent of premiums the employer pays by more than 5 percentage points (for example, decrease their own share and increase the workers' share of premium from 15% to 25%)."

There ya go NY!

Actually NY was correct. Your earlier post indicates that it had to do with premium increases (medical costs) which is not the case. NY simply pointed out that it has to do with employer contribution formula changes, which is reiterated in your own post.

The employer cannot pass on more than a 5% increase to the employee and stay grandfathered.
It does not matter if true medical inflation is 20%.

Increase in contribution formula, yes. Increase in premium does not matter so long as the contribution formula is not altered. Medical inflation would not effect contribution formula just because premiums increase.

If premiums go up 40%, both the employer and employee experience a 40% increase in their respective contribution levels. This does note effect grandfathering status.

If the employer chooses to reduce his/her liability on the plan by going from 100% to 50% contribution formula, that DOES change the grandfathering status of the plan.