HRA Approach

[ABC]

Taking my first group and implementing the HRA approach.

The group has over 60+ full time employees. Only 30+ on the group health plan. So putting the HRA contribution in place it will be interesting to see what traction we get on the Individual plans.

Most of the group is under 35F. I am expecting about 20 people to get approved on the Individual health plan.

This will erode the group plan but it's in a death spiral right now.

I think this will be the future approach to group health plans under 50 and maybe even under 100 lives.

I have estimated when I compare the comps to both approaches they are about equal the 1st year. The 2nd year it is over 50% drop in comp vs the PMPM. That is tough to swallow but I think it could be the future of small group benefits.

It is very hard to justify this approach long term.

I am open to hear what strategies other group brokers are embracing?

 

[leevena]

Taking my first group and implementing the HRA approach.

The group has over 60+ full time employees. Only 30+ on the group health plan. So putting the HRA contribution in place it will be interesting to see what traction we get on the Individual plans.

Most of the group is under 35F. I am expecting about 20 people to get approved on the Individual health plan.

This will erode the group plan but it's in a death spiral right now.

I think this will be the future approach to group health plans under 50 and maybe even under 100 lives.

I have estimated when I compare the comps to both approaches they are about equal the 1st year. The 2nd year it is over 50% drop in comp vs the PMPM. That is tough to swallow but I think it could be the future of small group benefits.

It is very hard to justify this approach long term.

I am open to hear what strategies other group brokers are embracing?

I have seen this strategy done by a few other brokers but with a different take. The take a % of the savings and the commisions from the individual policies. This means you need to have a contract with the employer and bill them, but it is not that difficult.

Good luck.

 

[ABC]

I have seen this strategy done by a few other brokers but with a different take. The take a % of the savings and the commisions from the individual policies. This means you need to have a contract with the employer and bill them, but it is not that difficult.

Good luck.

The consultant fee is something I am starting to kick around again.

 

[NWBenefitProvider]

So is the employer just setting a dollar conribution per eligible employee to get coverage on the individual market?

I think this is for sure going to be the way of the future for small groups, especially when 2014 rolls around and they do not have to worry about qualifying for coverage.

I'm interested in your thoughts on a consulting fee. I too have wondered about this from time to time. Did you come up with anything solid?

 

[Ann H]

You are correct about the 2nd year commission drop. Coupled with the extra time that it takes to meet with every employee to develop individual needs analyses and plans, it causes a big drop in income.

When underwriting is no longer an issue that will take care of a lot of the hassle, much less the liability. Currently, with declines on IFP plans for employees with health conditions, how would you work with the non-discrimination laws?

 

[leevena]

You are correct about the 2nd year commission drop. Coupled with the extra time that it takes to meet with every employee to develop individual needs analyses and plans, it causes a big drop in income.

When underwriting is no longer an issue that will take care of a lot of the hassle, much less the liability. Currently, with declines on IFP plans for employees with health conditions, how would you work with the non-discrimination laws?

Little confused, as usual. What discrimination laws?

 

[Ann H]

Little confused, as usual. What discrimination laws?

I don't know about the laws in all states, but in AZ we have to be careful that a collection of individual plans is not construed to be a group plan. On a group plan, we cannot discriminate among employees with regard to access for a benefit. We certainly cannot exclude them on the basis of health status.

Even list bill has become difficult because a collection of IFP plans has been construed to be a group. Some carriers require us to have the employer and the employee both sign acknowledgements that the list bill is for convenience only and the employer is NOT paying any of the premium, so that it is not considered employer-provided benefits and therefore subject to ERISA or the regs for group insurance.

A few months ago, I contacted two TPA's that I work with, who do HRA's, and both said they wouldn't administrate an HRA that is being used to pay for IFP plans. I'm sure 2014 guarantee issue will take care of the problem, and I see this as being the wave of the future, but I was just wondering how we can do this today without running into this discrimination problem.

 

[leevena]

I don't know about the laws in all states, but in AZ we have to be careful that a collection of individual plans is not construed to be a group plan. On a group plan, we cannot discriminate among employees with regard to access for a benefit. We certainly cannot exclude them on the basis of health status.

Even list bill has become difficult because a collection of IFP plans has been construed to be a group. Some carriers require us to have the employer and the employee both sign acknowledgements that the list bill is for convenience only and the employer is NOT paying any of the premium, so that it is not considered employer-provided benefits and therefore subject to ERISA or the regs for group insurance.

A few months ago, I contacted two TPA's that I work with, who do HRA's, and both said they wouldn't administrate an HRA that is being used to pay for IFP plans. I'm sure 2014 guarantee issue will take care of the problem, and I see this as being the wave of the future, but I was just wondering how we can do this today without running into this discrimination problem.

Thanks for the clarification. Bear in mind that I am not in AZ and I fully understand the carriers/tpa's/others hesitancy with this issue.

ERISA allows for an employer to offer a group plan or a set of individual plans to their employees, on a payroll deduction basis, and not be considered a welfare plan. This is subject to; totally funded by ee; participation is completly voluntary; employer functions is to publicize, not endorse the program, to collect and remit; and lastly no consideration is received by the ER. If an employer/broekr follows this, they should be ok.

You can reference either ERISA or I use Cornell law school, 29 CFR 2510.3-1 - Employee welfare benefit plan. | LII / Legal Information Institute

Don't know if this helps or not.

 

[ABC]

I know each state is different when it comes to this approach.

In Indiana it is legal to set up an HRA for medical reimbursement.
Under the IRS code, health insurance premiums qualify as a medical expense.

Under the HRA setup, the employer has huge flexibility with classes.

The consultant fee is a tough one. You could ask for a % of the savings. I will save this group $33K pre renewal. Post renewal the saving is $70K. To ask for 6% of the saving may be fair. What about the 2nd year? I would rather come up with a trailing consultant fee. Maybe a PMPM type fee? Try to wrap it into the TPA? I will be putting a lot of thought into this in the next 6 months.

This will be the approach for small group and maybe even large.
If you know group benefits then you can sell this approach. If you don't then there is a learning curve.

 

[leevena]

I don't know about the laws in all states, but in AZ we have to be careful that a collection of individual plans is not construed to be a group plan. On a group plan, we cannot discriminate among employees with regard to access for a benefit. We certainly cannot exclude them on the basis of health status.

Even list bill has become difficult because a collection of IFP plans has been construed to be a group. Some carriers require us to have the employer and the employee both sign acknowledgements that the list bill is for convenience only and the employer is NOT paying any of the premium, so that it is not considered employer-provided benefits and therefore subject to ERISA or the regs for group insurance.

A few months ago, I contacted two TPA's that I work with, who do HRA's, and both said they wouldn't administrate an HRA that is being used to pay for IFP plans. I'm sure 2014 guarantee issue will take care of the problem, and I see this as being the wave of the future, but I was just wondering how we can do this today without running into this discrimination problem.

Sorry, but just saw something that I did not pick up on earlier, the issue of the TPA who would not administer an HRA used for IFP's. The issue is probably due to the fact that an HRA cannot be used for non-employer dollars. (11 in the morning and I am still asleep at the wheel!). The use of an employer deduction/remit process cannot have an HRA, must use some other ERISA funding vehicle.