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2014 (and beyond) Defined Contribution Health Insurance Strategies

2014 (and beyond) Defined Contribution Health Insurance Strategies . Presented by Trey Tompkins of Admin America, Inc. To the South Atlanta Association of Health Underwriters Thursday March 20,2014 East Point, Georgia. Defined Contribution Health Insurance Strategies .

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2014 (and beyond) Defined Contribution Health Insurance Strategies

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  1. 2014 (and beyond) Defined Contribution Health Insurance Strategies Presented by Trey Tompkins of Admin America, Inc. To the South Atlanta Association of Health Underwriters Thursday March 20,2014 East Point, Georgia

  2. Defined Contribution Health Insurance Strategies • Overview of pre-2014 Strategies • PPACA and IRS Notice 2103-54 • Word On The Street • Remaining Options

  3. Overview of pre-2014 Defined Contribution Strategies • Internal Revenue Code Support • Common Vehicles • HIPAA Non-Discrimination Issues • ERISA Issues • State Law Issues • Carrier Issues

  4. Internal Revenue Code Support • Section 105 • Gross income does not include amounts paid by employers directly or indirectly to employees to reimburse them for expenses incurred for “medical care” • Covers the expenses of the employee, the spouse and dependents • Section 213(d) – Definition of Medical Care • Amounts paid for diagnosis, cure, mitigation, treatment, or prevention of disease or for the purpose of affecting any structure or function of the body or • Amounts paid for insurance for medical care or Long Term Care

  5. Common Pre-ACA Defined Contribution Vehicles • Cafeteria Plans • Premium Reimbursement Arrangements • List-Billing and Premium Only Plans • Additional Employee Funding Opportunity • Exclusion against Long Term Care related expenses • Health Reimbursement Arrangements • Rollover Possibility • Long Term Care Expense or Insurance Both O.K.

  6. Pre-ACA HIPAA Related Non-Discrimination Issues • HIPAA Prohibits Discrimination Based on Health Status • Individual Insurance Availability Dependent on Individual’s Health Status • Plan Designs Required To Accommodate Individuals Who Could Not Satisfy Underwriting Requirements • Possible But Increased Costs and Therefore Decreased Utility of the Strategy

  7. ERISA Issues • Factors Jeopardizing Employer Safe Harbor Exemption From ERISA for Voluntary Plans • Direct or Indirect Employer Contribution • Tax Preferred Reimbursement of Premiums • Never any Direct DOL Guidance on the Issue • Always of Concern for Conservative Clients and Advisors

  8. State Law Issues • Arrangements Could Be Deemed Group Health Plans Under State Law • Texas and North Carolina • Group Health Plan Status Required COBRA Offering, Guaranteed Issue and Pre-Ex Waivers • Carriers Could Not Effectively Participate Under These Conditions

  9. Carrier Issues • Specific Prohibitions in Application Barring Employer Participation in Premium Payments • Pre-ACA Consequences Included Rescission • Carriers Also Indicated Consequences Could Include Termination of Agents Appointment

  10. Questions about the old rules? Speaker’s Prerogative: the ability to drop pictures you like into presentations you spend hours preparing.

  11. PPACA Problems For Defined Contribution Strategies • ACA Prohibition Against Annual and Lifetime Limits For Group Health Plans • Mandatory Coverage For Preventive Care Services Without Cost Sharing

  12. IRS Notice 2013-54 • Issued September 13, 2013 • Classified the common Defined Contribution Vehicles as Group Health Plans • Subject to Annual and Lifetime Limit Prohibitions • Subject to Preventive Care Requirement • Prohibited Integrating Individual Insurance Coverage With The Defined Contribution Arrangement To Satisfy ACA Requirements

  13. IRS Guidance Regarding Notice 2013-54 • Acknowledged that other possible defined contribution vehicles may not fall within the descriptions of the arrangements prohibited by the Notice • Have expressed intent that Notice was meant to prohibit all Defined Contribution strategies based on Individual Health Insurance • Kevin Knopf – Sr. Technician Reviewer, IRS Office of Chief Counsel • Clients and Advisors must weigh the benefit of trying to take advantage of technically viable strategy against the cost of defending the strategy in the event of an IRS challenge

  14. Therefore Defined Contribution Is Dead …or Maybe Not

  15. Remaining Defined Contribution Options • New Plans Offered Through DC Vendors • SHOP Exchanges • Private Group Exchanges • Plans Utilizing Excepted Benefits (FSAs, HRAs) • Health Savings Accounts • Gross Ups

  16. Questions?

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