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Small Employers Can Reimburse for Medicare Part B, D Premiums

As the workforce ages and many employers want to keep on baby-boomer staff who have the experience and institutional knowledge that is irreplaceable, one issue that always comes up is how to handle health insurance.

Once your older workers reach the age of eligibility for Medicare, under current law you can help them pay for Part B and D premiums with a Medicare Premium Reimbursement Arrangement. These types of arrangements became legal after legislation was signed into law in 2013 to help employers provide benefits to their Medicare-eligible staff.

But the issue surfaced again recently when the Trump administration came out with new guidance for health reimbursement arrangements that paves the way for employers to set up HRAs to reimburse staff for health premiums in their personal (not company group) health plans.

Anybody who is about to turn 65 has a six-month period to sign up for basic Medicare, but if they want additional coverage they can pay for Medicare supplemental coverage such as Parts B and D.

Part B covers two types of services:

Medically necessary services: Services or supplies that are needed to diagnose or treat your medical condition and that meet accepted standards of medical practice.

Preventive services: Health care to prevent illness (like the flu) or detect it at an early stage, when treatment is most likely to work best.

Part D, meanwhile, covers prescription drug costs.

The dilemma for employers has often been whether to keep the Medicare-eligible employee on the company health plan or cut them free on Medicare.

Smaller employers – those with 20 full-time-equivalent employees – have the option to open a Medicare Premium Reimbursement Arrangement for those employees if they are coming off a group health plan and into Medicare.

For small employers, it’s legal to set up an arrangement like that, as long as doing so is at the employee’s discretion. Employers are not allowed to push an employee into a Medicare Premium Reimbursement Arrangement in order to get them off the company’s health plan.

The good news for employers is that they often can reimburse their employees in full for Part B and D, as well as Medicare Supplement, and still pay less than they would pay in group employee premiums alone. 

On top of that, the employee gets a lower deductible and overall out-of-pocket experience with less, if any, premium contribution.  

What you need to know

Here’s what you should know if you’re considering one of these arrangements:

A Medicare reimbursement arrangement is one where the employer reimburses some or all of Medicare part B or D premiums for employees, as long as the employer’s payment plan is integrated with the group’s health plan.

To be integrated with the group health plan:

  • The employer must offer a minimum-value group health plan,
  • The employee must be enrolled in Medicare Parts A and B,
  • The plan must only available to employees enrolled in Medicare Parts A and B, or D, and
  • The reimbursement is limited to Medicare Parts B or D, including Medigap premiums.

Note: Certain employers are subject to Medicare Secondary Payer rules that prohibit incentives to the Medicare-eligible population.


Protect Your Firm from Hacking by Disgruntled Former Employees

While hacking by outsiders is posing a larger and more significant threat to companies of all sizes, the threat of insider jobs – particularly by disgruntled former employees – is often an even bigger one.

These attacks, carried out with malicious intent to hamstring a company’s operations, can cause serious problems. Take, for example, the following recent events:

  • A former employee of Spellman High Voltage Electronics Corp. is facing charges after strange things started happening to the company’s systems after he resigned, due to allegedly being passed over for a promotion.

Shortly after he left, employees at Spellman began reporting that they were unable to process routine transactions and were receiving error messages. An applicant for his old position received an e-mail from an anonymous address, warning him, “Don’t accept any position.” And the company’s business calendar was changed by a month, throwing production and finance operations into disorder.

The mayhem cost his former employer more than $90,000, and he was arrested. “The defendant engaged in a 21st-century campaign of cyber-vandalism and high-tech revenge,” said Loretta Lynch, the United States attorney for the Eastern District.

  • A former employee of McLane Advanced Technologies was sentenced to 27 months in prison and ordered to pay $35,816 in restitution after pleading guilty to hacking into McLane’s systems and deleting payroll files to the point that staff could not clock in and the company could not issue payroll checks.

He was upset after the company had fired him and then refused to help him obtain unemployment benefits.

  • A network engineer, who was fired by the American branch of Gucci, stands accused of breaking into the computer systems of the Italian luxury goods organization, shutting down servers and deleting data.

The New York County District Attorney’s office accuses the former employee of using an account that he had secretly created while employed by Gucci to access the network after his employment was terminated.

He has been charged with computer tampering, identity theft, falsifying business records, computer trespass, criminal possession of computer-related material, unlawful duplication of computer-related material, and unauthorized use of a computer. The intrusion is said to have cost the company some $200,000.

What you can do

With these cases in mind, there are internal steps you can take to avoid this sort of thing happening at your company.

Route all offsite access through a VPN – This can typically prevent someone from entering your system altogether. But, once you have such a system in place, all outside connections need to be logged and monitored for suspicious activity.

Test your disaster recovery plan – You need to have a disaster recovery plan in place that includes backing up data every day, just in case someone deletes it from your servers. That way, if data is deleted you can immediately switch to a back-up IT environment.

A lot of times, organizations do disaster recovery, but unless they practice the actual recovery, they don’t know if it will work, and it doesn’t matter whether they have a physical or a virtual environment. So, don’t forget to test any plans you have.

Block unapproved software – Sometimes your employee hackers will install extra software that makes it easier for them to root through your system and create havoc. You should have systems in place that do not allow anybody to install unapproved software.

Disable ex-employee accounts and passwords – Whenever an employee or contractor ceases to work at your business – or in the case of layoffs, beforehand – you must disable their network access, accounts and passwords. You should regularly review which users have access to your systems, and know that changing passwords and resetting access rights is essential when a member of your staff leaves your employment.

Think like a malicious insider – IT managers must think like an inside attacker, and identify the weak points of their infrastructure that they themselves would exploit were they so inclined. As a senior manager, you should ask your IT managers just what they are doing to thwart any possible insider attacks.

Make suspect behavior cause for concern – Watch for human-behavior warning signs, such as complaining to others about the company and a more than usual amount of time spent accessing company data on your network. Develop a response plan for when such signs get spotted.

Beware resignations, terminations – Most insider attacks occur within a narrow window. Most people who steal intellectual property or destroy systems do so within 30 days of resignation. Accordingly, keep a close eye on departing or departed employees, and what they viewed.

If someone resigns who has had access to your most sensitive company information, including trade secrets, you need to pay special attention to ensure it’s not compromised.

Marshal forces – Businesses that prepare for attacks in advance tend to better manage the aftermath. When it comes to combating cases of suspected insider threat, include human resources, management, upper management, security, legal and software engineering.


New Health Savings Account, HDHP limits for 2020

The IRS has announced new health savings account contribution maximums for the 2020 health insurance plan year.

Employees who have an HSA linked to a high-deductible health plan (HDHP) will be able to contribute to their HSA up to a certain level to help pay for health care and pharmaceutical expenses.

Funds going into your employees’ HSA accounts are deducted before taxes during each paycheck and the balance can carried over from year to year.

Many HSAs also allow employees to invest the funds like they would with a 401(k). Because of this, HSAs have become a savings vehicle of sorts for people who are saving for health care expenses they are expecting in retirement.

HSAs can only be offered with an attached HDHP.

If you as an employer also contribute or partially match your employees’ contributions, they benefit even more, especially when compounding investment returns build up in the long term.

The IRS adjusts contribution limits for HSAs yearly based on inflation. For 2020, those limits will be:

  • $3,550 for individual coverage under an attached HDHP (up $50 from 2019).
  • $7,100 for family coverage (up $100 from 2019).

Also, remember that individuals who are 55 or older can make an additional $1,000 in catch-up contributions.

Besides the contribution maximum increasing, the deductible requirement for an attached HDHP will also climb for 2020:

  • For individual HDHPs, the deductible amount must be between $1,400 and $6,900. That’s compared with $1,350 and $6,750 in 2019.
  • For families, the range is $2,800 to $13,800. That’s up from $2,700 and $13,600 in 2019.

Long-term benefits

One of the best benefits from an HSA is the long-term advantage of being able to carry over balances year after year and let it build up for medical expenses in retirement. But, one of the key points that your employees should know is that if they use the funds in their HSAs for purposes other than qualified medical expenses, they have to pay a 20% penalty.

The website Investopedia recommends that your employees:

  • Max out their HSA contribution each year. If they do so, the amount they can save over the long term only grows through compounding.
  • Hold off on spending contributions now, and try to not use HSA funds for current medical expenses.
  • Make sure they only use the money for qualified medical expenses, so they don’t have to pay penalties of 20% plus regular income tax on their withdrawals.
  • Invest contributions for the long run. For example, if you’re currently invested in a mix of 80% stocks and 20% bonds, you should probably invest your HSA that way, too.
  • Use the account once they’re 65 or older. An added benefit to waiting until you’re at least 65 to spend your HSA balance is that the 20% penalty for withdrawing funds for purposes other than qualified medical expenses doesn’t apply. But, you will have to pay income tax if you don’t use the funds for qualified medical expenses.

Congress, Administration Serious About Tackling Health Care Costs

As more people struggle with their medical bills, Congress has been introducing a raft of new legislation aimed at cutting costs and making pricing more transparent.

The multi-pronged, bipartisan effort targets the lack of transparency in pricing particularly for pharmaceuticals, as well as surprise medical bills that have left many Americans reeling, and there are also other efforts aimed at reducing the cost burden on payers: the general public and employers.

And since consumers are affected regardless of their political affiliation, congresspersons are reaching across the aisle to push through legislation to address this crushing problem.

There are several draft proposals, but word is a number of bills are expected to be introduced soon.

Surprise medical bills

One of the top priorities seems to be surprise medical bills, which are in the administration’s crosshairs. President Trump in January 2019 hosted a roundtable to air the problems people face when hit with what are often financially devastating surprise bills after they venture out of their network for medical services for both emergency and scheduled medical visits.

After the roundtable, he directed a bipartisan group of lawmakers to create legislation that would provide relief. The House Energy and Commerce Committee in May responded by introducing draft legislation that aims to ban surprise medical bills.

Also, Sen. Maggie Hassan (D-N.H.) and Sen. Bill Cassidy (R-La.) have said they hope to introduce legislation to end the practice of surprise bills. With the White House and both sides of the aisle talking the talk, observers say that there are a number of ways legislation could tackle these surprise bills. That could include:

  • Setting caps on how much hospitals and service providers can charge, or
  • Requiring hospitals and service providers to turn to the insurance company (and not the patient) when they are seeking additional reimbursement.
  • Requiring the insurer to share more of the cost burden for the out-of-network services.

At this point legislation is still being formulated, but chances are good that we could see a bipartisan push to fix this problem. The biggest issue will be how to calculate what are “reasonable” costs for out-of-network services.

Pharmaceutical costs, transparency

The Trump administration has also made it a priority to reduce the costs of medications and tackle pricing transparency in the system.

While both Republicans and Democrats have decried the skyrocketing costs of prescription medications, the inflation for which is outpacing all other forms of medical care, so far there has been only one piece of legislation introduced tackling transparency.

Unfortunately, it’s part of a larger bill that aims to preserve the Affordable Care Act and reverse some recent policy decisions by the Trump administration, so the chances of that measure going anywhere in the Senate are slim to none.

The good news is that members from both parties have been talking about cooperating on legislation, and political observers say the chances are good some type of measure will be introduced this summer.

Other costs

Sen. Ron Wyden (D-Ore.) in February introduced legislation that would require insurers to tell people what they would have to pay out of pocket for any in-network treatment or prescription drug.

On top of that, the Senate Health Committee will soon introduce a number of bills aimed at reducing frictional costs in the system.

In addition, the Senate Finance and Judiciary committees are both in the process of formulating measures aimed at reducing health care costs, as well as prescription drug prices.


Workers’ Comp Audit Mistakes: What to Look For

No company owner wants to undergo a workers’ compensation audit, but they are a fact of life if you run a business and have employees.

Unfortunately, many audits don’t go smoothly and sometimes your insurer may make mistakes. Missouri-based Workers’ Compensation Consultants, which helps employers through the workers’ comp audit process, recently listed the 10 most common audit mistakes that insurance companies make.

The list highlights a common problem and how you can detect the mistakes to avoid being stuck with a massive audit bill. Insurance companies allow you to review the audit with your broker. If you notice that you have received an audit bill that is obviously overstated, you should contact us.

Here are the things to look for when reviewing an audit by your insurance company:

Wrong class code – Misapplication of job classifications occurs in many workers’ comp audits. With hundreds of job classes to choose from, mistakes can happen. Talk to us and review your old policies to see if any of your class codes have changed.

X-Mod is changed – After your insurer finishes the audit, it will use the information to calculate your premium. When that happens, it has to include your X-Mod to get the right rate. But sometimes the insurer may use an incorrect X-Mod. Check carefully.

Subcontractors are counted – Sometimes insurers will include subcontractors as employees, which results in a new audit bill to account for the additional “employees.” But if they are genuine subcontractors, they should not be counted. Often, uninsured contractors will be included as employees. Make sure to use insured contractors only.

Disappearing credits – Most policies will have some sort of premium credits or other modifiers. Sometimes during audits, the insurer will remove them when recalculating the premium they think you owe. Watch out for missing credits and other modifiers if you get an audit bill, like:

  • Premium discount
  • Schedule credits
  • Deductible credits
  • State-specific credits

Audit worksheets missing – If the auditor fails to provide you with audit worksheets, which are used do compile your payroll and other audit information, you should ask to check their work. They will provide you with the information you need to carry out such a check.

Your rates changed – The rates you are charged at the beginning of your policy period must remain the same for the entire policy period. If your base rates have changed, the insurer may have made a mistake.

Separation of payroll – Depending on your industry, you may or may not be able to split your employees’ payroll between job classifications (like cabinet installers and sheetrock hangers). This is a pinch point when errors can occur. If the auditor says you are not allowed to split job classifications even though you have in the past, your audit may be in error.

Unexpected large premium due – If you get a significant bill for your insurance company after your audit, the auditor may have made mistakes, particularly if you know that your employment has remained relatively stable and you’ve had no significant claims, if any. If it seems out of whack, call us.

Payroll data doesn’t match – If there is a discrepancy between your payroll data and what you see on the audit, a mistake may have been made. Try to match the payroll on the audit with that generated from your accountant. If the insurer made a mistake, you could end up paying for phantom payroll numbers.

No physical audit – There are three types of audits:

  • Mail audit
  • Phone audit, and
  • Physical audit

The mail and phone audits are prone to errors since neither you nor your staff likely have any experience in premium auditing. If you have a big bill after a mail or phone audit, mistakes could have been made.


40 States Sue Generic Drug Makers for Collusion

The heat is growing on the pharmaceutical industry after more than 40 US states filed a lawsuit accusing generic drug makers of engaging in a massive price-fixing scheme.

The lawsuit accuses 20 companies of conspiring to fix prices of more than 100 generic drugs, including some that are used to treat cancer and diabetes. The defendants include the largest producer of generic medicine in the world: Teva Pharmaceuticals.

The new lawsuit comes after a five-year investigation that uncovered a scheme through which “coordinated price hikes on identical generic drugs became almost routine,” according to an investigative report by the Washington Post. The suit covers the period from July 2013 to January 2015.

The companies and executives would “routinely communicate with one another directly, divvy up customers to create an artificial equilibrium in the market” to keep generic drug prices artificially high, the lawsuit says.

The scale of the alleged collusion was summed up by Joseph Nielsen, an assistant attorney general and antitrust investigator in Connecticut, whose office has taken the lead in the investigation: “This is most likely the largest cartel in the history of the United States,” he told the Washington Post last December.

In announcing the recent lawsuit, he cited e-mails, text messages, telephone records and testimony from former company executives that indicate a “multi-year conspiracy to fix prices and divide market share for huge numbers of generic drugs.”

This is not the only litigation. Pharmacies and other businesses have filed their own lawsuits against the generic drug makers. One such suit documents huge price hikes – like a 3,400% increase in the price of an anti-asthma medication – and investigators believe that generic drug producers colluded to raise prices in tandem or not make their products available in some markets or through specific pharmacy chains.

Significance of the states’ suit

The multi-state lawsuit is important because generics account for 90% of pharmaceutical spending in the U.S. Despite that, they only account for 23% of the total drug spend in the country, according to the Association for Accessible Medicines.

With so many prescriptions being written, the savings to consumers could be huge if the drug makers are found to have fixed pricing and they subsequently change their ways. What’s not clear, though, is whether it would actually spur changes in pricing by the companies.

According to the lawsuit, the drug companies allegedly conspired to manipulate prices on dozens of medicines between July 2013 and January 2015.

It accuses Teva and others of “embarking on one of the most egregious and damaging price-fixing conspiracies in the history of the United States.”

Connecticut Attorney General William Tong, who filed the suit, said the investigation had exposed why the cost of health care and prescription drugs was so high in the U.S.


Retaliation Cases Against Employers Continue Growing

The federal Equal Employment Opportunity Commission is seeing more and more retaliation complaints by U.S. employees, with such charges accounting for 47% of all charges in 2017. That’s compared with 37% in 2011.

Employment law attorneys say that the increase is in part due to the fact that the employees who bring retaliation charges have a higher degree of success than those that bring a regular discrimination charge.

There is a lower standard of harm that must be proven for a successful retaliation lawsuit thanks to the U.S. Supreme Court case, Burlington Northern & Santa Fe Railroad vs. White.

While an employee alleging discrimination must prove that they suffered a “materially adverse employment action,” a retaliation plaintiff only needs show that the employer undertook some conduct that may dissuade them from making or supporting a charge.

Also, juries inherently distrust employers and they wouldn’t put it past one to retaliate, according to an article written by Daniel A. Kaplan of the law firm of Foley &Lardner.

Kaplan sets out three steps employers can take to avoid retaliation complaints:

Set clear and unambiguous policies

  • Your company policy should clearly state that retaliation is not permitted.
  • The policy should describe the parameters of inappropriate conduct as well as you can define them.
  • Put the policy in writing.
  • Include a reporting and grievance procedure, including the person or persons to whom the employee can report a retaliation complaint.
  • Have employees sign an acknowledgment of receipt of your policy.

Investigate complaints promptly

  • Remember that anyone who participates in an investigation is likely protected from retaliation (not just the employee who makes the complaint, but witnesses as well).
  • Communicate the results of the investigation to the grievant.
  • Take effective remedial measures, including carefully reviewing all disciplinary measures before imposing them. You should also ensure that disciplinary actions are consistent with past practices.

Train management

  • Make sure all of your managers are trained and understand the policy.
  • Ensure they understand who is protected from retaliation (participants, complainants, and even persons related to the complainant in some cases).
  • They should also understand what constitutes retaliatory conduct and, if they are unsure, they should speak to your human resources manager.

Help Your Employees Save Money on Drugs

Most employers are doing all they can to keep their employees’ health insurance and health care outlays to a minimum.

And while most of those efforts are focused on the upfront cost of insurance, co-pays and deductibles, many employers fail to help their employees control the very costs they actually have the most control over and one of those areas is medicine.

Helping your employees become wise consumers of health services can also cut your overall insurance costs as well as help your employees conserve more of their own funds if they have high co-pays and deductibles.

The cost of drugs can vary greatly between pharmacies to a shocking degree. And while your employees may have low co-pays for some drugs, if they go to the most expensive option when the insurance is covering the tab, it basically adds to the cost drivers for your insurance plan.

Here’s how wild the price swings can be. Consumer Reports recently surveyed pharmacies to price out a basket of five popular generic prescription drugs and here are the prices:

  • Healthwarehouse.com: $66
  • Costco:  $150
  • Various independents: $107
  • Sam’s Club: $153
  • Walmart: $518
  • Kmart: $535
  • Grocery stores: $565
  • Walgreens: $752
  • Rite Aid: $866
  • CVS/Target: $928

It also pays to shop around from store to store and ask for discounts.

“A Rite Aid store near our headquarters in Yonkers, N.Y., was able to get the price of atorvastatin, the generic version of Lipitor, down to just $18 from $300 through a combination of in-store and external discount programs,” the report states. “But at another Rite Aid, we were told the cost could only be lowered to $127.”

Consumer Reports recommends that your employees:

  • Use online discounts. There are a number of websites that can provide you with discount coupons or vouchers for drugs, including:
    • GoodRx
    • Blink Health
    • WeRx.org

On these sites you enter the name of the drug, dosage and quantity and where you live and it will provide coupons or vouchers and identify which pharmacies you can use them at.

  • Expand your shopping horizons. As you can see on the list above, prices vary tremendously. And combining shopping around with a good plan for using coupons and your employees can save themselves and your health plan boat loads of money.
    They should also check out their local warehouse discount store as both Costco’s and Sam’s Club’s pharmacies were also quite reasonable.
    Not to be outdone, neighborhood pharmacies and grocery store pharmacies were also much cheaper than the large regional drug store chains. “The absolute lowest prices we found in each city we called were almost always at these kinds of stores,” Consumer Reports wrote.
  • Ask pharmacies if they will honor online coupons. Pharmacies will almost always honor them, Consumer Reports found. But Consumer Reports mystery shoppers had to be persistent in getting the pharmacies to use them, since they often run prescriptions through insurance automatically, even when paying the retail cash price and using discount coupons would cost less.

One last thing

Consumer Reports recommended that once someone settles on pharmacy that consistently gives them good deals on pharmaceuticals, they should fill all of their prescriptions there.

That way it’s easier for them to spot “potentially dangerous interactions and other safety concerns.”

But if your employees notice that their pharmacy bills start rising noticeably, it may be time for them to start shopping around again. To stay on top of this requires regular checks to make sure that they are not seeing prices creep up.


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