In Network or Out of Network -- Courts Decide

It's been the same with every health plan that I can remember being in. There is always a communication to me that I am responsible for determining whether the provider that I choose to see is in network or not. Frankly, it's never seemed fair.

Consider that health care payers don't always update their websites with changes immediately. Doctor's offices don't want to be responsible for telling their patients in which networks they are participating providers. So, the easy way out is to put the burden on the insured who really has no good way to divine the answer.

Enter Killian v Concert Health Plan. This case was eventually argued en banc (for the lay people among us including me, that means that it was heard by all the judges of the Court) before the 7th Circuit Court of Appeals (housed in Chicago). The Court, as I read it, ruled for the plaintiffs. For plan participants, this is good news. For insurers and perhaps for plan sponsors, it's not as good.

The most important (to me) facts were as follows:

• Susan Killian was a cancer patient.
• She suffered from lung cancer which spread to her brain.
• The first hospital that she went to (in network) said they could not operate, but sought a second opinion.
• The second opinion was provided at Rush University Medical Center that thought they could successfully operate.
• She was admitted for successful brain surgery, but died a few months later.
• The Killians (Susan Killian was married to James) received only out of network reimbursement for services at Rush.

This seems fairly normal, doesn't it? Well, it would be, if not for this fact pattern:

• Mrs. Killian's insurance card had on it several toll-free numbers that insureds could call to ask questions about their coverage.
• Mr. Killian called one before Mrs. Killian's surgery.
• The representative said there was no information on the hospital (Rush), but to "go ahead with whatever had to be done."

The Court cited five points in combination in coming to its decision:

1. Mr. Killian did appear concerned/interested in whether the providers were in or out of network.
2. Mr. Killian did follow the instructions on Mrs. Killian's insurance card by calling one of the toll-free numbers and inquiring about the in versus out of network status
3. Mr. Killian informed a representative (at the toll-free number) that he was looking to determine whether the surgery would be paid for as in network
4. Mr. Killian was told by the representative at the toll-free number to "go ahead with whatever had to be done."
5. Mr. Killian acted as a reasonable person would in extrapolating from that that the services would be covered as in network.

What the Court decided was that Mr. Killian may now pursue a claim against his deceased wife's health plan for breach of fiduciary duty. What Mr. Killian will actually do and how a court will rule on that matter is not clear, but this is the first case that I am personally aware of where the burden of determining in versus out of network status has been shifted somewhat by the Courts.

I'm not an attorney, so I'll leave the rest of the analysis to those with formal legal training. That said, as a health plan participant who has at times during his own lifetime been frustrated by the same determination, this feels like a step toward protection of plan participants who do act diligently.

Politics Doesn't Fix Health Care

It doesn't matter which party is making the decision. Politics doesn't fix health care.

It seemed clear to me that President Obama's November 14 decision to allow insurers to renew certain cancelled policies for 2014 was done entirely for political expediency. I have not yet found anyone who disagrees with me. So, now everything is fixed and everyone who had a policy that they liked in 2013 can keep that for 2014, right?

Wrong!

First, state regulators have to grant approval for this to happen. In a number of states, regulators have already said that they will not allow these sub-standard, non-compliant policies to be renewed.

Second, there have been increases in health care costs over the last year. The natural extension of this is that premiums must increase. This requires actuarial calculations to determine the correct increase. Actuarial work takes time. And, the actuaries who would do this may have other priorities right now. That some politicians(s) thought something was a good idea does not create more hours in the day, more days in the week, or more weeks in the year for any actuaries that I know, and I know a lot of actuaries.

Third, health insurance plans require administration. In the 21st century, plan administration requires software. Software requires time to be created or updated. And, it needs to be checked for glitches (see, for example, healthcare.gov). That some politicians(s) thought something was a good idea does not create more hours in the day, more days in the week, or more weeks in the year for any programmers that I know.

And, then there is the business decision that insurers must make. Despite a general public hatred of insurance companies, people tend to be somewhat loyal to their policies if not their insurers. Suppose you have a policy with, for example, Aetna and they decide to not reinstate it, but your friend who has a policy with, say, Kaiser, gets theirs reinstated, how will that make you feel about Aetna? On the other hand, if you find out that the Kaiser policy got reinstated with a large increase in premiums, you might feel even worse about Kaiser. It creates a frankly unhealthy guessing game.

But, wait, there's more.

According to the guidance we have received, these reinstated policies are simply a one-year fix. They will not be grandfathered, or so it seems. So, even if your policy is reinstated, come this time or thereabout, in 2014, you will be facing the same dilemma of trying to work out your health insurance arrangement for 2015. Well, at least healthcare.gov may be working properly by then.

Flaws of Common -- How About Choice Instead

I read a lot these days about "common." There's Common Core on the education side of things (in the US). I read this morning in a Harvard Business Review article about common goals for a health care system. We are supposed to do things for the common good.

This is all well and good, but when we look about any of these common elements, who determines what it is commonly best? In my experience, it is neither the end users nor the people in the trenches. More typically, it is one of the government, the bureaucrats (they may be government), the administrators who will never have to implement the common things they prescribe, or people from think tanks who often have never spent a day in the real world.

Here are a couple of facts. I am different than you. You are different from the person who is currently sitting or standing nearest to you. Even if that person is your identical (maternal) twin, you've had different experiences and while you may be far more alike than any two random people, you are not the same as each other. In fact, you are different.

So, what is commonly best? I don't know. Neither do you. And, neither do the people developing common programs. Perhaps (and perhaps not), they are more informed about the subject matter to which they are applying commonality than are you and I. But, generally, they have not walked a mile in your shoes or mine.

I'm much more a fan of choice. Suppose we consider employee rewards. For these purposes, I am going to define an individual's rewards value (or cost) to be the sum of (the value or cost) these elements:

• Compensation -- base pay plus bonus plus overtime plus long-term incentives plus equity compensation to the extent that any of these apply
• Retirement benefits -- this includes 401(k), profit sharing, pension, ESOP, or anything else that is targeted to help an individual to generate retirement income or retirement wealth [I separate this from the next element because retirement benefits are typically pay related while many other benefits either are not or are less pay related]
• Other benefits -- this includes health care as its largest component
• Softer stuff -- consider here things like training and development, and work/life benefits

Suppose for any given year, each employee was offered a formula (we're getting very hypothetical here, so ignore current tax law) whereby they would be allocated some number of dollars based on a percentage of what we would typically view as base pay plus some flat dollar amount. This is essentially what people are given today, except that they are largely told how to take those dollars. 

Suppose further that each employee could allocate those dollars any way that he or she wanted. Consider a health care option. Much like under the Affordable Care Act, a person would have an option of a somewhat minimal bare-bones plan (think Bronze missing some of the essential benefit coverage) right up through a plan that subjects the employee [and family] to extremely little risk (think Platinum plan). The difference here is that I am going to let each individual annually design their own program to meet their needs. In order to avoid complete anti-selection, however, there will be certain components that someone can only opt in and out of periodically (for example, once you opt in to maternity health benefits, I am going to make you stay in that program for at least 10 years to avoid people opting in only in the year in which they expect to have a baby).

What we would get from such a program is that each person would take the dollars allocated to them and design an UNcommon program that meets their individual needs. Pretty cool, huh?

Now, let's move back to education. In the programs that produce the most successful people (success here isn't measured by income, but by achievement and no, I don't know how to measure achievement either, but you know what I mean), teachers don't teach to tests. They teach to students. They let the creative juices flow whether that creativity is geared toward math for a mathematically inclined student or art for an artistically inclined student. The teachers seek to bring out the best in students. 

Yes, we all need exposure to different areas of education. And, while it does come up in conversation occasionally, that I learned in four different grades that Vasco Da Gama was a Portuguese explorer who sailed around the Cape of Good Hope in the very late 15th century, that knowledge has certainly not added to my probability of success. Perhaps that time in school could have been more useful to my future had it been spent on developing my social skills or on my writing (I hated writing when I was in school). I had classmates, however, who were so naturally social butterflies, but who thought that basic arithmetic was the most challenging thing they would ever encounter.

It goes back to my them. We are all different. If you are in your teens, even though you think that you and your best friend have so much in common (there's that word again), your lives will likely move down different paths.

Why then does everything have to be common?

Gamifying Benefits Programs or Top That!

Admit it. You probably like playing games. They may or may not be the same games that I like to play or that your neighbor likes to play, but you like playing games. And, one of the reasons that you like playing games is for the challenge of achievements.

You're part of the Facebook generations. Whether that means you are 14 years old and barely old enough without exaggerating your age to get a Facebook account or you're 40 years old and claim that you originally got on Facebook to watch what your kids were doing or you're 84 years old and you really like the idea of sharing pictures and tales of your grandchildren and great-grandchildren, there's a good chance that you spend more time on Facebook than you are willing to admit.

No, this is not an endorsement for Facebook. Some days I love it, some days I hate it. This is more of a look yourself in the mirror moment. When you first got on Facebook, it was probably either a curiosity or just a social thing. But, then you looked at your news feed and you saw that one of your friends had earned a new level in Farmville, or that another friend had passed three people in Candy Crush Saga,or that yet one more friend had played a 100 point word in Words With Friends, and you got that feeling in your brain -- hey, I can do that, too.

So, you started playing one game or another, and admit it, you became a little bit obsessed. Even though I know you won't admit it, you really want all of your friends to see it when your game of choice posts to your wall about your latest success. You puff up with pride and that wry little smile that says, "Top that!"

Before I move forward, I need to apologize to my readers. Many of you know that I would prefer that the English language remain sacrosanct and that we as writers and speakers should use actual words. Yesterday, I came across the words gamification and gamifying and I really doubted that they were words. So, I looked them up, and sure enough, much to my chagrin, they are words that can be found in English language dictionaries. Sad, but true. So, that explains my use of one of them in the title of this post and in other places within the post.

OK, welcome back to the real world.

Corporate HR struggles mightily with ways to make its benefits programs more effective. With large amounts of responsibility being placed on HR to make benefits programs both effective and cost-effective, it takes some creativity to move to the top of the classs.

Bring on gamification!

We're going to have to make participation in programs like this optional due to various privacy laws such as HIPAA (the Health Insurance Portability and Accountability Act of 1996, if you really want to know what HIPAA stands for), but I have a suspicion that because we all love games that many of your employees will, with no coercion at all, choose to share their game progress with friends, neighbors, co-workers, and even their dreaded second and third level connections. They'll get that sense of pride and be thinking, "Top that!"

Let's consider an example. Modern Cool Company (MCC) has been concerned about its employees' eventual ability to retire. MCC's Director of Benefits Oil Derrick Zoolander (he goes by Derrick) knows that most of MCC's employees don't save any money outside of their 401(k) plan and the data that Derrick gets from the plan's third party administrator (TrustWorthy) suggests that most are not saving much inside their 401(k). Derrick had no idea what to do, and frustrated, he hung out on Facebook.

Eureka, he found it. As he looked at his news feed, dozens of his friends were either posting or allowing their games to post about their accomplishments. Rachel Greene Slime killed her one-millionth enemy in Mafia Wars. Richie Cunningpork leveled up in Pet Saga. Chrissy Snow Flake passed her friend Jonas Grumpy (perhaps a more obscure reference, but Jonas Grumby was the Skipper on Gilligan's Island) and Greg Brainy was heard to be screaming "Marcia, Marcia, Marcia", after being passed by his sister in Vampire Wars.

Derrick went to his graphics people and had them start to develop 401(k) badges. When an employee of MCC named Don Draperies got a financial checkup through the TrustWorthy Adviser System (TWAS), he got a badge. He could toss it in the garbage (no self-respecting game player would ever do that), proudly display it in his cube, or bring it home to show his wife and kids (frankly his kids would be more impressed if he had a similar achievement in World at Warcraft), and perhaps more importantly for his ego, MCC's intranet allows him to collect his badge on there and post it to social media both internally and externally. Don was so excited that he posted it to his Facebook wall with the message, "Top that!"

Seeing the success and excitement of his first badge winner, Derrick went back to his graphics people and created more and more badges. There was the "Increased My Deferrals" badge, the "I Got My Full Match" badge, the "I Paid Off My Loan" badge, the "402(g) Limit" badge and the list goes on.

It only took a little over a year, but Derrick's 401(k) plan was the envy of his peer group, Levels of participation had gone from a measly 41% to 98% during 2014. Other than the one in the first week of January, the MCC 401(k) plan didn't have a single request for a hardship withdrawal the entire year, and Derrick learned right after Christmas that MCC had been named the winner of the Plan Sponsor of the Year Award for 2014 and that he would get to accept the award for the company. And, you know of course what he was going to do with that knowledge -- he posted it to Facebook with the status, "Top that!"

I know it sounds stupid and I know there may be legal hurdles and I know that you probably don't think gamification is a word, but consider it. Give it a try. Thank me later.

The Hidden Side of Health Care Costs

I'm not always a fan of Employee Benefit Research Institute (EBRI) reports, but this one resonated with me. 61% of workers report an increase in health care costs. But, the bigger story is that most of them say that this increase is affecting them in other ways. In these days of half the political world touting self-reliance and the other half touting the government providing for all, this survey through my lens says that neither works on an island. We need a bit of both.

So, what does the report say? It tells us that among the 61% whose health care costs are increasing (I am reading that health care costs for this purpose are the sum of premiums and out-of-pocket costs), as a result of this:

• 32% have had to decrease the amount they are saving for retirement
• 57% have decreased the amount they are saving for other purposes
• 22% are having trouble paying for necessities such as food, heat, and housing
• 38% are struggling to pay other bills
• 1/3 have seen increases in credit card debt
• 27% have essentially drained their savings
• 16% have had to borrow money

If I were on one side of the aisle (in Congress) or the other, I would say (you know which side comes down where on this one):

• This is exactly why we need the Affordable Care Act (ACA, PPACA, ObamaCare)
• Forcing people to have what the government deems the proper health insurance cannot work

Let's consider what is happening though. When I was in my teens, oh so many years ago, most of the adults around me were retiring in their late 50s or early 60s. They looked forward to their golden years. They had defined benefit pension plans. Now, unless they are among the particularly fortunate group, their means of saving for retirement is a combination of a 401(k) plan and whatever they can save on their own. Ask these people when they plan to retire and most will laugh at you. They cannot see that on the horizon.

Also, back in my teens, by the time people retired, they owned their homes free and clear. Now? A recent survey that I read (sorry, I can't find the link) informed me that at age 65, more than half of homeowners still have a mortgage and for many of them, it has a very substantial balance.

Whatever the reason, and that's for a different day and a different post, we need some real changes. In the credit card era, people lose track of what they owe. And, much like the federal government, it's tough to make a dent in that when so much of your income is used for debt service. Unlike the federal government, however, the average guy on the street just can't borrow money at interest rates from 0% to 4%. No, your credit card company probably charges you some amount in excess of 10%.

Do I have the answer? No, I don't. If I did, you would hear me screaming it far and wide. But, in a day when take-home pay for many Americans is decreasing (higher taxes, higher employee cost of benefits) and the cost of goods, services and debt service is not, it gets really difficult for the economy to grow.

To me, this is the ultimate hidden side of health care costs. Because of the increases in personal costs of health care, the non-health care side of the economy is stifled.

We need change, but I don't see that kind of change-a-coming.

IRS and Treasury Provide Carryover Flexibility in Health Care FSAs

This came as surprise to me. In Notice 2013-71, the IRS and Treasury provided another softer version of the Health Care Flexible Spending Account (FSA) use-it-or-lose-it (UIOLI) rule, allowing certain plans to be amended to allow for limited carryovers from year to year.

As people who deal with health care FSAs on a regular basis know, back in 2005, IRS and Treasury modified the then existing rules to allow a health care FSA to be amended to provide a "grace period" for UIOLI, extending 2 months and 15 days beyond the end of the plan year. So, in English, calendar year plans could allow participants in 2013, for example, to use their HSA deferrals up until March 15, 2014, without losing them. This was done to be consistent with the short-term deferral rules under Code Section 409A (although I'm not sure what the inherent connection should be between Sections 125 and 409A).

Now this. Under the new UIOLI rule, plan sponsors have a choice. Those that have never adopted the grace period rule (most have in my experience) may amend their plans to add the new $500 provision. Those that have the grace period provision may amend their plans to eliminate the grace period provision for a year and add the $500 rule.

What are the implications of this? While the Notice is effective immediately so that calendar year plans could be amended for the 2013 plan year, this blogger thinks that is generally not a good idea if the plan uses the grace period rule.

Why? Consider your employee Betty Badeyes. Betty, like the rest of us who stare at a computer screen more than we should, has long since not had 20/20 vision. She wears corrective lenses. And, she knows that she has an appointment in late January 2014 to have her eyes examined and probably get a new prescription. These are bona fide expenses for reimbursement under a health care FSA, and they are in excess of $500. Betty knows this. So, when she made her health care FSA election back in late 2012 for the 2013 plan year, she took into account that she would be spending about $1,000 in early 2014 that she could use under the grace period role.

If the plan sponsor, amends the plan to eliminate the grace period and implement the carryover rule for 2013, then Ms. Badeyes may have to change her name to Betty Badtemper as she will only be able to pay for about half of her eye care expenses with flex dollars. What's more is that unless she can find some other qualified medical expenses before the end of the plan year, Betty may be losing $500 under the UIOLI rule.

In summary, I think this is a good option that most plan sponsors should consider adopting. But, they should communicate the change before the beginning of the plan year that it will affect.

2014 IRS Limits -- Better Late than Never

As all those of you who weren't hiding away from your computer, smartphone, tablet, television, radio, and friends know, we had a little shutdown in Washington DC in the first part of last month. Non-essential employees not only weren't being paid to work, they weren't allowed to work.

Of course for many of us who are benefits professionals, knowing the 2014 limitations under various Code sections is pretty darn essential. But, the powers that be, who by the way wield far more power than your sometimes faithful blogger, decided that this was not among the essential functions.

Well, your government is back at work and therefore, we have our 2014 limits. Drum roll please ...

High-deductible health plans (HDHPs) 

• The annual limitation on deductions for an individual with self-only coverage increased from $3,250 to $3,300.
• For an individual with family coverage, that limitation increased from $6,450 to $6,550.
• A plan is high deductible the annual deductible is at least $1,250 (unchanged) for single coverage or $2,500 for family coverage and the annual out-of-pocket limits do not exceed $6,350 (up from $6,250) for single coverage or $12,700 (up from $12,500) for family coverage.

IRAs

• The IRA contribution limit remains at $5,500
• The IRA catch-up limit remains at $1,000
• The Adjusted Gross Income (AGI) phase-out starts at $96,000 (up from $95,000) for joint filers and $60,000 (up from $59,000) for individual filers

SEPs

• SEP minimum compensation remains at $550
• SEP maximum compensation increased to $260,000 from $255,000

SIMPLE Plans

• SIMPLE maximum contributions remain at $12,000
• SIMPLE catch-up contribution limits remain at $2,500

Other Limits

• 401(a)(17) pay cap up to $260,000 from $255,000
• 402(g) limit on elective deferrals to a 401(k) or 403(b) plan remains at $17,500
• The catch-up contribution limit remains at $5,500
• The 415(c) limit for annual additions to defined contribution plans has increased to $52,000 from $51,000
• The maximum account balance in an ESOP subject to a 5-year distribution period increased to $1,050,000 from $1,035,000
• The dollar amount used to determine the lengthening of the 5-year distribution period in an ESOP increased from $205,000 to $210,000
• The HCE threshold remained steady at $115,000
• The maximum benefit limitation for defined benefit plans under Code Section 415(b) increased from $205,000 to $210,000
• The compensation threshold for being a key employee (Section 416) increased to 170,000 from $165,000
• The Section 457 limit on elective deferrals remained unchanged at $17,500
• The taxable wage base increased from $113,700 to $117,000