Sunday, June 28, 2020

Federal Judge Upholds HHS’ Hospital Transparency Rule as U.S. Healthcare Moves One Step Closer Real Price Disclosure

Judge Rejects Argument That Patients Will Be "Confused" & "Frustrated" by Having Access to Real Price of Care

On June 23, 2020, a Federal District Judge ruled in favor of the Trump administration’s final rule requiring hospitals to disclose the "secret" negotiated prices they are paid by insurers. The rule was released on Nov. 15, 2019 (after being originally proposed in March of 2019), and is set to take effect Jan. 1, 2021.

In December 2019, the American Hospital Association (AHA) filed a lawsuit attempting to block the rule’s implementation, stating that a requirement to disclose negotiated prices violated their First Amendment rights.  The AHA further contended that, "the Rule is unjustified because the publication of hundreds of prices will 'confuse' patients and 'frustrate . . . [their] decisionmaking.' Pls.’ Mot. at 27. They further contend that the regulation is unduly burdensome." Civil Action No. 1:19-cv-03619 (CJN), page 33.

Does anyone else find it peculiar that it is not too burdensome to negotiate thousands of different reimbursements from tens of different carriers every couple of years and memorialize those understandings in hundreds of pages of contracts - but it is too burdensome to publish those prices to the public?   The Court ruled that it was within the Department of Health and Human Services’ (HHS) scope to require the disclosure of these negotiated rates, rejecting the AHA’s claims.

What is in the Final Rule?

Hospitals will be required to provide easily accessible billing information to patients. This means having all standard charges available online and in one single data file that can be “read by other computer systems,” according to a Centers for Medicare & Medicaid Services (CMS) press release.  Current federal rules and regulations mandate that hospitals make their retail or "chargemaster" rates available to the public.  But these rates are entirely fictional and capricious.  As the court noted, in this decision on page 16, "chargemaster rates are rarely demanded for payment—again, chargemaster rates are paid for only about 10% of hospital patients, making them anything but the 'standard' price demanded for a hospital’s services."

The charges listed would include “the gross charges, payer-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient, and the minimum and maximum negotiated charges,” according to the initial press release about the final rule.  As part of the final rule, CMS was granted more authority over enforcement. Specifically, the department has greater capability to audit hospitals and issue fines of $300 per day to those who are noncompliant.

This rule, more than any other we've seen in the modern era of American healthcare, actually has the potential to rein in costs.  In the end, Obamacare expanded healthcare access, but it did nothing to rein in costs.  In fact, on the whole, it increased costs by adding bureaucracy, mandatory benefits (even for those who didn't want them) and decreasing consumerism by increasing government payment.  This regulation would actually do more to unleash free-market consumerism in healthcare than any other federal law or regulation since the creation of the Health Savings Account in 2003. 

Next Steps

The rule won’t be effective until Jan. 1, 2021. In that time, hospitals will be working to make the applicable data available online. The AHA is almost certain to appeal the ruling, which could delay the rule’s effective date.

I fully expect the ultimate implementation of this rule to supercharge the use of Referenced Based Pricing, Health Savings Accounts and Individual Coverage Health Reimbursement Accounts, largely explained in my recent article here.  The bottom line is that American healthcare will continue to escalate at two to three times the general inflation rate and become less accessible for greater numbers of people until we minimize the economic impacts of third-party-payment, shine a light on real pricing and place consumers in greater control of healthcare expenditures.  This regulation is a powerful first step in healing an incredibly ill system. 

We will continue to monitor developments and provide updates as necessary.  I sat with Armstrong and Getty in March of 2019 to discuss the initial formulation of this regulation and its potential impact on U.S. healthcare.  That entire post is here and the audio is below.

Wednesday, June 24, 2020

Coronavirus Mental Health and Stress Resources for Employees

In response to the COVID-19 outbreak and subsequent fallout, the following federal resources are available to share with your employees:
  • The Centers for Disease Control and Prevention’s Coping with Stress page provides information about handling the stress of an outbreak, reactions, caring for yourself and your community, who is at a higher risk, and coming out of quarantine.
  • The U.S. Department of Health & Human Services (HHS) offers the following resources:
    • COVID-19 Behavioral Health Resources lists a collection of resources created by federal agencies and their partners to help healthcare providers, caregivers, and the general population prepare for and manage the negative behavioral effects that can accompany a public health emergency.
    • Mental Health and Coping links to resources and advice to help individuals cope and to support their mental and behavioral health during the COVID-19 pandemic. Many of these resources are available in multiple languages.
  • The HHS Substance Abuse and Mental Health Services Administration (SAMHSA) COVID-19 resources page links to resources to help individuals, providers, communities, and states across the country deal with mental health challenges related to the COVID-19 pandemic.
  • The Centers for Medicare & Medicaid Services (CMS) COVID-19 Partner Toolkit links to CMS and HHS materials on COVID-19.
  • The National Council for Behavioral Health’s Resources for COVID-19 provides links to resources for managing mental health during COVID-19 as well as tax, loan, and leave information for employers and employees.
  • The National Association of State Mental Health Program Directors COVID-19 Resource Links page provides federal government COVID-19 compliance resource links, state health department links, and more.
Additionally, the New Jersey Association of Mental Health and Addiction Agencies provides a Federal Resources for COVID-19 page with a wide variety of related material and the ThinkHR with Mammoth blog addresses, “How to support the Mental Health pf Your Employees During COVID-19.”

Tuesday, June 16, 2020

New OSHA COVID-19 Guidance for Reopening

On June 15, 2020, the Occupational Safety and Health Administration (OSHA) released a bulletin reminding employers that safety is a priority within both COVID-19 and common workplace hazards. In all phases of reopening, employers must plan for potential hazards related to COVID-19 and from routine workplace processes. Employee stress, fatigue, and distractions may be increased by the pandemic and must be considered when employers develop their employee return-to-work plan. OSHA advises that employers re-evaluate their return-to-work plans, with employee safety and health as a priority, before trying to increase production or tasks in an effort to catch-up on downtime.

As part of their reopening plans, OSHA recommends employers provide workers with safety and health training reviews and address maintenance issues deferred during a shutdown. Employers should also revisit and update standard operating procedures and remember that exposures to hazards may increase during shutdown and start-up periods. It is important for employers to review and address process safety issues – including stagnant or expired chemicals – as part of their reopening effort. Employers must also remember that retaliating against workers for raising concerns about safety and health conditions is prohibited.

OSHA provides COVID-19-related guidance to help employers develop policies and procedures that address the following issues:
OSHA’s guidance for employers also includes frequently asked questions related to COVID-19 in the workplace such as worksite testing, temperature checks and health screenings, and the need for personal protective equipment. This guidance accompanies the U.S. Department of Labor and U.S. Department of Health and Human Services’ previously developed Guidance on Preparing Workplaces for COVID-19.

Read more about COVID-19 on OSHA’s website

Thursday, June 11, 2020

New EEOC & OSHA COVID-19 Updates Covering the ADA and Cloth Face Coverings

The EEOC updated it’s What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws - Covering:
  • Employees are not entitled to an accommodation under the Americans with Disabilities Act to avoid exposing a family member who is at higher risk of severe illness from COVID-19 due to an underlying medical condition. 
Although the ADA prohibits discrimination based on association with an individual with a disability, that protection is limited to disparate treatment or harassment. The ADA does not require that an employer accommodate an employee without a disability based on the disability-related needs of a family member or other person with whom she is associated. 
For example, an employee without a disability is not entitled under the ADA to telework as an accommodation in order to protect a family member with a disability from potential COVID-19 exposure. 
  • Steps an employer can take if an employee entering the worksite requests an alternative method of screening due to a medical condition.
This is a request for reasonable accommodation, and an employer should proceed as it would for any other request for accommodation under the ADA or the Rehabilitation Act. If the requested change is easy to provide and inexpensive, the employer might voluntarily choose to make it available to anyone who asks, without going through an interactive process. Alternatively, if the disability is not obvious or already known, an employer may ask the employee for information to establish that the condition is a disability and what specific limitations require an accommodation. If necessary, an employer also may request medical documentation to support the employee’s request, and then determine if that accommodation or an alternative effective accommodation can be provided, absent undue hardship. 
Similarly, if an employee requested an alternative method of screening as a religious accommodation, the employer should determine if accommodation is available under Title VII.
  • Employees age 65 and over are at higher risk for a severe case of COVID-19 if they contract the virus subsequently the CDC has encouraged employers to offer maximum flexibilities to this group. Employers must be mindful that employees over age 65 have protections under the federal employment discrimination laws and are prohibited from involuntarily excluding an individual from the workplace based on his or her being 65 or older, even if the employer acted for benevolent reasons such as protecting the employee due to higher risk of severe illness from COVID-19.
  • Employers may not exclude an employee from the workplace involuntarily due to pregnancy.
  • A right to accommodation based on pregnancy continues during the pandemic.
There are two federal employment discrimination laws that may trigger accommodation for employees based on pregnancy.
First, pregnancy-related medical conditions may themselves be disabilities under the ADA, even though pregnancy itself is not an ADA disability. If an employee makes a request for reasonable accommodation due to a pregnancy-related medical condition, the employer must consider it under the usual ADA rules. 
Second, Title VII as amended by the Pregnancy Discrimination Act specifically requires that women affected by pregnancy, childbirth, and related medical conditions be treated the same as others who are similar in their ability or inability to work. This means that a pregnant employee may be entitled to job modifications, including telework, changes to work schedules or assignments, and leave to the extent provided for other employees who are similar in their ability or inability to work. Employers should ensure that supervisors, managers, and human resources personnel know how to handle such requests to avoid disparate treatment in violation of Title VII.
OSHA, COVID-19, and Cloth Face Coverings - On June 10, 2020, OSHA released frequently asked questions and answers related to COVID-19 and cloth face coverings addressing:
  • The key differences between cloth face coverings, surgical masks, and respirators.
  • That OSHA’s PPE standards do not require employers to provide cloth face coverings because they are not considered personal protective equipment (PPE) and are not intended to be used when workers need PPE for protection against exposure to occupational hazards.
  • OSHA’s recommendation that employers encourage workers to wear face coverings at work for source control purposes. Face coverings are intended to prevent wearers who have COVID-19 without knowing it (i.e., those who are asymptomatic or pre-symptomatic) from spreading potentially infectious respiratory droplets to others (this is source control).
  • Cloth face coverings do not substitute for social distancing measures.
  • Surgical masks or cloth face coverings are not acceptable respiratory protection in the construction industry when respirators are needed but not available due to the pandemic.

Monday, June 8, 2020

Updates to the Paycheck Protection Act Making it More Flexible

Late last week, the President signed legislation (H.R. 7010) enacting the Paycheck Protection Program Flexibility Act (PPPFA) which amends the CARES Act’s Payroll Protection Program (PPP). Here is a brief summary of the changes enacted by the new law: 
  • The timeframe in which borrowers must spend the PPP funds is expanded to 24 weeks (as opposed to 8 weeks) or December 31, 2020, whichever is earlier. This is effective immediately and applicable to all loans as if the language was part of the original CARES Act.
  • The date when workers must be rehired is extended from June 30th to to December 31, 2020.
  • The PPPFA softened rehiring requirements by adding a loan forgiveness exemption based on employee availability from February 15 through December 31, 2020. During this time, loan forgiveness will be determined without regard to a proportional reduction in the number of full-time equivalent employees if the borrower can document in good faith that:
    • They are unable to rehire former employees on February 15, 2020 and are also unable to hire similarly qualified employees for unfilled positions by December 31, 2020; or
    • They are unable to return to their pre-COVID-19 level of business activity (prior to February 15, 2020) because of federal safety and health requirements (issued from March 1, 2020 through December 31, 2020) for sanitation, social distancing, or any other worker or customer COVID-19-related safety requirement.
  • Businesses now have 5 years to repay a loan and the first payment will be deferred for six months after a forgiveness determination. This is only applicable to loans made on or after June 5, 2020.
  • The allocation of funds that must be used for payroll is modified requiring borrowers to spend 60% of the loan on payroll. 40% can be used for other expenses (the prior allocation was 75% payroll / 25% other).
  • Employers may delay paying employer payroll taxes for Social Security through December 31, 2020. 
The Small Business Association and Treasury Department are expected to release detailed guidance on these udpates.

Source: US H.R. 7010

Thursday, June 4, 2020

These States Maximize Your Business & Entrepreneurial Opportunity in a Post-COVID World of Social Unrest

American businesses teeter on the precipice of an onslaught of COVID-19 related lawsuits. The return-to-work decision is a difficult one in every aspect. But the question of employer liability for employees or customers who claim to have contracted the virus in the workplace is about to make things considerably more precarious.

Freedom loving people have always focused on taxation, regulatory burden, state debt and an unencumbered Second Amendment when analyzing whether it is time to move their business or just take their talent to a more appreciative state. The exodus from high tax, legislatively stifling states to states offering more liberty accelerated in recent years as documented regularly by ZeroHedge:
Historically, I used the below metric to show clients, family and friends which locations are likely to present them with the best business, employment and homeownership opportunities.

This then results in these final rankings: 

2020, however, requires the addition of a few more considerations as we now see the potential for crippling business lawsuits due to the coronavirus and widespread social unrest.

Overview of the Employer Liability Rules in Play

In general, workers injured in the workplace will receive compensation and benefits under the applicable state’s workers’ compensation laws. Benefits are provided irrespective of fault and are generally the exclusive remedy for workplace injuries, illnesses, or fatalities. Nearly all workers in the United States are covered by workers’ compensation.

The system is sometimes referred to as a grand bargain between employers and workers. It developed early in the 20th century in response to dissatisfaction with the tort system as a method of compensating workers for workplace injuries, illnesses, or deaths. Under this grand bargain, workers receive guaranteed, no-fault benefits for injuries, illnesses, and deaths, but forfeit their rights to sue their employers absent some form of willful, extremely reckless or grossly negligent employer behavior. Employers receive protection from lawsuits but must provide benefits regardless of fault.

COVID-19 now has states, employers and the federal government scrambling to come to grips with how the resulting illnesses and deaths will impact employer tort liability and workers’ compensation laws. Beyond the worker impact of COVID-19, businesses must further consider tort suits brought by customers and venders who claim that the business failed to act as a reasonably prudent business in the same or similar circumstances and that failure resulted in a COVID-19 infection. This legal upheaval is no small matter, no matter how it is approached. As stated by The Hill:
One U.S. law firm suggested coronavirus litigation could be “the new asbestos,” referring to a wave of personal injury litigation in the 1970s and '80s related to the carcinogenic material that was once commonly used in building construction.

“If you just let it all go now, it would be a disaster,” said David Rivkin, a partner at Baker Hostetler, who supports Congress granting businesses temporary immunity. “It would be a tsunami of lawsuits. Hundreds have already been filed.”

Therefore, as we review the list of states presenting entrepreneurs and businesses with the best opportunity to thrive, it makes sense to take an early look at how states plan to handle business liability for COVID-19 as well as the states most (and least) likely to have destructive riots and looting.   
States Seeking to Shield Business from Onerous Lawsuits  

“Bless this immunity.” - Tool, Fear Inoculum

From The Hill:
Many states have granted some form of liability immunity to health care workers and facilities. Utah and North Carolina have gone the furthest, passing laws that offer the strongest immunities yet for a range of industries as stay-at-home orders and business closures are eased.

In Utah, Gov. Gary Herbert (R) signed legislation earlier this month that makes all businesses and individuals immune from litigation based on others’ exposure to coronavirus on their property, with exceptions for things like willful misconduct. Oklahoma lawmakers have sent similar legislation to its governor.

North Carolina’s law is narrower than Utah’s and applies to “essential businesses” as defined in the state’s emergency declaration, but still offers more protection than other states.

At least six states — Alabama, Illinois, Louisiana, Ohio, South Carolina and Wyoming — have introduced legislation that would also shield more than just health care workers and facilities, according to the National Conference of State Legislatures (NCSL).
Alabama Governor Kay Ivey signed a proclamation that provides liability protections for businesses, healthcare providers, and other covered entities during the COVID-19 pandemic. I provides that businesses are not liable for a person’s death, injury, or property damage that results from an act or omission related to COVID-19, in any way, unless clear and convincing evidence otherwise proves that the harm was caused by the entity’s wanton, reckless, willful, or intentional misconduct.

The proclamation also creates a standard of care, which requires entities to reasonably attempt to comply with applicable public health guidance in response to COVID-19; and protects businesses from liability for damages from mental anguish, emotional distress, or for punitive damages.

States Making Things Worse for Employers

All that I'm to do
Calculating steps away from you” – Tool, Fear Inoculum

As David Lindsay and Erinn Rigney wrote at the National Law Review:
Perhaps the most significant pronouncement was by California Governor Gavin Newsom, who issued an executive order on 6 May 2020 that establishes a rebuttable presumption in workers’ compensation claims, presuming that covered workers who are diagnosed with COVID-19 contracted the illness at work, without the employee having to provide any further proof. Although this presumption is rebuttable—meaning that an employer can provide evidence to refute the presumption, it is likely to be a high burden for employers to meet, especially given the wide variety of ways COVID-19 can be transmitted. Further, California extended the presumption to any worker who reported to work outside of the home at the direction of their employer and received a positive test or physician diagnosis, a far broader category of workers than most other states. Therefore, in California, most eligible workers’ claims relating to on-the-job COVID-19 exposure likely will be covered by workers’ compensation.  
Riots Destroying Your Investment

On the good news front, auto, homeowners, and business insurance policies generally include coverage for property losses caused by riots and civil commotions. Standard business property insurance policies provide coverage for the structure of the building as well as the contents inside. Furthermore, Business Interruption (BI) coverage generally does reimburse losses when a covered peril forces a business to temporarily close its doors and pays employees, venders, rent and electric bills.

Nevertheless, this coverage is far from an inoculum against the perils of social unrest. Sixty percent of businesses with less than 100 employees do not even have (BI) coverage. For those that do, the lost income is calculated on a 12-month, look-back assessment of a business’ income prior to the date of loss. This means a business that has been shut or operating at a limited capacity due to COVID-19 will receive a reduced payout for any business income claims due to the recent rioting and looting.

Furthermore, no business owner wants to deal with the cleanup, claim process and resultant escalation in premiums after the fallout of such social unrest. So, as we consider the freest and most economically viable states for relocation, it makes sense to also factor in that state’s proclivity for social unrest and rioting. The below map was created at 11:30 AM PST on May 31, 2020 in the midst of the protests and social unrest resulting from the horrific alleged murder of George Floyd at the hands of former Minneapolis police officer Derek Chauvin. As of the time of this post, Derek Chauvin has been charged with 2nd degree murder in Minnesota.

Interactive US Map of Active Protests and Riots as of 11:30 AM PST on May 31, 2020.

As you can see from this map, some of the freest and most desirable states for business and employment also happen to be some of the least likely places that a business will confront rioters and looting. Montana, Idaho, Wyoming and the Dakotas form a 5-state zone remarkably free from social unrest and property damage.

Best States in 2020-2021 

Before 2020, businesses and entrepreneurs were leaving deep blue states for greener pastures in less encumbered jurisdictions. The pandemic, social unrest and devastating economic collapse coupled with the fact that so many more people are learning they can effectively do their job remotely through video-conferencing platforms will only accelerate this trend. Additionally, some states now seek to encourage the reopening of business by shielding employers from an onslaught of lawsuits due to complains that employees and customers could have contracted COVID-19 in the workplace. Conversely states like California seek to pin that responsibility on employers by creating a presumption that an employee’s sickness resulted from the workplace.

Utah, North Carolina, Wyoming and Alabama’s bold leadership in this regard elevate those states status for consideration in the new, post-pandemic workplace. In Utah and Oklahoma’s cases, you could argue that it might move them up into the top 10. While Alabama and North Carolina’s efforts are good for business, they are not enough to overcome those states’ weaker performance in other economic indices.

Choice of jurisdiction matters. As we move through ever-increasing tumultuous times, that choice becomes that much more important. California, New York, New Jersey and Illinois have co-opted individual liberties, saddled their people with an unsustainable debt, regularly punish the job creators and entrepreneurs while also being the most likely states to encounter social unrest. Meanwhile, South Dakota, Wyoming, Idaho, New Hampshire and Tennessee reward hard work, creativity and honor constitutional freedoms. Keep that in mind as you vote with the location your homes and businesses.

Tuesday, June 2, 2020

California Legislators Propose 4 New Employee Leave Laws to Go with the Existing NINE

From CalChamber
Even in the face of the coronavirus pandemic and a historic economic shock, the Legislature is considering legislation to increase the cost on employers of maintaining workers on the payroll. That is why these bills have been tagged as Job Killers.

AB 3216 (Kalra) proposes to expand several existing leaves, including leave under the California Family Rights Act (CFRA), pregnancy disability leave, and sick leave, and create paid emergency leave.  AB 2999 (Low) proposes to create a new 10-day leave of absence for bereavement leave.  Supporters claim that the leaves of absence are generally “unpaid” (except for sick leave and the new emergency leave) and therefore should not be a burden on employers.  Just because a leave is “unpaid,” does not mean there is not a cost.  Usually left out of the discussion is the method of enforcement, which is one of the biggest cost factors.  And, these proposed leaves cannot be viewed in isolation, but must be considered as a part of the existing leaves California already offers. ...

Currently, there are four bills pending that will expand or create a new leave of absence on employers with at least a single employee:
  • AB 3216 (Kalra) – 12 weeks of leave under CFRA a year, 4 months of pregnancy disability leave,  80 hours of emergency leave/year, and at least 3 days of paid sick leave/year 
  • AB 2999 (Low) – 10 days of bereavement leave per year 
  • SB 1383 (Jackson) – unlimited time off from work for a school closure or day care closure 
  • AB 2992 (Weber) – protected time off for an employee who is a victim of a crime or a family member who is a victim of a crime ...
These proposed leaves of absence are in addition to the existing leaves of absence California already has in place:

Pregnancy Disability Leave:  Applies to employers with 5 or more employees, 4 months of protected leave;

Military Spouse Leave:  Applies to employers with 25 or more employees and allows an employee to take up to 10 days to spend time with a military spouse who has been deployed in military conflict;

Organ Donation Leave:  Applies to employers with 15 or more employees and provides eligible employees with up to 60 days of protected leave in a year to donate an organ;

Bone Marrow Leave:  Applies to employers with 15 or more employees and provides eligible employees with up to one week of paid protected leave in a year to donate bone marrow;

Paid Sick Leave/Kin Care:  Applies to employers with one or more employees and requires 1 hour of paid sick leave for every 30 hours worked.  Half of all accrued sick leave must be used to care for a sick family member;

School Activities Leave:  Applies to employers with 25 or more employees and provides eligible employees with up to 40 hours of leave per year to participate in school activities with their children;

School Appearance Leave:  Applies to any employer with one or more employees and requires them to provide employees with time off in order to appear at school on a child’s behalf with regard to school suspension;

Domestic Abuse/Sexual Assault/Stalking Leave:  Applies to any employer with 25 employees or more and requires an employer to provide an indefinite leave of absence to an employee who is seeking services or medical attention as a result of domestic violence, sexual assault, or stalking;

New Parent Leave Act: Applies to employers with 20 or more employees and requires a 12-week protected leave of absence for bonding with a new child.
Full story.  

Monday, June 1, 2020

Carriers Are Going To Start Rebating Employer Health Insurance Plans - No, You Can't Pocket That Money

Because of the tremendous downturn in healthcare spending during March and April, many carriers are compelled under PPACA's Medical Loss Ratio rules to rebate some of those savings back to your employer plans.  As a reminder, unless the employer pays for one-hundred percent of all medical benefits (with no employee contributions) the employer has to share those savings with employees commensurate with the amount of premium the employees paid or by using the money to benefit the health plan.   

Here is what Healthcare Finance is reporting:   
... Health plans are mandated to spend at least 80% [85% in the large-group market] of their revenues on medical care. When they make more than that, they have to give money back to the purchasers.

Insurers are doing this now, rather than later, according to the Advisory Board's practice manager Rachel Sokol, who spoke during the company's weekly meeting on the impact of COVID-19 to payers.
Insurers want to create immediate value for members, instead of waiting for 2021, she said.

"That's why we're seeing the premium discounts now," Sokol said.

Among those insurers refunding money, UnitedHealthcare said it would provide more than $1.5 billion in initial assistance, including customer premium credits, because its members have been unable to access routine or planned care due to the COVID-19 pandemic. ...

Who Gets What

The portion of the rebate that must be treated as a plan asset depends on who paid the insurance premiums. For example:

þ  If the premiums were paid entirely out of trust assets, the entire rebate amount is a plan asset;

þ  If the employer paid 100 percent of the premiums, the rebate is not a plan asset and the employer can retain the entire rebate amount;

þ  If participants paid 100 percent of the premiums, the entire rebate amount is a plan asset; and

þ  If the employer and participants each paid a fixed percentage of the premiums, the percentage of the rebate equal to the percentage of the cost paid by participants is a plan asset.

Under the DOL’s guidance, employers are generally prohibited from retaining a rebate amount greater than the total amount of premiums and other plan expenses paid by the employer.

Using Plan Asset Rebates

Once an employer determines that all or a portion of an MLR rebate is a plan asset, it must decide how to use the rebate for the exclusive benefit of the plan’s participants and beneficiaries. Dept. of Labor Technical Release No. 2011-04 identifies the following methods for applying the rebates:

·        The rebate can be distributed to participants under a reasonable, fair and objective allocation method.

·        If distributing payments to participants is not cost-effective because the amounts are small or would cause tax consequences for the participants, the employer may use the rebate for other permissible plan purposes, such as applying it toward future participant premium payments or benefit enhancements.

If a plan provides benefits under multiple policies, the employer must make sure to allocate the rebate for a particular policy only to the participants who were covered by that policy. According to the DOL, using a rebate generated by one plan to benefit another plan’s participants would be a breach of fiduciary duty.  


Startling Healthcare Retirement Costs Projected for Folks Planning to Retire in 2020

These are the highest retirement projections I've seen:   
  • A healthy 65-year-old couple retiring in 2020 is projected to spend approximately $351,000 in today’s dollars ($535,000 in future dollars) on healthcare over their lifetime. 
    • Expenses at age 85 are estimated to be 234% higher than that at age 65.
  • A healthy 45-year-old couple is projected to spend approximately $505,000 in today’s dollars ($1.4 million in future dollars) on healthcare over their lifetime.
  • The estimated 2020 annual premium plus out-of-pocket cost for a healthy 65-year-old is $4,700.
  • A healthy 67-year-old couple is projected to spend 34% of their Social Security benefit on healthcare in 2020.  

How the Coronavirus Pandemic Impacted Healthcare Spending in One Image

Spending on health services dropped sharply in March and April 2020 compared to the previous year, according to personal consumption expenditure data from the Bureau of Economic Analysis. Across all health care services, which do not include pharmaceutical drugs, expenditures were down -38% in April 2020 compared to April last year.