What are the advantages of Partial Self-Fudned/Level-Funded Plans?
A partial-self funded or level-funded plan is considered a self-funded plan under ERISA however unlike a true-self-funded plan where employers pay a monthly or weekly claim amount plus a monthly administration fee, reinsurance premium or even an aggregate reinsurance premium, these plans provide a fixed monthly premium that combines all the components of true self-funding into a monthly fixed rate based on tiers, employee only, employee + one, family, etc. similar to fully-funded plan. Additionally, many carriers provide an option of a return of premium up to a percentage of the over-funding of premium to claims paid. Also, most of these plans provide a monthly reporting of premium and claim activity so you can see how well or poorly your plan is running.
How do I know if I am an Applicalbe Large Employer (ALE)?
The information provided below from the IRS gives the basic information to determine if you are an Applicable Large Employer (ALE). More detailed information can be found at the IRS website at https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer.
Example 1 – Employer is Not an ALE
1- Company X has 40 full-time employees for each calendar month during 2016.
2- Company X also has 15 part-time employees for each calendar month during 2016 each of whom have 60 hours of service per month. When combined, the hours of service of the part-time employees for a month totals 900 [15 x 60 = 900].
3- Dividing the combined hours of service of the part-time employees by 120 equals 7.5 [900 / 120 = 7.5]. This number, 7.5, represents the number of Company X’s full-time equivalent employees for each month during 2016.
4- Employer X adds up the total number of full-time employees for each calendar month of 2016, which is 480 [40 x 12 = 480].
5- Employer X adds up the total number of full-time equivalent employees for each calendar month of 2016, which is 90 [7.5 x 12 = 90].
6- Employer X adds those two numbers together and divides the total by 12, which equals 47.5 [(480 + 90 = 570)/12 = 47.5].
7- Because the result is not a whole number, it is rounded to the next lowest whole number, so 47 is the result. So, although Company X has 55 employees in total [40 full-time and 15 part-time] for each month of 2016, it has 47 full-time employees (including full-time equivalent employees) for purposes of ALE determination.
Because 47 is less than 50, Company X is not an ALE for 2017.
Example 2 – Employer is an ALE
1- Company Y has 40 full-time employees for each calendar month during 2016.
2- Company Y also has 20 part-time employees for each calendar month during 2016, each of whom has 60 hours of service per month. When combined, the hours of service of the part-time employees for a month totals 1,200 [20 x 60 = 1,200].
3- Dividing the combined hours of service of the part-time employees by 120 equals 10 [1,200 / 120 = 10]. This number, 10, represents the number of Company Y’s full-time equivalent employees for each month during 2016.
4- Employer Y adds up the total number of full-time employees for each calendar month of 2016, which is 480 [40 x 12 = 480].
5- Employer Y adds up the total number of full-time equivalent employees for each calendar month of 2016, which is 120 [10 x 12 = 120].
6- Employer Y adds those two numbers together and divides the total by 12, which equals 50 [(480 + 120 = 600)/12 = 50]. So, although Company Y only has 40 full-time employees, it is an ALE for 2017 due to the hours of service of its full-time equivalent employees.
What is a Total Maximum Out of Pocket Limit?
The Total Maximum Out of Pocket limit is the total amount of money an employee can pay for their healthcare in a single plan year. All employee deductible and coinsurance payments, office visit and prescription copays are applied to the Total Maximum Out of Pocket limit for that specific plan. If an employee reaches their Total Maximum Out of Pocket limit during the benefit year, their care is covered at 100% for the remainder of the benefit year. The Total Maximum Out of Pocket will reset at the beginning of the following plan year.
During a qualified life event change, may an employee change his or her actual health plan election from one program to another, such as from a health maintenance organization (HMO) plan to a preferred provider organization (PPO) plan?
Under the Health Insurance Portability and Accountability Act (HIPAA) special enrollment rights applicable to group health plan benefits, the regulations do permit a participant to select among all benefits plans made available to similarly-situated individuals. Therefore if this event is recognized, the employee may elect between all plans for which he or she would otherwise be eligible, such as moving from the HMO to the PPO plan. According to 29 C.F.R. § 2590.701-6, Special enrollment periods:
Special enrollees must be offered all the benefit packages available to similarly situated individuals who enroll when first eligible. For this purpose, any difference in benefits or cost-sharing requirements for different individuals constitutes a different benefit package. In addition, a special enrollee cannot be required to pay more for coverage than a similarly situated individual who enrolls in the same coverage when first eligible.