Past Issues
-October 2006Contact us:
Ed Bates
952.944.5044
Mary Bates
952.942.8355
Jereme Bates
952.944.2919
Did you know?
Children ages 1 to 2 years old are contagious with the flu for 10 to 14 days, while adults are contagious for a shorter period of time at only 5 to 7 days? (WebMD)
It is that time of
year again, so en-
courage your employees and their
families to get
their flu shot.
Quarterly Quote
The future belongs to those who believe in the beauty of their dreams.
- Eleanor Roosevelt
COBRA & Minnesota Continuation Laws
Written by Mary Bates
There are actually three forms of benefit continuation law that Minnesota group health plans are subject to: federal COBRA, federal PHSA, and Minnesota Continuation Law. Unless you are a governmental plan however, PHSA would not apply. Most of us are familiar with or have heard of COBRA, but did you know that if your group has less than 20 employees, your employees’ continuation rights would actually fall under Minnesota Continuation Law?
Do not panic if you did not understand that separation because the Minnesota Continuation Law, in general contains more liberal provisions than COBRA. In other words, Minnesota continuation mirrors COBRA and in some instances allows longer continuation periods.
The continuation options are never less than COBRA options, and that’s why we have casually referred to both programs as COBRA rights. Regardless of where your group falls, the covered employee or qualified beneficiary (non-covered employees or dependents are not eligible for COBRA or MN continuation) must be “formally”(in writing) notified of their continuation rights. (Coverages that can be continued are: health, dental, life, and Section 125 flexible spending accounts for medical expenses). Once the plan administrator has been notified of the “qualifying event”, they have 14 days under COBRA or 10 days under M N continuation laws to send (first class only) or present this notification. The employee and/or beneficiaries then have 60 days to elect continuation coverage. If the employee or beneficiary elects continuation, they then have 45 days to pay premium for the period of time preceding the election, in other words, there can be no lapse in cov erage. The continued member must then submit their premium by the date the plan administrator specifies, or in a timely manner. The law allows for the employer to charge an additional 2% for administrative costs, and it also allows a 30 day grace period on premium payments. If premium is not collected by the end of the 30 days, termination of the continuation coverage is an option.
In general, the main responsibility of the employer or plan administrator is to notify the employee or beneficiary of their continuation options, when a “qualifying event” occurs. If you’re not sure of what events fall into that category, it’s always best to ask.
If the employee or beneficiary does not respond after 60 days of your notice, your job is done. If they do elect continuation, it’s a good idea to note when the clock begins so that you can terminate coverage at the appropriate time. Some insurance companies will also track that, and in most situations, the employee will assume coverage elsewhere before their time is up. If you hear that an employee cannot afford to continue their coverage, tell them to call me and we can talk about short-term coverage. This type of coverage only covers new health issues (not pre-existing) and only goes up to 6 months, but it’s cheaper and fills that gap. Feel free to call me to assist you with any continuation issues; my goal is to keep it simple and help you stay in compliance.
Employee Funding of Benefit Plans
Written by Ed Bates
“Federal officials are checking whether $60 million in rebates paid last year by Medica have trickled down to the health plan's 1 million members. The Department of Labor recently asked Medica to turn over the names of the 10,000 employers who were given the rebates in the form of a 50 percent reduction in December's premium or fee charge.”(1)
Recently, the Department of Labor investigated the “Payment Holiday” that Medica offered last December. This was a well publicized endeavor that offered their employers a month in which only 1/2 of their medical premium payment needed to be paid. On the surface, this gesture was well intended by Medica, and well received by their participating employers.
In the process of announcing this unusual benefit, there was not much mentioned about employee contributions and how each employer should handle that aspect of the payment holiday. The Department of Labor however felt it was important to find out just what did happen to those employee dollars. Were they still collected by the employers as usual even though the employer’s costs had been reduced? As many of you are aware the Employee Income Security Act of 1973 outlines rules for both employee retirement and welfare plans. In this Act, which the Department of Labor is responsible to enforce, there are strict rules about handling employee contributions, especially in welfare plans or self funded medical plans. Even though the outcome of this investigation is not yet known, it is clear that we as employers need to always handle very carefully any amounts deducted from employees paychecks for any reason. The employer basically becomes the guardian of any such funds and is ultimately responsible to assure that they are used as intended by the employee. Thus in this particular event, each employer should have reduced any employee contributions by 50% for the month of December. In the future, if you just aren’t sure about something like this, ask us, your insurance agent, or contact the governmental agency responsible to enforce such rules.
(1) Article entitled “Did Members Enjoy Medica Holiday?" Minneapolis Star & Tribune 823-2004.
Written by Jereme Bates
Minnesota law requires employers to pay a minimum of 50% of each qualified employee health insurance premium. In many instances however, employers may pay 50% of the employee cost and an additional 25 to 50% of the dependent cost as well. Although very generous, there are two inherent flaws within this arrangement; employee equality and adverse selection.
Equality among employees is very important. It is only a matter of time before a single employee realizes that their employer is offering enhanced benefits to an employee of the same status simply because they have a family.
Adverse selection generally states that unhealthy employees without other options will gravitate towards your plan regardless of price, and those employees without an immediate need for insurance will seek out alternative options, based usually on price. Did you know that 20% of subscribers result in 80% of the claims? That means that those employees who need insurance, are the ones driving your up your costs, while those employees that are choosing to go without insurance, or went somewhere less expensive, are the ones that would have kept your costs balanced.
So what is the most ideal way to fund employer contribution? Fund as close to 100% of the employee premium as possible, making sure that all additional contribution is being paid to the employees first and then dependents. This will keep all eligible employees on the plan, which ultimately helps in balancing your claims. It encourages employees to find alternative options for dependents, while still providing options within your benefit programs for those same dependents. It keeps better equality within your company and it allows for balanced growth in the future, as these issues become more evident the larger a company becomes.