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Thread: employee contributions as a percentage of plan funding?

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    God/dess lynn2009's Avatar
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    Default employee contributions as a percentage of plan funding?

    xxxxxx
    Last edited by lynn2009; 01-18-2015 at 11:18 PM. Reason: grammar
    "There are different kinds of darkness. There is darkness that frightens, the darkness that soothes, the darkness that is restful. There is the darkness of lovers, and the darkness of assassins. It becomes what the bearer wishes it to be, needs it to be. It is not wholly bad or good."
    - The Court of Mist and Fury

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    Default Re: employee contributions as a percentage of plan funding?

    does this mean what I think it means, that they are charging employee's whatever they need to to cover the cost of the plan for the company (aka. an ass astronomical amount)? Can they increase the cost like that mid-plan year, or does it have to be for the new enrollment in 2015?
    Generally speaking, it sounds like this employer is operating a 'self-insured' employee health care plan ... which means that the funding for plan health benefit payouts are provided by an X% contribution from participating employees plus a Y% contribution from the employer. Again, generally speaking, when the employer sets premiums for a given year they cannot be changed during the year. However, next year's premiums will be recalculated based on this year's actual cost of benefit payouts. This arrangement can become extremely expensive if the participating employees actually use a lot of expensive health care services, while young and healthy employees choose not to participate ( and therefore contribute nothing toward defraying the costs created by older, sicker employees ).

    This is of course the basic operating principle behind all insurance ... spreading the risk, and sharing the costs. And both this employer, as well as the public health exchange insurance providers, have 'estimated' this year's premiums based on a set of assumptions about the group of people who will be paying insurance premiums and will be consuming health insurance payouts. If those assumptions are wrong, next year's premiums may need to be changed significantly. And indeed when young, healthy people choose NOT to participate, leaving mostly older, sicker participants whose actual health care cost creation is much higher, next year's premiums may need to change radically !!! This is true of 'self-insured' health insurance coverage provided by employers. But it is also true of public health exchange insurance providers.

    However, if the public health exchange insurance provider's assumptions are wrong, the US taxpayer is obligated to make up for the difference ( google 'risk corridor' ). When a self-insured employer's assumptions are wrong, the resulting additional costs must come out of the company's 'bottom line'. This probably explains the 'strong arm' tactics being used to convince more ( young and healthy ) employees to join the employer's self-insured plan ... because the employer realizes that if it is obligated to cover say $25k per year worth of health care benefits for older, sicker employees who are being charged $6k per year for those health care benefits, and has few or no young health employees being charged $3k per year but consuming <$1k per year in health care benefits to make up the difference, the company could face bankruptcy.

    At the moment, Americans under age 30 can purchase 'catastrophic only' public exchange health care coverage. However, if an employer offers 'qualifying' health insurance coverage which the employee chooses not to buy, the employee may forfeit the taxpayer 'subsidies' which reduce the cost of public exchange health insurance premiums.

    Following is from the CMS rules ...

    (snip)What is a catastrophic health plan?

    As defined in the ACA, a catastrophic plan covers essential health benefits, but only after out-of-pocket cost sharing reaches a high deductible that will match the level of the ACA’s required out-of-pocket maximum. In 2014, it is anticipated that threshold will be $6,400 for self-only coverage and $12,800 for family coverage.

    What are health reform requirements for catastrophic health plans?

    In 2014 catastrophic plans can be offered both on and off the Exchange in 2014. Actuarial value metal level requirements do not apply to catastrophic plans.

    Who is eligible for catastrophic plans?

    Catastrophic plans may only be offered to individuals who:
    are under age 30 before the plan year begins, OR

    Have received a certification from an Exchange that they are exempt from the individual mandate because they do not have an affordable coverage option or because they qualify for a hardship exemption

    How is affordable coverage defined?

    Coverage is considered unaffordable for individuals if their cost of coverage exceeds 8 percent of annual household income.
    If an individual is eligible for employer coverage, affordability is determined by comparing the “employee share” of the premium cost of self-only coverage for the employer’s cheapest coverage option that achieves minimum value (i.e., 60% actuarial value) to the taxpayer’s household income.

    If the individual is not eligible for employer coverage, affordability is determined by comparing to household income the lowest cost bronze plan (taking into consideration any applicable federal premium subsidies) offered in the Exchange where the individual would purchase coverage.(snip)
    Last edited by Melonie; 08-05-2014 at 03:52 AM.

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    Featured Member Vamp's Avatar
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    Default Re: employee contributions as a percentage of plan funding?

    Quote Originally Posted by lynn2009 View Post
    So I have kind of an odd question but I am hoping someone can follow me...

    I've written a couple of times on the forums about how lately I am just working my day job. I am on contract through a temp/recruiting agency at a larger company. The contractor thing blows while you're in it but you're almost always hired on for a real job after, and you get a high hourly pay to kind of make up for the fact that it sucks. And for people w/ only an undergraduate degree it is the only way to get into this larger company.

    This past May the temp agency had their annual enrollment for benefits. I am currently w/o health insurance as the plans listed were AWFUL. And they were very aggressive about getting people to sign up, calling, emailing, extending the deadline (lmao), going so far as to lie about how signing up for insurance in May would relieve you of the fine even if you hadn't had insurance by the real deadline of March 31. (I did not say anything about this, as I am not so stupid as to piss off the people still in charge of paying me). But I am fairly confident in saying that very few people signed up at all.

    I logged into my benefits page today to double check who my vision provider is as I wanted to get my exam before the year was up (I have dental, vision and life insurance). I looked at the health insurance plans again as I have been thinking that for 2015 the fine would be enough (& also I got terrible food poisoning earlier this month that my mom yelled at me to go to the ER for) that I might sign up either for one of my employer's shitty plans or a catastrophic plan through the exchange.

    I looked for the monthly premium for each plan (there are gold, silver and bronze - the difference for all 3 being the monthly premium and deductible). I could not find the monthly premium anywhere, what I found was "Employee contribution as a percentage of plan funding".

    So my question is - does this mean what I think it means, that they are charging employee's whatever they need to to cover the cost of the plan for the company (aka. an ass astronomical amount)? Can they increase the cost like that mid-plan year, or does it have to be for the new enrollment in 2015?

    I hope this makes sense!
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    Default Re: employee contributions as a percentage of plan funding?

    ^^^ actually, the 'plan year' approach is a matter of regulatory mandates. Those mandates essentially prevent insurers from increasing monthly premiums, or changing plan coverage, or cancelling coverage, within a single 'plan year'. However, once that 'plan year' ends and the next 'plan year' rolls around, everything is open to change.

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    Default Re: employee contributions as a percentage of plan funding?

    xxxxxxx
    Last edited by lynn2009; 01-18-2015 at 11:18 PM.
    "There are different kinds of darkness. There is darkness that frightens, the darkness that soothes, the darkness that is restful. There is the darkness of lovers, and the darkness of assassins. It becomes what the bearer wishes it to be, needs it to be. It is not wholly bad or good."
    - The Court of Mist and Fury

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    Default Re: employee contributions as a percentage of plan funding?

    For any benefit that is inexpensive like the vision or health advocate it lists a number but for anything more expensive, like the health insurance or optional family AD&D it uses the "Employee contribution as a percentage of plan funding" and also under a few tabs I saw an additional note "Calculated per employee using contribution logic". So I don't know what it means specifically, but seems like they are waiting to see how many people enroll before announcing what the monthly cost will be.
    This again supports a conclusion that this employer is attempting to 'self-insure'. The worst case scenario for small companies that 'self-insure' is that one covered employee winds up needing extremely expensive treatment ... say a 1/2 million dollar organ transplant. The company really has no way to come up with that sort of money ... thus a bankruptcy filing and nobody else gets health benefit payouts. Before the ACA, companies used to be able to impose 'lifetime' payout limits per employee etc. to reduce this risk ... but they are no longer allowed to do so.

    Agreed that this company's approach to health insurance sounds 'shaky' at best. As a healthy young person, I'd avoid this employer's plan ... claim 'unaffordability' of employer provided health insurance coverage ... and try to sign up for 'catastrophic' only coverage through the public health exchange.

    In regard to why companies attempt to self-insure, doing so avoids the 'cut' and administrative fees imposed by the large health insurance companies. However, the large health insurance companies effectively have millions of people paying monthly insurance premiums ( either directly or via an employer sponsored withholding program ) ... and as such run a much lower statistical risk that 'expensive' insured people will over-run the premiums received from healthy insured people. But where a small company with say 100 employees is involved, having two 'expensive' insured employees can bankrupt the insurance plan.
    Last edited by Melonie; 08-06-2014 at 03:56 AM.

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    God/dess lynn2009's Avatar
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    Default Re: employee contributions as a percentage of plan funding?

    Thanks! It is nice to get agreement.
    "There are different kinds of darkness. There is darkness that frightens, the darkness that soothes, the darkness that is restful. There is the darkness of lovers, and the darkness of assassins. It becomes what the bearer wishes it to be, needs it to be. It is not wholly bad or good."
    - The Court of Mist and Fury

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