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Social Security Benefits to Increase 3.6% for 2012

 Higher Cap on Taxable Earnings 
Cost-of-living adjustment is first since 2009                                          10/20/2011  By Stephen Miller, CEBS

Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 60 million Americans will increase 3.6 percent in 2012, the Social Security Administration announced on Oct. 19, 2011.

The 3.6 percent cost-of-living adjustment (COLA) will begin with benefits that nearly 55 million Social Security beneficiaries receive in January 2012. Increased payments to more than 8 million SSI beneficiaries will begin on Dec. 30, 2011.

The purpose of the COLA is to ensure that the purchasing power of Social Security and SSI benefits is not eroded by inflation. The COLA is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), as determined by the U.S. Bureau of Labor Statistics. The 3.6 percent COLA for 2012 was based on the increase in the CPI-W from the third quarter of 2008 through the third quarter of 2011.

Social Security Tax Rates
Social Security and Medicare taxes, also known as FICA (Federal Insurance Contributions Act) taxes, must be withheld from employees' wages.

The FICA tax rates in 2012 will remain at the same level as in 2011: 7.65 percent for employees and 15.3 percent for the self-employed. However, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act reduced the Social Security payroll tax by 2 percentage points for wages, salaries and self-employed income paid in calendar year 2011, applied to the portion of the tax paid by the worker and the self-employed individual. An Obama administration proposal to carry the temporary payroll tax cut forward into 2012 requires congressional approval.

The 7.65 percent tax rate is the combined rate for Social Security and Medicare. The Social Security portion—Old-Age, Survivors and Disability Insurance (OASDI)—is 6.20 percent on earnings up to the applicable taxable maximum amount (see below). The Medicare Part A hospital insurance (HI) portion is 1.45 percent on all earnings.

Higher Max on Earnings Subject to Tax
Based on the average wage increase in 2011, in 2012 the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $110,100 from $106,800. Of the estimated 161 million workers who will pay Social Security taxes in 2012, about 10 million will pay higher taxes as a result of the increase in the taxable maximum, according to the Social Security Administration (SSA).

Earnings Limit
The earnings limit for workers who are younger than full retirement age (age 66 for people born in 1943 through 1954) will be $14,640 (SSA deducts $1 from benefits for each $2 earned over $14,640). The earnings limit for workers turning 66 in 2012 will be $38,880 (SSA deducts $1 from benefits for each $3 earned over $38,880 until the month the worker turns age 66). There is no limit on earnings for workers who are full retirement age or older for the entire year.

Additional Social Security payment and withholding changes are detailed in an SSA fact sheet.

Medicare Premiums
Monthly premiums for Medicare Part B, which covers doctors’ visits and outpatient procedures, will increase by $3.50 to $99.90 in 2012, the government announced on Oct. 27, 2011.

Premiums for Medicare Part A, which pays for inpatient hospital, skilled nursing facility, and some home health care,will increase $1 per month, and the deductible will increase by $24.  About 99 percent of Medicare beneficiaries do not pay a premium for Medicare Part A since they or their spouses have at least 40 quarters of Medicare-covered employment.

On average, premiums for Medicare Advantage, the privately run alternative to the traditional program, will be 4 percent lower in 2012 than in 2011, and plans project enrollment to increase by 10 percent.

Stephen Miller, CEBS, is an online editor/manager for Society for Human Resource Management

  Health Care Reform – Health Plan Summary of Benefits and Coverage

The Patient Protection and Affordable Care Act (PPACA) requires health plans and health insurance issuers to begin providing a summary of benefits and coverage (SBC) no later than March 23, 2012. Both non-grandfathered and grandfathered plans will need to provide an SBC. An SBC is a concise document providing simple and consistent information about health plan benefits and coverage in plain language. Its purpose is to help health plan consumers better understand the coverage they have and, when selecting new coverage, to help them make apples-to-apples comparisons of different coverage options.

PPACA directed the Department of Health and Human Services (HHS) to develop standards for the SBC. On Aug. 17, 2011, HHS and the Departments of Labor and Treasury (Departments) announced proposed regulations for the SBC. The proposed regulations include guidance on: 

         Providing the SBC, including who must provide the SBC and timing requirements; and
         Preparing the SBC, such as content, appearance and language requirements.

The Departments also announced the availability of a proposed template for the SBC and additional proposed guidance containing instructions and sample language for completing the proposed template, as well as the uniform glossary of terms for the disclosure. The proposed template, instructions, sample language and glossary of terms were prepared by the Departments in consultation with the National Association of Insurance Commissioners (NAIC).

The SBC guidance provided by the Departments is not final. The Departments encourage public comments on the proposed guidance and intend to make revisions based on the public comments they receive. However, the proposed guidance is a good reference point to learn about the standards the Departments are considering for the SBC. 

The Ashley Group Legislative Brief summarizes PPACA’s standards for the SBC, including the proposed guidance provided by the Departments.  

PROVIDING THE SBC
General Requirements

The SBC does not replace any required disclosure documents for group health plan coverage, such as the summary plan description (SPD). Rather, it adds to the list of required disclosures. In the proposed regulations’ preamble, the Departments express concern about potential redundancies and additional costs associated with SBCs. To address this concern, the Departments encourage public comments on how the SBC can be coordinated with other disclosure materials, such as the SPD or application and annual enrollment materials.

PPACA provides that group health plans and health insurance issuers must provide an SBC at the following times: (1) to an applicant at the time of application; (2) to an enrollee prior to the time of enrollment or reenrollment; and (3) to a policyholder or certificate holder at the time of issuance of the policy or delivery of the certificate.

The proposed regulations include more specificity on providing the SBC and would require the following:

• A health insurance issuer must provide an SBC to a group health plan (or the plan’s sponsor) at certain times, such as upon application or request for information about the health coverage, before the first day of coverage if there have been any changes in the information required to be in the SBC, when a policy is renewed or reissued and upon request.
• Health plans and issuers must provide an SBC to a participant or beneficiary with respect to each benefit package offered for which the participant or beneficiary is eligible. The SBC must be provided annually at renewal and at certain other times, such as with enrollment application materials, before the first day of coverage if there have been any changes in the information required to be in the SBC, within seven days of enrollment pursuant to a special enrollment period and upon request. For providing the SBC at renewal time: 

If a written application is required for renewal, the SBC must be provided no later than when the application     materials are distributed; or if renewal is automatic, the SBC must be provided no later than 30 days before the beginning of the new plan year.

• Additionally, health plans and issuers must make the uniform glossary of terms available to participants and beneficiaries upon request.

According to the proposed regulations, if either the plan or issuer provides the SBC to a participant or beneficiary in accordance with the timing and content requirements, both will have satisfied their obligations. The Departments expect that plans and issuers will enter into contractual arrangements for sending SBCs.

To reduce unnecessary duplication for group health plans with multiple benefit packages, in connection with renewal, the proposed regulations require the plan or issuer to automatically provide only a new SBC with respect to the benefit package in which a participant or beneficiary is enrolled. SBCs for other benefit package options are not required to be provided automatically at renewal, but would need to be provided upon request.

Method of Delivery
The SBC may be provided in either paper or electronic form. The proposed regulations confirm that plans and issuers may electronically provide SBCs to participants and beneficiaries if they satisfy the Department of Labor’s (DOL) regulations on electronic disclosure.

PREPARING THE SBC:  The SBC is to be provided in a standardized format to help provide clear, consistent and comparable information about health plan coverage and benefits. As mentioned above, the Departments have provided a proposed template and a uniform glossary of terms for this purpose.

Content:  PPACA provides that SBCs must contain the following provisions:

• Uniform definitions of standard insurance and medical terms;
• A description of coverage, including cost-sharing for each of the categories of essential benefits;
• Exceptions, reductions and limitations on coverage;
• Cost-sharing provisions;
• Renewability and continuation of coverage provisions;
• A “coverage facts label” that includes examples to illustrate common benefits scenarios;
• A statement of whether the plan provides minimum essential coverage and ensures that the plan’s share of total allowed costs is not less than 60 percent, with respect to coverage beginning on or after Jan. 1, 2014;
• A statement that the outline is a summary of the policy and that the coverage document itself should be consulted for contractual provisions; and
• A contact number for consumers and a Web address where a copy of the actual coverage policy or certificate of coverage can be reviewed and obtained.

For the most part, the proposed regulations parallel the content elements required by PPACA. The proposed regulations, however, identify the four additional content elements:

• For plans and issuers with one or more provider networks, an Internet address (or similar contact information) for obtaining a list of the network providers;
• For plans and issuers with a prescription drug formulary, an Internet address (or similar contact information) for obtaining information about the prescription drug coverage;
• An Internet address for obtaining the uniform glossary of terms; and
• Premiums (or cost of coverage for a self-funded plan).

Appearance:  PPACA requires the SBC to be relatively short; it cannot be longer than four pages. The proposed regulations interpret the four-page limitation as four double-sided pages. The proposed template is six pages long. The proposed guidance states that the SBC may be provided in color or black and white.

Language:  PPACA requires the SBC to be presented in a culturally and linguistically appropriate manner, and use terminology that average enrollees can understand. To provide the SBC in a culturally and linguistically appropriate manner, the proposed regulations state that the plan or issuer must provide interpretive services and written translations in certain non-English languages upon request in specified U.S counties where at least 10 percent of the population is literate only in the same non-English language. Also, in such counties, English versions of the SBC must disclose the availability of language services in the relevant language.

MODIFICATIONS: Plans and issuers are required to give at least 60 days advance notice of any material modification in plan terms or coverage, if it is not reflected in most recent SBC and occurs other than in connection with a renewal or reissuance of coverage. According to the proposed regulations, a “material modification” includes: (1) an enhancement of covered benefits or services, such as coverage of previously excluded benefits or reduced cost-sharing; (2) a material reduction in covered services or benefits, such as through increased premiums or cost-sharing; or (3) more stringent requirements for receipt of benefits, such as a new referral requirement. The proposed regulations state that the material modification notice can be provided in a separate document describing the material modification or through an updated SBC.
 
PENALTIES: PPACA establishes a penalty of up to $1,000 for each willful failure to provide the SBC. Failing to provide the SBC may also trigger an excise tax of $100 per day per individual for each day of noncompliance.

COMPLIANCE DEADLINE: Under PPACA, plans and issuers must begin providing the SBCs by March 23, 2012. The proposed regulations do not make any adjustments to the compliance deadline. However, in the regulations’ preamble, the Departments request comments on how practical considerations might affect the timing of implementation.

The Ashley Group will continue to monitor health care reform developments and will provide updated information as it becomes available.

The Ashley Group Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.
© 2011 Zywave, Inc. All rights reserved.
EEM 8/11

HHS Final Rule on Controlling Premium Increases

On May 19, 2011, The Department of Health and Human Services (HHS) issued a final regulation aimed at controlling large health insurance premium increases.

This regulation was implemented to comply with the provision of health care reform that required HHS to establish a new process to annually review “unreasonable increases in premiums for health insurance coverage.” The reform provision mandated that the process must require health insurance issuers to submit justifications for unreasonable premium increases prior to implementing the increase.

The final rule issued by HHD provides that:

• Rate increases of 10 percent or more by insurers in the small group and individual markets must be reviewed by state or federal officials.
• Insurance companies will be required to justify significant rate increases and provide information to consumers about the reasons for the increases.
• Grandfathered plans and excepted benefits (such as separate dental-only and vision-only plans) do not have to comply with these requirements.

Effective September 1, 2011, insurers seeking rate increases of 10 % or more for non-grandfathered plans in the small group and individual markets must publicly disclose the proposed increases, along with justification for the increases.  (Effective September 1, 2012, the 10 percent threshold will be replaced with a state-specific threshold to reflect trends particular to that state.)

The increases will be reviewed by either state or federal experts to determine if they are unreasonable. States with effective rate review systems will conduct reviews, but if a state does not have the resources, the Centers for Medicare & Medicaid Services will conduct them.

Increases are considered unreasonable if found to be any of the following:

• Excessive:  The premium charged for the health insurance coverage is unreasonably high in relation to the benefits provided.
• Unjustified:  Justification date provided by the insurer is incomplete, inadequate or otherwise does not provide a basis upon which the reasonableness of an increase may be determined.
• Unfairly discriminatory:  Premium differences between insured within similar risk categories that are not permissible under state law or do not reasonably correspond to differences in expected costs.

This rule is designed to make more information available to consumers regarding premium increases. Details on the outcome of all reviews for increases of 10 percent or more, including the justification for the increase, will be posted by HHS website, www.healthcare.gov.

In addition, HHS will publish forms that insurers must use to propose rate increases and inform consumers about the proposed increases.

Benefits Bulletin, Third Quarter 2011 Issue

Workplace Wellness: Low-Cost Activities That Work
Workplace wellness programs that support employees and the environment that they work in not only have a positive impact on employee morale, they often present a positive return on investment for the employer, too. Workplace wellness programs can be extensive and sometimes expensive. However, there are ways for small employers to make positive changes at little or no cost.

Program Activities

Nutrition

Fruit and Vegetable Consumption

• Offer employee-led campaigns, demonstrations or programs.
• Provide healthy eating reminders and prompts to employees via multiple means (e.g. posters, e-mail, payroll stuffers).
• Offer appealing, low-cost fruits and vegetables in vending machines and in the cafeteria.
• Provide taste-testing opportunities at the workplace.
• Offer local fruits and vegetables at the workplace (i.e. workplace farmer’s market or community-supported agriculture drop-off point).
• Provide cookbooks, food preparation and cooking classes for employees’ families.
• Ensure on-site cafeterias follow healthy cooking practices and set nutritional standards for foods served that align with the Dietary Guidelines for Americans.
• Offer healthy foods at meetings, conferences and catered events.
• Use point-of-decision prompts as a marketing technique to promote healthier choices.
• Provide healthy cooking demonstrations that teach life-long skills (e.g., fruit and vegetable selection and healthy preparation).
• Use competitive pricing - price non-nutritious foods in vending machines and cafeterias at higher prices.
• Make kitchen equipment available to employees.
• Provide an opportunity for on-site gardening, if possible.

Sweetened Beverage Consumption

• Make water available throughout the day.
• Offer appealing, low-cost healthy drink options in vending machines and the cafeteria.
• Modify worksite vending contracts to increase the number of healthy options.

Physical/Weight Management Activities

• Allow access to on-and off-worksite gyms and recreational activities before, during, and after work hours.
• Offer and encourage participation in after work recreation or sport activities/leagues.
• Provide cash incentives or reduced insurance costs for participation in physical activity and/or weight management or maintenance activities.
• Provide shower and/or changing facilities on-site.
 

General Health Education Activities

• Have a current policy outlining the requirements and functions of a comprehensive workplace wellness program.
• Have a wellness plan in place that addresses the purpose, nature, duration, resources required, participants and expected results of a workplace wellness program.
• Orient employees with the wellness program and give them copies of the physical activity, nutrition and tobacco use policies.
• Promote and encourage employee participation in the physical activity/fitness and nutrition education/weight management program.
• Provide health education information to employees.
• Have a committee that meets at least once a month to oversee the wellness program.
• Offer regular health education presentations on various physical activity, nutrition and wellness-related topics. Ask voluntary health associations, health care providers and/or public health agencies to offer on-site education classes.
• Host a health fair as a kick-off event or as a celebration for completion of a wellness campaign.
• Designate specific areas to support employees, including educational opportunities for diabetics and nursing mothers.
• Conduct preventive wellness screenings for blood pressure, body composition, blood cholesterol and diabetes.
• Provide confidential health risk assessments.
• Offer on-site weight management/maintenance programs for employees.
• Add weight management/maintenance, nutrition and physical activity counseling as a member benefit in health insurance contracts.

Tobacco Cessation

• Establish a company policy prohibiting tobacco use anywhere on the property.
• Provide prompts/posters to support no tobacco use policy.
• Establish a policy supporting participation in smoking cessation activities during duty time (flex-time).
• Provide counseling through an individual, group or telephone counseling program on-site.
• Provide counseling through a health plan sponsored individual, group or telephone counseling program.
• Provide cessation medications through health insurance.