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As Out-of-Pocket Costs Go Up, Individuals More Likely to Shop for Health

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BRENTWOOD, Tenn., Nov. 3, 2014 /PRNewswire/ -- Research conducted by Change Healthcare and published today in the whitepaper "Higher Out-of-Pocket Costs Drive Healthcare Consumerism" confirms what experts have long presumed: As out-of-pocket costs go up, so does the likelihood that individuals will shop for value-based care.  The healthcare consumer engagement and cost transparency company looked specifically at the relationship between deductible amount and consumers' willingness to engage in healthcare – analyzing user data from three very diverse clients, including a retailer, a manufacturer and a financial services company.

"Our study looked at employee engagement relative to plan design – across two PPOs and six high-deductible health plans – and out-of-pocket costs, including deductible, co-pay and co-insurance," said Change Healthcare President and CEO Doug Ghertner.

Do you know how much your organization is really spending on payroll and HR administration?

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To my knowledge, PwC has yet to publish an update to it's 2011 study, "The hidden reality of Payroll & HR administration costs".  With the passage of the Affordable Care Act and it's regulatory and compliance burden laid at the feet of employers, the findings of this study are even more relevant today and worth a re-visit.  The study attempts to measure the Total Cost of Ownership ("TCO") of four core business functions:

  • Payroll (PR) - The process of collecting and entering data related to employee hours worked, determining taxation, calculating gross and net pay, and distributing compensation.
  • Workforce Administration (WA) - The administration of the core HR database (HRIS) and activities associated with maintaining employee information and various processing activities such as payroll, health & welfare administration, and other HR activities (recruiting, talent management, etc).
  • Time & Attendance (TA) - The process of collecting, reviewing, submitting and approving time data, including employee hours worked, PTO (vacation, sick, holiday) and leave balances.
  • Health & Welfare administration (H&W) - The administration of employee H&W benefits and programs including open enrollment and life event status change maintenance.

Collectively, these four components provide a comprehensive measure of TCO of payroll and HR administration costs.  The study shows that many organizations may be unaware of the true expense of

The IRS Really Doesn’t Want your Company to Pay for Individual Coverage

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As small employers (those with less than 50 FTEs) continue to evaluate the impact of the Affordable Care Act (ACA), growing minorities of business owners are seeking the healthcare off-ramp. Many of these employers believe that they and their employees may simply be better off on plans offered through the marketplace, particularly if their employees may qualify for federal subsidies. Understandably, employers are also concerned that such a major shift in employee benefits could contribute to low morale or even outright hostility from their employees. Some employers may provide an incentive to employees that enroll in individual plans by reimbursing the employee for a portion or all of the individual premium. Employers aren’t crazy for considering this option, since prior to guidance issued on September 13, 2013 employers could provide tax-free reimbursements for individual premiums through a special type of Health Reimbursement Arrangement (HRA). Insurance brokers who described them as “defined contribution plans” heavily promoted these arrangements and were beginning to gain traction prior to issuance of the IRS guidance.

IRS Increases 9.5% Affordability Threshold—Or Did It?

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On July 24, 2014, the Internal Revenue Service (IRS) released three Revenue Procedures (2014-46, 2014-37, and 2014-41), which provide guidance to individuals on their obligation to maintain minimum essential coverage (MEC) under the Affordable Care Act’s (ACA) so-called “individual mandate.” Most notably for employers is that, in Revenue Procedure 2014-37, the IRS increased the threshold for determining whether an employer has offered affordable coverage to an employee. For these purposes, the IRS increased the percentage of an employee’s household income that can be charged for group health insurance and still be considered affordable for purposes of the ACA’s “pay-or-play” requirements. The IRS guidance increases the percentage from 9.5% to 9.56%. In other words, an employer assessing the affordability for employee-only coverage for its least expensive plan in 2015 can require an employee to pay up to 9.56% of his or her household income and the insurance will still be considered affordable.