Under the new regulations, the following is the minimum size requirement:

• Part-time employees are counted based upon a full-time employee equivalent.  The full time equivalent cannot exceed 8 hours per day or 40 hours per week.
• Self-employed, independent contractors (and the employees of an independent contractor), and directors, even though they may have coverage under the group health plan, are excluded from the count.
• Foreign employees under a controlled group are included.
• A COBRA-subject employer is still defined as one with 20 or more employees on at least 50% of the working days in the preceding calendar year.

HIPAA – Compliance requirements for All Groups

These are the complex federal laws dealing with continuation and portability of health insurance coverage. The reporting requirements are terribly burdensome, and the penalties for non-compliance are steep.  The minimum tax for non-compliance discovered after a notice of examination is generally $2,500. And with the IRS, the burden of proof lies with you. Plus, unnecessary COBRA claims are costly and often the responsibility of the employer rather than the insurance carrier.

HIPAA Employer Audits cause panic and frustration. The majority of employers are non-compliant. The Department of Labor has increased their audit personnel and their audit budget.

The IRS estimates that a large number of employers are out of compliance with COBRA regulations. What is the risk of non-compliance? Substantial penalties and excise taxes are assessed at $100 per day per violation.  The maximum tax for “unintentional failures” is the lesser of 10% of the amount paid during the preceding tax year by the employer for group health plans, or  $500,000. The IRS currently performs over a dozen audit procedures for COBRA compliance. The federal government has also charged the Department of Labor with the responsibility for COBRA compliance. Now that final regulations are published, there’s an active enforcement effort underway as the government continues to shift healthcare costs out of the federal budget.

These are just a few of the audit points you should review to see if your group health plan has a compliance risk.

• Does your company have a written COBRA Procedures Manual that is consistently adhered to?
• Can you provide proof of advising all of your active employees and their dependents of their COBRA and HIPAA rights?
• Do you maintain documentation of any past requests for HIPAA certificates or COBRA coverage and/or details pertaining to related lawsuits?
• Is your staff trained to answer attorney questions challenging your company’s position?
• Has your staff granted extensions of the COBRA election period or payment deadlines?
• Does your company have an established program for keeping up to date with legislative and regulatory changes in COBRA and HIPAA law?
• Do you have proof that all 4 HIPAA notices (4) were sent to your employees upon becoming eligible for benefits and prior the renewal of the group medical plan?  How is this documented?

Did you hesitate in answering any of these audit questions? It might be time to contact QSR insurance for a review of your COBRA and HIPAA compliance procedures. We’ll be glad to help you assess your situation.

Cobra Administrator

A full-service program that relieves you of the burdens of compliance and administration. Let us worry about new requirements, eligible employee notifications and all the other duties involved in complying with the ever changing laws. Don’t put yourself at risk! Our system retains complete control of COBRA. We adjudicate eligibility so accurately that we keep your COBRA COSTS and CLAIMS to an absolute minimum. We store each employee’s information in our system and also assume full liability for our work.

In 1985, Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA) which was a potpourri of legislation affecting Medicare, Agriculture, Housing and numerous other Federal programs. For most employers, COBRA is the law that provides employees (or covered dependents) that have experienced a “qualifying event” with the right to continue their group health care coverage.

The law was ambiguous in its original form and therefore has been changed or clarified five (5) times. In its current state, the legislation places the following requirements on all employers with twenty or more employees that offer a group insurance program (with the exception of Churches and the Federal Government):

Services Provided

1. Initial COBRA Notification to all employees;
2. HIPAA notices – given to all employees upon becoming eligible for group benefits and prior to the renewal of the group medical plan
3. Notify employees who experience a “qualifying event”;
4. Notify dependents who experience a “qualifying event”;
5. Monitor COBRA election periods;
6. Monitor COBRA Participants time frames;
7. Collect funds for COBRA monthly premiums; and
8. Notify COBRA Participants of Conversion privilege.

Cobra Facts!

• Companies employing 20 or more people on at least 50% of the working days during the preceding calendar year are subject to COBRA. Both full and part time employees are counted, irregardless if they are insured under the company group plan. Employers have 30 days to notify the Plan Administrator (TPA) of a qualifying event. The TPA then has 14 days to notify the beneficiary.
• The following five situations constitute a qualifying event: Death of an employee-parent; Employment termination of the employee -parent; Divorce or legal separation of the parents; Medicare eligibility of the employee -parent; A child attaining maximum age for eligibility as a dependent under a group plan. It is the responsibility of the employer to notify both the employee and his/her spouse of their COBRA rights as qualifying events occur. COBRA requires to send a separate election notice to the spouse that resides at a different address. An employee must only be insured for one day under a group health plan to become eligible for COBRA.
• COBRA continuation applies to all group health benefits and include: Major Medical, Prescription Drug Card; Dental & Vision Coverage. Qualified beneficiaries have either the option of continuing all of the benefits or just their “core” coverage. Core coverage is any health benefit other than the dental and vision benefit. Health plans offering packaged dental and vision care must calculate the costs separate for core and non-core benefits within the package. However, stand-alone Rx Card, dental and vision plans may be chosen by the beneficiary to be continued only, in the event the dental and vision coverages are independent from the medical coverages.
• COBRA continuation is a federal law and applies to all states. COBRA  89 allows qualified beneficiaries with a pre-existing condition at the time of the qualifying event to continue their coverage under COBRA, and at the same time be enrolled in another group health plan, if the new plan includes any exclusions or limitations with respect to any pre-existing condition.

Long term care is the type of care that a person receives when they can no longer care for themselves. It includes a wide range of mostly non-medical services that are designed to help people maintain the maximum level of independence. Care can be custodial, intermediate or skilled in nature and can be provided in the home, community or institutional setting. Long term care can be provided in a formal or informal manner. Formal long term care refers to services that are paid for while family or friends provide informal care.

What is long term care insurance?

Long term care insurance indemnifies the insured for the costs associated with receiving care when they can no long take care of themselves. Long term care is designed to pay expenses that typically arise when someone is chronically ill. The three generic types of coverage are typically called nursing facility, home care and comprehensive, which includes both nursing and home care coverage. Mandated benefits vary by state of domicile. Check the policies in your areas for specific outlines of coverage.

Why does my client need long term care insurance?

Asset protection. Most people work hard all of their lives to build a nest egg. Unfortunately, when they get older and need long term care, they are often forced to liquidate or spend-down their assets due to the catastrophic costs of long term care. Due to the high cost of care many individuals are forced onto the welfare rolls and lose their independence. Many spouses of such individuals also suffer a diminished lifestyle.

Long term care insurance provides the liquidity necessary to pay for the high cost of caring for someone when they can’t take care of themselves.

The Health Insurance Association of America reports that the primary reason people purchase long term care insurance is asset protection, maintenance of the spouses standard of living, choice, quality of care, welfare avoidance, and peace of mind.

If my client has high assets why do they need long term care insurance?

People purchase various forms of insurance coverage to protect specific assets. They buy casualty insurance to protect their property, medical insurance to pay the bills when they get sick, disability insurance to protect their income if they become unable to earn a living and life insurance to provide liquidity for their survivors or to pay taxes. In each case they’ve chosen to pay for insurance coverage because it represents a low cost way to protect their assets against highly probability events. In fact they recognize the fact that insurance benefits represent a discounted dollar.

With the exception of death, the probability of needing long term care is higher than for the other risks that most people insure. Statistically more than 50% of us will eventually need long term care. The numbers are rising as we live longer.

Therefore, given the high probabilities and costs associated with the need for long term care, why would someone choose not to pay pennies on the dollar to protect their assets? If their rationale is that they may not need to use the coverage or that they can self-insure, then they ought to drop all of their insurance policies except their life insurance.

Doesn’t Medicare pay for long term care?

No. Medicare is designed to pay for the services associated with acute medical conditions. Medicare pays for a very limited amount of skilled care that is provided after a 3-day prior hospitalization. The care that Medicare covers includes skilled care only in a facility (less than 1% of all care provided in a nursing home) and some limited home health care designed to rehabilitate someone after a hospitalization. This rehabilitation is limited to skilled services such as respiratory, speech or physical therapy. Home health care does not include services associated with independent living such as housekeeping, meal preparation, shopping, etc.

What has to happen to my client to qualify for benefits?

Today, all long term care insurance policies pay benefits to the insured when they either suffer the loss of two of the activities of daily living or are diagnosed with a severe cognitive impairment (e.g. Alzheimer’s or dementia) such that they require some level of assistance in caring for themselves (contractual language varies from state to state). Some companies still offer a third benefit trigger, medical necessity, in their non-tax qualified policies.

The activities of daily living include eating, bathing, dressing, continence, toileting and transferring. In California non-qualified policy forms include ambulating.

What does the claims process look like for long term care insurance?

Generally, once the insured has suffered the loss of two activities of daily living or is diagnosed with a severe cognitive impairment, the insured, insured’s doctor and family and the insurance company enter into the case management, assessment and plan of care process. The insurance company either contracts with or employs case management professionals that assist the insured and their family in determining the care needs of the insured. This assessment process looks at the functional incapacity of the insured and from this a plan of care is created. This plan of care, or prescription for care, outlines the insured’s needs. The insurance company will base its claims payment on this plan of care and will periodically request that a new assessment be performed in order to assure that the insured is receiving the levels of care that they require.

Once the insured qualifies for benefits what will a long term care insurance policy pay for?

If the insured needs to go to a nursing home or some other institutional setting, the long term care insurance policy will pay for the expense associated with that stay up to the limits of the policy. In a home or community setting the policy will typically reimburse for such things as: adult day care, home care services (using the telephone, managing medications, assistance with moving about outside, shopping for essentials, laundry and light housekeeping), home maker services, hospice and respite care. These items can vary from state to state.

What is the best age to purchase long term care?

The 50s appear to be the best time to purchase long term care insurance. Premiums for people in their 50s are more affordable and the insurability issues facing insureds in their late 60s and early 70s are not typically a problem. Finally, many people in their 50s are business owners. Because of this they may be able to tax deduct some or all of their long term care insurance premiums.

What is the difference between tax qualified and non-tax qualified long term care insurance?

Tax qualified long term care insurance was created by the Health Insurance Portability and Accountability Act of 1996 (HIPAA). It provides some levels of tax deductibility of premiums depending upon the insured’s status as a taxpayer. It also guarantees that the benefits, when paid, will be tax free.

Non-tax qualified long term care insurance policies exceed HIPAA guidelines for tax qualified plans. The premiums are never tax deductible and Congress has not yet determined the taxability of non-qualified benefits.

There are some who feel that tax qualified policies are not as comprehensive as non-tax qualified plans. For an in-depth discussion of this issue refer to my article on the subject entitled; Tax Qualified vs. Non-Tax Qualified: The Final Word?

Should an employer group consider offering long term care insurance to their employees?

The worksite is a great place to offer high quality individual long term care insurance to employees. It allows them to purchase programs at a lower premium than if they were buying it directly. A number of companies offer endorsed group discounts to employer groups, sometimes as much as 15%.

Additionally, owners of closely held C-Corporations can purchase tax qualified policies on a tax-favored basis for themselves and key employees.

What is the best long term care product?

This is the most frequently asked question. The answer is, it depends. The agent needs to answer many other questions before he/she gets the answer. We always look at a company’s financial ratings. In light of the fact that most insureds will not make a claim for 15 to 30 years from now, you want to put your clients with a company that is financially sound and isn’t playing games with low-ball rates and overly aggressive underwriting.

The next question that needs to be answered is who is my client. Companies typically niche their products by age of insured and by health. This means that carriers focus their rate structure on specific age bands. Also, some are only preferred risk carriers while others are more aggressive and willing to consider special risks.

Finally, what benefits to you wish to offer? Some companies offer basic benefit packages. Others highlight certain “bells and whistles” that may appeal to other clients. Therefore, before you ask who is the best company you need to answer the question, who is my client.

What is the California Partnership for Long Term Care Insurance?

The California Partnership for Long Term Care Insurance (CPLTCI) is a partnership between state government and a handful of insurance companies. The primary purpose is to encourage people to protect their assets by purchasing a specially qualified long term care insurance policy. The inducement for the buyer is protection against Medi-Cal asset spend-down.

CPLTCI policies typically meet or exceed traditional policies in terms of benefits with the added advantage of asset spend-down protection. While they may not be for everyone anytime an agent in California proposes anything less than lifetime benefits, they need to advise their client of the CPLTCI option. It is usually in the client’s best interest to consider a Partnership plan because of the spend-down feature.