Coverage, Premiums and Rates

Coverage, Premiums and Rates

Till now, we have discussed the Eligibility, Electability, Defaults, Enrolment rules etc. and all these help us defining the rules upon which a Participant will be enrolled in a Comp Object. Now, let's go a step further. Let's discuss about the money that comes into action for these enrolments. There are many things that come into picture, the Benefit Amount upon which the Participant is enrolled, the Premium of the enrolment, the Employer Contribution and the Employee Contribution. The Employer Contribution is simply "Premium - Employee Contribution". So we are going to discuss about the Coverage, Premium and the Employee Contribution aka the Rate.

Coverage (Benefit Amount)

Coverage is also known as the Benefit Amount, and as the name suggests, it is the amount associated with any given comp Object. Usually Health Coverage Plan types do not have Benefit amounts, these are more appropriate to Plan types like Life Insurance and Flexible Spending accounts.

Coverage amounts are usually set by the Carrier, so they are independent of Program. At most cases, Coverage are defined at the Comp Object Levels, if there are Options in that Plan type, Coverage is defined at the OIPL level; else at the Plan level.

Let's define Coverage, and discuss the different aspects of it. See Figure 6.34 – Coverage Definition.

Responsibility: HRMS Manager

Navigation: Total Compensation -> Rate/Coverage Definitions -> Coverage Calculations

(Figure 6.34 – Coverage Definition)

Steps: Create a new record.

This completes the set up for a Coverage Calculation. We should have a Coverage defined for all our Life Insurance plans. There is one thing that we missed here, Variable Coverage. We left it knowingly. Let's park it for now, we will learn about that in a separate section. OK, let's move to the next section.

Premium

The Premium is the amount, which is taken by the Carrier in return of the Insurance. So in other words, it's the cost of the Insurance being offered. The Firms make direct contacts with the carriers in order to get a reasonable Premium from them based on the Plans the Carrier has to offer. Premium is something that the Firm pays the Carrier directly. The Employee does not have any interference with it; not even in COBRA Coverage. In COBRA Coverage too, the firm pays the Premium to the Carrier and gets it reimbursed from the COBRA beneficiary along with a 2% service charge. Premium must be defined for every Comp Object, as the Carriers that offer the Insurance claim it, and we must have a record of payments for our Accounts Payables. Let's see how to define a Premium. See Figure 6.35 – Premium Definition.

Responsibility: HRMS Manager

Navigation: Total Compensation -> Rate/Coverage Definitions -> Actual Premiums

(Figure 6.35 – Premium Definition)

Steps: Create a new record.

This completes the Premium Configuration; except the Variable Rates part. Let's move to the next section.

Rates

We understand that, the Premium is paid by the Firm. Now the firm pays a portion of it from its own pocket, we call it the Employer Contribution/ ERC; the rest of the amount is filled in by the Participant, it’s called as Employee Contribution/ Rate. So Rate is an important part of Benefits administration. Unlike Coverage and Premiums, Rates are specific to Programs; so that makes rates more flexible. One OIPL in one Program might have a lower rate than the same OIPL in another Program. For an example, In COBRA the rates will always be higher, as those are the 102% of premium, and there is no ERC.

Let's configure a rate, and learn more about it. See Figure 6.36 – Standard Rates.

Responsibility: HRMS Manager

Navigation: Total Compensation -> Rate/Coverage Definitions -> Standard Rates

(Figure 6.36 – Standard Rates)

Steps: Create a new record.

Matching Rate

There will be instances where the Employer cost is usually a match/ percentage of the Rate that the employee pays. Matching Rate is the place where we can add up rules that can make sure the percentage of the match is being charged to the Employer. Although this functionality is not fully functional yet; however this is certainly a powerful tool to handle the ER Match. At present we use a different rate to handle the ER Contribution and Match.

Period to Date Limits

There are plans where there is a Maximum Contribution amount defined as per regulations. For cases like that, we can define a Period to date limit that can stop or start the contributions once a Particular amount is reached. The Period to Limits can be defined in this navigation:

Responsibility: HRMS Manager

Navigation: Total Compensation -> Rate/Coverage Definitions -> Period-to-Date Limits

(Figure 6.37 – Period to Date)

Once the Limits are defined, it can then be attached to any standard rates to enforce the limit on it. The Period-to-Date Limit button on the Standard rates button is the place where a PTD can be attached to a rate.

Variable Rate Profiles

Let's imagine another scenario. Our firm wants the following rules to be implemented for Plan A.

  • The Participants from Benefit Group A and B should be charged $100 / month.
  • If on Unpaid Leave Of Absence, the activity type should change from Employee Payroll Contribution to Participant Individual Contribution
  • If the Participant is greater than 68, then the rate should be just $50/ month.
  • The Participant living in New Hampshire should pay $10 less than the regular rate.
  • All others should pay $127.68/ month to continue in the Plan.

So now, if we were to implement this requirement in the standard rate of Plan A, we might think of writing a Fast Formula that can handle all these; however making $10 less, changing the activity type etc is going to be a big task for sure. Oracle offers a solution; a Variable Rate Profiles, popularly known as VAPRO.

Variable Rate Profiles are as good as Rates. They have a set of conditions attached to it, if the condition passes; we consider the profile to be a pass. Now, the Profiles can have almost all types of Calculation Methods, as a Rate would have. So it’s almost the same. However with one difference, they do not have Comp Objects attached to them as the standard rates. They are run based on Conditions. We then attach the profiles to different rates to get different results. The idea is to create one variable profile for each of the requirements. For an example, one for Unpaid LOA people, one for NH participants etc. Then decide the order in which the profiles should have their priority. Once the priority is defined, then we will attach them on the standard rates. The system, while evaluating the rate, will first calculate the standard rate, then will go to the Variable Rate Profiles, it will check the condition on which the profile will pass, if the first one passes, it will take the amount attached to the Profile and return that; if the first one does not satisfy, it will go to the second one, and so on. If none of them pass, the amount on the standard rate will be the final amount. This was just an example related to rates; we can attach a Variable profile to Premiums and Coverage too.

Let's see how to create one. See Figure 6.38 – Variable Rates.

Responsibility: HRMS Manager

Navigation: Total Compensation -> Rate/Coverage Definitions -> Variable Rate Profiles.

(Figure 6.38 – Variable Rates)

Steps: Create a new record.

Now it’s time to set up the Conditions for which the variable Profile will pass. We have two ways,

  1. Eligibility Profile: Use Eligibility Profiles to set up the Conditions. These are the usual Eligibility and Rate Profiles created for Participants. Probably now, it would have been clear, why do they call it, Eligibility and Rate Profiles. :)
  2. Criteria: This screen looks exactly the same as Eligibility Profiles. We can just keep on entering the Conditions and that would do the trick.

It is advised to use the Criteria than using the Eligibility Profiles. Eligibility Profiles, if attached here, will create issues while tracing issues related to Participant Eligibility. We will talk more about those in troubleshooting section. However as Eligibility Profiles give us the liberty to use as many Profiles as we want, and again putting them as Mandatory or Option; Criteria are not capable of doing so. All the conditions will have to be summed together in one criterion.

(Figure 6.39 – Variable Rates Criteria)

The Condition of Matching rates work here as well. We can add up the sequence and percentages in the screen to help determining the ER Contribution matches.

Variable Profiles are used very frequently to manage complex rates, coverage and Premium calculations. As we have already created a Variable Profile, let's go attach one in one of the rates. For that, we will have to go to one of the Standard rates where the profile will be attached. And Click on the Variable Rates Button.

The Profiles are added in the Variable Profiles tab, with a sequence number depicting the Priority. The Profiles can be managed with a Start date and end date; hence end dating and date tracking is very much in use. As we had discussed earlier, once the standard rate Value is determined, the system goes on evaluating the conditions related to the entire set of Variable Profiles one by one, starting from the minimum sequence number. The Moment it hits a pass, it calculates the Amount based on the Calculation Method attached to the Variable Profile. It then takes the "Treatment" code and uses it against the Standard Rate value. Similar to Rates, Premiums and Coverage use Variable Profiles too.

Imputed Income

Imputed Income is a concept completely owned and used in US. First of all we need to understand that it has got something to do with Taxes. To explain, what exactly imputed income is, we will first check the bookish definition. It says "An income that may not be seen as cash, but instead comes in the form of a benefit; usually by having someone paying for our expense or sometimes by providing a Benefit."

So the government asks us to pay taxes for the Imputed Income, although it is not a direct form of Income in tax. It’s like someone gave Joe a Benefit as a favour, and Joe pays taxes for that. The Federal Government does not apply taxes on all of it; it does only in certain situations.

Now, let's learn it our way. Joe has a Domestic Partner OK? Now, as per Joe’s employer rules, he can cover his DP in the medical plan. Now Employer pays the Premium and it has an Employer Cost to it. So this is a Benefit that Joe’s Employer pays for Joe’s Domestic Partner. Now this is an example of Imputed Income; and the employee will get taxed for that; not the Employer. Let's go to another example, Joe’s life insurance. The law says, if Joe’s life insurance coverage is more than $50K, and Joe’s employer is paying the premium; in that case any premium that is paid for the excessive of $50k will be taxed against the Employee; not the Employer.

We have learnt about the concepts of Imputed Income, isn't it? Let's learn how to implement it. There will be plans that will be subject to Imputed income, like the life insurance plans, alright? Similarly, we will have to create a Plan type and a Plan for as a placeholder plan for Imputed Income. For one Program, there can be only one Imputed Income Plan; however once an Imputed income plan is created, it can be linked amongst more than one Programs.

Here are the rules for the placeholder plan.

  • It should not have any Eligibility Profiles attached.
  • In the Restrictions Tab, the Imputed Income Type must be chosen based on the type of Imputed Income in Place.

All the other plans, which are subject to Imputed Income, must have a person type chosen in the Subject to Imputed Income field in the general tab. Once the Placeholder plan is defined, we can go and create a Calculation for the same. See Figure 6.40 – Imputed Income.

Responsibility: HRMS Manager

Navigation: Total Compensation -> Rate/Coverage Definitions -> Imputed Income

(Figure 6.40 – Imputed Income)

Steps: Create a new record.