Curated Toolkit for the week of 5/27/2024 from Risk Strategies

Curated Toolkit for the week of 5/27/2024 from Risk Strategies


Cal OSHA to Enforce New Workplace Violence Prevention Plan Law

On September 30, 2023, Governor Gavin Newsom signed SB 553. Taking effect on July 1, 2024, SB 553 arose from a tragic 2021 workplace violence incident and will become the new Workplace Violence Prevention Plan standard. The new standard will be enforced by Cal/OSHA and will require California employers to have a Workplace Violence Prevention Plan to create a safer work environment for workers and patrons.?

The new legislation affects all employers, except those with stricter pre-existing violence prevention standards. These employers will continue to follow standards that have been previously outlined (for example, the Workplace Violence Prevention in Healthcare Standard, 8 CCR 3342). Other exceptions to the new legislation include teleworkers, where their work environment is not under the employer’s control, and workplaces that are not accessible to the public, as well as business with fewer than 10 employees.?

Similar to the Injury Illness Prevention Program, the Workplace Violence Prevention Plan under SB 553 requires a plan that encompasses several key elements, including identifying individuals responsible for the planning, development, communication, implementation, and evaluation of the plan. It also must articulate the employer’s response to workplace violence, explicitly prohibit any form of retaliation from the employer, and provide transparency regarding the results of investigation/corrective actions moving forward after an event has occurred. Additionally, there must be procedures that outline incident reporting, investigation post violent incident, and how to respond to employee concerns. Lastly, the plan should outline clear protocols for seeking assistance from relevant law enforcement agencies when necessary.??

An assessment of the current workplace violence hazard potential should be conducted when this program is first implemented, and periodic assessments scheduled to identify any new hazard and threats to the workplace. Any new hazard and threats (or ones not previously identified) will need to be mitigated appropriately based on severity. Records should be kept for identified workplace violence hazards, and corrective actions taken, as well as records of any violent incident investigations that occur.?

Training in the language native to the employee is mandatory for all workplaces subject to this new law. Training must be conducted before July 1, 2024, and annually thereafter. Records should be kept of all training.?

Want to learn more? On June 5th at 2 pm Eastern Time, the Risk Strategies Loss Control team will present a webinar to provide clients with more detail on SB 553. Simply send me an email to register. [email protected] Can’t make it on June 5th? Register anyway. A recording of the event will be shared with everyone. Lastly, please share with anyone who might be interested.?


The Rise of Direct to Employer Healthcare Relationships

Today's healthcare landscape is evolving, with traditional service delivery adapting to meet diverse needs more effectively. The Direct to Employer (DTE) healthcare model exemplifies this shift, emerging as a significant growth avenue for health systems. This approach aims to streamline healthcare solutions, making them more cost-effective and tailored to specific employer needs. Employers making decisions between traditional and DTE systems need to understand the nuances between the two and the specific value propositions DTEs hold for self-funded employers.

What is Direct to Employer healthcare?

Direct to Employer healthcare (also known as DTE and D2E) is a partnership between a hospital or health system and a self-funded employer. This strategy allows providers to serve employees directly by bypassing traditional insurance.

Health systems are constantly seeking new ways to stand out. The provider's main goal is to boost commercial revenue. Teaming up with a large local employer and cutting out the intermediate party could increase the market share and profit margins for growth-minded health systems. The DTE strategy complements advertising, service diversification, community engagement, and other marketing approaches.

The value proposition for employers

To be successful, a DTE relationship must benefit both the health system and the self-funded employer. Many employers are open to the idea of “steering care” or offering a limited network option if there is something in it for them. The biggest concerns for most employers are the overall cost of providing healthcare benefits for their employees and the fact that healthcare costs are increasing at a much faster pace than other expense categories. The result is that for most employers the cost of healthcare is their second largest expense behind payroll.

Naturally, employers want to save money and reduce healthcare costs while maintaining sufficient access and quality outcomes for employees. If a health system can satisfy these requirements and enhance the member experience, it presents a compelling value proposition to a self-funded employer.

Many health systems start their DTE strategy with 'clinical bundles.' These are packaged pricing deals for common surgeries like orthopedics and spinal procedures. Once established, these bundles can be sold directly to an employer, either through their current self-funded administrator or on a carve-out basis outside the medical plan.

The road to DTE success: critical considerations for health systems

Successfully implementing a Direct to Employer strategy requires careful consideration in several areas. For health systems, ensuring comprehensive geographic and service coverage is paramount. This involves providing a full spectrum of inpatient, specialty, and ancillary services, such as outpatient imaging. Often, this necessitates forming partnerships or establishing a "wrap network" to address any service gaps. A wrap network is a supplementary network of healthcare providers that fills any gaps in services or geographic coverage. This ensures that all employee needs are met, even when the primary network does not cover certain specialties or locations.

In terms of capacity, health systems must assess whether they can manage the increased patient volume that typically accompanies a large employer partnership. If establishing a complete carve-out network is not immediately feasible, many health systems opt to start with clinical bundles or direct primary care offerings.

The financial strategy also plays a crucial role. Health systems need to develop fee schedules that offer competitive savings to employers compared to average market prices. Decisions about accepting potentially reduced commercial fees in exchange for increased volume and considering risk-sharing arrangements, like total care cost guarantees, are critical.

To enhance the attractiveness of their DTE offerings, consider integrating value-added services, such as:

  • Reducing appointment wait times to boost patient satisfaction and streamline care.
  • Creating a cohesive care experience by integrating healthcare services and providers.
  • Utilizing nurse navigators to guide patients efficiently through their healthcare journey.

Pathways to progress in healthcare

As the Direct-to-Employer (DTE) healthcare model continues to redefine traditional approaches, its potential to transform health systems and benefit employers is undeniable. By embracing strategies like clinical bundles and prioritizing seamless care, health systems can build robust partnerships.


Health & Welfare Plan Compliance Reminder: PCORI Fee Filing Deadline

PCORI Fee Background

The PCORI fee is a requirement under the Affordable Care Act to fund the Patient-Centered Outcomes Research Institute, focusing on clinical effectiveness research. It was scheduled to end for plan years ending on or after October 1, 2019. However, a federal spending bill passed by Congress in 2019 reinstated the PCORI fees and filings for another ten years, through 2029.

The PCORI fee is filed and paid annually on IRS Form 720 (Quarterly Federal Excise Tax Return). Employers with self-funded health plans ending in 2023 are advised to use the 2nd quarter Form 720 to file and pay the PCORI fee by July 31, 2023. The information is reported in Part II of Form 720.

Since Form 720 is a tax form, rather than an informational return form such as Form 5500, employers or their accountants must prepare and file it. The IRS permits employers to deduct PCORI fees as an ordinary and necessary business expense under Internal Revenue Code (IRC) Section 162(a).[1]

For self-funded group health plans, the fee is calculated using the average number of lives covered under the plan, including all employees and covered dependents, and the applicable rate for that plan year, outlined in the table below and also accessed on the IRS website here .

PCORI Fee Calculation

The PCORI fee is calculated on the average number of lives covered under an applicable self-funded health plan. The IRS provides the following three alternative methods to determine the average number of lives covered under a self-funded plan for the plan year for PCORI fee calculation purposes:

  1. Snapshot Method: involves adding the total number of lives covered on a date during the first, second, or third month in each quarter of the policy year, or an equal number of dates for each quarter, and dividing the total by the number of dates on which a count was made. There are two methods within the snapshot method to count family members: The “snapshot count method” involves the plan sponsor counting the actual number of lives covered on the designated date. The “snapshot factor” method entails the plan sponsor counting the number of participants with self-only coverage on the designated date PLUS the number of participants with coverage other than self-only coverage on the designated date, multiplied by 2.35.
  2. Form 5500 Method: involves a formula using the number of participants reported on the Form 5500 for the plan year. Employer plan sponsors can only use the Form 5500 method if they file the Form 5500 by the due date for the PCORI fee for that year (typically July 31). Employer plan sponsors may not use the Form 5500 method to calculate the PCORI fee if they file a Form 5500 extension.
  3. Actual Count Method: involves calculating the sum of the lives covered for each day of the plan year and dividing that sum by the number of days in the plan year This is generally the least practical calculation method.

Your Risk Strategies team will provide a detailed analysis of which calculation method is most suitable for your self-funded plan.

HRAs/FSAs/HSAs/Excepted Benefits

  • HRAs: For Health Reimbursement Arrangements (HRAs), the IRS outlined two special PCORI fee-related rules. First, if the integrated medical plan is fully insured, then the plan sponsor may treat each employee's HRA as covering a single life and is not required to include all covered lives, such as covered dependents, when reporting and paying the PCORI fee. Second, if the integrated group health plan is self-funded (including level funded plans), then the HRA is not subject to a separate PCORI fee as long as the HRA and the self-funded group health plan have the same plan sponsor and have the same plan year. In this case, one PCORI filing and fee for the self-funded group health plan is due, based on all covered lives, not just employees (as noted in the paragraph directly above). Note that Individual Coverage HRAs (ICHRAs) are also subject to the PCORI fee and must be reported and paid by the July 31, 2024 deadline.
  • FSAs: Generally, Health Care Flexible Spending Accounts (FSAs) are not subject to PCORI fees as “excepted benefits.” However, if an employer contributes to an FSA that exceeds the lesser of $500 annually or a dollar-for-dollar match of the employee’s contribution, then the FSA is not considered an “excepted benefit” and is subject to PCORI fees. Similar to the HRA with a fully-insured integrated medical plan, the plan sponsor may assume one covered life for each employee with an FSA.
  • HSAs: Health Savings Accounts (HSAs) are not subject to the PCORI since HSAs are not group health plans, but rather individual accounts.
  • Excepted Benefits: The PCORI fee also does not apply to most dental and vision coverage since they are “excepted benefits,” exempt from PCORI fee requirements.

Click here for an IRS table summarizing which common health plans/arrangements are subject to the PCORI fee.

PCORI Filing and Payment Date Deadlines for 2024

As we previously reported last year , the IRS issued Notice 2023-70 in October 2023, increasing the PCORI fee for plan years ending on or after October 1, 2023 and before October 1, 2024, including plan years ending December 31, 2023, to $3.22 (increased from $3.00).


Click here for the IRS PCORI Fee Q&A webpage for additional information.

Short Plan Years

The PCORI fee still applies to a short plan year of an applicable self-funded health plan. A short plan year is a plan year of fewer than 12 months. The PCORI fee for the short plan year of an applicable self-funded health plan is calculated by multiplying the average number of lives covered during that plan year by the applicable dollar amount for that plan year.

Example: Self-funded short plan year starts on April 1, 2023 and ends on December 31, 2023. PCORI fee is equal to the average number of lives covered for April through December 2023, multiplied by $3.22 (the applicable dollar amount for plan years ending on December 31, 2023).

PCORI Fee Filing Corrections

Self-funded group health plan sponsors may make corrections to a previously filed Form 720 by filing a Form 720-X, Amended Quarterly Federal Excise Tax Return , including adjustments that result in an overpayment.

Failure to File PCORI Fees

Even though the PCORI statute and final regulations do not include a specific penalty for failure to file or pay the PCORI fee, it is considered an excise tax. As such, any related penalty for failure to file a return or pay a tax would generally apply under IRC Section 6651.

Section 6651 Penalties: Penalties may result in 5% of the amount of the excise tax, with an additional 5% for each additional month during which such failure continues, capped at 25% of the amount due.

Note that penalties under Section 6651 for failure to file or pay the PCORI fee may be reduced, or even waived, if the failure is due to reasonable cause and not due to willful neglect.

PCORI Fee Records Retention

Even though the PCORI statute and final regulations do not include a specific record retention requirement, it is considered an excise tax. The Form 720 instructions direct taxpayers to retain excise tax records for at least four years from the latest of the date the tax became due, the date the tax was paid, or the date the claim was filed.

Employer plan sponsors should be prepared to substantiate the enrollment count and the method used to calculate the PCORI fees through their records since these fees are based on the number of covered lives.

Next Steps for Employer Plan Sponsors

  • Self-funded plans: For employers sponsoring a self-funded group health plan (including level funded plans and HRAs), contact your Risk Strategies team for support with PCORI fee calculations and with any additional questions.
  • Fully insured plans: As noted above, no action is required for employers sponsoring a fully insured group health plan since the PCORI fee is already baked into their monthly premium payments by their health insurance carriers.
  • Finally, don’t forget another important health & welfare plan compliance filing deadline due on July 31, 2024 as well: Form 5500. Click here for more information on the upcoming Form 5500 filing deadline.

Risk Strategies is here to help. Contact me directly at [email protected]


Todd LaRue has over 20 years of experience in providing comprehensive and customized employee benefits, human resources consulting, and risk mitigation services to employers of all sizes and industries. His mission is to help employers achieve their long-term strategic goals, enhance their employee engagement, and reduce their operational costs and risks

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