Tag Archives: Patient Protection and Affordable Care Act

New Report: Employers will save billions by dropping health care benefits…it’s not a good thing!

7 May

The House Ways and Means Committee has released a report showing the potential savings large employers could realize by dropping their health benefits, paying a fine and turning employees loose on the individual insurance market. Admittedly this is a highly political document that draws conclusions of a questionable nature in the real world.  However, the very idea that employers will seriously consider dropping employee coverage is scary.  There are big dollars at stake here and no doubt there are some CFOs and CEOs who would very much like to get out from under the unpredictable costs of health care benefits…as many have already done for their retired employees.

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One can make a case that this coverage should not be linked to employment. In addition, workers who receive employer-sponsored coverage clearly have an advantage over those who must purchase coverage on their own.  Neither point makes the case for throwing the baby out with the bath water (a reference to the medieval practice of giving babies the last bath in the same water during the annual family washing).

I spent nearly fifty-years designing and managing health benefit programs for a Fortune 200 company.  I know the value this type of coverage provides to tens of millions of workers and their families.

Employer coverage provides a wide arrange of benefits beyond the financial advantages for workers. Virtually all large employer plans are self-insured; only the use of health care by the workers and their families are considered in setting premiums.  This means that workers can affect the cost of their care. Employers negotiate the best deal for administrative costs.  Most employers hear and resolve disputed claims or oversee the process if outsourced. Employers communicate extensively with employees about their benefits and health care issues.  Employers provide an array of services and programs to assist employees in obtaining care and manage their care and costs.  Employers have an incentive to manage costs beyond any applicable to an insurance company. Many employers will assist their workers in dealing with problems, they handle enrollment, and even assist workers negotiating with high fee, non-participating providers.  Most large employers provide several choices in health plan options.

On his Forbes blog Avik Roy writes:

Free-market reforms, on the other hand, would increase consumer choice, by giving workers control over their own health dollars. Under a free-market system, workers could stay with their employer’s plans, or buy insurance on their own that better suits their needs. For example, young, healthy workers could take dollars out of their company’s expensive plan and steer them towards high-deductible insurance combined with a health savings account.

Note to Mr. Roy, most workers do not want more choice and indeed are afraid of choice, afraid of making the wrong choice. Large employers are already adding HDHPs within their array of choices and this allows the experience for the entire group to be aggregated.  Setting up a system that allows young, healthy workers to leave the employer plan is called adverse selection and would add to the cost of coverage for the remaining workers and the employer eventually creating a death spiral as new young individuals are employed.

In summary, workers are far better off within an employer sponsored plan than they would be on their own deciding which plan and insurer to use and then having only the insurer selected to deal with problems and concerns that arise.

While there is no indication that large employers are seriously considering dropping health benefits en mass, with escalating costs and the growing number of federal mandates and compliance requirements that situation could change in the future. It would not be a good thing, be careful what you wish for.

Washington, DC – Today, in a new report prepared for Ways and Means Committee Chairman Dave Camp (R-MI), data from America’s Fortune 100 companies show they could save hundreds of millions of dollars a year under the new health care law by simply terminating health insurance for their workers and dumping these employees into taxpayer-funded health care exchanges.  

More than 70 percent of America’s Fortune 100 companies detailed their health care costs for the Committee, providing the ability to analyze how those self-reported costs would compare to ending employer-sponsored insurance and paying the employer mandate penalty.  Based on an aggregation of the data received, if the 71 Fortune 100 companies that replied to the survey ceased to offer health care coverage and paid the employer mandate penalty, they could save a total of:

  • $28.6 billion in 2014 (an average savings of over $400 million per company) and
  • $422.4 billion from 2014-2023 (an average savings of nearly $6 billion per company).

“The findings of the report, along with existing research, show that the Democrats’ health care law threatens the stability and sustainability of the employer-based health insurance system,” said Camp.  “Anyone who gets insurance through their job should be worried about what will happen next, because there is a distinct financial incentive for employers to terminate health care coverage under the Democrats’ health care law.  It is clear to me that because of this law, Americans will not be able to keep the health care plan they have and like.  American workers and taxpayers simply cannot afford to have this law remain on the books.”

The report is entitled “BROKEN PROMISE:  Why ObamaCare Will Force Americans to Lose the Health Care Coverage They Have and Like.”  Click here for the key findings, and here for the full report.

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The real reason contraception is “free” under the Affordable Care Act

6 Apr

Most people, including me, think mandated coverage of contraception was a result of the Affordable Care Act and the Institute of Medicine that is charged with making recommendations related to preventive services that should be covered at 100% by health insurance.

Recently, I found a copy of the website my.Barackobama.com dated November 3, 2008.

Here is what it says:

Barack Obama is an original co-sponsor of legislation to expand access to contraception, health information and preventive services to help reduce unintended pregnancies. Introduced in January 2007, the Prevention First Act will increase funding for family planning and comprehensive sex education that teaches both abstinence and safe sex methods. The Act will also end insurance discrimination against contraception, improved awareness about emergency contraception, and provide compassionate assistance to rape victims.

Think Contraception Logo

So you see, the full and “free” coverage of contraception was a long-planned goal and likely had little to do with the IOM recommendation, but more with an ideology that it is the federal government’s responsibility to solve just about any problem American’s face. Here we also see the claim of “insurance discrimination,” key rhetoric in promoting the idea that virtually every health care related expense should be covered and with minimal or no cost.

Once the Affordable Care Act was passed including discretion for the Secretary of HHS to designate preventive services, there was no need for separate legislation.

The President’s perspective may also have something to do with the fact that 72% of black American children are born to unwed mothers and many of those to teenagers. That indeed is a problem for the individuals involved and for society. It is a social crisis, a moral crisis and one that will not be solved by making the pill “free” especially given that many of the people involved already have access to contraception at minimal or no cost.

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Insurance coverage mandates are nothing new

2 Apr

The United States Supreme Court. The individual mandate to carry health insurance is under the microscope with a very basic question as to whether Congress has the authority to make such a requirement. Frankly, I don’t know the legal answer and given a unanimous verdict by the Supreme Court is unlikely, I guess no one else is 100% certain either. However, it seems to me that there is more than one way to create a mandate.

Take Medicare for example. Do you really have a choice of enrolling in Medicare? The obvious answer is yes you do, but hold on, is it a real choice? If you don’t want Medicare, can you buy other coverage instead? No you can’t, nobody can sell such coverage. Even coverage that supplements Medicare is regulated by the federal government and there is talk of trimming the coverage you can buy to pay your Medicare co-pays and deductibles.

Some people in Congress think too much insurance coverage leads to higher costs … they may have a point.

If you continue to work and have employer health coverage, you must keep your employer coverage even when you turn 65, you can’t use Medicare as your primary coverage even if you wanted to. Before this requirement was part of the Medicare law employers generally required you to use Medicare with the employer plan as supplemental.

If you delay enrolling in Medicare beyond your initial enrollment period, there is a penalty to pay. For Part B that penalty is ten percent for each year of delayed coverage; for Medicare Part D the penalty is 1% for each month you delay enrollment. In addition, you may enroll only during a three-month enrollment period held once each year. The reason for all this is simple; to prevent adverse selection when people enroll in coverage only when they anticipate using the benefits.

It seems that rules and regulations and penalties abound regarding your choices of health care, at least when you are as old as I am.

Granted the above are implicit mandates, but in the final analysis are they much different from the requirement to carry health insurance contained in the Affordable Care Act? This is the same logic used for the individual mandate under the Affordable Care Act; if you don’t take coverage, you pay a penalty to partially offset the additional cost created by those who enroll only when they expect to use the coverage. I am still free to not enroll for health insurance, but rather than pay a surcharge or suffer a delay in coverage when I decide I need it, I am required to pay an upfront penalty.

Such limitations and penalties are designed not to protect the individual, but the pool of insured that must eventually carry the cost burden for less responsible citizens. Boy, I’m glad I am not on the Supreme Court.

This debate all comes down to these rather simple words crafted by our Founders in the Constitution outlining the rights of Congress:

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

The essence of the argument seems to be whether Congress is creating commerce by requiring coverage and then regulating what it created.  Frankly, I think I could argue this either way and that’s scary. What is even scarier is that a one sided Congress hell bent on getting its way could not craft a better way to reach the same goal of expanded coverage without creating a Constitutional crisis. Arrogance has its unintended consequences too.

Are we serious about health care REFORM or just the promotion of “more?”

27 Mar
Nancy-Ann DeParle, director of the White House...

Nancy-Ann DeParle, director of the White House Office for Health Reform, at a senior staff meeting in the Oval Office. (Photo credit: Wikipedia)

I have long maintained that health care is too emotional for any of us to look at costs and efficiency objectively. We see or hear that a person was fully covered by their insurance and it’s a good thing.  An insurer was made to pay for this or that and it’s a good thing.  The idea that we care about cost is questionable and when it comes to ourselves or a loved one, there is no question that we do not care about the cost of health care at all.  It’s human nature after all and the very reason external control of some type is necessary if we are to seriously manage costs.  That control may come in the form of managed care, following certain guidelines for care, etc.

 
That human nature factor in health care does not go unnoticed by our politicians who cannot resist playing up the individual benefits of health care reform without regard to the cost.  At the same time that the Secretary of HHS trumpets the Department declining “unreasonable” premium rate increases, the White House promotes all the aspects of the affordable Care Act that increase costs.  This is not to say helping individuals is a bad thing, but it is also a costly thing and that simply cannot be pushed under the rug as if it does not matter.
 
We all know certain individuals are benefiting from the Affordable Care Act. Any time you give people more stuff and “free” stuff somebody is going to benefit and somebody else is going to pay for it.
 
If we can’t look at the cost of our own health care objectively, we should expect our most senior policymakers to do so for us collectively.  Good luck with that as it appears their main objective is promotion of all the goodies.   That is a great disservice to us all.
 
Text of e-mail from the White House:

Good afternoon – 

Too often in Washington, politicians tell compelling stories about individuals when they are trying to make a point. But once the news cycle moves on, those people keep living their lives and confronting the same problems. 

Health reform is different. 

We met Nathan and his son, Thomas, in 2009. Thomas was born with hemophilia, and he hit lifetime limits on his health coverage with two different insurance companies before he turned seven years old. Two years ago, Nathan was hopeful about what the Affordable Care Act would mean. 

Last week we spoke with Thomas’s family again and they made it clear: Health reform has improved their quality of life. It means they can focus on making sure Thomas has the best possible care. It’s changing their lives for the better. 

It’s a powerful thing to watch. Go check it out. 

Thomas is not alone. He’s just one of the 105 million Americans who no longer have lifetime dollar limits on their coverage. 

The Affordable Care Act gives hardworking, middle class families the security they deserve. Because of health reform, 54 million Americans with private insurance have been able to access more preventive services. In the 2011 tax year, two million workers will benefit from the small business health insurance tax credit. And 2.5 million young people under age 26 have gained coverage on their parents’ plan. 

Behind each of those numbers is a person like Thomas. Two years after President Obama signed the Affordable Care Act, life is a little better for millions of Americans from all over the country. 

So take a moment to hear some of their stories and hear why this matters for Americans across the country: 

http://www.whitehouse.gov/health-care-story 

Thanks,

Nancy-Ann 

Nancy-Ann DeParle
Deputy Chief of Staff 

P.S. — Learn about more individuals who are benefiting from the Affordable Care Act with our map that shows the impact of reform, state by state.

 
 
 
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How much health care can $10 a week buy?

20 Mar

In the 1980s while negotiating a union contract I was trying to make the case for raising the deductible and coinsurance in the health benefits plan. As part of my pitch I made an analogy with other forms of insurance.  What I said was that if you look at auto insurance, it doesn’t pay for an oil change or new tires.  One union representative said his wife had just had surgery and did I expect him to pay for that. The point was that not everything is insurable and some cost sharing is fair and desirable.  What I got back from the other side of the table was, “Are you comparing my wife to a car?”

The Health Lottery

Actually, I was comparing spending $20 on an oil change and $20 on an office visit coinsurance, but that didn’t matter.  That “Are you comparing my wife to a car?” syndrome is not unusual because we cannot get past the attitude that paying for health care is not the top priority for spending our money.

Here is another way to look at this.

Georgia residents spent an average $470.73 on the lottery in 2010, or 1 percent of their personal income.  Only Massachusetts (STOMA1) had higher spending, $860.70 per adult, more than three times the U.S. average. Georgia had per capita income of $34,800 in 2010, below the national average of $39,945, while Massachusetts’s was higher at $51,302, according to data compiled by Bloomberg.

In fact, in Georgia the median household income 2006-2010 was $49,347 and 15.7% of the population is below the poverty level. Under the Affordable Care Act a family with an income of $50,000 will receive a premium subsidy a little over $12,000 per year plus cost-sharing subsidies up to an additional $3,600 per year.

Clearly spending several hundred dollars on the lottery is not equal to the cost of health insurance, but the lottery is not the only non-necessity people spend money on. In other words, what is unaffordable is a lot more than health care, but we tend to reset our priorities so that the $80 office visit is unaffordable, but the lottery ticket is not.  Go figure.

Logically our priorities would be more like this:

  1. Food
  2. Shelter
  3. Health care
  4. Clothing
  5. Saving
  6. Retirement
  7. Education
  8. Other stuff
  9. Vacations
  10. Gambling

Exactly where are our priorities?  What is affordable?

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Independent Payment Advisory Board (IPAB) under attack from all sides; who has a better idea? Rationing, you say, you betcha!

16 Mar
OBAMACARE WATCH:.....CONGRESSIONAL BUDGET OFFI...

About that $3.1 billion

The Independent Payment Advisory Board contained in the Affordable Care Act has come under fire since it was first floated as an idea. The purpose of the IPAB is to find ways to control the cost of Medicare when certain expense targets are exceeded. The Board is limited in what it can do to affect this control, but that doesn’t seem to matter to critics. It is perceived as government control over health care and an initiative that is counter to allowing the markets to dictate costs through competition. 

First the IPAB was the dreaded “death panel,” now it will exercise too much bureaucratic control over the health care system and finally there is H.R. 452, the Medicare Decisions Accountability Act of 2011, a bill to repeal the Board entirely. The repeal believe it or not has (or had) some bi-partisan support until Republicans tied other changes to the legislation.  Now there is another snafu because the Congressional Budget Office reported that repealing the IPAB would increase direct spending. Here is what the CBO said on March 7.

SUMMARY 

H.R. 452 would repeal the provisions of the Affordable Care Act (ACA) that established the Independent Payment Advisory Board (IPAB) and created a process by which that Board (or the Secretary of the Department of Health and Human Services) would be required under certain circumstances to modify the Medicare program to achieve certain specified savings.

CBO estimates that enacting H.R. 452 would not have any budgetary impact in 2012 but would increase direct spending by $3.1 billion over the 2013-2022 period. That estimate is extremely uncertain because it is not clear whether the mechanism for spending reductions under the IPAB authority will be triggered under current law over the next 10 years. However, it is possible that such authority would be triggered in one or more of those years; thus, repealing the IPAB provision of the ACA could result in higher spending for the Medicare program than would occur under current law. CBO’s estimate represents the expected value of a broad range of possible effects of repealing the provision over that period.

An opinion piece in the Wall Street Journal, March 9, 2012 is less than friendly to the IPAB and less accurate than one would hope. However, most disturbing about ongoing criticism are both the lack of viable alternatives and a lack of understanding about how the system works. These factors coupled with a misplaced faith in market forces and competition is getting us nowhere fast both with Medicare and the health care system in general.

…IPAB really does embody ObamaCare’s innermost values and beliefs—to wit, that health decisions are too important to leave to the people receiving the care (patients), the people providing the care (doctors and hospitals), the people paying for the care (taxpayers), or even the people who got the government involved in the first place (politicians).

Instead, supposedly independent experts will run a battery of small experiments, figure out which ones “work” and then impose them through Medicare’s price controls on all U.S. medicine. When health spending in a given year exceeds a budget benchmark, as it always does and will, the 15 White House-appointed wise men will work their miracles…

Those “experiments”  will be changes in the way we pay for health care, perhaps similar to what is already being tried in the form of Accountable Care Organizations, bundled payments, hospital readmission programs, medical homes, etc.  Will they all work, probably not, but what’s new. If they don’t work, I can tell you one thing, it will be in large part because neither patients not providers want them to work.

The WSJ also says this:

“It’s also among the reasons Paul Ryan’s Medicare reform is so much better than Mr. Obama’s. Beneficiaries would receive a “premium support” payment to buy insurance, and insurers and providers would compete for business on value for money. What “works” is what millions of consumers decide.”

“Premium” and “support” are two words that also mean “defined contribution”, a tact now being taken by more and more employers which is merely a form of cost shifting.  Simply put, the beneficiary gets a fixed amount of money to spend on health care or the purchase of insurance.  They are then free to buy what they want with the fixed amount of money while any additional expenses come from their pocket.  In the case of Medicare the theory is that with this payment beneficiaries will be free to buy traditional Medicare or any of a number of other private plans that will “compete” for the fixed pool of money.  But how does all this competition save money?  Medicare is already the lowest payer except for Medicaid. Do we expect private plans to exert stronger oversight over claims and services provided, like tighter medical necessity controls, tighter networks, etc?  Sounds like another form of the dreaded rationing, either that or more interference between patient and their doctor.  Isn’t that what we have been accusing insurers of doing and what we don’t like?

We have well-intentioned dreamers out there who sincerely believe that empowered patients will seek efficiency forcing prices down and that somehow private insurers have a magic bullet that allows them to control costs.  If all that is true and if we are truly concerned about health care costs why hasn’t competition already worked?  Insurers compete for business among employers, there are many different insurers in a given area, patients are free to change coverage and in large employers to choose among several health plans. In many cases spouses can choose between two different employer plans. In other words, there is a lot of choice out there already.  Is cost a motivator?  Employees of employers large and small are paying thousands of dollars a year in premiums and that’s only a small portion of the cost, but you would think that paying $4,000 to $6,000 in premiums would provide motivation to shop around.

In addition to the fact that health care purchases are like no other purchases, there is one factor none of the current proposals consider. Pricing is left to the health care providers.  Medicare and Medicaid set prices which are 20% or so below market, each private carrier then negotiates an acceptable fee with providers and providers who do not accept an in-network fee charge the patient whatever they want and the patient has no recourse.  It’s the pricing stupid!

The only alternative, and the IPAB’s true end game, is harsher and more arbitrary price controls and eventually limits on the care patients are allowed to receive. The New England Journalists (of Medicine) deny this reality because ObamaCare has a clause that prohibits “rationing,” even as the law leaves that term undefined. But reducing treatment options will be inevitable as government costs explode.

Yes, WSJ, that is the end game.

Note to America: Whether it is price controls, premium support, or limits on what will be paid for, it is all “rationing.”  If we are going to save money and lower the future trend for health care costs, we must spend less money.  If anyone thinks we are all going to get the same, unlimited, open-ended health care we now think we need, or that providers will have the same level of income, then we are just kidding ourselves or we are outright fools… go ask the rest of the world.

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Medicare premium $247 in 2014 – false information won’t go away

13 Mar

I am beginning to become disillusioned about the ability of people to think and reason and not be blinded by prejudices  [i]. . . he said with tongue in cheek.  It seems that people will believe what they want to believe and not be deterred by the facts.

I have written frequently that the rumor about the Medicare Part B premium increasing to $247 in 2014 is not true and yet I still get comments to the contrary.  The latest is that Snopes.com says it is true. No, Snopes does not say that at all.  Here is what it says:

From Snopes:

As for future Medicare Part B premium rates, the information cited above is wrong on two counts: No provision of the health care legislation passed during the Obama administration sets Medicare premium rates, nor is a whopping jump of over 100% to a $247.00 monthly premium in 2014 a realistic figure.

Many people, it seems, just want to believe that so-called Obamacare is responsible for a tremendous jump in Medicare premiums (and no doubt the tornadoes in the mid-west as well).  That is not true; there is nothing in the Affordable Care Act that talks about the Medicare premium.

So far I have been accused of lying, of being a liberal, of being a supporter of President Obama and I forgot what else because of posting the truth about the Part B premium rumor.  Frankly, I am none of those, but I am one thing.  I am scared to death that some of these people are going to vote.

If you want to believe rumors and Internet nonsense that is your right, but for Pete’s sake, don’t spread false information or any information without checking out the facts.  You can go to Snopes, Fact Checker and other sources if you like.  In this case you can read the Medicare Trustees Report and you can easily get the full text of the Affordable Care Act.  You can do all kinds of productive things before you spread rumors, try it sometime.

Here is a tip. Just because it is on the Internet or you receive an e-mail along with another four million people, does not make it true.

[i] a preformed opinion, usually an unfavorable one, based on insufficient knowledge, irrational feelings, or inaccurate stereotypes

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What is the actual federal debt and who caused it?

6 Mar

I'm still not optimistic

We hear a lot these days about deficits, debt and even more about who is at fault, who added more and why.  What we don’t hear a lot about are the facts.

So let’s take a look;

On January 20, 2001 at the start of the Bush administration the federal debt was $5,727,776,738,304.64 (that’s trillion).  On January 20, 2009 at the end of the Bush administration the federal debt was $10,626,877,048,913.08 or an increase in eight years of $4,899,100,310.609 for an annual average increase of $612,387,538,826 (that’s billion).

On January 20, 2009 at the start of the Obama administration the federal debt was $10,626,877,048,913. As of January 20, 2012 the debt was $15,236,271,879,792.78 for an increase of $4,609,394,830,879 in three years or an annual increase of    $1,536,464,943,626 (that’s trillion).

So what caused all this debt; spending and tax reductions, but mostly not paid for spending.

In May 2001 Bush enacted tax cuts worth $1.3 trillion. On September 11, 2001 we began our war on terror followed by the Iraq war. In December 2003 Medicare Part D was approved (unfunded). In October 2008 we had the Emergency Economic Stabilization Act.

Remember, that from January 2007 forward both houses of Congress were controlled by Democrats.

Obama inherited a debt that had about doubled during an eight year period. During his first three years he increased the debt another 50%

During his administration we have had several major spending bills, including:

2009

February 17: American Recovery and Reinvestment Act

May 20: Helping Families Save Their Homes Act of 2009

August 6: Cash For Clunkers Extension Act

November 6: Worker, Homeownership, and Business Assistance Act of 2009

2010

March 18: Hiring Incentives to Restore Employment Act (HIRE Act)

March 23: Patient Protection and Affordable Care Act

March 30: Health Care and Education Reconciliation Act of 2010

July 22: Unemployment Compensation Extension Act of 2010

September 27: Small Business Jobs and Credit Act of 2010

December 17: Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

And of course, in February 2012 extension of unemployment benefits and the Social Security tax holiday.

So whose fault is our current debt? It’s every member of Congress since January 20, 2001.  Does it matter who inherited what or on whose watch September 11 occurred or the economy collapsed, not if you are a taxpayer or creditor of the U.S. it doesn’t.

You promised me...

Keep in mind that no matter how you slice it, no matter what shenanigans occurred by the financial community, the root cause of the economic crisis was federal policies trying to push more and more people into home ownership they could not afford and that goes back several administrations and Congresses controlled by both parties. Of course, careless individual borrowing and debt accumulation by individuals added fuel to the fire as well.

Raising taxes alone is not going to get us out of this mess and not just because you can’t raise enough in taxes to do so without killing the economy, but more importantly because Congress keeps spending without regard to the consequences.  You can argue all you want that short-term spending is necessary to stimulate the economy as many liberal-minded economists do, but the reality is that Congress doesn’t know when to stop because spending means votes from this generation and the people most affected can’t vote yet, so who cares.

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No child must be “dependent” to be eligble for the parents health insurance, regardless of age. Regulations under the Affordable Care Act do not define “adult”

1 Mar
Happy Children Playing Kids

They are all eligible

Prior to the enactment of the Affordable Care Act health benefits plans used language similar to this to explain who is eligible for coverage.

 Be sure you have enrolled only eligible dependents for your medical and dental coverage, which includes your spouse, natural children, and stepchildren, foster children dependent on you for support and maintenance, and legal wards. You must have a marriage certificate, birth certificates, or court papers to support each dependent’s status.

 Similar language is still used in some plans and it is quite misleading.  The words dependent or dependents are no long appropriate in any case when it refers to any child regardless of the child’s age.  The problem with using “dependent” in this context is that it may prevent employees from enrolling an eligible child or cause disenrollment of a child who is still eligible.  This is most likely to happen as a child graduates from high school around age 17 or 18 when it is questionable whether they are an adult or not.

In fact, no child has to be a dependent and there is no definition of “adult” in the regulations. Here is what the regulation says (note the last sentence I put in bold).

 Preamble to May 13, 2010 interim final rule:

Many group health plans that provide dependent coverage limit the coverage to health coverage excludible from employees’ gross income for income tax purposes. Thus, dependent coverage is limited to employees’ spouses and employees’ children that qualify as dependents for income tax purposes. Consequently, these plans often condition dependent coverage, in addition to the age of the child, on student status, residency, and financial support or other factors indicating dependent status. However, with the expansion of dependent coverage required by the Affordable Care Act to children until age 26, conditioning coverage on whether a child is a tax dependent or a student, or resides with or receives financial support from the parent, is no longer appropriate in light of the correlation between age and these factors. Therefore, these interim final regulations do not allow plans or coverage to use these requirements to deny dependent coverage to children.

Because the statute does not distinguish between coverage for minor children and coverage for adult children under age 26, these factors also may not be used to determine eligibility for dependent coverage for minor children.

 

You can find more on the rules for children here
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Wealthy in America-Inequality in America; where is the ROI? Higher taxes on the “wealthy” is a losing strategy

18 Feb

A favorite theme of today’s politicians is income inequality; not paying ones fair share, etc. However, inequality has been with all societies since time began. Inequality is not necessarily bad and can result simply from the high achievements of a relatively few in a society. This is not unfair as long as the successful have not intentionally prevented the mass of people from achieving success. For example, through unfair taxation or poor educational opportunity.

In a society such as in the U.S. opportunity abounds regardless of how difficult ones situation may be as the result of circumstances of birth. Some people rise above their circumstances to amazing heights, some rise modestly, some plod along and some do nothing positive, what’s new?

Economically - Challenged & illiterate .. CIA ...

Today we focus on the taxes paid by the rich; billionaires such as Warren Buffett claim they pay too little because most, if not all, of their income is taxed at capital gains or dividend rates. While true that those rates result in a low effective tax rate for the super wealthy, that argument seems to ignore the many government transfers and credits applicable to the majority of Americans. Various tax credits and deductions are unavailable or are limited for higher income (starting in some cases around $80,000 in annual income) Americans. If circumstances such as the number of children one decides to have can result in no income tax payable, how is it unfair that income invested (already taxed once) and at risk is taxed at a lower rate than ordinary income?

Higher income (far below millionaires and billionaires) Americans are limited in their tax advantages in many ways such as the taxation of Social Security benefits, higher Medicare premiums, limited IRA contributions, the alternative minimum tax, the estate tax (which the new Obama budget wants to raise to 45%), limited retirement benefits and 401(k) contributions, several new taxes under the Affordable Care Act including a new 3.8% tax on unearned income such as taxable profit from selling a home and more.

Virtually every tax advantaged program passed by Congress contains limitations or exclusions applicable to higher income individuals. In other words our tax system goes out of its way to benefit the non wealthy which is one of the reasons nearly 50% of Americans pay no income tax. Despite this, we are besieged with criticism of the 1% and far lower who, according to our President, don’t pay their fair share.

We struggle even defining wealthy. Is it income or is it assets and net worth? Is the senior citizen living on Social Security and a modest pension wealthy? What if he has accumulated $500,000 in savings and investments and has a fully paid home worth $400,000? Many government transfer programs ignore such assets when defining eligibility. One could easily have a half million dollars in net worth and still avoid taxation of Social Security and higher Medicare premiums. Is that fair?

Is it fair a man can be married three times, be divorced twice and each of those ex and current wives receive his Social Security benefit based on his earnings alone? Not only do higher income people (again, far from millionaires) pay Medicare payroll taxes on all of their wage income, they pay higher Medicare Premiums, while the taxes they pay on their Social Security benefits also pay for a portion of Medicare.

Should higher income people pay more to their government and get less, ok that’s a fair argument. But what is not fair is claiming the successful in America are not now paying their fair share.

If you are poor or low-income and have lived your life accordingly, you have received a disproportional amount of wealth transfer (not to mention access to hundreds of government programs designed to improve your education and lift you out of poverty) and will continue to do so in old age. If you are middle-income, you should remain middle-income in retirement and if you are higher income the same holds true. You lived your life, made your choices, reaped the rewards or suffered the consequences.

And who are these wealthy Americans? We all know about the Wall Street crowd, hedge fund managers, and CEOs, but what about the small business owners, the cop and teacher whose combined income puts them over the limit for many government transfers? Do we think of the prudent middle-income couple who have paid off their mortgage and accumulated a nice nest egg or the government worker with a generous pension and health benefits, plus 403b plan? Probably not.
Frankly it doesn’t bother me that Warren Buffet pays a lower tax rate than I do or that I pay a higher effective tax rate than the majority of Americans. What bothers me is that the politicians have framed the discussion so Americans believe that being fair means taxing the “wealthy” more so that mismanaged government programs and unrealistic promises made by politicians can be partially paid for. That is a losing strategy for all of us.  What we should be asking is what have we gotten for our investment in government programs since the War on Poverty in the 1960s. Why haven’t all the programs in the last fifty years closed the income gap from the bottom up?

Forget the “Pill” we need a new common sense pill for politicians. Now insurance companies will pay the full cost of oral contraceptives.

10 Feb
Birth control pill

Read this:

Politico: Birth-Control Compromise To Be Announced By White House
President Barack Obama is scheduled to deliver a statement at 12:15 p.m. He is expected to announce that he wants insurance companies to pick up the cost of providing free contraceptives for religious employers, according to one source familiar with the announcement. White House officials briefed reproductive rights groups and Democratic lawmakers Friday morning on the expected announcement (Budoff Brown, 2/10).

From Bloomberg Businessweek:  Under the new policy, religious employers will not be required to offer contraception and will not have to refer their employees to places that provide it. Instead, the employer’s insurance company must provide birth control for free in a separate arrangement with workers who want it

“He wants insurance companies to pick up the cost of providing free contraceptives for religious employers!”  Holy crap! (no pun intended).  

Insurance companies you say, has anyone told those in the White House that nearly all employers of any size are self-insured and there is no insurance involved, who will be paying for this coverage? 

Only in the case of religious organizations will insurance companies have to carry the full cost?  You are kidding right, all other employers must pay this added expense which will be shared by all employees.  What utter nonsense.

This is the most absurd issue to date with regard to the Affordable Care Act.  Birth control pills are not health care, pregnancy is not an illness and the cost of the pill is already affordable to anyone, poor, rich or otherwise.  Read the political rhetoric on this and you would think working women cannot afford contraception.  This isn’t about the poor, it is about people who earn a good living, in some cases the so-called wealthy, who now need a federal law to require a pill that does not treat an illness and is taken voluntarily (I know it can be used for certain medical conditions, but that is not the issue) to be free.

The argument that it is cheaper to pay for the pill than for a pregnancy is equally misleading.  It is still cheaper for everyone if individuals who voluntarily choose to take a contraceptive to pay their own way.  This is not a tradeoff, it is misuse of insurance. 

This isn’t about women’s health, it is about government furthering certain  agendas.  I think men who buy condoms should be covered 100%, men who need a hairpiece should be covered 100% on the basis of the psychological injury caused by baldness, reversal of a vasectomy should be covered at 100% as should the full cost of in-vitro fertilization.  You see anyone can make the case for “free” stuff without regard to logic or the consequences.

If this is going to be the way the Affordable Care Act is interpreted and administered, we are all in serious trouble. 

Related articles

“Unreasonable” premium increases denied-stand up and cheer?

23 Jan

If any insurance company, say your auto insurer or home owners insurer raised your premiums an unreasonable amount what would you do? I suspect you would switch insurance companies, perhaps give that little lizard a boot in the butt.  When it comes to health insurance it takes the federal government to tell you what is unreasonable. We all better hope that the denials being made by regulators are themselves reasonable. A small change in assumptions can make a big difference in outcomes and if premiums are too low, there will be a great deal of catching up to do. Remember, a premium set in 2011 is designed to cover claims incurred through 2012 which may not be reflective of experience in the past twelve months. Actuaries know this of course, but let us hope political pressure is not influencing the many variables that go into setting premiums.

If you look at the release below you will see a rate cut for Anthem Blue Cross in Connecticut. However, when you go to the HHS link in the press release you find this:

Connecticut Rate Review

The Rate Review program began September 1, 2011. No insurers in Connecticut have proposed rate increases of 10% or more since that time. Check back regularly for updates.

Then we have the following hype.  HHS is incapable of preparing a press release containing just facts, but rather must include more and more spin and unsubstantiated claims.

“The Affordable Care Act includes several policies, including rate review, to continue this slow growth.  By fighting fraud, better coordinating care, preventing disease and illness before they happen and creating a new state-based insurance marketplace, it helps keep health care cost growth low.”

In fact only rate review has been implemented, the efforts at coordinated care are focused on Medicare, preventive disease programs have been used by employers for many years with no measurable results and the state-based marketplace is two years away.

News Release

Affordable Care Act holding insurers accountable for premium hikes.  Health insurance premium increases in five states have been deemed “unreasonable” by the U.S. Department of Health and Human Services, HHS Secretary Kathleen Sebelius announced today.

After independent expert review, HHS determined that Trustmark Life Insurance Company has proposed unreasonable health insurance premium increases in five states—Alabama, Arizona, Pennsylvania, Virginia, and Wyoming.  The excessive rate hikes would affect nearly 10,000 residents across these five states.

To make these determinations, HHS used its “rate review” authority from the Affordable Care Act (the health care law of 2010) to determine whether premium increases of over 10 percent are reasonable.

“Before the Affordable Care Act, consumers were in the dark about their health insurance premiums because there was no nationwide transparency or accountability,” said Secretary Kathleen Sebelius.  ”Now, insurance companies are required to disclose rate increases over 10 percent and justify these increases.  It’s time for Trustmark to immediately rescind the rates, issue refunds to consumers or publicly explain their refusal to do so.”

In these five states, Trustmark has raised rates by 13 percent.  For small businesses in Alabama and Arizona, when combined with other rate hikes made over the last 12 months, rates have increased by 27.2 percent and 18.1 percent, respectively.  These increases were reviewed by independent experts to determine whether they are reasonable.  In this case, HHS determined that the rate increases were unreasonable because the insurer would be spending a low percent of premium dollars on actual medical care and quality improvements, and because the justifications were based on unreasonable assumptions.

In addition to the review of rate increases, many states have the authority to reject unreasonable premium increases.  Since the passage of the health care reform law, the number of states with this authority increased from 30 to 37, with several states extending existing “prior authority” to new markets.

Examples of how states have used this authority include:

In New Mexico, the state insurance division denied a request from Presbyterian Healthcare for a 9.7 percent rate hike, lowering it to 4.7 percent;In Connecticut, the state stopped Anthem Blue Cross Blue Shield, the state’s largest insurer, from hiking rates by a proposed 12.9 percent, instead limiting it to a 3.9 percent increase;In Oregon, the state denied a proposed 22.1 percent rate hike by Regence, limiting it to 12.8 percent.In New York, the state denied rate increases from Emblem, Oxford, and Aetna that averaged 12.7 percent, instead holding them to an 8.2 percent increase.In Rhode Island, the state denied rate hikes from United Healthcare of New England ranging from 18 to 20.1 percent, instead seeing them cut to 9.6 to 10.6 percent.In Pennsylvania, the state held Highmark to rate hikes ranging from 4.9 to 8.3 percent, down from 9.9 percent.

Today’s announcement comes the same week that a report showed that health care spending has grown at remarkably low rates.  According to an analysis done each year by the Centers for Medicare & Medicaid Services, U.S. health care spending experienced historically low rates of growth in 2009 and 2010.  A recent study released by Mercer Consulting also showed a slow-down in the average employee health benefit cost to businesses.

The Affordable Care Act includes several policies, including rate review, to continue this slow growth.  By fighting fraud, better coordinating care, preventing disease and illness before they happen and creating a new state-based insurance marketplace, it helps keep health care cost growth low.

For more information on the specific determinations made today, please visit http://companyprofiles.healthcare.gov/

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2012 is the start of new fees and taxes on health care organizations…what are the possible consequences? First up, a new excise tax on pharmaceutical companies

18 Jan
English: Novamoxin Prescription Drug - Amoxici...

First target

One of the criticisms of the Affordable Care Act has been that few people actually know what is contained in the Act.  Having spent untold hours reading the Act along with various independent assessments of the Act, I can testify to its immense complexity.   

For example, in order to pay for the expansion of subsidized health insurance to millions of Americans, the Affordable Care Act adds numerous new fees and taxes on individuals’, employers and the health insurance industry.  In 2010, there was a new tax on indoor tanning facilities (ok, so that is not a big deal, anyone who uses one of those deserves to be taxed). In 2014 there are new fees on employers and insurance companies, all of which have the potential of being passed along to consumers.  In 2012 pharmaceutical companies that sell to the federal government are assessed what is called an annual fee (excise tax). 

The various fees and taxes contained in the Act are among the few elements that are reasonably quantifiable.  Other elements of the Act that are to reduce costs rely on assumptions of long-term success for well-meaning, but untried programs generally related to Medicare.  To be successful, hospitals, physicians, other health care providers and Medicare beneficiaries must all work in a coordinated effort under new paradigms for providing health care.

Taking billions of dollars each year in new taxes impacts these organizations which then must find ways to mitigate this loss.  It is tempting to simply dismiss such taxes as justified on highly profitable organizations.  However, we should never forget that everything we do is connected to something else and every action has its consequences (think housing crisis).  Generating revenue for some means a loss for others, a savings here means less revenue there and in some cases that may mean a loss of jobs, less invested in research or simply passing costs along to another party. When additional costs are imposed on employers, especially related to health benefits, it generally means greater cost sharing for employees and a shift in compensation from cash to employee benefit programs.  Good benefits are valuable, but they don’t buy groceries or pay college tuition.

The following is excerpted from the IRS regulations with regard to the new fees on drug manufacturers (a very small sample of the hundreds of thousands, ultimately millions, of pages of regulations implementing the Affordable Care Act). 

The aggregate fee amount each year for all covered entities (referred to as the applicable amount) is $2.5 billion for fee year 2011; $2.8 billion for fee years 2012 and 2013; $3 billion for fee years 2014 through 2016; $4 billion for fee year 2017; $4.1 billion for fee year 2018; and $2.8 billion for fee year 2019 and thereafter. The applicable amount for each year is allocated, using a specified formula, among covered entities with aggregate branded prescription drug sales of over $5 million to specified government programs or pursuant to coverage under such programs.

The specified government programs are the Medicare Part B program, the Medicare Part D program, the Medicaid program, any program under which branded prescription drugs are procured by the Department of Veterans Affairs, any program under which branded prescription drugs are procured by the Department of Defense, and the TRICARE retail pharmacy program (collectively, the Programs).

The annual fee for each covered entity is calculated by determining the ratio of (i) the covered entity’s branded prescription drug sales taken into account during the preceding calendar year to (ii) the aggregate branded prescription drug sales taken into account for all covered entities during the same year, and applying this ratio to the applicable amount. Sales taken into account means branded prescription drug sales after the application of the percentage adjustment table.

Increased number of adult children covered by health insurance as a result of the Affordable Care Act

12 Jan
This image shows the income distribution of Am...

If there is one thing that the Affordable Care Act does well it is expanding health insurance coverage, much like what happened in Massachusetts. In the case of PPACA one goal was to expand coverage available to adult children. Some measure of additional coverage has been accomplished as reported below.  Keep in mind that these children do not have to be dependent on the parent (employee) in order to be covered, may be married and cannot be charged an extra premium for the coverage. In addition, beginning in 2014 these children can be employed and have other coverage available and will still be eligible for their parent’s plan.  Prior to that an employer may deny coverage to an employed adult child.

All this is a good thing if you are one of the families affected, but remember this additional cost is carried by employers and all other insured members of a group.

New Health Law Increased Insurance
Coverage of Adult Children

WASHINGTON—The new federal insurance law has increased the health insurance coverage of adult children between 2009 and 2011, according to a new report by the nonpartisan Employee Benefit Research Institute (EBRI).

The Patient Protection and Affordable Care Act (PPACA) enacted March 23, 2010, requires that group health plans and insurers make dependent coverage available for children until they attain the age of 26, regardless of tax or student status, or dependent status as it relates to financial support. The mandate to offer coverage to adult children ages 19‒25 took effect for policy years that began on or after Sept. 23, 2010, but since January is the beginning of the plan year for many employment-based health plans, many insurers adopted the requirements of the law before the effective date.

To determine whether the coverage mandate had an effect, EBRI examined data from two U.S. Census Bureau surveys (the Current Population Survey, CPS, and the Survey of Income and Program Participation, or SIPP), as well as from the National Health Interview Survey (NHIS) by the Centers for Disease Control. The data indicated:

  • The percentage of persons ages 19‒25 with employment-based coverage as a dependent increased from 24.7 percent in 2009 to 27.7 percent in 2010, according to the CPS. 
  • The percentage of individuals ages 19‒25 with employment-based health coverage as a dependent averaged 26.9 percent during January‒September 2010, and increased to an average 27.1 percent during October and November, per SIPP. 
  • The percentage with private insurance increased from 51 percent to 55.8 percent, and the percentage uninsured fell from 33.9 percent during 2010 to 28.8 percent during the first half of 2011 among those ages 19‒25, according to data from the NHIS. 

“Data from these three surveys show that PPACA has had a positive effect on the percentage of young adults with employment-based coverage as a dependent,” said Paul Fronstin, director of EBRI’s Health Research and Education Program and author of the report.

Full results of the report are published in the January 2012 EBRI Notes, “The Impact of PPACA on Employment-Based Health Coverage of Adult Children to Age 26,” online at www.ebri.org

The Employee Benefit Research Institute is a private, nonprofit research institute based in Washington, DC, that focuses on health, savings, retirement, and economic security issues. EBRI does not lobby and does not take policy positions.

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Medicare premiums 2014, the bogus rumor persists. $247 per month is ridicules

8 Jan

 

An Internet e-mail still circulates that come 2014 the Medicare Part B standard premium will be $247 per person. That’s nonsense for several reasons.

1. The calculation of the premium is set by law and that law has not changed.

2. There is nothing in the Affordable Care Act (Obamacare) that affects the Medicare premium calculation.

3. The President does not, as has been alleged, have the ability to unilaterally change any of this.

4. The standard 2012 premium for Medicare Part B is $99.90 (higher for the 5% higher income beneficiaries). If you used the highest rate of inflation to hit Medicare in the last forty years for both 2012 and 2013 you would get a premium of less than $130.00. The likelihood of that kind of inflation in the next two years is non-existent.

5. There is nothing in the 2011 Medicare Trustees report to indicate other than normal rates of cost increases over the next several years. In fact, the Trustee’s project that by 2020 the Part B premium will be $158.60. Even that is based on a premium for 2012 of $106.60 (not $99.90).

6. Most Medicare beneficiaries (95%) are protected from high increases in Medicare premiums under the Social Security hold harmless provision. This means that an increase in Medicare premiums cannot cause a net reduction in the Social Security payments. So, for example, if you are receiving $1,000 a month in Social Security benefits and you receive a 3% COLA increase, your Part B premium cannot increase my more than $30. Do the math and you will see there would have to be whopping COLA increases in Social Security in the next two years to get most people anywhere near $247 and that ain’t gonna happen.

English: President signing the Medicare Bill a...

1965

Are any of these projections 100% accurate? Certainly not, there are too many unknowns. However, before you pass along some outrageous story about Medicare premiums (or a tax on the sale of your home, or that the value of health benefits is now taxable income or that Obama was stopping the 2011 Social Security COLA – all of which were circulated in the last year), get the facts.

Unfortunately too many people out there are so obsessed with opposition to this or that, their judgement is clouded …or they are simply ignorant and that’s scary because they can still vote.

By the way, the story about a brain surgeon being at a meeting in Washington where denying care to Americans 70 and over was discussed is also a lie. There was no such meeting, there is nothing in the Affordable Care Act remotely related to that and the caller to a talk show giving the story was not a brain surgeon.

Read other articles related to Medicare under the “Medicare” and “Healthcare” categories on this Blog. 

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