Archive | September, 2010

Do you have questions about the implementation of PPACA (dependent coverage, grandfathering, claim appeals or other requirements)?

30 Sep

I have to have this all in place by when?


The Department of Labor has issued Questions and Answers to help better understand the issues. Here is a link to those Q&As.  

Affordable Care Act Implementation

Are Muslims exempt from PPACA requirements to carry health insurance?

28 Sep

More rumors abound regarding requirements under PPACA. The latest e-mail circulating is that Muslims are exempt from the requirement effective in 2014 to carry health insurance.

So what’s the answer, do Muslims get an exemption?

Maybe, but highly unlikely. The fact is that PPACA contains the same exemption for all religious groups that currently applies to the Amish who are exempt from participation in Social Security, they neither pay nor do they collect benefits. Neither Muslims nor any other religious group is named in PPACA.  The only specified group exempt is American Indians.

Here is what PPACA actually says, note the reference to the Internal Revenue Code Section 1402(g)(3)(B)

Now two things to consider.  First, there is no single muslim sect that has these tenets even though there is some issue with the use of insurance. Second, in the case of the Amish there is a clear close-knit group that takes care of its own and thus forego Social Security benefits.  It is highly unlikely that any system could be set up to deny health care to millions of American muslims who conscientiously oppose buying health insurance (any more than the system does not provide care to individuals who do not have insurance today).


‘‘(A) RELIGIOUS CONSCIENCE EXEMPTION.—Such term shall not include any individual for any month if such individual has in effect an exemption under section 1311(d)(4)(H) of the Patient Protection and Affordable Care Act which certifies that such individual is a member of a recognized religious sect or division thereof described in section 1402(g)(1) and an adherent of established tenets or teachings of such sect or division as described in such section.

Section 1402(g)(1) of the IRC provides, in part, that –

“Any individual may file an application . . . for an exemption from the tax imposed by this chapter if he is a member of a recognized religious sect . . . and is an adherent of established tenets or teachings of such sect . . . by reason of which he is conscientiously opposed to acceptance of the benefits of any private or public insurance which makes payments in the event of death, disability, old-age, or retirement or makes payments toward the cost of, or provides services for, medical care (including the benefits of any insurance system established by the Social Security Act). Such exemption may be granted only if the application contains or is accompanied by . . .
(B) his waiver of all benefits and other payments under titles II and XVIII of the Social Security Act on the basis on his wages and self-employment income. . . .”

Here are some of the terms of the IRC Code provision (this is not a new section and not written as part of PPACA).

Section 1402(g)(3)(B) of the IRC provides that the tax exemption on religious grounds shall end after the time the individual ceases to be a member of a properly recognized tax exempt religious sect, or when he ceases to be an adherent of established tenets or teachings of such sect, or at the time the Secretary of Health and Human Services (HHS) finds that the sect of which the individual is a member ceases to meet the requirements of section 1402(g)(1)(C) or section 1402(g)(1)(D).

Section 1402(g)(1)(C) of the IRC provides that the Secretary of HHS determines whether such sect has the established teachings referred to in the first sentence of section 1402(g)(1).

Section 1402(g)(1)(D) of the IRC provides that the Secretary of HHS determines whether it is the practice of the sect for members to make provision for their dependent members which in his judgment is reasonable in view of their general level of living.

As I have said before, there is a lot to really worry about with PPACA, stop wasting time on uninformed, ignorant people who apparently don’t know how to read.

Medicare Advantage Plans, it’s all good

27 Sep
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These summaries are from Kaiser Health News.  

Do you see a pattern in all this positive news that is inconsistent with cuts in Advantage Plan payments by Medicare, a 9% health care cost trend and a prescription trend of nearly 12%? And oh yes, the Congressional Budget Office estimates that enrollment in MA plans will be 2.6 million less by 2019 as a result of changes included in PPACA.  

What you don’t hear much about is the reduced benefits approved for 2011 or the fact that cutting $136 billion in payments to Medicare Advantage plans doesn’t happen until 2012.  Dare we speculate that the health insurers who offer Medicare Advantage plans and non-Medicare plans will offset the forced premium standards imposed by Medicare by raising the premiums for the non-Medicare population? Cost shifting from government plans has been standard practice since 1965. That outlet to price-fixing by Medicare is the only thing that keeps the entire system from collapse.  

Let’s hope (hee,hee) all this positive news is not just part of the PR blitz associated with health care reform and November elections. One thing is certain, there is nothing in PPACA that is positive for Medicare Advantage Plans.  

Sebelius: Medicare Advantage Premium Costs To Decline Slightly In 2011  


The Associated Press: “Seniors enrolled in popular private health insurance plans through Medicare will pay a little less on average next year, the Obama administration said Tuesday. The average monthly premium in so-called Medicare Advantage plans will dip to $35.69 in 2011, a 45-cent reduction from $36.14 this year, Medicare officials said.” According to Health and Human Services Secretary Kathleen Sebelius, the decrease represents a savings of only about 1 percent, but that’s a marked improvement over last year’s premium hikes – which averaged 15%. The future of Advantage plans “has been a source of concern because the new health care law cuts payments to the private insurance companies that operate them.” But 2011 rates are frozen and “significant reductions are still a couple of years away” (Alonso-Zaldivar, 9/21).  

USA Today: “Virtually none of the 11 million seniors who choose private health insurance plans under Medicare will lose access to those plans next year, federal officials announced Tuesday, despite fears that strict payment rates under the new health care law would cause some insurers to drop out. … ‘Despite lots of predictions of gloom and doom, the Medicare Advantage program … is stronger than ever before,’ Sebelius said. The government also announced that Medicare prescription drug premiums will remain relatively stable in 2011, and more insurance plans will eliminate a coverage gap included in a 2003 law to make the program affordable” (Wolf, 9/21).  

The Hill’s Healthwatch Blog: Administration officials said enrollment in “the controversial Medicare Advantage (MA) program” will increase in the year ahead. “White House health officials said the numbers indicate that — despite threats from conservatives and the insurance industry that the new healthcare reform law will cripple MA plans at the expense of seniors — both patients and taxpayers will benefit from the reforms” (Lillis, 9/21).  

What corporations are saying about health care costs

24 Sep

I have talked much about the unintended consequences of the health care reform legislation and the concern it has raised for costs, especially among companies that provide health care benefits to their employees and retirees.  In the unlikely event you don’t believe me, take a look at this excerpt from a letter from a CEO of  a large corporation to a retired employee who was asking about his health care benefits, prescription drug benefits in particular.  The concerns expressed in this letter are not unique, they are repeated in most if not all of the Fortune 1000 organizations in the US.     

Remember, if you like the coverage you have, you can keep it.


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A message from the White House. The fix begins September 23

23 Sep
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The good news never ends and neither does the scapegoating. Is it that these people just don’t get it or is it that politics takes precedence over common sense? If you put yourself on the White House e-mail list this is what you get (among a lot of other things).

As you can see, we are now about to prevent insurance companies from doing this or that to abuse you. The missing point is that the vast majority of people unaffected by any of these provisions will be paying higher premiums. And there is that word “free” again.

I guess it’s true, they really don’t get it…or really don’t care about the longer term consequences.

Isn’t it amazing that our politicians are against all the problems facing the Country and yet all the policy decisions from health care to wind farms and expanding home ownership to those who cannot afford it came from the politicians. Where are they when the consequences of their politics hit?

One more thing, take a look at this earlier post:

Good morning,

Six months ago, Gail O’Brien didn’t know whether or not she would be able to treat her cancer. Betsy Burton wasn’t sure if she could afford to keep paying the skyrocketing premiums for her employees’ health insurance. Paul Horne was struggling to make ends meet after his prescription drug coverage hit the “donut hole.”

The thing about these stories is that they could happen to anybody. Millions of Americans — maybe even you or someone you know — have been struggling for years with our broken health care system. These stories are what inspired me to fight for the Affordable Care Act and made me so proud to sign this landmark legislation into law six months ago.

Every day, I hear from Americans like Gail, Betsy and Paul, and a few of these folks have stepped forward to bravely share their stories with the entire country. Take a minute to hear what they have to say:

The Affordable Care Act is already making a difference in the lives of millions of Americans. And starting tomorrow, the Patient’s Bill of Rights goes into effect, ending some of the worst abuses of the insurance industry and putting you, not your insurance company, in control of your health care.

Here’s what the Patient’s Bill of Rights means for you:

No more discrimination against kids with pre-existing conditions. Insurance companies can no longer bar families from purchasing coverage because of a child’s pre-existing condition.

No more lifetime coverage limits. Insurance companies can no longer put a lifetime limit on the amount of coverage you can receive.

Young adults can now stay on their parent’s plan. Young adults can stay on their parent’s health insurance plan up to age 26 if their job doesn’t provide health care benefits — a huge relief for many parents and recent college graduates.

Free preventive care. If you join or purchase a new plan, the insurance company will be required to provide preventive care like mammograms, colonoscopies, immunizations, pre-natal and baby care without charging you any out of pocket costs.

Freedom to choose your own doctor. If you purchase or join a new plan, you have the right to choose your own doctor in your insurer network.

No more restrictions on emergency room care. Insurance companies will not be allowed to charge you more for out of network emergency services if you purchase or join a new a plan.

This is a long-overdue victory for American consumers and patients. For years, millions of Americans have been at the mercy of their insurance companies as they jacked up rates, denied coverage or dropped patients all together.

Now, some opponents of this reform have pledged to “repeal and replace” all of the progress we’ve made over the past six months. But I refuse to go back to the days when insurance companies could deny a child health care due to a pre-existing condition or impose a lifetime limit on care for a cancer patient. Those days are over.

The Affordable Care Act provides basic rules of the road that make our health care system work for consumers. It cuts costs and will help us begin to get our fiscal house in order. And most importantly, it provides Americans with the peace of mind that their insurance will be there for them when they need it.

To learn more about the Patient’s Bill of Rights and the Affordable Care Act, visit:


President Barack Obama

The White House • • Washington, DC 20500 •

More on health care costs. Why they are still out of control despite (and because of) PPACA

22 Sep

Image by Steve Rhodes via Flickr

As we get closer to the November elections, health care costs will be in the news even more.

Will health care reform lower health care costs or raise them? Will reform affect the basic cost trend for health care?

As you read and listen to this debate, listen very carefully because the spinning is amazing. For example, the President has said his reforms will lower costs, but listen closely.  You will hear he is talking about the costs for the federal government, not for you as an individual.  Also, consider how those costs are lowered.  Payments to Medicare providers are reduced, there are scores of new (unproven) initiatives and demonstration projects in the works and Medicare Advantage payments are cut.  There is also the new Medicare Advisory Board charged with making recommendations for controlling Medicare costs.

Academics, community organizers, politicians and anyone who has never worked in the real world including most of the Congressional staffers, have a unique way of thinking that to say so or to pass a law makes it so.

Recently, the President acknowledged that of course total cost for health care would go up if you add 30 million to the insured roles and that is true, but that is not the issue. The issue is what will happen to not only the premiums, but also the out-of-pocket costs for all Americans with health insurance. The answer to that is clear; they are going up as fast as or faster than before reform.

Keep in mind the health care costs we talk about:

  • Medicare and Medicaid for federal and state governments
  • Insured individuals and small groups
  • The insured that will be subsidized in the exchanges
  • The 70 million Americans (including millions of government workers and early retirees) covered by employer self-funded plans.

Look as this logically. First, define health care costs.  The cost of health care is not premiums. 

The cost is the price for each service provided multiplied by the number of services rendered.  Once you have that basic cost, it is allocated between the individual and the employer or the insurer (or the taxpayer).  The individual pays deductibles, co-payments and coinsurance.  The cost to a plan is determined by the services covered and the extent to which they are covered. 

PPACA clearly adds to the services covered, the individuals covered, and in many cases the portion of the charge covered by the plan.  Hence, it increases costs.  In several cases, it shifts costs to individuals.  For example, the change in the taxation of the Medicare Part D payments to employers for their retirees is causing a reduction in those benefits and hence cost shifting to retirees.  The same is true for the reduction in payments to Medicare Advantage Plans. The government is lowering its costs, but those costs shift to individuals, in this case to senior citizens.  Employers and insurers responded to the growth in health care costs by shifting more costs to the employee even before the additional costs added by PPACA.

Beginning in 2014 individuals and families with incomes up to four times the poverty level (currently $88,000 a year) will receive tax credits toward the cost of their insurance and the premium they pay is capped as a percentage of their income.  If you ask a politician, he or she will tell you that their health care is more “affordable”. For whom?  Nothing is happening that will actually control the health care costs that make up the premium. In fact, while the individual’s premium is capped, the growth of the government subsidy is assured because it is designed to match the growth in health care costs (reflected in premiums).  Therefore, instead of tackling the cost of health care the government’s focus is on controlling premiums.  If controlling premiums is the answer, why is Medicare in such trouble when there are no premiums for the government to pay and no insurance company involved?

There are many individuals who directly benefit from PPACA (adult children, those with pre-existing conditions, the uninsured, those who will be subsidized, even small business), but that does not change the fact that we have not controlled health care costs.  All that means is that we have added coverage and in the process added more costs. We have not solved a problem, we have made it more complicated, we have kicked the can down the road and we have set in place a growing entitlement with the same consequences as Medicare and Medicaid.  There are many people who will say so what, we reduced the number of uninsured, and more people will have coverage, who cares about costs?  That is hard to argue with,

I don't seem to be getting anywhere.

who does care about costs?

The Patient Protection Affordable Care Act is analogous to fixing a leaking tire by adding air every ten minutes rather than plugging the hole. However, even the air is not free!

Confidence in United States health care system has not improved

21 Sep

New Research from EBRI:

Health Reform Does Not Increase Confidence in Health Care System

WASHINGTON—Findings from the 2010 Health Confidence Survey (HCS) demonstrate that, despite the recent passage of health reform, dissatisfaction with the American health care system remains widespread. Furthermore, while confidence regarding various aspects of today’s health care system is not high, it has neither fallen nor increased as a result of the passage of health reform.

The HCS, an annual survey by the nonpartisan Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates, notes that since health reform was enacted just in March of this year, and implementing regulations have yet to be fully issued, the impact of the law—the Patient Protection and Affordable Care Act of 2010 (PPACA)—has yet to be felt.

However, confidence in the future availability of employment-based health benefits may have been affected by the passage of health reform, with fewer individuals confident that employment-based health coverage will be available to them in the future. The survey finds most Americans do not know when the legislation takes full effect.

Full results of the 2010 HCS appear in the September issue of EBRI Notes , online at

“It is still too early to determine how the new health reform law is being received, but we do know Americans have been and continue to be unhappy with the nation’s health care system,” said Paul Fronstin, director of EBRI’s Health Research and Education Program. “But people do see the law as detrimental to employment-based health coverage, which is where most Americans currently obtain their health insurance coverage.”

The 2010 HCS represents the 13th wave of an annual survey to assess the attitudes of the American public regarding the health care system in the United States. Among its key findings:

· The HCS was conducted two months after the passage of health reform, and finds that dissatisfaction with the American health care system remains widespread. A majority of Americans rate the health care system as poor (27 percent) or fair (31 percent).

· Confidence about various aspects of today’s health care system has remained fairly level despite the passage of health reform. More than one-half of survey respondents report being extremely or very confident that they are able to get the treatments they need. Confidence in having enough choice about who provides medical care is largely unchanged from 2009 levels. The percentage of individuals who say they are extremely confident that they are able to afford health care without financial hardship increased from 11 percent to 16 percent between 2009 and 2010. The increase came at the expense of decreases in the percentage reporting that they were very or somewhat confident.

· Americans’ ratings of their own health plan are generally favorable. Fifty-eight percent of those with health insurance coverage are extremely or very satisfied with their current plan, and 30 per-cent are somewhat satisfied.

· Satisfaction with health care quality continues to remain fairly high, with 59 percent of Americans saying they are extremely or very satisfied with the quality of the medical care they have received in the past two years. This is the highest level of satisfaction reported since the HCS was started in 1998. In contrast, just 22 percent are extremely or very satisfied with the cost of their health insurance, and only 19 percent are satisfied with the cost of health care services not covered by insurance.

· Confidence in the future availability of employment-based health benefits fell. In 2010, 52 per-cent of individuals with employment-based coverage reported that they were extremely or very confident that their (or their spouse’s) employer or union would continue to offer health insurance, down from 59 percent in 2009. The decline may be due to passage of health reform, the continuing weak economy, or both.

· Many Americans see themselves as good consumers of the health care system. Three-quarters report that they always or often have their doctor or medical professional explain to them why a test was needed, and two-thirds say they ask their doctor about the risks of treatment or side effects of medications. Slightly more than one-half indicate they ask about the success rate of the treatment option. Fewer say they always or often bring a list of medications, bring a list of symptoms, ask about less costly treatment options or medications, or ask for less invasive or easier treatment options.

· Many Americans have tried to find objective information about various aspects of health care. Nearly one-half tried to find information on the advantages and disadvantages of different treatment options, whereas 1 in 3 tried to find information about a doctor’s training and the costs of different treatments. Fewer had sought information on costs of doctors and hospitals, the number and success rate of hospital-based procedures, or disciplinary actions. Among those seeking information, between 17 percent and 35 percent found all of the information they sought, whereas between 54 percent and 72 percent found some of the information being sought.

· Many Americans may not be ready to use rating systems to make decisions about providers. Only about 1 in 3 indicates they would be extremely or very comfortable using such a rating system to find a doctor or hospital. Individuals rank the importance of information about the effectiveness of different types of treatments much more highly than a rating system based on cost. One-half think information about the effectiveness of different types of treatments would be extremely important if they were trying to choose a treatment, and 31 percent think it would be very important.

EBRI is a nonpartisan 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.

Managing prescription drugs is valid way to manage health care costs-results from Medicare study applicable to the private sector

20 Sep
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One of the valid criticisms of the health care reform effort is that there is little to manage health care costs, the fundamental cause of high premiums.  Of course, controlling health care costs is easier said than done and a real effort will upset a great number of people.  However, management of prescription drugs is one area where a win-win is possible.  In the private section pharmacy benefit managers (PBMs) promote the use of generic drugs, and alternative brand drugs in the same therapeutic class (formulary drugs).  They are often criticized for such action and accused of either arbitrarily changing a prescriptions (false) or interfering between the patient and doctor (also false). 

Nevertheless, managing prescription drugs is a valid way to manage health care costs and one area with minimal impact on the patient and virtually no impact on the physician, the both important in obtaining cooperation.  In addition, many plans both public and private provide financial incentives for the use of generic drugs and alternative brand drugs.  This may include higher co-pays and coinsurance if the generic or formulary drug is not used.  Patients always have an alternative, but at higher costs.  Of course, drug makers are not happy with these efforts and directly promote their drugs to both patients and providers.

Now the CBO reports on use of generic drugs and the savings that result for Medicare.

Four years ago, Medicare began providing outpatient prescription drug benefits for senior citizens and people with disabilities. Known as Part D, the program uses private plans to provide coverage for prescription drugs to enrollees. Those plans negotiate payment rates with pharmacies and rebates from drug manufacturers while competing for enrollees. Such competition provides incentives for plans to control their costs; one important way in which plans seek to control costs is by encouraging the use of generic drugs. A CBO study released today assesses how successful plans have been in encouraging the use of generic drugs and the potential for savings from the additional use of such drugs.

In 2007, total payments to plans and pharmacies from the Part D program and its enrollees were about $60 billion. The total  number of prescriptions filled was about 1 billion, of which 65 percent were filled with generic drugs, 5 percent were filled with multiple-source brand-name drugs (brand-name drugs that are also available in generic versions), and 30 percent were filled with single-source brand-name drugs (brand-name drugs for which no chemically equivalent generic versions are available). Even though a majority of prescriptions were filled with generic drugs, their lower prices meant that those prescriptions accounted for only 25 percent of total prescription drug costs.

Potential Savings from Generic Substitution. To control their costs, plans encourage enrollees to switch from brand-name drugs to their less expensive generic equivalents, a practice known as generic substitution. CBO estimates that:

Dispensing generic drugs rather than their brand-name counterparts reduced total prescription drug costs in 2007 by about $33 billion, meaning that total payments to plans and pharmacies from the Part D program and its enrollees would have been about $93 billion—or 55 percent higher—if no generics had been available.
The potential for additional savings from increased generic substitution is comparatively small, totaling less than $1 billion.

Potential Savings from Therapeutic Substitution. In one form of a practice known as therapeutic substitution, plans can also encourage enrollees to switch from a brand-name drug to the generic form of a different drug that is in the same therapeutic class (that is, a drug designed to treat the same medical condition). To assess the potential for such savings, CBO examined seven therapeutic classes identified by the Medicare program as providing opportunities for such substitution. CBO finds that:

If all of the single-source brand-name prescriptions in those seven classes had been switched to generic drugs from the same class, prescription drug costs would have been reduced by $4 billion in 2007. Savings from therapeutic substitution to generic drugs could have been much higher than $4 billion to the extent that other classes of drugs also would have presented options for substitution. The seven classes that CBO evaluated represented only about 15 percent of the cost of single-source brand-name drugs under Part D. However, the potential savings could have been lower than $4 billion because in many cases it would have been medically inappropriate to switch to a generic form of a therapeutically similar drug.

Policymakers would face several challenges in developing tools to achieve any additional savings from the expanded use of generic drugs—particularly in the case of therapeutic substitution. About half of Part D spending is on behalf of enrollees who have lower incomes and thus qualify for additional subsidies. Policies that used financial incentives to steer enrollees toward certain drugs might not be effective for that population because Medicare pays nearly all of their costs.

This study was prepared by Julie Somers of CBO’s Microeconomic Studies Division.

The Progesssive’s view of “fair” needs reworking

18 Sep
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We all know that the wealthy (defined as anyone who earns $200,000 a year or more) are the dregs of society, responsible for plunging our economy into ruin, sucking resources from the poor and crushing opportunity for the middle class – hey, I should become a White House speech writer.   

While we are overwhelming concerned about fairness, perhaps we should throw public employee unions into the mix.  If any group is crushing the middle class, it is these unions who ignore the fact their demands for overly generous pensions and other benefits come from the taxes paid by the citizens of their state, including sales, property and income taxes. Here is a clue; the “state” cannot afford what you demand.   

On the other hand, perhaps we should reconsider the percentage of national wealth spent on the elderly (me included) while young families struggle to make ends meet after growing payroll taxes reduce their take-home pay, is this fair? Here is a secret they should reveal in school:  Forty-years after you start working you are likely to stop working and while it may not be fun along the way, you have to put money aside every week for when you can no longer work. If you are lower-income all your life, you are going to be even lower-income in retirement, if you are retired; the chances are your income will not grow. While your income is not growing, your expenses are and so are things like your property taxes (see preceding paragraph).   

Fairness is one big bucket, not just the pot of gold held by the “wealthy.”  Fairness is assuring that every person has a fair chance to be whatever they want to be and that they are able to use the resources of their achievements as they see fit. Fairness is also helping those who truly are less fortunate and unable to participate in society, which does not include the irresponsible and those who shuffled along life’s path with minimal effort only to claim that their plight is due to someone else not paying his fair share.   

Fairness is not Progressives redistributing wealth, pitting one segment of society against another, or claiming we should all be equal for unequal effort.   

P.S. It is also not “fair” to have your credit card debt resolved for half of what you owe, or your mortgage mitigated or the IRS settle for a fraction of your unpaid back taxes in order for your debts to be spread to the rest of society.   

If you want to help control health care costs, put down the fork.

17 Sep

Controlling health care costs is on everyone’s mind these days.  Actually, we don’t care about health care costs just health insurance premiums but that is a whole other story.  

The trouble is you can’t separate the two despite what the politicians may say. 

There is something else you can’t leave out of the equation and that’s you and me. The next time you hear someone say they are going to focus on controlling health care costs listen carefully. 

Obese, who's obese?


If you don’t hear that controlling health care costs means you must change the way you live, use health care services and the way you receive health care, they are either lying or they don’t know what they are talking about. 

Here is an example of the relationship to health care costs and the people who use health care. 

How does obesity affect health care costs? 

Also consider this September 14 AP story by Tom Murphy: 

Many factors contribute to the rising cost of providing insurance, including expensive medical treatment, health issues related to obesity and an aging population, the number of unemployed taking advantage of short-term benefits and the effect of the new health care law. In a survey of about 60 health organizations around the country earlier in the year, Aon Consulting, a subsidiary of insurance broker Aon Corp., found that insurers expect to pay out 10.7 percent more in claims for preferred provider organization, or PPO, managed care.

What’s fair about an estate tax?

15 Sep
Title: "No, No! Not That Way" Locati...

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It’s here, it’s gone but you can bet it’s coming back. Originally designed to help pay for WWI, the estate tax (it was in place previously on a temporary basis), just won’t die as it should.      

Now the justification is that the wealthy need to pay their fair share. How many times have I heard that since January 2009?  What exactly is a fair share of ones life’s work and accumulated assets? Apparently some people think you should give 55% of it back to the government not withstanding taxes have been paid many times on that “wealth” during one’s lifetime.  Our income tax is already derived mostly from the top 5% earners in the U.S. but that is not sufficient.  After a person saves what is left post taxes from a lifetime of work, the idea of a fair share is changed and includes giving back most of those savings.   That is about as fair as going to a bank and telling it to change the terms of a mortgage because the person who took on the liability has decided they can no longer afford it, oops a bad example.  See, we do have a new definition of  “fair.”       

Hey, I’m never going to be hit by this tax personally, but the idea of such a tax is disturbing. Success in life is supposed to be a good thing, not penalized by confiscation. As a practical matter, where is money most efficiently used, by people spending it, helping the next generation, giving it to charity or giving it to the federal government?  I hope this is viewed as a dumb question.      

I have a better idea (he said with tongue in cheek), let’s do away with all income taxes and everyone just pay an estate tax. We would have more money to live on (talk about stimulating the economy) and then after we are gone the government can have it all. The transition could be a problem I guess unless we can get Congress to stop spending until enough Americans die.  How about this one, the estate tax is equal to the amount you collected from Social Security and no more, talk about saving Social Security.      

Sanders Estate-Tax Proposal Would Hit Wealthy Harder      

The estate tax lapsed temporarily on Jan. 1 after the Senate failed to extend it last year. If lawmakers do nothing, the tax will resume in 2011 with a 55% rate on estates above about $1.2 million. Last year, estates of more than $3.5 million for an individual were subject to a 45% tax.      

Mr. Sanders and his co-sponsors said, “It’s time for multi-millionaires and billionaires to pay their fair share.”      

I have to be fair, I have to be fair


Mr. Sanders, did you forget that the increase in the Medicare payroll tax and the new 3.8% tax on investment income for the “wealthy” make up nearly half—$210.2 billion of the $437.8 billion—of the increased taxes imposed by the Patient Protection Affordable Care Act. How much fairness is fair?    

Even though old Bernie is an admitted socialist and favors European style government, one would think that “fair share” does not extend to confiscation of up to 55% of ones assets.  He is also concerned over the gap between the have’s and have-nots in America and rightly so. But as is the case with so many liberals and socialists, his answer is to keep taking from the have’s as if they were the culprits rather than focusing on building up the have-nots.  The irony is that enhanced taxes from the “wealthy” do not directly benefit lower-income Americans but rather disappear into the federal budget.      

When the chickens come home to roost-the cost of health care (and health insurance) is not going down…oops!

12 Sep

Let me at those insurance companies

I used to take public transportation to work, but I started to drive and guess what, my auto insurance increased to cover the additional risk.  My home is in a hurricane prone area, guess what, my deductible was increased and my premium was raised.  I started to smoke (not really) and when my life insurance company found out, they raised my rates. Such is life.      

My health benefits plan was told to cover children to age 26, report the value of my benefits on my W-2, cover many preventive services at 100%, cover people with existing medical conditions the same as everyone else and to implement new appeal procedures.  My premiums are going up an extra 5%…those bastards!      

Costs are controlled, costs are controlled

Congress added all the goodies in health care reform early on in the process so it could sell the idea to the American people, what they forgot (eh, eh) to sell was the fact that all this stuff costs money and one way or the other Americans are going to pay. Now, insurers are seeking premium increases to cover the additional costs and risk as a direct result of PPACA changes. There is a good article in the September 8 Wall Street Journal summarizing the state of the individual market.      

Here is my favorite quote from that article:      

“In Kansas, I don’t have a lot of authority to deny a rate increase, if it is justified,” said Kansas Insurance Commissioner Sandy Praeger.      

Should any regulator have the authority to deny a rate increase that is justified?      

Apparently, the White House thinks so:      

“I would have real deep concerns that the kinds of rate increases that you’re quoting… are justified,” said Nancy-Ann DeParle, the White House’s top health official. She said that for insurers, raising rates was “already their modus operandi before the bill” passed. “We believe consumers will see through this,” she said. About half of all states have the power to deny rate increases. Ms. DeParle pointed out that the law awards states $250 million to bolster their scrutiny of insurance-rate proposals, saying that will eventually curb premiums for people.     

You’re sure this is going to work, right?     

I think she is right, consumers will see through this, except the “this” may not be what she envisions. Additional scrutiny may curb premiums in some cases, but how are we curbing health care costs. The premiums we are talking about are for new individual and small group coverage that is subject to all the new requirements of PPACA.  If you think we are having fun now, wait until all the provisions of PPACA hit for retired employees with employer based coverage and for the 70 million Americans with self-insured coverage through large employers and the States? Those plans are now grandfathered from many of the costly new provisions, but to keep that status is more costly than making changes to manage health care benefits and thus many if not most of the grandfathered plans will lose that status in the next few years.  Retired employees will see their benefits cut as well as the changes to employer based prescription drug programs kick in.   

“There will be zero tolerance for this type of misinformation and unjustified rate increases.”    

Is all this a surprise? Not exactly, in November 2009 a report from the Congressional Budget Office told lawmakers:  

Nongroup Policies CBO and JCT estimate that the average premium per person covered (including dependents) for new nongroup policies would be about 10 percent to 13 percent higher in 2016 than the average premium for nongroup coverage in that same year under current law. About half of those enrollees would receive government subsidies that would reduce their costs well below the premiums that would be charged for such policies under current law.   


Amazingly, politicians saying something will work does not make it so. Now to cover its tracks the Administration is once again taking the insurance industry to task warning them that “unnecessary” premiums hikes will not be tolerated. Hey, I don’t think we should tolerate unnecessary increases in anything, but duh, that’s not the point. The fact is that we passed legislation that will cause health care costs to rise either by design or by the shifting of costs from some federal programs. No amount of political scapegoating is going to change that.  

 In the news: New law won’t curb health care costs in this decade.             Spike in health care costs.  

You can demonize health insurers all you want, you can classify underwriting procedures as abuses, but the fact remains that health care trend for the next year is still 9% plus the additional costs added by PPACA. Some costs are directly related to benefit provisions of PPACA other changes raise administrative costs for employers, third-party administrators and insurance companies and some is caused by the fight over loss ratios.   You can’t squeeze this health care balloon and keep it the same shape it was before and you can’t make health care affordable by “curbing premiums.”

The perils of being dumb, I’m just not stimulated

11 Sep
Installation of a sidewalk in Middletown, Rhod...

Image via Wikipedia


Every time I pick up a paper and read about some stimulus plan or mortgage modification scheme I say to myself you must be really dumb if you don’t get this.  

A new plan about to be launched by the government will modify underwater mortgages for people who owe more than the property is worth.  At the risk of demonstrating my dumbness I ask, “why?”.  

An example in the Wall Street Journal talks about a 62 two year old with a condo worth $92,000 less than she owes. The worry is that when her interest only loan expires in five years she may not be able to make the payments. Here goes my dumbness again, what has that got to do with the fact the condo is worth less than she owes? Oh wait, a light has gone off…she will just walk away.  

Should I ask why she has a condo she apparently couldn’t afford regardless of the current value? Better not or my dumbness will be on display for the third time in one article.  

I guess the riskiest part of being dumb is that you expect people to act responsibly, to buy only what they can afford, to meet their obligations, pay their bills and otherwise not place more tax and other financial burdens on those of us in the population who are on top of the dumbness scale.  

Given I’m nearly sixty-seven, maybe it’s time to get smart, take a second mortgage on my home of thirty-six years and just live it up until I too need some modification. Perhaps then I can avoid the perils of being dumb.  

Now the President wants another $50 billion to repair roads, build transit systems, fix bridges.  Who can argue with such activity?  We certainly need to repair roads, etc., but isn’t that what money we don’t have has been doing for the last eighteen months with little success in stimulating the economy?  What am I missing here?  We keep throwing money around with not much to show in the way of results.  I know, it takes times and that is true, but are we aiming at the right target?  Does major infrastructure construction create that many new jobs or filter benefits throughout the economy or it is just that spending all that money is more visible because we are all stuck in a construction zone sooner or later.  

Is the stimulus being used wisely and in the right places? 

If we are going to mortgage our children and grandchildren’s future, the least we can do is spend some of the money on Chinese language lessons.  

I have already admitted my state of dumbness, so why stop now.  If we are going to spend all this money let’s focus it on things that get ALL Americans spending and stimulating the economy.  We know rebates don’t work, apparently large project spending fails as well.  As I may have said before, duh!  Spend some money and have the states suspend their sales taxes periodically over the next year.  Once that happens it is quite likely retailers will have sales and bargains galore to compound the effect.  There is no doubt that every penny spent means real stimulation for large sections of the economy.  

But what do I know, I’m just another dumb guy, but here is an editorial that I think provides a good assessment of where we have been and where we are going.  

Do preventive health care services save money?

9 Sep

Image by captaincinema via Flickr


Now that the health care debate is over and the PPACA is the law of the land, let’s review.  Congress in its infinite wisdom added extensive preventive and wellness services as part of the benefit mandate. Initially these mandates apply to new health plans, but as existing plans lose their grandfather status the mandates will apply to more and more plans.  The list of services to be covered at 100% is extensive and is expected to grow on a regular basis.  We will ignore the question of why such services need to be covered at 100% when open heart surgery is covered at 80%, so the question at hand is, does coverage for these services save money as claimed by the President and every (Democratic) politician this side of Mars? 

We already know that this and other mandates under PPACA are causing premiums to increase more rapidly, but does screening for high blood pressure, etc. save money (especially when it is paid for at 100%)?  The answer, yes, maybe and no. 

The Problem with Prevention was written on a New York Times Blog in August 2009, take a look for yourself. 

Changes in the Flexible Spending Account (FSA), no logic, plenty of cost shifting

8 Sep

The Flexible Spending Account (FSA) was created in 1978, when Section 125 was added to the Internal Revenue Code.  This section allows individuals to elect tax-free benefits in lieu of taxable cash in their pay. Over the years, many employers (about 26 percent) added this option to their employee benefits program.  Both the employer and the employee save money, albeit at taxpayers’ expense. Approximately 35 percent of eligible employees use the FSA when available. According to a Mercer Consulting study, the average employee contribution to an FSA is $1,235 (2005).    

In 2003, the IRS issued a revenue ruling stating that over-the counter medication may be reimbursable through a health FSA. The action was prompted because some medications previously requiring a prescription became available over-the counter, Claritin for example. The reasoning was that the drug was still a reimbursable medical expense.    


Hey pal, we did it again.  Do you think anyone will ever check the numbers?    

In the quest to make it appear that the Patient Protection Affordable Care Act PPACA was being paid for, Congress changed the rules for the FSA.    

Under the law, effective beginning in 2011, the cost of over-the-counter medicines may not be reimbursed with funds through an HSA, FSA, HRA, or Archer MSA, unless a physician prescribes the medicine (or unless it is insulin). The provision is estimated to raise $5 billion in revenue over 10 years.  

2010-59 and Revenue Ruling 2010-23. Employers should read these carefully. -Notice FSAs changes to PPACAOn September 3, 2010, the Internal Revenue Service (“IRS”) issued two pieces of guidance to implement the




  • Even if the OTC expense is incurred during the permissible 2 ½ month grace period for FSAs, it may not be reimbursed from the FSA 
  • OTC expenses may be reimbursed on or after January 1, 2011, so long as the expenses subject to reimbursement were incurred prior to January 1, 2011 
  • The IRS makes it clear that prescription” means “a written or electronic order for a medicine or drug that meets the legal requirements of a prescription in the state in which the medical expense is incurred and that is issued by an individual who is legally authorized to issue a prescription in that state.” 
  • The January 1, 2011 effective date applies regardless of whether the applicable plan is a calendar year plan. 

Let’s think about this.  The IRS’s logic of 2003 is still valid and more medications once prescription only are now available over the counter so logically there was no reason to change the law. Further, to continue to have an over-the counter medication eligible for an FSA or similar arraignment, all one has to do is get his doctor to write a script, i.e. “take an aspirin every day, take Claritin for your allergy.”  I hope that this is done on the phone otherwise; we may be adding office visit costs to health insurance simply to have an over-the counter medication continue eligible for the FSA.    

However, there is even more faulty logic in all this.  For the government to save money, the total amount placed into the FSA must be decreased.  Assume an employee places $1,000 into an FSA each year.  Typically, at the end of the year if there is money left the employee will use the funds on miscellaneous expense, like a pair of glasses or over-the counter medicine for the following year.  Of course, in some cases OTC medication is used regularly will be purchased throughout the year.    

Nevertheless, since the pre-tax money in the FSA is forfeited if not used by year-end and thus remains free from taxes, for there to be a tax savings for the government, the employee will have to reduce that $1,000 contribution before the start of the year.  Since medical expenses are unpredictable and employee out-of-pocket costs are rising, is it logical to assume that the average person will look at that $1,000 and say, “gee, I can’t use that money for my cough medicine or aspirin, I’m going to change the $1,000 to $978 next year?”  Don’t count on it.    

Therefore, if the employee leaves the $1,000 election in place, the government loses the taxes on that amount regardless of whether the employee is reimbursed the full amount or forfeits the $22.00 he would have spent on OTC medication.    

Beginning in 2013, the law limits pre-tax contributions to an FSA to $2,500 annually. The limit is indexed to inflation after 2014. Given the average contribution is far below $2,500, the average person is not affected.  On the other hand, the family trying to pay for orthodontics for a couple of children or the person with a high deductible and large medical expenses or the family with everyone wearing glasses will find their out-of-pocket costs going up as a result of this change. Given the new limit and the average contribution one has to wonder how the Joint Committee on Taxation (JCT) estimates the provision will raise $13 billion over 10 years.    

We should be wondering (and worrying) about the consequences of a number of provisions of the PPACA.    








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