Archive | August, 2011

COBRA health benefits subsidy for laid off workers ends

31 Aug

Many workers who lost their jobs have been receiving a subsidy toward the cost of health benefits under the provisions of COBRA. That subsidy was 65% of the premium. That’s a hefty amount considering that the average price for family coverage is about $1,137 a month, according to the Kaiser Family Foundation. With the subsidy, COBRA coverage costs an average of $398.

Kaiser Health News reports that Congress extended the COBRA subsidy three times to cover workers who lost their jobs through May 2010, but lawmakers last year resisted another extension amid rising concerns about the federal deficit. The subsidy lasted for up to 15 months so it expires Wednesday. (There is one exception, a Labor Department spokesman said. If workers laid off before May 31, 2010 were allowed by their employers to continue to receive their work-sponsored health coverage, their subsidy eligibility would begin when the company-paid insurance ended).

College costs and health care costs…two peas in a pod

30 Aug

If you want to understand health care costs, go to college.  No, that’s not exactly what I mean, I mean look at the cost of college.  College costs have risen nearly as fast as health care costs and yet there has been no big outcry, just an increased burden for student loans. Perhaps if there were insurance companies for college tuition it would be a different story.

There are a lot of similarities between college costs and the cost of health care.  First, the prices charged are not the prices paid by most people.  Doctors have their fees cut by agreement and colleges cut their real fees by giving out scholarships, grants and other awards.  In both cases, we should be asking what does this really cost.  We should also be asking why the charges are what they are; inefficiency is a factor in both education and health care.  In the case of colleges we have a lot of professionals on the payroll who only teach on a part-time basis. The rest of the time they are doing “research” and running their own consulting businesses (not the largest inefficiency by the way).  We need a new paradigm.

However, the most startling similarity is our view of the services provided.  We equate high cost with high quality, a faulty correlation.  We want the best for our families and tend not to question the cost of the service or the value we are receiving.  With health care we believe more is better and in education we think a big name and high tuition means greater success in life.  In many cases we would be better off not having that CAT scan or spending any money on a four-year college.

There is a lack of accountability in both higher education and in health care; we are hoodwinked by our emotional attachment to doing the best we can for our children and our health. In other words, we find it difficult to be objective, to ask questions, to challenge the assumptions we have learned to accept as a priori. As a result, costs keep rising at what should be unacceptable rates and the organizations and individuals involved in providing both health care and higher education go on their merry way above the fray.

The greatest problem you face after you retire

29 Aug

I have been retired for just over three years now.  I have collected my pension since July 2008 and Social Security since November 2009.  Each month my pension pay stub is available to me electronically so I go online and download it into a file where I save such information.  The left side of the stub shows  my income and tax payments and the right side my deductions which include an amount for life insurance, health and dental insurance, long-term care insurance and my property and casualty insurance (the latter two voluntary employee pay all benefits).

In the three years since I retired, one thing has become perfectly clear to me.  The left side of the stub never changes, but the right side increases each year.  Then there is the right side of things that don’t appear on ones paystub, like the price of food, gasoline, health care and all the other stuff we buy.

It’s not hard to do the math and figure out that sooner or later the left side of my pay stub will be insufficient to cover the right side and still maintain my lifestyle, something will have to give.  I could go out to dinner less often, I could give up or greatly reduce traveling which I enjoy immensely, or perhaps give up the occasional golf game, but regardless of what I decide to do nothing is that appealing.

I am lucky that I do have a pension, for millions of Americans the left side is IRAs or a 401(k) or perhaps there is no left side (except Social Security).  In many cases not having a steady stream of income means that the left side may not stay the same, but may go down as well, the last two years present a good example; it’s a scary thought.

So what does this all mean for people not yet retired?  It means longevity is your biggest concern in retirement.  Simply put, you could outlive your assets or live to the point where you cannot keep up with inflation and maintain the lifestyle you desire.  That lifestyle will change over the years to be sure, but regardless, it is all about the quality of life and the ability to be self-sufficient.

What does one do about this issue?  There are several strategies that are very basic and apply to most people.

  1. Forget the idea that you are going to retire at 55, 60 or even 65 for most people that is a pipe dream that will come back to bite them when they are 70.
  2. If you do not have a defined benefit pension plan that provides a lifetime annuity, get one.  That means take at least a portion of your 401(k) or IRA or even other savings and purchase an annuity that provides a lifetime stream of income.  You can also buy annuities that include COLAs.
  3. Delay receiving your Social Security until at least your full retirement age, longer if possible to increase the benefit.  Remember, unless you are receiving a pension from a government plan, Social Security is likely the only portion of your income with a cost of living adjustment possible.  You will need a higher Social Security benefit in your older years plus if you must take Social Security at 62 to meet expenses, you probably should not be retired.
  4. Make sure that you have some savings/investment outside your retirement funds that you can use to help offset the effects of inflation on your basic retirement income.  In other words, just because you are retired does not mean you don’t need an emergency fund.
  5. Don’t forget your survivors who may be counting on you for their income.  Unless you take a survivor annuity either from your pension or an annuity you purchase, these benefits will stop upon your death…then what?  If you take a survivor option with your annuity it will reduce your benefit or cost you more to purchase the annuity and then there is the possibility that the beneficiary will predecease you.  The alternative is to have a large stash of cash somewhere or adequate life insurance to allow your dependent survivor to maintain his or her lifestyle. 

There it is in a nutshell, longevity is your biggest concern in retirement, ironic isn’t it?  The one thing we all wish for in retirement…a long one…is the one thing that is most difficult to deal with financially.

To see the possible annuity your assets may purchase you might want to check out the calculator at

Extreme couponing on a national level – a stimulus to live with

27 Aug

I'm stimulated

The basic idea behind incentives is to motivate a specific action; you don’t complete that action, you don’t receive the incentive. While that all sounds simple, apparently our policymakers don’t get it.

Under the Bush administration rebate checks were doled out with the hope the money would be spent to stimulate the economy. Much of the money was saved or used to pay down debt. Now Obama wants to extend the tax reduction for payroll taxes, the savings for workers during 2011 apparently not used to buy stuff either. This isn’t surprising because if you give someone a chunk of money he is going to use it in a way that best meets his immediate needs (common sense not a degree in economics).

If we have money to spend (eh, that’s money to borrow first) why not use it so that the intended goal for the incentive is guaranteed to be reached. In this case if the goal is to stimulate spending and hence jobs, you don’t get the incentive until you buy something. Doesn’t that argue for sales tax holidays or perhaps some really quirky idea like national coupons (reverse ration stamps if you will – if you know what they are you may be as old as I am).

Working with private business the government could subsidize coupons for the purchase of a wide variety of products and services (but not necessities that must be purchased under nearly all circumstances). Businesses could add to the value of the coupon if it wanted to and run sales coordinated with the gradual release of the coupons to further boost sales Additional buying would likely be generated while people are claiming their coupons. And, some of the cost of the program would be recouped through higher tax revenue as a result of higher sales for businesses of all sizes. Talk about extreme couponing!

If you want to keep the left happy only give the coupons to families earning less than Warren Buffett.

How much money do I need to live on in retirement?

25 Aug

This is an easy answer?

I thought about this question a lot in the years just before I retired, I think about it more now that I have been fully retired for a year and a half. Given that I managed pension and 401(k) plans and conducted retirement planning programs, you would think the answer would come easy to me; you know what, it does.

Conventional wisdom says you need less income than before retirement because once you are retired you have no need to save and you don’t have the expenses associated with work. Unless you are planning to give up lunch for the rest of your life and plan to draw large lump sums from your retirement nest egg to deal with those emergencies that will inevitably come your way, don’t believe any of that nonsense.

One thing you can be sure of is that if some expenses go down when you retire others will go up and up and up.

There are numerous calculators and planners out there for you to take a look at and use for free, they will ask you to put in all kinds of nifty numbers and assumptions and voila’, they will tell you what percentage of your pre-retirement income you need in retirement. Go ahead, give them a try, it’s worth the experience and the resulting depression.

Unless you plan to live in a cave and admire the prehistoric drawings on the walls all day, you are going to need money and each year that goes by you are going to need more money. Consider this, let’s say you were a good saver and at retirement you accumulated $1,000,000 in assets (probably pre-tax so you really don’t have $1 million in the bank to use). In today’s market that will buy you an annuity paying about $6,345 per month for life or $76,140 a year before taxes. Not bad huh? Of course, there are two things to consider; first that amount never increases and second, upon your death the payments stop, over, done, kaput…now call in your spouse and let her (or him) read this.

Just because you are retired doesn’t mean you don’t need an emergency fund. Even if you have a steady guaranteed income, you still need cash if a financial emergency strikes, where are you going to get it if you don’t put money away periodically (otherwise known as saving)? Let’s say you don’t have a steady guaranteed income from a pension or annuity, but rather you are managing your own investments and withdrawals from your 401(k) or IRA, where are you going to get the ten grand for a new roof, take it from your 401(k)? Go ahead and see where that extra unplanned withdrawal gets you in a few years. Even if you borrow the money, you now have a new loan payment.

Here is the plan, use all the calculators you can get your hands on, listen to all the advice out there, look closely at all your expenses and the things you want to do in retirement and then . . . give my opinion at least a passing consideration.

Your goals for retirement should be (1) start with 100% replacement of pre-retirement income, (2) have a plan to have that amount increase with inflation and (3) figure out what additional income be it life insurance, a big pile of cash or a joint and survivor annuity you need so that any dependent survivors will have the income they need for the rest of their lives (an alternative plan here is to marry a much older women).

By the way, when I say you need 100% income replacement, it means 100% from all sources including Social Security and any investment income you may generate on a regular basis such as dividends.

See I told you the answer was easy to come by.

Is Medicare “innovation” in the delivery and payment of health care headed in the right direction?

24 Aug
Centers for Medicare and Medicaid Services (Me...

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Medicare is on a quest to raise the quality of health care and save money. Both are worthy and necessary goals, but is one new program after the other the way to go about it? Can any of these efforts produce significant positive results when they seem to dictate to the medical profession, are mired in tons of paperwork and regulation and often are voluntary with inadequate incentives for participation? Are the various efforts even coordinated?

Here is the latest example. If you were a physician, would you participate? What does it mean for your income? Do bundled payments work in an Accountable Care Organization?

The Centers for Medicare and Medicaid Innovation today announced the Bundled Payments for Care Improvement Initiative to help improve care for patients while they are in the hospital and after they are discharged. Doctors, hospitals, and other health care providers can now apply to participate in this new program that will align payments for services delivered across an episode of care, such as heart bypass or hip replacement, rather than paying for services separately.  Bundled payments will give doctors and hospitals new incentives to coordinate care, improve the quality of care and save money for Medicare.

We need these types of changes, but we also need less not more bureaucracy and most of all we need more and stronger incentives for both health care providers and patients to want to participate. Perhaps rather than focusing on the behemoth of traditional Medicare the effort should be to strengthen managed care plans within Medicare Part C and provide strong incentives for beneficiaries to join such plans.

Managed care is not the enemy, it is where all this is headed.

This quest for cost savings is similar to employers embracing wellness programs with no idea what is and is not working, or what a wellness program is for that matter and yet claiming great success even as they cut benefits, shift costs to employees and raise employee premiums to deal with rising health care costs.

A “quirky” idea…let’s hold a contest for employers to hire new workers

23 Aug

Here is an idea from the Center for American Progress.  Even they admit it’s “quirky,” but I think it’s more under the “they just don’t get it” category,” or perhaps it’s a matter of “all the liberal backed ideas haven’t worked,” so let’s get quirky. 

Keep in mind as you read the following that employers are still seeking to downsize, minimize wage costs and most obvious among the vast majority of employers, trying to desperately manage health care costs (in the face of another “quirky” progressive idea) mostly by shifting more costs onto workers in the form of higher premiums, deductibles and co-payments and the ever favorite consumer driven high deductible health plan. 

These folks at CAP are right that the fundamental problem is getting people to buy products and services so that there is a reason for companies to hire more workers and be able to pay higher wages…but a contest?

Rather we should find a way to make it more desirable for the 90 percent of Americans who have a job or steady retirement income to buy something. Right now many are scared, uncertain where we are headed, earn no interest on their savings, are confused about what is happening in Washington and wondering who is calling the shots. Whose fault is that?  I respectfully submit we are beyond blaming George Bush.  

But I have to admit, the folks at CAP deserve credit for having an idea, that’s more than we can say for the people in the West Wing. 

A national contest to hire workers (to do what?).  [excerpt]

…create a “National Payroll Contest” that offers prizes to the firms that generate the greatest increases in payroll over the course of the year. It’s an admittedly quirky idea. But hear us out. It would be inexpensive, and if it worked it would help create jobs.

The idea is to motivate companies to hire and give raises without offering subsidies for every person on their payroll, which is both expensive and inefficient as most of the jobs subsidized would be jobs that would have existed anyway. Instead, there would be a competition that would motivate many firms to hire and give raises. But only the most expansive firms would receive a benefit from the government.

Winning companies would be selected based on the amount of increase in the wages they pay that are subject to the payroll tax over the year. There would be separate prizes for different categories of companies based on size. Because wage income subject to the payroll tax is only the first $106,800 per employee, the prize would not go to firms that simply increased their top executive salaries the most but to those that either increased the pay of their rank-and-file workers or boosted the number of employees. For a winning company, the prize would be equivalent to 5 percent of their total payroll subject to payroll tax. In order to give employers more chances to win, and more motivation to get in the game, there would be second and third prizes as well.

The clear benefit of this proposal is that it is relatively inexpensive for the federal government. While it would motivate many firms to go the extra mile in increasing payroll in an effort to win the prize, it would only cost the public coffers the amount of the prize for the winning firms. And that cost could end up being offset by the increased revenue from the increase in hiring.

Of course, for the contest to work as intended, Congress will need to create rules to ensure that companies win the contest fair and square. Rules must be designed to prevent businesses from winning simply by acquiring other companies and claiming the payroll of the combined firms. But such rules need not be complicated.

The most obvious challenge to this idea (aside from being quirky) is the absence of good information for potential participants. A company that is hiring already and might be motivated to hire a bit more to have a chance at the prize is going to be reluctant to do so if it has no idea how it’s faring against its competition. For that reason, developing a system of public reporting from the government that maintained the confidentiality of firms would greatly increase participation.

Clearly, a National Payroll Contest will not alone provide nearly enough jobs to get us back to pre-recession employment levels. This is by no means its purpose. But it can be part of a larger set of policies that try to achieve that end, and Congress should give the contest serious consideration. We need to get people back to work, and to do so perhaps a little friendly competition would not be such a bad thing. This seems like a contest worth having.

Michael Ettlinger is Vice President for Economic Policy and Jordan Eizenga is an Economic Policy Analyst at American Progress.

HHS awards $40 Million in grants to sign up children for health coverage

22 Aug

Nobody can deny the desirability and value of assuring all children have access to and receive good health care starting at birth, I certainly never wanted less for my children.  To that end the government provides coverage through Medicaid and the Children’s Health Insurance Program (CHIP).  You can debate all you want the credibility of those programs, but that is what we have and that is what children and their families must rely on.

However, $40 million is needed to find and enroll these children?  We are only now getting to use technology to help in the process?  We have to pay schools, local organizations and local agencies to accomplish what should be a simply process? 

It seems to me that if it takes this much effort and this much money to enroll children in a government program, that process is way too complicated to start with.  Rather than throw money at making the existing process work (and I have no idea what that may entail), wouldn’t it be better to develop a user-friendly uniform process in all the states?  Just asking. 

The U.S. Department of Health and Human Services (HHS) today announced $40 million in grants for efforts to identify and enroll children eligible for Medicaid and the Children’s Health Insurance Program (CHIP). Grants were awarded to 39 state agencies, community health centers, school-based organizations and non-profit groups in 23 states. The two-year grants are authorized under the Children’s Health Insurance Program Reauthorization Act (CHIPRA) of 2009.

“Today’s grants will help us identify and enroll children in Medicaid and the Children’s Health Insurance Program, ensuring that more children have the health care they need,” said HHS Secretary Kathleen Sebelius.  “Keeping Americans healthy from a young age is the right thing to do, and it saves money by avoiding preventable diseases and conditions as they get older.  The activities we are funding will help eligible children get covered, stay healthy and prepare them to succeed in school.”  The grants will build on the Secretary’s Connecting Kids to Coverage Challenge  to find and enroll all eligible children and support outreach strategies that have been shown to be successful.  Grants were made in five focus areas: 

1)      Using technology to facilitate enrollment and renewal (approximately $20 million to ten grantees)

2)     Retaining eligible children in coverage (approximately $3 million to four grantees);

3)     Engaging schools in outreach, enrollment and renewal activities (approximately $5 million to seven grantees)

4)     Reaching children who are most likely to experience gaps in coverage (approximately $10 million to fourteen grantees)5)     Ensuring eligible teens are enrolled and stay covered (approximately $3 million to four grantees). 

Grant amounts range from $200,000 to $2.5 million with the largest grants going to the technology focus area.  For a list of grantees, please visit:

“We are making great progress enrolling eligible children in Medicaid and CHIP and the grants released today help keep these important efforts moving forward. They are a part of our commitment to help all eligible children get the health coverage they need,” said Cindy Mann, CMS deputy administrator and director of the Center for Medicaid, CHIP and Survey & Certification.

A new study just released by the Urban Institute and the Robert Wood Johnson Foundation found that, despite an increase in eligible children between 2008 and 2009, the total number of eligible but uninsured children declined from 4.7 million in 2008 to 4.3 million in 2009, in part due to outreach and enrollment efforts. 

Efforts to streamline Medicaid and CHIP enrollment and renewal practices, combined with robust outreach activities, have helped reduce the numbers of uninsured children.  For example, Oregon, a previous CHIPRA outreach grantee, has cut its percentage of uninsured children in half, from 11.3 percent in 2009 to 5.6 percent in 2011.  In the past two years, Oregon enrolled 94,000 eligible children in Medicaid and CHIP.  In addition to its efforts in reducing paperwork for families and establishing a timely and cost-effective online application process, Oregon used its grant funding to provide direct one-on-one enrollment assistance to families and conduct vigorous outreach activities throughout the school system. 

“We want to help others achieve what Oregon has accomplished and more,” said CMS Administrator Donald M. Berwick, M.D.  “Simplifying enrollment and renewal systems and ensuring that signing up for health coverage is standard practice in schools and health centers are central to sustaining the progress we’ve made. The CHIPRA grants are designed to support these efforts that will have lasting effects.” 

Today’s CHIPRA outreach grant announcement follows the August 12, 2011 release of a joint letter from HHS Secretary Kathleen Sebelius and Education Secretary Arne Duncan to the nation’s governors urging them to encourage schools to “undertake children’s health coverage outreach and enrollment activities when classes begin this fall.”  The letter suggests promising strategies such as enlisting school athletic coaches to help promote enrollment.  HHS is supporting such efforts by providing a strategy guide to states, schools, community groups, and other stakeholders as part of the “Get Covered, Get in the Game” initiative the agency conducted in 2010 with CHIPRA funding. 

CHIPRA, together with the Affordable Care Act, allocates a total of $140 million for enrollment and renewal outreach, including $112 million in grants to states, community groups and health care providers, $14 million specifically for organizations serving American Indians and Alaska Natives (AI/AN), and $14 million reserved for national enrollment campaign activities. The first $40 million in grants, as well as $10 million in AI/AN grants, were awarded in 2009 and 2010, respectively.


 Following is a list of the specific awards if you are interested: 


I am fed up with Obama, the Republican candidates, the Tea Party, Paul Krugman, Robert Reich and Congress, how about you?

21 Aug
Social Security Poster: widow

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I am firm believer that President Obama has not done a good job, even if you happen to believe in his philosophy of government and its role in our society. You would think that Republicans who are salivating at making him a one term president would learn from his mistakes in leadership and head full speed to the center of the political spectrum.  In the last two and a half years we have learned that neither far left nor far right cut it in America. Oh sure, both sides are loud enough and get a lot of press, but they can’t make any of their extremes work.  I am sick of the Tea Party on one side and Krugman and Reich on the other.  We can’t welfare our way to continued prosperity and we can’t expect average people to always do the right thing and be responsible citizens.

Rather than exercising common sense as to what is practical and workable and strategically sound in terms America’s goals and needs, we get the leading Republican candidates talking more nonsense to appeal to some magical base that may be visible but at the same time is non-existent, somewhat like AARP membership.

Social Security is unconstitutional; give me a break.  Scrap it and let the states run things; many states have demonstrated their prowess as running pension systems that’s for sure.  There is no doubt Social Security is a Ponzi scheme running out of time, so do we scrap it or fix it?  Let me see, the private pension system has all but disappeared, Americans left on their own are lousy savers and even worse investors, the ups and downs of the stock market make 401(k) plans and other retirement savings uncertain mostly because people do not manage their investments, know how to or apparently care about doing so.  And then we have the people who simply have no money to save (far fewer than claimed, but some Americans nevertheless).

If I were alive in 1934 I probably would have been opposed to the enactment of Social Security, but today experience says something different.  As much as we like to rely on personal responsibility and common sense, we must accept the fact that both are in short supply.  Social Security may be screwed up, but that is because we got away from the basics of providing a safety net of income in old age (and because the definition of old age has changed).  Successive Congresses since 1935 have tinkered with Social Security, adding scores of new benefits many having nothing to with income in retirement and turning the program into a giant welfare scheme while not anticipating the long-term consequences or thinking about the long-term costs. No one should be surprised.

What the next President should do is figure out how to fix it and move on, not take it apart or bury his head in the sand defending the status quo.

Whoever wants to be President in 2013 should ignore the 15% fringe on the left and right and do the practical, commonsense and affordable things for the remaining 70% of Americans.  Americans cannot fend entirely for themselves and government cannot and should not do it all for them, is it so hard to find something in the middle that works?

Is there any more to be said? Perhaps more lessons to be learned

20 Aug

Over the past week we have witnessed the culmination of the liberal experiment. The experiment attested that two parents don’t matter; that welfare, rather than work, cures poverty; you tolerate “minor crime”; you turn a blind eye to celebrity drug use; you allow children to leave school without worthwhile skills; you say there’s no difference between right and wrong. Well now we’ve seen the results.

From an Aug. 14 editorial in the London Telegraph

Social Security COLA still on track for nearly 3.5% increase in 2012

19 Aug

Good news for a change?

 The Bureau of Labor Statistics released the CPI-W figure for July, 2011, the first month of the three-month average (July, August, and September) that will determine the COLA applied to Social Security benefits at the end of 2011.

The CPI-W was 222.686 and when compared to the average for 2008 (the last year in which there was a COLA calculated) that number would call for a nearly 3.5% increase in Social Security benefits.  Of course an average of about 222.6 for the rest of the quarter will be required for the 3.5% COLA.  August and September CPI-W numbers will determine the actual COLA which will be known in October sometime.

Early Retiree Reimbursement Program (ERRP) – here comes the money, but what is the fair way to use it?

18 Aug

The health reform act provides $5 billion to reimburse employers for a portion of the cost of health claims for early retirees.  The idea is to encourage these plans not to drop coverage for early retirees at least until the health insurance exchanges are available in 2014.

Employers and other plan sponsors who have applied for and received reimbursement for these costs are figuring out how to use the proceeds.  While there are some limitations prescribed by regulation, the employer has a great deal of flexibility.  For example, they may or may not share some of the proceeds directly with retirees and while the payments are based on claims for early retirees the savings may be shared with all retirees (and active employees) in the same plan.  How to do this fairly is not easy to determine.

For example, if some retirees in the group pay a portion of the premium should the ones who don’t be excluded considering real cost sharing in terms of out of pocket costs has nothing to do with premiums?  Should only early retirees receive a portion of the reimbursement given their claims generated the payment and also that these individuals typically have the largest claims paid by the employer plan? 

And how should the reimbursement be made, a onetime premium credit in the same amount for all participants, a onetime lowering of any deductibles, a premium holiday equal to the total payment to retirees or perhaps a reduction in the premium for 2012 to reflect the reimbursement?

The last of these options has longer term consequences especially if the payments from the government go into a second year for a plan; retirees should be warned of this situation. 

For example, assume the total premium for a retiree’s coverage is $500 per month of which the retiree pays 20% or $100. For 2012 the premium is scheduled to increase by 8% for a new premium of $540 and thus the retiree share would be $108.  However, because of the ERRP payment, the retiree’s contribution is held at $100.  Now we come to 2013 and plan costs increase another 8% leaving a total premium of $583.20.  If there is no ERRP for 2012, the retiree contribution must jump from $100 to $116.40 or an of 16% increase.  If the ERRP reimbursement continues a second year as does the 8% increase in plan costs, come 2014 the retiree could see a premium increase from $100 to $125.97 or a nearly 26% increase on one step. 

Given the amount of the ERRP payment and increase in plan costs are unknown, it would seem a safer route for employers wishing to share the ERRP directly with retirees to do so with a onetime fixed payment or onetime adjustment to deductibles or co-pays to avoid compounding the impact on premiums for retirees.

Following is the releveant excerpt from the regualtions.


The empty promise – “if you like the health benefits you have, you can keep them.” Annual enrollment for 2012 and the loss of grandfathering under the Patient Protection Affordable Care Act

17 Aug

Tell me it isn't' so

During the health care reform debate the point was repeatedly made that workers who liked their benefits would not lose them, they could keep the benefits they had. Somebody should have checked with employers first before making that promise.

While it is true that the Affordable Care Act does grandfather existing plans and thus exempts them from some requirements of the law, such as providing preventive services without deductibles or co-payments applied, there is a catch. Employers can maintain their grandfathered status only if they do not make changes to their plan.

Here are changes that will cause a plan to lose its grandfathered status:

Elimination of a Particular Benefit

Increase in Coinsurance

Increase in Deductible or Out-of-Pocket Maximum ((by more than medical inflation plus 15%, as measured from 3/23/10)

Increase in Copayment: (by more than greater of: (1) $5 (adjusted for medical inflation), or (2) medical inflation plus 15%, as measured from

Decrease in Employer Contribution (if an employer decreases its contribution rate toward the cost of coverage by more than 5 percent below the contribution rate on March 23, 2010)

Changes in Annual Limits

- No Previous Limits: (if the plan imposes a new overall annual limit on the dollar value of benefits that did not exist before the law).
- Previous Lifetime Limits: (if there is new overall annual limit that is less than the value of an existing lifetime limit)
- Previous Annual Limits: (if the existing annual limit is decreased)

Here is the dilemma employer’s face; either they maintain grandfathering to avoid additional costs because of benefit mandates under the law or attempt to manage costs and make changes to the plan design and/or cost sharing. As we approach the 2011 open enrollment period, employees will quickly find out what decision employers have made. The choice is not hard.

 Making benefit changes such as raising deductibles or the percentage of premiums paid by the employee will save more money than the additional cost of the new mandates (at least until HHS expands the mandate). It’s the old give with one hand and take with the other. Nobody should be surprised at this outcome.

When the “promises” were made that you could keep the plan you like, the regulations had not been written that eventually mitigated the value of grandfathering, essentially making it impossible for employer and other plan sponsors to maintain the grandfathering status.

When you receive your open enrollment material to make benefit selections for 2012 do not be surprised if the plan you like has disappeared or changed substantially. You see, the “affordable” part of the Patient Protection Affordable Care Act is still missing.

More on Does Medicare work?

16 Aug

If you read my first post on this topic you recall I questioned Paul Krugman’s position that Medicare is less bureaucratic than private insurance.

To further make my point here is a summary of what is happening with Medicare’s Accountable Care Organizations. This text was prepared By Kaiser Health News.

Accountable Care Organizations

Allows providers organized as accountable care organizations (ACOs) that voluntarily meet quality thresholds to share in the cost savings they achieve for the Medicare program.Implementation: January 1, 2012 Implementation update: On April 7, 2011, the Department of Health and Human Services published a proposed rule in the Federal Register defining Accountable Care Organizations and set out requirements for governance, legal structure, transparency efforts and the incorporation of evidence-based medicine and quality efforts. HHS also released facts sheets for providers and consumers, as well as fact sheets on legal issues and quality scoring in ACOs. The Federal Trade Commission and Department of Justice issued a joint policy statement on antitrust issues related to ACOs. On May 20, 2011, CMS issued a request for applications for the Pioneer ACO Program, which is targeted at organizations that can demonstrate the improvements in quality and cost-savings of a mature ACO.

There you go Professor, four government agencies just to begin the process of creating another bureaucratic process, not to mention the proposed rules issued by HHS generated a great deal of negative comment from various sources because they are cumbersome and complex.  “Less bureaucratic than private insurance,” … only from the conscious of a liberal.

The individual mandate struck down…again. Being happy about that has consequences

15 Aug

There is joy in some quarters, consternation is others. Another court has said that the individual mandate under the Affordable Care Act is unconstitutional. I am not an attorney and certainly not an expert on the Constitution, but this seems like a stretch to me. There are many mandates we all live under every day of our lives. However, whatever your point of view on this matter, what should we do as an alternative?

Keep in mind I am being quite selfish here and you should be as well. The people who choose not to carry health insurance cost you money, lots of money. They cost you in terms of paying for uncompensated care and because the better risks, those individuals with no or very low health care expenses, are not paying premiums and therefore your premiums are higher than they otherwise would be.

If you believe people have a right to not buy something they believe they don’t need, consider that health insurance is not like buying any other product or service. If you choose not to buy homeowners insurance and your house burns down, that’s your tough luck, you get to appear crying on the evening news. If you don’t buy health insurance and your child becomes very ill, you also get to cry, but in this case your child will receive health care and somebody else will pay for it. We have not reached the point where we leave people lying in the street to die. This is really about paying ones (dare I say it) “fair share.”

Families with  incomes under about $80,000 will be subsidized when purchasing health insurance through the new exchanges coming in 2014, but that does not make insurance affordable, it will still be expensive and that may cause many people to decide it is better to simply pay the penalty and forego insurance, but they are still not giving up health care when it is needed.

Americans who oppose all or portions of Obamacare – that includes me – better have a viable alternative and that means you cannot ignore the fact that many people will act in their own best interest at the expense of others.  The primary problem with health care is the cost, when we lose site of that we get it wrong.

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