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Affordable Care Act

A look at the new Dallas Morning News series: Cost of Care

Cost of Care form Dallas Morning News R

In the Dallas Morning News series Cost of Care, Jim Landers explains how the recent decrease in US Healthcare spending may appear to be good news but the slowdown is really a consolation prize.  Compared to developed countries like Germany, people in the US spend as much as 89% more for healthcare.  Costs have been a growing problem for over thirty years.  A Kaiser Family Foundation study shows that from 1999 to 2014, family health insurance premiums have jumped 212%.  The United States is number one when it comes to healthcare spending.  The US is also the second fattest country in the world.  Regretfully employee wages have not kept up with the US appetite for healthcare and fatty foods.  In that same time period wages have only increased by 54%.

Landers concludes that the relative high cost of healthcare has forced people to buy health insurance because very few can pay for catastrophic medical care out of pocket.  Those out of control cost have also prompted both sides of the political isle to try to regulate health insurance to control the cost of healthcare.   Landers points out that the government mandates for everyone to buy health insurance would not be necessary if US healthcare spending was more in line with the rest of the world.  Here is the key to his analysis.  Greed now drives the system.

There are so many people making so much money from healthcare spending that it is now a significant part of US culture.  Healthcare spending represents 17.4% of all US spending.  Attempts to control healthcare cost by changing the culture have met with a lot of resistance.  However both politicians and some healthcare providers realize that the current level of healthcare spending is unsustainable.  Since it is not clear what the problem is, consumers are being forced to guide the healthcare market by spending more of their own money.  The average health insurance deductible has risen to $1,500. Forcing consumers to spend more of their own money does not appear to translate into shopping for the best price.  It makes consumers put off going to the doctor which may cost more in the end.   So who is to blame?  Cost of Care is a yearlong series that may not only help us see the problems with healthcare but realize some solutions.

Landers, Jim. “Cost of Care: The U.S. Health Care System Is Bleeding Green.” The Dallas Morning News 1 Feb. 2015, Metro sec. Print.

http://www.dallasnews.com/news/metro/20150131-cost-of-care-u.s.-health-system-is-bleeding-green.ece

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The Cost of a Heart Attack in Houston!

The Cost of a Heat Attack in Houston (2)

The public’s fixation on the individual mandate detracts from parts of the ACA that are good, yes good.  This is not a Democrat or Republican issue, this is an American issue.   Healthcare is such complicated problem that the breath of the Affordable Care Act will never get through to the average American.  Congress needs to break it down into smaller portions and make a more reasonable plan of implementation.  The ACA is more than the individual mandate.  One of the major problems today is that the average family pays over 20% of their income for health insurance.  At the current inflation rate of healthcare premiums that same family will be paying over 40% of their income for health insurance within 10 years.  That is an unsustainable rate of increase.  The part of the ACA that is good is it is shining the light on parts of the healthcare system that are causing cost to be out of control. Acting on disclosure requirements of the ACA the Centers for Medicare and Medicaid Services released a document called Medicare Provider Charge Data.  This details cost of medical procedures at hospitals from around the United States. Information from this report shows that if you had a heart attack and were treated at Methodist Willowbrook Hospital in Houston it would cost $72,128.  If you were taken 15 miles away to Memorial Hermann Hospital’s Memorial City location in Houston, it would cost you $31,313.  Both are great hospitals.  Why such a big difference?  The answer we have found in similar situations is unreasonable mark-ups and billing practices.  The Constitution allows Congress to pass tax laws to control commerce.  Control the cost of healthcare and you bring down the cost of health insurance.  Lower cost means more people will voluntarily buy health insurance.  When it comes down to feeding your family or buying health insurance, you feed your family.  The President and Congress need to drop the individual mandate and concentrate on fixing the current system not creating a new one.  But until Congress catches on private enterprise has already begun to fix problems like this by creating health insurance pricing models that are based on cost and a reasonable profit.  We’ve been using this model with a great deal of success thereby reducing cost over traditional pricing models by as much as 30%. For more information on fee model pricing vs. mark-up pricing contact me through LinkedIn at http://www.linkedin.com/in/vanrichards/, or visit our website at http://www.abs-insurance.com

Is this Groundhog Day? Attempt #42!

groundhog_day

The Delay of the “Pay or Play Tax” is a gift for large businesses! Here is what you must do now.

Business gift

The mid-summer announcement that the IRS is delaying the mandatory employer and insurer reporting requirement will significantly benefit large employers.  The question now is how many employers will recognize how to take advantage of this delay.  A few months have passed, what have you done?  If your company is a large employer this is what you need to do with your healthcare plan before the end of 2013.

First, don’t be fooled into believing that the Affordable Care Act will not be enacted.  The delay in the pay or play tax is only one aspect of the law.  Here are just a few parts that are moving forward in 2014:

1. Total prohibition of preexisting conditions.

2. The lifting of annual maximum limits

3. Guaranteed issue

4. Guaranteed renewability

5. Implementation of the SHOP Exchange Program

6. Implementation of the Individual Exchange Program

The benefit the delay offers is that there is more time for employers to get prepared for the pay or play tax.  Many large businesses (those with over 50 employees) rely on full time and part time employees.  The Affordable Care Act does define a full time employee as one who works 30 hours a week or more.  Healthcare coverage is only required to be offered to full time employees.

However large employers cannot suddenly decide to shift employees to part time on January 1, 2015.  To take advantage of the part time status of some employees, thus saving on healthcare cost, employers must follow specific administrative and stability period requirements.  Employers must establish, track and document the hours worked for each part time employee.

In their current form, the rules for establishing and tracking the administrative and stability period is complicated. The initial law created a twelve month period that employers had to track part time employee status.  The Treasury Department did offer transitional relief by allowing employers to use a six month period to begin.  Few employers took advantage of this offer to establish a system of reporting and that was one of the factors that lead to the delay of the reporting requirements.  With extra time to prepare for the new requirements, employers should not expect any leniency.    Based on the Treasury Department’s recent comments, they may make a change in these requirements to make it easier for employers to comply.  If new measurement guidelines are established before the end of 2014, this will give employers enough time to set the new measurement period.  This will allow employers to measure and document their part-time and full time employees’ hours worked for an entire year.  Then by end of 2014 they can see who they are expected to offer insurance to for the 2015 year.

Even though they are complicated, there are guidelines in place now.  Employers should review the capability of the reports available in their payroll systems.  Employers who cannot verify part time employee status within these guidelines will be subject to offering healthcare insurance or pay the “play or pay tax.  If new measurement guidelines have not been released by the IRS by the end of the third quarter, employers should be prepared to verify hours worked by employees under the current guidelines and add a document to their corporate minutes to confirm the establishment of administrative and stability period procedures.

October 1st is also a significant deadline for employers.  Every employer, those that do offer healthcare and even those who do not, MUST provide a notice to employees concerning the availability of health insurance exchanges.

For guidance and information on complying with these rules contact us through our website at www.abs-insurance.com or contact me directly through LinkedIn at www.linkedin.com/in/vanrichards/

Political, Pragmatic or Panic: Delay of major healthcare provision creates controversy and opportunity

healthcare

In a July 2,2013 Treasury Department blog post, Assistant Secretary for Tax Policy, Mark J. Mazur stated” The Administration is announcing that it will provide an additional year before the ACA mandatory employer and insurer reporting requirements begin.” In other words the “pay or play” tax has been delayed for one year. Those commenting on sites from the Wall Street Journal to the Washington Post echoed similar sentiments of skepticism about the entire Affordable Care Act. Many people still don’t like the law or don’t think it will work. But there is more to this newest move than the general public can see.

The Austin Statesman brought up an important point, “Democrats are defending 21 Senate seats to the Republicans’ 14, and the GOP had already started to excoriate Senate Democrats who had voted for the health law in 2009.” Couple that with this statement from NBC News, “98 percent of firms with 200 or more employees (already) offered health insurance”. Delaying the “pay or play” tax will appease many business owners. The delay will give politicians up for election the appearance of being empathic to the needs of the public. And the delay will give Health and Human Services, the IRS and the Department of Labor time to focus on implementing the health insurance exchanges. It would be safe to say that this was a pragmatic move on the Administration’s behalf.

But what does this mean for large businesses (those with 50 or more employees). In his blog post, Assistant Treasury Secretary Mazur stated that more details would be coming soon. However he did state that reporting of insurance cost will be strongly encouraged. So employers are still being asked to report the amount of money that is being paid for employees’ health insurance. This will be reported on the employees’ W-2 in box 12.

Ask yourself why in the world the IRS wants to know how much you are paying for health insurance? Here is my opinion. If the IRS knows how much individuals are paying for insurance, that information can be used by the Health and Human Service Department and the IRS to set the “pay or play” tax at a rate that will more strongly encourage employers to offer a level of healthcare that the government sees as necessary. In other words, HHS and the IRS could set the $2,000 annual penalty at a higher rate to more strongly encourage employers to NOT drop healthcare coverage. Some employers see the $2,000 penalty as a cheaper option than paying for healthcare for employees. What if the penalty was $6,000 per employee, would that change the decision of employers to offer healthcare? If the IRS is asking for the cost information now, the government intends on using it for something.

The key opportunity for employers is not to delay decisions for another year. Look for ways to cut and control cost within the limits of the Affordable Care Act now. Use the delay in the “pay or play tax” to your advantage. For more information on cost cutting strategies that work within the limits of the Affordable Care Act now you can contact me through LinkedIn at http://www.linkedin.com/in/vanrichards/

Affordable Care Act Avoidance Strategy that Doesn’t Work

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It was a little surprising this week (6/17/13) to read the insight of the Wall Street Journal’s Affordable Care Act panel of experts.  The WSJ posed this question “We’ve reported that some retailers and restaurant operators are hiring more part-time workers, or limiting part-timers to 29 hours per week, to avoid the insurance mandate.  How prevalent will these sorts of changes be?” None of the three panelist indicated that they understood the actual methodology that the IRS will use to define part-time employees.  The law does define a full time employee as one that averages 30 hours, but there is more to the definition.  David Marini, the managing director of strategic advisory services at ADP stated “there are organizations that are looking to limit the number of hours to below 30”.  Christine Eibner, an economist at RAND Corporation acknowledged “firms do make these types of structural changes to avoid requirements such as mandates”.  Kevin Kuhlman, a manager of legislative affairs at the National Federation of Independent Business said “we hear from members taking steps to reduce employee hours” and his solution was to increase the threshold above 30 hours per week.

Here is the point that they all missed. Part of the avoidance strategy is to avoid having 50 or more employees.  Remember that 50 or more employees is defined as a “large employer” and must comply with the mandate to offer healthcare to employees.   Just limiting employees to 29 hours will not work.  The 30 hour per employee limit is just part of the law.  In order to determine how many full time employees an employer has and what their average annual wages are, all employees are aggregated, full-time, part-time and leased employees, as defined in Code § 414(n).  Seasonal workers who work for the employer for more than 120 days of the year are also included as defined in Code § 45R(d)(5)

The calculation is done at year end but averages monthly.  Here is simplified example of how the calculation will work:

Example:

  • 40 full time employees
  • 50 part time employees working 29 hours a week. (50 x 29 x 4 = 5,800)
  • Total of 5,800 hours for the month/120 (this number is statutorily given)
  • 48.33 equivalent employees + 40 full timers
  • 88 full time equivalent employees for the month (regulations tell us to round down)

There are other strategies to limit an employer’s healthcare expenses that work and limit penalties.  For personalized answers to your company’s healthcare questions you can contact me at www.linkedin.com/in/vanrichards/

Proper timing can keep the “C” Suite out of trouble with new healthcare mandates.

The Buck Stops Here

The sign “The Buck Stops Here” was on President Harry Truman’s desk in the Oval Office.  Truman exemplified the responsibility that is on the shoulders of every corporate executive today. Know what is going on in every department of your company and take responsibility for it.  The Affordable Care Act has increased the responsibility of corporate executives dramatically.  Health Insurance used to be a responsibility delegated down to middle management.  But health insurance is a significant part of an employee’s compensation and workforce compensation represents approximately 43% of the average corporate budget. So selection, implementation, communication and maintenance of employee benefits require proper timing and attention from the highest corporate levels.

Selection

You may be familiar with the new health insurance exchanges.  Currently those exchanges are just for small companies and individuals.  If your company is a large employer (100 or more employees) you may think that the Affordable Care Act does not affect your company very much.  Not true.  All companies must meet many new requirements. The Affordable Care Act requires that employees receive up to fourteen new notices. The first is the new Exchange Notice that employers must distribute to EVERY employee by October 1, 2013.

Healthcare expenditure in the United States represents about 20% of the economy.    With the government trying to control such a large part of the economy, every healthcare plan with every company will be affected.  Savvy executives understand that where there is change, there is opportunity. Private enterprise has developed strategies to compete very well with the new health insurance exchanges and take advantage of the many new regulations that are part of the Affordable Care Act.  Stanford University Professor of Law and Business, Daniel Kessler stated in the June 13, 2013 Wall Street Journal Op-ed “apples-to-apples assessment shows how much higher exchange-plan premiums will be”.  Current trends indicate that the cost of most healthcare plans will go up in price.  Self-insured healthcare plans that allow the employer to share in some of the risk and reward of insuring their group do offer a significant alternative.

Why should you be concerned?

Why should you be concerned about health insurance exchanges if your company is considered a large employer? If you are a large employer and offer a plan that is considered “unaffordable” for your employees AND they apply for insurance through the individual health insurance exchange, your company will pay a $250 per month penalty, per employee accepted to the exchange.  If you consider one of Professor Kessler’s most significant findings you can see one way that private enterprise will compete well with exchanges.  Professor Kessler noted that the first healthcare exchanges to show their plans achieved their lower cost by “designing the plans around much more limited provider networks”.  Self-insured plans allow companies to control the network of providers to better suit their overall employee desires.  Exchanges open on October 1, 2013 and many employees will be looking at how the exchange plans compare to what they have with their employer.  My own families plan is through the Texas Retirement System Active-Care.  This is a plan that covers 477,000 employees and dependents.  Our plan is going up by almost 30% in September!  We’ll be looking at the Federal Exchange.  With such a large expense all options are open for consideration.  If you would like to look at the alternatives available for your large group you can contact me directly through LinkedIn at: www.linkedin.com/in/vanrichards/

The media eye’s new healthcare strategy, and sometimes they miss the point.

http://www.vansblog.net The new healthcare law has left all employers looking for ways to comply. Offering a self-insured plan does offer employers a broader array of solutions. The example given in the May 20, 2013 Wall Street Journal article, Employers Eye Bare-Bones Health Plans Under New Law uses extreme examples of the strategy. But there are some industries that have to take that route to remain profitable. Employers that have low income employees are still doing a service to their employees by offering some sort of plan. Something is better than nothing. But it puts the healthcare system back in the same predicament as they are in now; low income workers go to public hospitals for free care. However, there are two points where the article communicates the wrong conclusion. First if an employee has credible healthcare available from their employer they will not qualify for insurance through the Exchange. If their employer offers coverage, there are only two ways for the employee to qualify for coverage from the Exchange. First, is if premium of the employer’s plan is 9.5% or greater than the employee’s income. The language in the law could be a loophole for the Exchanges if the government chooses to exploit it. The regulation reads as 9.5% of household income. If the government wants to prevent the exchanges from imploding by only covering sick people, they could enforce this language. The other way to be denied Exchange coverage is if the employer’s share of the coverage is greater than 60%. If coverage is less than 60% then the employee would qualify for the Exchange.

The second point that the article does not communicate correctly is in the Kaiser example. It states that the $9 an hour worker would have to pay as much as $90 per month for a midlevel plan. If the employee picked the low level exchange plan, that might meet the affordability requirement. The Affordable Care Act states that the employer can avoid penalties by offering employee only coverage that meets the two criteria, employee only coverage is less than 9.5% of household income and the employers share of the coverage is greater than 60%. If the employee chooses not to take the coverage then the employer does not pay the penalty.

How you explain the Affordable Care Act options to your employees may have a significant effect on your employee retention.

Time is ticking down and the deadline for implementation of the most significant parts of the Affordable Care Act is just around the corner.  Open enrollment begins on October 1, 2013!  This week I’ll discuss the impact of the “pay or play” tax for employers.  Please remember that this is just the highlights.

On May 8, 2013  the Department of Labor issued temporary guidance and forms that every employer must complete for all employees.  At the end of the blog is the link to the sample notices published by the Department of Labor.

There is no doubt that how the tax and the tax credit work is complicated. Rather than trying to just restate the process that each employee must go through, I have created a flow chart that hopefully will simplify the “play or pay tax” options. (Look at the end of the blog for the chart) If you would like the chart in a printable file, please email and I’ll forward it to you.  Prior to the October 1, 2013 open enrollment, your employees will want or need to know if they qualify for the premium tax credit. If they use a tax software or have an accountant do their taxes that will be figured out for them. If you are wondering how the actual dollars and cents of the premium tax credit works, the Kaiser Family Foundation has a subsidy calculator that can give you a good idea of who may qualify and how much credit they will get. Here is the link to the calculator: Kaiser Family Foundation  Subsidy Calculator

Here is why the health care options you offer to your employees will affect their desire to work for your company or a competitor.  If the plan you choose does not favor your employees, they may get a better tax break by working for an employer that offers a health plan that offers them more premium tax credit.  In the context of this blog it is impossible to cover every circumstance that may affect your employee’s choices and the tax benefits available to them.  The important thing to take away is that the plan you choose to offer will affect more than just your employee’s health.  It may affect your company’s future profitability.

There are several factors to consider.

  • The income of your employees. Are they blue-collar, middle management or highly compensated?
  • What is the normal turnover rate of your employees?
  • What portion of the premium will your company pay?

If you need understanding how the pay or play tax will affect your company, give us a call: 713-320-6124 or drop me an email at van@abs-insurance.com

Here are the links to the new DOL forms previously mentioned:

Notice for employers with a health care plan.  

Notice for an employer not offering a health care plan.

To better profit$,

Van Richards

Pay or play chart

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