Friday, October 13, 2017

Premiums in Obamacare Exchanges Now Up 10% to 20% More After Administration Ends Unlawful Insurance Bailouts/Subsidies

PPACA creates two different primary mechanisms to redistribute taxpayer dollars to insurers and enrollees to reduce the cost of insurance for Exchange enrollees.  As Josh Blackman describes over at Cato:
[W]hile the ACA funds the subsidies under Section 1401 with a permanent appropriation, to date, Congress has not provided an annual appropriation for the cost-sharing subsidies under Section 1402. Once again, where Congress would not act, President Obama did so unilaterally. The executive branch pretended that the ACA had actually funded Section 1402 all along, and it paid billions of dollars to insurers. Once again, Mr. Trump is exactly right that this is a “BAILOUT.” And, once again, the payments are a violation of the separation of powers. 
Last year, a federal court ruled that Congress did not “squeeze the elephant of Section 1402 reimbursements into the mousehole of Section 1401.” Mr. Obama’s policy “violates the Constitution,” the court concluded. “Congress is the only source for such an appropriation, and no public money can be spent without one.” 
This case, brought by the House of Representatives, now hovers in a state of limbo. The Trump Justice Department has not yet signaled whether it would continue the appeal begun by its predecessor. If the government is serious about repudiating pen-and-phone governance, it should announce that the payments are illegal and drop the appeal. This decision will no doubt trigger litigation by ACA supporters, but the far more obvious choice rests with the elected branch.
Yesterday, President Trump announced that he was stopping those cost-sharing subsidy payments.  This hastens the demise of the ACA Exchanges by further elevating premiums for those enrollees selecting Silver plans in the Exchanges by 10% to 20% more  (above and beyond the 12% to 60% premium increases already slated) in 2018.

In California, for example, Exchange plans were to increase by 12.5% in 2018, without these additional payments to reduce the cost of Silver plans (the most common Exchange plan, where about 60% of enrollees end up) will go up 25% instead.

In Idaho, Silver plans were to increase by 20%.  This change will elevate those plans now by 40%.

Other states are much worse off.  Georgia, with rates that are 57% higher than last year, tops the list.  While many of Florida's premiums will be 45% higher in 2018.  And these increases are before yesterday's announcement that the cost-sharing subsidies will be eliminated meaning Florida and George enrollees can safely tack another 10% to 20% onto the cost of their Silver Plans in 2018.

This impacts families making between 135% (or 100% in states that didn't expand Medicaid) and 250% of the federal poverty level (FPL) as only those families making 250% or less of FPL were eligible for these subsidies.  Some estimates peg that as high as half or more all Exchange enrollees even though this only impacts Silver Plans. Only Silver Plans qualify for these extra cost sharing reduction subsidies under Section 1402.

This means that in the Exchanges, families of four making approximately $33,000 to $61,000 and couples making $22,000 to $40,000 will be impacted negatively.

Constitutionalists and fiscal hawks will undoubtedly applaud this decision as it eliminates one more form of redistribution under the ACA while adhering back to the separation of powers and ending an unlawful, unilateral, executive action made by the last administration.

However, proponents of the ACA and popular media have and will pan the move as being cold-hearted, mean-spirited and outside of the intent of PPACA by increasing the costs to the very Americans who can afford it least: those at the lower end of the pay scale; but just outside of the reach of Medicaid eligibility.

This is the equivalent of tossing one more grenade into the already beleaguered foxhole of Obamacare.  To the extent that this hastens real, practical, meaningful reforms to our health insurance markets, it will ultimately lead to insurance premium relief.  But doing this days before open enrollment and knowing it will likely mean that about $2 million fewer people will be able to afford healthcare is going to make this a public relations and political nightmare if our politicians can't come together to start to put real fixes in place in the next few months.

I was on the Armstrong and Getty Radio Program this morning discussing this topic. 


For more on that comment by Senator Ted Cruz regarding the doubling of insurer profit under Obamacare, see, "Insurers' Profits Have Nearly Doubled Since Obama Was Elected."

Tuesday, October 3, 2017

Administration and Congressional Leadership Release Tax Reform Plan

On Sept. 27, 2017, the Trump administration—in conjunction with Congressional leadership—released a tax reform plan designed to make significant changes to the federal tax code. This plan is intended to serve as a template for the Congressional tax writing committees that will develop tax reform legislation.
This tax reform plan was collectively developed by the Trump administration, the U.S. House of Representatives Committee on Ways and Means, and the U.S. Senate Committee on Finance. It includes only broad policy directives, with the expectation that Congress will provide more detail when drafting its tax reform legislation.
The tax reform plan would make significant changes for businesses and employees. For example, the tax plan would:
  • Create a new lower tax rate structure for small businesses—The plan would limit the maximum tax rate for small and family-owned businesses conducted as sole proprietorships, partnerships and S corporations to 25% from 40%. It also directs committees to adopt measures to prevent the recharacterization of personal income into business income to prevent wealthy individuals from avoiding the top personal tax rate.
  • Lower the corporate tax rate—The plan would reduce the corporate tax rate from 35% to 20%, and would eliminate the corporate Alternative Minimum Tax (AMT), in an effort to make American corporations more competitive globally.
  • Allow “expensing” of capital investments—The plan would allow businesses to immediately write off (or “expense”) the cost of new investments for at least five years.
  • Repeal or restrict many existing business deductions and credits—Because the plan would substantially reduce the tax rate for all businesses, it would eliminate the existing domestic production (Section 199) deduction, and would repeal or restrict numerous other special exclusions and deductions. However, the plan explicitly preserves business credits related to research and development and low-income housing.  
The elimination of certain deductions — in favor of doubling the standard deduction (below) — could eventually cause taxes for many people to increase.  "By 2027, taxes would rise for roughly one-quarter of taxpayers, including nearly 30 percent of those with incomes between about $50,000 and $150,000 and 60 percent of those making between about $150,000 and $300,000," said a Tax Policy Center report.
  • End “offshoring” incentives—The plan would end the incentive to offshore jobs and keep foreign profits overseas by exempting them when they are repatriated to the United States. It would impose a one-time, low tax rate on wealth that has already accumulated overseas so there is no tax incentive to keep the money offshore.
  • Repealing the estate or death tax.
  • Simplifying the individual tax rate structure to 12, 25, and 35%.  
  • The other main tax cut in the plan is a doubling of the standard deduction, which would not do much for growth but would simplify the system.  
The tax reform plan provides broad flexibility to Congressional tax writing committees in implementing these changes, as well as establishing additional reforms, when drafting their legislation. As a result, it is unclear whether these reforms will be included in any future tax reform bill.

Two Republican Senators have already expressed negative sentiment over the proposal.  Senator Rand Paul of Kentucky became the second Republican senator to publicly express doubts about the plan. Sen. Bob Corker of Tennessee said Sunday that if it looked like the plan was "adding one penny to the deficit, I am not going to be for it."
We will continue to monitor the tax reform process for any future updates.

Monday, October 2, 2017

Compliance Update: Newly Adopted Wage Equity Laws

  • New York and Delaware amended current laws making salary history inquiries an unlawful discriminatory practice.  
  • Oregon, Delaware, Massachusetts and San Francisco adopt new wage equity laws.
  • A number of other states and major cities are considering similar laws.
Effective Dates
  • October 1, 2017 - New York City and Oregon
  • December 1, 2017 - Delaware
  • July 1, 2018 - Massachusetts and San Francisco
  • January 1, 2019 - Oregon (protected classes)


In an effort to close the wage gap that exists between male and female employees, a number of states and major cities have recently adopted wage equity and salary history laws. According to the Bureau of Labor Statistics, in 2016, the average female employee earned 80 cents for every dollar a man received during the same period. Statistics suggest the gap may be even greater for ethnic or racial minority employees.

When applicable, employers must comply with their state and local laws in addition to the Federal Equal Pay Act. When both federal and local laws differ, the law that provides the greater protection or benefit to the employee applies.

Employer Action Steps

  • Eliminate prohibited salary history inquiries.
  • Update job applications and other employment forms to comply with pay equity laws.
  • Train recruiters and hiring managers regarding applicable pay equity laws.

State Laws
New York City

Effective date:
Oct. 1, 2017
An amendment to the New York City Human Rights Law prohibits employers from inquiring into a candidate’s salary history as an unlawful discriminatory practice.
Covered Employers: New York City employers and employment agencies with four or more employees. Individuals employed by a parent, spouse or child, and individuals engaged in domestic service are not considered employees under this amendment.
Covered Individuals: Candidates and new hires during the hiring process, except internal transfers or promotions, when public employees’ salaries are determined by collective bargaining or when disclosure of salary history is mandated by law.
Requirements: A covered employer is prohibited from inquiring about or relying on a candidate’s salary history when determining a salary offer.
Effective dates: Salary inquiries Oct. 1, 2017
Protected classes and posting requirements    Jan. 1, 2019
In addition to prohibiting salary history inquiries, the Oregon Equal Pay Act of 2017 extends pay equity protections to nine additional protected classes.
Covered Employers: All Oregon employers.
Covered Individuals: All Oregon job applicants.
Requirements: Effective Oct. 1, 2017, employers are prohibited from inquiring about an applicant’s salary history. Effective Jan. 1, 2019, employees who perform comparable work cannot be paid different pay rates based on race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability or age.

Effective date:
Dec. 1, 2017
An amendment to Title 19 of the Delaware Code prohibits employers from asking a candidate’s compensation history during the interview process.
Covered Employers: All Delaware employers and hiring agencies.
Covered Individuals: All Delaware job candidates.
Requirements: Employers are prohibited from making inquiries concerning a candidate’s compensation history, using that history to screen candidates or requiring that prior compensation satisfy minimum or maximum criteria.

Effective date:
July 1, 2018
The Pay Equity Act addresses equal pay for comparable work, allowable variations in wages, pay secrecy policies and using salary history in the hiring process.
Covered Employers: All Massachusetts employers.
Covered Individuals: All Massachusetts employees and candidates.
Requirements: Employers are prohibited from inquiring about or relying on a candidate’s salary history during the hiring process.
San Francisco

Effective date:
July 1, 2018
The Parity in Pay Ordinance prohibits employers from making inquiries concerning a job applicant’s salary history.
Covered Employers: San Francisco employers, those contracting with the city and their agents.
Covered Individuals: All job applicants, including temporary or seasonal workers.
Requirements: Employers are prohibited from asking an applicant’s salary history. Salary history may not be considered in the hiring process or when determining a salary offer. Employers are prohibited from disclosing a current or former employee’s salary history without prior authorization, unless the information is publicly available.

Applicable Federal Laws

In addition to the state and local laws mentioned above, employers should be aware of the following federal laws that regulate employment discrimination and other aspects of the hiring and employment processes.
Equal Pay Act
The Equal Pay Act (EPA) requires that men and women receive equal pay for equal work.
Covered Employers and Employees: Virtually all employers and employees.
Requirements: Employers are required to pay equal pay for equal work, regardless of gender. Men and woman in substantially equal jobs, those requiring equal skill, effort, and responsibility and performed under similar conditions at the same workplace, must be paid equally.
Title VII, the Age Discrimination in Employment Act (ADEA) and the Americans with Disabilities Act (ADA) prohibit compensation discrimination based on race, color, religion, sex, national origin, age or disability. There is no requirement that the jobs be substantially equal.
Covered Employers and Employees: Title VII and ADA, all employers with 15 or more employees. ADEA, all employers with 20 or more employees.
Executive Order 11246
Executive Order 11246 prohibits discrimination in employment decisions based on race, color, religion, sex, sexual orientation, gender identity or national origin.
Covered Employers and Employees: Federal contractors and federally assisted construction contractors and subcontractors, who do over $10,000 in government business in one year.

This Compliance Bulletin is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.  Published with permission for use by clients of BB&T of California. 
© 2017 Zywave, Inc. All rights reserved. 

Wednesday, September 13, 2017

Wellness Plans Face Significant New Scrutiny from the Department of Labor

 From EBN:
Employers who sponsor a wellness plan and service providers that offer wellness plans to their customers should be aware of recent enforcement activity by the U.S. Department of Labor, as well as a recent court ruling regarding Equal Employment Opportunity Commission regulations applicable to wellness plans. 
The DOL recently brought suit for various violations under the Employment Retirement Income Security Act of 1974, as amended against Macy’s Inc., along with the third-party administrators of the retailer’s health plan. 
The suit alleges that the Macy’s wellness plan does not meet the applicable wellness plan non-discrimination requirements because the plan failed to provide a reasonable alternative standard for participants to avoid the tobacco surcharge levied by the wellness plan. It also alleges the plan continued to charge participants a tobacco surcharge even when they participated in the tobacco cessation program offered under the plan. 
The non-discrimination rules under the Health Insurance Portability and Accountability Act, as amended by the Affordable Care Act, require participatory wellness programs to offer a reasonable alternative standard to participants who cannot meet the initial standard. 
According to the complaint, the Macy’s plan did not offer an alternative to the tobacco cessation program for those individuals for whom it was unreasonably difficult to complete the offered tobacco cessation program due to a medical condition, or for whom it was medically inadvisable to attempt to achieve the standards of the tobacco cessation program. 
In addition, the complaint alleges that the plan continued to charge the tobacco surcharge to participants who entered a tobacco cessation program. The only way for a participant to avoid the surcharge was to remain tobacco free for six consecutive months during the plan year. 
The DOL claims that amounts collected by the plan in the form of tobacco surcharges were used by Macy’s to pay claims and administrative expenses associated with its self-insured medical plan. 
The complaint asserts that these actions resulted in Macy’s violating several of ERISA’s fiduciary and prohibited transaction requirements, including failing to act solely in the interest of the participants and beneficiaries of the medical plan and for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of plan administration, and engaging in transactions that constituted a direct or indirect transfer to, or use by or for the benefit of a party in interest, of plan assets. 
The DOL also alleged HIPAA non-discrimination violations in Macy’s requiring participants to pay a premium or contribution that was greater than the premium or contribution for a similarly situated participant enrolled in the medical plan on the basis of a health status-related factor. 
The suit also alleges that Macy’s and the third-party administrators of its health plan breached their fiduciary duties under ERISA based on changes made to the plan’s methodology for calculating reimbursement of out-of-network claims. 
In the complaint’s prayer for relief, the DOL requests that Macy’s be ordered to reimburse all participants who paid a tobacco surcharge during the time period at issue, with interest, and be enjoined from collecting any tobacco surcharge until it revises its wellness plan to comply with the nondiscrimination requirements for wellness plans, including the requirement to offer a reasonable alternative standard. 
In addition, the DOL requests that Macy’s be required to disgorge all unjust enrichment or profits received as a result of the alleged fiduciary breaches it committed or for which it is liable.

More employers are requiring same-sex couples to marry to receive health benefits

From Wolters Kluwer: 
Employers are increasingly requiring same-sex couples to legally marry to receive health care benefits, data from the International Foundation of Employee Benefit Plans reveals. The trend follows the June 2015 Supreme Court ruling that legalized same-sex marriage. 
Immediately after the 2015 Supreme Court ruling that legalized same-sex marriage, three in ten employers reported they were likely to discontinue providing benefits to same-sex domestic partners. 
Findings were drawn from Employee Benefits Survey: 2016 Results, Domestic Partner Benefits After the Supreme Court Decision: 2015 Survey Results and Employee Benefits for Same-Sex Couples: The DOMA Decision One Year Later. 
Larger organizations are the most likely to be maintaining same-sex domestic partner benefits. Three in four organizations (77 percent) with 10,000 or more employees continue to offer domestic partner benefits. 
In 2014, one year before the ruling, employers reported that:
  • 51 percent provided benefits to same-sex partners in a civil unions
  • 59 percent provided benefits to same-sex domestic partners
  • 79 percent provided benefits to same-sex spouses.
In 2016, one year after the ruling, the number of employers offering health care benefits to unmarried same-sex couples has dropped. Employers report that:
  • 31 percent are providing benefits to same-sex partners in civil unions (down 20 percent from 2014)
  • 48 percent are providing benefits to same-sex domestic partners (down 11 percent from 2014).

AT&T Health Plan Must Cover Girl’s Horse-Based Therapy

From Bloomberg BNA
An AT&T Inc. health plan must pay for an employee’s daughter’s mental health treatment at a residential center that combines psychotherapy with riding horses ( Lynn R. v. ValueOptions , 2017 BL 293893, D. Utah, No. 2:15-cv-00362-RJS-PMW, 8/22/17 ). 
The health plan was wrong to deny more than $117,000 in medical claims for treatment the girl received at Utah-based Equine Journeys, a federal judge ruled Aug. 22. The plan said it denied coverage because the facility wasn’t nationally accredited, but the judge rejected this rationale. “Nowhere does the Plan state a provider must be nationally accredited for the treatment to be medically necessary,” the judge said.

Draft Forms and Instructions For 2017 ACA Reporting Released

The Internal Revenue Service (IRS) recently released the draft instructions for  2017 Forms 1094-C and 1095-C used by applicable large employers (ALEs) to report under Internal Revenue Code (Code) Sections 6055 and 6056. The newly released instructions  incorporate  minor changes that were reflected in the 2017 draft forms, released on July 27, 2017.   
2017 forms are due to employees/covered individuals by Jan. 31, 2018, and must be filed with the IRS by Feb. 28, 2018 (or April 2, 2018, if filing electronically since March 31 is a Saturday). As a reminder, it appears ALEs will not have the extension to file they had for their 2016 forms.
Draft instructions provide employers with a few clarifications, including the following:
  • Transition Relief: Certain limited transition relief was available to ALEs for 2015 & 2016. Since no transition relief is available in calendar year 2017,  any reference to that relief has been removed.  Both boxes "B" and "C" on line 22  of form 1094 C are now labeled "Reserved". These boxes will never apply in 2017 as the transition relief for boxes "B" and "C"are no longer applicable. The second change is column (e) in Part III of the Form 1094-C is also labeled "Reserved". Column (e) in Part III of the Form 1094-C was tied to box "C".
  • Plan Start Month: Optional again in 2017 on form 1095C, Part II.
  • Penalty Information: The penalty remains at $260 per violation, but maximum was indexed to an annual maximum of $3,218,500 (up from a maximum of $3,193,000, for 2016).
  • Formatting Returns: Clarifies formatting must be in landscape.
  • Line 15: The instructions  added  for Forms 1095-C filed with incorrect dollar amounts on line 15, Employee Required Contribution, may fall under a safe harbor for certain de minimis errors. The safe harbor generally applies if no single amount in error differs from the correct amount by more than $100. ( see page 6)
  • Line 16: A note has been added in the instructions for Code 2 series " There is no specific code to enter on line 16 to indicate that a full-time employee offered coverage either did not enroll in the coverage or waived the coverage."   This question has been raised often and  employers can either enter appropriate affordability codes of 2F,2H or2G or leave blank to indicate unaffordable.
  • IRS HotlineInformation on an IRS website and IRS hotline phone number  (1-800-919-0452)  have been added to the recipient form back page instructions
For a more detailed discussion of both the finalized forms and their accompanying instructions, please see our legislative alert below.

Federal Court Strikes Down 2016 Overtime Rule

  • A federal court struck down the 2016 overtime rule that was supposed take effect on Dec. 1, 2016.
  • The salary level limit for EAP employees remains at $455 per week or $23,660 per year.
  • The salary level limit for HCEs remains at $100,000 per year.
Important Dates:
  • November 22, 2016 - A federal judge issued a preliminary injunction blocking enforcement of the overtime rule.
  • August 31, 2017 - The final rule was struck down.

On Aug. 31, 2017, a federal judge in Texas struck down the Department of Labor’s (DOL) 2016 overtime rule, stating that the DOL had exceeded its authority by issuing a new salary level requirement for white collar exempt employees. 

The DOL is unlikely to appeal this court decision because the ruling does not put into question the DOL’s general authority to set any type of salary limit. 

However, the DOL has also signaled its intention to propose a new overtime rule. The DOL has published a request for information (RFI) to invite the public to comment on the issues the DOL should consider before proposing a new overtime rule. 

Action Steps 
Employers are not required to comply with the 2016 overtime final rule. This ruling ensures that the rule will not take effect. Employers should monitor developments on a new overtime rule proposal. 

DOL Rule on White Collar Exemptions 
The Fair Labor Standards Act (FLSA) establishes minimum wage and overtime pay protections for many workers in the United States. However, the FLSA exempts certain workers, such as white collar employees, from these protections. The white collar exemptions apply to certain executive, administrative, professional, outside sales, computer and highly compensated employees. 

To qualify for the executive, administrative or professional (EAP) exemption, an employee must meet a salary basis test, a salary level test and a duties test. The DOL’s 2016 overtime rule would have increased the required salary level from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). Highly compensated employees (HCEs) must also satisfy the salary basis and duties tests to be considered exempt, but a different salary level applies to them. The DOL rule would have increased the required salary level for highly compensated employees from $100,000 per year to $134,004 per year

Challenges to the 2016 Overtime Rule
In September 2016, a coalition of 21 states and a number of business groups filed two separate lawsuits challenging the new rule. These two lawsuits were combined in October. On Nov. 16, 2016, the court held a hearing on whether to grant an emergency injunction blocking the implementation of the rule. The judge presiding over the case issued his written ruling granting the injunction on Nov. 22, 2016.

On Aug. 31, 2017, the same federal court struck down the 2016 overtime rule stating that the DOL exceeded its authority when imposing the $913 per week ($47,476 per year) and $134,004 per year salary level limits.

The Future of FLSA Overtime Regulations
On July 26, 2017, the DOL published an RFI regarding the overtime exemptions for executive, administrative, professional, outside sales and computer employees. The purpose of the RFI is to gather information from the public before formulating a proposal to amend the FLSA or its regulations.

The RFI does not place any responsibilities on employers. However, any individual or organization interested in responding to the RFI must submit their comments to the DOL by Sept. 25, 2017. The DOL is encouraging individuals and organizations to submit their comments electronically, using the instructions in the Federal eRulemaking Portal.

When submitting a comment, employers should remember that, once submitted, comments are considered public records and will be published without editing. This includes any personal information provided.

Monday, August 14, 2017

Yes, You Must Add Employee Benefit Opt-Out Payments Into Total Compensation for Overtime Calcs

If you are an employer within the jurisdiction of the Ninth Circuit Court of Appeals and offer cash payments to employees who opt out of group health coverage (“opt-out payments”), what you don’t know about the court’s 2016 opinion in Flores v. City of San Gabriel may hurt you.0 
Specifically, the Ninth Circuit court held that opt-out payments had to be included in the regular rate of pay used to calculate overtime payments under the federal Fair Labor Standards Act (FLSA). In May 2017 the U.S. Supreme Court declined to review the opinion, making it controlling law within the Ninth Circuit, and hence in the states of Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington. 
The Flores case arose when a group of active and former police officers in the City of San Gabriel sought overtime compensation based on opt-out payments they received between 2009 and 2012 under a flexible benefits plan maintained by the City. The plan required eligible employees to purchase dental and vision benefits with pre-tax dollars; they could also use the plan to purchase group health insurance. Employees could elect to forgo medical benefits upon proof of alternative coverage; in exchange they received the unused portion of their benefits allotment as a cash payment added to their regular paycheck. The opt-out payments were not insubstantial, ranging from $12,441 annually in 2009 to $15,659.40 in 2012. The City’s total expenditure on opt-out payments exceeded $1.1 million dollars in 2009 and averaged about 45% of total contributions to the flexible benefits plan over the three years at issue. ...
Full column.

COBRA and Severance Agreements – Think Twice Before Wading Into This Mess

From Hill, Chesson & Woody:
Employers sometimes allow former employees to remain on their health insurance plan for some period of time after termination of employment at no cost or reduced cost to the terminated employee. While this may seem like a generous offer to include in a severance agreement, there can be unintended consequences for both the employer and the former employee if not handled correctly. Questions often arise regarding the interaction of severance agreements and health benefits. 
3 tips for employers contributing to or continuing a terminated employee’s health insurance:
  1. Educate the terminating employee about their coverage options. Make sure that the individual understands that if they accept your offer of COBRA coverage, they may not be able to purchase individual coverage through the Marketplace until the next Marketplace annual enrollment. Individuals who lose job-based coverage generally have 60 days to purchase coverage through the Marketplace. If they stay on COBRA beyond the Special Enrollment Period, they could lose that option. Maintaining COBRA coverage (at a higher cost than Marketplace coverage) until other employer-sponsored coverage becomes available or the next Marketplace annual enrollment could be the individual’s only option for avoiding a gap in coverage and tax penalties. 
  2. Offer the terminating employee COBRA. If the individual is left enrolled as an active employee, fully-insured employers may risk violating the medical plan eligibility requirements in their insurance contract. Similarly, self-funded employers may violate the coverage provisions of their stop-loss agreement. Consequently, failure to offer COBRA can expose an employer to significant financial liability for claims not paid by an insurance carrier or stop-loss insurer. Also, it ensures that coverage obtained through a new employer will pay primary to COBRA coverage. If you want to pay all or a portion of the individual’s coverage, work with legal counsel to draft a severance agreement that includes an employer contribution to offset the cost of COBRA coverage.
  3. Pay the COBRA premium directly. If the severance agreement includes an employer contribution toward the cost of COBRA coverage, minimize tax consequences by paying the COBRA premium directly to the plan instead of reimbursing the former employee. COBRA premium payments are not treated as taxable wages if made by the employer directly, or if the employer requires verification of or retains control over the purchase of COBRA coverage (such as requiring substantiation of the month’s premium payment prior to providing reimbursement). If you offer a terminated employee cash to purchase their own individual health insurance as part of a severance agreement, use caution. Although this might seem to provide the terminated employee with greater flexibility to choose the type of health insurance coverage that best fits their needs, it may result in the creation of a new ERISA group health plan and additional excise tax liability, among other compliance obligations. ...
Full story

What Changing Medical Carriers Does to Your Short-term Utilization

From the National Institute for Health Care Management:
  • Visits to new primary care physicians (PCPs) increased significantly for patients changing insurers relative to patients staying with the same insurer.
  • For patients initially covered by Medicaid, the monthly rate of visits to new PCPs increased by an average of more than 200 percent after changing insurers, and their rate of visits to new specialists rose by almost 50 percent.
  • For patients initially covered by private insurance, changing carriers was associated with a nearly 50 percent increase in new PCP visits while visits to new specialists fell slightly. The overall decline in new specialist visits was caused by lower use among patients who faced higher deductibles after changing plans.
  • These average utilization changes reflected larger changes in use shortly after the insurance switch that diminished over the subsequent year.
  • The rate of ED visits increased significantly for Medicaid patients in the month of their insurance transition, relative to levels seen in the four to twelve months before the transition, but quickly returned to baseline levels.

Friday, August 4, 2017

Another ACA Lie - Preventative Care Actually Does Not Save Money

...the commonly held, but mostly false, belief that more preventive care will reduce overall health care costs.
As counterintuitive as it seems, preventive measures generally increase rather than decrease costs. This in no way suggests that we shouldn’t pursue preventive measures. It simply means that we shouldn’t spend time dreaming up ways to spend the savings that will result. 
How can reality stray so far from what seems to be obvious logic? Let’s illustrate the conundrum by way of a thought experiment — the hypothetical costs involved in a hypothetical Disease X: 
COMMON SENSE: Suppose one out of 10,000 people will contract a potentially fatal Disease X, which — if not caught early — costs $100,000 to treat. Catching the illness early requires a $5 test, and the early treatment costs $20,000. So, if we test and treat the one sick patient, we enjoy $100,000 minus $5 minus $20,000 (equals) $79,995 in savings. So, common sense might suggest that prevention saves money. 
WIDESPREAD TESTING: But the first problem is that we don’t know in advance who needs an early screening. So, practically speaking, we have to conduct widespread testing. Testing all 10,000 people means $50,000 in tests to find the one unfortunate who has Disease X. Now, early detection saves $100,000, but we spend $50,000 for tests and $20,000 for treating the one sick person. Net savings are now $30,000, rather than $79,995. Still, some savings are better than none. 
FALSE POSITIVES: But, wait — as the TV ad says — there’s more. The test isn’t perfect and incorrectly flags two healthy people as having Disease X. We treat them, too, at a cost of $40,000, but there are no gross savings from those treatments, since neither would ever have become ill with Disease X. Now, we save $100,000 by detecting the one case early on. But we spend $50,000 in tests and $60,000 in early treatments. On net, our prevention program now amounts to a $10,000 loss — rather than savings. 
IATROGENESIS: Here things get worse. One of the two false-positive patients suffers adverse consequences from the early treatment. (The technical term is “iatrogenesis.”) We spend $30,000 to reverse the damage caused by the original treatment, which we omniscient readers know was unnecessary in the first place. The prevention program now cuts out $100,000 in costs by averting one case of Disease X, but requires us to spend $50,000 for tests, $60,000 for treatments, and $30,000 for undoing the side effects of one patient’s Disease X treatment. The net loss is now $40,000. 
We can add yet another complication. Preventive care often has the effect of extending life. While that is admirable and desirable, a longer life often means surviving long enough to contract even more expensive maladies (think of cancer or Alzheimer’s) that would never have occurred over a shorter lifespan. 
And so it goes with most preventive care. Again, that doesn’t mean we shouldn’t engage in preventive care. It only means we ought to expect our collective health care expenditures to rise, not drop, as we increase our preventive efforts. ...
This is not a new concept.  We've known it for years - but hey - that never stops politicians from repeating a good talking point, right?  See also:


Tuesday, August 1, 2017

Covered California Plans to Increase 12.5% to 25% in 2018

Covered California on Tuesday announced that health insurance rates on the state’s health insurance exchange created under the Affordable Care Act will increase by an average rate of 12.5 percent for 2018 plans. 
Peter Lee, CEO of the exchange, said the increase normally would have been just under 10 percent, but for a 2.8 percent tax on health insurers that resumes next year. 
But a bigger threat — the possibility that the Trump administration kills certain Obamacare subsidies — would increase rates by another 12.4 percent, he said, though Covered California has a work-around plan to avoid that scenario. ...  
Anthem Blue Cross of California will leave markets that comprise about half of its enrollment — except for Santa Clara County, the Central Valley and certain Northern California counties. 
That means 153,00 of those enrolled in Anthem plans through the exchange today will need to select a new plan for 2018. ... 
Anyone who earns between 139 percent and 250 percent of the poverty threshold — between $34,200 and $61,500 for a family of four — [has also been] eligible for additional reductions, which lower out-of-pocket costs such as co-pays and deductibles.
About 7 million Americans, including roughly 650,000 Californians, receive those extra subsidies. And the federal government reimburses insurers on the exchanges about $7 billion to reduce the cost of the co-pays and deductibles for those low-income people.
[The end of those] subsidies would send many premiums soaring because health insurers would have to pick up those costs themselves, and many companies would also likely flee the markets, experts say.
Covered California continues to seek clarification from the Trump administration about its intentions regarding the cost-sharing payments. But Lee said if the exchange doesn’t receive confirmation by the end of the month that the payments will continue, an additional average 12.4 percent surcharge will be attached to plans when enrollment opens Nov. 1.
The above article from the Mercury News did an adequate job in summarizing the rate increases and exit of Anthem, however, it did not explain the illegal cost reduction subsidies that have been forbidden in federal court.  In an attempt to not rock the boat too much (believe it or not), the Trump administration has been continuing these payments but that practice is not likely to continue.  Michael Cannon at the CATO Institute explains:
Another [issue] is the illegal “cost-sharing” subsidies President Obama began issuing – and that President Trump is still issuing – to insurers participating in ObamaCare’s Exchanges. In a case where the House of Representatives challenged the payments, a federal judge ruled that issuing those payments “violates the Constitution” and ordered them to stop, pending appeal. The Obama administration was pursuing an appeal, but the Trump administration has not indicated whether it would continue to appeal that ruling or enforce the judge’s order. Trump must do one or the other.
Two of President Trump’s cabinet picks have practically forced his hand on this issue.
When the federal district-court judge issued her ruling striking down the cost-sharing subsidy payments, Health and Human Services Secretary Tom Price was a Republican member of Congress. He issued a statement endorsing the ruling:
Today, Congressman Tom Price, M.D. issued the following statement after a federal judge ruled in favor of House Republicans’ lawsuit against Obamacare, saying that the Administration does not have the power to spend money on “cost sharing reduction payments” to insurers without an appropriation from Congress: 
“The ruling proves a momentous victory for the rule of law and against the Obama Administration’s overreach of Constitutional authority,” said Congressman Tom Price, M.D. “This historic decision defies the Obama’s Administration’s ask that the courts disregard the letter of the law and reasserts Congress’s power of the purse as defined by our nation’s founders in Article One of the Constitution.” 
“In recent weeks, we’ve seen insurers announce that they will exit the exchange markets in 2017, further deteriorating patients’ access and choice to health care plans that they want. This is yet again proof that Obamacare is on an unsustainable path, and House Republicans must remain committed to repealing and replacing this law. As a member of the Health Care Task Force, I’m honored to be working with my colleagues to advance positive, patient-centered solutions to the challenges in our health care system."
Price has made clear his view that Congress did not appropriate funding for these payments, and that continuing to make them would constitute executive overreach and violate the rule of law. If President Trump chooses to appeal the lower-court ruling, he would put Price in a situation where he would have to help implement a policy that he considers unconstitutional. Price arguably would have to resign.
Yesterday, Trump’s attorney general Jeff Sessions expressed his view that the payments are unconstitutional and that the lawsuit challenging those payments “has validity to it.” If Trump chooses to appeal the lower-court ruling, Sessions would be the guy who carries out that appeal. It would be…awkward for him to defend a policy he believes to be unconstitutional. 

Monday, July 31, 2017

Today in Government Healthcare: Obamacare Price Fixing Scheme Backfires; ER Room Use Not Reduced Under O'Care; Medicare Going Bankrupt & Carriers Run from Exchanges

I spent the morning getting caught on the latest industry news and am left with four telltale stories about the ineptitude of government healthcare:

1. Fewer and fewer insurers are even applying to offer Obamacare Exchange plans each yearIt was down 19% last year and another 38% this year.  Even an 'Obamacare Lawyer' can follow that math.  So, any bets on whether it will be down 57% next year or 76%?

2. The federal government's attempt to fix prices in Obamacare backfired as a University of Chicago study reveals that the Medical Loss Ratio Rules (MLR) have had no impact on premiums at all.  In fact, in some cases things were probably made worse as insurers make more money if they spend more on medical claims. Thus it benefits insurers to spend more on claims and ameliorates their incentive to engage in claim cost control or fraud prevention. Lastly, prior to Obamacare insurers were less afraid to be more aggressive with pricing in some years because they knew if they made a mistake they could raise rates the following year.  Under the new rules they are far more constrained from doing so.

3. According to an independent analysis from the Society of Actuaries, the Medicare trust fund is projected to be depleted by 2029.  The paper goes on to state:
  • Total Medicare spending will continue to grow faster than the economy, increasing the pressure on beneficiary household budgets and the federal budget and threatening the program’s sustainability.
  • Changes are needed to improve Medicare’s long-term solvency and sustainability. The longer corrective measures are delayed, the worse the financial challenges will become and the greater the burden that might be imposed on beneficiaries and taxpayers.
But how many politicians will tell you that?  Don't touch my Medicare!  Good luck with that.

4. No, Obamacare's passage and Medicaid expansion did not reduce emergency room visits - even when specifically studied in a state that expanded Medicaid.  As Politifact concluded, "there’s strong evidence that emergency room usage hasn’t declined much, if at all, since the [ACA] largely took effect in 2013. There’s also evidence that it has increased."

This was not that hard to foresee, by any means.  In true life or death situations people will go to the emergency room.  That dataset will not change much pre or post ACA.  However, for those inconvenient, nagging injuries or illnesses that sit on the borderline, one stays away from the emergency room when they are uninsured and concerned at a massive resulting bill.  However, once that person is shielded from the cost of that decision by Medicaid or an Exchange Plan, the calculus changes.  This phenomenon is only exacerbated by Exchange Plans and Medicaid's notoriously low reimbursement rates reducing the number of doctors willing to see patients.  Eventually (or maybe even as a first option, as the case may be) the ER room becomes the go-to for fast and convenient care.

Second Circuit Lowers Causation Standard for Employees Alleging FMLA Violations

This is from BakerHostetler LLP:
Last week, the Second Circuit joined the Third Circuit in lowering the causation standard in evaluating alleged Family and Medical Leave Act (FMLA) violations against employers. Under a lower “motivating factor” standard established in Cassandra Woods v. START Treatment & Recovery Centers, courts within the Second Circuit must consider whether the exercise of an employee’s rights under the FMLA was one “motivating factor” in the decision to fire the employee. Previously, the Second Circuit had adopted a higher “but for” standard, which considers whether the employer wouldn’t have fired the employee “but for” the employee exercising his/her FMLA rights, which considers whether the employer wouldn’t have fired the employee “but for” the employee exercising his/her FMLA rights. ...
In terms of the causation standard, Woods, and the U.S. Department of Labor (DOL) as amicus, urged the appeals court to give deference to the DOL regulation at 29 C.F.R. § 825.220(c), which states that “employers cannot use the taking of FMLA leave as a negative factor in employment decisions,” which they argued compels a “motivating factor” and not a “but for” causation standard. The appellate court found the DOL’s interpretation to be a reasonable one, vacated the jury verdict and remanded the case back to the lower court so that Woods can get a new trial, at which the jury can weigh the evidence under the lower standard.
Impact of This Decision
As a result of this decision, it is now easier for employees within the Second Circuit (specifically, in New York, Connecticut and Vermont) to prevail on claims alleging FMLA violations by their employers if they can demonstrate that their exercise of their FMLA rights was only one reason why their employers took the adverse employment actions against them. Therefore, employers should consult with experienced counsel prior to taking any adverse employment action against an employee who has exercised his or her FMLA rights, even if other reasons may exist for the adverse employment action.

Friday, July 28, 2017

On Average, Employers Pay 79% of Employee Medical Insurance Cost and 67% of Family Insurance Cost

Sixty-seven percent of private industry workers had access to employer-provided medical care benefits in March 2017. Having access means employers offered the benefit, regardless of whether employees chose to participate. Forty-nine percent of private industry workers participated in an employer-provided medical care plan in March 2017. That results in a take-up rate—the percentage of workers with access to a plan who participate in the plan—of 72 percent. ...

One reason workers may choose not to participate in the medical care benefits available from their employers is cost. On average, private industry employers paid 79 percent of the costs for medical plan premiums for single coverage and 67 percent for family coverage. For workers in management, business, and financial occupations, employers paid 79 percent of the premium costs for single coverage and 70 percent for family coverage. For workers in service occupations, employers paid 77 percent of the premium costs for single coverage and 62 percent for family coverage.

Source: The Bureau of Labor Statistics.

Repeal and Replace Likely Dead - They'll Move to Assess and Amend Now; My Visit with Armstrong & Getty

Obamacare is still in place, but as usual, we'll be following any regulatory, legislative or political changes that impact large employers.
  • July 25: The Senate voted 51-50 on a procedural vote to open up debate on the next steps for  possible ACA repeal and replace measures.  VP Pence provided the tie breaker.  
  • July 26: The Senate voted on the repeal only Obamacare Repeal Reconciliation Act (ORRA), which failed 45-55 with 7 Republicans voting against (Alexander-TN, Capito-WV, Collins-ME, Heller-NV, McCain-AZ, Murkowski-AK, and Portman-OH).
  • July 27 2:00 pm -The Senate voted in the afternoon on a single payer bill which failed 0-57  (see our article below).
  • July 27 6:00 pm - Four Senators, McCain, Graham, Cassidy and Johnson, hold a press conference to request the  Speaker of the House  give assurances that  a passed “skinny bill”  would be allowed to be the vehicle to go to conference for further deliberations. 
  • July 28 1:00 am - With a vote of 49-51, the “skinny bill” fails.  McCain, Murkowski and Collins vote NO. “We can’t make the same mistake we made in 2009,” McCain said.  “We’ve got to have Republicans and Democrats together.” Speaker McConnell expresses his disappointment as efforts to repeal the ACA collapse.
  • July 28 2:25 am – President Trump tweets “3 Republicans and 48 Democrats let the American people down. As I said from the beginning, let Obamacare implode, then deal. Watch!”
I was on Armstrong and Getty this morning discussing last night's vote.

We’ll continue to update you on pertinent developments.  Here is an overview from the media -

5 Ways White House Can Use Its Muscle To Undercut Obamacare
July 28, 2017 - California Healthline
Excerpt: "Obamacare faces a difficult political reality: Its marketplaces require active maintenance and federal support.  The White House can take a number of behind-the-scenes steps to sabotage the exchanges and hasten their undoing. It has been deploying some of those tactics for weeks now — even prompting a review from the Government Accountability Office to see if these actions are legal. Meanwhile, in a statement issued after Friday’s early-morning vote, Health and Human Services Secretary Tom Price reiterated the administration’s commitment to 'provide relief to Americans who are reeling from the status quo.'"
Senate Rejects Slimmed-Down Obamacare Repeal as McCain Votes No
July 27, 2017 – NY Times
Excerpt: “Unlike previous setbacks, Friday morning’s health care defeat had the ring of finality. After the result was announced, the Senate quickly moved on to routine business. Mr. McConnell canceled a session scheduled for Friday and announced that the Senate would take up the nomination of a federal circuit judge on Monday afternoon.”
Senate rejects measure to partly repeal Affordable Care Act, dealing GOP leaders a major setback
July 27, 2017 – Washington Post
Excerpt: “Their latest effort to redraw the ACA failed after Sen. John McCain’s decision to side with two other Republicans against President Trump and GOP leaders. The Arizona Republican, diagnosed with brain cancer last week, returned to Washington on Tuesday and delivered a stirring address calling for a bipartisan approach to overhauling the ACA, while criticizing the process that produced the current legislation.”
Obamacare Repeal Collapses as Senate GOP Blocks Health Bill
July 27, 2017 – Bloomberg
Excerpt: “It wasn’t immediately clear what the next steps would be for the Republicans. The repeal effort had appeared to collapse several times before, only to be revived. And several Republicans pleaded for their colleagues not to give up, even as President Donald Trump blasted the vote.”
GOP single-payer amendment fails in Senate
July 27, 2017 – The Hill
Excerpt: “Senators voted 0-57 on the amendment from GOP Sen. Steve Daines (R-Mont.) to implement a government-funded healthcare system…But the amendment, part of a days-long debate on repealing and replacing ObamaCare, was widely expected to fail, with Democrats accusing GOP senators of putting up a "sham" proposal…The legislation from Daines uses the same language as a Medicare-for-all bill in the House sponsored by Rep. John Conyers Jr. (D-Mich.).”