Saturday, November 30, 2013

It is November 30 and the Obamacare Federal Website is Still Not Working is still not working and some of its shortcomings are truly picture-perfect illustrations as to why projects like this cannot be managed by bureaucracies.  This is from the Wall Street Journal

[T]echnical problems still affect's ability to verify users' identities and transmit accurate enrollment data to insurers, officials say. The data center that supports the site faces continuing challenges, and tools for processing payments to insurers haven't been built. ...

[P]roblems with the performance of the site's databases, storage and servers and their interaction with each other continue to slow the site or make it unavailable for short periods, according to government officials and contractors working on the project. ...

HHS also didn't initially contract for a backup website or monitoring tools like those used by sophisticated consumer sites, according to people familiar with the matter.

The website still has no separate backup copy, but it did replace the virtual database with dedicated hardware, and bought and installed monitoring software.

Meanwhile, the site has a backlog of users who encountered problems in its first weeks of operation. Some appear to be locked out from the early stages unless they can get their account deleted. Others are stuck at the next big stage, persuading the federal government of their identity and their income so their application for tax credits can be processed.

Guy Dicharry of Los Lunas, N.M., said he had been in limbo at the identity-verification stage since Oct. 5, despite giving the site personal information several times so it can confirm his income. He hasn't heard back about a paper application submitted Nov. 1.

"This has been botched and is not getting fixed. If it's not fixed, I'll be ringing in 2014 as a newly uninsured person. I suspect that is the opposite of what the ACA was supposed to achieve," said Mr. Dicharry, who described himself as a supporter of the Affordable Care Act. ...

Ronald Gallagher of Paradise Valley, Ariz., said he had been helping his daughter shop for coverage. After 16 hours over four days starting Oct. 1, they were told her identity was verified and she could pick a plan. But when they logged in to the website, it said her application was "In Progress." ...

Even when people successfully enroll, insurers say they sometimes get incorrect data. Ms. Bataille, the government spokeswoman, said officials have seen "marked improvements" in the information transmitted to insurers but "we know there are still issues that remain." An HHS official also said that there had been improvements in identity verification, but that the agency knew it wasn't fully fixed.

Mr. Lewis of Maine Community Health Options also worried about a larger volume of applicants, especially since insurers have now been told to find ways to process applications that come in from people as late as Dec. 23 in time for their coverage to begin Jan. 1, rather than a previous Dec. 15 deadline.

If "there's an avalanche on that last date, I don't know if the system will be able to support all that," he said. 

Getting Around PPACA's $2,000 Penalties in 2015 with a 'Skinny Plan'

The Affordable Care Act’s employer mandate may have been delayed by a year, but come 2015, staffing firms will have had to decide whether to offer insurance or pay the penalties. For the moment, at least, there’s a middle-ground option that many staffing firms are considering.
A loophole in the Affordable Care Act allows employers to avoid the heaviest “employer mandate” penalty of $2,000 per all full-time employees per year by offering so-called “skinny plans” -- a group health plan designed to cover only non-catastrophic health exposures like wellness benefits, preventive care and certain routine medical care. Staffing firms planning to offer skinny plans hope the savings from avoiding the “no offer” penalty will outweigh the combined cost of the skinny insurance and penalties generated by employees who reject the skinny insurance and obtain subsidized coverage from state exchanges.
But the plans are not without risk. For example, some employees who accept the employer’s insurance may not fully understand the limited scope of its coverage and believe that it is comprehensive health insurance. 
Before ACA, employers would not have portrayed the benefits of skinny plans as health insurance; they would have called them wellness benefits. Most employees aren’t very knowledgeable about health insurance. Few of them will understand what a skinny plan is or, more important, what it is not....
A catastrophic health expense would be a cruel way for these employees to learn about the limits of their coverage. ...
Sponsors of skinny plans should plan to explain to their employees continually and in plain language that such plans are not the equivalent of traditional health insurance and that they need to consider obtaining comprehensive catastrophic coverage through state exchanges or elsewhere. ... 

Friday, November 29, 2013

Pre-Turkey Day Release Also Confirms Admin. Plan To Exempt Largest Plans (Mostly Unions) From One of Obamacare's Steepest Taxes

The Transitional Reinsurance Tax will cost approximately 2.5% of premium or $63 per covered member for self funded plans and will be collected beginning in about a year.  The Obama Administration has decided to "re-interpret" it's reading of it and exempt the largest plans (mostly unions) from that tax in subsequent years.  

At least those Taft-Hartley plans have something to be thankful for this season!   

This is from Professor Timothy Jost

The Proposed Notice would exempt from reinsurance contributions self-insured, self-administered plans.  Reinsurance contributions are required under the ACA from insurers and from third-party administrators of self-insured plans.  The ACA does not specifically address whether self-administered, self-insured plans are subject to the reinsurance contribution requirement.  Many of these plans are collectively-bargained Taft-Hartley multi-employer plans, which are funded by employer contributions and administered by trusts representing employers and unions.
Unions have argued that the Taft-Hartley plans should not be subject to the reinsurance contribution requirement, which only applies to an insurer or third-party administrator’s “commercial book of business.”  HHS required self-insured, self-administered plans to contribute to the reinsurance pool for 2014, but is reconsidering its initial interpretation of the statute and proposing to exempt them for 2015 and 2016. This has in turn provoked cries of union favoritism from Republican Senators, who have introduced legislation to block this interpretation of the law.  As the contribution amounts for 2014 are significantly larger than those for 2015 and 2016, and HHS does not propose to change the 2014 rule, the Taft-Hartley plans may not view this as a significant victory.
Under the ACA, the reinsurance program must collect $6 billion for 2015 and $4 billion for 2016, plus $2 billion in 2015 and $1 billion in 2016 to reimburse the federal treasury for the early retiree reinsurance program that operated from 2010 to 2013.  HHS proposes to collect an addition $25.4 million in 2015 for administrative expenses, which will be shared with states that elect to operate their own reinsurance programs.  A $44 per enrollee charge will be assessed against insured and self-insured coverage to cover these costs.  HHS will notify contributing entities of their assessed charges for a given year in December of that year.  The entity will have to pay a first installment of the assessed charge in January, 30 days later, to cover the cost of reinsurance and the administrative fee.  The insurer would pay a second installment in the fourth quarter of the year to cover the federal government reimbursement part of the charge.  Thus, for example, for 2014, contributing entities would pay a $52.50 per capita charge in January and a $10.50 charge would be due late in the fourth quarter. ... 

Here is a video of Megyn Kelly discussing the matter:

Thursday, November 28, 2013

Additional Medicare Tax Under ObamaCare

Just in time for Thanksgiving we get the regulations detailing how the new Medicare tax is to be implemented.  Note the marriage penalty built in below.  

Taxable yearPercent
Beginning after December 31, 20120.9

Special rules regarding Additional Medicare Tax. 

(1) General rule. An individual is liable for Additional Medicare Tax to the extent that his or her self-employment income exceeds the following threshold amounts.

Filling statusThreshold
Married individual filing a joint return$250,000
Married individual filing a separate return125,000
Any other case200,000

Note: These threshold amounts are specified under section 1401(b)(2)(A).

(2) Coordination with Federal Insurance Contributions Act. (i) General rule.Under section 1401(b)(2)(B), the applicable threshold specified under section 1401(b)(2)(A) is reduced (but not below zero) by the amount of wages (as defined in section 3121(a)) taken into account in determining Additional Medicare Tax under section 3101(b)(2) with respect to the taxpayer. This rule does not apply to Railroad Retirement Tax Act (RRTA) compensation (as defined in section 3231(e)).

(ii) Examples. The rules provided in paragraph (d)(2)(i) of this section are illustrated by the following examples:

Example 1.

A, a single filer, has $130,000 in self-employment income and $0 in wages. A is not liable to pay Additional Medicare Tax.

Example 2.

B, a single filer, has $220,000 in self-employment income and $0 in wages. B is liable to pay Additional Medicare Tax on $20,000 ($220,000 in self-employment income minus the threshold of $200,000).

Example 3.

C, a single filer, has $145,000 in self-employment income and $130,000 in wages. C's wages are not in excess of $200,000 so C's employer did not withhold Additional Medicare Tax. However, the $130,000 of wages reduces the self-employment income threshold to $70,000 ($200,000 threshold minus the $130,000 of wages). C is liable to pay Additional Medicare Tax on $75,000 of self-employment income ($145,000 in self-employment income minus the reduced threshold of $70,000).

Example 4.

E, who is married and files a joint return, has $140,000 in self-employment income. F, E's spouse, has $130,000 in wages. F's wages are not in excess of $200,000 so F's employer did not withhold Additional Medicare Tax. However, the $130,000 of F's wages reduces E's self-employment income threshold to $120,000 ($250,000 threshold minus the $130,000 of wages). E and F are liable to pay Additional Medicare Tax on $20,000 of E's self-employment income ($140,000 in self-employment income minus the reduced threshold of $120,000).

Example 5.

D, who is married and files married filing separately, has $150,000 in self-employment income and $200,000 in wages. D's wages are not in excess of $200,000 so D's employer did not withhold Additional Medicare Tax. However, the $200,000 of wages reduces the self-employment income threshold to $0 ($125,000 threshold minus the $200,000 of wages). D is liable to pay Additional Medicare Tax on $75,000 of wages ($200,000 in wages minus the $125,000 threshold for a married filing separately return) and on $150,000 of self-employment income ($150,000 in self-employment income minus the reduced threshold of $0).

(e) Effective/applicability date. Paragraphs (b) and (d) of this section apply to quarters beginning on or after November 29, 2013.

Source: Federal Register

How a Behavioral Economist Would Curb Overeating at Thanksgiving

... MIT economist Dan Ariely is a pioneer in the field. His bestselling book "Predictably Irrational" is as good an introduction to the discipline as you'll find. Human beings, he argues, aren't just irrational: They are irrational in predictable ways and in predictable circumstances. That means we can plan for that irrationality beforehand, when we're still feeling rational.

I asked Ariely how he would set up his Thanksgiving feast to limit overeating without having to exercise self-control. His answer was to construct the "architecture" of the meal beforehand. Create conditions that guide people toward good choices, or even use their irrationality to your benefit.

"Move to chopsticks!" he exclaimed, making bites smaller and harder to take. If the chopsticks are a bit extreme, smaller plates and utensils might work the same way. Study after study shows that people eat more when they have more in front of them. It's one of our predictable irrationalities: We judge portions by how much is left rather than how full we feel. Smaller portions lead us to eat less, even if we can refill the plate.

Speaking of which, Ariely suggests placing the food "far away." In this case, serve from the kitchen rather than the table. If people have to get up to add another scoop of mashed potatoes, they're less likely to take their fifth serving than if they simply have to reach in front of them.

"Start with a soup course," he says. That is what economists refer to as a default: Rather than putting everything on the table for people to choose, you begin by making the choice for your guests. If the first course is relatively filling and relatively low in calories, everyone will eat less during the rest of the meal.

Indeed, it's not a bad idea to limit the total number of courses. Variety stimulates appetite. As evidence, Ariely brings up a study conducted on mice. A male mouse and a female mouse will soon tire of mating with each other. But put new partners into the cage, and it turns out they weren't tired at all. They were just bored. So, too, with food. "Imagine you only had one dish," he says. "How much could you eat?"

What you eat, of course, is also important. Studies show that people aren't very consistent in the amount of calories they eat each day, but they're very consistent in the volume of food they eat each day. Thanksgiving is an exception to that consistency, but probably not to the underlying rule. Satisfaction doesn't depend on caloric intake; low-calorie, high-fiber foods and foods high in water content are filling. Thus, the more broccoli rabe there is at the table, the better. ...

We Aren't Eating as Much Turkey Per Person as We Did in the 90s

On the demand side, the quantity of turkey per person consumed rose dramatically from the mid-1970s up to about 1990, but since then has declined somewhat. The figure below is from the website run by the National Turkey Federation. Apparently, the Classic Thanksgiving Dinner is becoming slightly less widespread.

Wednesday, November 27, 2013

Yet Another Pre-Holiday Obamacare Delay: This Time It's the SHOP Exchange

The Obama administration today announced a one year delay of online enrollment for small businesses looking to purchase health coverage through federal Obamacare exchanges, another high-profile setback for

It’s the second delay for online small business enrollment, which the administration had said would begin this month.

The White House is trying to get the troubled enrollment website on track for individuals and families seeking coverage, which is a higher priority. It set this Saturday, Nov. 30, as a target date for getting working for the “vast majority” of users.

The delay of the small business exchanges comes as little surprise, as the administration had said earlier this week it would offer alternative ways for small businesses to enroll. Still, it undercuts the White House message that it’s beginning to turn around the disastrous rollout of the health care law....

Full story: Politico.

There Was Another Pre-Holiday Release of Regulations on Obamacare - Better Insurer Bailout Terms

Undoubtedly an appeasement from the Administration to insurers for the proposed 'fix' that will allow some individuals to keep their policies and not be forced into the Exchanges (which exacerbates adverse selection).

This is from Caroline Humer at Reuters:  (Hat tip: Dr. Ryan Kennedy)  
The U.S. government has issued a proposal that would likely increase risk payments in 2014 to health insurers offering plans on the Obamacare exchanges after the companies complained a recent policy change allowing people to keep their insurance policies had changed the financial equation.   
The rule, published on Monday in the Federal Register, lowered the threshold at which risk payments kick in for the sickest health plan members. The government proposed paying insurers 80 percent of claims greater than $45,000 in 2014. Previously the lower limit was $60,000. ...
Jack and Joe discussed this and lamented their excessive consumption of cinnamon rolls this morning in this clip:

The Covered California Numbers mentioned in this clip can be found here.  

Obamacare at the Fair, Marriage Penalties and Dismal Covered CA Enrollment Numbers on Armstrong and Getty 11/27/13

ObamaCare at the Fair

On Saturday I went to festival in the California foothills. Nestled in and betwixt the funnel cakes and fried candy bars you could sign up for Obamacare with the fine folks of Covered California.  So I sent my family off to the rock-climbing wall and spent some time talking to the two ladies administering government healthcare at the fair.  I played as dumb as I could and ultimately was told that I would qualify for subsidies if the amount my employer charged to cover my family was more than 9.5% of my annual W-2 wages.  That is inaccurate; it has to cost more than 9.5% of income for a single plan.  That is a big difference.  But hey, they are getting better. At least this time the question was not "do you think it is unaffordable?"

Assume that a person makes $30,000 per year.  Then coverage for that person can be as expensive as $237 a month and still be affordable under the law.  A typical employer single rate costs double that amount.  Hence an employer can charge approximately 50% of the cost of employee healthcare and still offer an "affordable" plan under the commands of PPACA.  Note, however, that most carrier contracts require an employer to pay at least 75% of the cost of single coverage, anyway.  So the bar for PPACA affordability is a low one.

What this enroller asked me, however, was if what I paid for family coverage exceeded 9.5% of my income.  That is a wholly different standard.  Many employers will pay something like 80% of the cost of employee coverage and then pay 50% of the cost of additional dependents.  It is not uncommon for family coverage to be $1,500 a month or $18,000 per year.  Well, if an employer could only charge me back $237 a month on that $1,500 premium they would be picking up the tab for $1,263 a month or 84% of family coverage.  Very few employers do that.  Government administrators at IRS and HHS knew that when they drafted these regulations and opted to tie the affordability test solely to single coverage to avoid a massive avalanche of unaffordable plans and completely gutting employer sponsored healthcare in one clean swoop.  

The enroller then asked if my wife and I were married. She seemed genuinely sad when I said we were. [Pouty face]. The subsidies work better for single people, she explained. This prompted me to do the research below.  

Marriage Penalty

Cohabitating couples make out better than married ones because the federal poverty level does not elevate equally with the number of individuals in the family. The federal poverty level is $11,490 for an individual, but only increases to $15,510 for a married couple — only $4,020 more. Thus, two unmarried people living together qualify for larger federal subsidies than they would if they were married.

Example of a couple moving in together to share expenses, each earning 200 percent of the FPL (about $23,000 annually).
  • If that same couple were to marry, their combined household income of approximately $46,000 would rise as a percent of the poverty level from 200% (individually) to 296% for a family of two. 
  • Tying the knot boosts their family income on paper, but has the opposite effect on their bank account. Individually they would each qualify for a subsidy of about $1,087, or $2,174 per household. If that same couple were to marry, their combined subsidy would drop to $753. 
  • Getting married costs them $1,421 annually.
I've calculated the penalty and it is generally between $1,000 and $1,500 per couple for combined incomes between $22,000 and $55,000.

For more on this see Devon Herrick, Obamacare's War on Marriage, National Center for Policy Analysis.  The numbers in my above example came from his research.

Covered CA's Dismal Numbers

In the fourth hour of today's show, Jack and Joe lamented their excessive consumption of Mrs. Gottwals' cinnamon rolls this morning and discussed the Covered California numbers as well as another little sneaky pre-holiday, regulatory release offering up more tax dollars to insurers who are stung with high claims in the Exchanges:  

  • Covered California has a goal of enrolling 500,000 to 700,000 subsidy eligible Californians by March 31, 2014.
  • Covered California just announced that it would proceed with its original plan to cancel 1.1 million existing individual policies (their estimate)––80% of them by December 31
  • Covered California also just said that 510,000 of them would qualify for a subsidy. 
  • So, if only the canceled policyholders who are subsidy eligible replace their canceled policies Covered California will make the lower end of its entire 2014 enrollment goal - doesn't sound like they are aiming too high here.  
  • Besides the 1.1 million who have lost their policies because of cancellation, Covered California estimates that 5.3 million Californians are uninsured and eligible to purchase coverage on the state exchange––about half with subsidies. 
  • Covered California is spending $250 million in federal grant money on an "outreach" campaign to get people signed up. 
  • Through mid-November, Covered California has enrolled about 80,000 people. 
    • None of these 80,000 have actually made a payment yet. NONE. All this means is that they have selected a plan. A bill is now being generated by the insurer. So how many will actually pay? Far less. 
    • Less than 1,000 people who list Spanish as their principle language enrolled in October. 
    • Demographic of October enrollees (29,113 total): 
      • Ages 18-25 - 2,344 people - 8%;  
      • Ages 26-34 - 4,580 people - 15.7%;  
      • Ages 35-44 - 4,937 people - 17%;  
      • Ages 45-54 - 6,865 people - 23.6%;  
      • Ages 55-64 - 10,387 people - 35.7%;   
      • This is how a death spiral begins.    

  • Of the 80,000 I expect only about 55,000 to actually pay for the insurance. The 80,000 includes people like me who have placed a few different plans in the cart and have no intention of actually paying for the plans.   
  • That means we could have taken the entire $250 million marketing budget and used it to pay $4,545 for each person who is actually going to pay for Obamacare. That is a monthly premium of $379.00 per person. We could have bought them high deductible HSA compatible plans for that amount of money.  And this is only the marketing budget. 
  • Also note that 1.1 million are losing coverage but their entire goal is only to enroll 500,000 to 700,000 people for this first year. Obamacare means less people will have coverage in California by their own numbers.  

All Armstrong and Getty podcasts available here.

Playlist of Craig's Appearances on Armstrong and Getty in 2013 here.

Tuesday, November 26, 2013

Another Way Taxpayers Lose Under ObamaCare

The Affordable Care Act (ACA) will flip state insurance commissioners' motives upside-down, prompting them to approve and even encourage premium increases, says Robert F. Graboyes, a senior research fellow with the Mercatus Center and professor of health economics at Virginia Commonwealth University.

  • Under the ACA, a family of four with $30,000 in income will only pay $600 for, say, a $10,000 insurance policy. The federal government will cover the remaining $9,400.
  • Under the "medical loss ratio" rules, the insurer can keep $2,000 for overhead and profit. The remaining $8,000 must go to health care providers -- doctors, hospitals, therapists, etc.

Now, suppose the insurer raises the premium to $20,000.

  • The family of four will still pay only $600. The federal government absorbs 100 percent of the increases and must now kick in $19,400 instead of $9,400.
  • The insurer doubles payments to providers by paying higher reimbursement rates and by expanding the menu of benefits, (e.g., more tests, more surgeries, lengthy spa visits.)

Again, the enrollee pays no more for insurance, but providers get $16,000 in income rather than $8,000 -- and insurers retain $4,000 instead of $2,000. Plus, the enrollee gets much more generous benefits. No insurer has any motive to reduce premiums, since no purchasers will benefit.

  • Because of the ACA's bizarre structure, higher premiums now mean better benefits for subsidized enrollees; higher incomes for doctors, hospitals, other providers and insurers; and higher state tax revenues from now-richer providers and insurers.

The only loser is the U.S. taxpayer, who must pay for these swelling costs.

Source: Robert F. Graboyes, "Another Way Taxpayers Lose Under ObamaCare," U.S. News & World Report, November 11, 2013.

Monday, November 25, 2013

Why Doctors Want Out of Obamacare

This is from Doctors Complain They Will Be Paid Less By Exchange Plans - Kaiser Health News

Physicians are uncomfortable discussing their rates because of antitrust laws, and insurers say the information is proprietary. But information cobbled together from interviews suggests that if the Medicare pays $90 for an office visit of a complex nature, and a commercial plan pays $100 or more, some exchange plans are offering $60 to $70. Doctors say the insurers have not always clearly spelled out the proposed rate reductions.

Sunday, November 24, 2013

Interlocking Governmental Web of Dependence Destroying Self Reliance

This is excerpted from a letter from a California business owner to Mish on his blog. The entire post is worth reading.
Employees who qualify for mediCAL (the California version of Medicare), which is most of my employees, will automatically be enrolled in the Federal SNAP program. They cannot opt out. They cannot decline. They will be automatically enrolled in the Federal food stamp program based upon their level of Obamacare qualification. Remember, these people work full time, living in a small town in California. They are not seeking assistance. It all seems like a joke. How can this be the new system?

Saturday, November 23, 2013

MediCAL and State Worker Compensation Engulfing California's Budget

This is from David Crane at Bloomberg

... Despite a 30 percent increase in the top income tax rate, higher sales taxes and fees, and greater total revenue, the state is spending less on education, transportation, courts, welfare and parks than it was six years ago. The reason: State spending on health care, employee compensation and benefits, interest, and prisons is greater than it was six years ago.

The largest spending growth is in Medi-Cal, which is California’s version of Medicaid. The program is the state’s second-largest and fastest-rising expenditure, and accounts for most of the Department of Health Care Services’ outlays, which grew 65 percent over the six-year period, to $24 billion a year, from $14 billion.

... California has historically chosen to enact more generous [Medicaid] eligibility criteria than most other states, leading to larger enrollment.

In 2012, Medi-Cal covered 7.6 million Californians, up from 5 million in 2000; and by 2014, the program is expected to cover 9 million, and will swallow ever-greater shares of the state budget. 

Just How Bad is Medicaid?

So far ObamaCare has enrolled about 400,000 folks in medicaid and only sold about 100,000 insurance policies.  That doesn't bode well for people getting actual healthcare.  Just because you have an "insurance" card does not mean a doctor will see you:
…30% of office-based physicians do not accept new Medicaid patients, and in some specialties, the rate of nonacceptance is much higher ― for example, 40% in orthopedics, 44% in general internal medicine, 45% in dermatology, and 56% in psychiatry. Physicians practicing in higher-income areas are less likely to accept new Medicaid patients. Physicians who do accept new Medicaid patients may use various techniques to severely limit their number ― for example, one study of 289 pediatric specialty clinics showed that in the 34% of these clinics that accepted new Medicaid patients, the average waiting time for an appointment was 22 days longer for children on Medicaid than for privately insured children. (NEJM)

Friday, November 22, 2013

What Employees Think About Your Benefits Communication

What Employees Think About Your Benefits Communication (PDF at link) 
  • While the largest segment (29%) of employees said they preferred one-on-one interactions with their HR department, their employers most frequently use non-interactive, text-based formats such as 
    • email (62.5%), 
    • websites (53.5%), and 
    • direct mail (52.8%) to communicate benefits information. 
  • Less than one third (29.5%) actually understand that they're only able to change enrollment information during open enrollment or qualifying events.
  • When asked how important is it to include their spouses and partners when deciding which health plan to get, 71.5% say it's important or very important. 

Health Care-Related Tax Provisions That Affect Businesses

IRS 2013 Tax Forum Presentation: Health Care-Related Tax Provisions That Affect Businesses (PDF) 

21 presentation slides. Topics include: 
  1. Transition Relief for 2014 under Sections 6056, 6055 and 4980H; 
  2. Applicable Large Employer (ALE) Status; 
  3. Tax provisions for Applicable Large Employers (ALEs): Information Reporting for ALE (Section 6056), Employer Shared Responsibility Provisions (Section 4980H);
  4. Tax provisions for Small Employers -- Small Business Health Care Tax Credit (Section 45R); and
  5. Tax provisions for all employer that sponsor self-insured plans regardless of size: Reporting of Minimum Essential Coverage (Section 6055). (Internal Revenue Service)  

Small Group Cancellations are up Next

This is The Next Shoe to Drop: Small Group Health Insurance Cancellations | The Health Care Blog

Obamacare is impacting the small group insurance market in many of the same ways as the individual health insurance market. While employers with less than 50 workers don’t have to provide coverage, if they do they are required to comply with the same essential benefit mandates, age rating changes, and pre-existing condition reforms the individual market faces.

That means essentially all small group policies cannot continue as they are––they have to be discontinued.

What makes things a bit easier, if not any less expensive, is that small employers typically have health insurance brokers to run interference for them and help them through this change where individual consumers often get that dreaded cancellation letter telling them they will not have health insurance after a certain date if they do not act quickly in what is a confusing marketplace in the best of times.

The first small group renewals are now occurring––the January 1 renewals that typically have to be delivered during the month of November under state law.

Many employers are facing significant changes in order to comply with Obamacare and therefore price increases. One Maryland broker I spoke to this week has 90 small group accounts and he reports his smallest increase was 15%, his largest was 69%, and most are in the 30% – 40% range.

(By comparison, Mercer just announced the average large employer health care cost increase for 2014 will be 5.2%, meaning small groups could have reasonably expected an increase under 10% without Obamacare.) The biggest rate increases are generally going to those employers with the youngest groups the most impacted by the new “age compression” rules. is impacting the small group insurance market in many of the same ways as the individual health insurance market. While employers with less than 50 workers don’t have to provide coverage, if they do they are required to comply with the same essential benefit mandates, age rating changes, and pre-existing condition reforms the individual market faces.

That means essentially all small group policies cannot continue as they are––they have to be discontinued.

What makes things a bit easier, if not any less expensive, is that small employers typically have health insurance brokers to run interference for them and help them through this change where individual consumers often get that dreaded cancellation letter telling them they will not have health insurance after a certain date if they do not act quickly in what is a confusing marketplace in the best of times.

The first small group renewals are now occurring––the January 1 renewals that typically have to be delivered during the month of November under state law.

Many employers are facing significant changes in order to comply with Obamacare and therefore price increases. One Maryland broker I spoke to this week has 90 small group accounts and he reports his smallest increase was 15%, his largest was 69%, and most are in the 30% – 40% range.

(By comparison, Mercer just announced the average large employer health care cost increase for 2014 will be 5.2%, meaning small groups could have reasonably expected an increase under 10% without Obamacare.) The biggest rate increases are generally going to those employers with the youngest groups the most impacted by the new “age compression” rules. ... 

California Says ‘No’ to Obamacare Free Riders and Makes Its Own Law

... California has decided to skirt the “Buy 1, Get 3 Free!” loophole in the Affordable Care Act, a modest piece of the sprawling health care regulation with huge implications. The provision holds the insured blameless for failing to make monthly premium payments while requiring doctors and insurers to continue to offer health care. During a three-month grace period before cancellation, subsidized policy holders can see doctors, have operations and rack up medical bills without paying for anything.

Doctors and insurers will be left holding the bag. ...

The California Department of Managed Health Care is drafting its own version of section 156.270 of the Affordable Care Act that says policy holders will be suspended and unable to use their Obamacare plan after one month of non-payment, which is consistent with California law for all other plans purchased outside of the state’s exchange.

“From our perspective this makes it much clearer to the enrollee who ultimately is responsible to pay these bills,” said Marta Green, spokesperson for DMHC. “If I walk into an insurance provider in month two or three and if I get $10,000 worth of services, at the end of the month I am responsible for $10,000 worth of bills. We are not going to have people caught unaware.”

California is drafting language to the law and then it must go through a 45-day public comment period before it can be enacted. ...

CALIFORNIA: Don't come knocking on our door

CALIFORNIA: Don’t come knocking on our door

The freebie loophole first caught the attention of the vocal California Medical Association several years ago. CMA officials immediately began peppering the U.S. Department of Health and Human Services with notices of concern seeking clarification. Initial drafts of Obamacare left insurance companies on the hook for all three months of the grace period. ...

When the federal government’s final ruling came down on March 27, 2012, the CMA found that it violated several California laws. But it was also missing something that would give the CMA some leverage: language stating that the Affordable Care Act was preemptive, meaning that the federal version would prevail over conflicting state laws.

So, armed with this bit of ammunition, the CMA set its sights on state health regulators and found a willing ally.

Besides the three-month grace period, Obamacare also violates these California laws:

    • “Prompt pay,” which states that health plans must promptly reimburse health care providers, and
    • “Recision,” which means California has a host of conditions that must be in place before retroactively terminating a policy. None of these are addressed in Obamacare.

In addition, Obamacare creates a federal dichotomy because the law states that insurance companies cannot charge different rates inside the exchange. In reality, rates would have to be higher inside the exchanges to compensate for the grace-period freebies.

So the DMHC contacted the Center for Medicare and Medicaid Services and told them what they intended to do.

“We got approval,” Green said. “What California is proposing is that if you (the insured) get in the black and pay your premium retroactively, you are all good. If you had services, you will be reimbursed.” ... 

How PPACA is Shredding the Poor's Safety Net

This is from John Goodman writing at the National Center for Policy Analysis:
Here is irony: the people who talk the most about the need for a social safety net (including the president himself!) are cheerleaders for a health reform that is going to shred it. 
How is that happening? By means of the Affordable Care Act (ObamaCare).
Through the Medicare and Medicaid programs, the federal government provides billions of dollars in subsides every year to hospitals that see a disproportionate number of patients who are poor and uninsured or who are on Medicaid. In both cases the result is the same: hospital revenues fall well short of the cost of care they dispense. 
The shortfall is what people in the health policy world call “uncompensated care” and the payments are referred to as “disproportionate share” money. 
Readers can be forgiven if they are naturally suspicious of hospital accounting. Just as hospital charges are for the most part phony numbers, so are most estimates of uncompensated care. Still, the is no denying that hospitals like Grady Health in Atlanta and Parkland Memorial in Dallas would not exist, or would not be able to maintain the current level of service, without a great deal of government money. 
That’s where ObamaCare comes in. One of the ways that the health reform is being funded is through cuts in disproportionate share funding for hospitals. The theory was: if more people ― especially low and moderate income people ― are insured, there will be less need for hospital subsidies. That theory overlooked four important features of the reform, however. ...
The whole post is worth reading.

Thursday, November 21, 2013

Armstrong and Getty with Craig Gottwals 11/21/13 re: Illegal Subsidies Off the Exchange and Hospitals Paying Obamacare Premiums

Most of the media latched into the fact that in a status call on Obamacare earlier in the week, the Administration announced that the whole website still needs about 40% more work to be built. Astonishing. But the Administration also announced yet another blatant violation to the text of PPACA.

And in a legal advisory to hospitals, the American Hospital Association asserts that the federal government's own regulations "clearly allow for another person or organization to pay the insurance premium for the enrolling individual."  This could have a dramatic negative impact on the risk pool in the Exchanges.

All Armstrong and Getty podcasts available here.

Playlist of Craig's Appearances on Armstrong and Getty in 2013 here.

Uh-Oh, New Death Spiral Alert: Hospitals Can Pay Patients Obamacare Premiums

The below article is a little deep inside the weedbeds of healthcare policy but what this means will have profound impact of the future affordability and viability of ObamaCare. Imagine a hospital with a very sick patient on hand who may be waiting for a life saving transplant and is uncovered and can't afford a PPACA Exchange plan (even with subsidies). The below summary of an American Hospital Association legal advisory is saying that the hospital can plunk down a few thousand dollars to ensure that the individual gets Obamacare and thereby the necessary insurance to make the hospital (who used to do this via charity care) financially whole.

On its surface, some people might look at this and may find it to be generous or a good thing to help the poor get coverage.  But it is not how the law is supposed to work and will cause an adverse selection landslide.  Note in the article how hostile the federal regulators are to the concept. They fully understand this is yet another unforeseen consequence of the few "illuminati" in power trying to write 75,000 pages of laws and regulations to foresee every conceivable outcome with one-sixth of our economy.   

As I read this, I pondered how many self-insured companies will travel down the same philosophical path.  A company could identify their worst claimant risks and implement practices to incentivize the sickest amongst their employee population to move into PPACA Exchanges as opposed to stay on the employer dime.  Even if an employer were to pay 100% of an employee's premium and all employee out of pocket expenses that employer might pay $10,000 to $25,000 for that employee as opposed to the $100,000 to $500,00 it could pay otherwise for the high claims under the reinsurance limits.  I'm not saying this would pass discrimination analysis, but when you place incentives and loopholes like this in the system, it will be abused.  There is no way around that. 

Another devastating result of this pondered by my colleague, Dr. Ryan Kennedy, was that a hospital or medical group who was in the position of treating a particularly high cost patient via a capitated arrangement (where the provider is generally just given a flat dollar amount to treat a person irrespective of number of claims or office visits) could provide the financial support to move that patient to a fee-for-service arrangement like a PPO where every single treatment or procedure given to the patient from the doctor results in a payment from the insurer.  The potential for system manipulation has been multiplied tenfold by these Exchanges and their dictates of guaranteed issue with substantial taxpayer price controls and mandated taxpayer bailouts when they inevitably spiral out of control.  

This is Cheryl Clark, for HealthLeaders Media:

In a legal advisory to hospitals, the American Hospital Association asserts that the federal government's own regulations "clearly allow for another person or organization to pay the insurance premium for the enrolling individual." 
The federal government has no legal authority to prohibit hospitals from paying their patients' insurance exchange premiums to encourage their enrollment, despite a Nov. 4 Centers for Medicare & Medicaid Services statement implying that it does, according to a sharply worded legal advisory from the American Hospital Association. 
What's more, there is clearly no prohibition against hospital-affiliated charitable foundations, or unrelated charities, paying these premiums on behalf of patients, the AHA said Wednesday. The financial assistance may be especially helpful to those would-be enrollees whose federal subsidies aren't enough to make coverage affordable. 
The AHA offered hospitals guidance on the issue after CMS issued a vaguely-worded and somewhat threatening Q&A about third-party premium payments. The agency said that if healthcare providers such as hospitals pay premiums for their most expensive patients, "HHS has significant concerns with this practice because it could skew the insurance risk pool and create an un-level field in the marketplaces." 
"HHS discourages this practice and encourages issuers to reject such third party payments. HHS intends to monitor this practice and to take appropriate action, if necessary." 
In its legal advisory, however, AHA said the opinion expressed by CMS it a Nov. 4 Q&A "appears to have no legal force or effect on hospitals [or insurers] and to be unenforceable. 
"If HHS wanted to try to make this position enforceable, it would have to go through rulemaking. But even then, HHS's authority to adopt the views expressed in the Q&A is highly questionable. By statute, everyone (except incarcerated individuals and undocumented immigrants) is eligible to purchase any QHP [Qualified Health Plan] offered through an exchange so long as the premium is paid." 
The AHA's legal advisory added that the federal government's own regulations implementing the federal premium tax credit "clearly allow for another person or organization to pay the insurance premium for the enrolling individual." 
The advisory was issued by the AHA's deputy general counsel Maureen Mudron and senior vice president/general counsel Mindy Hatton. 
CMS's Q&A surprised many hospital officials because HHS Secretary Kathleen Sebelius had clearly stated in a letter to Rep. Jim McDermott, (D-WA) that qualified health plans are not federal healthcare programs, and thus are not subject to anti-kickback statutes.... 
The AHA legal advisory is clear:
"We believe that existing IRS precedent strongly supports a determination that providing this type of subsidy advances the charitable purpose of hospitals and that any benefit to insurers is incidental to achieving the larger public good of making health care available to those with financial need." 
Providing subsidy support in the name of a charitable contribution, the advisory added, "is especially important for individuals residing in states that have chosen not to expand their Medicaid programs and could help fill the gap in making affordable coverage available to meet the needs in those communities."
Meanwhile, some hospitals have gone ahead and done so through charitable organizations. The University of Wisconsin Hospital and Clinics on Sept. 30 announced that it gave $2 million to United Way of Dane County to help low-income people purchase health plans on the state's exchange. The funds will help some 7,300 people, who now will pay only 2% of their premiums plus some out-of-pocket costs such as deductibles. ... 
Who Gets Help with Premiums? 
How hospitals or their doctors might decide which patients to cover is the tricky part, and up for debate. ... 
Some hospital officials have suggested that hospitals, or county health departments that own hospitals and clinics, or other entities might pre-select patients for subsidies based on their history of receiving uncompensated care, especially if their illnesses suggest the likelihood of repeat hospitalizations. ... 
If large numbers of hospitals take advantage of this, funding hundreds of their most expensive patients, they may reap major financial benefit. Instead of writing off that care, they will now be paid at health plan rates.
The emphasis is mine.

See alsoWill hospitals buy ACA insurance for their uncovered patients? from economist Tyler Cowen.

Obama Admin Announced it Would Break the Law Again This Week, ho, humm...

Most of the media latched into the fact that in a status call on Obamacare earlier in the week, the Administration announced that the whole website still needs about 40% more work to be built. Astonishing.  But the Administration also announced yet another blatant violation to the text of PPACA. 

This from Sarah Kliff at WaPo:
Direct enrollment through private insurers is getting easier. Insurers should be able to directly enroll shoppers through their own Web sites at this point, including (and this is the important point here) people who are shopping with insurance subsidies. "We do believe the majority of those high priority fixes for direct enrollment have been addressed," Bataille said. "We continue to work through some additional issues and make sure that [insurers] are seeing those fixes work. They will be more actively utilizing those direct enrollment processes."
When pressed on whether this would be true for Americans shopping with subsidies - and who would need to connect to the federal government to find out what subsidy they should receive - Bataille said, "Correct, that is for the subsidy eligible population."
The minor detail here is ... that is illegal under the unambiguous language of PPACA.  As you can read from Megan McArdle at Bloomberg   
The language of the statute is quite clear:
"(2) PREMIUM ASSISTANCE AMOUNT.--The premium assistance amount determined under this subsection with respect to any coverage month is the amount equal to the lesser of--

"(A) the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer’s spouse, or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act, or

"(B) the excess (if any) of--

"(i) the adjusted monthly premium for such month for the applicable second lowest cost silver plan [silver plans are only in the Exchange] with respect to the taxpayer, over

"(ii) an amount equal to 1/12 of the product of the applicable percentage and the taxpayer’s household income for the taxable year.
There is some provision to appoint agents. But the law specifically notes that those agents may not be health insurers:
(A) IN GENERAL.--A State may elect to authorize an Exchange established by the State under this section to enter into an agreement with an eligible entity to carry out 1 or more responsibilities of the Exchange.

(B)ELIGIBLE ENTITY.--In this paragraph, the term ``eligible entity'' means--

(i) a person--

(I) incorporated under, and subject to the laws of, 1 or more States;

(II) that has demonstrated experience on a State or regional basis in the individual and small group health insurance markets and in benefits coverage; and

(III) that is not a health insurance issuer or that is treated under subsection (a) or (b) of section 52 of the Internal Revenue Code of 1986 as a member of the same controlled group of corporations (or under common control with) as a health insurance issuer; or

(ii) the State medicaid agency under title XIX of the Social Security Act.
This is not the first time the administration has suggested that it's going to go against the plain text of the law, either. 
The emphasis and [] are mine.

See also Another Illegal ObamaCare Fix? from law professor Jonathan Alder.

Update: I've received a couple of comments from people claiming they were able to get subsidies directly from the Blue Shield of California website.  I'm not sure what is going on there, perhaps Blue Shield of California assisted them in enrolling via our Covered California Exchange website, which is working better than any federally facilitated site.  But this is what Blue Shield says on their website:
5.  Health insurance exchanges are state-run marketplaces where individuals and small businesses can buy health insurance for coverage beginning in 2014. The health insurance marketplace for California is called Covered California and will be available in 2014.
 Individuals may get financial assistance to make coverage more affordable and be able to compare and choose health coverage that best fits their needs and budget. Subsidies will only be available via Covered California to individual consumers who qualify.
The underscoring is mine.

Screenshot from November 21, 2013 at approximately 10:15 AM:

This is what Coved California says on page 15 in its November 2013 report to the Governor on the Health Exchange:

Why Employers Pray for Another Employer Mandate Delay or Repeal: Time is now for Employee Hour Tracking, Again

We do not yet have any word on transitional relief in 2015. Hence, as of now, all employers, irrespective of plan year, will have to comply on January 1, 2015 with the minimum hour requirements.   

Here is a great post from Danielle Arbe at HealthStat on the subject: 
Large employers are advised to begin analyzing their employee population now to accurately predict the number of full-time employees for which they'll need to provide coverage.
If you're thinking the federal government's recent one-year extension for the Affordable Care Act employer mandate was equivalent to an extended holiday, think again. The extension was granted partly because most employers were not prepared to provide appropriate health coverage offerings to their full-time workforce on January 1. Large employers in particular will be most wise to take steps now to learn the government's definition of full-time employee as it relates specifically to the ACA (it's not the same as "full-time" for overtime pay, etc.) and begin the extensive process of measuring and managing their potential covered population so that by this time next year they are prepared to make informed decisions that benefit themselves and their workforce.
One of the great ironies of the Affordable Care Act is that it was originally proposed as a way to make healthcare coverage more convenient for individuals and employers. Unfortunately, the government's definition of who qualifies as full-time under the ACA can be difficult to decipher and how you go about measuring it is cumbersome at best.
The “measurement period” is the period of not less than three but no more than 12 months where an employer figures out the average hours worked per week by an employee during that time.  For example, an employer who establishes a 12-month measurement period averages the employee’s hours over those 52 weeks to see if they are 30 or above (the cutoff for paying a penalty by not offering coverage).  The “administrative period,” which cannot exceed 90 days, is the period where you enroll these eligible employees. The “stability period,” which has different lengths of maximum time for new hires versus current employees, defines how long they will have coverage.
The interaction works something like this (assuming a 12-month measurement period and a 90-day administrative period):
  • Measurement period 1: Oct. 1, 2013 through Sept. 30, 2014
  • Administrative period 1: Oct. 3, 2014 through Dec. 31, 2014
  • Stability period 1: Jan. 1, 2015 through Dec. 31, 2015
  • Measurement period 2: Oct. 1, 2014 through Sept. 30, 2015
  • Administrative period 2: Oct. 3, 2015 through Dec. 31, 2015
  • Stability period 2: Jan. 1, 2016 through Dec. 31, 2016
  • Measurement period 3: Oct. 1, 2015 through Sept. 30, 2016
  • Administrative period 3: Oct. 3, 2016 through Dec. 31, 2016
  • Stability period 3: Jan. 1, 2017 through Dec. 31, 2017
Of course, employers can choose their own period lengths (as long as they comply with the law) so not all employers will be the same. ...

Wednesday, November 20, 2013

Democrats and Insurers in a Standoff with Pistols Drawn: Who Blinks?

This is from Megan McArdle at Bloomberg with a great analogy on the present delicacies inherent in ObamaCare's patchwork alliances: 
In [a] classic game-theory case, you and a professional associate are both arrested for theft. If neither of you talks, then you’ll probably get off. But if just one of you talks, then the person who talks will get a reduced sentence, while the other person has the book thrown at them. If you both talk, then both of you go to jail for a long time. The equilibrium is for both of you to talk, just in case the other guy does . . . which is why criminal gangs go to such elaborate lengths to build up trust and dispense punishment for snitches.
Insurers and Democrats are now in a similar situation. Legislators need insurers to help them make this law work by staying in the market and selling policies for affordable premiums. Insurers need legislators to hold this law together, particularly the individual mandate. If both of them hold strong, then Democrats have their best chance to get Obamacare working, and they can hope that voters like it so they can win re-election. Insurers, meanwhile, get a system in which the public is legally required to buy their product.
But if you think the other side might waver, then your best move is to defect immediately. If insurers stand strong but politicians end up repealing the mandate, then they will have lost a bunch of money for nothing. If politicians stand strong but insurers raise prices and/or exit the market, they’ll get slaughtered at the polls.
The moment that it looks like there’s a big risk that Obamacare won’t work, both Democrats and insurers are going to stampede for the exit. Yes, Obama can veto anything that threatens his favorite law. But if it gets that far, he’s already lost. His veto will cost his party big in the 2014 midterms, quite possibly enough to cost them the Senate. But by then it will probably be irrelevant, because if Obama has to veto something like a bipartisan bill to delay or repeal the individual mandate, his presidency will be over, and his signature legislation will be in grave danger. Insurers were willing to risk fairly substantial losses in 2014 to help the law get established and build market share. If it looks like the law is going to fail, they probably aren’t going to be willing to do it again in 2015.  

The Sensei Schools Ezra Klein on Healthcare Prices and Opportunity Cost

Doctor John Goodman: Does no one at The Washington Post understand the concept of opportunity cost? 

Americans spend 17.7 percent of GDP on health care. No one else spends even 12 percent. Let’s make that more concrete: If Americans only spent 12 percent of GDP on health care we would have saved $893 billion in 2012.

The reason isn’t that Americans get more health care than anyone else. We have more uninsured than anyone else. We have fewer physicians per capita than anyone but the Japanese. We go to the doctor less often than anyone but the Swiss. We don’t have more hospital beds than other developed countries, and when we do go to the hospital, we don’t stay longer.

But we do pay more for the privilege. The average hospital stay costs more than $21,000 in the U.S. It costs only $8,363 in France. (See “Why an MRI costs $1,080 in America and $280 in France“.) Administrative costs in the U.S. are more than three times higher than in most nations with universal health-care systems.

Earth to Ezra: if we have fewer doctors, fewer hospital beds, etc., then we are not spending more than other countries. We are spending less. Remember: health care prices mean nothing. We have so suppressed the market in health care that no one ever faces a real price for anything. So the only way to know what countries are really spending on health care is to look at real resource. With fewer real resources, we are getting results as good or better that the average developed country. That’s not bad.

Tuesday, November 19, 2013

Obamacare: Where Procrastination Pays-Off & The Early Bird Gets a Tapeworm

The Administration's Delays in PPACA Are Wreaking Havoc on Business

When the the few illuminati of government appointed "experts" try to outthink an entire market of free minds, calamity ensues.  In America, the lesson unfolds right before our eyes with the federal government's current effort to quasi-nationalize one-sixth of our economy via a myriad of complex patches, constituency buy-offs, politically enticing Trojan Horses and corporate welfare known as Obamacare.

Every centrally planned economy in world history has ended in hyperinflation, collapse or all out revolt.  Economies that nibble around the edges and flirt with the devil of central planning simply spiral downward a little less dramatically like we currently see in Greece, Portugal or Spain.

As we head into Thanksgiving we see employer premiums elevated by four to eight percent already with no commensurate benefit. Just over five million individuals have lost the health insurance they were paying for on their own only to learn they cannot get onto government websites to buy the new, more expensive policies they need with the help of our taxpayer dollars.   And things will only get worse as we move through 2015 and head into the scheduled reinstatement of the Employer Mandate, 105(h) Nondiscrimination Testing and the continued movement of workers from full to part-time positions.

Against this backdrop, a counterintuitive lesson emerges.  In the world of government bailouts, where political expediency trumps sound policy, early planners and adopters are the first entities punished for their work ethic.  When the government's attempts to control an economy inevitably go awry, it responds with political, rather than practical solutions.  It grants magical fairy-dust-fixes rewarding the businesses and individuals who didn't plan and weren't on schedule to comply.  

During the Obama Administration's rollout of the disaster one of its architects, Senator Max Baucus (D), called an oncoming "trainwreck" the early bird has been rewarded with a tapeworm.  Here are just a four examples of the delays and repeals I've personally seen hurt my clients.

1099 Reporting

The original version of the Patient Protection and Affordable Care Act ("PPACA") called for businesses to report not only services in excess of $500 on 1099 forms as was the law before PPACA, but the purchase of any goods over $500 as well.  Small businesses howled at the onerous burden that heaped upon them.  Some explained it would add hundreds of hours to their workload as it massively increased paperwork for no practical benefit other than an additional checkpoint for the IRS to catch under-reported sales.  Businesses diverted time, money and energy simultaneously fighting against this provision while preparing to process the added forms.  Eventually congress responded and repealed the provision.  If you and your business spent any time preparing to comply; you lost.  

Entire law review articles have been written about the complexity of this text.  It was written decades ago to keep businesses from developing self-funded medical plans solely to benefit their highly compensated employees.  It contains multiple alternate tests to ensure an employer's health plan is offered to and covers most of its employee base.  In its simplest and easiest to understand form, the test will require that all employers have at least 70 percent of their full time employees on their health plan or pay a fine of $100 per person per day for all employees not in the top 25 percent of wage earners in that employee population.  I'm grossly oversimplifying to keep this post readable.  But that fine would be $100 x 75% of all full time employees per day.

The Reform writers' inclusion of this test into PPACA was ludicrous.  It was a test written only for self-funded plans and containing a different penalty for those plans.  The plan was supposed to apply as soon as a health plan lost Grandfathered status (which most plans have).  The penalty is so onerous that the employer would be better off scrapping health insurance all together.  DOL, IRS, and HHS regulators eventually grasped the deep complexity and massive trauma this would cause for employer sponsored plans and suspended enforcement of the provision until they could figure out how to write the regulations in such a way as not to totally destroy employer based coverage (or at least not to do so before an election year).  Those regulations still have not been written.  This suspension, like the President's more recent moves to delay the Employer and Coverage Mandates, was done without congressional authority.  It is just one more case of President Obama's Administration saying, as Megan McArdle wrote at Bloomberg, this law is what we say it is.  We don't need congress.  We'll make up the rules as we go.

I had a large client actually refuse to open up offices in another state because of the confusion and ambiguity of this provision.  That expansion would have cost grandfathered status and potentially resulted in hundreds of thousands in fines.  Ultimately, they decided it was better to not expand and employ another 75 folks but to stand pat and guard grandfathered status at all costs.  Compliance with incomprehensible and ill-planed insurance tests trumped sound economic policy to expand and employ more folks.  Months later, regulators delayed the provision indefinitely.  And now, two years after that, my client is once again looking to re-enter that state.

Employer Mandate

Obamacare requires that all businesses with 50 or more employees provide healthcare to all employees working more than an average of 30 hours per week or pay a fine of $2,000 to $3,000 per employee.  There are look back, stability, and carry forward provisions in the law that are not easy to manage or administer.  Suffice it to say that a business really needs to be preparing for that Employer Mandate six to 15 months prior to its start date to adequately address the regulatory burdens.

The early adopters were preparing and doing what was economically necessary to manage their workforce by getting down below 50 employees or by reducing an employee hours below 30 in order to meet the scheduled January 1, 2014 launch date.  In July, the President pulled that rug out from under businesses, waived his magic wand and without congressional authority, decided to delay that enforcement for a year.  Once again, preparation was punished.

Here is a video from FOX's Shannon Bream discussing how at least 300 businesses are on record explaining how PPACA has forced them to reduce employee hours in anticipation of that mandate.   

Coverage Mandates Now Delayed

Oops.  On Thursday the President stood up and did it again.

This time he decided to pick and choose which federal taxes to enforce.  The Supreme Court held that the Individual Mandate was a tax not a penalty for persons who did not have government approved health plans in place by January 1, 2014.   What the President said on Thursday then means the federal government is now going to pick and choose which taxes it will enforce in 2014.  This violates a deeply held constitutional principal that the tax laws must be enforced uniformly.  Neither the IRS nor the Presidnent himself have the legal authority to pick and choose which tax laws to enforce.  Much will be said about this by constitutional scholars and Supreme Court wonks in the upcoming weeks.

But the practical implication on the ground here is another governmental spanking administered to protect political appearances.  This time, however, the spanking is for the insurers who locked arms with the federal government and dove into the state and federal exchanges head first.  I can just hear my mom now telling me that I'd better be careful which friends I choose.  "If you lie with dogs, you will wake up with fleas," she would tell me.

Now, in a desperate attempt to shift the political blame away from his failing health care overhaul, the President is asking insurers to turn on a dime and basically accomplish in one month what his government could not do in over three years.

Insurers must be seething over this.  All of the sudden, those fleas are really starting to gnaw at them.  At the end of my segment on Armstrong and Getty on Friday, Jack and Joe joked that the closed door meeting at the White House on Friday between the President and insurance executives probably looked more like an episode of the Jerry Springer Show.  I bet they were not far off.

I have an incredibly sharp human resources client in California's central valley who told me that after living through the ADA and FMLA, she learned not to comply with federal laws and regulations until the very last moment (or maybe even a little bit after that fact) because the large bureaucratic legislative and regulatory schemes simply never pan out and must be amended and modified or even scrapped to be workable.  Those laws pale in comparison to PPACA's perversions.

My new advice for clients?  Educate yourself, be ready to react on a dime, and understand the political ramifications of each of these massive provisions coming into play but don't even think about becoming an early adopter.  We will wait to the last minute before we begin to harm your business with the the trainwreck we have before us.