Wednesday, April 30, 2014

We Just Saw The Biggest Explosion In Health-Care Spending In Over 30 Years, And It Had A Big Impact On GDP

This is from Brett Logiurato at the Business Insider:
Spending on health care grew an astounding 9.9% in the Bureau of Economic Analysis' advance estimate of first-quarter GDP.

It's the biggest percent change in health-care spending since 1980, when health-care spending jumped 10% in the third quarter. Analysts said it's primarily due to a consumption boost from the implementation of the Affordable Care Act. Adjusted for inflation, America is spending more on health care than ever before. 
Personal consumption grew by 3.0%, about half of which was due to the growth in health-care spending, said Ian Shepherdson, chief economist for Pantheon Macroeconomics.

"If health-care spending had been unchanged, the headline GDP growth number would have been -1.0%," Shepherdson said. ...
Read the full story.  

Legal Opinion: An Employee Cannot Purchase an Insurance Policy Sold in the Individual Health Ins Market with Non-taxable Contributions – Period

Here is a great summary of the law on this matter from Christopher Condeluci at Venable LLP posted at the Inst. for Healthcare Consumerism.  Thanks to Ryan Kennedy for the pointer.  
Let’s cut to the chase, an employee cannot purchase an insurance policy sold in the individual health insurance market (i.e., an “individual market plan”) with non-taxable contributions – period, exclamation point.  
This includes payments from an employer to reimburse the premiums paid by an employee for an individual market plan under a Section 105 Medical Reimbursement Plan, a Revenue Ruling 61-146 arrangement or any other arrangement where employer dollars are being used for such reimbursements. This also includes the purchase of an individual market plan with employee pre-tax contributions made through a Section 125 cafeteria plan. ...  
Because an arrangement under which an employer reimburses an employee’s substantiated premiums for health insurance (e.g., a Section 105 Medical Reimbursement Plan or a Revenue Ruling 61-146 arrangement) would be considered a “group health plan” under the Internal Revenue Code (“Code”). ...
The entire post is definitely worth reading.

Friday, April 25, 2014

On Armstrong and Getty 4/25/14 Re: HHS' Disingenuous Assessment of Medical Inflation & More

I spent a little time this morning with Joe Getty and the rest of the A&G crew minus Jack (who was out today) discussing:
  • The disingenuous manipulation of healthcare inflation statistics by Health and Human Services causing billions more in eventual insurer risk transfer payments to fall on taxpayers; 
  • Why doctors are increasingly instructed not to discuss any ongoing or current ailments in physicals; 
  • Whether O'care really can be repealed; and 
  • How many Californians will actually stay enrolled in the state Exchange.  
Todays' Visit:

Here is the now defunct Oregon Obamacare Exchange commercial referenced.  R.I.P to the "long lived" Oregon State Exchange:

To listen to the entire hour of the Armstrong and Getty Show:  

For more reading on some of these topics, see:  

Thursday, April 24, 2014

Aetna: Half of Next Year's Premium Increases Due to Obama Admin's 'On the Fly' Change to the Law

This is from Jason Millman at the Washington Post:  
Bertolini said about half of the company's premium increases, whatever they turn out to be, will be attributable to "on the fly" regulatory changes made by the Obama administration. He cited as an example the administration's policy of allowing old health plans that were supposed to expire in 2014 to be extended another three years if states and insurers wanted to. ...

New PPACA Taxes to Cost Exchange Enrollees $350 Extra This Year & Employer Sponsored Plans $200 Per Employee

This is from Robert Brook at the American Action Forum, Hat Tip: Dr. John Goodman:  
... 2014 is the first year that people will see their premium totals rise significantly due to the ACA’s many taxes. People who enrolled on the exchanges will face seven new taxes in 2014 that on average total $354 per person annually. For others with an employer sponsored insurance (ESI) plan the charges will be less this year at $196, and for people that have self-insured ESI plans the additional charges will be a total of $94. A list and explanation for all of the ACA’s new taxes can be found below. Figures in the table are on a per-person basis; for family coverage simply multiply by the number of covered family members.


Wednesday, April 23, 2014

By Sept 30, 2014, ERs with More Than 49 Full-time EEs in the SF Bay Area will be Required to Offer Commuter Benefits

Who must comply? Employers with an average of 50 or more full-time employees per week working in the San Francisco Bay Area – the nine counties that surround the San Francisco Bay (i.e., Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, southern Sonoma, and southwestern Solano counties) – are required to comply with the program’s rules.

Who must be offered commuter benefits? Commuter benefits must be offered to employees who work an average of at least 20 hours per week during the previous calendar month within the geographic boundaries of the Bay Area and the above listed counties.

Five Steps to Compliance

Stept 1.  Select an Option - Commuter Benefit Options. Employers will need to select one of the following benefit options to offer to covered employees:
  • Option 1 — Pre-Tax Benefit. The employer allows employees to pay their transit or vanpool fares using pre-tax dollars, up to the maximum amount allowed by federal law (e.g., for 2014, $130 per month). 
  • Option 2 — Employer-Provided Subsidy. The employer provides a subsidy to cover the employee’s monthly transit or vanpool costs, up to a maximum of $75 per month (adjusted annually). 
  • Option 3 — Employer-Provided Transit. The employer provides a free or low-cost commuter transportation service for its employees (e.g., a shuttle service from a nearby transit station to the worksite). 
  • Option 4 — Alternative Commuter Benefit Program. An employer may also propose, and seek approval of, an alternative commuter benefit program that would provide at least the same reduction in single-occupant vehicle trips as any of the other above-described options. 
Example. If you have 30 full time employees located in San Francisco County, 15 employees in Santa Clara County, and 6 employees in Marin County, you have 50 or more combined in the nine counties listed above and you are subject to comply with this program.

If you have less than 50 full-time employees working in the San Francisco Bay Area, which consist of the counties listed above, your participation in the program is not necessary.

Step 2.  Designate a Commuter Benefits Coordinator.  For the purpose of this program, this is simply the person who will complete the registration form and report to the Air District/ MTC. (a human resources staff person, for example) and backup person to complete the online registration on behalf of your company. That Coordinator will have exclusive access to your registration information.

Step 3.  Go to and click on Bay Area Commuter Benefits Program to register.

Step 4.  Notify employees of the commuter benefit that your company will provide. Inform employees how to take advantage of the benefit.

Step 5.  Keep records to document implementation of your commuter benefits program and make available to the Air District/MTC upon request.

Even if you currently have a flex spending plan that includes a transportation benefit, your company must complete the registration process. If you currently don’t offer a Transportation benefit through your Flex administrator, your BB&T representative can assist with providing a quote.

For more details, visit or contact us.  See also a detailed list of program requirements.

To Retire Next Year A Couple Needs $366,600 Saved to Cover Medical Expenses

  • This is devastating news.  Fidelity does a similar study and releases it every spring. They have been hovering around $225,000 to $250,000 in recent years.    
  • Retiree healthcare costs will consume 100% of all Social Security Benefits within 10 years.  
Average health care costs for middle-income retirees are on a path to exceed their Social Security benefits, according to a newly created Retirement Health Care Cost Index as reported by Mary Beth Franklin at
... Retirement health care costs will increase from 69% of Social Security benefits for a couple retiring next year to 98% of Social Security benefits for a healthy couple retiring 10 years from now, according to the index. For couples retiring two decades from now, the gap will be even more dramatic. They would need 127% of average Social Security benefits to cover their health care costs in retirement. ... 
For an average healthy couple retiring next year, HealthView Services' data shows retirement health care costs will amount to about $366,600 in today's dollars. In another 10 years, costs will rise to approximately $421,000 in today's dollars, reflecting estimated health care cost inflation and expected Social Security annual cost of living adjustments.  
The gap between estimated health care cost inflation of 5% to 7% per year and the 2% in expected annual cost of living increases in Social Security benefits means any Social Security increases will likely go to future retirees' health care costs. ...

How May I Contact Employees on FMLA Leave?

Here is a very instructive excerpt from Von Briesen, summarizing the recently decided case of O'Donnell v. Passport Health Communications, Inc., in the Third Circuit. 
The court found that Passport did not interfere with O'Donnell's FMLA leave by continuing to contact her to negotiate the new position during her leave. First, Passport required that O'Donnell execute her offer letter and non-compete agreement before she requested or initiated FMLA leave. Thus, O'Donnell knew she was required to execute these forms before invoking her FMLA rights. 
The court held that Passport's contacts with O'Donnell during her FMLA leave were not improper. Passport's contact was limited to the status of O'Donnell's employment decision, the execution of the documents, and ongoing salary negotiations at O'Donnell's behest. Human Resources contacted O'Donnell solely to remind her that her position had been eliminated and that if she wanted to accept the new position, she was obligated to do so formally by signing the required forms in a timely manner. 
The court found that these de minimis contacts did not require O'Donnell to perform work for the benefit of the company. Furthermore, they did not materially interfere with her FMLA leave. The court stated that "There is no right in the FMLA to be 'left alone' and be completely absolved of responding to the employer's discrete inquiries." Passport's contacts were aimed only at retaining O'Donnell as an employee. These contacts did not "in any way hamper or discourage O'Donnell's exercise of her right to medical leave or attempt to persuade her to return from her medical leave early."

Survey: 2014 Benefit Plan Design Trends - More Cost Shifting to Employees

The 2014 Medical Plan Trends Report from HighRoads and CEB shows that companies are starting to evolve their benefits plans in response to PPACA. Top findings include:
  • Two-thirds of 2014 medical plans have individual, in-network out-of-pocket maximums (OOPMs) of $2,500 or more. This is up from 58 percent of plans in 2013, and 49 percent in 2012.
  • 42 percent of plans charge coinsurance for office visits, up from 35 percent in 2013.
  • Emergency room (ER) visit co-pays have increased by roughly $3 per year since 2009, with a 2014 average of $113 per visit.
  • The percentage of plans with high deductibles grew by 2 percent in 2014 from 23 percent to 25 percent.

Number of Federal Subsidy Programs Since 1970

Our country is headed in one direction and that is not toward the individual or even a decentralization to the states.  This is from Chris Edwards writing at Cato.

Tuesday, April 22, 2014

Stories Causing Atlas to Shrug, April 22, 2014 Edition

Hat Tip to Dr. John Goodman and Dr. Kris Held for pointers to the above stories.  

Your ObamaCare Deductibles in One Picture

Employer Alert: Telecommuting Gaining Steam as a Reasonable Accommodation Under the ADA

  • This case reinforces the point that courts are more and more willing to permit employees to work from home.  
  • Employers wishing to mandate employees be on site, should have an airtight case for that requirement when dealing with the Americans with Disabilities Act (ADA).   
In a recent federal appellate case from Michigan, the court found that a telecommuting arrangement allowing an employee to telecommute four out of five days of the workweek on a spur-of-the-moment, unpredictable, basis could be a reasonable accommodation under the ADA - even for a position that involves routine face-to-face interactions.

This particular employee could be a qualified individual based on two theories: either by eliminating the requirement of regular, predictable job attendance, or by permitting an unpredictable telecommuting arrangement that served as a work-around to regular job attendance.

In past decisions the same court ruled that:
“excessive absenteeism” renders an individual unqualified under the ADA as a matter of law, Brenneman v. MedCentral Health Sys., 366 F.3d 412, 419 (6th Cir. 2004), except in the “unusual case where an employee can effectively perform all work-related duties at home” without a substantial reduction in the quality of performance, Smith v. Ameritech, 129 F.3d 857, 867 (6th Cir. 1997) (emphasis added).
Nevertheless, this court went on to state that, "the class of cases in which an employee can fulfill all requirements of the job while working remotely has greatly expanded." (Page 13.)  And that they were "merely recognizing that, given the state of modern technology, it is no longer the case that jobs suitable for telecommuting are 'extraordinary' or 'unusual.'" (Page 18.)

Monday, April 21, 2014

With Nobody Looking, The Obama Administration Appears to Have Written an $8 Billion Check to Insurers

... [I]f the CBO is to be believed, the change isn’t due to any earlier error, but due to an administration regulation promulgated by the Obama administration that has resulted in a net of $8 billion more going to insurers. That’s a big change for several reasons. First, it means that the regulatory changes instituted by the Obama administration cost the federal government $8 billion. All of that money went to the insurance industry. And so, in March of 2014, without much fanfare, the Obama administration would in effect have written a check to the insurance industry for $8 billion. That payment would only have been motivated by one thing: a desire to keep insurers pacified and in the Exchanges after having deprived them of perhaps their most healthy potential insureds by a prior administrative ruling – in violation of the ACA — that insurers could keep selling non-compliant policies. The $8 billion would thus have been “damages” paid by the taxpayer in order to permit the President to honor his campaign promise that if you liked your insurance plan you could keep it. ... 

Sunday, April 20, 2014

86 Million Private Workers Support 148 Million Benefit Recipients in the U.S.

From CNS News:
All told, including both the welfare recipients and the non-welfare beneficiaries, there were 151,014,000 who "received benefits from one or more programs" in the fourth quarter of 2011. Subtract the 3,212,000 veterans, who served their country in the most profound way possible, and that leaves 147,802,000 non-veteran benefit takers. 
The 147,802,000 non-veteran benefit takers outnumbered the 86,429,000 full-time private sector workers 1.7 to 1. 
How much more can the 86,429,000 endure?

Regulation Nation

The Federal Register finished 2013 at 79,311 pages, the fourth highest total in history. That didn't match President Obama's 2010 all-time record of 81,405 pages. But Mr. Obama can console himself by noting that of the five highest Federal Register page counts, four have occurred on his watch. The other was 79,435 pages under President George W. Bush in 2008.
In case you are counting, that is about 330 new pages of regulations, laws, executive orders and court decisions per work day.

And ignorance of the law is no defense...

Thursday, April 10, 2014

California May Now Repeal Its 60-Day Waiting Period Mandate If CA Senate Bill 1034 Succeeds

Updated: On August 15th, California Repealed Its 60-Day Limit on Eligibility Waiting Periods and Now Conforms to PPACA's 90-Day Rule.  

Just in case you weren't fatigued by the never ending barrage of changes to President Obama's Health Law, California has proposed a significant change that will certainly make employers' heads spin (again).   Last year, California decided that the 90-day waiting period limit imposed by PPACA was too long and cut that period to 60 days via state law.  We reported on that change here.

Carriers (and therefore employers) have been scrambling to make sure that their waiting periods were either first of the month following 30 days or first of the month following one month to ensure they fall inside of 60 days.  Some carriers are allowing a waiting period of 60-days-on-the-dot, but who really wants to administer partial month premiums and contributions?  I've yet to come across that employer.

And now this, from Christine P. Roberts of Mullen & Henzell L.L.P at her E is For ERISA Site:
California Senate Bill 1034 sponsored by Senator Bill Monning (D-Carmel) would repeal language in the Health & Safety and Insurance Code that currently limits waiting periods under small and large group HMO contracts and health insurance policies to a maximum of 60 days. The new bill, if enacted, would prohibit insurers and HMOs from imposing any waiting or affiliation period under group coverage in the small and large-group markets. 
This would allow California employers to follow the Affordable Care Act’s maximum 90-day limit on eligibility waiting periods, recently confirmed in final regulations issued by the Departments of Labor, Treasury and Health and Human Services (the “Departments”). In the preamble to the final regulations, the Departments make clear that state insurance laws may impose more stringent waiting period rules than the federal standard. ...
SB 1034 is on the radar screen of insurance and HMO regulators in the state for several weeks and, to date, no opposition to the bill has been raised. The California Department of Insurance may or may not register a position on the bill and any opposition raised by the California Department of Managed Health Care generally would not appear until further along in the legislative process....
We will continue to track this Bill and report back here on any progress that is made.

April 9, 2014 Update: This bill passed a Senate committee 8-0 with only 1 vote abstaining.  This bill will likely pass and remove these limitations this year.

May 1, 2014 Update: It passed the Senate 35-0 and have moved to the Assembly.

First Evidence In: Exchange Enrollees Much Sicker Than Rest of Population

This could definitely speed up a death spiral.  This is from Kathryn Mayer at Benefits Pro:  
... [B]ased on their medication usage, PPACA enrollees are sicker than patients off the exchanges, often requiring specialty drug prescriptions. 
The pharmacy benefit manager said that six of the top 10 costliest medications used by exchange enrollees have been specialty drugs — such as those used to treat HIV/AIDS, autoimmune disorders and cancer. In commercial health plans, four of the top 10 costliest medications were specialty. 
“Our early analysis reveals that, in January and February, use of specialty medications was greater among exchange enrollees vs. patients enrolled in a commercial health plan,” Express Scripts said in its report. “Approximately 1.1 percent of total prescriptions in exchange plans were for specialty medications, compared to 0.75 percent in commercial health plans, a 47 percent difference.” 
Analysis also found the proportion of medications specifically to treat HIV was nearly four times higher in the exchanges than in commercial health plans. 
Also higher in exchange plans were the proportion of pain medications (35 percent higher in exchanges than in commercial plans), anti-seizure medications (27 percent higher) and antidepressants (14 percent higher). The proportion of contraceptives, however, was 31 percent lower in exchange plans. ...

Wednesday, April 9, 2014

An Outstanding Summary of the Real PPACA Exchange Enrollment Numbers at Coyote Blog

  • It turns out that a large block of uninsured actually had access and could afford it, they just chose not to buy it.  
  • The RAND marketplace number of 3.9 million is well below the Administration's claim of 7.1 million.  
Read the whole post here.  

Paper: Under PPACA, Between 6 & 11 Million Workers Increase Disposable Income by Working Less

Under the Affordable Care Act, between six and eleven million workers would increase their disposable income by cutting their weekly work hours. About half of them would primarily do so by making themselves eligible for the ACA's federal assistance with health insurance premiums and out-of-pocket health costs, despite the fact that subsidized workers are not able to pay health premiums with pre-tax dollars. The remainder would do so primarily by relieving their employers from penalties, or the threat of penalties, pursuant to the ACA's employer mandate. Women, especially those who are not married, are more likely than men to have their short-term financial reward to full-time work eliminated by the ACA. Additional workers, beyond the six to eleven million, could increase their disposable income by using reduced hours to climb one of the "cliffs" that are part of the ACA's mapping from household income to federal assistance.
Get the paper here from the National Bureau of Economic Research.

NYT: HHS Needed a Way to Measure Premium for Health Ins Without Showing What Obamacare is Actually Doing to Premium

This is from Casey B. Mulligan, an economics professor at the University of Chicago.  You may read all of it here at the New York Times.
In setting the 2015 calendar parameters for health plans and employers, Kathleen Sebelius, the secretary of health and human services, quietly did some creative but questionable arithmetic that forced taxpayers to give still more help to businesses and people who buy health insurance. ... 
The average per capita premium for health insurance coverage increased in 2013, especially in the individual market, because the Affordable Care Act required plans to provide more benefits. For example, the eHealth price index was about 40 percent greater during the first quarter of 2014 than it was for calendar year 2013 (see this chart, in which the dotted red line is the 2013 average). This is no surprise – more benefits mean higher premiums – and I presume that Congress understood this. ... 
But a political problem arises in that a premium increase that averages, say, 40 percent would require a 40 percent increase in the caps on what individuals with coverage can be asked to pay.... 
The Department of Health and Human Services needed a way to measure the average premium for health insurance without acknowledging what is actually happening to health insurance premiums. 
The department explains the two principles behind its solution. The first principle is to estimate premiums with its own projections, rather than averaging actual premiums observed in the marketplace. The second principle is to limit its use of data to market segments where “the premium trend is more stable.” 
Since only one year has passed since 2013, for now that means limiting the data used to market segments where the premium adjustments are sufficiently close to zero. 
In particular, for now the premiums in the individual market will be ignored for the purposes of estimating changes in premiums. As a result, the secretary has declared that the premium adjustment percentage is but a fraction of 40 percent: 4.2 percent, when rounded off. ... 
Perhaps taxpayers of the future will remember March 11, 2014, as the day when one cabinet secretary added billions of dollars to the deficit.  
The emphasis added is mine.  

Tuesday, April 8, 2014

State and Local Tax Burdens as a Percentage in the 50 States

Key Findings

  • During the 2011 fiscal year, state-local tax burdens as a share of state incomes decreased on average. This trend was largely driven by the growth of income in all states.
  • In 2011, the residents of New York, New Jersey, and Connecticut had the highest state-local tax burdens as a share of income in the nation. In these states, residents have forgone over 11.9 percent of income due to state and local taxes.
  • Residents of Wyoming paid the lowest percentage of income in 2011 at just 6.9 percent. They replaced Alaska, which had previously been the least-taxed for multiple decades, as the lowest-burdened state in the nation. After Wyoming and Alaska, the next lowest-taxed states were South Dakota, Texas, and Louisiana.
  • State-local tax burdens are very close to one another and slight changes in taxes or income can translate to seemingly dramatic shifts in rank. For example, the twenty mid-ranked states, ranging from Oregon (16th) to Georgia (35th), only differ in burden by just over one percentage point.
  • On average, taxpayers pay more to their own state and local governments (73 percent of total burden). Taxes paid within states of residence decreased on average in 2011, while taxes paid to other states increased, leading to a slight decrease in total burden. Some states deviated from these national trends, however.

Source: Liz Malm and Gerald Prante, "Annual State-Local Tax Burden Ranking FY 2011," Tax Foundation, April 2, 2014.

Monday, April 7, 2014

Admin Nixes Scheduled Healthcare Cuts After Dems Complain It Hurts in Election Year

At least we are getting a little more intellectual honesty in our healthcare delays now. Politics trumps the budget, constitution and healthcare policy, chapter 39, from Jonathan Easley writing at the Hill:
The Obama administration announced Monday that planned cuts to Medicare Advantage would not go through as anticipated amid election-year opposition from congressional Democrats. 
The cuts would have reduced benefits that seniors receive from health plans in the program, which is intended as an alternative to Medicare. 
Under cuts planned by the administration, insurers offering the plans were to see their federal payments reduced by 1.9 percent, which likely would have necessitated cuts for customers. 
Instead, the administration said the federal payments to insurers will increase next year by .40 percent. 
The healthcare law included $200 billion in cuts to Medicare Advantage over 10 years, in part to pay for ObamaCare....

Saturday, April 5, 2014

What Might James Madison Say About the "Patient Protection and Affordable Care Act"?

  • There have been 38 changes to this law via administrative action, executive order or what I'll refer to as "amendment to prosecutorial discretion."  
  • Statute itself is over 2,400 pages.
  • If the regulations implementing the statute hold to the same ratio as Medicare’s regulations-to-statue ratio, that will mean PPACA’s regulations will exceed 140,000 when they are all done.

  • It will cost over $1.5 Trillion when fully implemented - CBO revised estimate, March 2014. Price at passage was $0.9T. 
  • In 1965, government experts projected that in 1990, on an inflation-adjusted basis, Medicare would cost $12 billion. In reality, Medicare cost $107 billion in 1990.

  • 2013's edition of the Federal Register passed the 80,000 page mark.  An average weekday represents another 330+ pages of new federal rules, orders and hearings. 

  • HCR creates 20 new federal fees and taxes. (Tanning salons, FSA max’s, robust plans, premium tax, insurer risk corridor tax, Medicare increase, investment income increase, Rx tax, device tax, etc.)

  • Analysis by the Joint Economic Committee and the House Ways & Means Committee estimates up to 16,500 new IRS personnel will be needed to collect, examine and audit new tax information mandated on families and small businesses in HCR. 

  • The Law will greatly increase the federal government’s role in healthcare by expanding Medicaid by 33% and involving HHS in the design, sale and regulation of health insurance products. 
  • For nearly one-third of calls into the Medicaid/Medicare hotline reporting waste, fraud and abuse, government workers take over 4 months to begin investigation.
  • President Obama called Medicaid a broken system in 2009.  

  • 31 million nonelderly residents of the United States are likely to remain without health insurance in 2024, roughly one out of every nine such residents. 
    • This means that we will go from 45 million uninsured to 31 million for a net reduction of 14 million.  
    • There are 314 million people in America. This equates to a 4.5% reduction.

Case: Banning Dreadlocks in the Workplace is Not Race Bias and Permitted

The case is EEOC vs. Catastrophe Management Solutions from the Southern District of Alabama.  Civil Action Number 13-00476-CB-M, decided on March 27, 2014. 


The EEOC alleged that Catastrophe Management Solutions (CMS) engaged in intentional racial discrimination by implementing a policy that prohibited employees from wearing dreadlocks and enforcing that policy against Chastity C. Jones.  CMS's policy states:  
All personnel are expected to be dressed and groomed in a manner that projects a professional and businesslike image while adhering to company and industry standards and/or guidelines... hairstyles should reflect a business/professional image. No excessive hairstyles or unusual colors are acceptable. . .
CMS interpreted this policy to prohibit dreadlocks, made an offer of employment to Jones on the condition that Jones cut off her dreadlocks, and then withdrew the offer when she declined to do so. 

The EEOC alleged that CMS’s application of its policy to prohibit dreadlocks constitutes an employment practice that discriminates on the basis of race and that the policy has deprived Jones of equal employment opportunities.

CMS requested the court to dismiss the case because the facts alleged in the complaint did not support a plausible claim for intentional discrimination.


May a company enforce a grooming policy denying an employee a hairstyle such as dreadlocks if dreadlocks have socio-cultural racial significance to a particular race, such as African-Americans? 

Short Answer

Yes.  Dreadlocks are not inevitable and immutable just because it is one reasonable result of hair texture, which is an immutable characteristic. No amount of expert testimony can change the fact that dreadlocks are a hairstyle and, therefore, not a protected class. 
Law & Analysis:  

The EEOC’s complaint asserted that CMS refused to hire Jones because she is black. The factual allegations in support of that claim are simple. CMS interpreted its grooming policy to prohibit dreadlocks. Because Jones refused to cut her dreadlocks, CMS rescinded its offer to hire her. CMS argued that a grooming policy based on a mutable characteristic, such as hairstyle, is not racially discriminatory. The EEOC responded that a company policy that prohibits dreadlocks is racially discriminatory because “the wearing of dreadlocks by Blacks has socio-cultural racial significance.” 

Employers’ grooming policies are outside the purview of Title VII. Willingham v. Macon Tel. Publ’g Co., 507 F.2d 1084 (5th Cir. 1975) addressed the discriminatory impact of a grooming policy in the context of a sex discrimination claim. Pointing out that the purpose of Title VII is to provide equal access to the job market, the court held:
Equal employment opportunity may be secured only when employers are barred from discriminating against employees on the basis of immutable characteristics, such as race and national origin.... [A] hiring policy that distinguishes on some . . . ground [other than sex], such as grooming codes or length of hair, is related more closely to the employer’s choice of how to run his business than to equality of employment opportunity.... Hair length is not immutable and in the situation of employer vis a vis employee enjoys no constitutional protection. If the employee objects to the grooming code he has the right to reject it by looking elsewhere for employment, or alternatively he may choose to subordinate his preference by accepting the code a long with the job.

Hairstyle is an easily changed characteristic, and, even if socioculturally associated with a particular race or nationality, is not an impermissible basis for distinctions in the application of employment practices by an employer.  Therefore, the EEOC failed to state a plausible claim for relief and the case was dismissed.  

Note to Employers:  

This case illustrates the EEOC's enthusiasm to take employer grooming policies to task.  I found the EEOC's desire to litigate this claim surprising in light of the well-established, long case history denying protection for mutable characteristics like hairstyle.  

Friday, April 4, 2014

Benefit Clips, Friday April 4th: Cutting EE Hours Exposes Employers to Suits; Employer Mandate on Thin Ice; Disgraceful Gov't Waste

How capping employees’ weekly hours in order to reduce Obamacare exposure puts employers at risk of an ERISA suit.

18 Democrats join House GOP, SHRM & Teamsters on a bill to change PPACA's definition of full-time to 40 hours a week instead of 30 hours. This would gut the employer mandate.  One way or another, I think the Administration will gut or decline to enforce the employer mandate (again).  I predicted that in July here. Former White House Spokesman and ACA supporter Robert Gibbs predicted it this week here.  

A government agency established in 1992 as part of HHS gets $3.6 billion a year to treat the most needy amongst us with mental illness.  How are they doing that?  Partly by hiring highly controversial groups that claim there is no such thing as mental illness.

Top 10 Healthcare Services Excluded Under Obamacare


Thursday, April 3, 2014

Congress Repeals ACA Cap on Small Group Health Plan Deductibles

Good news we first teased here is now official.  From DataPath:
Congress yesterday passed legislation that eliminates the $2,000/$4,000 cost-sharing caps imposed on small group health plans by Section 1302(c)(2) of the Affordable Care Act (ACA). 
Originally introduced in the House as H.R. 4302, the “Protecting Access to Medicare Act of 2014” was approved by the Senate in a 64-35 bipartisan vote. The bill now goes to President Obama, who is expected to sign it this week. 
Once the legislation becomes law, small employers will be able to continue offering higher-deductible health plans with HRAs, HSAs, and FSAs – reducing overall costs of health insurance, driving consumerism, and making consumer-driven account-based arrangements more attractive for employers. ...

PPACA Supporter & Law Prof: Delays Set Troubling Precedent - Worrisome Policy

This is from a self described ardent supporter of PPACA, University of Michigan Law Professor Nicholas Bagley writing at the New England Journal of Medicine
... The U.S. Constitution imposes a duty on the President, as head of the executive branch, to “take Care that the Laws be faithfully executed.” The President may decline to enforce a law, but ignoring it altogether would violate his constitutional duty. 
At what point does a decision not to enforce the law ripen into a decision to dispense with it? The answer is not always clear. Take, for example, the delay of the ACA's insurance rules for people who want to keep their current, nonconforming plans. Viewed one way, the delay just postpones enforcing the ACA's rules against relatively few existing health plans, even as those rules take effect for the large majority of plans, including plans sold on the insurance exchanges. From another perspective, the delay flouts provisions of the ACA that had become politically inconvenient. No crisp line separates routine nonenforcement from blatant disregard. 
For several reasons, however, the recent delays of ACA provisions appear to exceed the scope of the executive's traditional enforcement discretion. To begin with, the delays are not “discretionary judgment[s] concerning the allocation of enforcement resources” that, per Heckler, are at the core of the executive branch's power to decline to enforce laws. Instead, they reflect the administration's policy-based anxiety over the pace at which the ACA was supposed to go into effect. The mandate delays, for example, were designed to “give employers more time to comply with the new rules.” Similarly, the postponement of the insurance requirements aims to honor the President's promise that “if you like your health care plan, you can keep it.” ...

Class Action Suit Over Mishandling of Obamacare Enrollments in Nevada - Let the Games Begin!

Barely a day following the end of Obamacare season comes word of a class action suit over mishandling of the enrollment procedure.

Just days after the deadline to enroll for insurance coverage through Nevada Health Link, the first class-action lawsuit has been filed on behalf of residents who say they signed up and paid their premiums – but were never given coverage. ...
Read the story here.  

Could ObamaCare and the NLRB Combine to End College Sports as We Know Them?

Immediately after the NLRB decision providing that student athletes could very well be reclassified as common law employees we health reform geeks began shooting emails back and forth about what this means in the context of PPACA.  It could eventually be a knockout blow.  

Employers have always been concerned about the potential for worker reclassification, but health care reform and a recent NLRB decision take this issue to an entirely new level.  “Large” employers who offer coverage will be required to offer coverage to “all” of their “full-time workers,” defined as at least 95% of employees working 30 hours per week. An employer that offers coverage to only 94% of its full-time employees, and has one employee who enrolled on an exchange with a premium credit, will be subject to annualized penalties of $2,000 per full-time employee, less the first 30 employees. This draconian penalty applies to all employees, not just the percentage excluded from the offer.

Consider that the NLRB just shocked the college sector with its ruling that Northwestern University students with football scholarships are employees for purposes of the National Labor Relations Act. The immediate result is that if the players with scholarships organize themselves with a labor organization, they can collectively bargain for themselves against Northwestern University. (Of course, we presume there will be further legal challenges.) But think about what this means in the context of taxes and health care reform. Will the IRS deem the students to be employees, liable for taxes, and full-time employees of Northwestern University for purposes of the health care reform employer mandate?

Northwestern University’s website reports that the University has 3,820 full-time faculty and 6,000 full-time staff. Let’s consider a hypothetical: on January 1, 2016, the IRS reclassifies enough students and independent contractors as “full-time employees” so as to cause the University to miss the 95% mark, and at least one employee used a premium credit to purchase coverage on an exchange. It appears that after paying all the health care plan costs, the University could also be liable for a penalty in the neighborhood of $20 million, per year.

...Given the high stakes involved with a failure to satisfy the 95% test, employers need to consider their margin for error, and give serious consideration to the circumstances involving anyone who is performing services but is not being treated as an employee....

Tuesday, April 1, 2014

President's 2008 Campaign Promise: You Won't Have to Change Plans and Your Costs Will Go Down By $2,500 Per Family

From David Limbaugh as posted on Twitter:
It would be pretty hard for the regime to assert the hearsay objection to our introduction of this into evidence.  
— David Limbaugh (@DavidLimbaugh)

Large Employer Survey: Obamacare to Cost $500 Per Worker Per Year for Next Ten Years

From Jason Millman writing for the Washington Post:
Large companies, including Fortune 500 firms, expect to face costs between $4,800 and $5,900 per worker over the next decade from provisions in President Barack Obama’s signature health care law, according to a new think tank that represents those corporations.

The survey aims to provide a glimpse into what costs the large employers expect if they don’t react to the Affordable Care Act. ...

Companies identified other ACA costs, such as fees for a temporary reinsurance program and a new government-sponsored institute studying the effectiveness of care interventions. They also cited the law’s preventive benefit requirements and a provision allowing young adults to stay on their parents’ health plans until age 26 as adding costs. Those two provisions, which have been in effect since 2010, accounted for 1-2 percentage points of the 9 percent increase in employer-sponsored family coverage in 2011, according to a Kaiser Family Foundation analysis. ... 

Gov't Run, Single Payer Plan in U.S: Oakland-Based VA Benefit Office Struggles To Process Backlog of 12K Claims

Bureaucracy is a heartless, cold, calculating machine that is incapable of caring about anything other than its own survival.  The larger the bureaucracy the worse things get.  And we have pushed our veterans into this horrific system.  It is enraging and heartbreaking.  

This is from Mark Emmons writing at the San Jose Mercury News, hat tip to Ryan Kennedy.  The entire story is worth your time to read.
Whenever Vietnam veteran Don Cooper asked about his request for an in-home aide, the Oakland VA regional benefit office told him the same thing: A decision would take 14 months. 
"Well, I'm going to be dead in 14 months," said Cooper, 72, of Livermore, who has stage 4 colon cancer. "But I couldn't get anybody to listen to me." ... 
[T]he latest weekly VA report shows that the center still has 12,103 claims pending longer than 125 days and 20,515 overall -- taking an average of 292 days to complete.

With Armstrong & Getty on April 1st Re: Obamacare's Sign-up Numbers, Why The Narrow Networks & The Face of Obesity

I had a brief April Fools' Day visit with Armstrong and Getty this morning.

Segment Notes:  

Odds and Ends:  

When Bureaucrats Define Healthcare This Woman is Borderline Obese & Can Be Penalized

The Health Insurance Portability and Accountability Act (HIPAA) was originally signed into law in August 1996.  It allowed an employer to charge an employee a penalty of up to 20% of insurance premium (more than charged other similarly situated employees) if that employee is not in compliance with a wellness program.  Obamacare increased that penalty up to 30% now with an option to go to 50% in a couple of years.  "Noncompliance" with a wellness plan could be as simple as having a BMI in the overweight or obese category.
  • BMI is a height and weight calculation that does not take into account muscle mass.   The BMI of the woman pictured below is 29 which means she is "overweight".  A BMI of 30 is obese.  
  • Under Obamacare rules, her employer would be perfectly within its legal rights in setting a target BMI of 26 and requiring her to either walk 150 minutes a week or pay more for her health insurance. 
  • For example, if the premium for a single person is $500 on an employer plan and the employer normally pays 90% of the premium asking the employee to pay $50, then an employer can ask this woman to pay an extra 30%.  
  • Thus, her penalty could be as high as an additional $150 a month (on top of her original $50 for a total of $200).  And that penalty can be increased to 50% under Obamacare.  

  • Anita Albrecht from London told she was obese and to start drastic diet 
  • But nurse did not take into account muscle weighs more than fat
  • The 39-year-old weighs around 9st 10 when competing
  • The personal trainer placed sixth in Miss Galaxy Universe in 2012
  • Already follows strict diet and consumes just 1,800 calories 
  • Now warning athletes about misleading nature of body mass index
Full story here.

Here was my segment on Armstrong and Getty discussing this and other Obamacare news: