IRS Confirms That Your "Opt-Out" or "Cash-in-Lieu" Program Must be Added to Employee Contributions

On December 16th in Notice 2015-87 the IRS confirmed what we knew to be their most likely interpretation of employer "opt-out" or "cash-in-lieu" provisions: opt-out dollars must be added to an employee's contribution amount in determining compliance with PPACA's affordability standards.  Over the year's we've addressed this issue here and here.  This IRS Notice provides clarification on the issue.

Question Presented

How are employer payments that are available only if an employee declines coverage under an eligible employer-sponsored plan (opt-outs or cash-in-lieu programs) taken into account for purposes of determining whether an applicable large employer has made an offer of affordable coverage under an employer-sponsored plan?

Ruling and Short Answer

If an employer offers an employee an amount that cannot be used to pay for coverage under the employer’s health plan and is available only if the employee declines coverage under the employer’s health plan (an “opt-out” payment), the employer must add that opt-out amount to its required contribution amount for the purpose of determining whether the employer offers affordable care under PPACA. The IRS and Treasury rationalize that the employee may purchase the health plan coverage only at the price of forgoing a specified amount of cash compensation that the employee would otherwise receive – salary, in the case of a salary reduction, or other compensation, in the case of the opt-out payment.

IRS Rationale and Example

In the IRS's judgement, an opt-out payment has the effect of increasing an employee’s contribution for health coverage beyond the amount of any salary reduction contribution.  Foregoing that opt-out, concludes the IRS, compels an employer to add the cash-in-lieu amount to the employee contribution in calculating PPACA affordability.

Example: if an employer offers employees group health coverage through a § 125 cafeteria plan, requiring employees who elect self-only coverage to contribute $200 per month toward the cost of that coverage, and offers an additional $100 per month in taxable wages to each employee who declines the coverage, the offer of $100 in additional compensation has the economic effect of increasing the employee’s contribution for the coverage. 

In this case, the employee contribution for the group health plan effectively would be $300 ($200 + $100) per month, because an employee electing coverage under the health plan must forgo $100 per month in compensation in addition to the $200 per month in salary reduction.

Timing and Relief Period

Consistent with this analysis, Treasury and IRS have determined that it is generally appropriate to treat an unconditional opt-out arrangement as part of the employee contribution amount. Accordingly, Treasury and IRS intend to propose regulations reflecting this rule and requesting comments on the treatment of employer offers of opt-out payments.

Regulations generally apply only for periods after the issuance of final regulations. However, Treasury and IRS anticipate that mandatory inclusion in the employee’s required contribution of amounts offered or provided under an unconditional opt-out arrangement that is adopted after December 16, 2015 (a “non-relief-eligible opt-out arrangement”) will apply for periods after December 16, 2015.

For this purpose, an opt- out arrangement will be treated as adopted after December 16, 2015 unless:

1. the employer offered the opt-out arrangement (or a substantially similar opt-out arrangement) with respect to health coverage provided for a plan year including December 16, 2015;
2. a board, committee, or similar body or an authorized officer of the employer specifically adopted the opt-out arrangement before December 16, 2015; or
3. the employer had provided written communications to employees on or before December 16, 2015 indicating that the opt-out arrangement would be offered to employees at some time in the future.

For the period prior to the applicability date of regulations, employers are not required to increase the amount of an employee’s required contribution by the amount of an opt-out payment (other than a payment made under a non-relief-eligible opt-out arrangement) for purposes of § 6056 (Form 1095-C).  Therefore, an opt-out payment (other than a payment made under a non-relief-eligible opt-out arrangement) will not be treated as increasing an employee’s required contribution for purposes of any potential consequences under § 4980H(b).

However, until the applicability date of any further guidance (and in any event for plan years beginning before January 1, 2017), individual taxpayers may rely on the treatment of unconditional opt-out payments described herein for purposes of §§ 36B and 5000A and treat these payments as increasing the employer’s required contribution.

Commentary and Conclusion:

Under the principles set forth in this Notice, an employer may continue opt-out payments without having to include those opt-out amounts in the employee contributions so long as that employer had a published opt-out policy in place prior to December 16, 2015. However, the IRS' final regulations on this matter could eliminate this particular grace/relief period in a subsequent year once the IRS adopts final regulations. This notice does not provide that previously existing opt out policies will be “grandfathered” indefinitely. It simply states that until further regulation, this notice may be relied upon by employers.

  

New Budget Deal Takes a Bite Out of Obamacare. Beginning of the End of the Cadillac Tax & Other Tax Moratoriums

Earlier this week, Republicans and Democrats in congress agreed to a new budget deal that will have significant impacts on PPACA.  This is a quick rundown of how the the Consolidated Appropriations Act, 2016 and the Orwellianly named, Protecting Americans from Tax Hikes Act of 2015 (I feel better already) will impact Health Reform.  

The Cadillac Tax, set to begin in 2018, is now delayed to 2020.  This tax is done. I've said that many times over the years and this was just the first official step in that process.  President Obama was never going to sign a bill repealing it, but businesses began cutting back on health plans in preparation for it.  In this compromise, President Obama can avoid the embarrassment of repealing it while businesses don't have to start making the unpopular cuts associated with it.

Every one of the three Democratic candidates for President and all of the 178 or so Republican candidates are against this tax.  Soon after inauguration, a new President will officially repeal or further erode it.  Perhaps we can engage in endless delays for a couple of decades before we repeal it - like lawmakers did on the Medicare "Doc Fix."

Just in case it is not delayed again or repealed, Republicans were able to get Democrats to agree to make the penalties associated with the tax deductible as business expenses.  This alone substantially weakens the impact of the Cadillac Tax. 

This two-year delay means that health plans (ultimately insureds) get to keep about $3 billion more of their money in 2018 and another $6 billion in 2019 according to the Congressional Budget Office.  It also means that in order to keep Obamacare, we need to borrow that $9 billion from China, Japan and the Social Security Program.  Go ahead and add it to our tab, we're good for it! 

The Health Insurance Provider Tax and Medical Device Tax won't be collected in 2017 as part of a one year moratorium.  This is just an odd compromise.  These taxes have both been in effect since 2013.  Again, I suspect the logic was that Obama would not sign a full repeal, but would sign off on a one year reprieve.  Hence, the cost of family coverage will be about $530 less in 2017.  Individuals will save about $170 in 2017.  And the price of Obamacare goes up about $12 billion in return.  That gets tacked onto our national debt.

Permanently nixing all three taxes (Cadillac, insurer and medical device) would save taxpayers at least $253 billion through 2025, according to the Congressional Budget Office.

Rubio's "Truth in Government" Risk Corridor Funding Limits Remain in Place for Another Year.  This spending bill will, once again, limit funding of the risk corridor program to the fees that the program collects from insurers that have excess profits.  This was how Obamacare was originally sold to the public.  In 2014 Senator Rubio insisted that the program retain that aspect of neutral funding in the face of an avalanche of changes to the law that threatened to increase the overall cost of PPACA.

His prognostication was correct.  The government's projections were so far off that insurers got back less than 10% of the losses for which they anticipated reimbursement.  Many assumed that federal bureaucrats would simply rob Peter to pay Paul and pay out these losses from other funds.  Hence, this became known as an "insurer bailout" program.  But thus far it has not been and won't be again in 2015.

No Unconstitutional IPAB "Death Panel" In 2016.  The new budget bill also guts the Independent Payment Advisory Board temporarily in 2016. The IPAB was supposed to be a panel of "experts" (aka, unelected bureaucrats) who would recommend binding spending cuts in Medicare to help pay for PPACA.  IPAB has not yet been established.  And this bill makes it almost certain it will not be in 2016.  PPACA does, however, give the HHS Secretary authority to take action for the IPAB if it cannot make recommendations so this battle is not yet over.

PPACA is changing as rapidly as ever.  More importantly, the recent changes are legislative as opposed to many of the extra-constitutional administrative and Presidential changes we saw in 2013 and 2014.  Just yesterday, Democratic presidential candidate Hillary Clinton said President Obama's healthcare is pushing people into part-time positions.  She and many Republicans are eager to address that issue by redefining full-time to be 40 hours a week as opposed to 30 or some other significant change to the employer mandate.  We will continue to see substantial uncertainty until we know who the President will be in 2017.

CBO Projects 2 Million Fewer Jobs Under ObamaCare

From The Hill:

ObamaCare is expected to cost the U.S. workforce a total of 2 million jobs over the next decade, Congress’s nonpartisan scorekeeper said Monday. 

The total workforce will shrink by just under 1 percent as a result of the new coverage expansions, mandates and changes in tax rates, according to a 22-page report released by the Congressional Budget Office (CBO). 

“Some people would choose to work fewer hours; others would leave the labor force entirely or remain unemployed for longer than they otherwise would,” the agency said in its latest analysis of the now five-year-old law. ...

 

Three Out of Four US Employers to Be Hit With Cadillac Tax by 2022

 From Yahoo Finance:

Many employers falsely assume that the Cadillac tax will apply only to the richest plans. However, newly release data from the 2015 UBA Health Plan Survey shows that even the lowest quality "Bronze-level" health insurance plans on the Affordable Care Act (ACA) exchanges are at risk of triggering the tax, potentially affecting 74 percent of employers by 2022. ...

United Benefit Advisors' Health Plan Survey, the nation's most comprehensive benchmarking survey of employer-sponsored health plans, includes responses from more than 10,000 employers that mirror 99 percent of American businesses. 

The Cadillac tax, which takes effect in 2018, will levy a 40 percent tax on health insurance plans that cost more than $10,200 for individuals and $27,500 for families. The excise tax is not currently based on benefit levels, but is solely based on annual premiums. Current regulations also will include employer and employee contributions to Health Reimbursement Arrangements (HRAs), Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). (UBA does not include these amounts into the trend increases below.) 

Using a six percent rate or "trend" increase, compounded each year, UBA finds that by 2018, 30 percent of employers will be subject to the Cadillac tax; by 2020, 50 percent; and by 2022 it will hit 73.79 percent of employers. ...

 

10 Things You MUST Know About the New PPACA Regs

A great short read from friend, Allison Bell over at LifeHealthPro.  Here are two of my favorites:

• The tri agencies will let the HRAs in group health-HRA packages escape from the PPACA ban on annual lifetime and benefits limits, but they are, effectively, banning individual health-HRA packages by requiring the HRAs in those packages to provide unlimited benefits for EHB services.  
•  Plans with locally based provider networks will have to open up to out-of-area dependent children.  

  

Penalty Risk When Dropping Coverage for Unpaid Premiums During Leaves Under PPAA

 From Graydon Head & Ritchey LLP.:

... Fortunately, the path to avoiding ACA penalties in this situation should look very familiar for employers subject to COBRA.  

The IRS treats an employer as having made an offer of coverage to a full-time employee if coverage terminates because the employee fails to timely pay the premiums. Effectively, you can terminate the employee’s coverage without fear that the employee will go to the exchanges, receive a subsidy, and trigger the penalties. However, just like COBRA, the IRS treats a premium payment as timely if paid within a 30-day grace period, and it is considered paid on the date the employee mails the check. So, for our scenario above, you may need to hold tight through the beginning of the third month before you verify that premiums will not be timely paid and terminate coverage.   Once you terminate the coverage for failing to pay a premium, you do not have to offer the employee coverage again until the next open enrollment period even if the employee returns to work sooner, and then only if the employee returns to a full-time position or is determined to be a full-time lookback employee despite the time spent on leave. ... 

 

The Embarrassing "Solution" to America's Health Insurance Crisis

This is from Jed Graham at IBD: 

Who gets the worst deal from ObamaCare? It's no contest: A few million modest-wage workers — and their spouses — can't qualify for exchange subsidies but many will owe a $695 penalty. 

They're full-time workers for companies that offer health insurance that meets ObamaCare's dubious "affordability test." 

Consider single workers earning $17,500, or 150% of the poverty level. For such workers, bronze-type coverage with a $5,000-plus deductible is deemed affordable in 2015 even if it costs $1,670 — just under 10% of income. That's 15 times the $9 a month or less it costs workers at the same income level to buy subsidized bronze-level policies via HealthCare.gov.

...[K]ey points about this clearly unequal treatment: 

Exacerbating Income Inequality 

First, for many modest-wage workers, ObamaCare makes income inequality worse. The $695 penalty for failing to buy coverage will amount to a pay cut of 4%, or 33 cents an hour, for these $8.42-an-hour workers. 

Dodging The Employer Mandate 

Second, many employers have figured out they can keep a lid on health insurance costs and still dodge ObamaCare's employer mandate penalty by offering "affordable" coverage that modest-wage workers find unaffordable. That's a big reason why the employer mandate, though it's had a clear negative effect on low-wage work hours, hasn't been nearly as big of a problem as some feared. 

But trading one negative consequence for another should provide little solace to supporters of the law, which was after all intended to ensure affordable care. 

Andy Puzder, CEO of Carl's Jr. and Hardee's parent CKE Restaurants, says that just 420 of 5,453 full-time workers offered a $5,500-deductible plan were willing to pay the $1,116 premium. The New York Times reports that insurance take-up by fewer than 10% of low-wage workers is commonplace. 

Wendy's (NASDAQ:) initially expected its health insurance tab to jump by $25,000 per restaurant, but cut that to $5,000 after finding few interested employees. 

Working Poor Aren't Enrolling 

... [T]hese uninsured full-time workers are hardly an exception. ObamaCare has, so far, failed to provide affordable care to a clear majority of modest-income individuals at 150% to 250% of the poverty level. Barely 1 in 4 in this income range who lack comprehensive employer coverage are getting silver-level exchange plans that carry more-or-less reasonable deductibles. That's based on an IBD analysis of enrollment data and multiple studies about the remaining uninsured population. ... 

By the end of September, paid exchange enrollment had dwindled to about 9.5 million, down from 11.7 million who selected plans at the start of the year. Now, there are roughly 2.7 million individuals with income between 150% and 250% of the poverty level with silver coverage, but that compares to a potential market in the neighborhood of 10 million, if full-time uninsured workers were included.... 

Oddly, ObamaCare has two sometimes contradictory definitions of "affordable." One, for employer plans, says coverage is affordable in 2016 if it costs no more than 9.66% of income, which means employees can't access exchange subsidies. The other says individuals should be granted a waiver from the individual mandate if the cheapest coverage available to them costs more than 8.13% of income. But that still means a $17,500 earner offered a $1,400 employer plan would have to buy it or face a penalty. 

To add insult to injury, the American Action Forum estimates that one million spouses are ineligible for exchange subsidies because they are married to someone with an offer of affordable employer coverage. ...

  

Stories Causing Atlas to Shrug, Dec. 1 | Woeful Enrollment Numbers, Fake Enrollees & Sky-High Deductibles

But At Least They are Watching Our Dollars: Obamacare Exchanges Fail to Catch 17 of 18 Fake Enrollees, GAO Audit

• Gov. auditors signed up 17 out of 18 fake ObamaCare enrollees for coverage through federal and state exchanges, a report released in October. 
• The GAO sent 10 auditors with fictitious enrollment information to the federal healthcare.gov site as well as two state-run ObamaCare exchanges, to sign up. 
• While eight didn't make it through the initial identity-checking process, all 10 eventually obtained coverage, even though four obviously had made up Social Security numbers that started with "000." 
• They all were able to keep their coverage despite filing fake follow-up documentation.
• In addition, the GAO tried to sign up 8 more up for Medicaid coverage. 3 made it through the process, and 4 ended up getting taxpayer subsidized private coverage instead. 

Obamacare's Woeful Enrollment and Rising Loss Ratios will Force a Rewrite to Survive.

• There are about 9.1 million enrollees today, and the consensus estimate—by the Congressional Budget Office, the Medicare actuary and independent analysts like Rand Corp.—was that participation would surge to some 20 million. But HHS now expects enrollment to grow to between merely 9.4 million and 11.4 million.
• For every person who’s subsidized to join and has, two people haven’t.
• The law’s failure to appeal to the young and rising middle class is already cascading through the insurance markets. 
• Most employer plan increase are between 8% and 13% (at least 3% of that is due to Obamacare taxes and fees). Aetna has requested all small employers in California pay 27.4% more in 2016. 
• Most Obamacare plan are going up 10% to 50%. 
• Overall, insurers providing Obamacare plans lost 12% in 2014 despite a $7.9 billion taxpayer handout. 
• And this weak enrollment is true even though, in CA for example, taxpayers pay 75% of premium for Obamacare recipients. Families making up to $96K qualify for the handouts.

Patients Now Avoiding Care Because of the High Deductibles and Meager Doc Lists Made Popular by Obamacare. A new survey of emergency room physicians suggests that many who have insurance are still avoiding care because of their insurance plan's high out-of-pocket costs.

• The poll of 1,433 ER doctors by the American Academy of Emergency Physicians found that 70% of ER doctors reported treating patients who have health insurance but have forgone necessary medical care due to cost. 
• The study also revealed a troubling pattern in which patients end up in the ER because they can't find non-emergency doctors to treat them. 
• According to the poll, 80 percent of ER doctors report treating patients who said they were having trouble finding relevant specialists included in their health plan. 
• Similarly, 73 percent report seeing increased numbers of Medicaid patients in the ER because insurers weren't providing enough primary care physicians or specialists. 

Fun facts on healthcare and retirement:

• Retiring in Idaho only takes 40% of the cash that's required to retire in California. $1M vs. $400K (savings required in addition to Social Security for a 65 year old to retire). 

• A 65-year-old couple who retires this year without employer-provided health insurance will need about $245,000 to pay future medical-related expenses. 

Why the Obamacare Ponzi Scheme is Hemorrhaging and Will Fail in One Page

Excellent summary from Devon Herrick over at IBD:

Average health spending per capita in the United States is around $8,600 annually. But it’s not distributed evenly. About 80 percent of the enrollees are healthy. They collectively consume only 20 percent of the health care dollars used; about $2,150 per year on average. However, some people are ticking time bombs. The least healthy 20 percent spend an average of about $35,000 yearly. 

On average:

• About 10 percent of the population has health concerns accounting for 17 percent of spending.

• Another 5 percent have serious health concerns accounting for 16 percent of health spending expenditures.

• The next 4 percent consumes nearly one-quarter of health care dollars (27 percent), while;

• The sickest 1 percent of patients accounts for 20 percent of spending.

• Think about that for a moment: the sickest 5 percent of the population consumes nearly half of all health care dollars. Of course, most of those are not really genetic losers. Many are merely aged seniors in their last months of life.

Obamacare purposely attempts to make health care affordable by forcing the healthy 80 percent to shoulder more of the costs for the unhealthy 20 percent. But that does not make care affordable; it merely shifts the costs from one party to another. 

 

After Making Obamacare Utterly Unworkable, Colorado Looks to Move to a Single-Payer Healthcare System

Ya gotta love when a plan comes together.

From BenefitsPro:

Activists in the Centennial State have gotten more than the 100,000 signatures needed to put an initiative on the ballot next year to establish a single-payer universal health care system in the state. ...  

If approved, the new system would create a state health care cooperative financed entirely by tax revenue. It would replace or at least significantly marginalize the private insurance industry in Colorado and scrap the state insurance exchange set up by the Patient Protection and Affordable Care Act.  

If passed, the new system would be financed by a 10 percent payroll tax hike, which would raise an estimated $25 billion. That is more than double all of the revenue currently flowing into the state’s general fund, according to an analysis by KUSA, the Denver NBC affiliate.  

The station also found the tax would amount to 

• $26 out of every bi-weekly paycheck for a worker making $20,000 a year; 

• $64 for one making $50,000 a year and 

• $192 for one making $150,000 a year. ...

Flowchart of the 80+ Federal Programs Spending $1 Trillion Per Year on Welfare in America

This is just a small portion of the cart, here is the full chart from the Ways and Means Committee.

Why People Aren't Buying Obamacare

From Investor's Business Daily:

It's hard to imagine that the Democratic Party, which rails against income inequality, is prepared to tax away about 3% of pre-tax income from modest-wage earners unless they buy coverage which may be of little use to them. 

Consider the options for single 27-year-olds earning $24,000 a year, or just over 200% of the poverty level, who live in St. Louis. 

The cheapest coverage available is the lowest-cost bronze plan from Coventry, a division of Aetna (NYSE:AET), for $960. But 4% of income for someone of modest means is a lot to spend for a plan that won't cover much before the $6,850 deductible is met.

Entitlement Nightmare | Bar Graph

From CATO:

Because the Obama administration has buried its head in the sand on the entitlement crisis, the next administration will face very ugly budget projections when it comes into office in 2017. The chart below shows the explosive CBO projections for the three largest entitlements. Over the next two presidential terms, spending is expected to grow 62 percent on Social Security, 73 percent on Medicare, and 45 percent on Medicaid. 

Without needed cuts, Social Security will become a $1 trillion program in 2018, and Medicare will top $1 trillion by 2022. These programs are only “working” to put the next generation of taxpayers into the poor house.

 

Cadillac Tax, Fake Enrollees and Medical Device Tax on the Michael Berry Show Today

I spent a little time on the air with Michael Berry today for an Obamacare update.  Our discussion begins at the 19 minute mark.  You can drag the player over to that timestamp:

You can hear all past Michael Berry Podcasts here.

Cadillac Tax Set to Hit As Many As 77% of Health Plans in 2018, CFOs and Unions Fret

Cadillac Tax Confuses and Frustrates Employers and Union Groups

Catch 22: To Make PPACA Fiscally Sustainable, the Cadillac Tax Must Become Politically Unsustainable

But At Least They are Watching Our Dollars: Obamacare Exchanges Fail to Catch 17 of 18 Fake Enrollees, GAO Audit

• Gov. auditors signed up 17 out of 18 fake ObamaCare enrollees for coverage through federal and state exchanges, a report released in October. 
• The GAO sent 10 auditors with fictitious enrollment information to the federal healthcare.gov site as well as two state-run ObamaCare exchanges, to sign up. 
• While eight didn't make it through the initial identity-checking process, all 10 eventually obtained coverage, even though four obviously had made up Social Security numbers that started with "000." 
• They all were able to keep their coverage despite filing fake follow-up documentation.
• In addition, the GAO tried to sign up 8 more up for Medicaid coverage. 3 made it through the process, and 4 ended up getting taxpayer subsidized private coverage instead. 

Stories Causing Atlas to Shrug, Oct. 21st | 27% Premium Increases & Mind Numbing O'Care Rules for Employees Out on Disability

Family Healthcare Costs To Go Down By $2,500? Aetna has requested a 27.4% increase in health insurance premiums for small businesses in California.

Under the mind numbingly complex rules of Obamacare, an otherwise full-time employee who ceases active employment and is placed on paid short-term or long-term disability leave continues to accrue hours of service, and therefore, may still be a “full-time employee” who works on average 30 hours per week or 130 hours per month.

Death Spiral: PPACA Plans, already failing to attract enough customers to sustain themselves, lost 12% in 2014 despite a $7.9 billion taxpayer handout.

Another nonprofit, member-owned health carrier spawned by a taxpayer handout of $73 million under Obamacare says it will close its doors at the end of the year after reporting a $22 million net loss for 2014 on $6.6 million in premium revenue.

A 65-year-old couple who retires this year without employer-provided health insurance will need about $245,000 to pay future medical-related expenses.
 

I Would Be So Bummed if This Were My Signature Law

The New York Times points out some classic Obamacare flaws.   

• One business that was forced to offer what the Government deems affordable health insurance to 600 employees had only two employees sign up. 
• The employer mandate has predictably made no noticeable effect on the number of workers enrolled in employer-sponsored health plans but added tens of thousands in employer costs for compliance and reporting.  
• And this classic: 

Until this year, most insurers would not cover groups that fell short of their minimum participation requirements. The Affordable Care Act struck down that policy — a sea change for the industry — by prohibiting minimum participation rules from being used to deny coverage to any employer with 100 or more workers. But there is a big loophole: Insurers are required to issue the policies, but they are not required to renew them.

Mario K. Castillo, a lawyer in Houston who has extensively studied the new law, said it was poorly understood in the industry, and a bureaucratic nightmare.

“They have to issue you a policy, but dropping it after one year is perfectly legal,” he said. “If you’re in this space, you essentially have to shop for insurance every year.”

 

Stories Causing Atlas to Shrug, October 13, 2015 | Retirement Costs, Litigation Nation & More Bad Gov't Food Info

Retiring in Idaho only takes 40% of the cash that's required to retire in California.

Litigation Nation: Class action approved against LinkedIn when court found that members consented to importing their contacts and sending the connection invitation, but did not find that members consented to LinkedIn sending the two reminder emails.

Government Nutrition: Scientists who tallied diet and health records for several thousand patients over ten years found that, contrary to the government advice, people who consumed more milk fat had lower incidence of heart disease.

 

Stories Causing Atlas to Shrug, October 10, 2015

In California taxpayers pay 75% of premium for Obamacare recipients. Families making up to $96K qualify for the handouts.

The government is not prepared for the complicated 2016 Obamacare reporting required to determine who is eligible for premium handouts. As a result the IRS is going to assess penalties against employers even if an employer does not receive the legally required warning notice.

Governmental Budgeting Prowess: When held to private standards (without the ability or print money to borrow infinitely) this Obamacare fund will only be able to pay 13% of the money it owes under the statue.

The Federal Government decided that the old system of 13,000 medical codes wasn't enough and has commanded that all medical providers move to a new system with 68,000 so that we can have codes for repeatedly walking in lampposts and getting sucked into a jet engine.

If Governor Brown Signs California Assembly Bill 1305 an Entire Subset of HSAs Will No Longer Qualify As HSAs

• Update, this bill was approved by the Governor on 10/8/15. 

In its neverending quest to legislate away all bad things, California teeters on the edge of passing a law that will make many HSA-eligible plans illegitimate on January 1, 2016.

AB 1305 was presented to the Governor on September 18, 2015.  He has until Sunday, October 11th to sign it and is expected to do so.

There is no reasonable way to interpret the requirement for an embedded out of pocket maximum (OOPM) described below that would square with all HSA-eligible plans. The standard effective date for new legislation such as this is January 1st following the enactment.  This bill does not provide delayed effective dates for the embedded OOPM; only for embedded deductibles.

In a last-minute amendment, for large groups only, the Senate extended the effective date of AB 1305's required embedded deductible mandate out to a “plan issued, amended, or renewed on or after 1/1/17.”  See the blue text below.  However, the current issue is related to the embedded OOPM.  Please see subsection c (3) in yellow which was not delayed until 1/1/2017.

CA AB 1305 amends Section 1367.006 of the Health and Safety Code to read:

(a) This section shall apply to nongrandfathered individual and group health care service plan contracts that provide coverage for essential health benefits, as defined in Section 1367.005, and that are issued, amended, or renewed on or after January 1, 2015. 

(b) (1) For nongrandfathered health care service plan contracts in the individual or small group markets, a health care service plan contract, except a specialized health care service plan contract, that is issued, amended, or renewed on or after January 1, 2015, shall provide for a limit on annual out-of-pocket expenses for all covered benefits that meet the definition of essential health benefits in Section 1367.005, including out-of-network emergency care consistent with Section 1371.4. 

(2) For nongrandfathered health care service plan contracts in the large group market, a health care service plan contract, except a specialized health care service plan contract, that is issued, amended, or renewed on or after January 1, 2015, shall provide for a limit on annual out-of-pocket expenses for covered benefits, including out-of-network emergency care consistent with Section 1371.4. This limit shall only apply to essential health benefits, as defined in Section 1367.005, that are covered under the plan to the extent that this provision does not conflict with federal law or guidance on out-of-pocket maximums for nongrandfathered health care service plan contracts in the large group market. 

(c) (1) The limit described in subdivision (b) shall not exceed the limit described in Section 1302(c) of PPACA, and any subsequent rules, regulations, or guidance issued under that section. 

(2) The limit described in subdivision (b) shall result in a total maximum out-of-pocket limit for all covered essential health benefits equal to the dollar amounts in effect under Section 223(c)(2)(A)(ii) of the Internal Revenue Code of 1986 with the dollar amounts adjusted as specified in Section 1302(c)(1)(B) of PPACA. 

(3) For family coverage, an individual within a family shall not have a maximum out-of-pocket limit that is greater than the maximum out-of-pocket limit for individual coverage for that product. 

(d) Nothing in this section shall be construed to affect the reduction in cost sharing for eligible enrollees described in Section 1402 of PPACA, and any subsequent rules, regulations, or guidance issued under that section. 

(e) If an essential health benefit is offered or provided by a specialized health care service plan, the total annual out-of-pocket maximum for all covered essential benefits shall not exceed the limit in subdivision (b). This section shall not apply to a specialized health care service plan that does not offer an essential health benefit as defined in Section 1367.005. 

(f) The maximum out-of-pocket limit shall apply to any copayment, coinsurance, deductible, and any other form of cost sharing for all covered benefits that meet the definition of essential health benefits in Section 1367.005. 

(g) (1) (A) Except as provided in paragraph (2), if a health care service plan contract for family coverage includes a deductible, an individual within a family shall not have a deductible that is greater than the deductible limit for individual coverage for that product. 

(B) Except as provided in paragraph (2), if a large group market health care service plan contract for family coverage that is issued, amended, or renewed on or after January 1, 2017, includes a deductible, an individual within a family shall not have a deductible that is more than the deductible limit for individual coverage for that product. 

(2) (A) If a health care service plan contract for family coverage includes a deductible and is a high deductible health plan under the definition set forth in Section 223(c)(2) of Title 26 of the United States Code, the plan contract shall include a deductible for each individual covered by the plan that is equal to either the amount set forth in Section 223(c)(2)(A)(i)(II) of Title 26 of the United States Code or the deductible for individual coverage under the plan contract, whichever is greater. 

(B) If a large group market health care service plan contract for family coverage that is issued, amended, or renewed on or after January 1, 2017, includes a deductible and is a high deductible health plan under the definition set forth in Section 223(c)(2) of Title 26 of the United States Code, the plan contract shall include a deductible for each individual covered by the plan that is equal to either the amount set forth in Section 223(c)(2)(A)(i)(II) of Title 26 of the United States Code or the deductible for individual coverage under the plan contract, whichever is greater. 

(g) (h)  For nongrandfathered health plan contracts in the group market, “plan year” has the meaning set forth in Section 144.103 of Title 45 of the Code of Federal Regulations. For nongrandfathered health plan contracts sold in the individual market, “plan year” means the calendar year.
(h) (i)  “PPACA” means the federal Patient Protection and Affordable Care Act (Public Law 111-148), as amended by the federal Health Care and Education Reconciliation Act of 2010 (Public Law 111-152), and any rules, regulations, or guidance issued thereunder.

Emphasis added.

The biggest issue with California's attempt to offer more friendly health insurance is that the above bill would make some HSA-compatible plans illegal on January 1, 2016.  HSAs are required to have a family deductible of at least $2,600.  However, this law would require a family HSA to have an individual OOPM of no more than the single OOPM offered.

Imagine an HSA plan with a deductible and OOPM of $1,500 for single employees and a deductible and OOPM of $3,000 for families.  I have clients with exactly such a plan. This law would require that the family HSA benefit have an embedded OOPM for individuals pegged at $1,500.  However, federal law requires that in order to qualify as an HSA the family deductible has to be no lower than $2,600.  $1,500 is lower than $2,600.  Houston, we have a problem.

In order to make this style of plan comply with the newly proposed California law and federal HSA rules, an employer would have to make an emergency change to its plan effective January 1, 2016 (even if they are not a calendar plan year) and increase the individual deductible and OPM up to $2,600 just so they don't run afoul of the convergence of these two rules.

Governor Brown's team has been made aware of these issues.  Now we just hope that they send this bill back for a common sense adjustment before it is enacted.  Stay tuned to this blog as we'll update the matter as soon as we know of the final resolution.

My Visit with Armstrong & Getty re: the Latest on Individual Mandate Costs, Obamacare Co-op Failures and Illegal Subsidies Oct. 2, 2015

My segment begins about 2 minutes in and runs to about the 14th minute.
 

Thank You Obamacare, May I Have Another?

This is from a business owner:

I just got the first year bill from my payroll company for the extra reporting we have to do each year vis a vis Obamacare:  $7195.50 for 2015.  Note that this adds absolutely no value -- this is not the cost of insurance or cost of any extra taxes sent to Uncle Sam.  This is merely the cost to handle all the new paperwork required in the law. 

I will repeat what I have said before -- the Republicans tend to focus narrowly on taxes and often tend to miss or downplay the regulatory issues, which I think actually loom larger in destroying economic growth.

And yep, he is right in line with every business out there.  We have 100s of clients that are all paying between $3,000 and $25,000 for this payroll reporting service depending on their size.  We'll never know how many people won't get hired, bonuses won't be paid or businesses won't be started due to regulatory dead-loss like this.  But it is a herculean burden on the economy.
 

CBO Report: Eliminating the Individual Mandate and Associated Penalties Would Reduce Deficit by $300 Billion

The CBO and JCT have completed a preliminary estimate of the net budgetary effect of eliminating the requirement that individuals purchase health insurance and associated penalties established by the Patient Protection and Affordable Care Act.  They estimate that eliminating that requirement and the associated penalties would reduce the deficit by about $305 billion over the 2015-2025 period. That total consists of a $311 billion decrease in direct spending partially offset by a $6 billion decrease in revenues.

How, you might ask?

Eliminating the individual mandate and the associated penalties would increase the number of people without health insurance coverage in 2025—relative to current-law projections—by about 14 million people, resulting in 41 million uninsured in that year. That increase in the uninsured population would consist of roughly

• 5 million fewer individuals with coverage under Medicaid or the Children's Health Insurance Program, 
• 1 million fewer individuals with employment-based coverage, and 
• 8 million fewer individuals with coverage obtained in the individual market (including individual policies purchased through the exchanges or directly from insurers in the non-group market). 

Similar changes in coverage would occur in most other years.

The savings generated from not having to buy other people healthcare in Medicaid, CHIP and the Exchanges more than offsets any associated national costs for uncompensated care.

  

Want to Use Your FSA or HSA Money for Over-The-Counter Meds? Let Your Congressman Know You Support This Bill

H.R. 1270 would amend the Internal Revenue Code to repeal the provisions that disqualify
expenses for over-the-counter medicine under health savings accounts (HSAs), Archer
medical savings accounts (Archer MSAs), health flexible spending arrangements (FSAs),
and health reimbursement arrangements (HRAs).
 

Another Day Brings Another Couple Probable PPACA Changes: Cadillac Tax & Auto-Enrollment

These are both changes for the better.  Auto enrollment into a medical plan has caused significant consternation for many employers since it was first slated to begin, three years ago.  But like so much in Reform, regulators have looked the other way as enforcing this law, as written, would do more harm than good.  Hence, it appears a formal repeal is afoot. Lawmakers vote to repeal health plan auto-enrollment requirement.

And, amidst Trump mania and her never-ending email debacle, Hillary Clinton has joined Bernie Sanders (and every Tea Party member and Libertarian) in officially calling for 2018's Cadillac Tax to be repealed.  As I've reiterated, this tax is doomed.  The political opposition to it is reaching critical mass.  At a bare minimum, it will be altered significantly before implemented.  Read more on that here: Clinton calls for repeal of 'Cadillac tax' on healthcare plans.
 
For a nice list of all of the changes, so far, check out Grace-Marie Turner's catalog of them over at the Galen Institute.
 

It Turns Out That Not-For-Profit Healthcare Doesn't Work Nearly As Well As PPACA Supporters Hoped

This is from California Healthline.  Hat tip: Ryan Kennedy:

Largest U.S. Co-Op Health Plan To Fold, Fourth To Close This Year 

Health Republic Insurance of New York, the largest cooperative health plan in the U.S., has been ordered to shut down as it nears insolvency, affecting hundreds of thousands of enrollees' coverage, the Washington Post reports. ... 

Co-ops were created under the Affordable Care Act to offer lower prices and compete with large insurers (Goldstein, Washington Post, 9/25). 

An HHS Office of the Inspector General audit released earlier this year found co-op plans were facing financial difficulties and experiencing low enrollment. 

According to the audit, 22 of 23 co-ops operated at a loss in 2014. The report found 13 of 23 co-ops fell short of enrollment goals (HHS OIG audit, July 2015). ...

House Votes Unanimously to Repeal ACA Small Group Market Expansion

Classic.  Now that most of the 51-100 employee groups have begun taking steps to adopt an early renewal in order to prolong the misery that would come with the new Obamacare small group definitions, congress has finally acted.  This was greatly needed about six months ago.  But, we'll take it now: better late than never, I suppose.  Next we have to ponder whether our respective states will make the change, once it becomes a legal option.

From Melissa Winn at Employee Benefits Adviser: 

In a unanimous vote, the House passed legislation today that would rescind the Affordable Care Act’s expanded definition of a small employer. The bipartisan bill has had strong support from employers and benefit industry insiders who feared the expansion could lead to premium increases and jeopardize the ability for small and mid-sized businesses to compete in today’s market. 

The benefit industry applauded the bill’s passage. 

“The Big ‘I’ is pleased to see this legislation pass the House of Representatives with such strong bi-partisan backing,” says Robert Rusbuldt, Big “I’” president & CEO. “One analysis from the actuarial firm Oliver Wyman estimated that the effect of expanding the definition of the small employer would result in nearly two-thirds of workers in small to mid-size firms receiving premium increases in 2016. H.R. 1624 would protect small to mid-sized employers and employees at those firms from seeing significant premium increases that are anticipated due to the Affordable Care Act.” 

The ACA proposes that effective Jan. 1, 2016, the definition of a small group employer increases from 1-50 employees to 1-100 employees. The Protecting Affordable Coverage for Employees Act (PACE) would maintain the current definition of a small group market as 1-50 employees and give states the flexibility to expand the group size if they feel the market conditions in their state necessitate the change.... 

Emphasis added.
 

No, PPACA Has Not Bent The Cost Curve Down

From Jerry Geisel at Business Insurance: 

Health insurance premiums for the program that covers federal employees and retirees will increase an average of 6.4% next year, the U.S. Office of Personnel Management disclosed Tuesday. 

That 6.4% increase for the Federal Employees Health Benefits Program — the nation's largest group plan with 8.2 million enrollees —ends a four-year run in which the average annual premium increase was under 4%. Premiums increased an average of 3.2% in 2015, 3.7% in 2014, 3.4% in 2013 and 3.8% in 2012. ...

How the U.S. Taxpayer Was Bilked for a Quarter of a Billion in Illegitimate and Unrecoverable Obamacare Handouts

This is from John Merline at Investor's Business Daily: 

Nearly half a million ObamaCare enrollees were able to claim more than $235 million in excess subsidies that they will never have to pay back, a recent IRS audit showed, thanks to a quirk in the law that leaves the program vulnerable to potentially billions in excess subsidy payments. 

Because ObamaCare subsidies are based on income, enrollees have to guess about their income for the next year when they sign up, which the exchanges use to calculate the tax credits. Enrollees can then opt to take these credits in advance, in which case they're sent directly to insurers, who subtract them from the enrollees' monthly bills. That's called the "advanced payment tax credit" or APTC. 

If an enrollee guesses wrong, they'll either get additional subsidy money when they file their taxes, or they'll have to pay some or all of their excess subsidy money back.  But the law caps how much of the excess subsidy money must be returned for those making less than 400% of poverty. (Families at 400% or above are ineligible for any subsidies.) The caps range from $300 to $2,500, depending on income and filing status. 

To illustrate how the caps work, consider a family of four that enrolled in ObamaCare and guessed their income would be $40,000. That family would receive a subsidy of $7,980 for the year, according to a Kaiser Family Foundation subsidy calculator....  

If it turns out that the family actually made $95,000, their subsidy should have been just $828, and they'd technically owe the difference — $7,152 — back to the government. 

But because their actual income was less than 400% of poverty, the most they'll have to pay back is $2,500. 

In other words, by underestimating their income, this family was able to leverage $4,645 in excess ObamaCare subsidies.... 

Take That Illinois! California Pulls Ahead in the State Bailout Sweepstakes

In one of my visits on the Armstrong and Getty Radio Program in recent years, I pondered that California had better hurry up and get going in its quest to bankrupt itself.  Because I don't think the country will have the stomach to bail out two states - and Illinois is certainly giving California a run for its money as far as whose budgetary status and financial acumen are more debauched.

California has landed the latest blow in the battle of mismanagement.  Yep, a full third of the Golden State is, apparently, impoverished enough to need taxpayer funded healthcare. Is that a safety net or hammock?

From SFGate:

Medi-Cal provides free health care to low-income people, including families, seniors, people with disabilities and children in foster care. Nearly a third of the state — 12.5 million people — are enrolled in Medi-Cal, which saw a dramatic increase under the Affordable Care Act. 

But the state stands to lose $1 billion in federal funding after the Obama administration warned California that its tax system — currently California only taxes the plans that accept Medi-Cal patients — doesn’t comply with federal law. The federal government provides matching funds to California for Medi-Cal. 

To prevent the $1 billion loss of matching federal funds, California must tax all health plans — not just those that accept Medi-Cal enrollees. Insurers that don’t participate in Medi-Cal are fighting the broader tax. 

If all health care plans are forced to pay a new tax, it is likely the costs will be passed down to customers. 

Lawmakers are weighing whether to tax all health plans at the same flat rate. ...

 

No Slowdown in Health Insurance Premiums - Large Employers Expect 6% to 9% Increase in 2016

This is from Shelby Livingston writing at Business Insurance:

... Group health care premiums continue to outpace inflation, and while most employers are feeling the pressure of rising health care costs, benefits experts say smaller employers may face a heavier burden. 

Large employers are projecting health care costs before implementing plan design changes to increase an average of 6% in 2016, according to a National Business Group on Health survey published earlier this month. 

And according to an Arthur J. Gallagher & Co. survey of smaller employers, most of which have less than 1,000 employees, released Friday, 44% reported premium rate hikes of 6% or more in 2014. Twenty-three percent saw rates in the double digits, the survey showed. 

Dave Ratcliffe, Washington-based principal in the health and productivity practice with Buck Consultants at Xerox, said employer health care cost trends before measures are taken to control costs are actually higher than most surveys show. 

“We see trend rates closer to 9%… not at 6%-7%,” Mr. Ratcliffe said.
According to Joe Ellis, Philadelphia-based senior vice president with CBIZ Inc., employer health care cost increases are actually lower than they have been in the past, though he said they are still averaging 7%-8% before plan design changes. ...

 

SHOCK POLL: 57% of Obamacare's "Newly Covered" Individuals Are on Traditional Employer Sponsored Plans

RAND agrees with the federal government's claim that just under 17 million more Americans now have coverage, however, what the government doesn't point out is that 57% of those are folks who are on an employer plan.  That increase certainly could have something to do with PPACA's employer mandate.  But it is more likely a result of a modestly improving economy.  Perhaps even more shocking is the fact that less than 25% of that 16.9 million are getting insurance through an Obamacare Exchange.  

RAND Corporation Study: 

Insurance coverage has increased across all types of insurance since the major provisions of the federal Affordable Care Act took effect, with a net total of 16.9 million people becoming newly enrolled through February 2015, according to a new RAND Corporation study. 

Researchers estimate that from September 2013 to February 2015, 22.8 million Americans became newly insured and 5.9 million lost coverage, for a net of 16.9 million newly insured Americans. 

Among those newly gaining coverage, 9.6 million people enrolled in employer-sponsored health plans, followed by Medicaid (6.5 million), the individual marketplaces (4.1 million), nonmarketplace individual plans (1.2 million) and other insurance sources (1.5 million).

 

On Armstrong & Getty Today Regarding the Conceit of Regulation, Part Time Work Under PPACA and the U.S Regulatory Explosion

"The conceit of regulation is that bureaucrats of below average talent have the knowledge, insight and skill to oversee the talented and to catch their errors before they do, themselves.... The best medical, financial and business minds migrate toward JP Morgan, Merck & Coke a Cola... where the work is stimulating and the compensation, high. It is unlikely that the best and brightest will settle for a federal regulatory agency and its relatively low pay."  John Tamny, Popular Economics.

My time in studio takes place in the first half of the today's third hour: 

Obamacare is pushing the lower end of full-time employees to part-time work: 

• In June of this year, there were 191,000 fewer workers with usual work schedules of 31 to 34 hours in their main jobs than at the end of 2012, a drop of 8%. 
• Meanwhile, an additional 406,000 people usually worked 25 to 29 hours, up 12%. 
• The divergent shifts on either side of the 30-hour divide coincide almost perfectly with the initial measurement period for ObamaCare employer penalties that began in 2013. 

Source: Investor's Business Daily.

Government-Sponsored Programs Make Up 52% Of What We Spend On Healthcare - Government-sponsored programs provide either health care or health insurance to the elderly, poor, veterans, military families, federal employees, uninsured children, American Indians and Alaskan Natives, refugees who resettle in the U.S., individuals with substance abuse and mental health issues and inmates in federal and state prisons.
  

Today’s typical Medicare beneficiary will have paid into the system just 13% to 41% of his or her expected Medicare consumption. The rest is funded by payroll taxes paid by today’s working Americans.

Federal Gov't Pumped Out 324 Pages of New "Law" Per Work Day in 2014 Devouring 29% of an Annual Family Budget

Federal Government Runs More Than 2,300 Subsidy and Benefit Programs - Double the Number in the 1980s 

  

Employers Expect a 6% Premium Increase in Healthcare Costs in 2016

This is from the National Business Group on Health 2015 annual survey:

According to the [National Business Group on Health Survey] survey, employers project their health care benefits costs will increase 6.0% in 2016, the same increase employers would have experienced this year had they made no changes to their plan design. However, many employers expect to keep increases to 5% for the third consecutive year by making plan changes, such as increasing cost-sharing provisions, adopting consumer-directed health plans, and expanding wellness initiatives. The survey, based on responses from 140 of the nation's largest corporations, was conducted in June, 2015. ...

By 2020, almost three-quarters (72%) expect one of their plans will trigger the tax, while their plan with the greatest enrollment will only be one year behind. ... 

More than one in three employers (34%) will implement surcharges for spouses who can obtain coverage through their own employer, an increase from 29% this year. A handful of employers will exclude spouses altogether when other coverage is available through an employer. ...

Overall, 83% of employers will offer a CDHP in 2016, up from 81% this year. In addition, one in three employers (33%) will only offer CDHPs to their employees in 2016. 

 

How an Identity Theft Sticks You With Hospital Bills | Thieves use stolen personal data to get treatment, drugs, medical equipment

This is a truly chilling story of the myriad of problems that arise when a theif steals your medical records from Stephanie Amour at the Wall Street Journal:

Kathleen Meiners was puzzled when a note arrived last year thanking her son Bill for visiting Centerpoint Medical Center in Independence, Mo. Soon, bills arrived from the hospital for a leg-injury treatment. 

But her son had never been there. 

Someone had stolen Bill Meiners’s Social Security and medical-identification numbers, using them to get care in his name. If he had been injured, she would have known: Mr. Meiners, a 39-year-old convenience-store worker with Down syndrome, lives with his parents in south Kansas City. 

To clear things up, Mrs. Meiners, who turns 74 on Saturday, took him to the hospital to show he was fine. It didn’t work: She says she spent months fighting collection notices and trying to fix his medical records. 

In a twist on identity theft, crooks are using personal data stolen from millions of Americans to get health care, prescriptions and medical equipment.  

Victims sometimes only find out when they get a bill or a call from a debt collector. They can wind up with the thief’s health data folded into their own medical charts. A patient’s record may show she has diabetes when she doesn’t, say, or list a blood type that isn’t hers—errors that can lead to dangerous diagnoses or treatments. 

Adding insult to injury, a victim often can’t fully examine his own records because the thief’s health data, now folded into his, are protected by medical-privacy laws. And hospitals sometimes continue to hound victims for payments they didn’t incur. ... 

And the medical establishment often doesn't make it easy to clean up the mess, as Mrs. Meiners found out. 

She began early last year with a call to the Centerpoint medical center, which she says promised to clear the fraudulently billed January 2014 leg-injury treatment. But in November, the center’s radiologists turned her son’s case over to collections, seeking $25. This year, the emergency-room physicians sent a bill for $462. And the hospital, she says, wanted her to pay a bill of about $300. 

Another concern for Mrs. Meiners was that the thief’s medical information got into her son’s health records, including a drug allergy her son didn’t have. She contacted her son’s insurer, which told her it removed the false information. 

She says Centerpoint told her that medical-privacy laws prevent her from looking at everything in her son’s medical record because it contained the thief’s health information. Federal medical-privacy laws bar a person’s access to someone else’s data, even if the information is in their own files, medical experts say. ... 

Unlike in financial identity theft, health identity-theft victims can remain on the hook for payment because there is no health-care equivalent of the Fair Credit Reporting Act, which limits consumers’ monetary losses if someone uses their credit information. ... 

[A recent] survey found 65% of victims reported they spent an average of $13,500 to restore credit, pay health-care providers for fraudulent claims and correct inaccuracies in their health records. ... 

Thieves use many ways to acquire numbers for Social Security, private insurance, Medicare and Medicaid. Some are stolen in data breaches and sold on the black market. Such data are especially valuable, sometimes selling for about $50 compared with $6 or $7 for a credit-card number, law-enforcement officials estimate. A big reason is that medical-identification information can’t be quickly canceled like credit cards. 

An undocumented immigrant, Amira Avendano-Hernandez, of Clinton, Wis., was sentenced in 2013 in U.S. District Court for the Western District of Wisconsin to six months in prison and restitution of more than $200,000 after she got medical treatment, including a liver transplant, using someone else’s name. She had bought a stolen Social Security number from a third party, according to the U.S. attorney’s office for the district. ...

Read the full story here.

Almost all Preventive Healthcare Costs More Than It Saves

Here are the key points from an excellent column up over at the New York Times by Margot Sanger-Katz:

• The argument for cost savings from universal preventive health coverage makes some intuitive sense, but it’s wrong. There’s strong evidence from a variety of sources that people who have health insurance spend more on medical care than people who don’t.  Almost all preventive health care costs more than it saves.

• There are three main reasons health spending is ticking up:

1. The aging of the population; people get sicker as they age;  
2. The improving economy, which will enable more people to afford medical care — or the time off from work it might take to attend to their health needs; and a big one 
3. Obamacare’s coverage expansion.

• For the individual patient whose heart attack is prevented by a cholesterol screening, to give one example, that blood test is a cost-saver. But to prevent one heart attack, the health care system has to test hundreds of healthy people — and give about a hundred of them cholesterol-lowering drugs for at least five years. Added together, those prevention measures cost more than is saved on the one heart attack treatment. 

• There’s also the unavoidable fact that every time you prevent people from dying from one disease, they are likely to live longer and incur future medical expenses.

  

Legal Alert: You Should be Adding in Your 'Cash in Lieu' Award to the Employee Contributions in Testing PPACA Affordability

[This post has been updated by IRS Notice 2015-87 in this post: IRS Confirms That Your "Opt-Out" or "Cash-in-Lieu" Program Must be Added to Employee Contributions.]

Melissa Ostrower, writing at Jackson Lewis has made an outstanding point regarding employer affordability standards under PPACA and the once common cash in lieu or "opt out" policies employers have offered in order to reward employees who do not sign up for benefits with them.  

Chalk this up as yet another reason to eliminate cash in lieu policies in the brave new world of Reform.  Also see my post on why Providing Cash-In-Lieu of Benefits Really Should Be Phased Out Under PPACA, here.  This, from Ms. Ostrower: 

... Affordable means that an employee’s required contribution for individual coverage under his employer’s the plan may not exceed 9.5 percent (indexed) of the employee’s household income. As employers do not generally have the household income information of its employees, the regulations under Internal Revenue Code Section 4980H provide three separate safe harbors under which an employer may determine affordability based on information that is readily available to the employer – (1) the Form W-2 wages safe harbor, (2) the rate of pay safe harbor, and (3) the federal poverty line safe harbor. ... 

[I]f [an] employer ... offers employees an “opt-out” payment for those who decline [medical insurance] coverage, then this opt-out amount must be counted as part of the employee contribution, according to informal discussions with Internal Revenue Service representatives (speaking in their individual rather than official capacities). ... 

While this impact of cash opt-out payments on affordability is not clearly articulated in the Section 4980H regulations, the Internal Revenue Service’s informal position described above is consistent with the final regulations relating to the requirement to maintain minimum essential coverage and makes sense from an economic standpoint. We note that the Internal Revenue Service also stated informally that it may treat similar cash payments to Service Contract Act and Davis-Bacon Act employees differently. 

Employer takeaway: If you have analyzed affordability without taking into account any opt-out payments you offer, you should take another look at whether your plan is affordable.

Government Healthcare in the United States. We're Already There - And Here is What It Looks Like

Government-Sponsored Programs Make Up 52% Of What We Spend On Healthcare - Government-sponsored programs provide either health care or health insurance to the elderly, poor, veterans, military families, federal employees, uninsured children, American Indians and Alaskan Natives, refugees who resettle in the U.S., individuals with substance abuse and mental health issues and inmates in federal and state prisons.

Today’s typical Medicare beneficiary will have paid into the system just 13% to 41% of his or her expected Medicare consumption.  The rest is funded by payroll taxes paid by today’s working Americans.

Of the 17 Obamacare Medicaid expansion states releasing public data, every single one far surpassed projected enrollment in 2014.  In fact, that expansion surpassed projections by an average of 91% in all 17 states.  

My Wife's Losing Her Obamacare Coverage Because The Insurer Lost $400 Million. So she eventually chose a 2015 plan almost identical to the 2014 plan she had with the same insurer—except the deductible went up from $2,500 to $6,000.  Oh, and it cost 50% more for that policy. And that was her best option.

A Race to the Bottom in PPACA Exchanges. The primary way insurers attempt to keep premiums down in Obamacare is by forming networks of any doctors who will accept the lowest fees.  Some exchange plans are paying doctors less than Medicaid pays. Blue Cross in Dallas, for example, pays some doctors 10% less than Medicaid’s fee. If insurance buyers were forewarned, that would be one thing. But no exchange plan is advertising that access will be worse than it is for Medicaid patients.  The Obamacare plans aren’t grouping together doctors who know each other and practice together. They are simply throwing out a low price and taking every physician who will accept it; devastating a patient's ability to get continuity of care.  

  

Federal Gov't Pumped Out 324 Pages of New "Law" Per Work Day in 2014 Devouring 29% of an Annual Family Budget

Unelected federal bureaucrats issued 16 new regulations for every law in 2014 — that’s 3,554 new regulations compared to 224 new laws.

These regulations severely hamper businesses, individuals, hiring and economic growth. The Competitive Enterprise Institute publishes an “annual snapshot of the federal regulatory state” entitled, “Ten Thousand Commandments.” This year’s edition paints a stark picture of the hidden cost regulations impose:

• Federal regulation compliance and intervention costs $1.88 trillion/year or 11% of U.S. Gross Domestic Product. 
• Federal regulations now exceed half the amount the federal government spends annually. 
• The total cost of federal regulation on U.S. households equates to $14,976 per home per year - around 29% of an average family budget of $51,100. 
• If U.S. regulation was a stand-alone economy, it would be the world’s 10th largest, just behind Russia and ahead of India.  
• The 2014 Federal Register contains 77,687 pages. That equates to 324 new pages of federal rules, laws, cases and orders per work day. 
• Of the 77,687 pages in the 2014 Federal Register, unelelected bureaucrats issued 24,861 in the form of regulations. 

Source: Ten Thousand Commandments, An Annual Snapshot of the Federal Regulatory State, 2015 Edition by the Competitive Enterprise Institute. 

  

Chicago is Spending $24 Million on a Wellness Program and Has No Clue if It's Working

It is so easy not to care when it is not your money.  This is from Crain's Chicago Business:

... [T]he city's watchdog said there are "serious questions" about whether the much-promoted [wellness] program, which aims to get city workers to shape up or pay more, actually has accomplished much except to spend money. 

"While the city spent nearly $10.5 million in taxpayer resources from 2012 to 2014 to improve employee health and reduce health care costs through (the program), the city has not formally assessed the program's impact in either area and, at present has no plans to do so," Ferguson said. With national research mixed on the subject, the city needs to set up "specific performance measurements and analysis" to find out. 

Under policies implemented by Emanuel, workers have to participate in Chicago Lives Healthy screenings, counseling and health activities or pay an extra $50 a month for their health insurance. Not surprising, 85 percent of benefits-eligible workers and dependents have signed up. 

But no formal measure of success has been adopted, Ferguson wrote, and the city's health care tab keeps rising. 

"In fact, despite a 19 percent decrease in its workforce between 2004 and 2013 (41,550 to 33,554 full-time equivalents), the city incurred a 43 percent increase in health care costs." 

The city's current $24 million contract with American Healthways Services, a Tennessee firm that runs the program, is due to expire at the end of the year. The company had received just under $10.5 million from the city through 2014. ...