Monday, March 30, 2015

The DOL Indicted 106 Individuals for Criminal Activity with Respect to Benefit Plans in 2014

This is from Melissa Winn at Employee Benefit Adviser:
Serving as a cautionary tale for employers and their benefit advisers, the Department of Labor’s increased efforts to investigate criminal activity with regards to employee benefit plans continued in fiscal 2014, including the indictment of 106 individuals. 
The DOL’s Employee Benefits Security Administration closed 365 criminal investigations in fiscal 2014, representing a nearly 30% increase since fiscal 2010. ... 
The number of criminal investigations has been trending upward since fiscal 2001, increasing 155% since then, but has accelerated in recent years, according a legal alert from the law firm Sutherland Asbill & Brennan. ... 
The Affordable Care Act’s reporting requirements have brought increased scrutiny of employer-sponsored health care plans and the government is largely expected to respond to anomalies or red flags with an employer audit. ...

Saturday, March 28, 2015

PPACA's Death Spiral is Afoot

According to the Manhattan Institute, premiums climbed by 41 percent on average from 2013 to 2014, and premiums are likely to rise sharply again after two insurance company bailout programs included in Obamacare expire in 2017. 
The other sign health insurance markets are in the early stages of a death spiral is the age mix of those buying policies through Obamacare. Originally it was estimated that around 40 percent of enrollees had to be in the relatively healthy 18 to 34-year-old age segment, so their premiums could be used to pay for the health expenses of older, less-healthy enrollees. So far it appears only some 28 percent of enrollees are in that coveted age group, which also comprises around half of the uninsured.  
All of this means insurers are getting a risk pool that is less healthy than expected, and more premium hikes are around the corner. While subsidies hide some from the full impact, others in the middle class will not be shielded....

Friday, March 27, 2015

Plan on Retiring? Make Sure You have $400,000 Tucked Away Solely for Healthcare

According to the 2015 Retirement Health Care Cost Data Report:
  • A healthy couple retiring at 65 this year will likely spend more than $266,000 on Medicare Part B, which covers doctors' visits and outpatient services, and Part D prescription drug plans as well as supplemental Medigap insurance over their lifetime. 
  • That is up 6.5% from last year's projection. 
  • When expected dental, vision, hearing costs not covered by Medicare, as well as co-pays and other out-of-pocket medical costs are included, lifetime cost estimates increase to nearly $395,000 for a 65-year-old couple retiring this year.
Full story.

Thursday, March 26, 2015

Hair Splitting Linguistic Minutia from the NLRB Conjures Up 39 Ways Your Employee Handbook Violates Federal Law

The National Labor Relations Board issued this March 18 report from General Counsel Griffin, chock-full of examples as to how your employee handbook is overly broad and violates the National Labor Relations Act whether you have union employees or not.

The report comes to you from one of your very favorite federal bureaucracies and is intended to help education employers as to what they can and can't ask of employees. The NLRB is taking this opportunity to expound upon recent case law and legal developments to make sure that employers don't include anything in an employee handbook that could be interpreted to chill employees from discussing terms of employment or working conditions.  To do that would run afoul of the Act.  

Below are some of my favorite examples of what the NLRB says are acceptable and unacceptable for your employee manual.  I'd like to subtitle this post, "Reason 984 to Not Become an Employer." 

Below are some of the strictly verboten terms from the report solely dealing the the topic of employer confidentiality.  The entire report goes on for 30 pages and contains other hair-splitting minutia on the topics of conduct towards supervisors, conduct towards co-workers, third party communications, logos, photography/recording at work, leaving work, and conflicts of interest.  It is mind numbing.  

Illegal Handbook Terms Regarding Employer Confidentiality
  • Do not discuss “customer or employee information” outside of work, including “phone numbers [and] addresses.”
  • “You must not disclose proprietary or confidential information about [the Employer, or] other associates (if the proprietary or confidential information relating to [the Employer’s] associates was obtained in violation of law or lawful Company policy) 
  • “Never publish or disclose [the Employer’s] or another’s confidential or other proprietary information. Never publish or report on conversations that are meant to be private or internal to [the Employer].”
  • Prohibiting employees from “[d]isclosing … details about the [Employer].”
  • “Sharing of [overheard conversations at the work site] with your co-workers, the public, or anyone outside of your immediate work group is strictly prohibited.”
  • “Discuss work matters only with other [Employer] employees who have a specific business reason to know or have access to such information…. Do not discuss work matters in public places.”
  • “[I]f something is not public information, you must not share it.”
  • Confidential Information is: “All information in which its [sic] loss, undue use or unauthorized disclosure could adversely affect the [Employer’s] interests, image and reputation or compromise personal and private information of its members.”
Legal Handbook Terms Regarding Employer Confidentiality
  • “Misuse or unauthorized disclosure of confidential information not otherwise available to persons or firms outside [Employer] is cause for disciplinary action, including termination.”
  • “Do not disclose confidential financial data, or other non-public proprietary company information. Do not share confidential information regarding business partners, vendors or customers.” 
  • “Do not disclose confidential financial data, or other non-public proprietary company information. Do not share confidential information regarding business partners, vendors or customers.” 
  • Prohibition on disclosure of all “information acquired in the course of one’s work.”
For a complete list of all 39 reasons your employer handbook breaks the law, see the comprehensive listing from Eric Meyer at the Employer Handbook.  

Must Read Benefit News for Practitioners and Advisers, March 26, 2015

  • Is There a Future for Employer Sponsored Health Insurance? Short answer, yes. Over the next five years, the effects of the PPACA on employer-sponsored insurance will be small. Any erosion in group coverage is likely to be limited to low-wage workers currently offered insurance in sub-50 employee groups.  That is the most likely place we'll see exchange uptake. [Source: Wharton Public Policy]. 
  • It's Time. Employers Should Consider Cadillac Tax Issues in Their CBAs. Employers are beginning to use a variety of strategies in CBAs to deal with the tax, such as reducing plan benefits and increasing deductibles; adding language to allow the employer to unilaterally reduce benefits to avoid the the Cadillac Tax; and allowing for automatic re-openers in 2017 when we have more regulations on the tax. [Source: Winston Strawn, LLP.] 

Governmental Success: 96% of Obamacare Enrollees Received the Wrong Subsidy Amount

Yes, you read that headline correct.  Sadly, every media headline I've seen on this topic completely misses the point by claiming some thing like, "Half of ObamaCare subsidy recipients will owe on their taxes."  That is not the full story.  In fact, it's only half of the story.

This is from Sarah Ferris at the Hill:
Half of all households that received ObamaCare tax credits last year will likely owe money to the federal government, a new study found. 
Nearly all families that received tax credits will either owe money or receive extra money because their tax filings had changed after they calculated their ObamaCare subsidies, according to a new report by the Kaiser Family Foundation. 
Only 4 percent of households received the correct subsidy, according to the report, which uses data from the national Survey of Income and Program Participation. 
Of those who will have to repay, the average amount owed is $794, the study found. Out of the 45 percent of people receiving money back, the average refund is $773....
The emphasis is mine.

So, in an effort to make healthcare more affordable and cover more people, our elected officials and federal bureaucrats have devised a system whereby citizens get the wrong tax subsidy 96% of the time.

Obamacare. Where a 96% error rate is the best wen can do.
Hat tip: Dr. Ryan Kennedy.


Stories Causing Atlas to Shrug, March 26, 2015 | Death Spiral Indicators, Employment Anchor & Keeping the Plan You Like

Death Spiral

Employment Anchor

Promises Kept

Wednesday, March 25, 2015

The More than 30 Individual Mandate Exemptions and Delay in Employer Mandate Means PPACA Hasn't Changed Employee Participation Rate in Employer Plans

Despite all of the headaches, cost increases and compliance nightmares, PPACA is not really moving the needle at all on employee participation in employer health plan coverage.  Much of that, undoubtedly, is due to the many delays and exemptions in play at the moment. 

This is from David Mcann at
Many companies feared that new health-insurance eligibility provisions under the Affordable Care Act that took effect for 2015, as well as the ACA’s individual mandate, would cause more employees to enroll this year, pushing up costs. 
Any hand-wringing over the matter appears to have been unjustified, however. 
With open enrollment results now in, Mercer reports in “Health Care Reform Five Years In” that there was virtually no change in the percentage of employees, full-time and part-time, who enrolled in employer-sponsored health plans. 
While there was a 1.6% increase in the number of employees enrolled, that was the result of a 2.2% increase in the size of the work force. ... 
Across all 600 employers that participated in the survey, the average percentage of employees who were eligible for coverage rose just one percentage point. 
And the average percentage of eligible employees who enrolled actually dropped a point, from 84% to 83%. That left the average percentage of all employees (both eligible and ineligible) who enrolled in 2015 essentially unchanged from 2014, at 74%. 
Enrollment Among respondents in the food and lodging businesses, the industry sector most affected by the 30-hour rule, the average percentage of employees eligible for coverage rose from 57% to 60%. But overall enrollment at those companies crept up by just one point, to 34%. ...

Monday, March 23, 2015

Doc Fix Deal on Tap This Week and Blue Shield Tax Status Overview with Audio from Armstrong and Getty Show

Doc Fix

Nancy Pelosi and John Boner are rumored to have brokered a deal to permanently solve the "doc fix." Congress is expected to vote this week.  If a deal is not struck by March 31st, the amounts paid to doctors treating seniors in Medicare would drop by about 20% immediately, thereby making it very hard for seniors to make appointments and get treatment.

17 times in 11 years, Congress and the President have delayed mandated Medicare reimbursement cuts as part of the so called ‘doc fix’. Those cuts have been required by law since 1997 and neither party has had the gumption nor the wherewithal to implement them, or more prudently, enact an honest solution. However, in passing PPACA, the Congressional Budget Office (CBO) scored the law as if the Medicare cuts would, in fact, occur. This despite the fact that not one congressman, senator or member of the executive branch truly believed such a cut would happen. 

Because many of the 17 band-aided fixes have taken the form of freezing doctor payments, the current payment rate is 17% below the 2001 rate, adjusted for increases in the cost of providing services. This rumored deal is slated to cost $210 billion over 10 years.  Fiscal conservatives are quick to point out that it will be $400 billion over 20 years as there will not likely be any long term savings from the legislation.  

Roughly two-thirds ($140 billion) of this proposed legislation is not paid for and will be tacked onto our deficit.  There are some nominal cuts to doctors, who will effectively see a 0.5% increase in Medicare reimbursements each year for the next five years.  Seniors making more than $133,500 will pay for $35 billion of the deal by paying 10% to 15% more in Medicare Part  B and D.  Seniors who currently pay 50% of those premiums will now pay 65% and those that paid 65% will now pay 75%.  

In order to get Democratic lawmakers to go along with this deal, the GOP has reportedly agreed to: 
  • $7 billion for community health centers; 
  • two more years of funding for the Children's Health Insurance Program (CHIP).  CHIP is a safety net for low income kids, in addition to Medicaid, covering about 10 million kids; and 
  • not offset the legislation by insisting on $140 billion in more cuts to pay for it. 
Some Democrats in the Senate, however, may thwart the deal as it is rumored they would like to hold out for additional funding for community health centers and two more years (for a total of four) for CHIP. 

Blue Shield of California

Last week the State of California made it known that it has revoked Blue Shield's nonprofit status and seeks tens of millions each year in back taxes extending back to 2013.  Blue Shield has paid federal taxes all along.  The California insurer has 3.4 million customers and reported $13.6 billion in revenue last year.

Its year-end $4.2-billion surplus is four times more than the amount the Blue Cross-Blue Shield Association says is required to cover future claims.  In 1996, California similarly removed tax exempt status from Blue Cross of California — now Anthem Blue Cross. It paid $3 billion in a settlement with the state at that time.

This news cannot be comforting to Kaiser.  Kaiser Permanente, also a nonprofit, has $21.7 billion in cash reserves, more than 1,600 times the amount required by state regulations and five times the reserve held by Blue Shield.  Kaiser argues that because it is a healthcare delivery system and an insurer, unlike Blue Shield which is solely an insurer, it needs more cash on hand.  I suspect, however, that argument will fall on deaf ears.

Here is my audio this morning from the Armstrong and Getty Radio Show:

You can hear all Armstrong and Getty podcasts here and live radio from 6 AM to 10 AM PST here.

You can hear all of my radio appearances on A&G and elsewhere in 2015 here.

Friday, March 13, 2015

Individual Mandate Exempt-A-Palooza Reaches 32 Ways You can Opt Out of Obamacare

32 Flavors of Obamacare Exemption

Why do we even still have an individual mandate?  Can we end this sham, yet? If you have a pulse, you can exempt yourself from the individual mandate.  We wasted thousands of hours and millions of dollars on a Supreme Court case on this matter only to see the law's proponents secretly repeal the individual mandate via extra-legal, administrative evisceration.

The below lists come from two government websites (here and here).  We are now up to 32 exemptions from the individual mandate.  There are 317 million Americans. Only 4 million will pay Obamacare's individual mandate. That's a whopping 1.26%. But in reality, none of them really needs to pay it either.  If they can't make one of the exemptions fit, they just aren't trying.

First, from the IRS:
  1. Coverage is considered unaffordable - The minimum amount you would have paid for employer-sponsored coverage or a bronze level health plan (depending on your circumstances) is more than 8 percent of your actual household income for the year as computed on your tax return. Also see the second hardship listed below, which provides a prospective exemption granted by the Marketplace if the minimum amount you would have paid for coverage is more than 8 percent of your projected household income for the year.
  2. Short coverage gap - You went without coverage for less than three consecutive months during the year.
  3. Income below the return filing threshold - Your gross income or your household income is less than your applicable minimum threshold for filing a tax return.
  4. Citizens living abroad and certain noncitizens
  5. Members of a health care sharing ministry - You are a member of a health care sharing ministry, which is an organization described in section 501(c)(3) whose members share a common set of ethical or religious beliefs and have shared medical expenses in accordance with those beliefs continuously since at least December 31, 1999.
  6. Members of Indian Tribes - You are a member of a Federally-recognized Indian tribe, including an Alaska Native Claims Settlement Act (ANCSA) Corporation Shareholder (regional or village), or you were otherwise eligible for services through an Indian health care provider or the Indian Health Service. 
  7. Incarceration - You are in a jail, prison, or similar penal institution or correctional facility after the disposition of charges.
  8. Members of certain religious sects - You are a member of a religious sect in existence since December 31, 1950, that is recognized by the Social Security Administration (SSA) as conscientiously opposed to accepting any insurance benefits, including Medicare and Social Security.
  9. Aggregate self-only coverage considered unaffordable - Two or more family members' aggregate cost of self-only employer-sponsored coverage exceeds 8 percent of household income, as does the cost of any available employer-sponsored coverage for the entire family.
  10. Gap in coverage at the beginning of 2014 - You had a coverage gap at the beginning of 2014 but were either enrolled in, or were treated as having enrolled in, coverage through the Marketplace or outside of the Marketplace with an effective date on or before May 1, 2014.
  11. General hardship - You experienced circumstances that prevented you from obtaining coverage under a qualified health plan, including, but not limited to, homelessness, eviction, foreclosure, domestic violence, death of a close family member, and unpaid medical bills. [More on this category later as it, alone, adds 13 more exemptions; many of which don't require documentation.  The hardship list begins on #20 of this list.]  
  12. Coverage considered unaffordable based on projected income - You do not have access to coverage that is considered affordable based on your projected household income.
  13. Determined ineligible for Medicaid in a state that did not expand Medicaid coverage - You are determined ineligible for Medicaid solely because the State in which you live does not participate in Medicaid expansion under the Affordable Care Act.
  14. Resident of a state that did not expand Medicaid - Your household income is below 138 percent of the federal poverty line for your family size and at any time in 2014 you reside in a state that does not participate in Medicaid expansion under the Affordable Care Act. (States that did not expand Medicaid: Alabama, Alaska, Florida, Georgia, Idaho, Indiana, Kansas, Louisiana, Maine, Michigan,  Missouri, Mississippi, Montana, North Carolina, Nebraska, New Hampshire, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wyoming, and Wisconsin.)
  15. Unable to renew existing coverage - You were notified that your health insurance policy was not renewable and you consider the other plans available unaffordable.  
  16. Gap in CHIP coverage - You applied for CHIP coverage during the initial open enrollment period and were found eligible for CHIP based on that application but had a coverage gap at the beginning of 2014.
  17. AmeriCorps coverage - You are engaged in service in the AmeriCorps State and National, VISTA, or NCCC programs and are covered by short-term duration coverage or self-funded coverage provided by these programs.
  18. Limited benefit Medicaid and TRICARE programs that are not minimum essential coverage - You are enrolled in certain types of Medicaid and TRICARE programs that are not minimum essential coverage. 
  19. Employer coverage with non-calendar plan year beginning in 2013 - You were eligible, but did not purchase, coverage under an employer plan with a plan year that started in 2013 and ended in 2014.  [At this point we move from the IRS list to the Harship list from
  20. You were homeless
  21. You were evicted in the past 6 months or were facing eviction or foreclosure
  22. You received a shut-off notice from a utility company
  23. You recently experienced domestic violence
  24. You recently experienced the death of a close family member
  25. You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property
  26. You filed for bankruptcy in the last 6 months
  27. You had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt
  28. You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member
  29. You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and CHIP, and another person is required by court order to give medical support to the child. In this case, you don't have the pay the penalty for the child.
  30. As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace
  31. Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable
  32. If you experienced another hardship in obtaining health insurance, use this PDF form to apply for an exemption with the Marketplace.
There actually would be 33 total but the second list from repeats numbr 14 on this list with slightly different wording.  Notice that numbers 31 and 32 on this list are truly doozies.  You can simply "believe" that Obamacare plans are too costly or experience any of another limitless form of hardship and get yourself out of the law.  So in reality, the 4 million Americans that are estimated to pay this fine should receive an "F" in creative writing and imagination.

The individual mandate does not exist.  It is a mirage.  We need to repeal it now so that we don't have citizens wasting countless hours this tax season trying to comply with pages of complex, conflicting and incomprehensible documentation as to their healthcare coverage or 32-flavors of exemption.  

BLS - Total Compensation Cost for a Union Worker: $46.50 per hr; For a Nonunion worker: $29.83

From the Bureau of Labor Statistics:
Private industry employers spent an average of $31.32 per hour worked for employee compensation in December 2014. Wages and salaries averaged $21.72 per hour worked and accounted for 69.4 percent of these costs. Benefits averaged $9.60 and accounted for the remaining 30.6 percent.  
Total compensation costs for union workers averaged $46.50 per hour worked in December 2014. The average for nonunion workers was $29.83. Benefits accounted for 40.3 percent of compensation costs for union workers, compared with 29.2 percent for nonunion workers. 
These data are from the Employment Cost Trends program. For more information, see "Employer Costs for Employee Compensation — December 2014" (HTML) (PDF).

What Happens If the Supreme Court Rules Against the Administration in King v. Burwell?

Andrew Kloster (Legal Fellow in the Edwin Meese III Center for Legal and Judicial Studies) and Alden F. Abbott (Deputy Director of the Meese Center) have written an outstanding, comprehensive, yet very readable summary about what will happen to health reform if the plaintiffs win in King v. Burwell at the Supreme Court.

Absent action by the federal government or states, a ruling against the Obama Administration would mean that:
  1. The overwhelming majority of individuals currently subjected to the individual mandate would be exempted as they would not be required to purchase unaffordable care. 
  2. The absence of those subsidies would also neuter the employer mandate in the 34 states that chose not to set up their own exchanges. And
  3. Federalism would be preserved as each of those 34 states could then opt to address the exchange situation on a case by case basis as they see fit.  
Read the whole article here

Promising New Alternative to Obamacare Proposed

Over at Life Health Pro, Allison Bell has summarized a promising new alternative to PPACA.  This proposal actually has a lot of potential and would make significant improvements.

"The PPACA replacement bill ... would:
  • Fund Medicaid with enrollment-based block grants.
  • Change medical malpractice rules.
  • Set new health care price transparency rules.
  • Create tax credits individuals and employers could use to buy health coverage. Credits would be available to individuals with annual income up to 300 percent of the federal poverty level.
  • Adjust the PPACA commercial health insurance consumer protection rules." 
Read the whole article here.

Sharing Economy, Social Media and "" Types of Businesses Helping to Reduce Employer Healthpan Costs

Interesting innovations in plan cost control.  

From and the Economist:
[The rise in healthcare costs] is also encouraging the creation of all sorts of health-related advisory and intermediary companies that help care providers, insurers, and patients save money. A company called Vitals approaches employees on behalf of their company’s health plan, and offers them cash rewards, and a taxi, if they agree to be treated at a cheaper provider.

The sums to be saved can be astonishing: a new cost-comparison tool created by Blue Cross Blue Shield, a big alliance of private health insurers, has found that a colonoscopy with a biopsy costs $8,489 at one clinic in Chapel Hill, North Carolina, but just $928 at another provider in Greensboro, only 50 miles or so away.

Cohealo offers a “sharing economy” solution for hospitals and clinics wanting to make the best use of expensive equipment, in much the same way as Airbnb helps people with spare rooms fill them with paying guests. Doximity is trying to be a Facebook for doctors, letting them refer patients and discuss treatments securely without the blizzard of faxes they rely on today.

Grand Rounds is a sort of medical an online matchmaker that pairs patients with specialists. As in other industries, administrators are being tempted to switch to renting software and data storage in the online “cloud”: Athenahealth, a seller of medical back-office software, is trying to get doctors and hospitals to move patients’ health records onto its cloud-based service. ...

Stories Causing Atlas to Shrug, Friday the 13th Edition | Aging Exchanges, Pricy Rx & Doc Shortage

Death Spiral Alert: If 2014-15 PPACA Exchange sign-up participation among young adults had matched their share of the population, then 4.8 million young adults would have enrolled this year — but just 3.25 million selected plans.

Millennials Saving; But Not Enough: In a recent survey of millennial workers, 63% report they started saving for retirement before age 25. But less than a third are saving at least 10% of their salary through their employer-sponsored retirement plan.

Pricy DrugsPrescription drug spending increased 13.1% in the United States last year, attributed partly to an increase in spending for specialty drugs.  This is more than double the rate of increase on medical services in general and the highest such increase in over a decade.

Doc Shortage QuantifiedPatient demand for doctors will grow by 17% by 2025, while physician supply will increase by 9%. Physician specialty areas, such as surgery, are expected to experience the greatest shortfalls. For instance, this study projects a primary care shortfall of between 12,500 and 31,000, and a non-primary care shortfall of between 28,200 and 63,700.


Thursday, March 12, 2015

Want to Really Anger Employees? Automatically Enroll Them in Your Health Plan Whether They Like it or Not

PPACA mandates that employers with more than 200 full-time employees are required to enroll newly hired full-time employees in a plan unless the employee specifically opts out of that plan. Federal regulators, however, have said that provision won’t take effect until the DOL issues regulations on the matter.  

But a new story caught my eye.  It seems that some employers are relying on PPACA to just enroll employees and deduct their pay whether they sign up or not.  Thankfully, none of my clients have chosen to go this route.  But, with PPACA's upcoming nondiscrimination rules and with carriers' increasing scrutiny around minimum participation requirements it does make sense that some employers would auto-enroll employees in order to avoid running afoul of the myriad of rules and regulations shot at them under reform. 

This is from Michelle Andrews at Kaiser Health News:
Under the health law, large employers that don’t offer their full-time workers comprehensive, affordable health insurance face a fine. But some employers are taking it a step further and requiring workers to buy the company insurance, whether they want it or not. Many workers may have no choice but to comply. 
Some workers are not pleased. One disgruntled reader wrote to Kaiser Health News: “My employer is requiring me to purchase health insurance and is automatically taking the premium out of my paycheck even though I don’t want to sign up for health insurance. Is this legal?” 
The short answer is yes. Under the health law, employers with 100 or more full-time workers can enroll them in company coverage without their say so as long as the plan is affordable and adequate. That means the employee contribution is no more than 9.5 percent of the federal poverty guideline and the plan pays for at least 60 percent of covered medical expenses, on average. 
“If you offer an employee minimum essential coverage that provides minimum value and is affordable, you need not provide an opt out,” says Seth Perretta, a  partner at Groom Law Group, a Washington, D.C., firm specializing in employee benefits. ...

Tuesday, March 10, 2015

March 2015 CBO Report: Health Reform to Cover Fewer as Premium Increases Set to Double | With Audio from Armstrong & Getty

Most of the talk about the latest Congressional Budget Office Report on the Patient Protection and Affordable Care Act (PPACA or Health Reform) has been rather positive. Headlines proclaim that costs are decreasing and cursory reports lead readers to believe that some element of PPACA must be working to reign in the costs of American healthcare.  But a more in depth look reveals large scale problems with the law.  Our savings are not due to some masterful control in costs but instead to a greater degree of cost shifting, a still struggling economy, and under-utilization due to woefully narrow networks.  People aren't using as much healthcare because:
  • Too many Americans are still not working or underemployed.  I don't care that the disingenuously manipulated U-3 is going down.  That statistic is useless.  The last jobs report revealed that the population grew by 176,000 while the labor force shrunk by 178,000 for a net increase of 354,000 people not in the labor force. This reduced our participation rate again to 62.8%.  
  • Higher deductibles and copays used in PPACA's most common Bronze and Silver plans are keeping people from going to the doctor. And, 
  • The incredibly narrow networks used in the Exchanges have greatly impeded people's ability to actually see doctors.  
For more on the how the economy, jobs and income impact healthcare use, take a look at this excellent piece from Avik Roy in Forbes illustrating how the current slowdown in healthcare spending actually began in 2007 - long before we had PPACA.  

There definitely are some elements of good news in this report, namely:
  • The total cost of PPACA is now slated to be $1.75 trillion as opposed to January's 2.03 trillion. 
  • This is anticipated to result in a net cost of 1.2 trillion after PPACA's taxes and fees are collected.
  • Fewer people will be relying on government handouts for their healthcare as 22 million are now estimated to be in an Exchange in 2025 as opposed to January's 24 million estimate.  
  • Similarly, fewer people will have to rely on Medicaid or CHIP (very poor performing programs for those in poverty).  That number has dropped from 16 million to 14 million.  
  • 2 million fewer folks will actually lose their employer coverage.  Now the CBO estimates that 7 million will lose it by 2025 as opposed to 9 million.  

But further analysis of this report paints a much more troubling picture:

   More Government Subsidies
  • Subsidies to help purchase coverage through the Exchanges totaled $15 billion in 2014. That figure is expected to grow to $41 billion in 2015 and $107 billion in 2025.  
  • 8 million of the 11 million individuals enrolled in Exchange coverage will receive subsidy transfers averaging $3,960 in 2015. By 2020, about 17 million of the 23 million expected to be enrolled in Exchange coverage will receive annual handouts of $5,070 on average. 
  More Spending on the Broken System of Medicaid
  • CBO officials estimated an $8 billion increase in Medicaid spending over the next two years because of unanticipated higher federal spending on the program during the first four months of 2015.
  More Uninsured
  • "When the CBO first estimated Obamacare’s impact on the uninsured, in March 2010, the agency predicted that the law would reduce the number of uninsured U.S. residents by 32 million by 2019. Its now predicts a reduction of 24 million; in other words, Obamacare’s impact on coverage will be 8 million fewer than originally predicted." - Avik Roy, Forbes
  Entirely Unaffordable
  • It's unaffordable without handouts. "Of the 8.8 million people who signed up for 2015 coverage via through Feb. 22, 87% qualified for premium tax credits, Health and Human Services Secretary Sylvia Burrell said Monday, leaving just 13% of the group unsubsidized." - Jed Graham, Investors Business Daily
  The Illusory Cadillac Tax Moves Closer
  • CBO is finally starting to acknowledge that the Cadillac Tax on higher value plans, set to begin in 2018, will not yield the revenue they expected it would.
    • Taxes such as this rarely generate what they are anticipated to generate because businesses and individuals engage in rational avoidance.  
    • But more importantly, as that date approaches and the unions who hate the provision join together with other opponents of the law, the likelihood of its amendment, repeal or administrative neutering becomes increasingly probable. 
    • In fact, I suspect this aspect of the law will be repealed or amended so as to render this provision toothless, eventually. 
    • In this revision, alone, the CBO expects to yield 62 million fewer dollars from the Cadillac "Excise" Tax. That is a downward revision of 42% in two months. 
  Premiums About to Spike, Again
  • Private healthcare spending per enrollee is going to double from about 4.3% inflation per year per enrollee to about 8.5% for two reasons, the CBO Says: 
    • "Reinsurance payments that the government makes to insurance plans whose enrollees incur particularly high costs for medical care will be phased out over the next two years, placing upward pressure on exchange premiums.  
    • Plans initially offered through the exchanges appeared to have, in general, lower payment rates for providers, narrower networks of providers, and tighter management of their subscribers’ use of health care than do employment-based plans. CBO and JCT anticipate that many plans will not be able to sustain such low provider payment rates or such narrow networks over the next few years, placing upward pressure on exchange premiums."
    • I.e., premiums are about to spike at double their historical rate as insurer bailouts are set to expire and because the woefully inadequate, super narrow networks can't last. 
I visited Armstrong & Getty briefly on Wednesday morning to discuss this report. All Armstrong and Getty podcasts can be found here. This was today's segment: 

Why Your Summer Interns are Probably Not Seasonal Employees under PPACA and Must Be Offered Benefits by the 90th Day

First off, the terms “seasonal worker” and “seasonal employee” are both used in the Employer Shared Responsibility provisions of PPACA but in two different contexts with two different meanings.

The IRS has clarified that the term “seasonal worker” is relevant for determining whether an employer is an applicable large employer subject to the Employer Shared Responsibility provisions:
To be an applicable large employer, an employer must have employed, during the previous calendar year, at least 50 full-time employees (including full-time equivalent employees).  However, if an employer’s workforce exceeds 50 full-time employees (including full-time equivalent employees) for 120 days or fewer during a calendar year, and the employees in excess of 50 who were employed during that period of no more than 120 days were seasonal workers, the employer is not considered an applicable large employer.  Seasonal workers are workers who perform labor or services on a seasonal basis, as defined by the Secretary of Labor, and include retail workers employed exclusively during holiday seasons.  For this purpose, employers may apply a reasonable, good faith interpretation of the term “seasonal worker.” 
Whereas the term “seasonal employee” is relevant for determining an employee’s status as a full-time employee under the look-back measurement method:
For purposes of the Employer Shared Responsibility provisions, an employee is a full-time employee for a calendar month if he or she averages at least 30 hours of service per week (or 130 hours of service per month).  The final regulations under the Employer Shared Responsibility provisions provide two methods for determining full-time employee status, one of which is the look-back measurement method.  Under the look-back measurement method an employer may determine an employee’s status as a full-time employee during a period (referred to as the stability period), based upon the hours of service of the employee in a prior period (referred to as the measurement period). The look-back measurement method includes special rules that apply to new employees who are seasonal employees.  For this purpose, a seasonal employee means an employee who is hired into a position for which the customary annual employment is six months or less and for which the period of employment begins each calendar year in approximately the same part of the year, such as summer or winter. 
The remainder of this article deals with seasonal employees as it is assumed all readers beyond this point have at least 50 full-time employees.

Full Time Employees 

For a new employee who is reasonably expected at his or her start date to be a full-time employee (and is not a seasonal employee - as explained below), the employer determines the employee’s status as a full-time employee based on the employee’s hours of service for each calendar month. Whether an employer’s determination regarding a new employee’s full-time status is reasonable is based on the facts and circumstances at the employee’s start date.

Examples of factors to consider in determining if a new employee is full-time:
  • Whether the employee is replacing an employee who was (or was not) a full-time employee;
  • The extent to which hours of service of ongoing employees in the same or comparable positions have varied above and below an average of 30 hours of service per week during recent measurement periods; and
  • Whether the job was advertised, or otherwise communicated to the new hire or documented (for example, through a contract or job description), as requiring hours of service that would average 30 (or more) hours of service per week or less than 30 hours of service per week.
If the employee’s hours of service for the calendar month equal or exceed an average of 30 hours of service per week, the employee is a full-time employee for that calendar month.

Variable Hour, Seasonal and Part-time Employees

Under the look-back measurement method, the Company determines whether new variable hour employees, new seasonal employees and new part-time employees are full-time employees by measuring their hours of service during an initial measurement period (or IMP).
  • An employee is a variable hour employee if, at the employee’s start date, the Company cannot determine whether the employee is reasonably expected to be employed, on average, at least 30 hours per week because the employee’s hours are variable or otherwise uncertain.
  • A part-time employee is a new employee who the Company reasonably expects to be employed, on average, less than 30 hours per week during the IMP, 
  • A seasonal employee is generally an employee who is hired into a position for which the customary annual employment is six months or less. Also, the period of employment for a seasonal employee should begin each calendar year in approximately the same part of the year, such as summer or winter.
Summer Interns and Short Project Employees

If an employee is expected to work more than 30 hours per week (130/month) on a regular basis but only for a limited period of time, you will need to offer benefits within 90 days or at the time you would normally offer benefits to your full time employees (for example, on the first of the month following 60 days).  The only ways to safely circumvent offing such benefits to a short-timer or summer intern would be if:
  1. The person could be legitimately categorized as a seasonal worker which means that their job can only, by it's very nature and definition, be accomplished during a recurring season.  For example, ski lift operators can only work from November to March in northern California because that is when snow is present.  The same logic would apply to someone who is harvesting a crop that may only be attended to during a finite period of time of less than six months. Or;
  2. the person will work less than 90 days. Or; 
  3. the person will be working less than 30 hours per week. 
Many clients are opting to limit summer interns to a maximum of 29.5 hours a week in order to avoid this issue. That is one clean and simple way to address this matter.

Others are limiting summer interns to 89 or less days to accomplish the same goal. However, that day limit also means you cannot subsequently hire that summer intern inside of 13 weeks as you would then have made that person a full time employee and violated their right to earn benefits as other full timers would have earned them (such as on the first of the month following 60 days).  If an employee goes at least 13 consecutive weeks without an hour of service and then earns an hour of service, he or she is treated as a new employee for purposes of determining the employee’s full-time status under the look-back measurement method.

Many summer interns might be asked to work more than 90 days and be desired to work more than 30 hours a week.  Then, you might periodically hire that summer intern an additional 20 to 25 hours per week after the summer if they turn out to be a valued employee.  In these cases, it is clear: you must offer them benefits as if you hired them as a full time employee on day one.

I also understand that some employers would like to take the position that all summer interns are, in fact, seasonal employees as their work can only be performed during summer break.  I think it clear from all IRS, HHS and DOL guidance on the matter that such a position is too risky for an employer to take.  The only way I'd feel comfortable with that interpretation is if the summer intern's "seasonal" work is truly something that, by its very nature, could not reasonably be accomplished during the fall, winter or spring.

Hence, in all cases, employers would be safest to limit summer intern work to 29.5 hours a week or simply offer benefits as you would to full time employees.  Most of the interns would not take you up on the benefit offer anyway as they are normally covered under a parent's plan until they are 26 years old.  And even if they accepted those benefits, they would only be on them for a month or two as they would no longer qualify when they went back to school and reduced work hours for to zero or some number under 30 hours a week.

Saturday, March 7, 2015

Oklahoma's Message to Sup. Ct. Justice Kennedy Re IRS' Illegal Subsidies for Obamacare Enrollees in States Opting Out of Exchanges

The below quoted language is Oklahoma's Attorney General, Scott Pruitt, writing in the Wall Street Journal in response to comments made by Justice Kennedy during Wednesday's Supreme Court case, King v. Burwell.  The case hinges on wording in the 2010 Affordable Care Act stipulating that premium tax credits—i.e., subsidies for states like Oklahoma and 35 other states—are available for people who enroll in ObamaCare “through an exchange established by the State.” 

36 states opted not to open up a state-run Exchange, and instead, chose to let the federal government open and operate those Exchanges.  Most of the law's proponents want subsidies available in all 50 states irrespective of who runs the state's Exchange.  However, many states and opponents of PPACA do not want subsides available in their state because the availability of subsidies substantially increases the likelihood and prevalence of individual mandate fines and employer mandate penalties.

This leaves us with the question: does "through an exchange established by the State" mean through an exchange established solely by the state or either by the state or federal government?

This is from Attorney General Pruitt:
... [In oral argument yesterday,] Justice Kennedy was asking, if Congress did in fact condition ObamaCare’s tax credits on a state having set up an exchange, does that amount to an unconstitutional coercion of the states? In short: no. 
First, in the last ObamaCare case, NFIB v. Sebelius (2012), the Supreme Court said a statute is coercive only if it amounts to “a gun to the head” that “leaves the States with no real option but to acquiesce.” Here, we know that states had an option not to acquiesce in establishing health-care exchanges because they did not, as a matter of fact, acquiesce. Compare and contrast this with the Medicaid expansion at issue in NFIB v. Sebelius, where no state had refused the expansion, precisely because it was so coercive. 
There is no merit to the argument that the states were unaware of the consequences of refusing to establish an exchange. Oklahoma, for example, where I am attorney general, sued the Internal Revenue Service months before making its decision to decline to set up an exchange, arguing that the ObamaCare tax credits and subsidies could not be given in Oklahoma. Oklahoma knew the consequences of its decision but was not coerced into cooperating with implementation of the Affordable Care Act. 
Likewise, in January 2012, seven states, including Virginia, Maine and North Dakota, asked the federal government for “a written legal opinion from the Office of the Attorney General or a declaration from a federal court certifying that the federal government is authorized to establish an exchange under federal law, and detailing the authority of the federal government in all operational aspects of the exchange, including, but not limited to the authority to administer premium tax credits.” Those seven states were aware of the possibility that the IRS might have no authority to grant tax credits in states that declined to establish an exchange. ...
Second, there is no legal precedent for a finding of coercion based solely on the fact that a federal program does not work well when the states decline to assist in its implementation. This sort of “well, Congress did such a bad job that states have no choice but to step in and bail Congress out by acquiescing” argument is, as U.S. Solicitor General Donald Verrilli put it Wednesday, “novel.” That is precisely why the federal government never made this argument in any brief, and why Mr. Verrilli was quick to distance himself from it at oral argument. 
Third, this sort of federal program isn’t antithetical to federalism, it is federalism. As we explained in our amicus brief to the court, this carrot-and-stick approach is found in dozens of federal programs sprinkled throughout the United States Code. The states are not children that the federal government must paternalistically “protect” from the consequences of their choices by rewriting statutes. In our constitutional system, states are free to make decisions and bear the political consequences, good or bad, of those choices. 
Declining to establish a state exchange allowed Oklahoma to voice its strong political opposition to the Affordable Care Act as a whole, as well as to make a statement that it wanted neither the large-employer mandate nor the individual mandate to have effect within its borders. That was the trade-off. Oklahoma declined the premium tax credits, but freed itself of those mandates, and that was a choice the state was happy to make. 
So to Justice Kennedy I say this: King v. Burwell isn’t about protecting the states from their choices, it is about allowing coequal sovereigns to make their choice and bear the consequences of that choice. ...

Compliance & Reform Updates: SCOTUS Hears Federal Subsidies Case; Cadillac Tax Comments Sought; Penalties for No Coverage & ADA Violated at End of FMLA Leave

Healthcare Reform
IRS Invites Comments on Cadillac Tax Implementation for 2018
March 4, 2015-BB&T Insurance Services
Excerpt: “For taxable years beginning in 2018, the Affordable Care Act (ACA) imposes a 40 percent excise tax on high-cost group health coverage. This tax, also known as the “Cadillac tax,” is intended to encourage companies to choose lower-cost health plans for their employees… The Cadillac tax is on the "excess benefit," which is the amount that the cost of coverage exceeds certain statutory dollar limitations. There are separate statutory limitations for self-only coverage and other-than-self-only coverage. The Notice contains a discussion of how the statutory limit might be determined where an employee has self-only coverage for some benefits and other than self-only coverage for other benefits.”

The Cadillac Tax: How a 40% Tax Really Could Mean a 60% Tax
March-Employee Benefit News
Excerpt: "The Cadillac tax is a nondeductible excise tax, which increases the cost impact on for-profit employers. And depending upon who the “coverage provider” is that pays the tax, employers may be paying out closer to 60% to cover the excise tax, say Laderman and Stover. For insured plans, insurers likely will build the excise tax into the premium rates they charge employers. Because the premium amount is taxed for the insurer as income, they’ll likely build in 60% to ensure the 40% is covered after taxes. The tax treatment could also prove costly for non-profits and governments. How the tax treatment will play out remains to be seen."

Mid-argument updates: King v. Burwell (Latest update: 11:06)
March 4, 2015-SCOTUS
Excerpt: “In the midst of a discussion of context and the consequences of petitioners’ reading, Justice Kennedy raised a question that will surely receive a lot of scrutiny in the coming discussion of the case. He pointed out that, under petitioners’ reading, the federal government would be all but forcing states to create their own exchanges. That’s true not just for the headline reason covered by this case – that their citizens would be denied benefits – but for a very perceptive reason that Justice Kennedy added: namely, state insurance systems will fail if the subsidy/mandate system created by the statute does not operate in that particular state.”

FAQ: What Are The Penalties For Not Getting Insurance?
March 3, 2015-Kaiser Health News
Excerpt: “The $95 penalty has gotten a lot of press, but many people will be paying substantially more than that. A single person earning more than $19,650 would not qualify for the $95 penalty ($19,650 – $10,150 = $9,500 x 1percent = $95). So the 1 percent penalty is the standard that will apply in most cases, say experts. For example, for a single person whose modified adjusted gross income is $35,000, the penalty would be $249 ($35,000 – $10,150 = $24,850 x 1percent = $249).”

King v. Burwell: What to Expect From the Supreme Court Argument
March 2, 2015-Olgetree Deakins
Excerpt: “…the Supreme Court is not expected to issue a decision in King until close to the last day of the current term. The Supreme Court’s order disposing of the case—referred to as its “mandate”—is not issued until at least 25 days after the decision is announced, and the Court has discretion to withhold its mandate beyond that minimum period. In practice, this means that an adverse outcome for the government may have a somewhat delayed impact. However, rather than attempting to anticipate the substance of the Court’s decision, employers should continue their ongoing ACA compliance efforts and await further official guidance before suspending or modifying those efforts in reliance on King.”

March 6, 2015-Alston Bird Employee Benefits and Executive Compensation Advisory
  • "Mere pay increase that is not restricted is OK. If an employer increases compensation to assist employees with payments for individual market coverage, the arrangement is not an employer payment plan as long as the increased compensation is not conditioned on the employee’s purchase of individual market coverage.
  • Including premium reimbursements (conditioned on purchase of coverage) in income still results in an [impermissible] employer payment plan. If an employer pays an individual market premium directly or reimburses an employee upon proof of premium payment, the arrangement would be an employer payment plan subject to Notice 2013-54 even if the employer includes the amount in taxable income." This arrangement will run afoul of new Reform laws for groups over 50 employees. 

In Other News
EEOC Charges Employer Violated ADA By Terminating Employment At FMLA Leave End
March 2015-Solutions Law Press
Excerpt: “Employers considering terminating the employment of employees not ready to resume their usual duties when their eligibility for medical leave ends under the Family & Medical Leave Act (FMLA) or other leave policies should first consider whether the employee qualifies for accommodation under the Americans With Disabilities Act. That’s the message transmitted by a new Employment Opportunity Commission (EEOC) Americans With Disabilities Act (ADA) lawsuit against ValleyLife of Phoenix, Arizona.”

March 6, 2015-Mish's Global Economic Trend Analysis
  • Civilian Non-institutional Population: +176,000
  • Civilian Labor Force: -178,000
  • Not in Labor Force: +354,000
  • Participation Rate: -0.1% to 62.8%