Saturday, May 30, 2015

America Faces an Epidemic of Overdiagnosis and Overtreatment Wasting One-Third of Healthcare Dollars and Costing Lives

Millions of Americans get tests, drugs, and operations that won’t make them better, may cause harm, and cost billions.

This is an excerpt from a 9,000 word article in the New Yorker written by Atul Gawande:
[A] huge proportion [of people] receive care that [is] simply a waste.
The researchers called it “low-value care.” But, really, it was no-value care. They studied how often people received one of twenty-six tests or treatments that scientific and professional organizations have consistently determined to have no benefit or to be outright harmful. Their list included doing an EEG for an uncomplicated headache (EEGs are for diagnosing seizure disorders, not headaches), or doing a CT or MRI scan for low-back pain in patients without any signs of a neurological problem (studies consistently show that scanning such patients adds nothing except cost), or putting a coronary-artery stent in patients with stable cardiac disease (the likelihood of a heart attack or death after five years is unaffected by the stent). In just a single year, the researchers reported, twenty-five to forty-two per cent of Medicare patients received at least one of the twenty-six useless tests and treatments. ...
H. Gilbert Welch, a Dartmouth Medical School professor, is an expert on overdiagnosis, and in his excellent new book, “Less Medicine, More Health,” he explains the phenomenon this way: we’ve assumed, he says, that cancers are all like rabbits that you want to catch before they escape the barnyard pen. But some are more like birds—the most aggressive cancers have already taken flight before you can discover them, which is why some people still die from cancer, despite early detection. And lots are more like turtles. They aren’t going anywhere. Removing them won’t make any difference. 
We’ve learned these lessons the hard way. Over the past two decades, we’ve tripled the number of thyroid cancers we detect and remove in the United States, but we haven’t reduced the death rate at all. In South Korea, widespread ultrasound screening has led to a fifteen-fold increase in detection of small thyroid cancers. Thyroid cancer is now the No. 1 cancer diagnosed and treated in that country. But, as Welch points out, the death rate hasn’t dropped one iota there, either. (Meanwhile, the number of people with permanent complications from thyroid surgery has skyrocketed.) It’s all over-diagnosis. We’re just catching turtles. 
Every cancer has a different ratio of rabbits, turtles, and birds, which makes the story enormously complicated. A recent review concludes that, depending on the organ involved, anywhere from fifteen to seventy-five per cent of cancers found are indolent tumors—turtles—that have stopped growing or are growing too slowly to be life-threatening. Cervical and colon cancers are rarely indolent; screening and early treatment have been associated with a notable reduction in deaths from those cancers. Prostate and breast cancers are more like thyroid cancers. Imaging tends to uncover a substantial reservoir of indolent disease and relatively few rabbit-like cancers that are life-threatening but treatable.
We now have a vast and costly health-care industry devoted to finding and responding to turtles. Our ever more sensitive technologies turn up more and more abnormalities—cancers, clogged arteries, damaged-looking knees and backs—that aren’t actually causing problems and never will. And then we doctors try to fix them, even though the result is often more harm than good. 
The forces that have led to a global epidemic of overtesting, overdiagnosis, and overtreatment are easy to grasp. Doctors get paid for doing more, not less. We’re more afraid of doing too little than of doing too much. And patients often feel the same way. They’re likely to be grateful for the extra test done in the name of “being thorough”—and then for the procedure to address what’s found. ...
Could a backlash arrive and halt the trend [of overtreatment]? It’s a concern. No one has yet invented a payment system that cannot be gamed. If doctors are rewarded for practicing more conservative medicine, some could end up stinting on care. What if Virginia Mason turns away a back-pain patient who should have gone to surgery? What if Dr. Osio fails to send a heart patient to the emergency room when he should have? What if I recommend not operating on a tiny tumor, saying that it is just a turtle, and it turns out to be a rabbit that bounds out of control?
Proponents point out that people can sue if they think they’ve been harmed, and doctors’ groups can lose their contracts for low-quality scores, which are posted on the Web. But not all quality can be measured. It’s possible that we will calibrate things wrongly, and skate past the point where conservative care becomes inadequate care. Then outrage over the billions of dollars in unnecessary stents and surgeries and scans will become outrage over necessary stents and surgeries and scans that were not performed.
Right now, we’re so wildly over the boundary line in the other direction that it’s hard to see how we could accept leaving health care the way it is. Waste is not just consuming a third of health-care spending; it’s costing people’s lives. As long as a more thoughtful, more measured style of medicine keeps improving outcomes, change should be easy to cheer for. Still, when it’s your turn to sit across from a doctor, in the white glare of a clinic, with your back aching, or your head throbbing, or a scan showing some small possible abnormality, what are you going to fear more—the prospect of doing too little or of doing too much?...

Friday, May 29, 2015

Overhead Costs and Bureaucratic Waste Exploding Under Obamacare, Study

Don't worry, they are from the government and they are here to make healthcare more affordable.

Okay, now you can stop laughing and get up off of the floor. The latest numbers are in on the Patient Protection and Affordable Care Act's ("PPACA's") administrative costs and the results are predictable, yet still staggering because of the sheer scale of inefficiency and waste.

Many in the industry knew that heaping a massive federal bureaucracy on top of an already inefficient, over-regulated oligopoly would only make things worse. But things appear to be getting much worse in a hurry. Administrative costs for healthcare plans are expected to explode by more than 270 billion dollars over the next ten years, according to a new study published by the Health Affairs blog.

The quarter of a trillion dollars in new costs, covering both private insurers and government programs, will be “over and above what would have been expected had the law not been enacted,” one of the authors, David Himmelstein, wrote.
  • This year alone, overhead is expected to make up 45% of all federal spending related to PPACA. 
  • By 2022, that ratio is supposed decrease to about 20% of federal spending related to the law. 
  • In contrast, by the very rules of PPACA, large group insurers are only permitted to keep a maximum of 15% for administration and profit on any policy sold with the remainder being rebated to customers. 
  • This level of administrative waste equates to $1,375 per newly insured person per year.  
  • Obamacare is not out of line with other bloated administrative costs from federal healthcare programs. Medicare Advantage plans’ overhead averaged $1,355 per enrollee in 2011. 
  1. "The Post-Launch Problem: The Affordable Care Act’s Persistently High Administrative Costs", by David Himmelstein and Steffie Woolhandler at the Health Affairs Blog and 
  2. "Overhead costs exploding under ObamaCare, study finds", by Sarah Ferris at The Hill. 

Tuesday, May 26, 2015

New Overtime Rule to Reduce Overall Wealth, Create More Admin Work for HR and Accelerate Automation

Much like increases in the minimum wage, government mandated artificial price-floors effectively outlaw entry level jobs and, in this case, overtime.  When a market won't support the pricing bureaucrats fancy, employers reduce hours, automate, sell less, or simply close their doors. This is from Allen Smith writing at SHRM, summarizing a study from Oxford Economics regarding the government's attempts to increase pay via overtime laws: 
A big concern HR professionals have with the upcoming proposed overtime rule is how their employers will afford overtime for so many additional people, assuming that the salary threshold for exempt positions is raised and many more employees become eligible for overtime. 
But research has found that realistically, no matter how much the salary threshold is increased, employers will adapt and use various strategies to keep employees’ overall pay relatively the same, according to a May 19, 2015, National Retail Federation and Oxford Economics study
Raising the wage threshold from $455 to $984 per week, or to more than $51,000 per year, would mandate overtime pay for an additional 2.2 million workers in the retail and restaurant industries alone. “Assuming, unrealistically, that employers do nothing to alter workers’ hours, benefits or hourly rate of pay to compensate for their increased costs, this would cost restaurant and retail employers $9.5 billion per year,” the report stated. 
However, businesses likely would adjust compensation schemes to ensure they do not absorb additional labor costs by:
  • Lowering hourly rates of pay to leave total pay amounts largely unchanged.
  • Cutting bonuses and benefits to increase base salaries above the new threshold.
  • Reducing some workers’ hours to fewer than 40 per week to avoid paying overtime, cutting compensation proportionally.
Employers likely would counteract those lost hours by hiring new, lower-wage and largely part-time hourly workers, the study predicted. 
In jobs with back-office activities, employers would turn to automation to increase efficiency. And workers in lower-level professional and managerial jobs would find their status jeopardized, the study added. 
“The net results of these changes would be an accelerated ‘hollowing out’ of low-level professional and administrative functions, as firms centralize their management structures to rely on a smaller number of genuine managers and professionals,” the report stated. “Workplaces would become more hierarchical and inequality would increase. Lower-level employees, currently covered by overtime law, would find it harder to rise into the professional ranks as the number of midlevel salaried positions contract. Companies would encounter difficulties developing talent and promoting internally because of a narrower pipeline of talent.” ...

Federal Court Confirms That Posting SPD on Company Intranet Site Is Not Good Enough to Satisfy Legal Requirement to "Furnish"

In Thomas v. CIGNA, et al, the court reiterated that plan participants to whom materials are furnished electronically must be provided with an electronic or written notice at the time a document is furnished, apprising the individual of the significance of the document and of their right to request and obtain a paper copy of the plan documents.  In this instance, the employer simply posted the requisite documents on its intranet site.  That, without other written notice that an SPD was being posted, its significance, and the plan participant's right to request a written copy was not enough to comply with federal statutes and regulations.

This case contained an excellent summary on the rules surrounding an employer's use of electronic means to deliver plan documents, such as SPDs.  That discussion is provided for you in part, below.  This is from pages 26 to 31 in Thomas v. CIGNA, et al, Eastern District of New York, March 2, 2015:
Section 104(b)(1) of ERISA, 29 U.S.C. § 1024(b)(1), requires the administrator of an employee benefit plan to "furnish" each participant with a copy of the summary plan description ("SPD") at specified times and intervals.... [S]ection 104(b)(1) ... require[s] a plan administrator to furnish the SPD to each participant "within 90 days after he becomes a participant" or within 120 days after the plan becomes subject to ERISA. 29 U.S.C. § 1024(b)(1). In addition, "[i]f there is a modification to the plan or change of the sort described in [29 U.S.C. § 1022(a)] ... a summary description of such modification or change must be furnished not later than 210 days after the end of the plan year in which the change is adopted." 29 U.S.C. § 1024(b)(1)....
[S]tatutes require that the SPD be "furnished," not simply made available. ERISA requires the administrator of an employee benefit plan covered by Title I of the Act to make certain disclosures to participants, beneficiaries and other specified individuals....
The DOL has issued detailed rules and regulations regarding how to satisfy section 104(b)(1)(A) of ERISA.... [T]he DOL has taken the position that materials can be furnished through "measures reasonably calculated to ensure actual receipt of the material by plan participants, beneficiaries and other specified individuals." 29 C.F.R. § 2520.104b-l(b)(1). Moreover, materials which are "required to be furnished to all participants covered under the plan and beneficiaries receiving benefits under the plan ... must be sent by a method or methods of delivery likely to result in full distribution." Id. The regulations specifically endorse certain methods of delivery, such as "in-hand delivery to an employee at his or her worksite" or publication of the material "as a special insert in a periodical distributed to employees ... if the distribution list for the periodical is comprehensive and up-to-date and a prominent notice on the front page of the periodical advises readers that the issue contains an insert with important information about rights under the plan and the Act which should be read and retained for future reference." Id. The regulations also expressly permit materials to be furnished by first-class mail, but provide that second- or third-class mail "is acceptable only if return and forwarding postage is guaranteed and address correction is requested." Id. However, the regulations caution that "in no case is it acceptable merely to place copies of the material in a location frequented by participants." Id. 
Prior to 1997, the regulations did not contain any provisions relating to furnishing materials through electronic means. In 1996, however, section 101(c) of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") amended section 1 04(b)(1) of ERISA to provide that "[t]he Secretary [of Labor] shall issue regulations within 180 days after August 21, 1996, providing alternative mechanisms to delivery by mail through which group health plans (as so defined) may notify participants and beneficiaries of material reductions in covered services or benefits." ...
The "safe harbor" [for electric delivery of plan documents] was codified in 29 C.F.R. § 2520.104b-1(c), which provided: 
(1) The administrator of a group health plan furnishing documents described in section 1 04(b)(1) of the Act through electronic media will be deemed to satisfy the requirements of paragraph (b)(1) of this section with respect to participants described in paragraph (c)(2) of this section if-
(i) The administrator takes appropriate and necessary measures to ensure that the system for furnishing documents results in actual receipt by participants of transmitted information and documents (e.g., uses return-receipt electronic mail feature or conducts periodic reviews or surveys to confirm receipt of transmitted information); 
(ii) Electronically delivered documents are prepared and furnished in a manner consistent with the applicable style, format and content requirements (See 29 CFR 2520.102-2 through 2520.102-5); 
(iii) Each participant is provided notice, through electronic means or in writing, apprising the participant of the document(s) to be furnished electronically, the significance of the document (e.g., the document describes changes in the benefits provided by your plan) and the participant's right to request and receive, free of charge, a paper copy of each such document; and 
(iv) Upon request of any participant, the administrator furnishes, free of charge, a paper copy of any document delivered to the participant through electronic media.
29 C.F.R. § 2520.104b-1(c)(1). 
Paragraph (c)(2) provided that the furnishing of documents through electronic media would be deemed to satisfy the requirements of paragraph (b)(1) only with respect to participants who had
(1) "the ability to effectively access at their worksite documents furnished in electronic form" and 
(2) "the opportunity at their worksite location to readily convert furnished documents from electronic form to paper form free of charge." 29 C.F.R. § 2520.104b- I (c)(2)(i) and (ii).
In explaining why it limited electronic disclosure to these participants, the DOL stated its belief that "the critical determination in assessing the adequacy of the system, as a means for communicating to plan participants" was "the extent to which participants can readily access and retain the delivered information." Interim Rules Amending ERISA Disclosure Requirements for Group Health Plans, 62 Fed. Reg. at 16982. ...

Monday, May 25, 2015

Health Insurers Asking for Hefty Premium Increases in 2016

Readers of this blog know that we forecast significant premium increases from 2016 to 2018 as insurers begin to feel the full impact of: 
  1. Adverse selection in the Exchanges (death spiral); and 
  2. The phasing out of the taxpayer funded transfer payments to insurers under the "Three R's Program" (insurer bailouts).  
It looks like the severe increases are underway. This is from the Wall Street Journal
Major insurers in some states are proposing hefty rate boosts for plans sold under the federal health law, setting the stage for an intense debate this summer over the law’s impact. 
In New Mexico, market leader Health Care Service Corp. is asking for an average jump of 51.6% in premiums for 2016. The biggest insurer in Tennessee, BlueCross BlueShield of Tennessee, has requested an average 36.3% increase. 
In Maryland, market leader CareFirst BlueCross BlueShield wants to raise rates 30.4% across its products. Moda Health, the largest insurer on the Oregon health exchange, seeks an average boost of around 25%. 
All of them cite high medical costs incurred by people newly enrolled under the Affordable Care Act. 
Under that law, insurers file proposed rates to their local regulator and, in most cases, to the federal government. Some states have begun making the filings public, as they prepare to review the requests in coming weeks. The federal government is due to release its rate filings in early June. 
Insurance regulators in many states can force carriers to scale back requests they can’t justify. The Obama administration can ask insurers seeking increases of 10% or more to explain themselves, but cannot force them to cut rates. Rates will become final by the fall. 
“After state and consumer rate review, final rates often decrease significantly,” said Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services, the federal agency overseeing the health law. ...
Insurers say their proposed rates reflect the revenue they need to pay claims, now that they have had time to analyze their experience with the law’s requirement that they offer the same rates to everyone—regardless of medical history. ...

Friday, May 22, 2015

Leg. Alert: Changes to CA's Family Rights Act Go Into Effect on July 1, 2015

California regulators have approved changes to the rules implementing the California Family Rights Act ("CFRA").    

CFRA (California's more protective version of FMLA) protects employees' rights to take time off from work because of the birth or adoption of a child, to care for a parent, spouse, or child with a serious health condition, or because of the employee's own serious health condition.

The purpose of these amendments is to further supplement the existing regulations (primarily by clarifying confusing rules) and adopt and modify some of the parallel FMLA regulations. 

These amendments include substantive changes, such as 
  • establishing procedures for the payment of group health benefit premiums during CFRA leave, 
  • detailing how employers can violate the CFRA by interfering with employee rights under the law, and
  • clarifying that same-sex spouses are covered under the CFRA.  
You can review the final text of the amended regulations here.

Wednesday, May 20, 2015

How This Trio of PPACA Taxes and Mandates Falls Squarely on Taxpayers, Not Insurers. With Audio from Armstrong & Getty

On May 21st, I joined Armstrong and Getty in the 7 AM hour to discuss this article. Audio of my visit with them is in the first portion of this hour:

No, Your Preventive Care Isn't Free and Neither Are Your Politician's Bright Ideas

If the American taxpayer, or more importantly — voter, learns anything from the gargantuan federal boondoggle of PPACA, I hope it's the lesson that every tax, fee or mandate aimed at a corporation pummels the individual. 

Nothing is free, ever. And no corporation ever pays a tax. Corporations, instead, are sometimes enlisted by politicians and bureaucrats to collect taxes on behalf of the government. This is particularly true when elected officials find the tax in question to be politically undesirable. Solution: tax businesses and allow businesses to pass on the cost to consumers.  It's shocking and discouraging that it works, but it does.  And nowhere has it been more embarrassingly flagrant than in Obamacare. 

I recall conducting open enrollment meetings as early as 2011 and having employees ask me about those fairy dust adorned "free" preventive benefits now available due to the magic of Health Reform. I'd always take the time to explain that those annual physicals were absolutely not free.  No, just because the government forbid an insurer from charging a copay for an annual physical didn't make it free at all.  

Instead, it meant that the service was no longer paid for on an as-used basis. Now, all physicals are prepaid via a 0.5% to 1% increase in premium to all policyholders (whether they use their annual physical or not).  But sadly, far too many fail to grasp this basic principle and run around repeating the political spin that somehow congress and the President waived a magic wand and made preventive care absolutely free.  
Now, five years into this law riddled with more than 20 new taxes and fees, the devastating impact on the individual is finally gaining more coverage.  This is from the Associated Press as published at the New York Times about the so called "Health Insurer Tax" in Obamacare and how it is being funneled back onto taxpayers in an utterly stupefying way: 
There’s more than a touch of absurdity in the way an industry fee in President Barack Obama’s health care law is being passed along to state taxpayers. 
As Alice in Wonderland might say, a curious tax just got curiouser. The burden to states could mount to $13 billion in less than a decade. 
The Health Insurance Providers Fee was aimed at insurance companies. The thinking went: Because insurers would gain a windfall of customers, they ought to help pay for the expansion of coverage. Insurers say they have raised prices for individuals and small businesses to cover the new tax. 
As it turns out, they are raising their prices to state Medicaid programs, too.
The federal government issued guidance in October requiring states to build the tax into what they pay for-profit Medicaid health plans that serve low-income people. The first year’s tax was due to the IRS in September, and state governments are now settling up with insurance companies. 
It works like this: State governments pay insurers for the tax. The insurers then pay the tax to the federal government. The federal government then reimburses part of the cost to the states. 
It may sound absurd, but it’s not amusing to state governments, which wind up losing 54 cents for every dollar of the insurance tax. State taxpayers end up the biggest losers, without any added benefit to their state’s low-income Medicaid patients.  
“It’s like a merry-go-round with an extra loop in the middle,” said Rebecca Owen of the Society of Actuaries. 
The extra loop? The health law tax is not deductible for the insurance companies when they file their corporate income taxes, and state governments must kick in extra to cover that cost, too. ... 
“They had a naive notion we were going to get something from insurers” who were gaining many new customers from the health law, said economist Douglas Holtz-Eakin, president of the American Action Forum, a center-right public policy institute. “It defied any notion of good tax policy.” ... 
The states with the most managed care will be hurt the most. Florida will pay up to $1.2 billion over 10 years, according to a 2014 report by the actuarial firm Milliman. The same for Pennsylvania. Texas will pay up to $1 billion and Tennessee as much as $884 million. For California, the decade’s total will be up to $798 million and for Georgia, $647 million. ...
Obamacare's Medicaid expansion is also making news this week.  As those enrollments mount, we can now see that the number of people signing up is blowing past bureaucrats' projections.  This "free" benefit is going to end up wreaking havoc on state budgets which means maximum pain for taxpayers.  This is from Rachana Pradhan writing at Politico:  
Medicaid enrollment under Obamacare is skyrocketing past expectations, giving some GOP governors who oppose the program’s expansion under the health law an “I told you so” moment. 
More than 12 million people have signed up for Medicaid under the Affordable Care Act since January 2014, and in some states that embraced that piece of the law, enrollment is hundreds of thousands beyond initial projections. Seven states have seen particularly big surges, with their overruns totaling nearly 1.4 million low-income adults. 
The federal government is picking up 100 percent of the expansion costs through 2016, and then will gradually cut back to 90 percent. But some conservatives say the costs that will fall on the states are just too big a burden, and they see vindication in the signup numbers, proof that costs will be more than projected as they have warned all along. 
Obamacare originally expanded Medicaid — which traditionally served poor children, pregnant women and the disabled — to all childless low-income adults with incomes up to 138 percent of the federal poverty level (about $16,250 for an individual) across the country. But the Supreme Court made expansion optional in 2012. And 21 states, mostly with GOP governors, have resisted. 
“The expansion of Obamacare will cost our state taxpayers $5 billion,” Florida Gov. Rick Scott said in an interview with POLITICO last week, referring to the 10-year cost. “Name the health care program — I think the only one is Medicare Part D — that cost less than what they initially anticipated…Historically, if you look at the numbers, with the growth in Medicare costs, Medicaid costs, it’s always multiples.” A bitter critic of Obamacare, Scott at one point surprisingly backed expansion, but withdrew his support earlier this year. His state legislature is deeply split on Medicaid policy. 
In some states that did expand, the take-up has been startling — the result, officials say, of significant pent-up demand for coverage. In Illinois, nearly 541,000 people had signed up as of December, far beyond the 199,000 adults the state had estimated would enroll in 2014. The numbers increased to nearly 634,000 as of April. 
In Washington, 535,000 people had signed up as of March — already beating the state’s January 2018 goal. Officials’ projection for March had been just 190,365 newly eligible enrollees. ... 
Beyond the low-income adults that became newly eligible for Medicaid because of the health care law, states have long feared the budget impacts of the “woodwork effect” — people previously eligible for Medicaid who are only enrolling now because of the broader outreach surrounding Obamacare. 
Generally, even the states that have shunned Obamacare Medicaid expansion are seeing enrollment growth. The federal government does not cover as much of traditional Medicaid costs; on average, the feds’ share is 57 percent and the states pay the rest. 
That “woodwork” phenomenon could create budget concerns for states if enrollment is significantly higher than projections, acknowledged Matt Salo, executive director of the National Association of Medicaid Directors. But even that outcome, he stressed, “still solves a health care problem.” These people are now insured, and that could lead to less cost-shifting and crisis care that was also a fiscal strain on states. ...
And lastly we get to the Cadillac Tax.  This tax was so unpopular among PPACA's supporters and drafters that the Administration had to push its effective date out to 2018 to get unions to hold their nose and agree to support it.  By 2018 there would be a new President and almost entirely new congress, anyway.  The thinking was to let that group deal with this lipstick wearing swine.

Of course, the Jonathan Gruber crowd sold this to politicians as a tax on health plans and insurers - not people.  But that just means higher premiums in order to cover the cost of the tax.  Now businesses are forced to either pass on the exorbitantly high premiums to their policy-holding employees or to slash benefits to stay under the tax's threshold.  This is from Robert Wood, writing at Forbes:
A survey by the International Foundation of Employee Benefit Plans reveals that 62% of companies facing a 40% Cadillac tax hit in 2018 are already changing their coverage to avoid it. Conversely, only 2.5 percent of companies say they will pay it. How do you avoid it? Change to higher deductible plans, reduce benefits, shift more costs to employees, or even drop high-cost plans altogether. 
The tax is increasingly under fire from Congress, and this marketplace reaction is fueling the bonfire. If no one pays it, how else will we pay for Obamacare? The Supreme Court upheld Obamacare as a tax law, and it contains many taxes. One tax that hasn’t yet kicked in is the Cadillac tax. In enacting the law in 2010, the Cadillac tax was buried, not applying until 2018. 
As the IRS gets ready for 2018, it released guidance setting out approaches to the excise tax. Like all of Obamacare, the Cadillac tax is enormously complex and nuanced. Of all the taxes in the ironically named Affordable Care Act, none is more onerous than the Cadillac tax. It is a big tax too, a whopping 40% on top of all other federal taxes. What’s more, it is an excise tax, one of the most dreaded kinds of taxes there is. It is a rifle shot tax that is supposed to discourage something very specific. ... 
... The Affordable Care Act included the Cadillac tax as a tool to cut health care costs. It puts direct and forceful pressure on employers to offer less-generous health insurance plans. Starting in 2018, Obamacare imposes a 40% tax on the cost of individual health plans above $10,200 for individuals and $27,500 for family coverage. 
In evaluating these dreaded thresholds, both employer and worker contributions are included. The tax is decidedly punitive. The tax applies to every dollar above those thresholds. Like a cliff, the dollars are taxed at a 40% rate. What’s more, the tax is not deductible by the employer. ... 

With Healthcare Reform in Place, Employer Costs Have Dropped 3,000% and Employees Have Received Raises

Now that Reform is a reality, who could complain about a 3,000% drop in prices and raises for all employees?

Wait, what?  That is not your reality?

The below is only a minute and a half long.  It is must see TV:

Hat Tip: InsureBlog.

Monday, May 18, 2015

PPACA: Crediting Employees for Hours of Service When No Work is Performed and Keeping Employees on Your Health Plan When They No Longer Work

This is Part 2 of a Story We Posted on May 7, 2015.  You can read that story, entitled, "An Employee Moving from Full to Part-Time Status May Have to Stay on Your Health-Plan for More Than a Year Under PPACA" here.

By Craig Gottwals

Special thanks to Jennifer Moore and Michael Sanchez who assisted in the research for and editorial work on this column.   

In Brief:

  • In Part 1 we explained how an employee could move from full to part-time employment status and still remain on your benefits for as long as a year and a half under PPACA.
  • In this post we take a deeper look at: 
  1. which hours count as hours of "work" or "service" under PPACA; and 
  2. how you may have to keep an employee on your health insurance for up to a year when they are no longer working (as opposed to having gone part-time).  

The complexities that emerge as employers attempt to apply the rules of the Patient Protection and Affordable Care Act ("PPACA") multiply exponentially as real-life scenarios arise.  Employers and human resource practitioners now see what 2,400 pages of statute and 30,000-plus pages of regulations look like in practice.

In this post we'll look specifically at what an employer must count as an hour of service during an employee's measurement period to ascertain whether that employee is, in fact, a full-time employee.  Once full-time status is confirmed in any given situation, we'll turn our attention to the conditions of employment that would require that an employee remain covered under your health plans.

Hours of Service that Must Be Counted to Determine Full-Time Status in the Measurement Period

The federal regulation addressing the issue of which hours of service count in determining an employee's full-time employment status during that employee's measurement period under PPACA is 29 CFR 2530.200b-2 - Hour of service.  It states, in part:
(a) General rule. An hour of service which must, as a minimum, be counted for the purposes of determining a year of service, a year of participation for benefit accrual, a break in service and employment commencement date (or reemployment commencement date) ... is an hour of service as defined in paragraphs (a)(1), (2) and (3) of this section. The employer may round up hours at the end of a computation period or more frequently.
(1) An hour of service is each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer during the applicable computation period. 
(2) An hour of service is each hour for which an employee is paid, or entitled to payment, by the employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. Notwithstanding the preceding sentence, ... 
(ii) An hour for which an employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed is not required to be credited to the employee if such payment is made or due under a plan maintained solely for the purpose of complying with applicable workmen's compensation, or unemployment compensation or disability insurance laws; and 
(iii) Hours of service are not required to be credited for a payment which solely reimburses an employee for medical or medically related expenses incurred by the employee. 
For purposes of this paragraph (a)(2), a payment shall be deemed to be made by or due from an employer regardless of whether such payment is made by or due from the employer directly, or indirectly through, among others, a trust fund, or insurer, to which the employer contributes or pays premiums and regardless of whether contributions made or due to the trust fund, insurer or other entity are for the benefit of particular employees or are on behalf of a group of employees in the aggregate.
With regard to unpaid leave under FMLA, USERRA, jury duty or perhaps an extension of FMLA leave as part of an ADA accommodation, the regulations have a special section entitled "Special rule for determining hours of service for reasons other than the performance of duties."  In those cases, employers are required to determine hours of service by either:
  1. Determining the average hours of service per week for the employee during the measurement period, excluding the special unpaid leave period, and using that average for the employee for the entire measurement period; or
  2. For an employee whose pay is not calculated on the basis of units of time, crediting the employee with hours of service for special unpaid leave at a rate equal to the average weekly rate at which the employee was credited during the other weeks in the measurement period.  
Hence, for purposes of counting hours of service, an employer must credit an employee's:
  1. Hours of work;
  2. Vacation;
  3. Sick hours (donated or their own);
  4. PTO;
  5. Unpaid leave; 
  6. Time out on Long Term Disability; 
  7. Timeout on Short Term Disability; and 
  8. Legally required unpaid leave such as FMLA, USERRA, Jury Duty, and perhaps an ADA Extension of FMLA (whether an ADA extension of FMLA as a reasonable accommodation would be counted as an hour of service in the measurement period is an open question). 
An employer need not credit service for leaves that are solely mandated by: 
  1. State workers compensation laws; or 
  2. State disability laws. 
However, if a leave is covered by both a state disability leave as well as a privately insured disability leave or some other creditable leave (such as FMLA), the employer would need to credit those hours.  In any case, if the employer is crediting hours of work for a period of time in which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence, that employer need not credit any more than 501 hours for any such period.  

Employment Status in the Stability Period

Once an employee is in their stability period, the employer must keep them on the health insurance plan until that person is no longer an employee or until a subsequent measurement period reveals they are no longer a full-time employee under the rules of PPACA.

If the employee is not paying their portion of the premium, they can be cancelled for non-payment.  An employee can also be terminated for legitimate, non-discriminatory reasons.  However, if the person is re-hired inside of 13 weeks, they must be treated as though they have been continuously employed and were never terminated.

Furthermore, ERISA makes it illegal to terminate someone for the purpose cutting off a benefit that they have achieved a legal right to receive.  In part, Section 510 of ERISA provides:
It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan ... or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan.
This can keep a "former" employee on your health plan for up to a year (or more) in some cases.  Assume the employer uses a 12-month measurement period (approximately 95% of employers are) and that the employee in question worked 60 or even 70 hour work weeks before they went out on an FMLA leave.  You could then end up with a situation where FMLA expired and the employee stayed out on an extended leave:
  • due to a collectively bargained agreement; or 
  • a possible ADA extension of FMLA for a reasonable accommodation; or 
  • because there is a worker's compensation dispute and your employment counsel has advised you not to terminate the employee while out during that time. 
In that case, as long as the person is still "employed" (even if they receive no compensation from you) they must be offered medical insurance under your company health plan for the remainder of their stability period.  In fact, if they really did work 60-hour weeks for six months and then stopped working, cobbling together the job protected leaves listed above, they could stay on your plan for the remainder the present stability period and much of the next one.

  • X-Corp has a calendar year benefit plan and uses a 12-month measurement period for all employees. 
  • Jill has worked at X-Corp for many years as an hourly-paid clerk in their accounting department. 
  • During the first 6 months of 2015, Jill averaged 60 hours a week for a total of 1,440 hours in 2015. 
  • On July 1, 2015, Jill went out on an FMLA leave. 
  • X-Corp also has a collectively bargained agreement with employees that entitle them to an additional 6-month unpaid leave of absence after the expiration of FMLA. 
Under the above rules, Jill would be credited with 2,160 hours of service in 2015: 1,440 hours of work, plus 60 hours per week during FMLA, for an additional 720 hours. 2,160 hours of service in 2015 is clearly more than the 30 hours per week required to be considered full-time under PPACA (it's actually more like 41 hours per week).  So, when X-Corp conducts its testing during their administrative period at the end of 2015, they will see they must continue to offer Jill health insurance into 2016.

Jill will remain on the health plan as long as she continues to pay her portion of the premiums and until her 6-month union-mandated post-FMLA leave expires.  In this example, Jill will have company sponsored healthcare until approximately April 1, 2016 when her employment could be terminated according to the provision of the union agreement.  This is because Jill has 12 weeks for FMLA and then 6 months under the union agreement.  This is true even though Jill would not have worked a day since June 30, 2015.

Saturday, May 16, 2015

The Road to Benefit Taxation

If PPACA's Cadillac Tax remains in place as it is currently written, this is a great snapshot of how it will eventually tax more and more of your health plan over time.

Source: Milliman.

Friday, May 15, 2015

2018's Cadillac Tax Slated to Gouge Both Fully Insured and Self Funded Plans

This is from Towers Watson
[P]reliminary guidance [provides that] applicable coverage would include coverage under both fully insured and self-insured employer-sponsored health plans, regardless of who pays for the coverage or whether it is paid for with pretax or aftertax dollars. Applicable coverage would include (non-exhaustive list):
  • Employer and employee contributions to major medical coverage excludable from employees' gross income
  • Employer and employee contributions to health flexible spending accounts (FSAs)
  • Employer contributions (including employee pretax salary reduction contributions) to health savings accounts (HSAs) and Archer medical savings accounts
  • Health reimbursement arrangements (HRAs)
  • Onsite medical clinics (except for those providing only de minimis medical care, such as free first aid to employees)
  • Retiree coverage
  • Executive physical programs ...

Thursday, May 14, 2015

Benefit Bites, May 14, 2015 | Cost of Diabetes; Free Healthcare for Illegals in California & Medicaid Costs

It now costs $10,000 or more per person annually to treat someone with diabetes than someone who doesn’t have the chronic disease, according to a new analysis of large insurance company claims data. Spending per capita on health care for people with diabetes was just shy of $15,000 in 2013. By comparison, $4,305 was spent in the same year on people who didn’t have diabetes, according to claims information for people under age 65 with employer-sponsored insurance.

Illegal immigrants would get Medi-Cal under California bill. Senate Bill 4 will make taxpayer funded healthcare available to more than a million illegal immigrants for Medi-Cal, the state's health program for the poor.

Extending state-subsidized healthcare coverage to people in the country illegally could cost California as much as $740 million annually, according to a Senate fiscal analysis.  Around 900,000 immigrants in the state would qualify, according to the analysis, and would be eligible for Medi-Cal and other state programs.

5 percent of Medicaid patients account for half of program's costs. GAO found that from 2009 to 2011, 5 percent of enrollees in Medicaid, the government health insurance program for the poor, made up 48 percent of costs; the most expensive 1 percent made up 25 percent of costs.

Wednesday, May 13, 2015

Number of Americans Spending $100,000 on Prescriptions Triples in One Year - Study

From Reuters summarizing a study from Express Scripts:
  • About 139,000 Americans used at least $100,000 worth of medication in 2014, nearly triple the 47,000 who hit that mark in 2013.  
  • Health insurance covered 97.4% of the drug expenses among patients prescribed at least $50,000 worth of medicines in 2014. 
  • Among baby boomers aged 51 to 70 in the high-cost category, 77% were being treated for hepatitis C, for which costly new cures were introduced last year. Fifty percent were being treated for cancer. 
  • Anti-depressant use among those also taking a specialty medicine was more than twice the national average. 

Friday, May 8, 2015

Opioid Scripts Are Up Partly Due to an Obamacare Incentive Program That Even Sen. Feinstein Warned About

This is a classic example of how bureaucrats and legislators fail to appreciate the unintended consequences of interventionist actions that appear wonderful upon first glance. 

This is from Robert King writing at the Washington Examiner:
Experts say too many patients are being prescribed opioid painkillers by emergency room doctors, and a program created by Obamacare could be enabling the problem. 
A new study released this week found 17 percent of nearly 20,000 patients were discharged from emergency rooms with an opioid prescription. Experts and lawmakers say a push under Obamacare for hospitals to get good patient satisfaction scores is one cause of the problem. 
America is in the midst of an opioid "epidemic," according to the Centers for Disease Control and Prevention. Painkillers killed more than 16,000 people in 2013. A huge part of the problem is the prescribing of painkillers, which quadrupled from 1999 to 2013. ...
Patients with back pain got the most opioids, followed by those with abdominal pain. "The majority of prescriptions had small pill counts and almost exclusively immediate-release formulations," according to the study. 
Oxycodone, the active ingredient in Oxycontin, was the most prescribed, with 52 percent. 
Doctors may feel pressured by hospital administrators to prescribe opioids because it may lead to a better score on a patient satisfaction survey, experts said. 
A program created by Obamacare tied extra funding to high scores on the survey. 
"Their reimbursement and quality ratings are linked to ways patients rate them on categories," said Dr. Andrew Kolodny, president of the doctor advocacy group Physicians for Responsible Opioid Prescribing. 
The survey has three questions about pain, including whether the physician adequately treated pain. 
While it sounds like a benign question, "it forces physicians and surgeons to not only ask about pain but be sure they are prescribing appropriate medication," said Dr. David St. Peter, a hospitalist with Saratoga Hospital in New York. St. ... 
This practice hasn't gone unnoticed by Congress. 
Sens. Chuck Grassley, R-Iowa, and Dianne Feinstein, D-Calif., wrote to CMS last year that the surveys could impact opioid prescribing. The senators cited news reports of doctors in South Carolina admitting to prescribing more opioids in response to patient survey scores. 
"One hospital with low satisfaction scores even went so far as to offer Vicodin 'goody bags' to patients discharged from its emergency room in an effort to improve its scores," the letter from the senators reads. ...

How Five Republicans Let Congress Keep Its Fraudulent Obamacare Subsidies - D.C. Insiderism at Its Worst

In Brief
  • Congress clearly issued a fraudulent application to the District of Columbia’s health exchange.  
  • The application erroneously stated that Congress only employed 45 people and included obviously fake names. 
  • It was done to gain an exemption and ensure that lawmakers and staffers could keep healthcare subsidies.
  • A few lawmakers now seek to subpoena that application so they can ascertain who lied to steal from the American taxpayer.  
  • But it appears that leadership in both the Republican and Democratic parties conspired to ensure that Americans never know who commissioned this fraud.
You might not want to read this piece so closely after breakfast.  It is guaranteed to make you ill.  This is from Brendan Bordelon, writing at National Review: 
The rumors began trickling in about a week before the scheduled vote on April 23: Republican leadership was quietly pushing senators to pull support for subpoenaing Congress’s fraudulent application to the District of Columbia’s health exchange — the document that facilitated Congress’s “exemption” from Obamacare by allowing lawmakers and staffers to keep their employer subsidies. 
The application said Congress employed just 45 people. Names were faked; one employee was listed as “First Last,” another simply as “Congress.” To Small Business Committee chairman David Vitter, who has fought for years against the Obamacare exemption, it was clear that someone in Congress had falsified the document in order to make lawmakers and their staff eligible for taxpayer subsidies provided under the exchange for small-business employees. 
But until Vitter got a green light from the Small Business Committee to subpoena the unredacted application from the District of Columbia health exchange, it would be impossible to determine who in Congress gave it a stamp of approval. When Vitter asked Republicans on his committee to approve the subpoena, however, he was unexpectedly stonewalled. 
With nine Democrats on the committee lined up against the proposal, the chairman needed the support of all ten Republicans to issue the subpoena. ...
But, ultimately, only 5 of those Republicans supported the subpoena to see which members of congress and congressional staffers were seeking to defraud the federal government and the American people.  Read the entire story here.

Thursday, May 7, 2015

Compliance Alert: An Employee Moving from Full to Part-Time Status May Have to Stay on Your Health-Plan for More Than a Year Under PPACA

This is Part 1 of a two-part story. Part 2, entitled, "PPACA: Crediting Employees for Hours of Service When No Work is Performed and Keeping Employees on Your Health Plan When They No Longer Work" is posted here.
  In Brief:
  • After their 2015 renewal, large employers are officially under the dictates of Healthcare Reform's Employer Mandate. 
  • Most employers are using the IRS's "look-back" method to determine which employees are full-time. 
  • In that case, an employer is no longer free to simply move an employee from full-time-benefited status to part-time-nonbenefited status without applying their measurement and stability periods. 
  • In some cases, an employer may have to keep a part-time employee on benefits for the remainder of their current stability period or the remainder of the current one and the subsequent one. This can be up to a year and a half in certain situations.
  • One way for an employer to partially avoid this is to use the IRS's month-to-month method; at least with respect to salaried personnel.  

Under the new rules of Healthcare Reform, a nuanced hypothetical has made waves throughout our office as it relates to moving an employee from a full to part-time position.  Prior to Reform, when a full-time employee changed to a part-time position at your company, you moved that employee off of the benefit plans and offered COBRA (provided your plans didn't offer benefits to part-timers).  If you offer a fully-insured medical plan, you almost certainly made this adjustment to their enrollment at the end of the month in which the employee changed status.  In the new world of Reform, this is not so cut and dry.

In fact, if you are using the most common method of determining full-time status, the look-back method, it is no longer your reality. In that example, you would now have to keep that employee on your benefits plan despite the fact that you have moved them to part-time status.  This is the case even if they come to you and ask to be made part-time.

The common misconception among many in the industry is that you only needed to measure/test variable hour or part-time employees.  And in a practical sense, that is true. You are offering benefits to your full-time employees, anyway, so why "test" whether or not you need to offer them benefits, right?  However, the problem arises when you move a person from full to part-time employment.

Dan is a member of your in-house legal department. He has worked for you for ten years.  You have always offered him benefits and he has always been a salaried, full-time employee.  In fact, Dan typically worked 60-plus hours per week.  You have 500 employees, most of whom are salaried.  You have some hourly folks and have selected a 12-month look-back period as your measurement to determine whether part-time or variable hour folks qualify for benefits. Your plan year renewal date is on January 1.   
On August 15th of 2015, Dan comes to you and explains that he would like to move to part-time to reduce stress levels and spend more time with his family. He is dual covered under a spouse's medical plan anyway, he says.  So there is no need for him to work full-time for coverage.  You're legal staff is robust and you can easily accommodate his request. So you make him part-time, effective immediately. 
When do you drop Dan off of your benefit plans?  Before we can answer that, we must review a few regulatory provisions of PPACA. 
IRS regulations provide guidance on how Applicable Large Employers ("ALE's") should identify full-time employees for purposes of offering health plan coverage and avoiding a pay or play penalty.

Who Is a Full-Time Employee?

A full-time employee is an employee who was employed on average at least 30 hours of service per week. The final regulations generally treat 130 hours of service in a calendar month as the monthly equivalent of 30 hours per service per week.

To determine an employee’s hours of service, an employer must count:
  • Working Hours: Each hour for which the employee is paid, or entitled to payment, for the performance of duties for the employer; and
  • Non-working Hours: Each hour for which an employee is paid, or entitled to payment, by the employer on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military leave or leave of absence.
All periods of paid leave must be taken into account; there is no limit on the hours of service that must be credited. Also, all hours of service performed for entities treated as a single employer under the Tax Code’s controlled group and affiliated service group rules must be taken into account. For example, an employee who for a calendar month averaged 25 hours of service per week at one employer and 15 hours of service per week at an employer in the same controlled group would be a full-time employee for that calendar month.  However, hours of service performed as a bona fide volunteer (for example, a volunteer firefighter) or as part of a governmental work-study program are not counted.

Calculation Methods

Hourly Employees
For employees paid on an hourly basis, an employer must calculate hours of service from records of hours worked and hours for which payment is made or due for vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence.

Non-hourly Employees
For employees not paid on an hourly basis, employers are permitted to calculate hours of service by using one of the following three methods:
  1. Counting actual hours of service from records of hours worked and hours for which payment is made or due; or 
  2. Using a days-worked equivalency method under which an employee is credited with eight hours of service for each day with an hour of service; or
  3. Using a weeks-worked equivalency method under which an employee is credit with 40 hours of service per week for each week with an hour of service. 
Employers may use different methods for non-hourly employees based on different classifications of employees if the classifications are reasonable and consistently applied. Employers may change methods each calendar year.

However, employers may not use the days-worked or weeks-worked equivalency methods if those methods would substantially understate the hours of service of a single employee or a substantial number of employees. The number of hours calculated under the days-worked or weeks-worked equivalency must reflect generally the hours actually worked and the hours for which payment is made or due.

IRS Measurement Methods

The final regulations provide two methods for determining full-time employee status—the monthly measurement method and the look-back measurement method. These methods provide minimum standards for identifying employees as full-time employees. Employers may decide to treat additional employees as eligible for coverage, or otherwise offer coverage more expansively than would be required to avoid a pay or play penalty.

In general, an employer must use the same measurement method for all employees. Thus, an employer generally cannot use the monthly measurement method for employees with predictable hours of service and the look-back measurement method for employees whose hours of service vary. However, an employer may apply either the monthly measurement method or the look-back measurement method to the following groups of employees:

Monthly Measurement Method

The monthly measurement method involves a month-to-month analysis where full-time employees are identified based on their hours of service for each calendar month. This method is not based on averaging hours of service over a prior measurement period. This month-to-month measuring may cause practical difficulties for employers, particularly if there are employees with varying hours or employment schedules, and could result in employees moving in and out of employer coverage on a monthly basis.  For this reason, a substantial majority of employers have chosen not to employ this method of calculation. However, it may be the right method to choose for your salaried personnel.

An employer could use the monthly measurement method for salaried employees and the look-back measurement for hourly ones.  In that case, none of your salaried employees would ever be in a stability period and your benefit administration would be a month to month determination similar to what you did prior to PPACA.  This assumes that the employee remained salaried after the switch.  If, however, they switched to hourly and  therefore switched from the monthly method to the look-back method an entirely different set of rules apply.  Essentially, those rules mandate that the employee is treated by whichever method provides them the best result (look-back or monthly) for both the stability period where the change occurs and the next stability period.

Monthly Measurement Exception
There is one exception to this rule (and because of its complexity some employers are not adopting it).  It requires you to wait at least three months and measure the employee’s hours during those months.  However, you also have to go back and see what the offer of coverage was when the employee first became employed and confirm that an offer of minimum value coverage was made during the applicable period following hire.  Many employers may not have that information.  Here is the rule:

Under Treas. Reg. §54.4980H-3(f)(2) if an employee was determined to be full-time based on the standard measurement period and then switched to a part-time position, the employer can treat the employee as ceasing to be a full-time employee on the last day of the third calendar month after the change in employment status. But, in order to treat the employee as part-time the following conditions must all be met:
(a) The employer has offered the employee minimum value coverage continuously during the period beginning on the first day of the calendar month following the employee’s initial three full calendar months of employment and ending on the last day of the calendar month in which the change in employment status occurs;
(b) The employee has a change in employment status to a position or status in which the employee would not have reasonably been expected to be a full-time employee if the employee had begun employment in that position or status; and
(c) The employee actually is credited with less than 130 hours of service for each of the three full calendar months following such change in employment status.
Look-Back Measurement Method

To give employers flexible and workable options and greater predictability for determining full-time employee status, the IRS developed an optional look-back measurement method as an alternative to the monthly measurement method. The details of this method vary based on whether the employees are ongoing or new, and whether new employees are expected to work full-time or are variable, seasonal or part-time employees.

The look-back measurement method involves:
  • A measurement period for counting hours of service (called a standard measurement period or an initial measurement period);
  • A stability period when coverage may need to be provided depending on an employee’s full-time status; and
  • An administrative period that allows time for enrollment and disenrollment.
An employer has discretion in deciding how long these periods will last, subject to specified IRS parameters.

Ongoing Employees
For ongoing employees, an employer determines each employee’s full-time status by looking back at a standard measurement period (SMP) lasting between 3 to 12 consecutive months, as chosen by the employer. For example, if an employer chooses an SMP of 12 months, the employer could make it the calendar year, a non-calendar year plan year or a different 12-month period, such as the one that ends shortly before the plan’s open enrollment period.

An ongoing employee is an employee who has been employed by a large employer for at least one complete SMP.

Question Answered and Practice Points

Turning back to our hypothetical scenario at the beginning of this post, the answer depends on whether the employer designated a look-back measurement period for all employees or whether the employer, in-fact, took the extra step to designate salaried personnel to be segregated into full or part-time status based on the monthly method.  To reiterate, the downside of the monthly method is that an employer could end up moving employees on and off the benefits on a month-to-month basis.

However, one way to approach this problem would be to make all of an employer's salaried personnel determinations of full or part-time status based on the monthly method and then use the look-back method for all hourly employees. Had an employer taken this extra step in our above example, that employer could have moved Dan off of benefits at the end of August for September of 2015.  This method, however, is not without its own challenges because if you move Dan off of the benefits in September, you had better make sure he does not actually end up working more than 30 hours per week in September.  If he does, you will have violated the mandate to offer him benefits in a month in which he was full-time. For this reason, the month-to-month method is essentially unworkable for hourly personnel and really only a legitimate option for salaried workers whose hours would not vary.

If, instead, all employees are measured via the look-back method Dan would remain on the plan at least until 12/31/2015 (assuming the employer is using the most popular 12 month measurement and corresponding stability periods).  During the employer's administrative period, prior to 12/31/2015, Dan's hours must be tested for the 2016 stability period.  If Dan averaged more than 30 hours of work in a week for 2015, he would have to be offered medical benefits again in 2016.  This is true even though he has been "part-time" since August of 2015.  And in our example, that is likely the case as we pointed out that Dad had averaged over 60 hours a week up to August 15, 2015.

On the other hand, splitting measurement periods for hourly and salaried personnel, adds yet another layer of complexity, administration and disclosure for employers.  These distinctions would need to be addressed in the employer's healthcare eligibility policies as well as its Summary Plan Description.  Additionally, the employer's Human Resources and payroll departments would need to coordinate closely to ensure that the two different measurement methods (monthly versus look-back) are being administered correctly.

In reality, there are two practical implications of this convoluted myriad of regulation:
  1. Employers who want to employ both a look-back and monthly measurement period to track an employee's benefit-eligibility status really should bite the bullet and invest in an online tracking system for this.  To do so manually would be a herculean task for an employer with more than a moderate degree of employment complexity.  Please ask me or your account manager about this.  We do have experience with some of the new benefit administration systems that have recently been developed to tackle this problem.  We also have discounted pricing available to clients.  
  2. Employers (even those who choose to add an online tracking system) may very well elect to employ a standard look-back method for all employees.  In fact, most employers are moving in this direction.  Under these new rules, you must be mindful anytime you seek to remove an employee from your benefit plans.  And if you have any doubt at all, do not hesitate to contact your BB&T benefit team. 

  1. Pay or Play Penalty – Identifying Full-Time Employees. BB&T Legislative Alert 4-2014, March 5, 2014.  
  2. Large Employers Must Apply the Same Measurement Method to All Employees in the Same Category, Leavitt Group, June 19, 2014.  
Jennifer Moore and Michael Sanchez assisted in the development of this post with research and editorial work. I'd like to thank them for their assistance.

I encourage you to read either or both of the above publications for a more in-depth look at this issue and measurement periods, in general.

Wednesday, May 6, 2015

Friday's Jobs Report Will Look Decent Because the Government is Making Up Numbers of Jobs ... Based on the Weather?

This is from the New York Post:
... This Friday, the Labor Department will announce job growth and the unemployment rate for April and — drum roll, please — it probably won’t look as ugly as the GDP. 
That’s because Labor uses trick statistics when it gives a picture of the springtime job market.

Each spring, Labor starts adding phantom jobs to its count — jobs they guess have been created but can’t prove have been created.

Some of that phantom spirit is tied to the weather. No, really. At Labor, good weather = the birth of companies = more jobs.

And even in this day and age of instantaneous knowledge of everything, Labor still guesses at how many jobs these newly born companies are generating.

When it reports April employment numbers this Friday at 8:30 a.m., Labor will include about 263,000 phantom jobs. 
At least, that is how many phantom jobs it factored in last May.

This May, the Bureau of Labor Statistics will add around 204,000 phantom jobs. In June through August, that number falls to 129,000 and then to 122,000 and then 104,000.

And there is no telling if any of those jobs actually exist. In fact, what if companies were quietly dying this spring instead of sprouting up like so many daffodils? Well, Labor would worry about that later on.

Of the 263,000 or so phantom jobs that will be added through guesstimates in April, probably 50,000 or so will — thanks to seasonal adjustments — be added to the “realer” number to produce the total Labor will announce.

Journalists and economists will report whatever Labor puts in the headlines without question.

But now you know better. ...

Benefit Bites: Costly Rx, State Exchanges Face Bankruptcy, Why the IRS Hung Up on You, Big Government Means Big Fraud and More

Interesting Benefit News: 

The medical profession is moving in the same political direction of the legal profession. In 1993-1994, 69% of physicians who made political donations gave to Republicans, and their giving comprised 65% of doctors’ political giving. In 2013-2014, 45% of doctors who made political donations gave to Republicans, and they comprised 50% of doctors’ political giving.

The 10 costliest drugs covered by Medicare Part D - Fourteen different drugs topped the $1 billion mark in 2013, among them well-known names like Nexium, Crestor and Cymbalta. This information published as part of a new dataset released on April 30 by the Centers for Medicare and Medicaid Services (CMS). The report gathered an unprecedented level of information from more than one million health care providers who collectively prescribed $103 billion in prescription drugs under the program.

Atlas Shrugs Over Obamacare: 

Obamacare State Exchanges Bleeding Cash - Nearly half of the 17 insurance marketplaces set up by the states and the District under President Obama’s health law are struggling financially, presenting state officials with an unexpected and serious challenge five years after the passage of the landmark Affordable Care Act.

New York Times - The IRS' overloaded phone system hung up on more than 8 million taxpayers this filing season as the agency cut millions of dollars from taxpayer services to help pay to enforce Obamacare. For those who weren't disconnected, only 40% actually got through to a person. And many of those people had to wait on hold for more than a half-hour.

While Obamacare’s Medicaid expansion has only been around for a few years, states have already blown past their maximum expansion enrollment numbers by the millions costing taxpayers billions. Obamacare expansion states have a systemic problem of under-projection and over-enrollment. California’s enrollment projection fallacies lead the way at 120% above "expected" levels.

The Government-Corporate Complex Embracing Medicine - Just 15 years ago, insurers were fleeing from a private Medicare plan program that sprang up in the 1990s, the Medicare+Choice program, over concerns about shifts in program rules and funding levels. Today, insurers are flocking to the Medicare Advantage, Medicare supplement insurance and Medicare Part D prescription markets.

Big Government - Big Bureaucracy - Big Ripoff: 

Veterans Administration official stole between $150,000 and $478,000 from a Veterans Affairs retail store and blew the cash on stripper sex, prostitutes, and gambling sprees, according to the Justice Department.

Here is how bureaucratic oversight works - Some physicians who have been banned from billing Medicare or some state Medicaid programs because of fraud are still billing other states’ Medicaid programs.

Tuesday, May 5, 2015

AP: Obamacare Leads to Growth in Food Stamp Dependency

I think it is cute how the AP acts "surprised" that massive government dependency initiatives beget greater reliance on other government handout programs. What did they think would happen when the government simultaneously bolstered advertising for the benefits of food stamps while streamlining the application process for folks who'd like to double or triple dip into various taxpayer handouts? 

This is from Carla Johnson and David Mercer writing for the AP:
President Barack Obama’s health care law has had a surprising side effect: In some states, it appears to be enticing more Americans to apply for food stamps, even as the economy improves. 
New, streamlined application systems built for the health care overhaul are making it easier for people to enroll in government benefit programs, including insurance coverage and food stamps. 
[State enrollment increases range] from 1 percent to 6 percent over two years, according to an Associated Press analysis.... [Nevada] shot up 14 percent. 
West Virginia’s food-stamp enrollment increased 4 percent after a Medicaid expansion that was part of the health care changes. Enrollment jumped because people were “more engaged with our systems and more aware what they’re eligible for,” said Jeremiah Samples of the West Virginia Department of Health and Human Resources. 

'Significant' Increase in Emergency Room Visits Under Obamacare, Poll: American College of Emergency Physicians

Part of the political sales pitch for Obamacare was a promise that emergency room visits would decrease.  But that can't happen when you add insureds to the rolls while simultaneously making it less desirable to practice medicne.  More demand and less supply means longer wait times than ever.  That equation, for many, means a visit to the emergency room for primary care needs.

As Kathryn Mayer at BenefitsPro writes, "Specifically, 28 percent [of doctors] report 'significant increases' in all emergency patients since the requirement to have health insurance took effect. Only 3 percent of doctors reported any decrease in ER visits. In addition, more than half (56 percent) said the number of Medicaid emergency room patients is increasing."

Furthermore, 70 percent of doctors further reported that their emergency department is not “adequately prepared for potentially substantial increases in patient volume.”

And as you can see from the below graph from the Scranton Times Tribune, the problem is not trending in the right direction.


Obamacare's Insurer Bailout Fund, Curtailed by Congress, Comes Up 90% Short

Congress has temporarily stopped the potential unlimited taxpayer liability of Obamacare’s risk corridors (or "bailouts"). As you will recall these built in bailouts protect profits for health insurers by transferring money from insurers with "extra" (as designed by government formula) profits to those whose do not have profits from Obamacare. Congress applied the brakes in CROmnibus, which funded the government for 2015. It placed a restraint on the risk corridors by requiring that any payments beyond budget neutrality required appropriation. And this congress does not plan to make that appropriation.

Congress did this after Obama Administration bureaucrats commented that they felt they were well within their authority to write regulations requiring taxpayers to fund any shortfalls in the risk corridor program. These statements were, in essence, a sales pitch to leery insurers. I know of at least one insurer who bit so hard on this offer, they've completely swallowed the hook. If congress doesn't reverse this action, they could be in a dire situation.

And now Standard and Poor's Capital IQ is reporting that:
  • The ACA risk-corridor pool will be significantly underfunded for 2014 if the CROmnibus limit remains in place. 
  • The aggregate risk-corridor payables recorded by U.S. insurers for 2014 are less than 10% of the aggregate risk-corridor receivables booked by insurers for the same year: a 90% shortfall. 
  • And, uncertainty of payment due to under-funding created by PPACA will cause volatility in the market for all insureds.
In sum, S&P sates that, "the ACA risk corridor will not receive adequate monies from insurers with profitable exchange business to pay insurers that have unprofitable exchange business. ... When insurers priced their exchange products for 2014 they likely assumed the risk corridors would work effectively. Thus, increased uncertainty only results in incorrect pricing assumptions and operating-performance volatility for insurers that are most involved in the ACA."

Some insurers are far more dependent on Obamacare's planned risk corridor transfers. The insurers with greater receivables as a percent of total reported capital face the greatest risk. See the below chart (Click on it for a larger view):