Friday, July 31, 2015

$57 Million Federal Experiment To Make Healthcare More Efficient Fails - Knock Me Over With a Feather

I know this will come as a shock to regular readers of this blog, but yet another federal health law initiative is failing.  This is from Kaiser Health News:
A $57 million experiment to deliver better, more efficient care at federally funded health centers struggled to meet its goals and is unlikely to save money, says a new government report. 
The test to coordinate treatment for high-risk Medicare patients in hundreds of communities was one of many demonstrations run by the Department of Health and Human Services’ innovation center. 
The Affordable Care Act created the lab and gave it $10 billion over a decade to test new ways to improve care and save money. 
As the trial wound down last fall, 69 percent of the clinics that hadn’t dropped out had obtained full accreditation as “medical homes” — primary care practices that coordinate care across the maze of specialists, hospitals and emergency rooms. 
HHS had hoped for 90 percent.  
Another goal was to cut unnecessary hospital visits. But admissions and emergency-room care rose in centers that were part of the experiment compared with results in those that weren’t. So did expenses. ...
Full story.  

Thursday, July 30, 2015

1 in 3 Californians Enrolled in Medicaid

This is from James Poulos writing at Cal Watchdog:
The Golden State has seen more than triple the expected enrollment under the Obamacare-authorized expansion of Medicaid, a surge of over 2 million. “Beyond that,” the Associated Press reported, “a record number of people who already qualified for the low-income health program signed up, pushing overall enrollment in the state’s Medicaid program known as Medi-Cal past 12 million to roughly 1 in 3 Californians.” ... 
While legislators have crunched the numbers, regulators have labored to understand just how poorly the new health care regime matches up with the demand it has created. In an effort to control costs, California “has relied heavily on managed care insurance companies,” the San Francisco Chronicle noted in a report on the state’s struggles to come with Medi-Cal demand. Under the current approach, California “pays insurers a fixed amount per patient and expects the companies to provide access to doctors and comprehensive care, rather than paying for each medical visit or procedure under a fee-for-service model.” 
Trouble has arisen around what happens next. Last month’s state audit of the managed care system revealed that many of those enrolled in an insurance plan effectively can’t get to a doctor. “The California audit found the state didn’t verify that insurers’ directories of doctors were accurate, or that the plans had enough doctors to meet patients’ medical needs,” the Chronicle confirmed. “And thousands of phone calls to an ombudsman’s office — created to investigate complaints — went unanswered every month.” ...

Wednesday, July 29, 2015

Employee Medical Premium Contributions and Pay in 2015, U.S. DOL Survey Data

Average Employer Contributions for Medical Insurance Premiums in 2015:
  • Private nonunion for single coverage: 77%
  • Private nonunion for family coverage: 65%
  • Private union for single coverage: 87%
  • Private union for family coverage: 84%
  • State or local government for single coverage: 87%
  • State or local government for family coverage: 71%
Median Hourly Wage:
  • Private industry workers: $17.40 per hour
  • State and local government workers: $23.76 per hour
Sample size: Data for the March 2015 reference period were collected from a probability sample of about 8,600 establishments in private industry and approximately 1,500 establishments in state and local government.

Tuesday, July 28, 2015

Litigation Alert: Reducing Employee Hours to Avoid Obamacare Has Already Gotten One Employer Sued Under ERISA § 510

The importance of this case cannot be understated to employers with large populations of variable hour employees.  Yes, it is important to all employers, but in the lower wage, hourly types of populations where employers have been managing hours worked to keep benefit costs affordable, this could be devastating.  

This is from Joseph Lazzarotti writing at Jackson Lewis, Benefit Law Advisor (hat tip to BenefitsLink for yet another outstanding find): 
One strategy for minimizing exposure to the employer shared responsibility penalties under the Affordable Care Act (ACA) is to minimize the number of “full-time employees” – that is, the number of employers working 30 or more hours per week on average. Employers can accomplish this through reducing the number of hours certain current and future employees work so that they will not be considered to be “full time” as defined by the ACA, requiring coverage to be offered to a smaller group or none at all. One company’s alleged attempt to do just that is the central claim in a class action lawsuit by an employee alleging the company has interfered with her rights to benefits under ERISA. (Marin v. Dave & Buster’s, Inc., S.D.N.Y., No. 1:15-cv-03608)
The claims are based on Section 510 of ERISA. The relevant section of that law 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, this title, section 3001 [29 USC §1201], or the Welfare and Pension Plans Disclosure Act, or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, this title, or the Welfare and Pension Plans Disclosure Act.
Put simply, the law makes it unlawful for any person to discriminate against a participant or beneficiary for exercising a right granted (or interfering with the attainment of a right) under ERISA or an ERISA employee benefit plan. In this case, the plaintiff is claiming that the employer reduced her hours of work to below that which the ACA would cause her to be a “full-time employee.” In doing so, the defendant avoided the requirement under the ACA to offer her coverage, as well as any the corresponding penalty under Internal Revenue Code Section 4980H if she were a full-time employee. In other words, the essence of the plaintiff’s claim is that by reducing her hours of employment, the employer interfered with her attainment of a right under the plan to be eligible to be offered coverage under the medical plan.
... If successful, one effect of plaintiff’s argument may be that once an employer hires an employee in an eligible classification under an ERISA plan, that employee has a right under ERISA and the plan to be eligible, and any change by the employer in that classification, or what causes the employee to be in that classification, is an impermissible interference with that right. ...

Monday, July 27, 2015

Fake Whistleblower Techniques Employees Are Using to Cost Employers in Terminations

This is part of a longer post by the fine folks over at Coyote Blog.  It is yet another example of how hard it is to employ folks in California.  I've seen the same kind of thing happen and thought the author was lucky it only cost $20,000.  Something like this can easily get up to $50,000 in legal fees.  Yes, shelling out $20,000 to $50,000 in legal fees constitutes an employer "victory." Welcome to California: 
... Many employees have discovered a legal dodge to enhance their post-employment lawsuits (I know that several advocacy groups in California recommend this tactic).  If the employee suspects he or she is about to be fired, they will, before getting fired, claim all sorts of past discrimination.  Now, when terminated, they can claim they where a whistle blower that that their termination was not for cause but really was retaliation against them for being a whistle-blower. 
I remember one employee in California taking just this tactic, claiming discrimination just ahead of his termination, though he never presented any evidence beyond the vague claim.  We wasted weeks with an outside investigator checking into his claims, all while customer complaints about the employee continued to come in.  Eventually, we found nothing and fired him.  And got sued.  The case was so weak it was eventually dropped but it cost us -- you guessed it -- about $20,000 to defend.  Given that this was more than the entire amount this operation had made over five years, it was the straw that broke the camel's back and led to us walking about from that particular operation and over half of our other California business.

Saturday, July 25, 2015

32% of People Aged 25-54 in the U.S. Are Not Working Full-Time

Mike "Mish" Shedlock set forth an outstanding analysis of this trend in the increase of our under employed.  The full post is absolutely worth a read. 

From Mish's Global Economic Trend Analysis:
Key Dates and Percentages of People Aged 25-54 Not Working Full-Time
  • 32.08% in June 2015
  • 28.57% in November 2007
  • 26.88% in April 2000
  • 28.49% in June 1990 
The all-time low in this series is 26.88% in April of 2000. That coincides with peak entry of women in the work force coupled with the top of the internet boom.

The pre-recession levels in 2007 and 1990 were around 28.5%. If one uses 28.5% as a measure of normalcy, then in percentage terms we are still about 3.58 percentage points too low in fulltime employment. 
If one uses the record low 26.88% as a target, then we are about 5.2 percentage points lower in fulltime employment than we should be.

Friday, July 24, 2015

The Affordable Consolidation Act Moves the Insurance Market From an Oligopoly to a Duopoly

Only massive bureaucracies with huge compliance and legal departments are equipped to deal with the approximately 40,000 pages of the Patient Protection and Affordable Care Act's laws and regulations.  It is crushing competition.  Ultimately, I suspect we will end up with two nationwide carriers and at that point the market will be so broken we will need the government to intervene and set the market free or turn it into a fully socialized program. The trajectory of U.S. history suggests a renewed lunge toward freedom is the less likely of those choices.

So why is the insurance industry consolidating? Lots of reasons. First of all, heavily regulated industries thrive on consolidation. These companies have a lot of regulatory overhead, first of all for compliance, and second of all for lobbying. The bigger you are, the easier it is to afford a team of experts to make sure that you understand all the pertinent regulations, and a second team of experts to prevent legislators and bureaucrats from burdening you with a lot more pertinent regulations. These are largely fixed costs, and merging reduces them. Getting bigger also makes it harder for legislators to refuse to return your phone calls.  
Second of all, Obamacare's new exchanges may play at least a small role. Not all of it, by a long shot -- the individual market for health insurance is a small and not particularly well-loved part of insurers' overall business. However, that piece may get larger, if Obamacare succeeds in restructuring the market for health care, as employers convert more positions to part-time jobs without benefits, or decide it's easier to give people money to shop on the exchanges than to keep dealing with the hassle of providing health insurance. And thanks to the exchanges, that individual market is now competing on price more than it did in the past, because prices are now completely transparent and roughly comparable. Pricing power suddenly matters more -- not so much the power to charge consumers more, but the power to pay suppliers less. 
Which brings us to the third big reason for merging: Insurers are under pressure from other parts of the industry that are also consolidating. Hospital networks have gotten bigger and more powerful. Physicians are increasingly going to work for hospitals or large practices. This could put insurers at a disadvantage to negotiate prices. If your suppliers are highly fragmented, you can walk into the meeting and say, "Here's what we're offering; take it or leave it." But if there are only two or three big hospital networks in your area, they can say the same thing to you. This has produced something of an arms race between insurers and providers trying to get bigger so they will better be able to crush the other. When Mothra and Godzilla are battling over the city, you don't want to be the tiny human standing on the ground between them. ...
Other stories on this subject:
  1. Health Affairs Blog: The lessons of oligopoly are pertinent here: consolidation that would pare the insurance sector down to less than a handful of players is likely to chill the enthusiasm for venturing into a neighbor’s market or engaging in risky innovation. One need look no further than the airline industry for a cautionary tale.
  2. Forbes: Anthem-Cigna Deal Is Bad For Doctors On Obamacare Networks.  
  3. Forbes: Anthem Just Paid $54B To Buy Cigna. No One Knows What Will Happen Next.
  4. Wall Street Journal: In the game of merger musical chairs the five biggest health insurers have been playing lately, Aetna Inc. and Humana Inc. hustled to grab the first seats.
  5. Florida Times Union: Aetna's acquisition of Humana could result in higher premiums, lower payments to providers.  
  6. Market Realist: Health Net bought by company, Centene, which earns about 89% of its total revenues from government-subsidized health insurance programs such as Medicaid and the Children’s Health Insurance Program
  7. Lincoln Journal Star: In the wake of the ACA, Assurant is getting out of the health insurance business.  
  8. Los Angeles Times: As health insurers merge, consumers' premiums are likely to rise.  

Cadillac Tax Confuses and Frustrates Employers and Union Groups

This is from HM Stoploss News
In 2018, the [Cadillac] tax will be paid on dollar amounts exceeding $10,200 per employee for single coverage and $27,500 per employee for other-than-self-only coverage. ... 
Employers are responsible for calculating the total amount of the tax for each employee and notifying the IRS and each benefit provider who will pay the tax – the group health insurer if coverage is issued under an insured plan; a plan sponsor if the employer makes contributions to a Health Savings Account (HSA) or Archer Medical Savings Account (MSA) or the plan administrator for any other applicable coverage. 
What Coverage is Applicable?Applicable coverage means, for an employee, coverage under any group health plan including both fully insured and self-funded plans made available to the employee by an employer, which is excludable from the employee’s gross income. This includes:
  • Health Flexible Spending Accounts (FSAs)
  • Archer MSAs
  • HSAs
  • Government plans (except military plans)
  • Coverage for on-site medical clinics
  • Retiree coverage
  • Multiemployer plans
  • Coverage only for a specified disease or illness
  • Hospital indemnity or other fixed indemnity insurance if the payment for coverage or insurance is excluded from gross income or a deduction is allowed
Future guidance also is expected to mention that Health Reimbursement Accounts (HRAs) and executive physical programs are applicable coverage as well. 
What Does This Mean for Employers?The Cadillac Tax will negatively impact both fully insured and self-funded employers. Because the tax applies to the overall value of the health insurance benefits and comprises both employer- and employee-paid portions, a cost shift to employees will not be effective for employers who want to avoid paying the tax. Employers in geographic areas that are known for high health care costs will reach the excess dollar limits and experience the tax sooner than companies offering health insurance in lower cost regions. 
Future tax thresholds will be based on inflation, but because health care costs have increased historically at a greater rate than inflation, more employer plans will hit the tax threshold sooner every year. ... Unfortunately, it will be quite difficult for employers to avoid the tax while continuing to offer health plans that are compliant with ACA regulations for benefit design and cost-sharing requirements. As we get closer to the effective date of the tax implementation, more information will be available regarding the formula for determining the value of the plans. 
Employers know that offering health benefits can help attract and retain talented employees, so they remain reluctant to drop health insurance coverage, but it will be harder and harder to offer employee health benefits without hitting the Cadillac Tax thresholds....

Thursday, July 23, 2015

Cost-Shifting: The Hidden Tax Employers Pay to Compensate for Government Underfunding in Medicare and Medicaid (& Now PPACA), Study

This if from Health Care Trends in a study focused on the state of Wisconsin:
  • Federal and state payments for hospital care do not cover the cost of providing those services.
  • Wisconsin hospitals would have to lay off more than 10,000 employees and cut an additional $750 million in operating costs in order to remain financially viable at government reimbursement rates; this would severely impact the quality of care hospitals provide.
  • In order to offset the underfunding, hospitals must reduce operating costs and increase the revenue they receive from private payers more for the same medical services; this process is commonly known as cost shifting.
  • In southeastern Wisconsin, cost shifting is responsible for 35 percent of the overall commercial rates paid.
  • Cost shifting is a hidden tax on employers that affects their ability to compete economically; it has a greater impact on smaller employers, which are the primary engine of job growth for the state.


Stories Causing Atlas to Shrug, July 23 | Price Gouging Hospitals, Doc Shortages & PPACA Economy Strain

Lost in the dire warnings about a national primary care physician shortage is an equally alarming projected shortage in practicing non-primary care physicians (all specialties other than primary care specialties): 33,100 by 2015.

Repealing the PPACA would increase Gross Domestic Product (GDP) by about 0.7% in the 2021-2025 period, mostly because provisions of the law that are expected to reduce the supply of labor would be repealed.

The 50 U.S. hospitals with the highest markup of prices.  Some are charging patients more than 10 times the rates allowed under Medicare.
  • Excerpt: "Even the average U.S. hospital charges its non-Medicare patients far more than for those on Medicare. Costs at the average hospital in 2012 were 3.4 times the amount allowed by Medicare. In other words, if the Medicare-allowed charge was $100, the average hospital charged uninsured patients $340. Hospitals among the top 50 in price charged $1,100."
Like the U.S., France also places significant legal burdens on businesses that grow up to and beyond 50 employees.  Consequently France has 2.4 times as many companies with 49 employees as with 50.

Wednesday, July 22, 2015

Medical Cost Trend to Be 6.5% in 2016; 4.5% After Benefit Design Changes

  • Employers offering high-deductible health plans grew almost 300% since 2009 when [PWC] began tracking employer health plan design. Although consumers now think more about what services to use, this trend can also inhibit early diagnosis and result in more costly chronic care management. 
  • The healthcare-spending trajectory has leveled off but is not decreasing. Private healthcare spending continues to increase faster than the economy despite steps taken to bend the cost curve. Efficiency has not always meant value.
  • Cost-sharing slows consumer use of health services. Employers offering high-deductible health plans grew almost 300% since 2009 when HRI began tracking employer health plan design. Although consumers now think more about what services to use, this trend can also inhibit early diagnosis and result in more costly chronic care management.
  • Curtailing inpatient care lowers costs. With more hospital care shifting to less expensive ambulatory centers, retail health clinics and physicians offices, the impact has been a decrease in hospital inpatient prices.

Tuesday, July 21, 2015

New Legislation Increases Penalties for Information Return Failures, Including IRS Forms 1094 and 1095 Mandated by Health Reform

This is from EBIA:
Congress has significantly increased the penalties for failures related to information returns and individual statements required by numerous sections of the Internal Revenue Code, including health care reform’s new reporting requirements for health coverage providers and applicable large employers (ALEs) on IRS Forms 1094 and 1095.... Included in the recent trade legislation that restored the Health Coverage Tax Credit ..., the increases apply to returns and statements required after December 31, 2015. (Since the new filings under health care reform are first required in early 2016, the increased penalties will apply to them from the outset.) The penalty for general failures increases from $100 to $250 per return, and the calendar-year cap increases from $1.5 million to $3 million. (“Failures” include failure to file by the due date, failure to include all required information, and provision of incorrect information.) If failures result from intentional disregard of the filing requirements, the per-return penalty increases to $500, and the calendar year cap does not apply. Lower penalty amounts continue to apply for smaller entities and for failures corrected within certain timeframes, but those penalty amounts will also increase under the law. 
Since the increased penalties also apply to individual statement failures, there could be a double impact where a Code provision imposes dual requirements to file an information return and an individual statement. ... 
EBIA Comment: The IRS previously announced limited relief from penalties for Forms 1094 and 1095 filed and furnished in 2016, for ALEs able to show a good faith effort to comply with the new requirements.... Although these penalty increases do not seem to affect that relief, they provide additional incentives for ALEs to at least satisfy the good faith standard for the fast-approaching 2016 deadlines. It is also worth noting that these penalty provisions apply to a wide array of other information returns and individual statements required by the Code, including Forms W-2 and 1099-R. As these forms contain increasingly complex information (for example, the requirement to report the aggregate cost of employer-provided health coverage on Form W-2...), the potential for mistakes increases and higher penalty amounts raise the financial stakes for employers. ...

Monday, July 20, 2015

Study: PPACA Exchange Plans Offer 66% of the Doctors of Standard Commercial Plans

One of the largest complaints associated with Obamacare plans has been the lack of physician availability. Avalere Health has helped to quantify this in a recent study:
  • The average provider networks for plans offered on the health insurance exchanges created by the Affordable Care Act (ACA) include 34 percent fewer providers than the average commercial plan offered outside the exchange.
  • Exchange plan networks include 42 percent fewer oncology and cardiology specialists; 32 percent fewer mental health and primary care providers; and 24 percent fewer hospitals. Importantly, care provided by out-of-network providers does not count toward the out-of-pocket limits put in place by the ACA.

Sunday, July 19, 2015

John Oliver on Public Money for Professional Stadiums

Cities spend massive amounts of public money on privately-owned stadiums: often for multi-billionaire owners. John Oliver takes a look at this absurd trend abusing tax-exempt municipal bonds to further enrich team owners as only can.  Hilarious and mildly enraging.


Saturday, July 18, 2015

CFOs: Audit Your Benefit Plans or Face Personal Liability

"Failure to make sure that an employee benefit plan audit is done properly may spawn personal liability for a plan sponsor’s officers – including the CFO."
This is from Adam Lilling, writing at
An employee benefit plan (EBP) that has over 100 participants is required to have an audit to accompany the filing of its Form 5500. Many CFOs consider these audits unnecessary and delegate the audit process to the controller or human resource manager.
What many finance chiefs don’t realize, however, is that in doing so they are ceding all control of the management of a risk that can come back to bite them personally. Failure to submit an EBP audit that meets standards can result in the U.S. Department of Labor bringing civil action against the plan sponsor and/or fining the sponsor up to $1,100 a day without limit. In such cases, the plan sponsor often incurs legal fees and spends a significant amount of time trying to resolve the situation.
The Employee Retirement Income Security Act (ERISA) requires plan administrators to ensure that plan financial statements are audited in accordance with Generally Accepted Auditing Standards, and that they are presented in accordance with Generally Accepted Accounting Principles, both of which are specialized for EBPs. Hiring an auditor is considered a fiduciary obligation, and failure to properly fill that obligation may result in personal liability for the officers of the plan sponsor – including the CFO.
In May, the DOL released a study titled “Assessing the Quality of Employee Benefit Plan Audits” that concluded that 39% of the audits inspected were deficient, up from 19% in 1997. To limit their firm’s risk exposure, CFOs of companies that sponsor plans should challenge their auditors to ensure they are providing quality audits that meet standards. ...

Remitting Employee Contributions on a Timely Basis 
Plan sponsors have the fiduciary responsibility to transmit employee contributions to the plan “as of the earliest date on which such contributions can reasonably be segregated from the employer’s general assets,” according to the Code of Federal Regulations. The lack of a bright-line rule for large filers (generally defined as those with over 100 participants) creates ambiguity in testing. Generally, the auditor will consider the sponsor’s ability to remit tax payments and the sponsor’s general history of remittance. 
To avoid issues in the future, the sponsor should set up automatic remittance from its payroll company to the plan. Often sponsors have overly complicated systems that involve sending checks to a third-party administrator before it gets to the trust company, or being dependent on one employee who may have other responsibilities or may be out of the office on the day the contributions need to be remitted.  
Those manual functions often do not add value and put the sponsor at risk for remitting participant contributions late. .. 
Demographic Data 
The sponsor is required to keep an accurate census of plan participants and amass appropriate supporting documentation. The census is used as a basis for such plan decisions as those involving inclusion and exclusion from the plan, eligibility for employer contributions, vesting, and benefit payments. A sponsor that neglects this responsibility may have an inaccurate census or inadequate supporting documentation. The auditor must read the plan document to determine which demographic criteria are necessary to test. Common demographic attributes that need to be tested are dates of birth, sex, dates of hire, and dates of termination. 
To improve the quality of the census and documentation of demographic data, the sponsor should conduct internal audits on the census. The human resources manager should test a certain number of employees in the census each month by inspecting personnel files and comparing the demographic data in them against the census, just as an auditor would. If the human resource functions are decentralized, the manager should test different locations and compare the record keeping policies at each location. ...
Full story posted here.  

Friday, July 17, 2015

Study: Medicaid Enrollment Made No Statistical Improvement in Blood Pressure, Cholesterol, Blood Sugar, or Heart Attack Rate

The Oregon Health Insurance Experiment is a randomized, controlled study made possible by a lottery process used in 2008 to expand Medicaid coverage to some in the state. The study addresses coverage take-up rates and the characteristics of enrollees; use of health services; health outcomes and measures of well-being; enrollee finances and medical debt. Health Affairs just published a policy brief on the study and the two below paragraphs struck me as our nation has invested so much, under PPACA, in expanding Medicaid to cover one-third more enrollees:
...The experiment ... allowed researchers to examine the impact of coverage on people's health. A survey and health screenings conducted about two years following the lottery revealed mixed results on the impact of [Oregon Health Plan] enrollment on health status. While enrollment increased the probability that people reported themselves to be in good to excellent health (compared with fair or poor health) by 24 percent, certain objective measures of physical health did not show significant signs of improvement. 
Specifically, there was no statistically significant effect on measures of blood pressure, cholesterol, or blood sugar or on the diagnosis of, or medication for, blood pressure issues or high cholesterol. Medicaid enrollment also did not reduce the predicted risk of a cardiovascular event within ten years and did not significantly change the probability that a person was a smoker or obese. It did, however, raise rates of diabetes detection and management, and it reduced observed rates of depression by 30 percent....

GAO Audit: Obamacare Covering Bogus Enrollees with Taxpayer Dollars

This is from Virgil Dickson at Modern Healthcare:
A Government Accountability Office report that revealed lacks the ability to verify user information is drawing both support and criticism. 
GAO officials posed as phony applicants for coverage on and were able to get subsidies two years in a row, even though they provided fake information.

The findings raise questions about whether is able to detect fraud, according to the GAO. ...
"Not only does this negligence enhance the likelihood for abuse of taxpayer dollars, but it also calls into question the legitimacy of the health law's enrollment numbers and challenges the integrity of the website's security checks," Finance Committee Chairman Orrin Hatch (R-Utah) said in a statement. ...
“It is hard to believe that our government is so inept at implementing basic quality-control procedures,” said Larry Ponemon, chairman and founder of the Ponemon Institute, a research organization dedicated to cybersecurity, data protection and privacy. “A commercial organization would last one nanosecond if it operated at this level of incompetence.” 
"Once again these findings highlight the fact that insufficient controls have been built into the program. I am afraid that this is just another indicator that is flawed and that the administration has failed to implement the appropriate safeguards to protect sensitive data and prevent misuse," said Michael Gregg, chief operating officer of IT security firm Superior Solutions....

Thursday, July 16, 2015

Individual Mandate Penalty Stats Are Now Available: 2% of American's Paid It & 300K Shouldn't Have

2.6 Million Served | 6.6 Million Fined
  • 6.6 million U.S. taxpayers paid a penalty imposed for the first time this year for not having health insurance.  
    • That is 2% of the population of the United States. 
    • In January, the Treasury Department projected that 6 million taxpayers would pay the fine. 
  • The average penalty was $190.  
  • 300,000 taxpayers overpaid the penalty by a total of $35 million by failing to accurately apply one of the, now, 32 exemptions to the mandate.  
    • The average overpayment was a little more than $110. 
    • And the IRS has not yet decided if it will issue a refund for those overpayments or pocket the cash.  
  • 10.7 million taxpayers did make use of one of the 32 exemptions.  
  • In contrast to the 6.6 million fined for not purchasing healthcare, 2.6 million Americans received an average of $3,000 each to buy a PPACA Exchange plan. 
Note: ISRP is government speak for "tax." The IRS calls the individual mandate penalty/tax an "Individual Shared Responsibility Payment."  George Orwell is proudly chuckling in his grave.

DOL Updates Standard for Determination of Employees and Independent Contractors - There Will Be More Employees and Fewer ICs

On July 15, the Department of Labor issued 15 pages of new guidance on how businesses should distinguish between employees and independent contractors, noting misclassification of employees has been on the rise throughout the country.  The DOL’s Wage and Hour Division now recommends that employers incorporate economic realities when determining how to classify a worker, including the company’s degree of control over the person.  The effect of this is to classify more workers as employees and less as independent contractors. The guidance provides, in part: 
... Unlike the common law control test, which analyzes whether a worker is an employee based on the employer’s control over the worker and not the broader economic realities of the working relationship, the “suffer or permit” standard broadens the scope of employment relationships covered by the FLSA. Indeed, the FLSA’s statutory definitions (including “suffer or permit”) rejected the common law control test that was prevalent at the time. As the Supreme Court explained:
[I]n determining who are “employees” under the Act, common law employee categories or employer-employee classifications under other statutes are not of controlling significance. This Act contains its own definitions, comprehensive enough to require its application to many persons and working relationships, which prior to this Act, were not deemed to fall within an employer-employee category. ...
An “entity ‘suffers or permits’ an individual to work if, as a matter of economic reality, the individual is dependent on the entity.” Antenor, 88 F.3d at 929. The Supreme Court and Circuit Courts of Appeals have developed a multi-factor “economic realities” test to determine whether a worker is an employee or an independent contractor under the FLSA. See, e.g., Tony & Susan Alamo, 471 U.S. at 301 (noting that the test of employment under the FLSA is economic reality); Goldberg v. Whitaker House Co-op, Inc., 366 U.S. 28, 33 (1961) (the economic realities of the worker’s relationship with the employer control, rather than any technical concepts used to characterize that relationship). The factors typically include: 
  • (A) the extent to which the work performed is an integral part of the employer’s business; 
  • (B) the worker’s opportunity for profit or loss depending on his or her managerial skill; 
  • (C) the extent of the relative investments of the employer and the worker; 
  • (D) whether the work performed requires special skills and initiative; 
  • (E) the permanency of the relationship; and 
  • (F) the degree of control exercised or retained by the employer. 
In undertaking this analysis, each factor is examined and analyzed in relation to one another, and no single factor is determinative. The “control” factor, for example, should not be given undue weight. The factors should be considered in totality to determine whether a worker is economically dependent on the employer, and thus an employee. The factors should not be applied as a checklist, but rather the outcome must be determined by a qualitative rather than a quantitative analysis. The application of the economic realities factors is guided by the overarching principle that the FLSA should be liberally construed to provide broad coverage for workers, as evidenced by the Act’s defining “employ” as “to suffer or permit to work.” ...

Wednesday, July 15, 2015

California Governor Signs Paid Sick Leave Amendment—Effective Immediately

This is from the law firm of Ogletree Deakins:
Key Takeaways for California Employers
... This new legislation brings necessary improvement to California’s paid sick leave law. The new legislation clarifies several of the ambiguous provisions in the original law and also provides more meaningful and practical options to employers, particularly with respect to allowing different accrual methods than the original 1 hour for every 30 hours worked and providing options as to how to calculate the rate of pay for sick leave that is taken. 
The new legislation does not go far enough, however, in clarifying several other significant requirements of the law, including whether the 30-day work requirement for eligibility applies to 30 actual work days or a 30-day period of calendar days. The language of the law strongly indicates that the requirement is referring to actual work days, which makes sense since employees in many industries work for several employers during a year, and these workers may not accrue 30 work days with one employer for several months. However, the California Labor Commissioner, without citing any legal or legislative basis for the interpretation, has informally suggested that the 30-day requirement should to be interpreted as calendar days. ...
Full post linked here

Health Savings Account Balances, Contributions, Distributions, 2014

Balances & Claims
  • Average health savings account (HSA) balances increased from $1,408 to $1,933 (up about 37 percent) in 2014, according to a new report by the nonpartisan Employee Benefit Research Institute (EBRI).
  • Account balances averaged $655 for owners under age 25 and $5,016 for owners ages 65 and older.
  • On a yearly average, individuals who made contributions deposited $2,096 to their account while HSAs receiving employer contributions received $1,021 a year, on average. 
  • Among HSAs with claims, the average amount distributed for health care claims was $1,951.
  • Enrollment in HSA eligible health plans is estimated to be about 17 million policyholders and their dependents in 2014.  
  • 4 in 5 HSAs have been opened since the beginning of 2011.

Source: Employee Benefit Research Institute (EBRI).

Tuesday, July 14, 2015

Exactly When May Employers Cut Off Medical Coverage to Adult Dependent Children Who Reach Age 26 Under PPACA?

As of January 1, 2015 (or the first renewal thereafter for plans qualifying for transitional relief), PPACA’s employer mandate rules began imposing penalties on large employers (those with 50 or more full-time and full-time equivalent employees) that do not offer coverage to all full-time employees and their dependent children. For purposes of these rules, a “dependent” is defined as a biological or adopted son or daughter who is under 26 years of age. 

The employer shared responsibility final regulations clarify that a child is a dependent for purposes of the employer shared responsibility penalties for the entire calendar month in which he or she attains age 26. However, the final rules exclude stepchildren and foster children from the definition of dependent.

Hence, large employers that are subject to the employer mandate must offer dependent coverage to children (but not step or foster children) of their full-time employees through the entire month in which the dependent attains age 26 in order to avoid the shared responsibility penalties.  Therefore,
  • Small employers are not subject to penalties under PPACA’s adult coverage mandate if they do not offer dependent coverage at all, or terminate dependent coverage on the child’s 26th birthday; but
  • Large employers that are subject to the employer mandate are subject to penalties if they do not offer dependent coverage to the children of their full-time employees through the entire month in which the dependent attains age 26.

Monday, July 13, 2015

Cost of Covering New People Under PPACA Significantly Higher than Expected

This is from the Wall Street Journal
The cost of covering people who qualified for Medicaid as part of the federal health law was significantly higher than expected in 2014, federal actuaries said Friday. 
Adults who became eligible for Medicaid as a result of the health law’s expansion of the program to include most low-income Americans incurred average medical costs of $5,517, the Centers for Medicare and Medicaid Services office of the actuary said. 
That was about $1,000 higher than had initially been expected for the first full year of the expansion, which marked a sweeping change for the government program that will see its 50th anniversary later this month. ...
The exact number of Americans who gained coverage through Medicaid who wouldn’t have qualified before has been unclear. The CMS actuary said that for 2014, the newly eligible accounted for 4.3 million of 5.7 million new enrollees in the program. ...
More than 70 million Americans used the program in 2014, the actuary’s report said. In some states, as many as one in three residents are covered by it. 

Obamacare Speeds Mergers and Reduces Choice in U.S. Healthcare, WSJ

Novel concepts—whether practice-management companies, home health care or the first for-profit HMO—almost always have come from entrepreneurial firms, often backed by venture capital. 
That venture capital has been drying up since ObamaCare was passed. Instead, the biggest wagers in health-care services are being placed by private equity, which is chasing opportunities to roll up parts of the existing infrastructure. For instance, there were 95 hospital mergers in 2014, 98 in 2013, and 95 in 2012. Compare that with 50 mergers in 2005, and 54 in 2006. Cheap debt and ObamaCare’s regulatory framework almost guarantee more consolidation. That will mean less choice for consumers.
Source: “How the Affordable Care Act Is Reducing Competition,” Wall Street Journal, July 5, 2015.

Saturday, July 11, 2015

The Sheer Gravity of the U.S. Debt Crisis

This is from Terence Jeffery, writing at CNS News:
... “Just holding federal debt at its current high level of 74 percent of GDP in 2040 would require significant changes in tax and spending policies,” [Congressional Budget Office Director Keith] Hall testified. “The combinations of increases in federal tax revenues and cuts in non-interest federal spending relative to current law of about 1.1% of GDP in each year for 25 years would be needed.
“In 2016, this would be a spending and/or a tax revenue increase totaling about $210 billion dollars--and then more than that in each year after that,” said Hall. 
“If those changes came from increases of equal percentage in all types of revenues they would represent an increase of 6 percent relative to current law for each year between 2016 and 2040,” Hall testified.
“In 2016, for example, an average middle-income household would have to pay $750 more in taxes and more than that in each year afterwards,” he said. 
“Or if the changes came from cuts of equal percentage in all types of non-interest spending, that spending each year would have to be 5.5 percent less than projected,” he said. “If the reduction was applied across the board to all types of non-interest spending, an average 65 years old in the middle of the earnings income who retires in 2016 would see a reduction of about $1,050 in his or her initial annual Social Security benefits—more than that in each year afterwards.” 
“The more ambitious goal of returning public debt by 2040 to its average level over the past half century, which is 38 percent of GDP, would require more than that,” Hall said. “This would require a revenue increase and/or non-interest spending decrease totaling 2.6 percent of GDP every year. 
“This means an average middle income household would have to pay $1,700 more in federal taxes in 2016 and larger amounts in subsequent years,” he said. “Or by cutting non-interest spending across the board, average Social Security benefits for a 65-year-old in the middle of the earnings distribution would have to drop by $2,400 in 2016 and by larger amounts in later years.”

Friday, July 10, 2015

PPACA Cherleading: Why Big Insurance Loves Big Government

From Investor's Business Daily:
... [T]he reason for all these hosannas is these executives [of big insurers] don't want to do anything that could risk having their merger blocked by Obama's anti-trust regulators. Broussard [Humana's CEO], Laszewski says, is "arguing that the feds don't need to worry about too much market consolidation . . . because the Obama administration is such a fabulous regulator." 
In other words, this is a classic example of how businesses get co-opted by big government spending programs and regulations. 
Obama is forcing the industry to consolidate, so industry leaders need to play nice while they try to do so. And since a combined Aetna/Humana would get a huge chunk of its revenues from the government — either Medicare, Medicaid or ObamaCare — they're hardly in a position to trash government health care programs. 
We warned long ago that once ObamaCare was in place, it would be virtually impossible for lawmakers to remove it, in part because health care businesses would fight against repeal. 
"Once ObamaCare succeeds in distorting the health care market," we wrote in this space in August 2013, "businesses forced to adjust their operations to conform to these distortions will quickly become Obama-Care's biggest defenders." 
Broussard and Bertolini [Aetna's CEO] are now playing this role.
Hardly a more fitting time for one of my favorite movie images of all time ...


Thursday, July 9, 2015

California Ranks 44th in State Solvency, Study

This is from the Mercatus Center at George Mason University:
The financial health of each state can be analyzed through the states’ own audited financial reports. By looking at states’ basic financial statistics on revenues, expenditures, cash, assets, liabilities, and debt, states may be ranked according to how easily they will be able to cover short-term and long-term bills, including pensions.
This ranking of the 50 states is based on their fiscal solvency in five separate categories: 
  • Cash solvency. Does a state have enough cash on hand to cover its short-term bills?
  • Budget solvency. Can a state cover its fiscal year spending with current revenues? Or does it have a budget shortfall?
  • Long-run solvency. Can a state meet its long-term spending commitments? Will there be enough money to cushion it from economic shocks or other long-term fiscal risks?
  • Service-level solvency. How much fiscal “slack” does a state have to increase spending should citizens demand more services?
  • Trust fund solvency. How much debt does a state have? How large are its unfunded pension and health care liabilities?

Wednesday, July 8, 2015

Nightmare Trend for Employers: Turning Every Minor Slight Into a Lawsuit

[A] propos[ed change by the American Law Institute] has gained traction — one that could make any touch (even non-sexual touches) a civil liability if someone so chooses.  
The proposal, a Restatement of Torts relating to assault and battery, was approved by the organization's members last month. 
This proposal would change the definition of battery from something a "reasonable person" would deem as "offensive" to any contact that offends the "unusually sensitive sense of personal dignity, and the actor knows that the contact will be highly offensive to the other." 
The Wall Street Journal gives an example of such contact: A hospital patient says he doesn't want to be touched by any Jewish doctors or nurses. Under ALI's new restatement, the hospital might be sued successfully if it fails to accommodate such a preference.  
"Thus if the trial takes place in a community with a significant Muslim population, the hospital will be more likely to settle — an outcome that will encourage religious bigotry," WSJ reporter Ronald Rotunda wrote. 
That's because the final draft removed the words "or religion" from its explanation of why the bigot would or would not be placated. Originally, the draft said: "if the patient had demanded that she not be touched by a nurse or doctor of a particular race or religion, the hospital and medical staff have no obligation to respect that preference." But it was updated to make religious bigotry acceptable. 
Another example from WSJ would be a John Doe tapping a veiled Muslim woman's shoulder to get her attention and ask for directions. He, under the new ALI restatement, could be sued for battery because he should have known that Muslim women cannot be touched by non-family members. Of course, if she tapped his shoulder, she would not be held liable under the new restatement. 
But it's not just religious sensitivities that would be covered under the new restatement — anyone who is easily offended (or especially litigious) would instantly have grounds to sue people for innocent behavior. 
"In North Carolina, an employee sued his supervisor for assault and battery because the supervisor, in his own office, smoked a cigar. There was no company rule against that, but the employee had warned the supervisor that he found cigar smoking 'obnoxious,' " Rotunda wrote. "A state court dismissed the case (McCracken v. Sloan, 1979) because the employee's 'mental distress' was not enough for assault and battery. The American Law Institute says: 'This case would very likely result in liability today.'" ...

Tuesday, July 7, 2015

Number of Residents Enrolled in Medicaid in Each State

Here is an interesting map from California Healthline.
  • California is up 34% since PPACA took effect.  
  • Kentucky is up 88%.  

Monday, July 6, 2015

Why Are the 2016 PPACA Rates All Over The Place? Here Is a Brief List

  • The number of people signing up for Obamacare has varied considerably by state and is far below the level of penetration the industry typically needs to create a sustainable risk pool.
    • Vermont signing up 75% of the exchange eligible and Iowa only signing up 20%––insurers typically want to see 75% sign-up. 
    • This year’s results were not encouraging with the states having the best first year enrollment stalling out in 2015––California, Washington, and New York.
  • Many carriers are worried that the Obama administration is not going to follow through on its promises to pay off most of a carrier’s losses through the “3Rs” reinsurance program and decided not to wait another year before hiking their rates.  
  • In December Congress passed legislation requiring that one element of the PPACA 'bailouts'—the risk corridors—be revenue neutral after the administration last year promised it would not be capped. 
    • S&P recently reported that, “The ACA risk corridor will not receive adequate monies from insurers with profitable exchange business to pay insurers that have unprofitable exchange business.”
  • Then there is the permanent and revenue neutral risk adjustor element of the program. Health insurers with the worst claims experience end up getting subsidized by the ones with the best experience. The problem is that the government won’t do this calculation on the last year’s business until after the health plans have to submit the next year’s rates making next year’s rate calculation dicey at best.
  • Over the years, it has been common to see one insurance company in the same market dramatically price its business differently than another. Some have more data, some are more patient, some are willing to under price to grab more market share, some have more experience in this market niche, and some just screw it up. 
  • Health plans are still dealing with incomplete data. Really, they are looking at just one year of claims experience (early 2014 to early 2015) for a brand new book of business in which the enrollment has not been stable.  As most healthcare consultants will tell you, three years are typically necessary to give accurate projections.
  • What has concerned many actuaries is how the market penetration for Obamacare slowed considerably in year two in the states with the best first year enrollment results. Almost all of the states recorded a second year growth rate of 10% to 20%. A 20% growth rate might sound good, but to hit the original Obamacare enrollment targets in this first three-year ramp-up, we needed to see enrollment double; not grow by a fifth.   
Source: Robert Laszewski - the president of Health Policy and Strategy Associates, LLC, a policy consulting firm based in Washington, D.C.  His full article is published at Forbes.

New York Times: Health Insurance Companies Seek Big Rate Increases for 2016

Interesting.  Clearly nobody everybody saw this coming.  NYT:
Health insurance companies around the country are seeking rate increases of 20 percent to 40 percent or more, saying their new customers under the Affordable Care Act turned out to be sicker than expected. Federal officials say they are determined to see that the requests are scaled back. 
Blue Cross and Blue Shield plans — market leaders in many states — are seeking rate increases that average 23 percent in Illinois, 25 percent in North Carolina, 31 percent in Oklahoma, 36 percent in Tennessee and 54 percent in Minnesota, according to documents posted online by the federal government and state insurance commissioners and interviews with insurance executives. 
The Oregon insurance commissioner, Laura N. Cali, has just approved 2016 rate increases for companies that cover more than 220,000 people. Moda Health Plan, which has the largest enrollment in the state, received a 25 percent increase, and the second-largest plan, LifeWise, received a 33 percent increase. 
Jesse Ellis O’Brien, a health advocate at the Oregon State Public Interest Research Group, said: “Rate increases will be bigger in 2016 than they have been for years and years and will have a profound effect on consumers here. Some may start wondering if insurance is affordable or if it’s worth the money.” 
President Obama, on a trip to Tennessee this week, said that consumers should put pressure on state insurance regulators to scrutinize the proposed rate increases. If commissioners do their job and actively review rates, he said, “my expectation is that they’ll come in significantly lower than what’s being requested.” 
The rate requests, from some of the more popular health plans, suggest that insurance markets are still adjusting to shock waves set off by the Affordable Care Act.  ...

How Your Domestic Partner Benefits Can Now Get You Sued

This is the first law firm I've seen making the point we've made for over a year now.  Domestic partner benefits can expose a company to discrimination claims now that all persons can get married.
... Now that same gender marriage will be legal throughout the country, this reason for allowing domestic partner coverage is no longer present.

Further, particularly following the Obergefell ruling, to only offer domestic partner coverage to individuals of the same gender as opposed to all domestic partners (whether of the same or opposite gender) may trigger employment discrimination claims. In other words, employees with opposite gender domestic partners may take the position that they are being discriminated against. ...
Source: Miller Johnson.

Sunday, July 5, 2015

CalPERS HMO Rates Soaring 12.2% in Sacramento Region

This is clearly not a good sign of what lies ahead in 2016 for northern California.

This is from Kathy Robertson writing in the Sacramento Business Journal:
People who work for cities, counties, school districts and other public agencies in the four-county Sacramento region face an average HMO premium increase next year of 12.2 percent. Amounts vary by health plan from a low of 5.17 percent for Kaiser Permanente to 18.76 percent for the Blue Shield NetValue plan. Anthem Blue Cross charges more here than in any other region, including the Bay Area. 
CalPERS negotiates one statewide rate for state workers, but public agency rates are negotiated by region. The rating system was launched a decade ago to accommodate public agencies in Southern California that complained about sharing the burden of higher health-care costs in Northern California. ...

Saturday, July 4, 2015

Quantifying Just How Small The Exchange Networks Are

 This is from the American Journal of Managed Care:
A new study from the University of Pennsylvania’s Leonard Davis Institute (LDI) of Health Economics has shed some light on the breadth of physician networks being sold on the marketplaces. Researchers used a dataset consisting of 450,232 physicians participating in plans issued by 251 carriers across 355 networks. 
This is the first study to summarize network size by physician, not just hospital participation. 
The researchers had to come up with some way to categorize network size, despite the definition by the health law’s legislation leaving some uncertainty. The ACA simply requires that plans maintain “a network that is sufficient in number and types of providers” so that “all services will be accessible without unreasonable delay.” However, what defines sufficiency? 
The LDI report identified 5 network sizes using, admittedly, arbitrary cutoffs: x-small (less than 10% of providers), small (10% to 25% or providers), medium (25% to 40% of providers), large (40% to 60% of providers), and x-large (more than 60% of providers). 
The results of the study found that 41% of networks on the marketplaces are considered small or x-small. Only 11% are considered x-large and include more than 60% of office-based practicing physicians in the area. 

Thursday, July 2, 2015

Breaking: Health Net Sold to St. Louis-Based, Medicaid-Focused Insurer Centene Corporation

PPACA has launched an avalanche of mergers, proposed mergers and change in the healthcare industry.  Today was the latest.  This is from the Wall Street Journal
Centene Corp. on Thursday said it agreed to buy Health Net in a cash-and-stock deal valued at $6.3 billion, as health insurers increasingly look for tie-ups that can help them cut costs and grow scale. 
St. Louis-based Centene, a Medicaid-focused health insurer, expects the deal to boost its presence in California and other western states, while allowing for $150 million a year in synergies in the second year after closing. 
Health Net shareholders will receive 0.622 shares of Centene and $28.25 in cash for each share held, for a total consideration of $78.57 based on Wednesday’s closing price. That represents a 21% premium to Health Net’s last closing price. 
Shares of Centene gained 5% in premarket trading, while Health Net’s shares rallied 5.4%. 
The deal comes amid a frenzy of merger talks in the health-insurance industry. 
Changes brought on in part by the Affordable Care Act have prompted major players in the health-insurance industry to consider mergers that could help them cut costs and reap other benefits. 
In recent months, UnitedHealth Group has approached Aetna about a takeover deal, while Anthem has approached Cigna Corp., The Wall Street Journal has reported. Meanwhile, the Journal has also reported that Aetna and others are considering buying Humana Inc. 
For its part, Centene expects the deal to make it one of the largest Medicaid managed-care organizations in the country with about 6 million members. Los Angeles-based Health Net has a presence in Western states including California, which has the country’s largest Medicaid program, Arizona, Oregon and Washington. 
Centene shareholders would hold 71% of the combined company upon closing, with Health Net shareholders owning 29%. 
Including the assumption of $500 million in debt, the transaction is valued at $6.8 billion. ... 
The deal is expected to close by early 2016.