Friday, April 22, 2016

Fun Friday Facts on Federal Taxation - How Much You Pay and Where it Goes

Over the last seven years the federal government has collected $124,003 in taxes per job (full or part time) in the United States.  

Over that same seven years, the federal government has increased our national debt by $57,051 per job (full or part time) in the United States.

And lest you think that money is well spent, here are just a few of the programs we funded in 2016 alone.  See also, Unwanted tanks, ineffective jets among $5.1B in Congressional earmarks in 2016, stating in part:
1. $40 million to upgrade the M1 Abrams tank. The tank plant is in Lima, Ohio, but its suppliers are spread across the country. Congress has for years approved M1 upgrade money over the objections of defense leaders. A top Army official told Congress in 2012 that it already had more than enough. CNN reported then that 2,000 were parked in a California desert. 
2. $1 billion for a new Arleigh Burke-class guided missile destroyer. The group notes in the Pig Book that since fiscal year 1991, members of Congress have added 21 earmarks for this program, totaling $2.7 billion. Over time the Navy has launched more than 60 such destroyers. 
3. $255 million for two F-35 joint strike fighter aircraft, which has been in development nearly 15 years and is four years behind schedule. The program already is about $170 billion over budget and has been plagued with problems. 
4. $51 million for the Appalachian Regional Commission, created by Congress in 1965 to bolster the economy in Appalachian areas in Ohio and 12 other states. The appropriation represents a 133.9 percent increase over 2015, Citizens Against Government Waste said. The commission pays for several hundred highway and development projects in the Appalachian region, but critics say it duplicates efforts of other federal, state and local programs. 
5. $84.7 million for House office buildings under the Architect of the Capitol, boosting the total available in that fund to nearly $175 million. That figure is nearly 94 percent greater than what the Obama administration requested. The group speculates that the money will be used to help renovate the Cannon House Office Building, a 10-year, $750 million project. ...

Thursday, April 21, 2016

Why You Probably Don't have a Gender Wage Gap at Your Company: Harvard Professor Debunks the Gender Pay Myth

This is from Ashe Schow writing at the Washington Examiner:
I've written extensively on how the gender wage gap would be more accurately referred to as the "gender earnings gap," because the gap is due mostly to choices women make and not discrimination.
Econ. professor says gap is due mostly to choices men &
women make in their careers. (Brendon Thorne/Bloomberg)
But now you don't have to take my word for it, you can listen to Claudia Goldin, an economics professor at Harvard University. Goldin spoke to Stephen Dubner, the journalist behind the popular podcast "Freakanomics," in a segment about what really causes the gap.
As one can imagine, Goldin comes to the same conclusion that I and many others have: That the gap is due mostly to choices men and women make in their careers and not discrimination.
"Does that mean that women are receiving lower pay for equal work?" Goldin asked after listening to clips of President Obama and comedienne Sarah Silverman claim that women earn 77 cents to the dollar that men earn. "That is possibly the case in certain places, but by and large it's not that, it's something else."
That "something else," is choice — in the careers that women take, the hours they work and the time off they take. Dubner asked her about evidence that discrimination plays a role in the gap, to which Goldin responded that such a "smoking gun" no longer exists.
"It's hard to find the smoking guns, OK? The smoking guns existed in the past," Goldin said. "I have found many a smoking gun where you find actual evidence of firms saying, for example, 'I do not hire Negroes.' Or, 'I do not hire women.' I mean, you actually find these in 1939."
Goldin argued that once you account for a number of factors, including taking time off from work and different careers, then there isn't "tons of evidence that it's true discrimination."
Goldin also suggested that the old claim that men are just better at bargaining doesn't contribute much to the gap. She said studies have shown men and women show up to a job straight out of college (meaning they have the same education level) and earn the same amount.
"So if men were better bargainers, they would have been better right then. And it doesn't look as if they're better bargainers to a degree that shows up as a very large number," Goldin said.
But as men and women progress through their careers, Goldin said, the difference in pay comes to light.
"But we also see large differences in where they are, in their job titles, and a lot of that occurs a year or two after a kid is born, and it occurs for women and not for men," Goldin said. "If anything, men tend to work somewhat harder."
I can see her last sentence there gaining the ire of many a feminist. Of course women work hard, Goldin isn't suggesting they don't work hard — she's referring to the difference in the number of hours women and men work.
"And I know that there are many who have done many experiments on the fact that women don't necessarily like competition as much as men do — they value temporal flexibility, men value income growth – that there are various differences," she added. ...
The full column is absolutely worth the read.

Wednesday, April 20, 2016

Death Spiral or No Death Spiral - A Summary from One of My Favorite Econ Bloggers

From Mish
... Obamacare Death Spiral Debate 
No Death Spiral: Dr. Mandy Cohen, the chief operating officer of the Centers for Medicare and Medicaid Services (CMS), said in an interview that there is “absolutely not” a risk of a death spiral or collapse in the ObamaCare marketplaces. 
Death Spiral or Premium Hikes: Michael Adelberg, a former CMS official under President Obama and now a consultant at FaegreBD had this to say: “Given that most carriers have experienced losses in the exchanges, often large losses, it only makes sense that most exchange insurers will request significant rate increases for 2017.” 
Adelberg added “Market exits are not out of the question if an insurer is looking at consecutive years of losses and regulators are unable to approve rates that get the insurer to break-even.”
Death Spiral, Not Tomorrow, Possibly Later: Blue Cross of North Carolina CEO Brad Wilson said in an interview that the company had lost $400 million due to its ObamaCare business. Wilson said he is not worried about a death spiral happening “tomorrow,” but has concerns if the situation does not change over time. 
Death Spiral: The most prominent insurer eyeing the exits is UnitedHealth, which made waves in November by saying it was considering whether to leave ObamaCare in 2017 because of financial losses. The company last week announced that it is dropping its ObamaCare plans in Arkansas and Georgia, and more states could follow. 
No Death Spiral: The Department of Health and Human Services argues that the attention on UnitedHealth is overblown, given that the insurer is actually a fairly small player in the marketplaces. 
Debate Winners and Losers 
  1. The winner in this debate is “death spiral or premium hikes” 
  2. The loser in this debate is the public. ...

Tuesday, April 19, 2016

Healthcare Fraud: How It’s Harming You and How You Can Help Prevent It

From the Law Offices of Robert Malove:
Most people associate white collar crime with blockbuster court cases like Enron. But did you know there’s another type of white collar crime that is being perpetrated thousands of times daily and costing us an estimated 272 billion dollars a year? The crime is healthcare fraud and it is rapidly growing more popular, attracting novice to seasoned criminals, and spreading like a cancer across our country. The devastating effects of this crime wave are being felt by every tax payer. We are all victims and paying the price through higher healthcare premiums and out-of-pocket expenses, reductions in our coverages, faulty medical care, and worse.
Despite efforts to hasten it’s growth, healthcare fraud is rapidly spreading. Although policies have been put in place to reduce healthcare fraud, we, the tax payers, may be the most effective deterrent. There are many things you can do to help prevent healthcare fraud, which we will cover later. First, let’s dig into exactly what is happening and why. ...
#1 Upcoding: This is when a service is provided or a diagnosis is made, but the provider bills insurance for a more expensive service, or more serious diagnosis. So say you went in for a mammogram and your doctor then turns around and bills your insurance, or Medicare, for a more expensive type of mammogram and, or, additional tests. These tests will show up and become part of your permanent medical record. You could end up receiving care you don’t need based upon these types of fictitious charges. ...
Full story with many other good tips here.

Monday, April 18, 2016

Competition Works: Every Health Insurer Added to a Market Correlates to a 2% Decrease in Your Premiums

As Anthem and CIGNA seek to merge along with Aetna and Humana, we can expect an even larger jump in premiums.  Economies of scale are a real advantage but I can assure you after having worked in this industry for 15 years that absolutely nothing holds prices down like insurer competition.  And it appears we are on the verge of losing much of that. This is from Forbes:
[R]esearchers looked at premium prices from 2014 and 2015, and tested whether those prices went up or down as insurers exited or entered marketplaces. In some localities, you see, a consumer might have had four insurers competing for her business in 2014 and only two in 2015. In other localities, consumers might have seen the number of insurers increase over that same time. The researchers took advantage of this variation in competition to see how prices changed as insurers exited and entered markets. 
They discovered that the addition of one insurer to a market was associated with a 2% drop in premiums. Here is picture of that result. (Ignore the bars and focus on the lines, which move from left to right showing a drop in prices as the number of insurers in a given marketplace increases.)

A word of caution here: This study shows correlation, not causation! There are differences across marketplaces that these researchers cannot account for, which might explain their results. ...

Friday, April 15, 2016

When Politicians Can't Tax Something You Have, They Call It an "Expenditure" - Taxation of Health Insurance Looms

I just love how politicians consider it some sort of wasteful spending when there is an item of compensation you earn that they can't take from you at the point of a gun.  I suppose this ultimately means, "if you like your tax exclusions, you can keep your tax exclusions." Accounting Today:
The House Ways and Means Committee held a hearing Thursday on proposals to limit tax breaks for employers who provide health care for employees.
“Let’s consider the largest health tax expenditure, for employer-sponsored health insurance plans, commonly referred to as the employer exclusion,” said committee chairman Kevin Brady, R-Texas “Congress incorporated this highly popular tax break into the tax code decades ago so that employers could attract and keep workers during a time of wage freezes. At the time this provision was created, the labor market and the health insurance market both looked very different.”
More than 150 million Americans under the age of 65 now receive their health insurance through their employer, he noted. However, Brady questioned whether the employer exclusion might have some negative economic impact.

“The employer exclusion is a contributing factor in our country’s stagnant wage growth,” he said. “That’s because the tax code incentivizes putting a greater share of compensation toward nontaxable health plans and less to taxable paychecks. So, as health care costs rise, employers divert increases in compensation to health care at the expense of take-home pay.” ...
[Yes, of course. We need politicians to be able to tax every cent of compensation we can ever earn to be made better off. Why didn't I think of that?] Back to the story:
However, the employer exclusion also had its defenders on the committee, including the ranking Democrat, Rep. Sander Levin, D-Mich., who called the Republican proposal another in a long series of attempts to undermine the Affordable Care Act’s expansion of health care coverage.
“This would disrupt the employer-based health insurance system that 155 million working Americans and their families rely on for coverage, and likely result in many employers no longer offering health coverage to employees,” said Levin. “And it would leave many, including employees who are older or in poor health, without the ability to find affordable coverage.”...

The VA is Just One Example of Government Run Healthcare. Here is Another

From KHN:
... The federal government is obligated by law to provide medical care to American Indians and Alaska Natives, and it does it through the Indian Health Service, an agency of the Department of Health and Human Services. There are also tribal-run health centers set up on reservations. And 20 states have Urban Indian Health Programs, which receive IHS funding to provide medical services and support to American Indians who don’t live on reservations.
But there are still significant gaps in care, both on the reservation and in town. The IHS is chronically underfunded. It receives a set amount of money each year to take care of 2.2 million native people — no matter how much care they may need. On the reservation, IHS facilities often don’t have services that people elsewhere expect, such as emergency departments or MRI machines. And those limited facilities can be hours away by car. In town, reaching care is easier, but clinics also don’t have enough funding to meet all of the health needs of the community. And people can’t get the free drugs they are entitled to through the IHS anywhere but an IHS facility. ... 

Obamacare "Bleeding Out": Insurers Warn Losses Unsustainable

No, I could not beat Matt Drudge's headline on this one. He nailed it. 

This is from the Hill:
Health insurance companies are amplifying their warnings about the financial sustainability of the ObamaCare marketplaces as they seek approval for premium increases next year. 
Insurers say they are losing money on their ObamaCare plans at a rapid rate, and some have begun to talk about dropping out of the marketplaces altogether.
“Something has to give,” said Larry Levitt, an expert on the health law at the Kaiser Family Foundation. “Either insurers will drop out or insurers will raise premiums.” 
While analysts expect the market to stabilize once premiums rise and more young, healthy people sign up, some observers have not ruled out the possibility of a collapse of the market, known in insurance parlance as a “death spiral.”
In the short term, there is a growing likelihood that insurers will push for substantial premium increases, creating a political problem for Democrats in an election year. 
Insurers have been pounding the drum about problems with ObamaCare pricing.
The Blue Cross Blue Shield Association released a widely publicized report last month that said new enrollees under ObamaCare had 22 percent higher medical costs than people who received coverage from employers. 
And a report from McKinsey & Company found that in the individual market, which includes the ObamaCare marketplaces, insurers lost money in 41 states in 2014, and were only profitable in 9 states. ...

Monday, April 11, 2016

Obamacare Exchange/Marketplace Updates, 2016

  • The Congressional Budget Office sharply reduced estimates on Marketplace/Exchange enrollment from 21 million to 13 million. 
    • 11 million are expected to receive a subsidy. 
    • The average enrollee has 72% of his/her premium subsidized. 
    • On average, subsidies are $272 per month or $3,264 per year. 
  • 1.6 million of those taxpayers ultimately had to pay money back to the government because their actual incomes were higher than they had projected when they signed up for a plan on the Marketplace. The average amount repaid was about $800.
  • Centers for Medicare and Medicaid Services has begun to limit Special Enrollment Period (SEP) entry – SEP individuals are utilizing 55% more services than open enrollment counterparts. 
  • The largest U.S. health insurer, United Health Care, said it has suffered major losses on policies sold in the Marketplace and is contemplating an exit. 
  • Some state-run exchanges are seeing large rate increases by Blue Cross/Blue Shield plans –
    • 47% in Minnesota, 
    • 36% in Tennessee. 
  • The average deductible for individual and family silver plans on the Marketplace is $2,927 and $6,010. 
    • A study by the Kaiser Family Foundation found that less than one-fifth of low-income families can afford their high deductibles and 
    • only about half of middle-class families can.
  • Employers are sticking with plans – 
    • in 2015, only 7% of employers with 50-499 said likely to terminate plans within five years (vs. 21% in 2013); 
    • 5% of employers with 500+ said likely to terminate.

Friday, April 8, 2016

When You Need Care Now But Aren’t Likely to Die, Urgent Care is the Ticket

Some good reasons to opt for urgent care over the emergency room when you can, from the WSJ:
  • There are an estimated 10,000 urgent care centers in the United States and another 1,400 are expected by 2020. 
  • Increasingly, hospitals are building, acquiring or partnering with urgent care providers.
  • Wait times are 30 minutes or less whereas a wait in the emergency room can run eight times that length. 
  • The average cost at an urgent care center is about $150, compared to $1,354 for an emergency room visit. 
  • Centers are usually open evenings and weekends when doctors’ offices are closed.

Thursday, April 7, 2016

Want to Fix the Doctor Shortage? Cut Income Tax Rates

The following is from Chris Edwards writing at Cato:  
The Association of American Medical Colleges (AAMC) has released projections showing that we may have doctor shortages in coming years. The demand for doctor services is rising in our aging society, but various factors in the health care industry are hampering supply. 
But policymakers should remember that high income tax rates inhibit the supply of top earners across all industries. America’s tax system is the most “progressive” or graduated among OECD nations, and that has consequences. If the government penalizes the most productive people, they will work fewer hours, retire earlier, and make other decisions to reduce their labor efforts. 
Some politicians on the campaign trail want to raise tax rates on high earners, and they seem to consider them little more than economic leeches. The truth is that most high earners are very industrious people who add crucial skills to the economy. The nation’s 708,000 doctors and surgeons are a case in point.
The Bureau of Labor Statistics (BLS) reports that “physicians practicing primary care received total median annual compensation of $241,273 and physicians practicing in medical specialties received total median annual compensation of $411,852” in 2014.
So how does Congress reward that hard work? It imposes punitive marginal income tax rates on them of up to 40 percent, with state income taxes on top of that. Even lower-earning doctors can be pushed into the highest income tax brackets if their spouses work. 
Doctors are exactly the type of workers who have large negative responses to high tax rates because they have substantial flexibility in managing their careers. With high tax rates, fewer people will want to go into this difficult profession, stay in it, and work the long hours—and that ends up hurting all of us who use the nation’s health care system.

Wednesday, April 6, 2016

Federal Bureaucrats: Failing to Guard Your Obamacare Subsidy Tax Dollars

The Government Accountability Office's (GAO) report summary is brief and absolutely worth a full reading.  But here are some direct quotes from that summary:  
  • [The Centers for Medicare & Medicaid Services] CMS foregoes information that could suggest potential program issues or potential vulnerabilities to fraud, as well as information that might be useful for enhancing program management. 
  • GAO found CMS did not have an effective process for resolving inconsistencies for individual applicants for the federal Health Insurance Marketplace (Marketplace). 
    • For example, according to GAO analysis of CMS data, about 431,000 applications from the 2014 enrollment period, with about $1.7 billion in associated subsidies for 2014, still had unresolved inconsistencies as of April 2015—several months after close of the coverage year
    • In addition, CMS did not resolve Social Security number inconsistencies for about 35,000 applications (with about $154 million in associated subsidies) 
    • or incarceration inconsistencies for about 22,000 applications (with about $68 million in associated subsidies). 
  • During undercover testing, the federal Marketplace approved subsidized coverage under the act for 11 of 12 fictitious GAO phone or online applicants for 2014. 
    • The GAO applicants obtained a total of about $30,000 in annual advance premium tax credits, plus eligibility for lower costs at time of service. 
    • The fictitious enrollees maintained subsidized coverage throughout 2014, even though GAO sent fictitious documents, or no documents, to resolve application inconsistencies. 
  • GAO found CMS relies upon a contractor charged with document processing to report possible instances of fraud, even though CMS does not require the contractor to have any fraud detection capabilities. 
  • CMS has not performed a comprehensive fraud risk assessment—a recommended best practice—of the PPACA enrollment and eligibility process. 

Obamacare is Regulating Health Savings Accounts Out of Existence

This is from Roy Ranthum (Mr. HSA) writing at National Review:
Almost six years to the day after the Affordable Care Act was enacted, the Department of Health and Human Services (HHS) has taken steps to kill health savings accounts (HSAs) in the state health-insurance exchanges. It was bound to happen at some point, although some may be surprised that it took this long. In case you missed it, final regulations published on March 8 will make it impossible to offer HSA-qualified plans in the future. Whether this is by accident or design, the outcome is clear. 
Over the past several years, HHS has fended off industry concerns about the availability of HSA-qualified plans in the state exchanges while (a) doing nothing to help consumers identify HSA-qualified plans on the exchanges or (b) provide information to individuals that choose HSA-qualified plans about where to get more information about opening and contributing to an HSA. In the March 8 rule regarding the requirements for health plans that will be offered on the state insurance exchanges for 2017, HHS stated that HSA eligibility was not a meaningful distinction for health plans because consumers can determine whether a plan is HSA-qualified by examining a plan’s cost-sharing amounts. So, it will not require HSA-qualified plans to be designated as such. 
In order to figure out exactly how HSAs will be eliminated, one has to sift through a massive, more than 500-page-long rule. This will be accomplished through the new standardized benefit designs for plans offered within the lower three “metal” tiers: Bronze, Silver, and Gold. Yet the proposed rule published last fall gave no hint at just how lethal these standardized plan designs in the final rule would be. 
Buried in the details of the final rule are the two main reasons why HSA-qualified plans will not survive: 
1) Plans must apply specific deductibles and out-of-pocket limits that are outside the requirements for HSA-qualified plans. 
2) Plans must cover services below the deductible that are not considered “preventive care.” 
[Regarding the first reason] ... Because of a different inflation-adjustment factor applied to [PPACA compliant plan] limits than for HSA-qualified plans, the gap between the annual limits has and will continue to grow. Based on our projections, we’re extremely confident that our analysis below will hold true. 
  • Bronze standardized plans will be required to have a deductible of $6,650. This amount is $100 above the projected maximum deductible of $6,550 for HSA-qualified plans for 2017. 
  • Gold standardized plans will be required to have a deductible of $1,250. This amount is $50 below the projected minimum deductible for HSA-qualified plans for 2017. 
  • Bronze and Silver standardized plans will be required to have out-of-pocket limits of $7,150, well above the projected out-of-pocket limit of $6,550 for HSA-qualified plans for 2017.
... Regarding the second reason, HHS is requiring plans to cover a variety of services below the deductible in an attempt to make them more appealing to consumers. These services include a limited number of primary-care visits, specialty-care visits, mental-health and substance-use-disorder outpatient services, urgent-care visits, and drug benefits. But for those who are unfamiliar with HSAs, HSA-qualified plans are not permitted to cover any services below the deductible except for preventive services. Since HHS did not provide any exceptions for HSA-qualified plans, covering these services will also prevent plans covering these services from being HSA-qualified. 
... [I]t is only a matter of time before the HSA-qualified plans completely disappear. That could happen as early as 2017 even though the standard benefit designs are optional. By 2018, when the designs likely become mandatory, HSAs will cease to exist in the marketplace. 
Full story here.

Managers and Supervisors Can be Sued Individually by Employees for FMLA Violations, Court Confirms

Congratulations!  You've been promoted to the supervisor level.  Now you might want to consider some additional training or an errors and omissions policy.  Yet another court reminds us, missteps in the Family Medical Leave act are costly for managers. This is from Legal Newsline:  
The U.S. Court of Appeals for the Second Circuit has ruled that some employees may be held individually liable for employment claims brought under the Family and Medical Leave Act, taking a split from other federal employment laws.  
The case, Graziadio v. Culinary Institute of America, saw Cathleen Graziadio filing a lawsuit in U.S. District Court for the Southern District of New York against Culinary Institute of America, Shaynan Garrioch and Loreen Gardella for interference with FMLA leave, FMLA retaliation and associational discrimination under the Americans with Disabilities Act. ... 
The defendants moved for summary judgment on all claims and, on March 20, 2015, the district court granted their motion in full, dismissing Graziadio’s FMLA claims against Garrioch and Gardella individually, finding that neither qualified as an “employer” subject to liability under the FMLA. 
So the defendant managers were off of the hook in this particular case, however, the court did go on to provide:
The court looks at least four factors when determining if a manager or supervisor can be individually liable for FMLA violations.
  • Whether the manager or supervisor had the power to hire and fire the employees;
  • Whether the manager or supervisor supervised and controlled employee work schedules or conditions of employment;
  • Whether the manager or supervisor determined the rate and method of payment; and
  • Whether the manager or supervisor maintained employment records.
“This was a non-exhaustive list,” .... “But here the court found the manager met enough of the factors.”
An individual may be held liable under the FMLA only if he or she is an employer, which is defined as encompassing "any person who acts, directly or indirectly, in the interest of an employer to any of the employees of such employer.” ...
What exactly did the managers (and HR Manager) do in this case?  Here is how Seyfarth Shaw summarized it:
[T]he plaintiff took FMLA leave to care for her son, and then took additional leave a few weeks later when her second son broke his leg. During the plaintiff’s second term of absence, the employer took issue with the paperwork supporting the leave request, and refused to allow her to return until she provided new documentation. Communication between the plaintiff and the employer broke down, and ultimately the employer fired the plaintiff for abandoning her job. The plaintiff subsequently sued the employer and two of her supervisors alleging interference and retaliation under the FMLA, and discrimination under the Americans with Disabilities Act (ADA). ...  
At the District Court, summary judgment was granted to the employer [and the managers in question]. The District Court found that the plaintiff could not establish that she was wrongfully denied FMLA leave, or that the employer’s actions were retaliatory or discriminatory. ...
In light of this startling Circuit Court opinion, employers may wish to consider the ramifications of this case as they analyze their organizational structure, chain-of-command, policy, procedures, and training systems. It’s one thing to deliberately decide as a business to subject lower level managers to individual employer liability, but something quite else for it to happen accidentally.

Slashing Benefits: Employers Expect Premium Increases to be Only 4% After Cutting Benefits This Year

Whenever we see trend forecasts out there, it is paramount to distinguish if that projected increase is before or after changes.  Here are some highlights from a recent employer survey published by Globe Newswire:
  • 78% of employers project they will make even further changes (erode benefit levels) in their health plan designs and vendor strategies over the next four years, according to a survey of U.S. employers. 
  • After these expected changes, employers anticipate cost increases in 2016 to be around 4%, more than twice the Consumer Price Index. 
  • Electronic telemedicine physician visits are rapidly becoming ubiquitous: 67% of employers offer them today [as most carriers have embedded them in some form]; by 2018, that number could increase to 90%.
  • Employer-owned or sponsored workplace health centers remain appealing: 22% of employers have one or more today; by 2018, that number could grow to 40%.

Under ERISA and FLSA, Employees Are Suing Employers for Reductions in Hours to Curtail Healthcare Costs

This is an excerpt from a much longer benefit and compensation advisory issued by Alston & Bird.  The entire 8-Page PDF is worth your time to read, however, I wanted to call special attention to the below issue as it is an issue I've seen bubble up numerous times in the last year or so. 
... On May 8, 2015, a federal class action lawsuit was filed in the Southern District of New York against the restaurant chain Dave & Buster’s. The lawsuit alleges that the company violated the Employee Retirement Income Security Act of 1974 (ERISA) by moving full-time employees to part time to avoid the ACA. On February 9, 2016, the court denied Dave & Buster’s motion to dismiss this lawsuit. 
In Marin v. Dave & Buster’s, the plaintiffs alleged that some employees who were receiving health care coverage had their hours cut to avoid providing them ongoing health insurance benefits. Moreover, the plaintiffs alleged that the company stated that their hours were cut to reduce the company’s health care expenses. ... This, according to the plaintiffs, violated § 510 of ERISA, which makes it “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.” 
The defendant argued, on a motion to dismiss the complaint, that the conduct alleged was entirely legal. Specifically, the reduction in hours was for the purpose of avoiding the provision of future benefits to which plaintiffs had no legal right. Although the district court rejected this argument, it is possible that it will ultimately prevail or that it would prevail in another district or circuit. Indeed, the defendant clearly could have achieved the same goal, legally, simply by excluding the plaintiffs from eligibility first, and then reducing the hours in order to avoid excise taxes. While the district court in Dave & Buster’s allowed the case to go forward, other courts may not consider it sensible to distinguish between two very similar means to achieving what is clearly a legal result – no coverage and reduced hours. 
The Dave & Buster’s case has struck fear into the hearts of many employers, for good reason....  
Under ERISA § 3(7), a “participant” is an employee or former employee “who is or may become eligible” to receive benefits under an employee benefit plan. In Firestone Tire & Rubber Co. v. Bruch, 498 U.S. 101 (1989), the Supreme Court held that the term “participant” means “either an employee in, or reasonably expected to be in, currently covered employment.” That means “participant” includes employees who are eligible to be covered, but not enrolled. However, if a class of employees is not eligible to participate in a plan, courts have held that they are not participants under ERISA....
Based on this precedent, if a participant who is currently enrolled in or eligible for the plan establishes that his or her hours were reduced to prevent future eligibility, under the plaintiffs’ theory in Dave & Buster’s, he or she would establish a prima facie case under ERISA § 510. The employer would then have to establish that plan coverage was not the primary motivation for its action. However, if an individual was never eligible for coverage (or if the plan were amended to remove coverage for the employee before the hours were reduced), it seems unlikely that the employee could establish a prima facie case under ERISA § 510 because the reduction in hours would be for the legitimate purpose of minimizing excise taxes, not for the purpose of denying benefits. (But note that minimizing excise taxes is still not a legitimate basis for retaliation against an employee for obtaining an ACA subsidy or premium tax credit, even though such action could result in the employer paying an excise tax.) ...

Friday, April 1, 2016

Insurers Cut Commissions to Restrict When and What Plans People Buy

The free market will always stay ahead of the rules and regulations promulgated by bureaucrats.  Here is another classic example of how Obamacare staggers along like Frankenstein, resulting in obscure ways for insurers to try and guard profits:  
  • Insurers increasingly are dropping agent commissions to discourage the sale of the Obamacare plans on which they are losing money.  
  • Insurance agents now enroll about half of those who buy insurance on the government exchanges.  
  • A study out Tuesday by the Blue Cross Blue Shield Association found the cost of medical care for those newly enrolled in ACA plans were 19% higher in 2014 and 22% higher in 2015.  
  • Insurance was supposed to be easier to buy, so it was assumed agents would not be needed to buy ACA plans. The opposite has happened. 
  • Some insurers have gone so far as to drop commissions on different types of plans in different states, particularly gold and platinum plans, which attract people with the most health problems because of their low deductibles. 
Full story: Insurers cut commissions to restrict when and what plans people buy, USA Today, March 31, 2016.

Visit with Armstrong and Getty on April Fools Day, Latest CBO Report on Obamacare Cost and Efficacy

I spent the 9 AM PST hour with Armstrong and Getty in studio today.  The audio begins about 90 seconds in and runs to the 26 minute mark.