Author Archive | John Barrett

State Court Rules on Calif. Rescission Rules

By ALLISON BELL

California Superior Court Judge Michael Kenny has sided with insurers on some issues and with regulators on others in a ruling on tough new California rescission regulations.

The Association of California Life & Health Insurance Companies (ACLHIC), Sacramento, Calif., filed a suit, Association of California Life & Health Insurance Companies vs. California Department of Insurance, et al., Case Number 34-2010-80000637-CU-WM-GDS, in August 2010, an effort to keep California from enforcing anti-rescission regulations that were issued in July 2010.

Kenny, a judge in Sacramento, has ruled that ACLHIC that can bring the suit, and that the California Department of Insurance lacked the statutory authority to define a variety of rescission-related practices as unfair claim settlement practices.

The California department does have the authority to establish deadlines insurers must meet when trying to rescind policies, Kenny says.

THE REGULATIONS

A rescission is a procedure that a health insurer uses to rescind, or take back, a health insurance policy and return the former customer and itself to the states they were in before the policy existed.

California regulators have accused health insurers of using rescissions to cancel policies issued to individuals who made innocent mistakes on applications or left out information that was not relevant to their current health problems.

California tried to require insurers to:

– Complete investigations of possible omissions of material information from health insurance applications within 15 days of learning of the omissions.

– Complete investigations within 90 days.

– Send an investigation target a notice about an investigation every 30 days.

– Send the target a written notice about the final determination within 7 days of concluding the investigation.

THE SUIT

ACLHIC filed a petition contending that the regulations are too expensive and too difficult to implement, and that former California Insurance Commissioner Steve Poizner exceeded his authority when he developed the regulations.

The California Department of Insurance has questioned whether ACLHIC – an association of insurers, rather than an insurer – has standing to file the suit.

In California, an association can bring a suit if its members have standing to sue in their own right and it is seeking to protect interests that are germane to its purpose, Kenny says.

One section of the proposed regulations would require an insurer to follow specific medical underwriting guidelines if it wants to have the right to rescind a policy or otherwise change the policy terms after an insured files a claim.

The California department does not have the statutory authority to promulgate the section, Kenny says.

The language in the section would define violations of the rescission rules as an unfair claims settlement practice, and the California Legislature already has given a specific description of unfair claims settlement practices and given itself the sole right to define unfair practices, Kenny says.

Another anti-rescission regulation section would require an insurer that wanted the authority to rescind policies to send a complete copy of the application to the insured at the time a policy is delivered. That provision is invalid for the same reason that the medical underwriting requirements section is invalid, Kenny says.

The California department does have statutory authority to establish “reasonable timeframes within which an insurer must conduct a cancellation investigation after submission of a claim,” Kenny says. “The Court cannot conclude that the Department acted arbitrarily, capriciously, or without reasonable or rationale basis” in adopting the section.

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NINE WAYS THE NEW HEALTH LAW MAY AFFECT YOU IN 2011

Kaiser Health News – Jan. 3:

Opponents of the new health care overhaul law are threatening to repeal, defund and kill it in court, but that isn’t stopping Washington from implementing a number of important provisions in 2011. While many people will welcome the new benefits, some will face higher costs as a result of the law.

Seniors are affected by several of the provisions. They will get big discounts on prescription drugs and free preventive care, but some in Medicare Advantage plans may lose coveted extra benefits such as vision and dental coverage. Everyone will be able to count calories when dining at chain restaurants or sidling up to vending machines. But forget about using pre-tax income in popular flexible spending accounts to pay for over-the-counter medications, unless you get a prescription.

These changes follow a handful of early benefits that debuted in 2010. Already, adult children are allowed to remain on their parents’ policies until the age of 26, for example, and insurers can no longer cancel coverage when people get sick (except in cases of fraud).

The following are nine health law changes to take note of this year.

1. Will you get an insurance rebate?
Starting this year, health insurers must spend at least 80 percent of their premiums on medical care, or face the possibility of giving rebates to consumers. The rule applies to policies purchased by individuals who don’t get coverage through work, and for many policies offered by employers. For policies sold to large employers, insurers must hit an 85 percent spending target. Self-insured employers are exempt from the rule. The goal is to pressure insurers to restrain profits and administrative costs, such as overhead, marketing and executive salaries.

But insurers probably won’t be issuing too many rebates, which would go out in 2012. Of the 75 million people who have insurance that is covered under the rule, the government estimates that 9 million will be eligible for a rebate in 2012. That’s because many insurers reach those target levels now, and the ones that don’t may adjust so they meet the spending limits. Other insurers may drop out of the market.

Under another part of the law, regulators have proposed that beginning July 1 premium increases of 10 percent or more be subject to additional review by states and the federal government. Insurers would have to publicly disclose some of the data supporting their requests – such as how much they’re paying for medical services. The review would determine if the increase is considered unreasonable. Some state regulators have authority to deny an increase, but the law does not grant that power to the federal government.

The proposed rule would affect policies sold to individuals and small businesses.

2. Lower Rx costs for seniors
Prescription drug costs could shrink $700 for a typical Medicare beneficiary in 2011, as the law begins to close the notorious doughnut hole – the gap in prescription coverage when millions of seniors must pay full price at the pharmacy – according to the seniors group AARP. The National Council on Aging estimates the savings could reach $1,800 for some. Starting in January, drug companies will give seniors 50 percent off brand drugs while in the gap, excluding those low-income people who already get subsidies. Generics will also be cheaper. “It’s quite significant,” said AARP’s John Rother. “People stop filling prescriptions when they hit the doughnut hole.” The National Council on Aging estimates that about 4 million Medicare beneficiaries will face the gap this year.

3. It has how many calories?

How many calories are in that Outback Steakhouse’s blooming onion? (1,551) Or Pizzeria Uno’s individual-size Chicago style deep-dish pizza? (2,310).

Beginning soon after the Food and Drug Administration finalizes rules in 2011, chain restaurants with 20 or more locations, and owners of 20 or more vending machines, will have to display calorie information on menus, menu boards and drive-thru signs. Restaurants must also provide diners with a brochure that includes detailed nutritional information, like the fat content of their dishes. Consumer advocate Jeff Cronin of the nonprofit Center for Science in the Public Interest says it will put “eating into context.”

4. Higher Medicare Premiums

Medicare premiums in 2011 will take a bigger bite from wealthier beneficiaries. Since 2007, this group has paid more than the standard premium for Part B, which covers physician and outpatient services. But the income threshold was indexed to prevent inflation from moving more people into the affected group. The health law freezes the threshold at the current level: incomes of $85,000 or above for individuals and $170,000 for couples. With that step, beneficiaries paying higher premiums will rise from 2.4 million in 2011 to 7.8 million in 2019, according to an analysis by the Kaiser Family Foundation. (KHN is part of the foundation.) Their monthly premiums this year will be between $161.50 and $369.10, while the standard premium will be $115.40. Also, premiums for Medicare Part D, which covers prescription drugs, for the first time will be linked to income. The thresholds will be the same as those for Part B and will not be linked to inflation. About 1.2 million beneficiaries will pay the income-related Part D premium this year, rising to 4.2 million beneficiaries in 2019.

6. Restrictions on medical savings accounts

Consumers with flexible spending accounts (FSAs), in which pre-tax income can be used for medical purchases, can no longer spend the money on over-the-counter drugs, including ones that treat fevers or allergies and acne, unless they have a doctor’s prescription. The new restrictions, which lawmakers included in the health overhaul to raise more revenue, also apply to health reimbursement arrangements (HRAs), health savings accounts (HSAs) and Archer medical savings accounts (MSAs). Starting this year, those with HSA or MSA accounts who spend money inappropriately will not only owe taxes on it, but also face a tax penalty of 20 percent, double what it was. For all pre-tax accounts, medical devices such as eyeglasses and crutches, and co-pays and deductibles still qualify for the accounts. Insulin obtained without a prescription is also eligible.

6. Bolstering seniors’ access to primary care

Medicare is bumping up payments for primary care by 10 percent from Jan. 1 through the end of 2015. It’s an incentive for doctors and others who specialize in primary care – including nurses, nurse practitioners and physician assistants – to see the swelling numbers of seniors and disabled people covered by the program. Health practitioners will qualify for the bonus only if 60 percent or more of the services they provide are for primary care. General surgeons also will receive an increase if they’re practicing in areas where there are doctor shortages. Experts agree there’s a growing shortage of primary care providers, a big problem considering that the health law is expected to expand coverage to 32 million more Americans by 2019. The bonus won’t cure the problem, but many see it as a start. “It’s significant, but it’s not the end all,” said Dr. Roland Goertz, president of the American Academy of Family Physicians, emphasizing that the bonus will end in 2015.

7. Staying healthy
Several provisions of the law promote prevention of disease, especially for seniors. Medicare enrollees will be able to get many preventive health services – such as vaccinations and cancer screenings – for free starting in January. Specifically, the law eliminates any cost-sharing such as copayments or deductibles for Medicare-covered preventive services that are recommended (rated A or B by the U.S. Preventive Services Task Force). Also starting in January, Medicare beneficiaries can get a free annual “wellness exam” from their doctors who will set up a “personalized prevention plan” for them. The plan includes a review of the individuals’ medical history and a screening schedule for the next decade. The law also eliminates any cost sharing for the “Welcome to Medicare” physical exam, which previously included a 20 percent co-pay. And people working for small employers will get some help.

The law authorizes the federal government to issue grants totaling $200 million for companies with fewer than 100 workers that start wellness programs focused on nutrition, smoking cessation, physical fitness and stress management.

8. Trimming Medicare Advantage

The health law puts the squeeze on private health plans that provide Medicare coverage to about a quarter of beneficiaries. Payment for these Medicare Advantage plans is being restructured. Rates this year will be frozen at 2010 levels and lower rates will be phased in beginning in 2012. Medicare says the reductions are fair because the plans are paid $1,000 more per person on average than the traditional fee-for-service program spends on a typical senior. Dan Mendelson, president and CEO of Avalere Health, a consulting firm based in Washington, says some plans will respond by cutting ancillary benefits, such as vision and dental care. But he calls this “a transition year” and says more significant changes will come in 2012, when in addition to the rate reductions, the government begins offering bonuses to top-performing Advantage plans based on quality measurements.

9. Fighting hospital infections

About 1.7 million patients pick up life-threatening, but preventable, infections at hospitals, according to a study earlier this year in the Archives of Internal Medicine. In July, Medicaid will say “enough.” The federal government – which shares the cost of this program for the poor with states – will stop paying for treatment of some hospital-acquired infections. The Medicare program for the elderly and disabled and many private insurers already ban payments for treating many of these infections.

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NEW YEAR’S HEALTH INSURANCE TIPS FOR 2011

Market Wire –

Dec. 16: Mountain View, CA – The leading online source of health insurance for individuals, families and small businesses, released a series of tips to help health insurance consumers find affordable coverage and get the most for their health insurance dollars in 2011.

In 2010, families with employer-based health insurance saw a 14% average increase in coverage costs compared to 2009(1). Those who went through their employer’s open-enrollment period at the end of 2010 on ‘auto-pilot’ (without paying careful attention to their choices) may find that their current health plan is simply unaffordable when new rates take effect in January 2011.

Others who do have the right health plan for their needs may not know how to best take advantage of their coverage in order to save money over the course of the year.

Five Health Insurance Tips for 2011:

1.  Don’t get stuck with a lemon. Lots of health insurance companies make changes to rates and benefits at the beginning of the new year. By mid to late January, you may be getting your first taste of what these changes mean for you and your family. If employer-based health insurance is no longer affordable, check with your Human Resources department and get to know your options in the non-group market. Keep in mind, however, that until 2014 you may still be turned down for individual and family coverage due to a pre-existing medical condition.

2.  Check out new health reform-compliant plans. Health insurance companies are introducing new plans to comply with health reform rules that make some preventive care free and do away with lifetime coverage limits. Some older plans may not have to meet these requirements. If you want to take advantage of new health reform protections, work with a licensed online agent.

3.  Be sure your old plan still fits
. Like old cars or houses, an old health plan can feel pretty comfortable, but that doesn’t mean it’s still a good match for you and your family. If you were married or divorced, had children, or gained or lost income this past year, you may be able to save money on medical costs by starting the year with a plan better suited to your needs.

4.  Don’t pay two deductibles. Many health insurance plans come with calendar-year deductibles. If you’re planning a move or other life changes in 2011 and know you’ll have to switch health insurance plans mid-year, it may be smarter to find a new plan early. Since certain medical claims are only paid by the insurance company after the deductible is met, moving to a new health insurance plan in January or February may help you avoid paying deductibles twice in a single year.

5.  Fund your HSA early. If you have a Health Savings Account (HSA) and want to get the most out of it, fund it to the maximum amount early in the year. That will allow you to use pre-tax dollars for copayments and deductibles while allowing unused money to collect interest for more of the year. Also, remember that in 2011, HSA (and FSA) funds can no longer be used to pay for most over-the-counter medications.

NOTE: Keep in mind that when you switch plans or apply for a new individual or family health insurance plan, you may be subject to medical underwriting. If you have an individual or family plan and developed medical conditions recently, you may need to stay on that plan to keep your coverage secured.

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CALIFORNIA HEALTH INSURERS CITE RISING HOSPITAL COSTS

The Sacramento Bee –

Dec. 10: As health insurers again increase premiums on thousands of subscribers, the industry is seeking to shift the debate over escalating health care costs to the rising price of hospital care.

In California, hospital prices jumped 150 percent since 2000, according to a study of state hospital data conducted by America’s Health Insurance Plans, the industry’s trade association.

“What this data shows is that there needs to be much greater focus on the underlying cost of medical care that is driving those premium increases,” said Robert Zirkelbach, a spokesman for the group.

“At some point, people will have to address these underlying cost drivers if health care costs are going to come down.”

To gauge prices, AHIP used inpatient revenue self- reported by California hospitals to the Office of Statewide Health Planning and Development.

In California, the prices charged to commercial health plans rose by 159 percent from 2000-2009 — more than twice the rate of increase for Medicare, which serves mostly seniors, and more than eight times that for Medi-Cal, the government insurance program for the poor.

“The report’s focus on California hospital costs just reinforces what we have been saying the past couple of years. Steep increases in medical costs must be addressed. Our country and state cannot sustain this kind of growth,” said Patrick Johnston, president of California Association of Health Plans.

The health insurers’ group acknowledged the challenges faced by hospitals and other medical providers as they provide free care to those without insurance or those too poor to pay.

Meager reimbursements from governme nt insurance programs such as Medi-Cal and Medicare haven’t helped hospitals’ bottom lines. As a result, hospitals make up lost revenue by shifting costs to patients with private insurance.

Insurance companies say they are merely passing on those increased costs to
their customers. But a group representing hospitals criticized the insurance industry study as a political attempt to shift blame for rising insurance rates. “It’s the continuing saga of AHIP pointing fingers at the hospital industry.

It’s really tough for a pot to call a kettle black,” said Scott Seamons, regional vice president for the Hospital Council of Northern and Central California. “I don’t know what their objective is here, but it smells,” he said.

For years, the insurance industry has been under scrutiny for surges in premiums and has fought a losing battle to garner sympathy from the public and policymakers.

“Unfortunately, for political reasons, people have been reluctant to address underlying medical costs and focus only on insurance premiums,” Zirkelbach said.

It’s easy to see why insurers have been under fire, particularly among the millions of Americans who buy health coverage on their own.

While insurance premiums are expected to rise by an average of 9 percent next year, rates for people buying coverage in the individual market are seeing steeper increases. Those customers are also paying higher deductibles.

Jamie Court, president of Consumer Watchdog, a left-leaning advocacy group based in Santa Monica, accused insurers of attempting to sow confusion expressing concern about rising costs while simultaneously increasing premiums.

“It’s been very clear to us that insurance companies have been scapegoating the president’s health insurance reform plan for everything that is wrong with health care in this country and using it as an excuse to raise premiums,” Court said. “Consumers have been left in a lurch.”

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SOME HEALTH INSURERS RAISING RATES AGAIN

 
San Francisco Chronicle –

Dec. 9: Some health insurers are bumping up rates yet again to reflect changes mandated by the new federal health overhaul law as well as state reforms that will go into effect Jan. 1.

Blue Shield of California, for example, has sent letters informing customers with individual policies that their premiums will go up in the low single digits because of the federal law.

Some of those same policyholders also could see their rates go up as much as an additional 17.7 percent to account for a new state law that will prohibit insurers from charging women more for insurance than men.

For consumers, many of whom already have been hit this year with hefty premium increases to accommodate higher medical costs, the additional raise attributed to health reform will further strain their budgets.

Scott Morgan, a Blue Shield customer in San Francisco, saw his premium rise by 29 percent in June, so he was stunned to get another rate increase, this time for 34 percent. That means the same coverage he was paying $335 a month for at the end of May will cost him $581 a month come January.

“The federal reform is going to add 3.4 percent. That’s fair. But do I believe that means my rates should go up another 30 percent above that?” said Morgan, 52, a self-employed consultant for corporate meetings. “I think what they’re doing is they’re getting their licks in while they can.”

Since the federal health care overhaul legislation was passed in March, several provisions have taken effect, including the elimination of lifetime and some annual coverage limits. Children are allowed to stay on their parents’ health policies until the age of 26 and insurers can no longer deny coverage to children with pre-existing health conditions.

‘Gender rating’

Starting next year, insurers in the individual and small group markets will be required to spend at least 80 percent of their premium dollars on medical care, while those covering large groups will have to spend a minimum of 85 percent on those purposes.

On the state level, a law taking effect Jan. 1 will ban the practice known as “gender rating,” in which women were typically charged more than men for health insurance. While women tend to use more services in their younger years, the difference often evens out as people age.

“The new federal law that applies to policies written after Oct. 1 does incur costs,” said Patrick Johnston, president and chief executive officer of the California Association of Health Plans, the trade group for the state’s insurers. “Those are in the range of 3 percent to 10 percent, varying with the policy and the purchaser.”

Blue Shield has calculated the reforms under the federal health law will require premiums to go up more than 4 percent for some policies.

About 80 percent of Blue Shield’s 340,000 individual policyholders are getting a rate change effective Jan. 1 – and about a third of those members already had a change in October, said Tom Epstein, a vice president with the San Francisco health insurer. While the vast majority will get an increase, some will actually see their rates cut, he said.

“We do not expect to make any money in the individual market this year, despite these rate increases,” he said.

Unfair justification

Consumer groups say it’s unfair to use health reform to justify rate increases.

“These types of rate increases have been happening for years now,” said Sondra Roberto, staff attorney with Consumers Union. “We really need more scrutiny in how they’re coming up with these rate increases.”

Premium increases proposed this year by Anthem Blue Cross of as much as 39 percent in the California individual market not only jumpstarted the debate over the federal health law but also prompted increased scrutiny by state regulators as well as a new state law designed to add a layer of consumer protection.

In addition, federal regulators have called for state and federal reviews of “unreasonable” rate increases, but have yet to define what such an increase is.

“Beyond unaffordable” is how another Blue Shield customer, Terry Seligman, described the 4.83 percent rate increase she will have to pay on Jan. 1, which comes on top of the 13 percent hike she’s paid since Oct. 1. The combined increases reflect a jump in premiums of nearly 19 percent since Sept. 30.

“I never thought I’d be happy to say this, but next year I’ll be on Medicare,” said Seligman, 64, who runs a travel insurance business in San Francisco and has been a Blue Shield customer for 26 years. “And not a moment too soon.”

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Sen. Tom Coburn: Why the New Health Law Could Decrease Competition & Increase Costs | Health Reform Report

Supporters of the Patient Protection and Affordable Care Act argued before the passage of the new law that health care in America needed more “choice and competition.” So they may be surprised to learn the massive overhaul actually could decrease choice and competition.  In fact, an accumulating body of data shows the new law is on track to actually reduce competition between health care providers, which will increase health costs for patients. There are good reasons for concern.

An implicit pledge of the health overhaul is that delivery will be improved through “Accountable Care Organizations.” ACOs are generally envisioned as teams of doctors and nurses share savings in their coordinated effort to deliver higher quality, lower cost health care.  Coordinated care is a great goal, but there are good reasons to be concerned that ACOs will not accomplish. 

First, there is the question of whether or not there will be shared savings. During the past decade, the Medicare program conducted a pilot project in which teams of health care providers could share savings from coordinated care, but only half of the teams in the demo experienced any savings. 

Second, there is the issue of who will share any savings. The health overhaul left in place existing federal restrictions on physician referrals and further barred physicians from having ownership of hospital endeavors. So, unless the rules for ACOs are changed dramatically, ACOs could accelerate the trend of physicians leaving private practice to work in a centralized hospital setting. 

Physicians are already exiting private practice in droves. A recent national survey of more than 2,000 physicians found that more than seven in 10 physicians said they would leave their medical practices for hospital or work-part-time, stop taking new patients, or simply retire altogether.  As a former Medicare official recently noted, “in 2005, more than two-thirds of medical practices were doctor-owned, a share that was largely constant for many years [but] by next year, the share of practices owned by physicians will probably drop below 40 percent, according to data from the Medical Group Management Association.”

At the same time, over the next three years, three in four hospitals or health systems reported they plan on hiring more physicians, and more than half said they will buy entire medical practices  Last year alone, half of new doctors were hired by hospitals.

Respected Harvard health care economist Regina Herzlinger has noted that ACOs hold promise or lead to peril in direct relationship to how they are designed and implemented.  Her conclusions, based on a careful examination of the consolidated health care system in Massachusetts, underline the importance of provider groups of all sizes being enabled to share with patients in any savings.  And, just as important, rather than adopting a one-size-fits-all rules, regulators must adopt a flexible ACO structure that is predictable, yet adaptable.

Many health care providers and policy analysts have offered their prognostications, but Herzlinger’s focus on properly aligning underlying incentives is key.  ACOs could further diminish the quality of patient care if they fail to preserve, and build on, the primacy of the patient-physician relationship.  Unfortunately, the current outlook is not encouraging.

A widely-read recent New York Times article noted “consumer advocates fear that the health care law could worse some of the very problems it was meant to solve -by reducing competition, driving up costs, and creating incentives for doctors and hospitals to stint on care.”  A White House official also recently acknowledged that “the economic forces put in motion by the [health legislation] are likely to lead to vertical organization of providers and accelerate physician employment by hospitals and aggregation into larger physician groups.”

A former Medicare policy advisor said the law assumes “doctors will fold their private offices to become salaried hospital employees, making it easier for the federal government to regulate them and centrally manage the costly medical services they prescribe.”  Certainly, many of the new law’s changes will centralize decisions in Washington, DC, removing power from physicians while dramatically increasing the control of federal bureaucrats and politicians. 

 Economic theory suggests that consolidation of providers under a hospital will increase a hospital system’s market share and negotiating power over remaining providers. As massive hospital systems grow even larger, choice and competition will be reduced in the health care marketplace and costs to consumers will increase even further.

 Such a conclusion is grounded not only in economic theory, but experience. The consolidation of providers is one important reason that health care costs in Massachusetts already are the most expensive in the nation. As the Massachusetts Attorney General concluded in a report earlier this year examining the underlying drivers of health costs, “price variations are correlated to market leverage…of the hospital or provider group compared with other[s] within a geographic region.”

California appears to suffer from a similar problem. The Center for Studying Health System Change studied California’s experience in attempted health reforms and also concluded “proposals to promote integrated care through models such as accountable care organizations could lead to higher rates for private payers.”

And, if these trends were not concerning enough, there is a final wrinkle worth noting. Because the new law cuts nearly $530 billion from Medicare to spend on new programs, some providers are finding their current business model financially unsustainable. 

 Faced with the prospect of shutting its doors or merging with competitors, many health care providers are being consolidated with other types of providers.  The Wall Street Journal recently noted that Moody’s Investors Services informed analysts to “expect consolidation in health industries, as providers acquire different health-care entities to diversify.”  A Deloitte study echoed Moody’s findings, saying “there is considerable [mergers and acquisitions] activity, particularly among those organizations experiencing threats to their reimbursement levels.”  While corporate motives driving these mergers may be benign, the impact on consumers’ wallets will nonetheless be real and potentially significant.

None of these changes are good for consumers, patients, or health care providers. Even supporters of the health care overhaul will be forced to admit the failings of their massive overhaul as costs increase, providers consolidate, and choices for consumers are reduced.  But the likely problems with ACOs are really just a symptom of the larger problem: a massive 2,700 page government-centered approach to health care that fails to fix many of the basic problems and makes some problems even worse.   That is why the best way forward is to repeal the law and replace it with sensible, proven reforms that will reduce costs, increase competition, empower patients, realign incentives, and put federal health spending on a truly sustainable path.   

Tom Coburn, MD is a United States Senator from Oklahoma.

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Workers Get Health Care Allowances

New Laws Give Employees Money to Buy Individual Health Insurance

Park City, UT December 1, 2010

For information contact John Barrett at (626 797-4618  www.healthinsbrokers.com

Zane Benefits, Inc. helps employers take advantage of new IRS laws (Section 125 and Section 105) that allow employers and employees to contribute tax free dollars to individual health insurance costs.    Zane Benefits’ solution involves a switch to employer-funded individual health insurance in which each employee receives a tax-free monthly allowance to purchase their own individual policy.

Individual health insurance used to be expensive and hard to get. However, due to health insurance reforms, individual policies are now more affordable and accessible. For example, insurance companies must now accept children regardless of preexisting conditions, and guaranteed acceptance is being extended to all citizens over the next few years. Additionally, a new federal risk pool is now available for anyone who cannot find health insurance on the individual market.

Many employees are able to buy individual policies for less than the monthly amount funded by the company. The allowance can also be used for eyeglasses, dental care and other medical expenses. Today, there are various ways for all employees to get some kind of health coverage through state and federal programs.

Zane Benefits offers two options (“ZaneHRA” and “ZanePOP”) to employers that want to make the switch to employer-funded individual health insurance.

ZaneHRA, which is a defined contribution health plan, works best for companies that want to offer health benefits, but cannot offer group health insurance due to high cost or participation requirements. With ZaneHRA, employers offer a defined contribution health plan in which they make available monthly contributions (“allowances”) that employees choose how to spend. Employees can use their monthly “ZaneHRA Allowance” to reimburse their individual health insurance costs and eligible medical expenses 100% tax free.

ZanePOP, which is a premium-only-plan for individual health insurance, works best for companies that do not offer health insurance or have employees who are not eligible for a group health insurance plan. With ZanePOP, employers allow employees to reimburse themselves for individual health insurance costs using pre-tax salary. Employees typically save 20-40% on their insurance premiums. Employers save an additional 7.65% in FICA taxes on all reimbursements.

According to Rick Lindquist, who manages Zane Benefits’ affiliate distribution, “an employer can setup a ZaneHRA or ZanePOP plan in 10 minutes online. Once the plan is setup, it takes less than 5 minutes per month to administer because we integrate with the company’s existing payroll service.”

Zane Benefits has built a web-based training program to help insurance agents and CPAs learn the new rules. “Our products are distributed in all 50 states by independent licensed insurance brokers. However, many agents do not realize individual health insurance can be reimbursed tax free. We are working hard to educate brokers on these new products so that they can help their clients.”

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Union Drops Health Coverage for Workers’ Children

By Yuliya Chernova

Associated Press

One of the largest union-administered health-insurance funds in New York is dropping coverage for the children of more than 30,000 low-wage home attendants, union officials said. The union blamed financial problems it said were caused by the state’s health department and new national health-insurance requirements.

The fund is administered by 1199SEIU United Healthcare Workers East, an affiliate of the Service Employees International Union. Union officials said the state compelled the fund to start buying coverage from a third party, which increased premiums by 60%. State health officials denied forcing the union fund to make the switch, saying the fund had been struggling financially even before the switch to third-party coverage.

The fund informed its members late last month that their dependents will no longer be covered as of Jan. 1, 2011. Currently about 6,000 children are covered by the benefit fund, some until age 23.

The union fund faced a “dramatic shortfall” between what employers contributed to the fund and the premiums charged by its insurance provider, Fidelis Care, according to Mitra Behroozi, executive director of benefit and pension funds for 1199SEIU. The union fund pools contributions from several home-care agencies and then buys insurance from Fidelis.

“In addition, new federal health-care reform legislation requires plans with dependent coverage to expand that coverage up to age 26,” Behroozi wrote in a letter to members Oct. 22. “Our limited resources are already stretched as far as possible, and meeting this new requirement would be financially impossible.”

Behroozi estimated that the fund faced a $15 million shortfall in 2011 and more in the following years for the coverage of workers’ children.

The union said in a statement that the state required the fund to participate in a new program — the Family Health Plus Buy-In Program — beginning in 2008. The union said it expected that by joining the program, many of its members would qualify for state assistance for health-insurance coverage. “Instead they raised insurance rate increases without any increase in funding, and then cut Medicaid funding to the same workers nine times in the last three years,” the union said in a statement.

But the state denies requiring the union to join the program. “The state is not forcing 1199 to do anything regarding its employee health insurance,” said Jeffrey W. Hammond, spokesman for the New York Department of Health.

Home-care agencies that contribute to the union fund collect their revenue from the state’s Medicaid program. Over the past two years the state cut about $370 million in Medicaid reimbursements to home and community-based care programs, according to New York State Association of Health Care Providers Inc., a trade association that represents agencies that employ home attendants.

“In home care in general, whether in a union or a non-unionized workplace, they are dealing with the crisis of trying to do more and more with less and less, and cut on top of cut,” said Christine Johnston, president of the association.

For the 1199 fund, premiums rose because Fidelis realized that the home health-care attendants are sicker than average, according to Mark Lane, president and chief executive of Fidelis Care. “These people are hard working people. There’s physical labor, which manifests itself in terms of more chronic and acute care type of illnesses,” said Lane.

As premiums went up and employer contributions remained constant, the benefit fund started cutting the rolls of eligible members. In the past three years the 1199 fund reduced its total enrollment in half, to less than 40,000 currently.

“We hope the state of New York will do the right thing and provide the funding necessary for this most vulnerable population of direct caregivers,” the union said in a statement.

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HEALTH BENEFIT COST GROWTH ACCELERATES, SURVEY SAYS

Business Wire –

Nov. 22: New York – 2010 is Year Zero for health reform the year against which the effects of the new Patient Protection and Affordable Care Act (PPACA) will be measured.

Growth in the average total health benefit cost per employee, which had slowed last year to 5.5%, picked up steam, rising 6.9% to $9,562, the biggest increase since 2004, according to the latest National Survey of Employer-Sponsored Health Plans, conducted annually by Mercer.

Employers expect high cost increases again in 2011. They predicted that cost would rise by about 10% if they made no health program changes, with roughly two percentage points of this increase coming solely from changes mandated by PPACA for 2011. However, employers expect to hold their actual cost increase to 6.4% by making changes to plan design or changing plan vendors.

Mercer’s survey includes public and private organizations with 10 or more employees; 2,836 employers responded in 2010. “Employers did a little bit of everything to hold down cost increases in 2010,” said Beth Umland, Mercer’s director of health and benefits research. “The average individual PPO deductible rose by about $100.

Employers dropped HMOs, which were more costly than PPOs this year. Large employers added low-cost consumer-directed health plans and found ways to encourage more employees to enroll in them. And more employers provided employees with financial incentives to take better care of their health.”

Large employers experienced a sharper cost increase than smaller employers in 2010. Cost rose by 8.5% among employers with 500 or more employees, but by just 4.4% among those with 10–499 employees.

“Large employers may have been taken by surprise by the uptick in the cost increase this year,” said Susan Connolly, a Partner in Mercer’s Boston office. “Higher prices for health care services seem to be part of the equation, but if the recession caused a slowdown in utilization last year, we may also be seeing the effect of employees getting care they’ve been putting off.”

Enrollment in CDHPs offered by the nation’s largest employers jumps sharply in 2010

Overall enrollment in high-deductible, account-based consumer-directed health plans (CDHPs) grew from 9% of all covered employees in 2009 to 11% in 2010.

CDHP enrollment has risen by two percentage points each year since 2006.

With the cost of HSA-based CDHP coverage averaging just $6,759 per employee among all employers in 2010 – almost 25% lower than the cost of PPO coverage the appeal of these plans is clear.

“As both employers and employees become more comfortable with high-deductible plans, we’re seeing more organizations willing to commit to the consumerism concept,” said Ms. Connolly. “Over the past few years employers have worked on finding a balance between giving employees more responsibility for their health care spending and providing the support to help them succeed.”

Already committed to employee health management, employers add financial incentives to build participation

Employers will soon be more limited in how they can shift cost to employees.

Starting in 2014, PPACA sets minimum standards for “plan value” (the percentage of health care expenses paid by the plan) and “affordability” (the employee’s share of the premium relative to household income). These changes are bringing greater focus on improving workforce health as a way to control health benefit cost.

Over the past decade employers have added a wide range of programs under the employee health management or “wellness” umbrella, from health risk assessments (offered by 69% of large employers in 2010) to disease management programs (73%) to behavior modification programs (50%).

In 2010 more employers added incentives or penalties to encourage more employees to participate: 27% of large employers with health management programs provided incentives, up from 21% last year. In addition, the incentives are becoming more substantial. Three years ago, a token gift like a hat or water bottle was the most common incentive for completing a health risk assessment; now it is cash (typically, $75) or a lower premium contribution (typically, a reduction of $180).

Results are encouraging: For a second year in a row, medical plan cost increases in 2010 were about two percentage points lower, on average, among employers with extensive health management programs than among those employers offering limited or no health management programs.

Very large employers are also increasingly willing to reward employees who demonstrate responsibility for their own health. More than a fourth of those with 20,000 or more employees require lower premium contributions from nonsmokers – 28%, up from 23% last year. An additional 6% provide other incentives to nonsmokers.

Employers drop retiree medical plans in favor of subsidizing individual coverage

The prevalence of retiree medical plans slid to its lowest point ever in 2010, with just 25% of large employers offering an ongoing plan to retirees under age 65 (down from 28% in 2009) and just 19% offering a plan to Medicare-eligible employees (down from 21%). An additional 10% of employers have closed their retiree plans to new hires but continue to offer coverage to employees retiring or hired after a specific date.

A diminished tax break for employers who provide retiree drug plans and the anticipated availability of better Medicare coverage as the government shrinks the so-called “doughnut hole” gap in prescription drug coverage are among the factors that have employers reexamining their retiree health programs.

As some employers take the step of terminating group coverage for retirees, they are softening the blow with a subsidy to help pay for individual coverage. Nearly one in ten of the largest employers (those with 20,000 or more employees) now provide such a subsidy in lieu of a group plan.

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What You Need To Know About The One‐Year Tax Deduction On Health Costs For The Self‐Employed

On September 27, 2010, the Small Business Jobs and Credit Act of 2010 (H.R.5297) was signed into law. The legislation provides an important tax break for the over 23 million self‐employed Americans that represent 78 percent of all small businesses in the U.S.

The self‐employed have not received the same tax benefit related to health insurance expenses that all other businesses entities have enjoyed. Various business entities are able to fully deduct the cost of health coverage as a business expense, saving them a significant amount in payroll taxes.

With the passage of the Small Business Jobs and Credit Act, the self‐employed will be allowed to take a one‐year tax deduction for health costs in determining payroll tax (self‐employment tax.) Here is some guidance to determine whether you can benefit from this new deduction:

1)  Who can qualify for this one‐year self‐employment tax deduction on health costs?

Self‐employed business owners that meet all of the following requirements can take advantage of this new tax deduction:

•    Files an IRS Form 1040 Schedule C tax form or Schedule E with earned income ‐ this includes sole proprietors, single member LLCs, and sole owner S‐Corporations.
•    Pays self‐employment taxes via IRS Form 1040 Schedule SE.
•    Pays for individual or family health coverage in 2010.

2)  When can I take this deduction?

This deduction is available for health costs paid by self‐employed business owners in 2010. Self‐ employed business owners should look to take advantage of this deduction when preparing their taxes next year in time for the April 15, 2011 tax filing deadline.

3)  How much will I save with this one‐year tax deduction on health costs?

The self‐employed must pay the employer and employee contribution to payroll taxes, totaling up to 15.3 percent on business income. For the self‐employed, payroll taxes are called self‐ employment taxes.

To calculate your savings from this new tax deduction, simply add up your total 2010 health insurance costs and multiply that by 15.3 percent. The resulting amount will represent how much you will save on your self‐employment taxes when filing your 2010 taxes next year.

According to a report on individual health insurance released by America’s Health Insurance Plans (AHIP), annual premiums averaged $2,985 for single coverage and $6,328 for family plans nationwide in mid‐2009. A majority of the self‐employed with health coverage currently purchase it via the individual insurance market.

Based on these average premium costs, the new one‐year tax deduction on health costs for payroll tax purposes would save self‐employed business owners approximately $456.71 to $968.14 in taxes.

•    NOTE: If you qualify for this deduction and your annual income is above the maximum wage limit subject to payroll (FICA) taxes, currently $106,800, then you will receive a lower tax benefit. Please contact your tax professional to assist you with calculating your exact tax savings.

4)  What if I purchased health coverage mid‐year or am planning to purchase health coverage this year, will I still get the benefit from the tax deduction?

If you meet the above qualification requirements in Question 1, you can still benefit from this one‐year tax deduction.

Since the benefit of the deduction is larger for those with higher health costs, those who purchased coverage mid‐year or will be purchasing health insurance in 2010 will simply have a smaller tax benefit when they file their taxes in 2011.

5)  What are the next steps a self‐employed business owner should take to ensure they qualify and benefit from this one‐year self‐employment tax deduction on health costs?

Self‐employed business owners should inform their tax professional about this new one‐year tax deduction. Prior to filing your taxes next year, your tax professional can determine whether you qualify and can take this tax benefit.

6)  Why is this tax deduction benefiting the self‐employed only available for one‐year?

Lawmakers only extended this tax benefit to the self‐employed for one‐year to provide some temporary bottom‐line cost savings to America’s smallest businesses in this difficult economic time and also, to minimize the cost to the federal government.

It is important to reiterate that the self‐employed are the only business entities which do not receive a business deduction for their health care costs. All other businesses are able to fully deduct their health costs lowering their payroll tax liability. We feel that self‐employed should have the same tax treatment of health costs as all other businesses.

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