Archive | Employers Reaction to Bill

The Supreme Court and the health-care mandate muddle

By George F. Will
Sunday, March 13, 2011

When the Supreme Court considers whether Congress has the constitutional power to compel individuals to buy health insurance, the argument supporting Congress may rest on a non sequitur and a semantic fiat. A judge’s recent ruling argues that the insurance mandate must be constitutional because Obamacare would collapse without it. A forthcoming law review article agrees with this and with the judge’s idea that, regarding commerce, being inactive is an activity.

Obamacare does indeed require the mandate: Because the law requires insurance companies to sell coverage to people regardless of their preexisting conditions, many people might delay buying insurance until they become sick. But is the fact that the mandate is crucial to the law’s functioning dispositive?

U.S. District Judge Gladys Kessler’s ruling that the mandate is constitutional conflates moral, policy and constitutional considerations. She says that people who choose “not to purchase health insurance will benefit greatly when they become ill, as they surely will, from the free health care which must be provided by emergency rooms and hospitals to the sick and dying who show up on their doorstep.” So “those who choose not to purchase health insurance will ultimately get a ‘free ride’ on the backs of those Americans who have made responsible choices to provide for the illness we all must face.”

Her disapproval is neither a legal argument nor pertinent to one. The question remains: Does Congress’s power to regulate interstate commerce entitle it to create a health-care regime that requires the mandate?

Mark Hall of Wake Forest University, in an article for the University of Pennsylvania Law Review, says there would be constitutional “uncertainty over the mandate in isolation.” But it is “inextricably intertwined” with Obamacare’s “other insurance regulations” – e.g., those pertaining to preexisting conditions – “which indisputably are constitutional.” So the “strongest defense” of Congress’s power to enact the mandate is “the acknowledged undesirability, if not impossibility” of the regulations regarding preexisting conditions, absent the mandate.

Hall says that the mandate “meets a high threshold of necessity to accomplish the overall reform scheme, clearly within congressional power, to create a market structure in which no one is ever again medically uninsurable.” But unless we postulate that Congress has whatever power is required to create such a market structure, this question remains: Does the fact that Congress has the constitutional power to do X – say, guarantee universal access to insurance – make Y constitutional merely because Y is necessary for doing X?

Congress has the constitutional power to combat political corruption, the “appearance” thereof and the “circumvention” of laws for this purpose. But suppose Congress, exercising this power by regulating campaign finances, decides that abridging freedom of speech is necessary for its anti-corruption measures. This necessity, defined by this preference, does not make such abridgement constitutional. The Supreme Court said as much concerning McCain-Feingold.

The mandate’s defenders note that the Constitution says Congress has the power to “make all laws which shall be necessary and proper for carrying into execution” its enumerated powers, one of which is to regulate interstate commerce. “Necessary and proper.” An unconstitutional law is improper.

Does the mandate acquire derivative constitutionality merely by Congress making the mandate necessary for something Congress wants to do in the exercise of the enumerated power of regulating interstate commerce? If so, what would not acquire such constitutionality?

Madison’s constitutional architecture for limited government will be vitiated unless the court places some limits on what constitutes commerce eligible for regulation. So the question becomes: Is the inactivity of not buying insurance a commercial activity Congress can proscribe because it has economic consequences?

Hall says it is unclear what constitutes “pure inaction.” But virtually nothing qualifies as “pure” inactivity if, as he says, “the passivity of non-purchasing decisions does not rob them of their inherently economic nature.” Judge Kessler disdains the distinction between activity and inactivity as “of little significance.” Her Orwellian theory is that government can regulate the activity – the mental activity – of choosing not to participate in a commercial activity.

Hall perfunctorily says that “some limit” on Congress’s commerce power “is necessary” but then says “democratic electoral constraint” – trusting “the political process itself to set limits” – will suffice to restrain government.

The question about the mandate is, however, whether a political institution has traduced constitutional limits placed on it. Because the Framers prudently doubted the sufficiency of “democratic electoral constraint” – because they were wary about “the political process” policing itself – the Constitution was written.

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FEW SUPPORT ‘INDIVIDUAL MANDATE’ IN HEALTH CARE REFORM LAW, POLL FINDS

HealthDay News – Mar. 7:

Half of U.S. adults still oppose the “individual mandate” clause in the new health care reform law that requires all Americans not already insured to purchase health insurance, while only 22 percent support it, a new Harris Interactive/HealthDay poll finds.

But certain arguments in favor of the mandate seem to sway opinion back toward support for it. For example, 71 percent of the more than 3,000 adults polled in mid-February agreed with the suggestion that “for health insurance to work, it is necessary to include people who are healthy in order to help pay for those who are sick.”

That seems to indicate that “while the individual mandate is still widely unpopular, indeed by far the most unpopular part of the Affordable Care Act [ACA], some arguments in favor of it are supported by most people,” said Humphrey Taylor, chairman of The Harris Poll, a service of Harris Interactive.

Prior Harris Interactive/HealthDay polls have consistently shown that the individual mandate is the only part of the Affordable Care Act that is unpopular with a majority of Americans.

Half of those interviewed for the new poll felt the individual mandate was unconstitutional, while 20 percent thought it was constitutional, and 30 percent weren’t sure. Among Republicans, 78 percent said the mandate was unconstitutional, compared with 31 percent of Democrats.

Most experts now believe that the constitutionality of the individual mandate will only be settled by the U.S. Supreme Court. However, only slightly more than a third (36 percent) of those polled believe that the nation’s highest court would be able to decide the issue in a non-political, non-partisan way.

Thirty-nine percent felt that any Supreme Court decision would be colored by the justices’ political leanings. “Most people do not feel that the Court is above politics,” Taylor said.

In recent lower court rulings on the Affordable Care Act, three judges appointed by Democratic administrations have so far supported the law, while two judges appointed by Republican administrations have ruled it unconstitutional.

Devon M. Herrick is a senior fellow at the National Center for Policy Analysis, a nonpartisan, nonprofit think tank focused on free-market approaches to public policy. He believes that the Supreme Court will largely look to the letter of the law when making any decision.

“I do not believe federal judges will rule for or against the Affordable Care Act based solely on their political affiliation,” he said. “However, differing political views can undoubtedly influence a judge’s interpretation of whether the ACA’s individual mandate violates the Constitution.”

The new poll found that the nation as a whole is still split on how it feels about the Affordable Care Act overall, with 39 percent of respondents opposed to the reform package, 34 percent in favor and 27 percent still undecided.

Most of this division cleaves along party lines, with 72 percent of Republicans wanting to repeal all or most of the legislation, compared to 15 percent of Democrats.

Smaller majorities agreed in the new poll with other arguments that would support the individual mandate. For instance, 56 percent agreed with the statement, “If everyone is required to have health insurance, including healthy people, it will make the average cost of insurance less expensive.”

And 51 percent agreed with the contention that “requiring insurance companies to provide health insurance to people with preexisting conditions will not work unless everyone is required to have insurance” a major argument often put forward as to why the individual mandate is necessary.

The AARP said it agrees with that reasoning. “Our members have been telling us for decades about the problems they’ve had getting or keeping access to health insurance because of their age or health history,” said Nancy LeaMond, executive vice president of AARP’s State and National Group. “The implementation of the ACA, which includes the individual mandate, is necessary to keep insurance companies from blocking coverage due to a person’s age or pre-existing conditions, or dropping coverage when someone gets sick.”

Other arguments in favor of the individual mandate didn’t get majority support in the new poll. For example, more people (54 percent) disagreed than agreed (46 percent) with this statement: “If it is constitutional for the states to require people to buy car insurance or wear seat belts, it should be constitutional for the federal government to require people to buy health insurance if they do not already have it.”

There are parts of the Affordable Care Act that still garner widespread support among Americans. For example, a majority of both Republicans and Democrats like the provision that bars insurance companies from refusing to cover people with pre-existing conditions.

“The individual mandate is the most controversial portion of the Affordable Care Act. Less than one-quarter of those surveyed support it,” Herrick noted. “Yet, there is strong public support that people with pre-existing conditions should not face discrimination when purchasing coverage. The problem for policymakers is how to reconcile these two conflicting views.”

The Harris Interactive poll of 3,419 Americans over the age of 18 was conducted online within the United States between Feb. 16-18

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Obama administration keeps giving out Obamacare waivers, despite new Republican spotlight

By Matthew Boyle – The Daily Caller

Although House Energy and Commerce Committee Chairman Rep. Fred Upton, Michigan Republican, is about to launch a congressional investigation into Obamacare waiver selection, the administration continues to approve waivers from health-care law for labor unions and others. In fact, since Upton first requested documentation from Health and Human Services Secretary Kathleen Sebelius in late January, the administration has issued 307 more Obamacare waivers, 47 of which for labor unions. That brings the total number of waivers to 1,040. Labor unions received 269 of those.

That means unions received about 26 percent of all waivers the administration has given out, but only about 12 percent of workers nationwide are unionized.

The waivers allow recipients to delay compliance with an Obamacare requirement that makes companies — or group policyholders like labor unions — provide more coverage for their employees or workers this year. Upton has said the administration is favoring labor unions over companies, and wants to know why Obama has allowed them a way out. Rep. Cliff Stearns, Florida Republican and the chairman of Energy and Commerce’s subcommittee on Oversight and Investigations, said it’s “ironic” that the administration would exempt people from its prized legislative victory.

The waivers allow recipients to delay meeting the Obamacare stipulation that requires companies and group policyholders to increase the amount of coverage their employees get annually. The waivers are good for one year, but recipients can re-apply for them every year. That amount is set to increase every year through 2014 as HHS phases out annual coverage limits companies were previously allowed to provide for employees.

“Ironically, if you consider listening to the administration for the last two years, you’d wonder why anyone would need to be protected from this law,” Stearns said in opening remarks for a hearing he was holding on Obamacare waivers on Feb. 16. “Yet, today, we learn that over 2.5 million people have been exempted from the administration’s healthcare plan through these waivers.”

Since that hearing, Obama’s administration has issued 38 more waivers, which Stearns said are there to “protect” people from Obamacare.

“Two and a half million people need to be protected, literally, from the devastating effects of the health-care bill the administration has passed. Yes, protected,” Stearns said. “Under the very standards to determine whether a waiver will be granted, a company or insurer needs to show that, unless a waiver was granted, beneficiaries were either going to face a significant premium increase or a significant reduction in access to benefits.”

What the administration says waivers are for is to exempt certain companies or policyholders from “annual limit requirements.” These applications are “reviewed on a case by case basis by department officials who look at a series of factors including whether or not a premium increase is large or if a significant number of enrollees would lose access to their current plan because the coverage would not be offered in the absence of a waiver.”

Some industries and groups receiving Obamacare waivers are:

* Several different local union chapters, including the Teamsters, SEIU, UFCW, Steelworkers, Communications Workers of America, Social Service Employees Union, United Federation of Teachers, public sector unions including police officers’ unions
* Lots of local schools
* Several specialized health service providers for issues including mental health, eye care, and x-ray and imaging companies, and rehabilitation centers
* Small banks and financial institutions

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Experts: Individual mandate might fail

By DAVID NATHER | 3/1/11 4:25 AM EST

Forget all the shouting you’ve heard about the new mandate to buy health coverage. Forget the lawsuits, the cries of “Big Government” from Republicans and the Democrats’ claims that the new health care law would fall apart without it.

What if it just plain doesn’t work?

That’s a real possibility, according to health care economists and analysts across the political spectrum. They’re warning that the penalties in the law are actually so low — despite all the protests they’re causing — that a lot of people may decide it’s cheaper to pay the fines than to buy coverage.

If that happens, the “individual mandate” might not bring in enough healthy, uninsured people to cover the costs of sicker people and keep everyone’s insurance premiums stable. And those goals are the whole point of including the mandate in the law in the first place.

It’s not a topic that has gotten a lot of attention, except in quiet conversations in Washington health policy circles. And you won’t hear much about it as long as the focus is on the state lawsuits, the GOP attempts to repeal or defund the law and the Obama administration’s insistence that Americans have a responsibility to get health coverage.

But some of those who have looked at the law closely believe there’s a good chance that, when the mandate begins in 2014, it will still be more expensive to buy health insurance than to stay uninsured and pay the tax penalty. That means the law won’t work as designed to cut health care costs. Since everyone with pre-existing conditions can get coverage starting that year, insurers will need healthy people to pay premiums to help cover their costs. If the mandate doesn’t bring enough of them into the system, premiums could shoot sky-high for everyone else.

A failed mandate would mean that Republicans and other opponents of the law have spent a lot of time and money fighting a requirement that has no real power. It would also mean that President Barack Obama and congressional Democrats are spending a lot of political capital defending an unpopular mandate that won’t even do what it’s supposed to do.

“The mandate is a disaster politically,” said Robert Laszewski, a health care consultant who has written about its weaknesses. “It doesn’t work politically. It might not work constitutionally. And it sure doesn’t work in terms of preserving the integrity of the health insurance market.”

The problem becomes clear when you do the math.

Under the law, the penalty for not having coverage is phased in. When it starts in 2014, the penalty will be $95 or 1 percent of an individual’s income, whichever is greater. And when it’s fully in place, starting in 2016, it will cost either $695 or 2.5 percent of income.

What does that mean in real terms? A family making $55,125 a year — 250 percent of the federal poverty line — would face a $1,378 fine if it didn’t have health insurance (that’s 2.5 percent of its income). But it could pay up to $4,438 in premiums if it bought health insurance. And that’s after the tax credits the law would give it to make the insurance cheaper.

Critics on the right, including analysts at the conservative Heritage Foundation, have pointed out the problem. But so have analysts on the left, including Paul Starr, co-editor of the liberal American Prospect. Uwe Reinhardt, a respected health care economist at Princeton University, has written that the penalties are so low that young and healthy people might just decide to pay the fine.

“Where are the incentives? The incentives are going to be for millions of Americans to go bare,” said Robert Moffit, a senior fellow at The Heritage Foundation. “You can save thousands of dollars each year. Why would you be insured?”

Not everyone sees it that way. Administration officials point out that the Congressional Budget Office decided the mandate was strong enough that 94 percent of Americans will end up with health coverage, compared with 83 percent now.

That’s only a bit lower than Massachusetts, 98 percent of whose residents have health insurance — and with a weaker individual mandate than the federal law, according to Len Nichols, director of the Center for Health Policy Research and Ethics at George Mason University.

Massachusetts might not be a good model to predict how the rest of the country would react to the mandate, though, because it started with higher health coverage rates than red states such as Texas and its political climate might have been more receptive to an individual mandate, Nichols said.

There are other reasons the federal mandate’s weaknesses might not decide its fate. For one thing, it’s not clear how many Americans will actually whip out their calculators, figure out what 2.5 percent of their income is and decide that health insurance is more expensive.

And some health care analysts argue that most people will make their decision based on a gut feeling — how much is health care worth to them at that moment — rather than weighing all factors in a completely rational way. “People could save money by not buying health insurance even with the individual mandate. That much is clear,” said David Kendall, a senior fellow at Third Way, a centrist Democratic think tank. But “if purchasing health insurance was an entirely rational exercise,” Kendall said, “we wouldn’t need to require people to buy it.”

Finally, some analysts say the generosity of the tax credits to help people buy insurance — rather than the mandate itself — will push people to go ahead and buy coverage.

“The subsidies are more important than the mandate by far,” said Gary Claxton, director of the Health Care Marketplace Project at the Henry J. Kaiser Family Foundation. “Given that most people want to have health insurance, and the subsides are pretty good, there’s already a pretty strong incentive to get coverage.” The mandate, he said, is just “another impetus that pushes you over the top.”

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The Massachusetts Health-Reform Mess The Bay State has shown the risks of ObamaCare.

By JOHN E. CALFEE

The biggest problem with ObamaCare is that it is bereft of proven ways to curtail increases in health-care costs. This has given rise to unending speculation about what will happen to these costs when the law’s main provisions go into effect in 2014.

To get a glimpse of the future, take a look at Massachusetts, whose 2006 health-care overhaul was by all accounts the model for the federal Patient Protection and Affordable Care Act passed last year. It was launched in promising circumstances: The Bay State already had the lowest percentage of uninsured people in the nation, and some of ObamaCare’s provisions such as community rating (everyone can buy insurance at the same price, regardless of health) were already in place.

So, how are things going in Massachusetts? The easy part was getting more people insured. Coverage increased from about 88% to 96%. But the number of emergency room visits, which everyone expected to drop once people had to purchase insurance, is still going up. Surveys show roughly half the visits are unnecessary. Surveys also indicate that finding a primary care physician is becoming more difficult.

There are other troubling signs. Cities and townships were expected to move their employees into cheaper health policies through the new state-sponsored insurance exchange, the Health Care Connector. None have—because unions fear the very tools that keep costs competitive in the private sector, such as co-pays. (Gov. Deval Patrick wants a new law to force the unions into the Connector.) Despite an individual insurance mandate, thousands of consumers wait to purchase coverage until they require costly procedures and then exit after paying a modest penalty. That makes insurance more expensive for everyone else.

Massachusetts reformers deferred cost control to the vague prospect of a “Round 2” of reform—much as congressional Democrats did a year ago when they passed ObamaCare. Meanwhile, economists John Cogan, Glenn Hubbard and Daniel Kessler reported in the Forum for Health Economics & Policy (2010) that insurance premiums for individuals (alone or in employer-sponsored group plans) increased 6% to 7% beyond what they would have without the reform. For small employers, the increases are about 14% beyond those in the rest of the nation. Four years after reform, Massachusetts still has the highest insurance premiums in the nation, and the gap is getting wider.

In 2010, insurance firms announced premium increases of 10% to 30% in the individual and small-group market. Gov. Patrick, on the verge of a tough re-election race, had the state insurance commissioner deny the higher rates.

Insurance firms protested that they increased premiums because they had to deal with entrenched providers, especially hospitals, most notably the academic giants of Boston and Cambridge. Then the state prepared to introduce highly intrusive price controls over those providers—only to discover that this would provoke formidable political opposition while encountering myriad practical difficulties.

Last month Round 2 arrived. Gov. Patrick introduced a bill that will impose de facto price controls on everyone from solo primary care doctors to prestigious academic hospital systems. An 18-member board will decide how and how much providers should be paid, and the bill gives regulators the power to force private insurers to accept these fiats. Some 30 states experimented with such rate-setting in the 1970s and ’80s. Except for Maryland, all of them—including Massachusetts—deregulated in the 1990s because costs rose even as quality and choice declined.

In a mere four years, Massachusetts has demonstrated that the most important effects of its reform arise not from the letter of the law but from the law’s unintended and unpredictable consequences. The state is lurching from one crisis to another as it attempts to construct a system vastly different from any seen before or anything contemplated when reform was first passed. Health care in the state is evolving toward a state-run version of Medicare combined with government reorganization of the delivery of medical care.

The cost problem in Massachusetts is not going to be solved anytime soon. The question to be asked is why we should plunge ahead with a national version of this model before we learn whether Masssachusetts’s brave new world is one in which we want to live?

Mr. Calfee, a fellow at the American Enterprise Institute and frequent contributor to the Journal, died last month. His daughter Jessica Stahl, an economist, helped finalize the piece.

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Death Panels And Job Losses

CBO Director Elmendorf and former Speaker Pelosi seem to be about 4.8 million jobs apart. AP

Reform: As the head of Medicaid and Medicare services testifies in favor of ObamaCare, the CBO director says it will destroy 800,000 jobs. Talk about killing two birds with one stone.

Former House Speaker Nancy Pelosi once famously said that we’d have to pass ObamaCare to see what was in it. She also boasted that the health care bill would create 4 million jobs — “400,000 of them almost immediately.”

Now that we’ve seen what’s in it, we realize the possible consequences for our physical and economic health. And congressional testimony before GOP-led committees has given us fresh reasons for repeal.

Contradicting Mrs. Pelosi, CBO director Douglas Elmendorf told the House Budget Committee on Thursday that one of the unintended consequences of ObamaCare would be a reduction in employment by half a percent by 2021.

In an exchange with Rep. John Campbell, R-Calif., Elmendorf confirmed the analysis contained in a CBO report issued last August. “That net effect reflects changes in incentives in the labor market that operate in both directions,” he said.

“The way I would put it,” Elmendorf said, “is that we do estimate … that employment will be about 160 million by the end of the decade. Half a percent of that is 800,000.” That number is 50% more than all the people who work for GM, Ford, and Chrysler combined.

ObamaCare mandates and costs will reduce hiring while some workers will have less incentive to enter the work force. In fact, Elmendorf’s number may be quite low, considering it’s been estimated that ObamaCare will impose $500 billion in new taxes and will actually cost more than $2.3 trillion in 10 years.

“Since day one,” said John Murray, deputy chief of staff for Majority Leader Eric Cantor, “Republicans have opposed ObamaCare for a simple reason: It would destroy jobs. (House) Minority Leader Pelosi, (Senate Majority) Leader Reid and others said we were wrong. Guess not.”

Meanwhile Dr. Donald Berwick, President Obama’s choice to head the Centers for Medicare and Medicaid Services, was testifying before the House Ways and Means Committee on ObamaCare’s implications for those two programs and the seniors they serve. He also testified on his past admiration for the rationing and cost-effectiveness standards applied at Britain’s National Health Service (NHS).

In questioning Berwick, committee chairman Dave Camp, R-Mich., noted that “Medicare actuaries predict that because of the cuts in the Democrats’ health care law, 725 hospitals, 2,352 nursing homes and 1,587 home-health agencies will become unprofitable.” Rep. Sam Johnson, R-Texas, said 300 doctors in his state have already dropped Medicare.

GOP members expressed concern about what would happen after the $575 billion in Medicare cuts that ObamaCare requires were made. Testifying later, Richard Foster, nonpartisan chief actuary of Medicare, said he worried that cuts in Medicare would eventually hurt seniors as they are joined by 80 million baby boomers.

To these questions and others Berwick whistled past the actuarial graveyard, talking only about how he was “really excited about the promise the affordable care act offers.” That promise is rapidly degenerating into self-fulfilling prophecies of doom.

Camp asked Berwick point-blank about the statement he once made about Britain’s system: “I fell in love with the NHS … to an American observer, the NHS is such a seductress.” “Are you still in love with the NHS?” Camp asked. “There are strengths and weaknesses for every health care system around the world,” Berwick responded lamely.

We’ve documented how socialized medicine around the world makes decisions based on cost-effectiveness rather than medical need and has led to rationing and even denial of service, with people literally dying on waiting lists. The death panels are real, and they are coming here to place our lives and livelihoods in grave danger.

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CALIFORNIA TAXES PARENTS WHO ADD ADULT CHILDREN TO WORKPLACE HEALTH POLICIES

The Sacramento Bee –

Feb. 7: Thousands of California parents leaped at the chance to provide health coverage to their grown and uninsured children when a provision in the federal health care law took effect last fall.

Now some of those parents, such as Barry Demant of Folsom, are finding a hidden cost to the new benefit: a bigger tax bill. A loophole in California’s tax law requires the state to levy income taxes on the premiums employers pay to provide health insurance to the non-dependent children of their workers.

Last fall, Demant added his unemployed 25-year-old daughter to his company’s group health plan. That meant he no longer had to pay $180 a month to insure her through a separate individual health policy.

As part of the federal health care law, insurers are required to allow parents to enroll children up to age 26 on their health plans. “I wanted to give the health care law a chance, and I thought it would be a great opportunity, even if only selfishly, to reduce the amount I pay for her premiums,” Demant said.

He found out about the tax when his human resources department told him that a bump in income and taxes would soon appear in his paycheck. In the end, he said, some of the money he thought he was saving could evaporate in the form of increased state tax payments. Demant would not say exactly how much more he’ll be paying in taxes.

As Californians begin preparing personal income tax returns, some lawmakers are pushing to pass a law that would exempt those contributions from being subject to state personal income taxes, as was done on the federal level.

“The federal health care law dramatically changed things, and not all states have kept up with the pace of those changes. And we’re trying to make sure that we’re doing what’s right for our working families,” said Assemblyman Henry Perea, D-Fresno, who chairs the chamber’s Revenue and Taxation Committee.

Perea is a co-author of legislation, AB 36, that would conform the state tax code to federal rules that exempt the benefit from taxable income. A similar effort last year died when it was included in broader tax legislation that never made it to the governor’s desk. This time, proponents are hoping stand-alone legislation will get the necessary support.

By changing the tax code, budget-strapped California would lose a $92 million tax windfall, according to estimates by the Franchise Tax Board. “We shouldn’t consider it as a loss,” Perea said. “The benefit of making sure young adults have health insurance outweighs this new source of revenue.”

Millions affected

The new federal health care law was hailed as an answer to the millions of 20-somethings who go uninsured after falling off parents’ health plans.

Typically, dependents who aren’t bound for college have been pushed off their parents’ policies soon after graduating from high school. As many as 8.8 million young adults between the ages of 19 and 25 were uninsured in 2008, according to the Kaiser Family Foundation.

In California, about 1.3 million in that age group could benefit from the new rule, according to Young Invincibles, an advocacy group pushing to expand health coverage among the country’s young.

The new law went into effect Sept. 23 and required insurers and companies to offer the coverage. Because adult children typically don’t qualify as dependents under the tax code, employer contributions on their behalf are being counted as income by the state. The federal government exempted those contributions.

Dolores Duran-Flores, a lobbyist for the California School Employees Association, said she was surprised when she learned last month that the state would be taxing the health benefits.

Health care is an important issue for the 219,000 members of the union, mostly school support staff, already beset with layoffs and furloughs.

“It just makes sense to close this loophole,” she said. “There’s a glitch in the law, and we need to do something about it.”

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The Whole Foods Alternative to ObamaCare

Eight things we can do to improve health care without adding to the deficit


by John Mackey

“The problem with socialism is that eventually you run out of other people’s money.”

— Margaret Thatcher

With a projected $1.8 trillion deficit for 2009, several trillions more in deficits projected over the next decade, and with both Medicare and Social Security entitlement spending about to ratchet up several notches over the next 15 years as Baby Boomers become eligible for both, we are rapidly running out of other people’s money. These deficits are simply not sustainable. They are either going to result in unprecedented new taxes and inflation, or they will bankrupt us.

While we clearly need health-care reform, the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us much closer to a government takeover of our health-care system. Instead, we should be trying to achieve reforms by moving in the opposite direction–toward less government control and more individual empowerment. Here are eight reforms that would greatly lower the cost of health care for everyone:

• Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs). The combination of high-deductible health insurance and HSAs is one solution that could solve many of our health-care problems. For example, Whole Foods Market pays 100% of the premiums for all our team members who work 30 hours or more per week (about 89% of all team members) for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees’ Personal Wellness Accounts to spend as they choose on their own health and wellness.

Money not spent in one year rolls over to the next and grows over time. Our team members therefore spend their own health-care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully. Our plan’s costs are much lower than typical health insurance, while providing a very high degree of worker satisfaction.

• Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair.

• Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable.

• Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.

• Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care.

• Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor’s visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?

• Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility.

• Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren’t covered by Medicare, Medicaid or the State Children’s Health Insurance Program.

Many promoters of health-care reform believe that people have an intrinsic ethical right to health care–to equal access to doctors, medicines and hospitals. While all of us empathize with those who are sick, how can we say that all people have more of an intrinsic right to health care than they have to food or shelter?

Health care is a service that we all need, but just like food and shelter it is best provided through voluntary and mutually beneficial market exchanges. A careful reading of both the Declaration of Independence and the Constitution will not reveal any intrinsic right to health care, food or shelter. That’s because there isn’t any. This “right” has never existed in America

Even in countries like Canada and the U.K., there is no intrinsic right to health care. Rather, citizens in these countries are told by government bureaucrats what health-care treatments they are eligible to receive and when they can receive them. All countries with socialized medicine ration health care by forcing their citizens to wait in lines to receive scarce treatments.

Although Canada has a population smaller than California, 830,000 Canadians are currently waiting to be admitted to a hospital or to get treatment, according to a report last month in Investor’s Business Daily. In England, the waiting list is 1.8 million.

At Whole Foods we allow our team members to vote on what benefits they most want the company to fund. Our Canadian and British employees express their benefit preferences very clearly–they want supplemental health-care dollars that they can control and spend themselves without permission from their governments. Why would they want such additional health-care benefit dollars if they already have an “intrinsic right to health care”? The answer is clear–no such right truly exists in either Canada or the U.K.–or in any other country.

Rather than increase government spending and control, we need to address the root causes of poor health. This begins with the realization that every American adult is responsible for his or her own health.

Unfortunately many of our health-care problems are self-inflicted: two-thirds of Americans are now overweight and one-third are obese. Most of the diseases that kill us and account for about 70% of all health-care spending–heart disease, cancer, stroke, diabetes and obesity–are mostly preventable through proper diet, exercise, not smoking, minimal alcohol consumption and other healthy lifestyle choices.

Recent scientific and medical evidence shows that a diet consisting of foods that are plant-based, nutrient dense and low-fat will help prevent and often reverse most degenerative diseases that kill us and are expensive to treat. We should be able to live largely disease-free lives until we are well into our 90s and even past 100 years of age.

Health-care reform is very important. Whatever reforms are enacted it is essential that they be financially responsible, and that we have the freedom to choose doctors and the health-care services that best suit our own unique set of lifestyle choices. We are all responsible for our own lives and our own health. We should take that responsibility very seriously and use our freedom to make wise lifestyle choices that will protect our health. Doing so will enrich our lives and will help create a vibrant and sustainable American society.

Mr. Mackey is co-founder and CEO of Whole Foods Market Inc.

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Opinion: Obamacare Is Already Falling Apart

Sally C. Pipes
Special to AOL News

Last week, the House of Representatives voted by a wide margin — 245 to 189 — to repeal the president’s landmark health reform package. It’s unclear whether Senate Majority Leader Harry Reid, D-Nev., will bring the measure up in the upper body.

But even he doesn’t, the law is already showing signs of serious trouble.

In recent weeks, some Democrats who supported the law have called for scrapping portions of it.

Take the so-called 1099 provision, which will require businesses to submit a tax form to the IRS for each vendor with whom they do more than $600 in annual business starting in 2012. Following the midterm elections, President Obama signaled a willingness to repeal the rule, calling the hidden tax “burdensome for small businesses.” He went on to say that “it requires too much paperwork, too much filing. It’s probably counterproductive.”

Sen. Max Baucus, D-Mont., one of the principal authors of the health care law, and former House Speaker Nancy Pelosi, D-Calif., have also expressed support for repealing the provision.

What’s taken them so long? The rule would saddle some 40 million businesses with huge new compliance costs. Instead of devoting resources to job creation and business development, entrepreneurs would be forced to waste time and money filing new paperwork.

The Obama administration is also regularly choosing to exempt many firms from some of the health care bill’s new rules, rather than admit that the bill will negatively impact workers or cause them to lose coverage. For instance, McDonald’s received a waiver after announcing that its low-cost, bare-bones “mini-med” health plans would run afoul of the medical-loss rules, which require insurers to spend at least 80-85 percent of premium dollars on claims.

In just eight months since the legislation passed, the feds have handed out more than 200 other exemptions to employers, insurers, and labor unions that together cover more than 1.5 million people.

The Obama administration is also coming to grips with the looming failure of one of the most highly touted aspects of the law — a program to provide health insurance to those denied coverage because of preexisting conditions.

The Department of Health and Human Services estimated in July that it would now be insuring 375,000 people who had been previously shut out of the insurance market. But the administration recently admitted that only about 8,000 people with preexisting conditions had actually signed up.

That’s about 2 percent of the projected enrollment.

The next component of the bill to fail may be the most important one — the deeply detested individual mandate, which requires the uninsured to either get health coverage or pay a fine.

In both Arizona and Oklahoma, voters have approved state constitutional amendments aimed at outlawing the mandated purchase of health insurance.

Nearly three-quarters of voters in Missouri signed off on a similar ballot initiative earlier this year. Twenty-six state attorneys general and the National Federation of Independent Business are currently pursuing a lawsuit challenging the constitutionality of the mandate. Virginia’s attorney general has mounted a separate lawsuit, as has a group of citizens in Ohio.

The Congressional Budget Office (CBO) predicted the failure of the individual mandate well before the reform law passed. A July report from the nonpartisan agency predicted that by 2016, four million people would defy the mandate and pay the fine for remaining uninsured. All told, according to CBO, about 21 million people will be uninsured in 2016 — most of whom will be exempt from the fines altogether.

So despite committing more than a trillion taxpayer dollars over the next decade to health reform, Obamacare will leave tens of millions uninsured, drive the cost of care up for virtually all Americans, and put the federal government in charge of ever more of our health care decisions.

As the Obama administration grapples with implementing its signature piece of legislation, the case for repealing it is becoming self-evident. Public support for the law continues to erode. Lawmakers should follow the House’s lead and repeal this monstrosity.

Sally C. Pipes is president, CEO and Taube fellow in health care studies at the Pacific Research Institute. Her latest book, “The Truth About Obamacare,” was published in 2010.

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Looking to the Affordable Care Act For Help

By PAUL DOWNS

Now that 2010 is complete, I can see what kind of help Obamacare — sorry, the Patient Protection and Affordable Care Act — will give me with my health insurance bills. I mentioned in a previous post that my insurance rates for 2011 were a little lower than they had been in 2010 (although I expect them to resume their regular upward march next year). I own a small, struggling manufacturing company that has been providing health care to my people even though it’s a stretch. Surely the Affordable Care Act will come to my rescue! But the devil is always in the details, particularly when Congress decides to “help.” So the first thing to check: Am I eligible for the tax credit? Here’s what I found in the guidelines issued by the Internal Revenue Service:

“In order to be a qualified employer, (1) the employer must have fewer than 25 full-time equivalent employees (‘F.T.E.’s) for the tax year, (2) the average annual wages of its employees for the year must be less than $50,000 per F.T.E., and (3) the employer must pay the premiums under a ‘qualifying arrangement’ described in Q/A-7.”

Hmmm. This might not be so simple. Let’s take these one step at a time:

How many full time employees do I have? I ended the year with 12 on the payroll, including myself, but I started the year with eight. So here’s the guideline: “The number of an employer’s F.T.E.’s is determined by dividing (1) the total hours of service for which the employer pays wages to employees during the year (but not more than 2,080 hours for any employee) by (2) 2,080.” This raises a question: Do I include myself? The answer is no:

“A sole proprietor, a partner in a partnership, a shareholder owning more than 2 percent of an S corporation, and any owner of more than 5 percent of other businesses are not considered employees for purposes of the credit. Thus, the wages or hours of these business owners and partners are not counted in determining either the number of F.T.E.’s or the amount of average annual wages, and premiums paid on their behalf are not counted in determining the amount of the credit.”

O.K., that’s clear. I don’t count. And if I had any family on the payroll, they wouldn’t either. As usual, the guy who pays the bills is excluded from any tax break for health insurance.

On to the employees. They get personal days and holidays and overtime, and the guys who have been working all year have well more than 2,080 hours each. But the hours exceeding 2,080 won’t count toward the total, as we saw. What about the others? There’s a large clump of verbiage in section 16 of the I.R.S. document that  boils down to this: If the employee worked or was paid for less than 2,080 hours a year (including vacation and holidays), add the actual hours to the total. If salaried, add 40 hours for each week worked or paid for. If it’s an hourly worker, and you paid for more than 2,080 hours, just add 2,080. Then divide all of that by 2,080 to get your F.T.E.’s. And don’t forget to round down to the next whole number. That’s right: 4.99 F.T.E.’s is rounded down to 4. Which might help you if you are trying to scrape under the 25 F.T.E. limit, and might hurt you when you calculate average wages.

I paid for 21,168 hours of work in 2010, including overtime, personal days and holidays. When I subtract hours in excess of 2,080 per employee, that leaves me with a total of 19,008. Dividing by 2,080, I get 9.13 F.T.E.’s. Round that down to 9. Looks like I’m under the 25 limit. So far, so good.

On to the average wage calculation. What’s included? The I.R.S. says:

“The amount of average annual wages is determined by first dividing (1) the total wages paid by the employer during the employer’s tax year to employees who perform services for the employer during the tax year by (2) the number of the employer’s F.T.E.’s for the year, as calculated under Q/A-16.”

Uh oh. The total wages will include what I paid for all of the overtime, holidays and personal days, even if that exceeds 2,080 hours. Since many of my highest-paid shop guys work the most hours, that means the average is going to be bumped way, way up. I paid $451,662.50 in wages and salaries. Divide that by 9 F.T.E.’s and I get $50,184.72 per employee, which is just over the $50,000 per F.T.E. limit to qualify for the tax credit. I’m cooked.

The Affordable Care Act will not help me. I will have to deal with the burden of health insurance costs on my own. Some further thoughts:

  • I understand the concept of means testing for government benefits. However, the means being tested by the Act are probably the wrong ones. The ability of the employer to pay for health insurance isn’t considered at all. After going through the calculation I have to conclude that I would be a heck of a lot better off if I cut my people’s pay dramatically. Not only would I save on the wages, but also I would get some help with the costs of insurance. Was the Affordable Care Act intended to be an assault on middle class wages? It does incentivize the hiring of more lower paid workers instead of increasing the productivity and pay of a smaller work force. But how does that work if you have high pay, high skill workers? Of course, I could sidestep all of this by shipping production to China.
  • I now have every reason to dramatically increase the amount that my employees contribute to their insurance costs. The Affordable Care Act pegs the tax credits available to the amount of employee co-pays — but since I don’t qualify anyway, there’s no reason to hold back. I don’t see why I shouldn’t raise their portion from the current 33 percent contribution to 50 percent or more, with the eventual goal of getting rid of the health insurance benefit entirely. Every dollar they contribute would increase the profit of the company and by extension my own pay. After 25 years of being a generous boss, my willingness to insulate my workers from the broader shifts in the economy is almost gone. Maybe if we’d been profitable for years I would feel differently, but I’m ready to put the financial health of my company before the rewards of being Mr. Nice Guy.
  • If health insurance costs were falling, rather than rising, we wouldn’t be having this discussion. Even though the Affordable Care Act will not help me immediately, I support it. As far as I know, it has provisions that are intended to rein in the continuing growth of medical spending. The existing system, if unmodified, will put me in the same bind, probably faster. Keep in mind that my insurance costs have risen an average of 10 percent a year for every year I have offered insurance. The Act also promises to create a market for individuals and families to purchase their insurance themselves, at reasonable cost to them, so I can get out of the health insurance business entirely. I look forward to that day.

I’m curious if anyone else has done this calculation — and what you found for your own company.

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside of Philadelphia.

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