Archive | Employers Reaction to Bill

Health Insurers Raise Some Rates by Double Digits

Health insurance companies across the country are seeking and winning double-digit increases in premiums for some customers, even though one of the biggest objectives of the Obama administration’s health care law was to stem the rapid rise in insurance costs for consumers.

Dave Jones, the California insurance commissioner, said some insurance companies could raise rates as much as they did before the law was enacted. Particularly vulnerable to the high rates are small businesses and people who do not have employer-provided insurance and must buy it on their own.

In California, Aetna is proposing rate increases of as much as 22 percent, Anthem Blue Cross 26 percent and Blue Shield of California 20 percent for some of those policy holders, according to the insurers’ filings with the state for 2013. These rate requests are all the more striking after a 39 percent rise sought by Anthem Blue Cross in 2010 helped give impetus to the law, known as the Affordable Care Act, which was passed the same year and will not be fully in effect until 2014.

In other states, like Florida and Ohio, insurers have been able to raise rates by at least 20 percent for some policy holders. The rate increases can amount to several hundred dollars a month. The proposed increases compare with about 4 percent for families with employer-based policies.

Under the health care law, regulators are now required to review any request for a rate increase of 10 percent or more; the requests are posted on a federal Web site, healthcare.gov, along with regulators’ evaluations.

The review process not only reveals the sharp disparity in the rates themselves, it also demonstrates the striking difference between places like New York, one of the 37 states where legislatures have given regulators some authority to deny or roll back rates deemed excessive, and California, which is among the states that do not have that ability. New York, for example, recently used its sweeping powers to hold rate increases for 2013 in the individual and small group markets to under 10 percent. California can review rate requests for technical errors but cannot deny rate increases.

The double-digit requests in some states are being made despite evidence that overall health care costs appear to have slowed in recent years, increasing in the single digits annually as many people put off treatment because of the weak economy. PricewaterhouseCoopers estimates that costs may increase just 7.5 percent next year, well below the rate increases being sought by some insurers. But the companies counter that medical costs for some policy holders are rising much faster than the average, suggesting they are in a sicker population. Federal regulators contend that premiums would be higher still without the law, which also sets limits on profits and administrative costs and provides for rebates if insurers exceed those limits.

Critics, like Dave Jones, the California insurance commissioner and one of two health plan regulators in that state, said that without a federal provision giving all regulators the ability to deny excessive rate increases, some insurance companies can raise rates as much as they did before the law was enacted.

“This is business as usual,” Mr. Jones said. “It’s a huge loophole in the Affordable Care Act,” he said. While Mr. Jones has not yet weighed in on the insurers’ most recent requests, he is pushing for a state law that will give him that authority. Without legislative action, the state can only question the basis for the high rates, sometimes resulting in the insurer withdrawing or modifying the proposed rate increase.

The California insurers say they have no choice but to raise premiums if their underlying medical costs have increased. “We need these rates to even come reasonably close to covering the expenses of this population,” said Tom Epstein, a spokesman for Blue Shield of California. The insurer is requesting a range of increases, which average about 12 percent for 2013.

Although rates paid by employers are more closely tracked than rates for individuals and small businesses, policy experts say the law has probably kept at least some rates lower than they otherwise would have been.

“There’s no question that review of rates makes a difference, that it results in lower rates paid by consumers and small businesses,” said Larry Levitt, an executive at the Kaiser Family Foundation, which estimated in an October report that rate review was responsible for lowering premiums for one out of every five filings.

Federal officials say the law has resulted in significant savings. “The health care law includes new tools to hold insurers accountable for premium hikes and give rebates to consumers,” said Brian Cook, a spokesman for Medicare, which is helping to oversee the insurance reforms.

“Insurers have already paid $1.1 billion in rebates, and rate review programs have helped save consumers an additional $1 billion in lower premiums,” he said. If insurers collect premiums and do not spend at least 80 cents out of every dollar on care for their customers, the law requires them to refund the excess.

As a result of the review process, federal officials say, rates were reduced, on average, by nearly three percentage points, according to a report issued last September. In New York, for example, state regulators recently approved increases that were much lower than insurers initially requested for 2013, taking into account the insurers’ medical costs, how much money went to administrative expenses and profit and how exactly the companies were allocating costs among offerings. “This is critical to holding down health care costs and holding insurance companies accountable,” Gov. Andrew M. Cuomo said.

While insurers in New York, on average, requested a 9.5 percent increase for individual policies, they were granted an increase of just 4.5 percent, according to the latest state averages, which have not yet been made public. In the small group market, insurers asked for an increase of 15.8 percent but received approvals averaging only 9.6 percent.

But many people elsewhere have experienced significant jumps in the premiums they pay. According to the federal analysis, 36 percent of the requests to raise rates by 10 percent or more were found to be reasonable. Insurers withdrew 12 percent of those requests, 26 percent were modified and another 26 percent were found to be unreasonable.

And, in some cases, consumer advocates say insurers have gone ahead and charged what regulators described as unreasonable rates because the state had no ability to deny the increases.

Two insurers cited by federal officials last year for raising rates excessively in nine states appear to have proceeded with their plans, said Carmen Balber, the Washington director for Consumer Watchdog, an advocacy group. While the publicity surrounding the rate requests may have drawn more attention to what the insurers were doing, regulators “weren’t getting any results by doing that,” she said.

Some consumer advocates and policy experts say the insurers may be increasing rates for fear of charging too little, and they may be less afraid of having to refund some of the money than risk losing money.

Many insurance regulators say the high rates are caused by rising health care costs. In Iowa, for example, Wellmark Blue Cross Blue Shield, a nonprofit insurer, has requested a 12 to 13 percent increase for some customers. Susan E. Voss, the state’s insurance commissioner, said there might not be any reason for regulators to deny the increase as unjustified. Last year, after looking at actuarial reviews, Ms. Voss approved a 9 percent increase requested by the same insurer.

“There’s a four-letter word called math,” Ms. Voss said, referring to the underlying medical costs that help determine what an insurer should charge in premiums. Health costs are rising, especially in Iowa, she said, where hospital mergers allow the larger systems to use their size to negotiate higher prices. “It’s justified.”

Some consumer advocates say the continued double-digit increases are a sign that the insurance industry needs to operate under new rules. Often, rates soar because insurers are operating plans that are closed to new customers, creating a pool of people with expensive medical conditions that become increasingly costly to insure.

While employers may be able to raise deductibles or co-payments as a way of reducing the cost of premiums, the insurer typically does not have that flexibility. And because insurers now take into account someone’s health, age and sex in deciding how much to charge, and whether to offer coverage at all, people with existing medical conditions are frequently unable to shop for better policies.

In many of these cases, the costs are increasing significantly, and the rates therefore cannot be determined to be unreasonable. “When you’re allowed medical underwriting and to close blocks of business, rate review will not affect this,” said Lynn Quincy, senior health policy analyst for Consumers Union.

The practice of medical underwriting — being able to consider the health of a prospective policy holder before deciding whether to offer coverage and what rate to charge — will no longer be permitted after 2014 under the health care law.

*Modified from a New York Times article dated January 5, 2013

 

 

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PPACA taxes and fees: Coming to a return near you

The Patient Protection and Affordable Care Act (PPACA) is supposed to provide health insurance subsidy tax credits for about 20 million low-income and moderate-income Americans in 2014, but it also could impose a significant increase in federal income tax payments for some high-income Americans.

Here’s a look at some of the major PPACA taxes and fees that are supposed to take effect in 2014.

  • Health care industries. Insurers, drug companies and medical device manufacturers face new fees and taxes.
  • The insurance industry faces an annual fee that starts at $8 billion in its first year, 2014.
  • Companies that make medical equipment sold chiefly through doctors and hospitals, such as pacemakers, artificial hips and coronary stents, will pay a 2.3 percent excise tax on their sales, expected to total $1.7 billion in its first year, 2013. They’re trying to get it repealed.
  • Pharmaceutical companies that make or import brand-name drugs are already paying fees; they totaled $2.5 billion in 2011, the first year.
  • Employer penalties. Starting in 2014, companies with 50 or more employees that do not offer coverage will face penalties if at least one of their employees receives government-subsidized coverage. The penalty is $2,000 per employee, but a company’s first 30 workers don’t count toward the total.
  • The intentionally uninsured. Nearly 6 million people who don’t get health insurance will face tax penalties starting in 2014. The fines are estimated to raise $6.9 billion in 2016. Average penalty in that year: about $1,200. The penalty provision is supposed to exempt people with conscientious reasons for refusing to buy health coverage and those who cannot find affordable coverage.
  • Upper-income households. Starting Jan. 1, individuals making more than $200,000 per year, and couples making more than $250,000, will face a 0.9 percent Medicare tax increase on wages above those threshold amounts. They’ll also face an additional 3.8 percent tax on investment income. Together these are the biggest tax increase in the health care law.
  • Indoor tanning devotees. The 10 percent sales tax on indoor tanning sessions took effect in 2010. It’s expected to raise $1.5 billion over 10 years. The 28 million people who visit tanning booths and beds each year — mostly women under 30, according to the Journal of the American Academy of Dermatology — are already paying. Tanning salons were singled out because of strong medical evidence that exposure to ultraviolet lights increases the risk of skin cancer.

*Modified from a LifeHealthPro.com article

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Health Costs on His Mind Small Factory Owner Looks for Ways to Cope With New Law

Sales at Automation Systems LLC, a parts-assembly factory in the Chicago suburbs, dropped 60% following the 2008 financial collapse. Owner Carl Schanstra was able to get the firm back on its feet by breaking into new markets, such as the auto industry. Sales are up 12% this year, and are likely to rise again next year, too.

But for the 34-year-old, the expected growth in sales brings a new concern. He is worried that as Automation Systems continues to expand, it will be subject to a provision in the health-care overhaul that could damage its bottom line.

Mr. Schanstra is contemplating various strategies he can take next year in order to sidestep what he believes are significant burdens of complying with the law. In fact, he’s considering whether he should split his manufacturing firm in two.

That is because his plant, with sales of about $1.6 million for 2012, currently employs 40 full-time workers, mostly low-paid employees who monitor the factory equipment. If sales were to continue to rise, the plant could, conceivably, employ 50 full-time workers in 2014. Under the new health-care law, the Affordable Care Act, businesses with 50 or more full-time equivalent employees will be required, starting in that year, to offer workers health insurance or potentially pay a penalty.

The expense, he says, would drive up the cost of his labor. So he doesn’t want to let employment at the factory reach that number. “I’ll be hammered for having more people at work,” says Mr. Schanstra, who took over the firm when his father died in 2003.

Splitting the business into two would be a “headache,” he acknowledges. But with fewer than 50 full-time equivalent employees in each half of this business, he hopes to avoid paying the penalties that otherwise could amount to at least $40,000 a year. His firm hasn’t offered health-insurance benefits since 2003, when premiums jumped 50%, bringing his yearly outlay for coverage for his staff of 20 people to about $40,000 total.

The Checkup

Automation Systems LLC weighs whether to add workers as Affordable Care Act nears

  • Sales of $1.6 million for 2012, up 12% this year and expected to rise next year
  • 40 full-time employees, 10 shy of the 50 that would trigger health-care requirement
  • Penalty for not offering 50 or more full-time workers health insurance: At least $40,000

Source: The company

Legal and tax experts say breaking up a firm—as Mr. Schanstra is contemplating—generally won’t allow a business owner to stay outside the parameters of the law. According to the Internal Revenue Code, all workers who are employed by a common group of corporations or business partners must be treated as being employed by a single owner.

But an owner could potentially create a spinoff entity if his or her business has more than one revenue stream, and if there are different owners for each entity, says Peter Fleming, a partner with Carnegie, Pa.-based accounting firm Wilke & Associates LLP. He recommends exploring other options first. “The spinoff move is a big step,” he says, because it requires surrendering a portion of the company over to someone else.

Small-business experts say it isn’t surprising that some business owners are thinking of splitting their firms or taking other steps to eschew the health-care overhaul due to the associated costs and regulatory burdens. “It’s a very legitimate question to ask, should I try to find a way to get under the 50-employee threshold,” says Alden Bianchi, a partner with law firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC in Boston. Providing health insurance is “a compensation cost and it’s the job of the business owner to minimize costs,” he adds.

Exploring far-reaching strategies to dodge the employer mandate isn’t uncommon, adds Katie Mahoney, executive director of health-care policy at the U.S. Chamber of Commerce, because, for some business owners, “it’s a matter of dollars and cents and they don’t have it. They find a way around it or they close their business.”

Average premiums for family health-insurance plans have increased 97% since 2002, according to a September study conducted by nonprofits Kaiser Family Foundation and Health Research & Educational Trust.

Business owners have other less-radical options for maneuvering around the law’s provisions.

Some say they’re likely to reduce their workers’ hours or even lay off staff in order to remain below the thresholds established under the act. Under the law, firms with 50 or more full-time-equivalent employees will have to provide “minimum essential” and “affordable” coverage, or pay a penalty for each employee in excess of 30 full-time employees.

Sidney Brodsky, chief executive officer of James Gerard Foods, a gourmet food business in Phoenix with roughly 50 employees, says he is considering “weeding out” his weakest performers to reduce his firm’s head count to below 50 full-time equivalents. He would then bring on contract workers, should he need more help.

Mr. Brodsky has offered health-care benefits to his employees for the past 12 years, though he only contributes 50% toward their premiums. By hovering under the law’s employee threshold, he can continue to offer health benefits to his employees without having to worry about meeting the “minimum essential” mandate. In order to avoid penalties, employers must offer a plan that covers at least 60% of the of the actuarial value of the cost of the benefits. In addition, employers must not charge the employee more than 9.5% of his or her household income toward the cost of health-insurance premiums.

Others plan to shift to part-time workers, because there are no penalties if part-time employees aren’t offered coverage.

Mr. Schanstra says he is thinking of bringing in a partner to take over one half of the business, should he divide it. He is also considering opening a factory in South America—and focus his growth there—catering to industries in that region. “I want to see where the cards fall,” he says. “Splitting the company is not off the table.”

Mr. Schanstra is aware that dividing his business into two may not help him dodge the law’s requirements. His backup plan, if he can’t split his firm, is to keep his head count low or to invest in machinery that would replace workers. He also plans to raise prices as much as 20% starting in January to buffer any health-care related costs he may incur in 2014.

Getting part-time staff is “not a really good functional way for us to operate our business,” he says, because of how employees’ shifts, which rotate 24 hours a day, are scheduled for optimal productivity.

“The unknown makes everyone stop spending and start saving,” he says. “We will be more cautious and leaner and tighten up.”

Corrections & Amplifications
Under the Affordable Care Act, employers with 50 or more full-time equivalent employees more must offer a health plan that covers at least 60% of the of the actuarial value of the cost of the benefits. In addition, employers must not charge the employee more than 9.5% of his or her household income toward the cost of health-insurance premiums. A previous version of this article stated that employers are required to pay 60% of the total cost of the plan’s benefits.

*Modified from a Wall Street Journal Article by Emily Maltby and Sarah Needleman

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Are 2013 health care tax hikes just the start?

BY 

DECEMBER 26, 2012

WASHINGTON (AP) — New taxes are coming Jan. 1 to help finance the Patient Protection and Affordable Care Act (PPACA). Most people may not notice. But they will pay attention if Congress decides to start taxing employer-sponsored health insurance, one option in play if lawmakers can ever agree on a budget deal to reduce federal deficits.

The tax hikes already on the books, taking effect in 2013, fall mainly on people who make lots of money and on the health care industry. But about half of Americans benefit from the tax-free status of employer health insurance. Workers pay no income or payroll taxes on what their employer contributes for health insurance, and in most cases on their own share of premiums as well.

It’s the single biggest tax break the government allows, outstripping the mortgage interest deduction, the deduction for charitable giving and other better-known benefits. If the value of job-based health insurance were taxed like regular income, it would raise nearly $150 billion in 2013, according to congressional estimates. By comparison, wiping away the mortgage interest deduction would bring in only about $90 billion.

“If you are looking to raise revenue to pay for tax reform, that is the biggest pot of money of all,” said Martin Sullivan, chief economist with Tax Analysts, a nonpartisan publisher of tax information.

It’s hard to see how lawmakers can avoid touching health insurance if they want to eliminate loopholes and curtail deductions so as to raise revenue and lower tax rates. Congress probably wouldn’t do away with the health care tax break, but limit it in some form. Such limits could be keyed to the cost of a particular health insurance plan, the income level of taxpayers or a combination.

Many economists think some kind of limit would be a good thing because it would force consumers to watch costs, and that could help keep health care spending in check. PPACA took a tentative step toward limits by imposing a tax on high-value health insurance plans. But that doesn’t start until 2018.

Next spring will be three years since Congress passed the health care overhaul but, because of a long phase-in, many of the taxes to finance the plan are only now coming into effect. Medicare spending cuts that help pay for covering the uninsured have started to take effect, but they also are staggered. The law’s main benefit, coverage for 30 million uninsured people, will take a little longer. It doesn’t start until Jan. 1, 2014.

 

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Five Things To Watch in Health Care in 2013

California Healthline Contributing Editor by Dan Diamond –

December 12, 2012:

“Prediction is indispensable to our lives,” forecaster extraordinaire Nate Silver writes in his new book, “The Signal and the Noise.” Every day, whether wearing a raincoat to work or setting aside funds for future spending, “we are making a forecast about how the future will proceed — and how our plans will affect the odds for a favorable outcome.”

In health care, the mix of ever-shifting technologies, laws and competitive landscape means that many patients’ lives (and industry dollars) rest on whether providers and regulators can make the right bets. And some years, the industry’s direction is relatively easy to predict.

For example, when “Road to Reform” did a similar forecasting exercise last year, the 2012 signposts were clear. March’s Supreme Court case. The November election.

What will be significant in 2013 is a bit murkier, though several major developments await in the months ahead. A slew of ACA-related provisions are slated to take effect, with new taxes and programs like the Bundled Payments for Care Improvement Initiative slated to come online. Both parties continue to discuss entitlement reforms, which could include raising the Medicare eligibility age. The Independent Payment Advisory Board may submit its first draft spending control proposal.

Here are five broader trends that industry observers are watching.

Premium Growth

The Affordable Care Act was supposed to help tamp down health care costs, and some supporters have suggested (possibly prematurely) that the law has been responsible for a slowdown in health spending growth.

But average Americans haven’t seen much of a difference yet. A new analysis released on Wednesday found that workers’ spending on premiums swelled by 74% between 2003 and 2011.

And while the ACA contains measures to control premiums — like new rules on insurer oversight and administrative spending — observers don’t expect any immediate relief.

“Hold onto your hat,” consultant Robert Laszewski warns. Having spoken with a number of insurers in the individual and small group markets, Laszewski says to “expect a 30% to 40% increase in the baseline cost of individual health insurance to account for the new premium taxes, reinsurance costs, benefit mandate increases, and underwriting reforms.”

Those premium hikes may disproportionately hit people in their 20s and 30s, given new regulations that will narrow the difference in health insurance rates between younger and older consumers.

They also allow opponents of the ACA to score political points. The ongoing rise in premium costs “breaks a promise made by the president to lower premiums for families by $2,500,” according to Rep. Phil Roe (R-Tenn.).

Employer Decisions

One of the most significant industry questions post-ACA: Will employers continue to provide traditional health benefits for their workers, drop coverage or adopt new models in hopes of controlling spending?

It’s been hard to get a clear answer, partly because firms have been slow to announce their changes, fearing public backlash. “Road to Reform” recently reviewed a slew of employer efforts to control benefit costs, such as possibly shifting more full-time workers into part-time arrangements, and the accompanying critical news reports.

One of those companies was Darden Restaurants, which has since clarified that it would not be modifying workers’ hours.

“The program was only a test,” Darden spokesperson Matt Kobussen tells California Healthline, and “none of [the company’s] current full-time employees, hourly or salaried, will have their full-time status changed as a result of health care reform.”

But less-public changes to benefit design and provision are well in the works, at Darden and elsewhere. For example, the restaurant company is among several major firms exploring whether using defined contribution — where employers pay a fixed amount into employees’ health plans and allow workers to choose their coverage from an online marketplace — would be a more cost-effective way to provide health coverage.

Exchange Implementation

While HHS moved the deadline for states to decide whether they’re operating their own health insurance exchange, it’s kept the Oct. 1, 2013 deadline for all exchanges to begin enrolling consumers. And most observers agree: It will be a sprint to hit that deadline, especially with more states opting to let the government set up the model.

“Will the [federal government] be ready to provide an insurance exchange in all of the states that don’t have one on Oct. 1, 2013?” Laszewski asks.

“I have no idea. And neither does anyone else I talk to … We only hear vague reports that parts of the new federal exchange information systems are in testing.”

Merger and Integration Activity

The case doesn’t carry the weight of Florida v. Sebelius, but FTC v. Phoebe Putney Health System — and FTC v. ProMedica, for that matter — reflects the broad tension between regulators and providers.

In both lawsuits, FTC is attempting to prevent provider consolidation that the agency says would lead to anti-competitive behavior and higher prices for patients. And victories in those cases would further embolden FTC to intervene in merger activity, lawyers tell “Road to Reform.”

But hospitals, physicians and other providers say that they must move into new arrangements in hopes of navigating the changes wrought by the ACA, which is intended to reward more integration and care networks.

Comparative Effectiveness Research

While many experts polled by “Road to Reform” highlighted some of the ongoing policy issues that will spill into next year — from states’ decisions on expanding Medicaid to “fiscal cliff” negotiations — one pointed to potential changes in care quality as a top 2013 priority.

“I’m thinking a lot about” the Patient-Centered Outcomes Research Institute, economist Austin Frakt tells California Healthline.

“Comparative effectiveness research is far more important than most of the tinkering that gets proposed (like raising the Medicare age),” Frakt adds.

But is PCORI properly designed to help transform health care, or is it just another pool of research funding? As Michael Millenson writes, the institute is slated to spend $300 million on patient-centered outcomes research next year, which could make it a major player in funding new quality initiatives. But PCORI’s designers intentionally tamped down, worried that too much focus on “comparative effectiveness” would be seen as prioritizing “cost-effectiveness,” and even rationing.

“PCORI is the offspring of a shotgun marriage” between regulators who favor government-led reforms and those who are skeptical of them, Millenson concludes. “[And] no one is quite sure yet what this child will be once it grows up.”

Looking Forward

As forecasts go, all observers that “Road to Reform” talked to agreed: It will be another fast-paced year for the industry.

Of course, there’s always this maxim from expert prognosticator Silver: “It is amusing to poke fun at the experts when their predictions fail.”

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Business That Drop Health Care Coverage Could Face Backlash

Many U.S. businesses — particularly those that are small or primarily depend on low-wage workers — are considering whether to stop providing health coverage to their employees and instead pay penalties under the Affordable Care Act, a move some experts say could result in a worker backlash, Bloomberg reports.

Background

Under the ACA, businesses with at least 50 workers beginning in 2014 must pay a penalty of $2,000 per employee if they do not provide affordable coverage to their employees. Meanwhile, the average annual premium for family coverage is expected to cost $12,000 in 2014, of which employers typically cover 80%, or about $9,600, according to estimates from Towers Watson.

Reasons To Continue Providing Insurance

Mercer partner Tracy Watts said that although it might seem like an easy decision for such employers to forgo providing coverage, companies have several compelling reasons to continue providing insurance, including:

 

  • Using the coverage as a recruitment tool
  • Keeping workers healthy
  • The fear of backlash from higher-earning employees whose out-of-pocket insurance costs could go up

 

If their work-based coverage is dropped, low-wage workers might pay lower premiums for health insurance by purchasing coverage through the ACA’s insurance exchanges. However, those whose incomes are too high to qualify for federal subsidies would pay more, according to Randall Abbott, a senior consultant at Towers Watson.

In addition, while health coverage is tax deductible for employers, the $2,000 penalty is not. Further, workers who are forced to find their own health coverage might expect additional compensation, and wages also are not tax deductible, Abbott said.

According to a survey by Mercer, just 6% of businesses are planning to drop health coverage by 2014, and only 9% of retail and hospitality businesses are likely to take that step.

Meanwhile, the Congressional Budget Office in July estimated that the ACA would result in a loss of benefits for 2.5% of the U.S.’s 161 million employees, or about four million individuals (Nussbaum/Wayne, Bloomberg, 12/05)

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Sears Switches to Defined Contribution & Private Exchange Model

Sears Holdings Corp. has joined the ranks of thousands of businesses small and large, by announcing it will move to a Defined Contribution model for employee health benefits in 2013. Through the plan, Sears will allocate a fixed dollar amount for employees and their dependents to purchase health insurance through a private health exchange.

The goal of the shift is to combat the rising cost of providing health benefits to Sears’ 90,000 eligible employees.

The cost per participant under traditional group health plans is on the rise. Employers are also feeling the pinch from minimum requirements such as the minimum percentage of the premium that must be paid by the employer, and the requirement that a minimum percentage of employees join the group plan. If either of those minimums is not met, the entire plan is canceled.

Sears’ Defined Contribution Model

Under the new plan, Sears will be able to cap their monthly health benefits cost per employee by giving a fixed dollar amount (the “defined contribution”) to each employee. Each employee will choose a health insurance plan on the private exchange that works for them, their spouses, and their dependents.

For decades, U.S. employers have been offering a one-size-fits-all plan with benefits that some employees may not need. Defined Contribution gives employees more choice and mitigates an employer’s financial risk from unexpected claims.

About the Private Health Exchange

The states and feds may still be hashing out the details of the state health exchanges, but businesses like Sears are pushing private exchanges forward. Sears employees will now have 15 choices for health insurance instead of the existing 4. Coverage options are available from five different medical insurers.

The objective of providing more choice through an exchange is to create competition and drive prices down for the policyholders.

“The more insurance providers compete, the better,” said Chris Brathwaite, spokesman for Hoffman Estates-based Sears. “I will have an opportunity to shop for a health care provider who meets my medical and my pocketbook needs.”*

Sears has not revealed how much it will allot for employees, but the amount will generally cover the insurance premium of one of the plans under the exchange. Depending on the amount and class of employee, employees could be responsible for paying a portion of the remainder of expenses they incur. All of the available plans provide catastrophic protection and cannot reject people for medical history or pre-existing conditions.

Health Reform and Companies’ Defined Contribution Shift

It is anticipated that more companies will adopt the Defined Contribution healthcare model as they are faced with rising expenses as 2014 nears.

“The best decision for most employers and their employees will be to eliminate their company-sponsored health insurance in favor of a defined contribution HRA solution,” says renowned economist and Zane Benefits founder, Professor Paul Zane Pilzer.

“That’s because employees no longer need employers to purchase quality health insurance, and, starting in 2014, employees earning less than 400% of the FPL (~$92,000 for a family of four) per year who purchase a personal policy will receive a large federal subsidy on their premium if their company doesn’t offer a group plan.”

As a result, all of the following Defined Contribution plans are expected to become mainstream:

  • Health Reimbursement Arrangement (HRA)
  • Medical Expense Reimbursement Plan (MERP)
  • Fixed Contribution Plan
  • Section 105 Plan

Modified from a Zane Benefits Blog 11/20/2012

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Here’s Those Layoffs We Voted For Last Night

Last night’s victory for the President marks the first time since its inception that Obamacare is no longer a what-if; it is the future of health care in America.

It also means a near immediate impact on the economy.  With 20 or so new or higher taxes set to be implemented, ranging from a $123 billion surtax on investment income, through the $20 billion medical device tax, all the way down to the $600 million executive compensation limit, Obamacare will be a nearly unbearable tax burden on the economy.

Who will pay?  The middle-class workforce, of course.

So with another four years for President Obama to look forward to, and the obvious inevitability of Obamacare that this entails, let’s examine the very real jobs that will be lost, and the very real lives that will be affected.

Welch Allyn

Welch Allyn, a company that manufactures medical diagnostic equipment in central New York, announced in September that they would be laying off 275 employees, or roughly 10% of their workforce over the next three years.  One of the major reasons discussed for the layoffs was a proactive response to the Medical Device Tax mandated by the new healthcare law.

Dana Holding Corp.

As recently as a week ago, a global auto parts manufacturing company in Ohio known as Dana Holding Corp., warned their employees of potential layoffs, citing “$24 million over the next six years in additional U.S. health care expenses”.  After laying off several white collar staffers, company insiders have hinted at more to come.  The company will have to cover the additional $24 million cost somehow, which will likely equate to numerous cuts in their current workforce of 25,500 worldwide.

Stryker

One of the biggest medical device manufacturers in the world, Stryker will close their facility in Orchard Park, New York, eliminating 96 jobs in December.  Worse, they plan on countering the medical device tax in Obamacare by slashing 5% of their global workforce – an estimated 1,170 positions.

Boston Scientific

In October of 2009, Boston Scientific CEO Ray Elliott, warned that proposed taxes in the health care reform bill could “lead to significant job losses” for his company.  Nearly two years later, Elliott announced that the company would be cutting anywhere between 1,200 and 1,400 jobs, while simultaneously shifting investments and workers overseas – to China.

Medtronic

In March of 2010, medical device maker Medtronic warned that Obamacare taxes could result in a reduction of precisely 1,000 jobs.  That plan became reality when the company cut 500 positions over the summer, with another 500 set for the end of 2013.

Others

A short list of other companies facing future layoffs at the hands of Obamacare:

Smith & Nephew – 770 layoffs
Abbott Labs – 700 layoffs
Covidien – 595 layoffs
Kinetic Concepts – 427 layoffs
St. Jude Medical – 300 layoffs
Hill Rom – 200 layoffs

  • Beyond the complete elimination of a significant number of American jobs is another looming problem created by the health care law – a shift from full-time to part-time workers.

Sean Hackbarth of Free Enterprise explains:

A JP Morgan economist “points out that 8.3 million people are working in part-time jobs even though they’d prefer full-time work. Unfortunately, because of President Obama’s health care law, the Patient Protection and Affordable Care Act (PPACA), workers in the hotel, restaurant, and retail industries could be pushed into part-time jobs working less than 30 hours per week.”

“Under the health care law, if a company has more than 50 “full time equivalent” workers, a combination of full and part-time employees, but doesn’t offer “affordable” coverage that meets the government’s minimum value standard, the company will have to pay a penalty. This penalty is determined by the number of full-time employees minus 30 full-time employees. So to reiterate a very important point: part-time workers are not part of the penalty formula. The health care law creates a perverse incentive to hire part-time versus full-time workers.”

Tangible examples of Obamacare causing a reduction in full-time workers:

Darden Restaurants

According to the Orlando Sentinel, Darden Restaurants, a casual dining chain best known for their Red Lobster, Olive Garden and LongHorn Steakhouse restaurants, is “experimenting with limiting the hours of some of its workers to avoid health care requirements under the Affordable Care Act when they take effect in 2014”.

JANCOA Janitorial Services

The CEO of JANCOA, Mary Miller, testified to Congress that Obamacare was a “dream killer”, adding that one option she had to consider “is reducing the majority of my team members to part-time employment in order to reduce the amount that I will be penalized.”

Kroger

The American retailer in Cincinnati, Ohio recently was reported to be planning a significant slashing of their hourly workers.  Doug Ross writes:

Operative Faith (a mid-level manager with the company) reveals that Kroger will soon join the ranks of Darden Restaurants and slash the hours of its non-exempt (hourly) workers to avoid millions in Obamacare penalties.

According to the source, Obamacare could result in tens of thousands of Kroger employees being limited to working 28 hours per week.

Summary

This is by no means, meant to be an exhaustive list.  But it is meant to provide examples of real companies, real jobs, and real names, soon to be added to the growing list of employment casualties provided by the inevitable implementation of Obamacare.

*Modified from a Freedom Works article by  By Rusty Weiss on November 07, 2012

 

 

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Health-Care Law Spurs a Shift to Part-Time Workers

Some low-wage employers are moving toward hiring part-time workers instead of full-time ones to mitigate the health-care overhaul’s requirement that large companies provide health insurance for full-time workers or pay a fee.

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Several restaurants, hotels and retailers have started or are preparing to limit schedules of hourly workers to below 30 hours a week. That is the threshold at which large employers in 2014 would have to offer workers a minimum level of insurance or pay a penalty starting at $2,000 for each worker.

The shift is one of the first significant steps by employers to avoid requirements under the health-care law, and whether the trend continues hinges on Tuesday’s election results. Republican presidential nominee Mitt Romney has pledged to overturn the Affordable Care Act, although he would face obstacles doing so.

President Barack Obama is set to push ahead with implementing the 2010 law if he is re-elected.

Pillar Hotels & Resorts this summer began to focus more on hiring part-time workers among its 5,500 employees, after the Supreme Court upheld the health-care overhaul, said Chief Executive Chris Russell. The company has 210 franchise hotels, under the Sheraton, Fairfield Inns, Hampton Inns and Holiday Inns brands.

“The tendency is to say, ‘Let me fill this position with a 40-hour-a-week employee.’ “Mr. Russell said. “I think we have to think differently.”

Pillar offers health insurance to employees who work 32 hours a week or more, but only half take it, and Mr. Russell wants to limit his exposure to rising health-care costs. He said he planned to pursue new segments of the population, such as senior citizens, to find workers willing to accept part-time employment.

He described the shift as a “cultural change” toward hiring more part-timers and not a prohibition against hiring full-timers.

CKE Restaurants Inc., parent of the Carl’s Jr. and Hardee’s burger chains, began two months ago to hire part-time workers to replace full-time employees who left, said Andy Puzder, CEO of the Carpinteria, Calif., company. CKE, which is owned by private-equity firm Apollo Management LP, APO -0.74% offers limited-benefit plans to all restaurant employees, but the federal government won’t allow those policies to be sold starting in 2014 because of low caps on payouts. Mr. Puzder said he has advised Mr. Romney’s campaign on economic issues in an unpaid capacity.

Home retailer Anna’s Linens Inc. is considering cutting hours for some full-time employees to avoid the insurance mandate if the health-care law isn’t repealed, said CEO Alan Gladstone.

Mr. Gladstone said the costs of providing coverage to all 1,100 sales associates who work at least 30 hours a week would be prohibitive, although he was weighing alternative options, such as raising prices.

The Costa Mesa, Calif., company currently offers benefits to workers who put in at least 32 hours a week.

Supporters of the health-care overhaul said most large employers already covered workers voluntarily, and requiring others to do so or pay a penalty was important to level the playing field between businesses.

A spokeswoman for the Department of Health and Human Services said the administration didn’t believe the law would substantially affect employment, citing the Massachusetts health-care overhaul signed by then-Gov. Romney in 2006.

“Consistent with the experience in Massachusetts and projections of the Congressional Budget Office, the health-care law will improve the affordability of health care while not significantly impacting the labor market,” spokeswoman Erin Shields Britt said in a written statement. “This law will decrease costs, strengthen our businesses and make it easier for employers to provide coverage to their workers.” Administration officials declined to answer further questions.

Companies in industries that already offer full benefits have indicated that they weren’t planning major changes around the law. Several employers with hourly workforces, including Marriott International Inc. MAR -0.14% hotels, the Costco Wholesale Corp. COST +1.67% warehouse chain and the Panera Bread Co. PNRA +0.56% restaurant chain also said they had no plans to change employee hours in response to the law.

But benefits consultants said most retail and hotel clients have explored shifting toward part-time workers.

Those industries are less likely to offer health coverage now, and if they do, the plans typically are too skimpy to meet the minimum-coverage requirements.

“They’ve all considered it,” Matthew Stevenson, a workforce-strategy principal at Mercer. In a July survey, 32% of retail and hospitality company respondents told the consulting firm that they were likely to reduce the number of employees working 30 hours a week or more.

Consultants have warned that companies that use more part-time labor risk productivity losses from high staff turnover and lower morale. Laurence Geller, who until last week was CEO of Strategic Hotels & Resorts Inc., BEE +13.29% said he weighed moving toward part-time workers but decided against risking that highly trained staff at his high-end hotels would go elsewhere. The company owns hotels bearing the Four Seasons, Fairmont and Ritz-Carlton names.

The insurance mandate applies to companies with the equivalent of 50 or more full-time workers, a calculation based on the number of people employed by the company and an average of hours they work in a week. Companies are adjusting schedules now because they will have to review employment rolls for up to a year in advance to determine which workers will be deemed full-time under the law.

A company will have to pay a penalty of $2,000 for every such worker, after the first 30, if it doesn’t offer qualifying health coverage. If a company offers health insurance but the coverage is deemed sparse or unaffordable, the company must pay $3,000 for every worker who gets a federal tax subsidy to purchase coverage as an individual.

Darden Restaurants Inc. DRI +0.72% was among the first companies to say it was changing hiring in response to the health-care law. The Orlando, Fla., parent of Red Lobster and Olive Garden in February began testing hiring part-time workers in four markets to replace some full-time employees who had left, a spokesman said.

Ken Adams said his 10 Subway restaurant franchises in Michigan have about 60 employees who work 30 hours or more in a given week. Before year-end he plans to cut their hours to below 30 and, in some cases, to reduce positions altogether, he said. A Subway corporate spokesman said it was up to individual franchisees to make such decisions.

*Modified from a WSJ article by Julie Jargon, Louise Radnofsky, and Alexandra Berzon

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New Obamacare Tax Form Mandates Americans Report Personal Health ID Info to IRS

Here’s why the IRS will require Americans to disclose their personal health ID information starting in 2014

When Obamacare’s individual mandate takes effect in 2014, all Americans who file income tax returns must complete an additional IRS tax form. The new form will require disclosure of a taxpayer’s personal identifying health information in order to determine compliance with the Affordable Care Act’s individual mandate.

As confirmed by IRS testimony to the tax-writing House Committee on Ways and Means, “taxpayers will file their tax returns reporting their health insurance coverage, and/or making a payment”.

So why will the Obama IRS require your personal identifying health information?

Simply put, there is no way for the IRS to enforce Obamacare’s individual mandate without such an invasive reporting scheme.  Every January, health insurance companies across America will send out tax documents to each insured individual.  This tax document—a copy of which will be furnished to the IRS—must contain sufficient information for taxpayers to prove that they purchased qualifying health insurance under Obamacare.

This new tax information document must, at a minimum, contain: the name and health insurance identification number of the taxpayer; the name and tax identification number of the health insurance company; the number of months the taxpayer was covered by this insurance plan; and whether or not the plan was purchased in one of Obamacare’s “exchanges.”

This will involve millions of new tax documents landing in mailboxes across America every January, along with the usual raft of W-2s, 1099s, and 1098s.  At tax time, the 140 million families who file a tax return will have to get acquainted with a brand new tax filing form.  Six million of these families will end up paying Obamacare’s individual mandate non-compliance tax penalty

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