Archive | Health Care Bill Impact on Business

Doctor Shortage Likely to Worsen With Health Law

RIVERSIDE, Calif. — In the Inland Empire, an economically depressed region in Southern California, President Obama’s health care law is expected to extend insurance coverage to more than 300,000 people by 2014. But coverage will not necessarily translate into care: Local health experts doubt there will be enough doctors to meet the area’s needs. There are not enough now.

Other places around the country, including the Mississippi Delta, Detroit and suburban Phoenix, face similar problems. The Association of American Medical Colleges estimates that in 2015 the country will have 62,900 fewer doctors than needed. And that number will more than double by 2025, as the expansion of insurance coverage and the aging of baby boomers drive up demand for care. Even without the health care law, the shortfall of doctors in 2025 would still exceed 100,000.

Health experts, including many who support the law, say there is little that the government or the medical profession will be able to do to close the gap by 2014, when the law begins extending coverage to about 30 million Americans. It typically takes a decade to train a doctor.

“We have a shortage of every kind of doctor, except for plastic surgeons and dermatologists,” said Dr. G. Richard Olds, the dean of the new medical school at the University of California, Riverside, founded in part to address the region’s doctor shortage. “We’ll have a 5,000-physician shortage in 10 years, no matter what anybody does.”

Experts describe a doctor shortage as an “invisible problem.” Patients still get care, but the process is often slow and difficult. In Riverside, it has left residents driving long distances to doctors, languishing on waiting lists, overusing emergency rooms and even forgoing care.

“It results in delayed care and higher levels of acuity,” said Dustin Corcoran, the chief executive of the California Medical Association, which represents 35,000 physicians. People “access the health care system through the emergency department, rather than establishing a relationship with a primary care physician who might keep them from getting sicker.”

In the Inland Empire, encompassing the counties of Riverside and San Bernardino, the shortage of doctors is already severe. The population of Riverside County swelled 42 percent in the 2000s, gaining more than 644,000 people. It has continued to grow despite the collapse of one of the country’s biggest property bubbles and a jobless rate of 11.8 percent in the Riverside-San Bernardino-Ontario metro area.

But the growth in the number of physicians has lagged, in no small part because the area has trouble attracting doctors, who might make more money and prefer living in nearby Orange County or Los Angeles.

A government council has recommended that a given region have 60 to 80 primary care doctors per 100,000 residents, and 85 to 105 specialists. The Inland Empire has about 40 primary care doctors and 70 specialists per 100,000 residents — the worst shortage in California, in both cases.

Moreover, across the country, fewer than half of primary care clinicians were accepting new Medicaid patients as of 2008, making it hard for the poor to find care even when they are eligible for Medicaid. The expansion of Medicaid accounts for more than one-third of the overall growth in coverage in President Obama’s health care law.

Providers say they are bracing for the surge of the newly insured into an already strained system. Temetry Lindsey, the chief executive of Inland Behavioral & Health Services, which provides medical care to about 12,000 area residents, many of them low income, said she was speeding patient-processing systems, packing doctors’ schedules tighter and seeking to hire more physicians.

“We know we are going to be overrun at some point,” Ms. Lindsey said, estimating that the clinics would see new demand from 10,000 to 25,000 residents by 2014. She added that hiring new doctors had proved a struggle, in part because of the “stigma” of working in this part of California.

Across the country, a factor increasing demand, along with expansion of coverage in the law and simple population growth, is the aging of the baby boom generation. Medicare officials predict that enrollment will surge to 73.2 million in 2025, up 44 percent from 50.7 million this year.

“Older Americans require significantly more health care,” said Dr. Darrell G. Kirch, the president of the Association of American Medical Colleges. “Older individuals are more likely to have multiple chronic conditions, requiring more intensive, coordinated care.”

The pool of doctors has not kept pace, and will not, health experts said. Medical school enrollment is increasing, but not as fast as the population. The number of training positions for medical school graduates is lagging. Younger doctors are on average working fewer hours than their predecessors. And about a third of the country’s doctors are 55 or older, and nearing retirement.

Physician compensation is also an issue. The proportion of medical students choosing to enter primary care has declined in the past 15 years, as average earnings for primary care doctors and specialists, like orthopedic surgeons and radiologists, have diverged. A study by the Medical Group Management Association found that in 2010, primary care doctors made about $200,000 a year. Specialists often made twice as much.

The Obama administration has sought to ease the shortage. The health care law increases Medicaid’s primary care payment rates in 2013 and 2014. It also includes money to train new primary care doctors, reward them for working in underserved communities and strengthen community health centers.

But the provisions within the law are expected to increase the number of primary care doctors by perhaps 3,000 in the coming decade. Communities around the country need about 45,000.

Many health experts in California said that while they welcomed the expansion of coverage, they expected that the state simply would not be ready for the new demand. “It’s going to be necessary to use the resources that we have smarter” in light of the doctor shortages, said Dr. Mark D. Smith, who heads the California HealthCare Foundation, a nonprofit group.

Dr. Smith said building more walk-in clinics, allowing nurses to provide more care and encouraging doctors to work in teams would all be part of the answer. Mr. Corcoran of the California Medical Association also said the state would need to stop cutting Medicaid payment rates; instead, it needed to increase them to make seeing those patients economically feasible for doctors.

More doctors might be part of the answer as well. The U.C. Riverside medical school is hoping to enroll its first students in August 2013, and is planning a number of policies to encourage its graduates to stay in the area and practice primary care.

But Dr. Olds said changing how doctors provided care would be more important than minting new doctors. “I’m only adding 22 new students to this equation,” he said. “That’s not enough to put a dent in a 5,000-doctor shortage.”

*Modified from a New York Times article



Employees Favor Employer Health Plans (Even as Some Employers May Dump Them)

Most U.S. workers are satisfied with employer-provided health coverage, according to a new survey by the Washington, D.C.-based National Business Group on Health.

The report, “Perceptions of Health Benefits in a Recovering Economy: A Survey of Employees,” was conducted from late May through early June. A total of 1,545 employees at organizations with 2,000 or more employees responded. Respondents were between the ages of 22 and 69 and receive their health care benefits through their employer or union.

  • Higher premiums and out-of-pocket costs for health care benefits rule the roost, as most covered employees realize. But the survey finds that roughly one in three employees are not confident in their ability to shop for health insurance on their own.

More than half are not confident they can purchase the same or better quality insurance on their own. Reports coming out after the U.S. Supreme Court upheld the Affordable Care Act do not bode well for employees, the reports suggesting they may be forced to buy insurance in health insurance exchanges.

About one in 10 employers in the United States say they’ll drop health coverage for employees in the next few years as the major provisions of the Patient Protection and Affordable Care Act take effect. And more indicate they may do so over time, a survey by consulting company Deloitte finds, an article in BenefitsPro reported this week.

A health insurance exchange is an online marketplace set up under the health reform law wherein individuals and small businesses can shop for health plans from private insurance companies. Each state’s exchange is set to offer coverage beginning Jan. 1, 2014. People may seek federal financial assistance when they apply.

  • There is also a third option tickling some fancies: As recapped in an article published July 19 on, an Employee Benefit Research Institute brief suggests the PPACA exchange system could lead to a return to an employer-sponsored defined contribution health benefits system.

Under this system, employers would give a set amount of cash to employees, the funds used by the employees to buy guaranteed-issue, mostly community-rated coverage through the exchanges.

Nearly two thirds of workers have experienced higher premiums and out-of-pocket costs, according to the survey. The new law mandates that, starting in 2014, any company with 50 or more full-time employees has to provide coverage or pay a penalty.

  • There have been conflicting reports over how many employers will drop coverage for employees. Deloitte’s report predicts a lesser impact than some. Last year, consulting firm McKinsey & Co. drew fire from when it stated 30% of respondents will “definitely” or “probably” stop offering employer-sponsored health insurance after 2014. According to the Deloitte survey, 9% of companies expect to stop offering insurance in the next one to three years.

But U.S. workers’ satisfaction levels with employer-provided health care coverage has risen or remained the same compared to three years ago, according to a survey of employees conducted by the NBGH, a non-profit association of nearly 350 large employers.

The survey found that nearly two in three workers (63%) are very satisfied with health coverage provided by their employer or union. Roughly one-third (35%) are more satisfied with their coverage compared to three years ago, the survey found.

The survey also found that 87% of employees rate health benefits as very important when making a decision about accepting a new job or remaining with their employer. Fewer than 8 in 10 (78%) rate retirement benefits as very important, which is up sharply from 63% in 2007. Only 12% are less satisfied; the remaining 53% say their satisfaction level has remained the same.

Thirty-nine percent of employees rank biometric screenings as a very important health benefit program, followed by exercise programs (31%) and on-site fitness centers (31%). Less healthy respondents give a higher rating to programs in stress management, weight loss, and coaching, programs; however, most employees (68%) do not believe employees should be required to participate in a wellness program to qualify for health insurance. And even more (71%) don’t think employers should charge employees more for health coverage if they don’t meet specific health goals, the report finds.

“Employers continue to make significant investments in the health of their employees, even though the slow recovery has left many employers and the economy struggling,” states NBDH President and CEO Helen Darling. “In the wake of the Supreme Court’s ruling to uphold the health care reform law and a future that will include health exchanges where individuals can shop for and buy insurance, some employers will be carefully weighing their options.

*Modified from article


One in 10 employers plans to drop health benefits, study finds

About one in 10 employers plans to end workers’ health insurance as the new healthcare law takes effect, according to a new study. The finding could bolster opponents of the law, who argue that its changes to the healthcare system will force workers out of insurance plans they like. Supporters of the law say most people will keep their current coverage.

Surveying 560 U.S. companies, consulting firm Deloitte found that 9 percent of employers are planning to drop employee health benefits within three years. Eighty-one percent said they would continue covering employees, and 10 percent said they were not sure. The study was conducted between February and April, before the Supreme Court ruled to uphold most of the healthcare law. Deloitte said it does not believe the decision would change companies’ responses.

The law includes a provision requiring people to carry health insurance or pay a fine, and seeks to make it easier for Americans to find and afford coverage outside of their employers.

  • The study found that smaller firms were most likely to say they will drop coverage. Thirteen percent of companies with 50 to 100 workers said they would end policies within three years, compared with 2 percent of companies with more than 1,000 workers. The businesses surveyed were not identified.

A spokeswoman for the Department of Health and Human Services said the Massachusetts law that inspired the federal healthcare overhaul led to an increase in the number of people insured through their employers. “This law will decrease costs, strengthen our businesses and make it easier for employers to provide coverage to their workers,” Erin Shields Britt told The Wall Street Journal.

Several other estimates have predicted that fewer people will receive healthcare through their employers after the healthcare law takes effect. In March, for example, congressional auditors pegged the figure at 3 and 5 million people each year from 2019 to 2022. The Congressional Budget Office added that most employers “will continue to have an economic incentive to offer health insurance to their employees.

* Modified from The article


Enrolling Healthy People a Likely Challenge for Calif. Health Exchange

A significant challenge for state officials implementing the California Health Benefit Exchange will be to draw enough healthy individuals to the exchange to keep prices down and provide enough income to health insurers, the Sacramento Bee reports.

  • According to the Bee, if the exchange attracts only high-cost patients, insurers might not participate (Yamamura, Sacramento Bee, 7/17).

About the Exchange

The federal health reform law requires states to launch online insurance marketplaces by 2014.

The California Health Benefit Exchange primarily will serve individuals and small businesses. An estimated 4.4 million California residents are expected to use the exchange by the end of 2016 (California Healthline, 6/13).

Officials plan to open registration for the exchange in October 2013.

Attracting Healthy Individuals, Insurers to Exchange

According to a report, exchange officials are planning a large public outreach effort next year to entice healthy residents, which could include:

  • Advertisements in various languages;
  • Banners on social networking websites; and
  • Literature distributed through churches.

In addition, officials are considering:

  • Hosting a health care summit with first lady Michelle Obama;
  • Recruiting celebrity spokespeople; and
  • Working with popular television shows to incorporate health care changes into their story lines.

Diana Dooley — California Health and Human Services Secretary and a member of the exchange board — said, “We’re doing a lot of work at the exchange to understand what motivates people” to seek health insurance through the exchange, as well as their concerns with doing so.

Meanwhile, Marian Mulkey — director of the Health Reform and Public Programs Initiative at the California HealthCare Foundation, which publishes California Healthline — said that the exchange is “an important new channel” for insurers to sell health plans. However, she said, “[I]t doesn’t mean they will all arrive with the same enthusiasm, wanting to participate.”

Charles Bacchi — executive vice president at the California Association of Health Plans — said that to maintain reasonable risk pools, “it’s important that the exchange and outside marketplace look alike.”

Federal Funding for the Exchange

Meanwhile, health care advocates have acknowledged uncertainties about federal funding for the exchange. Although the U.S. Supreme Court ruled last month to uphold the health reform law, Republicans have indicated they will seek to repeal the law if they win the White House and Congress in the November election.

Anthony Wright — executive director of Health Access California — said, “The real risk to the exchange is the loss of the [federal] subsidies, which would be a real attraction for millions of Californians.” He said the exchange could work without the subsidies, “but it wouldn’t be as attractive to as many people” (Sacramento Bee, 7/17).



Counties Worried About Doctor Count Ahead of Medi-Cal Growth

County officials are concerned by a shortage of physicians in the state as California prepares for a Medi-Cal expansion under the federal health reform law, the Ventura County Star reports.

  • Background

Under the reform law, states have the option of expanding Medicaid coverage to individuals with incomes of up to 133% of the poverty level; this is in excess of $92,000 for a family of four.

The law’s Medicaid expansion provision also will expand coverage to low-income adults who have no children. Following the U.S. Supreme Court ruling upholding the reform law, California officials said the state would move forward with implementing its provisions. Forty-seven California counties are participating in the “Bridge to Reform” program, which aims to implement the Medicaid expansion ahead of schedule.

Inland communities — which are facing a shortage of primary care physicians — will have more residents receiving Medi-Cal coverage under the expansion than wealthier coastal communities. The state has an uneven distribution of physicians. For example, Riverside and San Bernardino counties have only one medical school and struggle to attract and retain physicians, while some counties in the northern part of the state have an abundance of doctors.

Meanwhile, a report by the California HealthCare Foundation’s Center for Health Reporting found that nearly half of primary care physicians in the state are not willing to see new Medi-Cal beneficiaries because they say Medi-Cal reimbursement is too low. California also has a large number of physicians who are nearing retirement age, which could affect the number of physicians who treat Medi-Cal beneficiaries.

  • Concerns

Mary Carr, executive director of the Ventura County Medical Association, said that mandates in the reform law and resulting health care trends — such as accountable care organizations, electronic health records and lower physician reimbursement — could result in fewer physicians available to treat newly insured patients. She said the changes “may cause physicians to choose early retirement.”

  • Seeking Solutions

Lee Kemper — executive director of the County Medical Services Program, a consortium of 34 rural counties implementing the Medi-Cal expansion — said Medi-Cal reimbursement rates must be increased in rural areas to attract more doctors. In addition, Senate Health Committee Chair Ed Hernandez (D-West Covina) plans to draft legislation that would expand scope-of-practice definitions for certain health care providers — such as nurse practitioners and physician assistants — to help bolster the state’s health care workforce. In addition, Hernandez said he will try to increase the number of medical students in the state and push for medical residency programs in underserved areas.

*Modified from the Ventura County Star



Medi-Cal compensation inadequate, doctors say, as enrollment boom looms

When Dr. Jerold Kaplan made a home visit last year to a man with a foot wound, he billed Medi-Cal — the state’s health care program for the poor and disabled — what he thought was a modest $90.

His payment: $8.96. The Berkeley wound surgeon received a bit more for his home visit to a quadriplegic last year: $13.44. Medi-Cal told him it cut both payments in half because of late paperwork. But even at the full rate, he would have received no more than $27 for a house call — barely enough to cover gas.

As California gears up for a major expansion of Medi-Cal under national health reform, such compensation is leading to a critical concern:

  • Will enough physicians be willing to see the influx of new patients?

Many doctors now refuse to accept Medi-Cal patients or sharply limit the number they see because of what they describe as extremely low reimbursement rates. As a result, patients report difficulty getting timely care, a problem the expansion could worsen.

“Medi-Cal has gotten so ridiculous in its reimbursement there are a lot of doctors that aren’t interested in working for it,” Kaplan said. Now covering 7.7 million Californians, Medi-Cal is the state’s version of the federal Medicaid program.

It is expected to grow by 900,000 children with the state’s recent elimination of the Healthy Families program, which provided low-cost insurance for children and teens. The state will enroll an additional 1.5 million or more adults when national health reforms take effect in 2014. All told, Medi-Cal could balloon by 30 percent, financed largely by an additional $9 billion a year in federal money beginning in 2014.

Many consumer advocates strongly support the expansion and argue that it will greatly benefit the state by giving preventive care to those who are uninsured, helping them avoid more serious — and more costly — illnesses. “It’s going to be a huge boon to not just the newly covered Californians, but to our health care system as a whole,” said Anthony Wright, executive director of Health Access California. But Wright agreed work needs to be done to make sure the program is ready.

  • California has one of the lowest Medicaid reimbursement rates in the nation, ranking 47th of 50 states. And it could drop further.

In a budget move, state lawmakers last year approved a 10 percent pay cut for Medi-Cal providers. But the cut is on hold pending a ruling on a lawsuit doctors filed.

  • While patients generally laud the program, 23 percent of adults report difficulty in finding a primary care doctor who will accept Medi-Cal, and 34 percent have had trouble finding a specialist, according to a 2011 survey by the California HealthCare Foundation.”If they can get established with a physician at all, they have to wait much longer for an appointment and as a result, they are going to the emergency room for routine care and that clogs up the ER,” said Dr. William Lewis, a Los Gatos ear, nose and throat doctor and past president of the Santa Clara County Medical Association.

“That is clearly going to get worse if you’re adding people without adding doctors.”

Medi-Cal pays Lewis $15 to $20 for an office visit, compared with the $50 he gets from Medicare and $60 to $70 from a private insurer.

The Medi-Cal rates are so low, Lewis said, he doesn’t bother billing for it because it’s not worth the hassle. He just eats the cost. Lewis typically declines to see new Medi-Cal patients unless it is a follow-up visit with someone he treated in a hospital emergency room. “You cannot run a practice seeing Medi-Cal patients,” he said. “You can’t pay your employees and pay for your overhead and keep your doors open.”

Statistics on the number of physicians who accept Medi-Cal are hard to come by. The state has nearly 80,000 doctors enrolled as Medi-Cal providers, a number that has held fairly steady over the past five years, said Norman Williams, spokesman for the state Department of Health Care Services.

But critics counter that many of those physicians see only a patient or two, or have closed their practice to new Medi-Cal patients. Under the national health reform law, Medi-Cal payments for primary care doctors will rise to Medicare levels in 2013 and 2014, Williams noted. That will mean a significant pay boost in California and should help ensure there will be enough doctors to see patients, he said.

But the boost will not apply to specialists, and many primary care doctors may be reluctant to accept new patients fearing the rates will drop back in 2015, said Dr. Ted Mazer, an officer with the California Medical Association and a San Diego-based ear, nose and throat surgeon.

The state will monitor Medi-Cal patients’ access to doctors, and if problems develop, “we’ll take immediate action,” Williams said. Some fear that the doctors, clinics and hospitals that see Medi-Cal patients now will be inundated once the expansion occurs.

When San Mateo mom Macrina Mota’s daughter injured her foot playing soccer last year, the two spent 13 hours in an emergency room to treat a sprained foot. “They’re just overbooked; they’re overloaded,” Mota said.

Other Medi-Cal recipients encounter different barriers. New mother De Jornae Thomas, of Oakland, said having Medi-Cal has helped ensure that her 2-month-old son, Josiah, has the medical attention he needs. But because Medi-Cal requires her to pay a cost-sharing fee, she avoids checkups for herself. “I haven’t been to the doctor in awhile for myself, outside of my pregnancy,” she said.

East Oakland pediatrician Brian Blaisch is on the front lines of the debate, with nearly 90 percent of his 1,500 patients on Medi-Cal. Despite his commitment to such families, Blaisch now only occasionally accepts new Medi-Cal patients and moonlights at two hospitals to make ends meet, which makes for 60-hour workweeks. He said he has maxed out loans on his home to keep his practice afloat.

Still, Blaisch strongly supports the Medi-Cal expansion but said the state may need to expand community clinics and offer financial incentives to encourage more doctors to see Medi-Cal patients. “For me, it’s just a mission,” he said. “This is what I grew up thinking I was going to do.”

*Modified from a article


Employer Mandate – What Happens If a Company Does NOT Offer Health Insurance

The Health Care Reform bill requires certain employers to offer health insurance, else pay a tax penalty: Effective January 1st, 2014, “applicable large employers” will be required to offer “minimum essential coverage” that is “affordable” to their employees. “Applicable large employers” who fail to offer “minimum essential coverage” that is “affordable” will be required to pay a “penalty” on their tax return. obamacare approved

1) Who are “applicable large employers”?
2) What qualifies as “minimum essential coverage”?
3) What is the penalty if I do not offer “minimum essential coverage”?
4) What is the penalty if I do offer “minimum essential coverage”, but it is not “affordable” for some of my employees?

1) Who are “applicable large employers”?

A company is defined as an applicable large employer on a calendar year basis. For example, a company could be an applicable large employer in 2015, but not in 2014. If the company employed 50 or more full-time employees on average during the preceding calendar year, they are an applicable large employer for the current calendar year.

A company is NOT an applicable large employer if the company:

  •     employed less than 50 full-time employees on average during the previous calendar year, or
  •    employed more than 50 full-time employees no more than 120 days during the previous calendar year due to a seasonal workforce.

Calculating the number of full-time employees.

Generally, a full-time employee is an employee who is employed on average at least 30 hours of service per week in a given month. However, for purposes of determining whether a company is an applicable employer, the company must include all full-time employees plus the full-time equivalent of its part-time employees.

To calculate the full-time equivalent of part-time employees, a company should add the number of hours worked by part-time employees and divide the total by 120.

The sum of the full-time employees and the full-time equivalent of the part-time employees is the number used to determine whether a company is an applicable large employer.

  • Simple translation: If you have less than 50 employees, you are not an applicable large employer. If you have 50 or more employees, you probably are an applicable large employer.

2) What qualifies as “minimum essential coverage”?

Minimum essential coverage is the minimum amount of health insurance coverage an applicable large employer must make available to avoid paying the maximum penalty (see #3, below).

In order to avoid paying the maximum penalty, the employer must offer each employee the ability to enroll in minimum essential coverage through an eligible employer-sponsored plan, which is: any plan or coverage offered in the small or large group market within a State (including small business exchanges),
coverage under a grandfathered health plan, or a qualified governmental plan.

3) What is the penalty if I do not offer “minimum essential coverage”?

An applicable large employer who does not offer minimum essential coverage may not have to pay a penalty.

The employer only pays a penalty if at least one employee enrolls in a health insurance exchange and also qualifies for premium subsidies and/or other tax credits from the federal government.

  • If at least one employee receives federal subsidies due to purchase of health insurance through an exchange in a given month, the employer must pay a monthly penalty based on the number of full-time employees employed during that month.

IMPORTANT: When calculating the amount of the penalty, the employer receives a credit of 30 full-time employees. (For example, a company with 50 full-time employees only has to consider 20 employees for purposes of the penalty).

The annual per employee penalty is $2,000.

To get the monthly per employee penalty, you simply divide the annual penalty by 12.

To calculate the total monthly penalty, you multiply the # of full-time employees employed during the month minus 30 by the monthly per employee penalty.


In February, ABC Manufacturing employs 60 full-time employees and does not offer minimum essential coverage. In February, at least one employee purchases health insurance through the exchange and receives premium subsidies from the federal government.

The annual per employee penalty is $2,000.

The monthly per employee penalty is $2,000*(1/12).

For purposes of this calculation, we only need to consider 30 full-time employee due to the 30-employee credit.

The total monthly penalty is equal to 30*2,000*(1/12) which is $5,000.

4) What is the penalty if I do offer “minimum essential coverage”, but it is not “affordable” for some of my employees?

An applicable large employer that offers minimum essential coverage to its full-time employees may still be required to pay a penalty if the coverage is not “affordable” for one or more employees.

An employer’s coverage is considered unaffordable for any full-time employees who, in a given month, enrolls in a health plan offered through an Exchange and are eligible to receive federal premium subsidies (or cost-sharing subsidies).  (Note added 07/15/2010:  An employee is only eligible for premium subsidies through the exchange if their required contributions for their employer’s plan is greater than 9.5%)

If one or more full-time employees receive federal subsidies due to purchase of health insurance through an exchange in a given month, the employer must pay a monthly penalty based on the number of full-time employees who receive federal subsidies.

The annual per employee penalty for not offering affordable coverage is $3,000.

To get the monthly per employee penalty, you simply divide the annual penalty by 12.

To calculate the total monthly penalty, you multiply the # of full-time employees who receive premium subsidies (or cost-sharing subsidies) by the monthly per employee penalty.

The penalty is capped at a maximum of $2,000 per full-time employee per year.


In February, ABC Manufacturing employs 60 full-time employees and does offer minimum essential coverage. In February, three (3) employee purchase health insurance through an exchange and receive premium subsidies from the federal government. Thus, the coverage is unaffordable for three (3) employees for the month of February.

The annual per employee penalty is $3,000.

The monthly per employee penalty is $3,000*(1/12).

For purposes of this calculation, we only need to consider the 3 full-time employee who are receiving federal subsidies.

The total monthly penalty is equal to 3*3,000*(1/12) which is $750.

*Modified from a Zane Benefits article




Individual Mandate – What Happens if You Don’t Buy Health Insurance

The Health Care Reform bill requires certain individuals to purchase health insurance, else pay a tax penalty:

Effective January 1st, 2014, “applicable individuals” will be required to maintain “minimum essential coverage” for themselves and their dependents.  “Applicable individuals” who fail to maintain “minimum essential coverage” will be required to pay a “penalty” on their tax return.individual mandate

1) Who are “applicable individuals”?

2) What is minimum essential coverage”?

3) How much is the “penalty”?

  • Who are “applicable individuals” for the Individual Mandate?

A person is defined as an applicable individual on a monthly basis.  For example, you could be an applicable individual in January, but not in February.  A person is an applicable individual, unless one of the following circumstances apply: the person has been approved for a religious exemption under Section 1311(d)(4)(H) of the Patient Protection and Affordable Care Act (PPACA) the person is a member of a health care sharing ministry the person is not a citizen or national of the United States or an alien lawfully present in the United States the person is incarcerated without any pending disposition of charges

Simple translation: A U.S. citizen is an applicable individual unless he or she is religiously exempt, a member of a health care sharing ministry or in jail.

  • What is “minimum essential coverage” for the Individual Mandate?

Minimum essential coverage is the minimum amount of health insurance coverage an applicable individual must purchase to avoid paying the penalty.

The following plans qualify as minimum essential coverage:

Coverage under government sponsored programs (e.g. Medicare and Medicaid)

Coverage under an employer-sponsored group health plan offered in the small or large group market within a State

Coverage under a plan offered in the individual market within a State

Coverage under a grandfathered health plan

Coverage under a State risk pool as recognized by the Secretary of Health and Human Services (HHS)

The following plans do not qualify as minimum essential coverage:

Coverage only for accident, or disability income insurance, or any combination thereof

Limited scope dental or vision benefits

Benefits for long-term care, nursing home care, home health care, community-based care, or any combination thereof

Coverage for on-site medical clinics

Coverage only for a specified disease or illness

Hospital indemnity or other fixed indemnity insurance

Other similar insurance coverage, specified in regulations, under which benefits for medical care are secondary or incidental to other insurance benefits

Simple translation: “If you have individual health insurance, employer-sponsored group health insurance, or if you participate in a State risk pool, Medicare or Medicaid, then you have minimum essential coverage.

  • How much is the “penalty” for the Individual Mandate?

If an applicable individual does not maintain minimum essential coverage for 1 or more months during a tax year, then they must pay a penalty.

  • The size of the penalty is phased-in over three years:

In 2014, the penalty will be $95 per person up to a maximum of three times that amount for a family ($285)* or 1% of household income if greater

In 2015, the penalty will be $325 per person up to a maximum of three times that amount for a family ($975)* or 2% of household income if greater

In 2016, the penalty will be $695 per person per year up to a maximum of three times that amount for a family ($2,085)* or 2.5% of household income if greater

*Note: If you claim dependents, you are responsible for making sure they have minimum essential coverage.

Each year, the penalty is capped at an amount equal to the national average premium for bronze level health plans offered through state exchanges.

An applicable individual can be exempted from the penalty calculation for a month if during the month:

The individual has income below the filing threshold determined by the Secretary of the HHS.

The individual’s cost to purchase health insurance exceeds 8% of gross income

The individual is a member of an Indian tribe.

The secretary of HHS determines the individual qualifies for a hardship that made him/her incapable of obtaining health insurance.

Simple translation: The amount of the penalty depends on a number of factors including your income, the size of your household and your access to affordable health insurance.

  • In most cases, it will make most economic sense to purchase health insurance vs. paying the penalty.

Modified from a Zane Benefits Article



If ObamaCare survives, legal battle has just begun

Even if the Affordable Care Act survives its first Supreme Court test— a ruling is due Thursday — the lawsuits won’t end. Citizens have already filed challenges to what critics call the law’s “death panel” and its impact on privacy rights, religious liberty and physician-owned hospitals. Still another potential lawsuit poses as great a threat to the law as the case now before the high court.

Under the guise of implementing the law, the Internal Revenue Service has announced it will impose a tax of up to $3,000 per worker on employers whom Congress has not authorized a tax. To make things more interesting: If the IRS doesn’t impose that unauthorized tax, the whole law could collapse. The Act’s “employer mandate” taxes employers up to $3,000 per employee if they fail to offer required health benefits. But that tax kicks in only if their employees receive tax credits or subsidies to purchase a health plan through a state-run insurance “exchange.”

This 2,000-page law is complex. But in one respect the statute is clear: Credits are available only in states that create an exchange themselves. The federal government might create exchanges in states that decline, but it cannot offer credits through its own exchanges. And where there can be no credits, there is nothing to trigger that $3,000 tax.

  • States are so reluctant to create exchanges that Secretary of Health and Human Services Kathleen Sebelius estimates she might have to operate them for 15 to 30 states. Even if she manages that feat, the law will still collapse without the employer mandate and tax credits.

Unauthorized Tax

To prevent that from happening, on May 18 the IRS finalized a rule making credits available through federal exchanges, contrary to the express language of the statute.

Because those credits trigger penalties against employers, the IRS is literally taxing employers and spending billions without congressional authorization. Estimates by the Urban Institute indicate that had this rule been in effect in 2011, it would have cost at least $14.3 billion for HHS to run exchanges for 30 states. About 75% of that is new federal spending; the remainder is forgone tax revenue.

The IRS doesn’t have a leg to stand on here. It has not cited any express statutory authority for its decision, because there is none. The language limiting tax credits to state-established exchanges is clear and consistent with the rest of the statute. The law’s chief sponsor, Senate Finance Committee chairman Max Baucus (D-Mont.), is on record explaining creation of an exchange is among the conditions states must satisfy before credits become available. Indeed, all previous drafts of the law also withheld credits from states to push them to cooperate.

Employers can sue

Under the Congressional Review Act, Congress has 60 days from the date of issue to block the rule. Reps. Scott DesJarlais, R-Tenn., and Phil Roe, R-Tenn., have introduced a resolution. It may receive a cold reception from President Obama, but “taxation without representation” is a difficult position to defend. If that approach fails, states that have refused to establish a health insurance exchange, and large employers the IRS will hit with this unauthorized tax, could challenge the rule in court.

The authors of the Affordable Care Act wrongly assumed states would be eager to implement it. If saving the law from that miscalculation requires letting the IRS tax Americans without authorization, then it is s not worth saving.

*Modified from an article by Jonathan Adler, and Michael Cannon


Red states eye health exchanges

By J. LESTER FEDER | 6/14/12

Some conservative experts see reason to hope the states that have been fighting the health care reform law could become hotbeds of health policymaking if the Affordable Care Act fails. They say the work many red states have been quietly doing to comply with the law in case they lose in the Supreme Court could be repurposed to create state-based reforms on a more conservative model. Some states, for instance, may look at their own version of Utah’s small-business insurance exchange.

These alternative approaches are unlikely to address a key goal of President Barack Obama’s health care reform law — expanding coverage to millions of uninsured people — in part because without the federal law, they wouldn’t have the federal cash for subsidies. But lawmakers in conservative states still see an opportunity to address some problems and lay down a marker for eventual broader reforms requiring federal action.

“States will have invested significant time and resources … in the way of their own state brain trust,” said Leavitt Partners’ Cheryl Smith, who has been advising several Republican-led states on health insurance exchanges. “I think what we’ll see is this unleashing of creative juices within states to solve problems.” The health care law has created a focus that even its opponents say may create openings for conservative states to “reclaim” the concept of exchanges as a vehicle for moving away from the employer-based insurance system, said Ed Haislmaier of The Heritage Foundation.“Of particular concern to me [is] that folks on the right not throw out the baby with the bath water,” Haislmaier said Wednesday.

One state that is prepared to head in this direction is Mississippi. The state joined the lawsuit seeking to have the law struck down, but it took a $20 million planning grant, and that work won’t go to waste, said Mississippi Insurance Commissioner Mike Chaney. “Our game plan was to take all the federal money we could take [and] build the exchange,” Chaney said. “If PPACA is ruled unconstitutional in part or in whole, we’re still prepared to go forward with the exchange.”

But an exchange would look very different in a world without the health reform law’s consumer protections and requirements for health plans. Chaney said Mississippi would not set standard benefit packages, require insurers to sell to people with pre-existing conditions or subsidize people buying coverage. This would limit its value to those who currently are uninsured, of course, and could have limited participation like the lightly regulated exchange in Utah.

But its goal, Chaney said, wouldn’t be to help the people who currently have the greatest difficulty buying insurance. It primarily would aim to “make shopping easier for people who can afford [coverage] and don’t have health problems.” He said he hoped it also would create a market for some bare-bone plans affordable to those on the edge of being able to buy plans today. But progressive health care experts say that streamlined exchange model just wouldn’t do much. Bob Crittenden of the Herndon Alliance dismissed it as having “very little value.”

Haislmaier disagrees. The value, he said, is that these market-oriented exchanges would point toward a fundamental change in how health care works. That, in turn, would require the federal government to change policies such as the tax break for employer-sponsored insurance.

Exchanges are best used as a vehicle for allowing employees to shop around for insurance using fixed contributions from employers, Haislmaier argued, citing Utah as a model. This embodies a key tenet of conservative health reform ideas — making individuals more responsible for buying insurance and using competition to drive down costs.

State reforms will likely be most useful as “positioning” for future federal debates on health care reform, said the Kaiser Family Foundation’s Larry Levitt. That may prove true for any reforms more liberal pro-ACA states try as well.

If the Supreme Court takes away the insurance subsidies along with the mandate, it’s hard to see how any state could find the resources to significantly expand coverage. “I think it would be an opening for, frankly, both sides,” Levitt said. “Single-payer advocates will be pushing their agenda as well, but it would be an opening for conservative governors to stake out their point of view.”

Though few states are publicly discussing plans as concrete as Mississippi’s, Iowa Gov. Terry Branstad told The Des Moines Register this week that he’s been working with insurance and hospital industry leaders to come up with an alternative health reform plan in his state. “We’ve had kind of a working group that’s been looking at this for a long time,” Branstad said, adding, “We’re going to see this court decision come down, and then we’re going to have to determine where we go from there.”