Archive | Health Care Bill – Washington

California Sets Benefit Standards for Health Plans in Exchange

On Wednesday, California became the first state to set benefit standards for health plans offered through its state health insurance exchange.

Background

The Affordable Care Act requires states to launch online insurance marketplaces by 2014. California’s exchange — named Covered California — primarily will serve individuals and small businesses. The exchange is expected to open for registration in October.

In January, exchange officials told Gov. Jerry Brown (D) and the Legislature that health plans offered through Covered California will be classified by “metal ratings” — including platinum, gold, silver and bronze — based on the coverage they offer.

  • Platinum plans will offer 90% coverage
  • Gold plans will offer 80% coverage
  • Silver plans will offer 70% coverage
  • Bronze plans will offer 60% coverage

Plan members will have to pay out of pocket for the percentage not covered by the plan.

Details of Standardized Rates

  • Platinum and gold plans will have no annual deductibles and will charge as low as $25 for physician office visits
  • Silver plans will have $2,000 in annual deductibles and will charge $45 for physician office visits
  • Bronze plans will have $5,000 in annual deductibles and will charge $70 for physician office visits

Monthly premiums will vary, based on the plan chosen and the income level of the policyholder. For example, a family of four with an income between $22,000 and $35,000 annually would pay between $39 and $118 each month for a silver plan.

Tax credits are available for individuals and families who meet certain income requirements and do not have access to affordable health insurance through their employer or another government program.

There are some key facts about tax credits.

Tax credits lower the cost of your premium. Tax credits reduce the amount of the premium you will pay for insurance

Tax credits help low- and middle-income individuals and families. Tax credits are available to individuals and families who meet certain income requirements.

Tax credits can be used when you enroll. Tax credits can be applied to the cost of your health plan when you enroll – you do not need to wait until you file a tax return at the end of the year.

Tax credits are only available through Covered California. You must enroll in a health plan through Covered California if you want to use your tax credits.

Tax credits are paid directly to your health plan. These tax credits are paid by Covered California to your health plan to keep your costs low.

Tax credits will be adjusted at the end of the year based on your actual income. At the end of the year, the tax credits may be adjusted if your income is different than you anticipated. This means that you will want to notify Covered California if your income changes.

*Modified from a California Healthline and www.coveredca.com website

 

 

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Health Care Reform Checklist for Individuals and Families

Whether you are uninsured, or just want to explore new options, the new Health Insurance Marketplaces will give you and your family choice.

Starting October 1st, 2013, you will be eligible to enroll in health insurance via the new health insurance marketplaces (for coverage starting January 1st, 2014).

Here’s step-by-step check list to ensure you are prepared for the October 1st, 2013 open enrollment.

Step 1 – Find out whether your employer will offer group health insurance post-2014

There are two primary categories of health insurance to choose from:

Individual health insurance,

Group health insurance.

1) Individual Health Insurance

Individual health insurance plans are health insurance plans purchased by individuals to cover themselves or their families. Anyone can apply for individual health insurance. In 2014, insurance companies will no longer be able to decline individuals for individual health insurance based on a pre-existing medical condition. Also, starting in 2014, there are new special tax incentives available to businesses and employees when employees purchase individual health insurance.

2) Group Health Insurance

Group health insurance plans are a form of employer-sponsored health coverage. Costs are typically shared between the employer and the employee, and coverage may also be extended to dependents. In certain states, self-employed persons without other employees may qualify for group health insurance plans.

  • Many small businesses are expected to terminate group health insurance (in favor of individual health insurance) in 2014.

Step 2 – Learn about different types of health insurance

Whether you’re looking at individual health insurance or group health insurance, there are several different types of health plans available. The four you should know are:

PPO Health Insurance Plans,

HMO Health Insurance Plans,

HSA-Qualified Health Insurance Plans, and

Indemnity Health Insurance Plans.

  • The plan type that is best for you and your employees depends on what you and your employees want, and how much you are willing to spend. 

Step 3 – Make sure you understand the health insurance terminology

When shopping for a health insurance plan, one of the challenges people face is understanding health insurance terminology. Here are five key health insurance terms you and your employees need to understand:

“Premium” – The premium is the amount you pay to the health insurance company each month to maintain your health insurance.

“Copayment” – Your copayment, or “co-pay,” is the specific dollar amount you may be required to pay up front for a specific type of service.

“Deductible” – Your annual deductible is the amount you may be required to pay out-of-pocket before the insurance company will begin paying for your covered medical claims.

“Coinsurance” – Coinsurance is the amount that you are obliged to pay for covered medical services after you’ve satisfied any copayment or deductible required by your health insurance plan.

“Max Out-of-Pocket (OOP) Costs” – Your maximum out-of-pocket cost sets a limit to your annual financial liability.

Step 4 – Make a list of questions to ask your broker 

Some questions you might want to ask include:

Can I stay with my current doctor?

Will this plan cover my health costs when I’m traveling?

Will I be eligible to contribution to an HSA?

How will this cover my pre-existing condition?

Step 5 – Gather basic information about your household income

Beginning 2014, individuals will have access to tax subsidies to buy private health insurance through the public exchange. These subsidies will be for those who enroll in a silver plan through the exchange.

  • The subsidy caps the cost of individual health insurance at 2% – 9.5% of their household income if their household income is less than 400% above the federal poverty line. This equates to roughly $90,000 per year for a family of four.

*Modified from a Zanebenefits.com article

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What is the Health Insurance Marketplace?

Recently, HHS re-branded health insurance exchanges as “Health Insurance Marketplaces”. Here’s an overview of the new Health Insurance Marketplace.

About The Health Insurance Marketplace

When key parts of the health care law take effect in 2014, there’ll be a new way for individuals, families and small businesses to get health insurance.

Whether you’re uninsured, or just want to explore new options, the Marketplace will give you more choice and control over your health insurance options.

The Health Insurance Marketplace is designed to help you find health insurance that fits your budget, with less hassle.

Get Ready to Enroll In The Health Insurance Marketplace

  • Enrollment in the Marketplace starts in October 2013.

Whether you’re uninsured, need insurance for your small business, or just want to explore your choices, the Health Insurance Marketplace can help you find a plan that’s right for you.

Get a Break On Health Insurance Costs

  • More people than ever will qualify for free or low cost health insurance in 2014. 

When key parts of the health care law take effect in 2014, more people than ever before will qualify for health insurance that fits their budget. You may be eligible for a free or low-cost plan, or a new kind of tax credit that lowers your monthly premiums right away.

Thanks to new rules and expanded programs, even working families will be able to get help through the Health Insurance Marketplace.

Most people will be able to get a break on costs through the Marketplace, even if you think your income is too high to get help. One application, one time, and you’ll see all the programs you qualify for.

Different financial assistance programs will be directly linked into the Health Insurance Marketplace when enrollment starts in October 2013. In the meantime, you or your child or teen may qualify NOW for no-cost or low-cost health insurance through Medicaid and the Children’s Health Insurance Program (CHIP).

Insurance Plans Run By Private Companies

When you shop at the Marketplace, everything you need is laid out for you. All your costs are stated up front, so you’ll get a clear picture of what you’re paying and what you’re getting before you make a choice.

Under the health care law, there will also be new protections for you and your family. Health insurance companies can’t refuse to cover you or charge you more just because you have a chronic or pre-existing condition, and they can’t charge more for women than for men.

Small Businesses

Today, small employers like you have a tough time finding and affording coverage that meets the needs of your employees. Starting in 2014, you’ll have more choice and control over your health insurance spending through the Small Business Health Options Program (SHOP), a new program designed to simplify the process of finding health insurance for your small business.

You choose the level of coverage you’ll offer, and define how much you’ll contribute towards your employees’ coverage.

You’ll also have exclusive access to an expanded Small Business Healthcare Tax Credit. This tax credit covers as much as 50% of the employer contribution toward premium costs for eligible employers who have low- to moderate-wage workers.

When you get insurance through the SHOP, it makes it easy for you take advantage of other tax breaks too including the chance for you and your employees to use pre-tax dollars to make your premium payments.

You and your employees will also benefit from new protections that help you get real value for your premium dollars. There are new limits on the higher premiums insurers can charge businesses with older employees, and an employee with high health care costs no longer increases your group’s premium. There are also new limits on the share of premiums going to insurers’ profits and administrative costs.

The health insurance plans available in the SHOP will be run by private health insurance companies, the same way small group plans are run now. All plans will offer the same benefits as a “typical” employer plan, including real protection against financial catastrophe.

Plans will present their cost and coverage information in a standard format, using plain language that’s clear and easy for you to understand. You and your employees will be able to easily compare plans based on price, coverage, quality and other features that are important to you.

You can use your existing insurance broker to access the SHOP, or you can shop for plans yourself, without a broker. You can review pricing and coverage in apples-to-apples comparisons, complete a single application, and choose the level of coverage that works for your budget, your business, and your employees.

*Modified from a Zanebenefits.com article

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Seven million will lose insurance under Obama health law

President Obama’s health care law will push 7 million people out of their job-based insurance coverage — nearly twice the previous estimate, according to the latest estimates from the Congressional Budget Office released Tuesday.

  • CBO said that this year’s tax cuts have changed the incentives for businesses and made it less attractive to pay for insurance, meaning fewer will decide to do so. Instead, they’ll choose to pay a penalty to the government, totaling $13 billion in higher fees over the next decade.

But the non-partisan agency also expects fewer people to have to pay individual penalties to the IRS than it earlier projects, because of a better method for calculating incomes that found more people will be exempt.

Overall, the new health provisions are expected to cost the government $1.165 trillion over the next decade — the same as last year’s projection.

With other spending cuts and tax increases called for in the health law, though, CBO still says Mr. Obama’s signature achievement will reduce budget deficits in the short term.

During the health care debate Mr. Obama had said individuals would be able to keep their plans.

*Modified from a Washington Times article

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Obamacare’s Pressure Points There are at least nine stumbling points in its implementation.

President Obama’s reelection, along with the Supreme Court’s ruling last June on his signature health-care reform, may seem to have guaranteed that the Affordable Care Act (ACA) will remain the law of the land. But that could turn out to be the easy part of Obamacare. Implementing the ACA’s main provisions by January 1, 2014 — the date on which the law is to take full effect — presents a more grueling and protracted set of tests.

The next round of health-care-policy battles will play out not just before Congress but also in state capitals and health-care markets across the country. You could think of these fights as being like a martial-arts battle, in which various “pressure points” are attacked to produce significant pain, serious injury, or even temporary immobilization, not to mention an aversion to future fighting. Let’s take a closer look at the more painful pressure points in the ACA.

1) Health exchanges.

Nearly two-thirds of states still are not fully on board with running their own exchanges to offer the federally subsidized coverage dictated by the ACA. As many as 23 states would rather leave the daunting implementation process entirely in the hands of federal officials. Another ten may enlist as junior apprentices in largely federal-run “partnership” exchanges. But the White House desperately needs state governments to provide infrastructure and local-market experience as well as to take more of the political blame for the implementation fiascos ahead. Many states complain that the rules for exchanges are unclear, costly to administer, coercive, or all of the above. The federal government is supposed to set up exchanges in states that fail to do so, but, later next month, a federal district court in Oklahoma will begin to rule on arguments that directly challenge the authority of the federal government to distribute tax credits in federally run exchanges, which does not appear to be provided for in the text of the ACA.

2) Medicaid expansion.

By one count earlier this month in The New England Journal of Medicine, 17 states have not yet agreed to expand their Medicaid coverage up to the ACA-designated 138 percent of the federal poverty level, A somewhat smaller number of states are officially opposed to the Medicaid expansion, and well under half of all states support it. The Supreme Court ruled that the Medicaid expansion must be optional, not a mandate enforced with penalties to states’ existing Medicaid programs. Many governors and state legislators doubt that the law’s initially generous federal funding will be sustainable within a largely unreformed, but expanded, entitlement program that already is straining their budgets. Existing Medicaid programs already fail to attract enough physicians because of their below-cost reimbursement policies.

3) Individual-mandate enforcement.

The mandate that, beginning next year, requires almost everyone to purchase coverage meeting federal standards remains highly unpopular. Moreover, the tax penalties to enforce it are quite small compared with the premium costs of the required coverage. Many young and healthy individuals will therefore have a strong incentive to remain uninsured. Various exemptions (including those for the relative “unaffordability” of the premiums relative to one’s household income) will limit further the possibility of requiring coverage.

4) “Minimum” health-benefits coverage.

The ACA’s bureaucratic file drawers are full of “essential” benefits and services that all health plans must offer, with four tiers of actuarial value (the share of covered benefits actually paid by an insurance plan).Then add income-based subsidies — to reduce premium costs as well as to lower other cost-sharing expenses. But don’t forget medical-loss ratio floors that limit the value of administrative services that insurers can provide, as well as their return on capital. The ACA also imposes adjusted community rating (effectively forcing lower-risk customers to pay more, so that higher-risk expensive ones can pay less); and guaranteed-issue requirements (allowing customers with costly preexisting conditions to insist on private insurance coverage whenever they want it). All of these ACA requirements affecting most forms of fully insured coverage (technically speaking, neither self-insured nor “grandfathered”) mean that those premiums will spike higher (particularly for healthier young adults in the individual market) and could outrun the budgetary limits of taxpayer subsidies.

5) Who picks up the check?

Realistically assessing the fiscal effects of Obamacare doesn’t show only that we’re running out of room on Uncle Sam’s credit card. In addition, higher health-benefits costs will continue to suppress private-sector wage and job growth as well as prevent public investment in other priorities. Average workers and patients will ultimately bear the cost of the ACA’s new taxes, even though they are nominally aimed at health-care providers and higher-income individuals.

6) Health-care-provider capacity.

The ACA will be much better at stimulating demand for health-care services than increasing their supply. A Congressional Research Service report last month noted current shortages of physicians and cautioned that the ACA may compound the problem by increasing the demand for health-care services. There are a handful of incentives in the law to increase the supply of health-care providers, but they are short-term, discretionary, and yet to be implemented. The ACA’s reimbursement and regulatory disincentives to enter or remain in medical practice, on the other hand, will be permanent.

7) “Pilot” error.

A host of projects under the ACA that are meant to demonstrate innovations in health-care delivery systems have yet to get off the ground or show consistently positive (let alone reproducible) results. Some of these pilot programs look like health-policy kamikaze missions. The more-likely method of restraining health-care spending will be the old stand-by of formulaic, across-the-board reimbursement cuts for doctors, hospitals, and makers of medical products.

8) Transparency without real prices.

Two sets of the ACA’s stated policy objectives appear to be at war with each other. The bill’s jargon of bundled payments, population-based capitation, complex cross-subsidies, risk adjustments, and pay-for-compliance incentives indicate that bureaucrats are really in charge. Such “trust us, we know what’s good for you” approaches threaten to undermine other gestures in the law to make health-care information more transparent, consumers cost-conscious, and providers accountable to patients rather than public payers.

9) Standardization vs. customization.

The ACA embodies the progressive preference for rule by (politically favored) experts. , It treats health care as a manufacturing process with uniform standards based on “best evidence” and top-down quality assurance. Monopsony purchasing and economies of scale reign supreme. Different patients are to be treated as identical cogs on an assembly line. This type of politically driven health care is inherently centralizing and static. Competitive markets, on the other hand, are open to dynamic, bottom-up innovation, product differentiation, and improvements in customer service.

These pressure points, all serious vulnerabilities, suggest that the ACA’s implementation process will be politically precarious and economically painful. However, it will also present new opportunities to retrace our steps and consider a different path.

*Modified from a National Review Online article.

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Will some families be priced out of health overhaul?

Some families could get priced out of health insurance due to what’s being called a glitch in President Barack Obama’s overhaul law. IRS regulations issued Wednesday failed to fix the problem as liberal backers of the president’s plan had hoped.

As a result, some families that can’t afford the employer coverage that they are offered on the job will not be able to get financial assistance from the government to buy private health insurance on their own. How many people will be affected is unclear.

The problem seems to be the way the law defined affordable.

  • Congress said affordable coverage can’t cost more than 9.5 percent of family income. People with coverage the law considers affordable cannot get subsidies to go into the new insurance markets. The purpose of that restriction was to prevent a stampede away from employer coverage.
  • Congress went on to say that what counts as affordable is keyed to the cost of self-only coverage offered to an individual worker, not his or her family. A typical workplace plan costs about $5,600 for an individual worker. But the cost of family coverage is nearly three times higher, about $15,700, according to the Kaiser Family Foundation.
  • So if the employer isn’t willing to chip in for family premiums _ as most big companies already do _ some families will be out of luck. They may not be able to afford the full premium on their own, and they’d be locked out of the subsidies in the health care overhaul law.

Employers are relieved that the Obama administration didn’t try to put the cost of providing family coverage on them.

“They are bound by the law and cannot extend further than what the law provides,” said Neil Trautwein, a vice president of the National Retail Federation.

The Obama administration says its hands were tied by the way Congress wrote the law. Officials said the administration tried to mitigate the impact. Families that can’t get coverage because of the glitch will not face a tax penalty for remaining uninsured, the IRS rules said.

“This is a very significant problem, and we have urged that it be fixed,” said Ron Pollack, executive director of Families USA, an advocacy group that supported the overhaul from its early days. “It is clear that the only way this can be fixed is through legislation and not the regulatory process.”

But there’s not much hope for an immediate fix from Congress, since the House is controlled by Republicans who would still like to see the whole law repealed.

The affordability glitch is one of a series of problems coming into sharper focus as the law moves to full implementation.

Starting Oct. 1, many middle-class uninsured will be able to sign up for government-subsidized private coverage through new health care marketplaces known as exchanges. Coverage will be effective Jan. 1. Low-income people will be steered to expanded safety-net programs. At the same time, virtually all Americans will be required to carry health insurance, either through an employer, a government program, or by buying their own plan.

Bruce Lesley, president of First Focus, an advocacy group for children, cited estimates that close to 500,000 children could remain uninsured because of the glitch. “The children’s community is disappointed by the administration’s decision to deny access to coverage for children based on a bogus definition of affordability,” Lesley said in a statement.
*Modified from an AP article

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PPACA could price smokers out of health insurance

Millions of smokers could be priced out of health insurance because of tobacco penalties in the Patient Protection and Affordable Care Act (PPACA), according to experts who are just now teasing out the potential impact of a little-noted provision in the massive legislation.

  • PPACA — “Obamacare” to its detractors — allows health insurers to charge smokers buying individual policies up to 50 percent higher premiums starting next Jan. 1.
  • For a 55-year-old smoker, the penalty could reach nearly $4,250 a year. A 60-year-old could wind up paying nearly $5,100 on top of premiums.

Younger smokers could be charged lower penalties under rules proposed last fall by the Obama administration. But older smokers could face a heavy hit on their household budgets at a time in life when smoking-related illnesses tend to emerge.

Workers covered on the job would be able to avoid tobacco penalties by joining smoking cessation programs, because employer plans operate under different rules. But experts say that option is not guaranteed to smokers trying to purchase coverage individually.

Nearly one of every five U.S. adults smokes. That share is higher among lower-income people, who also are more likely to work in jobs that don’t come with health insurance and would therefore depend on the new federal health care law. Smoking increases the risk of developing heart disease, lung problems and cancer, contributing to nearly 450,000 deaths a year.

Insurers won’t be allowed to charge more under the overhaul for people who are overweight, or have a health condition like a bad back or a heart that skips beats — but they can charge more if a person smokes.

Starting next Jan. 1, the federal health care law will make it possible for people who can’t get coverage now to buy private policies, providing tax credits to keep the premiums affordable. Although the law prohibits insurance companies from turning away the sick, the penalties for smokers could have the same effect in many cases, keeping out potentially costly patients.

“We don’t want to create barriers for people to get health care coverage,” said California state Assemblyman Richard Pan, who is working on a law in his state that would limit insurers’ ability to charge smokers more. The federal law allows states to limit or change the smoking penalty.

“We want people who are smoking to get smoking cessation treatment,” added Pan, a pediatrician who represents the Sacramento area.

Obama administration officials declined to be interviewed for this article, but a former consumer protection regulator for the government is raising questions.

“If you are an insurer and there is a group of smokers you don’t want in your pool, the ones you really don’t want are the ones who have been smoking for 20 or 30 years,” said Karen Pollitz, an expert on individual health insurance markets with the nonpartisan Kaiser Family Foundation. “You would have the flexibility to discourage them.”

Several provisions in the federal health care law work together to leave older smokers with a bleak set of financial options, said Pollitz, formerly deputy director of the Office of Consumer Support in the federal Health and Human Services Department.

First, the law allows insurers to charge older adults up to three times as much as their youngest customers.

Second, the law allows insurers to levy the full 50 percent penalty on older smokers while charging less to younger ones.

And finally, government tax credits that will be available to help pay premiums cannot be used to offset the cost of penalties for smokers.

Here’s how the math would work:

Take a hypothetical 60-year-old smoker making $35,000 a year. Estimated premiums for coverage in the new private health insurance markets under Obama’s law would total $10,172. That person would be eligible for a tax credit that brings the cost down to $3,325.

But the smoking penalty could add $5,086 to the cost. And since federal tax credits can’t be used to offset the penalty, the smoker’s total cost for health insurance would be $8,411, or 24 percent of income. That’s considered unaffordable under the federal law. The numbers were estimated using the online Kaiser Health Reform Subsidy Calculator.

“The effect of the smoking (penalty) allowed under the law would be that lower-income smokers could not afford health insurance,” said Richard Curtis, president of the Institute for Health Policy Solutions, a nonpartisan research group that called attention to the issue with a study about the potential impact in California.

In today’s world, insurers can simply turn down a smoker. Under Obama’s overhaul, would they actually charge the full 50 percent? After all, workplace anti-smoking programs that use penalties usually charge far less, maybe $75 or $100 a month.

Robert Laszewski, a consultant who previously worked in the insurance industry, says there’s a good reason to charge the maximum.

“If you don’t charge the 50 percent, your competitor is going to do it, and you are going to get a disproportionate share of the less-healthy older smokers,” said Laszewski. “They are going to have to play defense.”

*Modified from a LifeHealthPro.com article

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CBO: PPACA tax credit could be big

By 2021, federal health insurance purchase tax subsidies could amount to about 13 percent of the insurer’s total 2011 premium revenue.

Analysts at the Congressional Budget Office (CBO) have analyzed the premium assistance tax credit, a component of the Patient Protection and Affordable Care Act of 2010 (PPACA), in a general report on refundable tax credits.

An ordinary tax credit is an amount that a taxpayer can subtract directly from the amount a taxpayer owes the government Traditionally, if using a tax credit would make the taxpayer’s tax bill a negative number, the taxpayer simply got out of paying taxes, or possibly could apply the amount to the next year’s tax bill. When using a refundable tax credit produces a tax obligation amount that happens to be a negative number, the government pays that amount to the taxpayer, CBO analysts wrote in their report.

The topic is of special interest this year, because the drafters of PPACA used refundable tax credits as the vehicle for helping low-income and moderate-income pay for health insurance.

When Congress created the first refundable tax credit — the Earned Income Tax Credit (EITC) program — in 1975, the goal of that program and later, similar programs was mainly to help low-income people increase their income, the analysts said.

In the past, Congress usually used spending programs such as the Food Stamp program, Medicaid and Pell Grants to help people pay for specific goods and services, such as food, health care or education, the analysts said.

Today, because tax credit programs tend to be more palatable to members of Congress and to the credit users than “government handouts,” Congress has structured more aid programs as refundable tax credit programs.

The EITC program and the child tax credit program will be by far the biggest refundable tax credit programs this year, and they are on track to generate about $125 billion of the $149 billion in refundable tax credits that taxpayers will report, the analyst said.

The new PPACA premium assistance tax credit could lead to about $35 billion in credit costs in 2014, and $110 billion of the $213 billion in total refundable credit costs in 2021, the analysts said.

U.S. health insurers took in about $864 billion in premium revenue in 2011, according to government estimates.

Tax credit recipients are supposed to use the premium assistance tax credit to pay health insurance premiums, and most will then have to use some of their own cash to cover the rest of the cost of the premiums.

Private health insurers are expected to generate much higher premium revenue in 2021 than in 2011, but, if consumers had spent an additional $110 billion in health insurance in 2011, that would have increased their revenue by about 13 percent.

Distributing benefits through refundable tax credits rather than through direct spending programs may effect the fairness of the tax system, the complexity of the tax system, and the efficiency of how resources are allocated in the economy, the analysts said.

In some cases, the analysts said, researchers have suggested that well-designed refundable tax credits might increase fairness and resource allocation efficiency.

Studies have suggested that the EITC has helped lead to a big increase the employment and earnings of single mothers that took place in the 1990s, the analysts said.

In the past few years, as the result of the weak economy, older tax credits, and new, stimulus-related tax credits, the average individual income tax rate for households in the bottom 40 percent of the income distribution has been negative, the analysts said.

The analysts also talk about questions about the complexity of administering the premium assistance tax credit.

PPACA lets individuals ask to get an advance on the premium assistance tax credit that they expect to collect, so that they can use the amount to pay for health coverage in 2014.

The government is supposed to pay the advance payments directly to the health insurers, and PPACA will limit how much individuals have to pay back if the government pays an advance premium assistance tax credit amount that happens to be bigger than what an individual actually qualifies for.

The amount the individual ends up qualifying for will depend on how much the individual earns, who else is in the individual’s family, and how much others in the individual’s family earn, and the initial, preliminary credit determination will depend on what those factors look like two years before the individual officially gets the credit, the analysts said.

“The amount of the credit will later be recomputed on the basis of the taxpayer’s characteristics in the year that the subsidy is paid,” the analysts said. “As a result, some recipients may have to repay part or all of any overpayment if changes in their family’s composition and income affect their eligibility for the credit or its amount.”

*Modified from LifeHealthPro.com article

 

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New regulations shed light on looming health-care reform costs for businesses

January 16, 2013

The ramifications of health care reform for business owners are coming into focus as regulators float new rules to govern employer-sponsored coverage.

  • Lost in the political fervor over the fiscal cliff, the Internal Revenue Service recently proposed new regulations to govern what has been dubbed the “employer mandate” section of the Affordable Care Act. The provision, which takes effect next year, requires companies with 50 or more employees to either provide adequate and affordable coverage to their workers or pay tax penalties.

But just how are those 50 to be counted?

Business owners have been waiting to find out how part-time and seasonal employees will count toward staff totals, how owners of more than one business are supposed to tally their workers, and of course, exactly how steep the penalties will be for failing to provide coverage.

The IRS addresses several of those issues with its newly proposed regulations. Here’s a look at what we now know about the employer health care requirements, as well as three key questions that remain unanswered.

Included in the proposed rules

A formula for calculating full-time equivalents: The health care law set the threshold for large-employer penalties at 50 full-time employees and full-time equivalents, but left the definition of those terms up to the IRS.

  • The agency has proposed counting all employees who work an average of 30 hours per week as full-time workers and calculating full-time equivalents by adding up the total number of hours worked by part-time employees each month and dividing by 120. Thus, a company with 45 full-time employees and eight part-timers who each work 85 hours per month (about 20 hours each per week) would be subject the large-employer coverage mandate (5.66 full-time equivalents + 45 full-time employees = 50.66 employees).

A slim margin-of-error for no-coverage penalty: The law states that a no-coverage penalty shall apply to any eligible large company that “fails to offer [coverage] to its full-time employees,” and the penalty has been pegged at $166.67 per month multiplied by the number of full-time employees, excluding the first 30. By that formula, a firm with 51 full-timers that doesn’t provide coverage would generally pay $3,500 per month (21 X $166.67).

But while that language granted regulators permission to penalize large firms that do not immediately provide benefits to each and every full-time employee, the IRS has granted some leniency. The new regulations would only enforce the non-coverage penalty for employers who fail to offer coverage to more than 5 percent of their employees (or five workers, whichever is larger).

  • The inclusion of paid-leave hours: But what about paid vacation, holidays or extended leaves—do those hours count toward monthly totals for each employee?

This was a pressing question for many business owners, and most of them won’t like the answer. Regulators have suggested that hours used to determine full-time status will include hours worked and hours for which employees are entitled to compensation even if no work is performed. That means time spent away for paid vacation, illness, maternity leave and even jury duty can push workers over the threshold for full-time benefits.

  • A transition rule for determining employer-size status: Business owners must make their own large- or small-employer determination on an annual basis by counting the number of full-time employees and equivalents they had during each month of the past calendar year.

But for the first year, to ease the transition, regulators have included a provision that allows them to count their employees for any six-month period in 2013 to determine their size status for 2014. The rules also delay the penalty for failing to provide coverage to employees’ dependents until 2015 so long as large employers that don’t yet offer those benefits take steps toward implementing them by 2015.

  • A delayed start for non-calendar year plans: The law states that the employer mandate provisions will take effect on January 1, 2014, which left business owners with fiscal-year (rather than calendar-year) health care plans wondering whether they would be held to that start date (which may fall right in the middle of their current plan) or permitted to wait until the start of their 2014 fiscal year. The proposed regulations grant them that break, noting that large businesses will not be subject to penalties until the start of their plan year for 2014.

Still up in the air

What constitutes a controlling interest in a business? The language in these latest proposals remains vague for owners of multiple businesses and part-owners of a single business. For example, if a pair of business partners share ownership of two companies, each taking a two-thirds majority stake in one firm and one-third ownership of the other, the regulations do not specify whether they will each be forced to count only one entity’s employees toward their respective totals or whether they will both count all workers.

What constitutes a seasonal employee?

The regulations leave the term “seasonal employee” open to interpretation when calculating their contribution to a company’s size status and their eligibility for health benefits. In one case, the regulations refer to definitions of “seasonal employee” set by the Labor Department, but later, regulators state that through at least the end of 2014, employers will be responsible for using a “reasonable good faith interpretation” of the term to determine which of their workers should be considered seasonal.

What constitutes adequate and affordable care? While the IRS has started to clarify the tax penalty side of the health reform equation, plenty of large employers are still waiting for the Department of Health and Human Services to define the law’s essential health benefits package — in other words, they haven’t yet been told what type of medical and health-related expenses their plans must cover for full-time employees. Until then, projecting future health costs for many businesses remains difficult.

*Modified from a Washington Post article

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ObamaCare’s Health-Insurance Sticker Shock

Thanks to mandates that take effect in 2014, premiums in individual markets will shoot up. Some may double.

By MERRILL MATTHEWS AND MARK E. LITOW

Health-insurance premiums have been rising—and consumers will experience another series of price shocks later this year when some see their premiums skyrocket thanks to the Affordable Care Act, aka ObamaCare.

The reason: The congressional Democrats who crafted the legislation ignored virtually every actuarial principle governing rational insurance pricing. Premiums will soon reflect that disregard—indeed, premiums are already reflecting it.

Central to ObamaCare are requirements that health insurers (1) accept everyone who applies (guaranteed issue), (2) cannot charge more based on serious medical conditions (modified community rating), and (3) include numerous coverage mandates that force insurance to pay for many often uncovered medical conditions.

Guaranteed issue incentivizes people to forgo buying a policy until they get sick and need coverage (and then drop the policy after they get well). While ObamaCare imposes a financial penalty—or is it a tax?—to discourage people from gaming the system, it is too low to be a real disincentive. The result will be insurance pools that are smaller and sicker, and therefore more expensive.

How do we know these requirements will have such a negative impact on premiums? Eight states—New Jersey, New York, Maine, New Hampshire, Washington, Kentucky, Vermont and Massachusetts—enacted guaranteed issue and community rating in the mid-1990s and wrecked their individual (i.e., non-group) health-insurance markets. Premiums increased so much that Kentucky largely repealed its law in 2000 and some of the other states eventually modified their community-rating provisions.

States won’t experience equal increases in their premiums under ObamaCare. Ironically, citizens in states that have acted responsibly over the years by adhering to standard actuarial principles and limiting the (often politically motivated) mandates will see the biggest increases, because their premiums have typically been the lowest.

Many actuaries, such as those in the international consulting firm Oliver Wyman, are now predicting an average increase of roughly 50% in premiums for some in the individual market for the same coverage. But that is an average. Large employer groups will be less affected, at least initially, because the law grandfathers in employers that self-insure. Small employers will likely see a significant increase, though not as large as the individual market, which will be the hardest hit.

We compared the average premiums in states that already have ObamaCare-like provisions in their laws and found that consumers in New Jersey, New York and Vermont already pay well over twice what citizens in many other states pay. Consumers in Maine and Massachusetts aren’t far behind. Those states will likely see a small increase.

By contrast, Arizona, Arkansas, Georgia, Idaho, Iowa, Kentucky, Missouri, Ohio, Oklahoma, Tennessee, Utah, Wyoming and Virginia will likely see the largest increases—somewhere between 65% and 100%. Another 18 states, including Texas and Michigan, could see their rates rise between 35% and 65%.

While ObamaCare won’t take full effect until 2014, health-insurance premiums in the individual market are already rising, and not just because of routine increases in medical costs. Insurers are adjusting premiums now in anticipation of the guaranteed-issue and community-rating mandates starting next year. There are newly imposed mandates, such as the coverage for children up to age 26, and what qualifies as coverage is much more comprehensive and expensive. Consolidation in the hospital system has been accelerated by ObamaCare and its push for Accountable Care Organizations. This means insurers must negotiate in a less competitive hospital market.

Although President Obama repeatedly claimed that health-insurance premiums for a family would be $2,500 lower by the end of his first term, they are actually about $3,000 higher—a spread of about $5,500 per family.

Health insurers have been understandably reluctant to discuss the coming price hikes that are driven by the Affordable Care Act. Mark Bertolini, CEO of Aetna, the country’s third-largest health insurer, broke the silence on Dec. 12. “We’re going to see some markets go up by as much as 100%,” he told the company’s annual investor conference in New York City.

Insurers know that the Obama administration will denounce the premium increases as the result of greedy health insurers, greedy doctors, greedy somebody. The Department of Health and Human Services will likely begin to threaten, arm-twist or investigate health insurers in an effort to force them into keeping their premiums more in line with Democratic promises—just as HHS bureaucrats have already started doing when insurers want premium increases larger than 10%.

And that may work for a while. It certainly has in Massachusetts, where politicians, including then-Gov. Mitt Romney, made all the same cost-lowering promises about the state’s 2006 prequel to ObamaCare that have yet to come true.

But unlike the federal government, health insurers can’t run perpetual deficits. Something will have to give, which will likely open the door to making health insurance a public utility completely regulated by the government, or the left’s real goal: a single-payer system.

Mr. Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Mr. Litow is a retired actuary and past chairman of the Social Insurance Public Finance Section of the Society of Actuaries.

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