Archive | Health Care Bill – Washington

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.

Example.

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.

Example.

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

 

 

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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

 

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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

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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.”

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4 Controversial Ways to Improve Health Insurance

What else can be done to improve U.S. health insurance? Major pieces of legislation have already been passed to allow (1) tax-deductible employer-reimbursed individual health insurance and (2) high-deductible health insurance with Health Savings Accounts. Additionally, some experts believe the Affordable Care Act (ACA) makes the most changes to the health insurance industry since World War 2.

Here are 4 controversial ways to further ensure better health insurance for every American at less cost. controversial health insurance reform

1. Allow Health Insurance to Be Sold Across State Lines

The largest determinant of the monthly premium for individual health insurance is not the individual’s age or health but the state in which they live. Because of a federal law passed in 1945, it is currently illegal for a carrier to sell health insurance to an out-of-state individual—unless the out-of-state insurer goes through an expensive filing process and meets the unique health insurance requirements of the individual’s state of residence. If this law were repealed, anyone could purchase a health insurance policy from any carrier in any state.

In Michigan in 1908, when Henry Ford produced the Model T costing $825, there were thousands of small auto manufacturers in the United States making cars costing $10,000 or more. To protect their own manufacturers, neighboring states passed laws claiming that the Model T was dangerous and thus not allowed to drive on their roads. Eventually, the federal government stepped in and regulated the automobile industry—mandating that any automobile meeting certain minimum standards could be freely driven in every state.

Allowing consumers to purchase health insurance from carriers in any state might not only increase competition and drive down prices; the increase in competition might also allow millions more individuals with preexisting conditions to get private health insurance without having to rely on more expensive state-guaranteed coverage.

2. Make All Health Insurance Premiums Tax Deductible

Make all health insurance premiums tax deductible for individuals without regard to employment (individual health insurance is already tax deductible via a Section 105 Plan or Section 125 Plan). This extremely simple change would take away the main reason employers are involved in health insurance and level the playing field for all Americans, whether they are employed, self-employed, or unemployed. Overnight, this bill could reduce the after-tax price of individual health insurance for consumers 25 to 50 percent.

Making all health insurance premiums tax deductible for all consumers may be long overdue—this simple change in our tax code could correct an inequity and eventually return responsibility for health insurance to individuals and government instead of employers.

3. Make All Healthcare Providers Disclose Prices

Almost all healthcare providers, from major hospitals to individual doctor’s offices, charge varying prices for the exact same service depending on the network in which the patient is a participant. The same doctor visit might cost a cash-paying un-insured person $110, while a person with an employer-sponsored health plan bargained down the price would pay only $42.

While there is nothing wrong with large customers bargaining for better prices, today there is no longer any true “retail” price in medical care. Providers have inflated their retail prices two to five times just to meet contracts forcing them to give 50 to 80 percent discounts to large purchasers.

In 1934 the Securities Exchange Act created the SEC and mandated that U.S. public companies disclose accurate financial information. This act did not tell businesspeople how to run their business—it merely told them that they must disclose pertinent facts to investors or be subject to criminal prosecution.

Healthcare providers could be required to disclose their prices and all discounts given off these prices. Open disclosure might drive consumerism and lower prices for all. Does a consumer paying a $10,000 hospital bill have a right to know that another person is being charged only $1,000 for the exact same service? Do people standing in line at a pharmacy have a right to know when they are being charged two to three times the price of the person next to them for the exact same drug?

Armed with medical care retail price information, consumers could seek out the best networks and might be able to negotiate with medical providers.

4. End Federal Lifetime Health Benefits for Congressmen, Senators, and Government Officials

When it comes to health insurance, we have created an elite class. This elite class consists of our elected federal and state officials who have voted themselves and their associates unlimited lifetime health benefits paid for by taxpayers. In doing so, they have removed themselves from being participants in solving the current health insurance crisis that affects the rest of American citizens. They do not directly feel the pain of America’s health insurance problems.

*Modified from a Zane Benefits Blog

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Many hospitals, doctors offer cash discount for medical bills

By Chad Terhune May 27, 2012  Los Angeles Times

The lowest price is usually available only if patients don’t use their health insurance. In one case, blood tests that cost an insured patient $415 would have been $95 in cash.

 

A Long Beach hospital charged Jo Ann Snyder $6,707 for a CT scan of her abdomen and pelvis after colon surgery. But because she had health insurance with Blue Shield of California, her share was much less: $2,336. Then Snyder tripped across one of the little-known secrets of healthcare: If she hadn’t used her insurance, her bill would have been even lower, just $1,054. “I couldn’t believe it,” said Snyder, a 57-year-old hair salon manager. “I was really upset that I got charged so much and Blue Shield allowed that. You expect them to work harder for you and negotiate a better deal.”

  • Unknown to most consumers, many hospitals and physicians offer steep discounts for cash-paying patients regardless of income. But there’s a catch: Typically you can get the lowest price only if you don’t use your health insurance. That disparity in pricing is coming under fire from people like Snyder, who say it’s unfair for patients who pay hefty insurance premiums and deductibles to be penalized with higher rates for treatment.

The difference in price can be stunning. Los Alamitos Medical Center, for instance, lists a CT scan of the abdomen on a state website for $4,423. Blue Shield says its negotiated rate at the hospital is about $2,400. When The Times called for a cash price, the hospital said it was $250. “It frustrates people because there’s no correlation between what things cost and what is charged,” said Paul Keckley, executive director of the Deloitte Center for Health Solutions, a research arm of the accounting firm. “It changes the game when healthcare’s secrets aren’t so secret.”

Snyder’s experience is hardly unique. In addition to Los Alamitos, The Times contacted seven other hospitals across Southern California, and nearly all had similar disparities between what a patient would pay through an insurer and the cash price offered for a common CT, or computed tomography, scan, which provides a more detailed image than an X-ray.

Health insurance still offers substantial value for consumers by providing preventive care at no cost and offering protection from major medical bills that could bankrupt most families. But cash prices — typically available for hundreds of common outpatient services and tests — have a real appeal to millions of consumers who are on the hook for a growing share of their medical costs as employers and insurers cut back on coverage and push more high-deductible plans.

  • Some doctors are trying to spread the word about cash prices and they’re urging patients to pressure hospitals and insurers to offer a better deal. David Belk, an internist in Alameda, launched a website about medical costs and speaks to community groups about the huge markups compared with the prevailing cash price. Belk recently told a group gathered at a seniors center about the vast price difference when he requested routine blood work for a patient last year. A local hospital charged her $782. Her insurer said that with its discount, she owed only $415. “She could have gotten it for $95 in cash. How does that make sense?” Belk said. “The last thing the insurance companies want you to know is how inexpensive this stuff really is.”

For those patients who have insurance, getting the lower price would typically mean withholding that information from the hospital or clinic. Experts warn that doing so, however, means any payments don’t apply to customers’ annual insurance limits for out-of-pocket spending. The decision on whether to pay cash or apply the fee toward the deductible will depend on a variety of factors, including the amount of the deductible and whether the person expects to incur more medical bills that year.

The cash discounts evolved over time after hospitals were criticized in recent years for charging the uninsured their highest rates and then hounding them at times with overzealous collection efforts. New government rules ensued limiting in many cases what hospitals could charge lower-income patients who were footing their own bills. Meantime, hospitals have been trying to boost revenue by encouraging more patients to pay upfront so they can avoid a lengthy and uncertain collections process.

The California Hospital Assn. says that discounted cash prices are intended for the uninsured, not those who have coverage. Jan Emerson-Shea, a vice president at the industry group, said most hospitals offer a separate discount to insured patients who are willing to pay their portion upfront. “If you have insurance, you are under that insurance plan’s negotiated rate with the hospital,” she said.

In the view of Robert Berenson, a senior fellow at the Urban Institute and vice chairman of the Medicare Payment Advisory Commission, big hospitals are exerting their market power to charge ever-increasing rates and major insurers go along with it because they can pass along the costs to employers and consumers. Insurance industry officials say that health plans negotiate the lowest prices they can, but that they also need to include prominent hospitals favored by customers in the network, and those institutions can command higher prices.

Hospital executives say they don’t like to charge insured patients more, but say that’s a result of the country’s broken healthcare system. At Long Beach Memorial Medical Center, where Snyder got her CT scan, the hospital’s chief financial officer said insured patients like her pay more to subsidize the uncompensated care given to the uninsured and low reimbursements for Medicaid patients. “We end up being forced to charge a premium to health plans to make the books balance,” said John Bishop, the hospital’s finance chief. “It’s a backdoor tax on employers and consumers.” Those higher prices charged by hospitals and other medical providers drove up healthcare spending at double the rate of inflation during the recession even as patients used less medical care, according to a new study by the Health Care Cost Institute.

Snyder, the salon manager, stumbled across the two-tier system accidentally. She has filed suit against her insurer, saying she hopes her case will lead to more disclosure of the price options, and ultimately lower treatment costs for patients. The Long Beach woman said she sought treatment in 2009 for a pain in her abdomen. First her doctor ordered a CT scan of her abdomen and pelvis at Liberty Pacific Medical Imaging, an independent facility near Long Beach Memorial. She got approval from Blue Shield, and she paid the negotiated rate of $660. Snyder underwent surgery on her colon, and her doctor ordered another CT scan in January 2010 because she felt lingering pain.

This time, her surgeon referred her to the hospital’s imaging center. Snyder said she assumed her bill would be about the same because it was the identical test. Instead, Blue Shield’s rate with Long Beach Memorial was $3,497 and the insurer told Snyder she owed $2,336, records show. Incensed by having to pay nearly four times as much for the second scan, she started searching for an explanation. That’s when she discovered that the hospital’s cash price was less than half what she owed through her insurance.

In a complaint filed last month in Orange County Superior Court, Snyder accused Blue Shield of unfair business practices, breach of good faith and misrepresentation over her medical bills. The suit seeks class-action status on behalf of other Blue Shield customers. A spokesman for Blue Shield said the case has no merit and the nonprofit insurer negotiates the most favorable rates it can. In a court filing, Blue Shield said it “cannot promise or represent that there could not be providers who will charge someone less out-of-pocket cost for a service than she would pay if the Blue Shield contract rate applies.”

Snyder said she went back to work last year at a hair salon in Seal Beach, partly to help pay her insurance premiums of $700 a month. “It kills me that I’m paying that much in premiums,” she said, “and it’s better to pay cash out of my own pocket.”

Health-policy experts say the growing awareness of cash prices should accelerate the trend toward increased disclosure of all types of medical costs. But entrenched interests are likely to resist. “The insiders in the healthcare industry don’t want to lose control over this information,” Keckley said. “But price transparency is inevitable.”

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IT could end up being health reform’s highest hurdle

If state health care exchanges survive the Supreme Court challenge to health care reform, the election and state tea party activists, health policy experts are worried they could still be brought down by a much more mundane problem: information technology. Even states that are solidly committed to pursuing an exchange are facing major logistical challenges in building the computer systems that will be able to handle enrollment when exchanges open for business in 2014.

That’s largely because the system that will actually connect people to the right coverage will have to “talk” to many other systems, and the systems don’t use a common language. This includes a yet-to-be built federal “data hub” with tax and citizenship info, the enrollment systems of multiple private insurers selling exchange plans and — hardest of all — state Medicaid enrollment systems, many of which are not yet fully computerized.

Even if all the states that have taken the biggest steps to launch exchanges — fewer than 20 at the moment — were charging full speed ahead, there’s a lot of concern that they’ll have to switch to a “partnership” exchange model, with the federal Department of Health and Human Services running key functions. That’s because their IT systems could fail final tests in the months before the exchanges open in 2014. And that would mean losing some of the ability to customize the enrollment process for a state’s needs.

“People fear that the technology piece is just not going to be quite there,” said former Maine Insurance Commissioner Mila Kofman, who is now at Georgetown University’s Health Policy Institute. “The states that want the state-based exchange might not be able to be certified” by HHS to open on their own in 2014, she said. This is a major reason that most health consultants estimate that fewer than a dozen states will be running fully state-based exchanges, at least at first.

Patrick Howard, of Deloitte Consulting, who is working on exchanges in multiple states, counts only around seven states that have finalized contracts with vendors to build these IT systems. A few more are currently shopping for a contractor. That doesn’t give the others a whole lot of time to tackle a complicated task. “Every month matters now,” Howard said.

California provides one of the most dramatic illustrations of the challenge pro-health reform states are facing. The Golden State was the first to authorize the creation of a state exchange after the health law passed. But it still hasn’t signed a contract with an IT vendor, even though its deadline for announcing a developer passed two months ago, said Micah Weinberg of the Bay Area Council, an advocate close to the exchange development process.

  • And the existing state of its systems for enrolling people in public insurance programs means it’s going to be a huge jump to get ready for 2014. Weinberg illustrates the problem by explaining that if the state’s Children’s Health Insurance Program — Healthy Families — is found to be eligible for the Medicaid program, a paper file is overnighted to the other program’s enrollment office. “That’s our IT system here in California,” Weinberg said ruefully.

States are making a major push to upgrade their Medicaid enrollment systems, thanks in part to funding provided by the stimulus bill. But a January study by the Kaiser Family Foundation found that only one state, Oklahoma, had a fully automated Medicaid enrollment system that could process applications in real time. And the state is fighting the health reform law.

While upgrading their Medicaid enrollment systems, the states are going to have to start using federal tax data to make their eligibility determinations for the first time — the same information that the exchange will use to calculate the premium subsidies for people who are buying private coverage. The need for real-time information creates a second problem for the exchanges. They have to build a way to integrate their system with the feds’ data repository — and that hasn’t even been built yet.

HHS is overseeing the construction of what it’s calling a “data hub” that will combine tax information from HHS with the other information needed to establish that people are eligible for coverage. The technical specifications for transmitting data haven’t been released yet, and HHS officials said at a conference on Wednesday that they still hadn’t reached agreements with some of the other programs that will need to contribute information to the hub.

The data hub, said Deloitte’s Howard, is “a black box we will deal with as it comes up.” There is also no standard format for private health insurers to give details on plan benefits and in-network providers to the exchange — key information an individual is going to want to know about a plan when enrolling in an exchange, Howard said.

This is not unfamiliar territory for insurers, who are used to private insurance portals like eHealthInsurance, but common standards still need to be worked out in every state. Of course, many of these challenges facing state exchanges are also ones that will make it hard for the federal government to build IT systems in states that don’t set up their own. That includes not only the states that try and fail, but also the ones in which the administration will have to set up a federal exchange because the state is not cooperating with implementation.

But HHS has something of a head start on the process, having awarded the development contract back in December to CGI — a company that was already working on building HealthCare.gov, the informational site about the health care law with limited tools to help people find insurance. And experts think it can move ahead faster by basically telling state Medicaid programs and insurers how they will have to connect to a federal system rather than customizing their system in every state.

HHS had hoped that states would get a head start on the IT challenge through Early Innovator grants, which initially went to six states and a multi-state consortium working with the University of Massachusetts Medical School. But three of these states have since backed out of the program and are now resisting health reform implementation.

Jay Himmelstein, who is directing the New England multi-state grant, is hopeful that the four projects still under way will be able to hand off solutions to states and greatly accelerate their work. But even if they offer such tools, other states will need to get serious about moving ahead fast. “There are very tight timelines,” Himmelstein said. “They’re doable, but they’re very tight.”

*Modified from an article in Politico

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Putting the ‘Insurance’ Back in Health Insurance

We understand that it would make no sense to buy auto insurance after we’ve already crashed our car. We appreciate that it would be strange to buy homeowner’s insurance after our house has already burned down. And yet, when it comes to health coverage, many of us think that it makes perfect sense to wait until we’re sick to buy health insurance. If we really want to make health insurance affordable and accessible to everyone, we need to go back to basics, and understand all of the government-induced distortions that have made health insurance look nothing like actual insurance.

The point of insurance, of course, is to pool the risks of a group of people as a mechanism for protecting against uncertain financial loss. If 100 people pool their risks together and the home of one of them burns down costing $100,000, each person ends up paying around $1,000: a hundred thousand divided by 100, plus the overhead costs associated with administering the scheme.

But there’s a twist. Let’s say one of the homeowners lives in a neighborhood where the frequency of arson is high. Let’s say another homeowner lives in an arson-free neighborhood, with a fire station next door. Should these two homeowners pay the same $1,000 for their insurance? The second homeowner would call that a bad deal for him, and would ordinarily refuse to participate, unless the insurance premiums were adjusted so that he paid less, while the first homeowner paid more.

The adjustment of health insurance premiums, based on the risks of each policyholder, is called medical underwriting. In nearly all types of insurance, without underwriting, insurance would be prohibitively expensive. If the price of insurance for low-risk individuals is unfairly high, the low-risk types will sit on their hands, and only high-risk individuals will buy insurance. Because high-risk individuals have higher average costs, the costs of premiums will go up: a process called adverse selection.

Adverse selection is a serious problem. According to the U.S. Census, 55 percent of Americans without health insurance are under the age of 35. 72 percent are under the age of 45. It’s these generally healthy people, in the first halves of their lives, who elect to go without insurance, because it is far too expensive, relative to their current health status. Older Americans are much more likely to be insured, because they get a great deal: the cost of their insurance is heavily subsidized by the young.

How government policies create adverse selection

Thanks to a number of unwise policies adopted by state and federal governments in the United States, adverse selection is a huge problem in American health insurance. Let’s go through these policies.

Community rating. Community rating provisions prevent insurers from varying premiums on the basis of a policyholder’s age, gender, or health status. For example, Massachusetts in 1996 enacted a law requiring that insurers charge their oldest customers only 2 times what they charge their youngest ones. Obamacare imposes a similar 3:1 rating band based on age, and prohibits insurers charging different rates based on health status.

The problem is that the oldest individuals in the private market (those younger than 65), on average, spend six times as much on health care as the youngest ones do (those older than 18). Hence, 3:1 community rating forces the youngest people to pay 75 percent more for insurance, so that oldest people can pay 13 percent less.

Above is a simplified illustration of how community rating causes adverse selection. In the first bar, there is a classically underwritten distribution of insurance costs: the 18-year-old pays $800 in premiums, and the 64-year-old pays $4,800: six times as much. Then, in the second bar, 3-to-1 community rating is imposed, which redistributes the cost of premiums. Now, 18-year-olds must pay $1,400 for insurance—a 75 percent increase—so that 64-year-olds can pay 13 percent less.

When a young person’s average annual health expenditures are $700 a year, and he is asked to pay $800 a year for insurance, it’s a reasonable deal. But when that same person is asked to pay $1,400 a year for his $700-a-year expenditures, it’s an unreasonable deal. You can’t blame young people for balking at that offer. If 50 percent of the young people drop out of the insurance pool, but all of the older people stay in, you get the third bar, in which adverse selection drives up—by 17 percent—the average premium costs for the people remaining in the insurance pool.

What’s telling in the above illustration is that, after adverse selection, the oldest policyholder ends up paying more than he would have under free-market underwriting: $4,900 instead of $4,800. A government policy aimed at forcing young people to subsidize premiums for the elderly ends up driving up costs for everybody.

Guaranteed issue. For the same reason, forcing insurers to cover everyone with pre-existing conditions drives premiums upward. If you know you can buy insurance after you’re sick, you have every incentive to drop out of the system now, and wait until you’re sick to buy insurance.

Benefit mandates. Coverage mandates also create adverse selection. For example, some states force all plans in a state to cover acupuncturists and chiropractors. Others force insurers to cover substance abuse treatment and smoking cessation programs. Lobbyists convince state legislatures to adopt these mandates, in order to enrich their service-providing clients. If you’re a drug addict, it’s a great deal. If you’re not, it’s another reason for you not to bother buying insurance.

The typical benefit mandate adds 4 percent to the cost of an insurance plan. According to a study by Victoria Bunce of the Council for Affordable Health Insurance, 106 new insurance mandates were enacted by the states in 2011. Rhode Island and Virginia lead the nation with 70 mandates each, as of 2011. Idaho and Alabama are last, with 13 and 19 mandates, respectively.

Other benefit mandates are financial, such as Obamacare’s requirement that all plans sold on the new exchanges have a “minimum actuarial value” of 60 percent. This means that insurers must cover more of your care, which means that premiums need to be higher. Young, healthy people have little interest in such plans.

Any willing provider. “Any willing provider” mandates restrict the ability of insurers to exclude certain doctors and hospitals from their networks. If insurers have to work with everyone, they lose some of their negotiating leverage with hospitals to keep prices down.

Contractual breakdown. An underappreciated issue that drives adverse selection is that of contractual breakdown. Under Obamacare, policyholders are able to terminate their insurance coverage at any time. But insurers are forced to honor their policies if their beneficiaries get sick. As Richard Epstein puts it,

The least risky individuals, therefore, have every incentive to get out of the system, which is regrettably accommodated by the [Affordable Care Act] rules that allow people to terminate coverage unilaterally at any time for any reason. A sounder system would have allowed health-insurance carriers to require the insureds to pay a penalty to withdraw from coverage, or to insist that they remain in the plan for some minimum period.

What phone companies can routinely do is thus systematically denied to health-insurance carriers.

Again, if insurers can’t count on policyholders to stay on their plans for the length of their contracts, insurers have to charge more money to make up for the fraction of people who game the system by dropping out.

In addition, carriers have no incentive to enter into long-term contracts with beneficiaries. When it comes to health care, long-term policies would do much to improve the system.

Let’s say you buy a health insurance policy that lasts for five years, which neither side can unilaterally terminate. That’s a system that is common in Switzerland. There, contracts are signed for one to five years, and can’t be broken unless you leave the country.

Under a five-year contract, the insurer has a much greater incentive to make sure you stay healthy, because it will be more liable for the bills if your health deteriorates. One-year contracts, on the other hand, incentivize an insurer to simply hope that you don’t get sick, with little eye to the long term.

Says Harvard Business School’s Regina Herzlinger,

Why don’t you get rewarded [for healthy behavior, in the U.S. system]? So here’s a Swiss health policy, a five-year policy, they measure your health in the beginning of the five years, they predict how healthy you will be five years from now. You have to stay with them for five years, because they’re going to make you healthy. They’re going to help you get healthy. And they want you to be around with them when you’re finally healthy. Here’s the deal: at the end of the five years, if you’re as healthy as they predicted, or healthier, they give you half your money back.

Because Americans don’t buy insurance for themselves, they have no incentive to buy plans like these.

What can be done?

Reforming the system involves, first and foremost, encouraging people to buy insurance for themselves, by eliminating the tax-code discrimination against individually purchase health insurance. Second, people should be able to buy insurance across state lines. When individuals are buying their own policies, they will vote with their feet for policies that have fewer mandates and fewer problems with adverse selection. Third, we should eliminate federal mandates that drive up insurance costs, especially in the individual market.

In addition, we should eliminate the barriers against long-term insurance contracts: (1) the ability of policyholders to terminate their coverage at will; and (2) policies that discourage the formation of multi-year insurance contracts.

One possible reform is to encourage more innovation with guaranteed-renewable insurance, such that a person who buys insurance for one year is contractually guaranteed the opportunity to renew that policy at previously-agreed-to rates. The existing forms of guaranteed-renewable coverage tend to increase up-front costs in exchange for lower costs on the back end, which can still cause adverse selection. The goal would be to preserve the incentives for people to buy insurance in the first place, and encourage long-term encourage contracts.

Free markets continually make all sorts of goods cheaper and more plentiful. Some cling to the belief that this can’t be achieved with health insurance. But it can.

*Forbes Article

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Why HRAs Will Become the Foundation of Employee Health Benefits

New business methods and technology now allow employers to enroll employees in a single HRA software platform from which employees access their:

  1.     HRA benefits
  2.     HSA link to any financial institution
  3.     A Private Exchange for purchasing individual/family health insurance

HRAs started out as supplements to employer health benefit plans for incidental items not covered by traditional health insurance plans. However, because of their enormous legal flexibility and new technology designed to take advantage of this flexibility, HRAs will become the foundation of every employer’s health benefit plan.

For employers who offer group insurance, HRAs will become the front-end delivery vehicle of primary health benefits for fully-insured and self-insured plans. For employers who cannot afford a group health plan, HRAs are becoming the basis of a defined contribution health plan that enables millions of employees to purchase individual/family health insurance policies directly from an insurance company.

Whether as the front-end of an employer-sponsored group plan or defined contribution health plan, here are just a few ways HRAs can deliver better and more cost-effective health benefits to employers and their employees today.

(1) HRAs Improve Retention

The greatest challenge for employers today is retaining qualified employees. HRAs are extremely powerful for retention because employees accumulate for their future what they don’t spend today, but lose their accumulated balance when they quit (unless they meet employer-specified HRA retiree vesting requirements).  Additionally, employers can vary HRA benefits by class of employee to create further incentives for employees to stay and grow.

(2) HRAs Boost Recruiting Success

The second greatest challenge facing employers today is recruiting quality employees, whether for salaried and hourly positions. HRAs are the ultimate employee recruiting tool because they allow employers to afford and offer much better health benefits than their competition. In addition, using HRAs enables employers with group plans to offer better coverage to new employees by doing the following:

HRAs Eliminate Waiting Periods – New employees can enroll, submit claims, and have their claims approved for reimbursement, but not actually be reimbursed until the waiting period (e.g. six months) is complete.
HRAs Provide Coverage for Hourly, Part-time, or Seasonal Employees – Employees can receive HRA allowances tied to their hours worked but forfeit their entire HRA balance unless they work a minimum number of hours or return (after a seasonal layoff) within a specified time period.

(3) Allocate HRA Benefits by Class

Employers have always been allowed to allocate health benefits by using reasonable classifications with wages and retirement, giving different health benefits to employees based of job categories, geographical locations, etc.

But, before HRAs, employers lacked the technology and systems to offer health benefits packages tailored for each Class of Employee based on their recruiting and retention objectives. New HRA technology allows employers to set-up a completely different benefits plan for each Class of Employee (e.g. call center staff, managers, executives) and electronically administer such a different HRA benefits plan with electronic signatures and customized per-class plan documents and HRA SPDs (Summary Plan Descriptions).

(4) HRAs Improve Coverage for All Employees

Besides rising costs, every employee and employer has something they don’t like about their health benefits. HRAs allow employers virtually unlimited flexibility to add benefits (such as smoking cessation, weight loss programs, maternity supplements, or improved coverage for out-of-network providers).  Online tools connected to the claims processing system allow employers to monitor and control the cost of these additional benefits in real-time.

(5) Implement and capture savings from high deductible plans using HRAs

Using HRAs enables employees to move to high deductible plans.  Employers with fully-insured group plans can immediately save up to 50% on their existing group premium without reducing any benefits by switching to a higher annual deductible, and using their HRA to pay employee medical expenses under the new deductible. Employers who do this typically then give back about 1/3 to 1/2 of their savings to maintain the same level of benefits—for a net savings of 15%-30% after HRA reimbursements. Similarly, employers who use HRAs without a group plan can provide employees with funds to offset out of pocket expenses associated with lower-priced high deductible personal health policy.

These compelling benefits make HRAs a logical vehicle for employers of all sizes.

*Modified from a Zane Benefits Blog

 

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Immigration status is a health policy challenge

The Obama administration’s drive to cut down on America’s uninsured is about to get multilingual. Come 2014, when core provisions of the Affordable Care Act kick in, millions of legal immigrants will have new options for gaining health coverage. And like U.S. citizens, most will be subject to the individual mandate, under which they will be required to get coverage to avoid a penalty.

The national health law explicitly excludes illegal immigrants — a politically explosive topic — and bans them from the new state insurance exchanges, even if they use their own money. They will make up a big chunk of the remaining uninsured population. But advocates say states have good reasons to reach out and get uninsured legal residents covered — especially as the federal government picks up most of the tab.

“States with high immigrant populations are definitely looking forward to seeing how the Affordable Care Act is going to be able to provide the state more options for those immigrants,” said Sonal Ambegaokar, a health policy attorney at the National Immigration Law Center. According to the Henry J. Kaiser Family Foundation, non citizens — legal and illegal — are three times as likely as native-born citizens to be uninsured.

In 2014 — assuming the health law survives the Supreme Court and hasn’t been undone by a new administration — legal immigrants will be able to shop for health coverage through the new state insurance exchanges. They can get the same income-linked subsidies as citizens.

Legal immigrants’ five-year federal waiting period for Medicaid, approved in 1996, won’t change. But for legal immigrants who have been here five years, Medicaid may be more accessible because it’s being expanded and the eligibility rules are being broadened. Traditionally, the states and Washington have split the costs of covering this low-income population, but Washington will pay more for the newly eligible.

States have the option of waiving the five-year rule for legal immigrants, but they must use their own funds, and only about 15 have done so, according to Kaiser. More have lifted the rules for children and pregnant women in the Children’s Health Insurance Program, Kaiser found.

Health policy experts say states have reasons to encourage legal immigrants to enroll in their exchanges. Most eligible immigrants are relatively young and healthy — part of a population states want to have in an insurance pool to spread the risk and make the market work.

“The overall benefit of having the legal resident population in is it tends to be younger, and therefore, it can be healthier,” said Ruselle Robinson, a Boston-based health care attorney. “That is the group that the individual mandate is trying to bring in.”

“It’s to a state’s advantage to really outreach and make sure all those immigrants who are eligible get enrolled,” agreed Ambegaokar.

One policy challenge has to do with “mixed-status” families. Those are families in which the children are legal, but one or both parents are not. About 6 million kids were in such families in 2010, the Urban Institute estimated. According to Kaiser report, those children are “are at increased risk of being uninsured.” The reason, Ambegaokar said, is many families with mixed status are hesitant to access the health care system, and others aren’t clear that some of their relatives may be eligible for coverage.

Even if states have energetic outreach efforts and boost enrollment among legal immigrants, they will face the daunting problem of care for undocumented immigrants — about 10 million in 2010, according to the Pew Hispanic Center. Payments to hospitals that treat disproportionate numbers of poor and uninsured patients will be cut under the health law because there will be fewer without coverage. But hospitals must provide emergency care to everyone. Any solutions will unfold in the charged environment that immigration policy engenders.

Even health care for legal residents can create political storms. Massachusetts state lawmakers tussled with Gov. Deval Patrick in 2009 when they attempted to strip subsidized health insurance from tens of thousands of lawful immigrants to help balance the budget. At Patrick’s insistence, those immigrants were instead placed in a program with reduced benefits. This year, the Massachusetts high court ruled the less-generous program is discriminatory and ordered state officials to return the immigrants to the state’s insurance exchange.

*Modified from a Politico.com article

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