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

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

BLOOMINGTON, Ind. — Bill Hewlett and David Packard, tinkering in a California garage, began what became Hewlett-Packard. Steve Jobs and a friend built a computer in the California garage that became Apple’s birthplace. Bill Cook had no garage, so he launched Cook Medical in a spare bedroom in an apartment in this university town.

Half a century ago, in flight from Chicago’s winters, he settled here and began making cardiovascular catheters and other medical instruments. One thing led to another, as things have a way of doing when the government stays out of the way, and although Cook died last year, Cook Medical, with its subsidiaries, is the world’s largest family-owned medical devices company.

In 2010, however, Congress, ravenous for revenues to fund ObamaCare, included in the legislation a 2.3% tax on gross revenues — which generally amounts to about a 15% tax on most manufacturers’ profits — from U.S. sales of medical devices beginning in 2013.

This will be piled on top of the 35% federal corporate tax, and state and local taxes. The 2.3% tax will be a $20 billion blow to an industry that employs more than 400,000, and $20 billion is almost double the industry’s annual investment in research and development.

An axiom of scarcity is understood by people not warped by working for the federal government, which can print money when it wearies of borrowing it. The axiom is: A unit of something — time, energy, money — spent on this cannot be spent on that.

So the 2.3% tax, unless repealed, will mean not only fewer jobs but also fewer pain-reducing and life-extending inventions — stents, implantable defibrillators, etc. — which have reduced health care costs.

The tax might, however, be repealed. The medical device industry is widely dispersed across the country, so numerous members of Congress have constituencies affected by developments such as these:

Cook Medical is no longer planning to open a U.S. factory a year. Boston Scientific, planning for a more than $100 million charge against earnings in 2013, recently built a $35 million research and development facility in Ireland and is building a $150 million factory in China. (Capital goes where it is welcome and stays where it is well-treated.)

Stryker Corp., based in Michigan, blames the tax for 1,000 layoffs. Zimmer, based in Indiana, is laying off 450 and taking a $50 million charge against earnings. Medtronic expects an annual charge against earnings of $175 million. Covidien, now based in Ireland, has cited the tax in explaining 200 layoffs and a decision to move some production to Costa Rica and Mexico.

Already 235 members of the House of Representatives — 227 Republicans and eight Democrats — are co-sponsors of a bill to repeal the tax. Twenty-three Republican senators, but no Democratic senators, favor repeal.

The Democrats who imposed this tax on a single manufacturing sector justified this discrimination by saying ObamaCare would be a boon to the medical devices industry because, by expanding insurance coverage, it would stimulate demand for devices. But those insured because of Obama-Care will be disproportionately young and not needing, say, artificial knees. And well before ObamaCare, the law had long required hospitals to provide devices to the needy who are uninsured.

Unsurprisingly, Sen. Scott Brown, R-Mass., supports repeal of the tax. Surprisingly, so does his opponent, Elizabeth Warren, an impeccably liberal ObamaCare enthusiast who notes that in Massachusetts, the medical devices industry has 24,000 employees and accounts for 13% of the state’s exports.

Warren is experiencing another episode of New England remorse: “When Congress taxes the sale of a specific product through an excise tax … it too often disproportionately impacts the small companies with the narrowest financial margins and the broadest innovative potential.”

Well, yes. In 1990, when President George H.W. Bush’s recanted his “no new taxes” pledge, he enabled the Democratic-controlled Congress, with a legion of New England liberals in the lead, to impose a 10% tax on yachts costing more than $100,000.

Yacht sales plunged 70% in six months, a third of all yacht-building companies — many in New England — stopped production and more than 20,000 workers lost their jobs. In 1993, the tax, although not the damage, was repealed.

Given humanity’s fallen condition, almost everyone’s tax policy is: “Don’t tax you, don’t tax me, tax that fellow behind the tree.” There are, however, vulnerable wealth-and-job-creating businesses behind most

Investors Business Daily Editorial

Health Reform: The New York Times just discovered that the nation’s health care system was on the mend before ObamaCare took effect. Too bad it didn’t tell its readers how Obama’s “reforms” will destroy this progress.

The Sunday Times article — “In Hopeful Sign, Health Spending Is Flattening Out” — didn’t break any new ground. The numbers the reporter used have been around since January. But it was a tacit admission by the paper that the health care system was not in a state of crisis before ObamaCare.

Quite the opposite, in fact. As the story notes, annual increases in health spending had been trending downward for years, to the point where they climbed less than 4% in 2009 and 2010.

This isn’t the only good news. The Times story doesn’t mention it, but premium increases had also been moderating over the past several years. While some of the slowdown was due to the recession, the Times notes that it “was sharper than health economists expected,” and quotes a former Obama health adviser as saying that “I think there’s much more going on.”

So what is that “much more”? To its credit, the Times also makes clear that the slowdown was due in large part to the recent trend in the private sector toward more high-deductible insurance plans. By 2011, the share of workers enrolled in high-deductible plans had risen to 13% from just 3% five years earlier.

This is a reversal of the trend over the past several decades, which had seen out-of-pocket spending for health care steadily decrease, as government programs and generous health benefits increasingly shielded consumers from the direct cost of care. While almost half of health spending was paid out-of-pocket in 1960, the figure had dropped to just 11% by 2010.

Not surprisingly, as consumers paid less and less out of pocket, demand for health care became virtually unlimited, pushing up spending and inflation. But it wasn’t until recently that businesses — after trying everything else — started bringing consumers back into the cost picture with “consumer directed” health plans.

These higher-deductible plans cut health spending, as consumers suddenly realized that health care costs money. A 2011 Rand Corp. study found health spending for families with a deductible of $500 per person or more dropped an average 14%

But the real story here isn’t these recent gains in getting health spending under control. It’s how ObamaCare will poison the patient just as it was starting to recover.

ObamaCare’s coverage mandates, its limits on co-pays and deductibles, its attack on Medical Savings Account plans, its vast expansion of Medicaid and its massive subsidies all will shield consumers from even more of the direct cost of care.

Medicare’s chief actuary, Richard Foster, told Congress in March that “out-of-pocket spending would be reduced significantly” by ObamaCare — and by that he meant $237 billion in a decade.

And, not surprisingly, that is going to drive up health spending. Foster predicts, in fact, that after staying relatively low for years, national health spending will shoot up by more than 8% in 2014, when ObamaCare fully takes effect. Over the next decade, he said, ObamaCare will add more than $300 billion to the U.S. health tab.

Anyone who thinks ObamaCare will fix the nation’s health system has it backwards. The system was getting healthier before ObamaCare, and will continue to improve only if that misbegotten law is repealed.

It’s something everyone knows, but no one wants to talk about: Medicare’s cash position makes Enron’s business model look downright reputable.

Medicare is bleeding cash — a fact disguised by creative accounting. According to Monday’s release of the 2012 Trustees Report, in 2011 Medicare took in $260.8 billion in payroll taxes and beneficiary premiums, but spent $549.1 billion in medical services. That means last year Medicare ran a $288.3 billion cash shortfall.

And 2011 wasn’t the exception; it was the norm. Since President Lyndon Baines Johnson secured passage of Medicare legislation in 1965, the program has run cash deficits every year except 1966 and 1974.

Advocates of the status quo argue that Medicare receives “general revenue transfers,” but that’s government-speak for raiding the Treasury to spend other tax revenues. It’s the dramatic use of general-revenue transfers that has hidden Medicare’s true insolvency from the public and masked Medicare’s contribution to the national debt.

The annual release of the Medicare Trustees report offers a fleeting moment for adult conversations among policymakers about the program’s long-term trajectory. We must take advantage of this year’s moment and come to a bipartisan understanding that the Medicare program needs structural reform and not just nibbling around the edges.

To illustrate why structural reform is needed, consider what it would have taken to have had a positive Medicare cash-flow balance in 2011:

For Medicare Part A (hospitals), the cash deficit was $61 billion. To balance this deficit, payroll taxes on employers and workers would have to have been increased by 31 percent.

For Medicare Part B (physicians), the cash shortfall was $168 billion. To balance this deficit, seniors’ physician premiums would need to increase by 392 percent, meaning the annual physician premium cost to seniors would have risen from $1,198 to $4,687 — an increase of $3,499.

For Medicare Part D (drugs), the cash shortfall was over $59 billion. To balance this deficit, seniors’ premiums for prescription drugs would need to increase by 871 percent, meaning the annual drug-premium cost to seniors would rise from $372 to $3,250 — an increase of $2,878.

It is plain that these sharp increases are not viable. Nonetheless, President Obama steadfastly defends Medicare’s existing financing structure. In his address to AP reporters last month, the president called alternative (and bipartisan) approaches such as premium support to be “thinly veiled social Darwinism.” Since only the fittest will survive the future collapse of Medicare, President Obama should think hard before making such accusations.

Since taking office, President Obama has overseen a Medicare cash-flow deficit of more than $869 billion. This includes $570.7 billion in red ink accumulated since the passage of the president’s signature health-care law, which siphoned off $732 billion in Medicare funding over the next ten years. By the end of 2012, the trustees project that the Obama administration will have overseen a $1.2 trillion Medicare cash shortfall.

Left unchanged, Medicare costs will continue to escalate, leading to annual shortfalls and a projected cash-flow deficit of over $450 billion in 2020. These shortfalls lie at the heart of past and future deficits. Between 2001 and 2010, cumulative Medicare cash-flow deficits totaled $1.5 trillion, or almost 28.5 percent of the total federal debt accumulated in the hands of the public during the past decade.

Going forward, the situation is even worse. By 2020, the cumulative cash-flow deficits of $6.3 trillion will constitute 41 percent of the nation’s total debt accumulation. Including interest costs, accumulated Medicare spending will be responsible for over 43 percent of public debt.

A sensible solution would be to offer Medicare beneficiaries the option of a defined-contribution program — as proposed by House Republicans and Mitt Romney. Seniors would be budgeted an annual contribution, which could be adjusted to reflect costs associated with their health status and financial wherewithal. For the federal budget, the result is a capped exposure to Medicare — one that would adjust to reflect the number of seniors and inflation.

That would be great news for the nation’s spending outlook. It would be even better news for the exploding debt and the threat it carries to the nation’s economic health. Most importantly, it would secure Medicare for future generations.

— Douglas Holtz-Eakin is the president of the American Action Forum and previously served as the director of the Congressional Budget Office. Jim Nussle is a former chairman of the House Budget Committee and previously served as the director of the Office of Management and Budget.

Chicago Tribune, By Ricardo Alonso-Zaldivar

April 24, 2012: If the Supreme Court strikes down President Barack Obama’s health care overhaul, don’t look to government for what comes next.

Employers and insurance companies will take charge. They’ll borrow some ideas from Obamacare, ditch others, and push even harder to cut costs.

Here’s what experts say to expect:

— Workers will bear more of their own medical costs as job coverage shifts to plans with higher deductibles, the amount you pay out of pocket each year before insurance kicks in. Traditional insurance will lose ground to high-deductible plans with tax-free accounts for routine expenses, to which employers can contribute.

— Increasingly, smokers will face financial penalties if they don’t at least seriously try to quit. Employees with a weight problem and high cholesterol are next. They’ll get tagged as health risks and nudged into diet programs.

— Some companies will keep the health care law’s most popular benefit so far, coverage for adult children until they turn 26. Others will cut it to save money.

— Workers and family members will be steered to hospitals and doctors that can prove that they deliver quality care. These medical providers would earn part of their fees for keeping patients as healthy as possible, similar to the “accountable care organizations” in the health care law.

— Some workers will pick their health plans from a private insurance exchange, another similarity to Obama’s law. They’ll get fixed payments from their employers to choose from four levels of coverage: platinum, gold, silver and bronze. Those who pick rich benefits would pay more.

“Employers had been the major force driving health care change in this country up until the passage of health reform,” said Tom Billet, a senior benefits consultant with Towers Watson, which advises major companies. “If Obamacare disappears … we go back to square one. We still have a major problem in this country with very expensive health care.”

Business can’t and won’t take care of America’s 50 million uninsured.

Republican proposals for replacing the health care law aren’t likely to solve that problem either, because of the party’s opposition to raising taxes. The GOP alternative during House debate of Obama’s law would have covered 3 million uninsured people, compared with more than 30 million under the president’s plan.

After the collapse of then-President Bill Clinton’s health care plan in the 1990s, policymakers shied away from big health care legislation for years. Many expect a similar reluctance to set in if the Supreme Court invalidates Obama’s Affordable Care Act.

Starting in 2014, the law requires most Americans to obtain health insurance, either through an employer or a government program or by buying their own policies. In return, insurance companies would be prohibited from turning away the sick. Government would subsidize premiums for millions now uninsured.

The law’s opponents argue that Congress overstepped its constitutional authority by requiring citizens to obtain coverage. The administration says the mandate is permissible because it serves to regulate interstate commerce. A decision is expected in late June.

The federal insurance mandate is modeled on one that Massachusetts enacted in 2006 under then-Gov. Mitt Romney. That appears to have worked well, but it’s unlikely states would forge ahead if the federal law is invalidated because health care has become so politically polarized. Romney, the likely Republican presidential nominee, says he’d repeal Obamacare if elected.

That would leave it to employers, who provide coverage for about three out of five Americans under age 65.

“With or without health care reform, employers are committed to offering health care benefits and want to manage costs,” said Tracy Watts, a senior health care consultant with Mercer, which advises many large employers. “The health care reform law itself has driven employers, as well as the provider community, to advance some bolder strategies for cost containment.”

First, employers would push harder to control their own costs by shifting more financial responsibility to workers.

Data from Mercer’s employer survey suggests that a typical large employer can save nearly $1,800 per worker by replacing traditional preferred provider plans with a high-deductible policy combined with a health care account. “That is very compelling,” said Watts.

It won’t stop there. Many employers are convinced they have to go beyond haggling over money, and also pay attention to the health of their workers.

“As important as it is to manage the cost of medical services and products, and eliminate wasteful utilization, there has been a strong recognition that ultimately healthier populations cost less,” said Dr. Ian Chuang, medical director at the Lockton Companies, advisers to many medium-size employers. His firm touts programs that encourage employees to shed pounds, get active or quit smoking.

Employer health plans were already allowed to use economic incentives to promote wellness, and the overhaul law loosened some limits.

A Towers Watson survey found that 35 percent of large employers are currently using penalties or rewards to discourage smoking, for example, and another 17 percent plan to do so next year. The average penalty ranges from $10 to $80 a month, but one large retailer hits smokers who pick its most generous health plans with a surcharge of $178 a month, more than $2,100 a year.

Overall, one of the most intriguing employer experiments involves setting up private health insurance exchanges, markets such as the health care law envisions in each state. Major consulting firms such as Mercer and Aon Hewitt are developing exchanges for employers.

As under the health care law, the idea is that competition among insurers and cost-conscious decisions by employees will help keep spending in check. Aon Hewitt’s exchange would open next January, with as many as 19 companies participating, and some 600,000 employees and dependents.

“The concept of an exchange does not belong to Obamacare,” said Ken Sperling, managing the project for Aon Hewitt. “We’re borrowing a concept that was central to the health care law and bringing it into the private sector. Whether the law survives or not, the concept is still valid.”
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