Lane 3

Why Did You Sponsor @rjurney’s Trip to Silicon Valley?

How cool is that? The good folks at TechDrawl, Ben and Celia Dyer, rub some brain cells together and decide to ask some questions regarding the the impact of geography on a start-up. Who better to send on the mission than Russell Jurney? Armed with an AirTran ticket, Flip Mino, and some walking-around money, Russell set off to the Silicon Valley to get some answers.

So, what inspired you to part with your hard-earned dollars and sponsor Russell’s trip? Here’s my reasoning:

I had been following with interest the back and forth twitter of Urvaksh Karkaria, a journalist with the Atlanta Business Chronicle and author of the AtlanTech blog, and Paul Freet, a serial entrepreneur and Commercialization Catalyst at Georgia Tech’s VentureLab. Their conversations basically centered around the future of the dead tree (print) media in relation to “new” media. So, in the end, I viewed the call for sponsorship of Russell’s trip as a way to (i) help the Atlanta start-up community, and (ii) participate in a new media experiment.

What I expect to see from Russell’s reporting is an unabashed level of honesty and candor, a Linus-like level of sincerity, a tenacious dedication to the story, and a good dose of humor that is unique to the man.

Good business reporters like Urvaksh will always have an audience. A niche, however, is being carved out for stories that don’t fit the traditional print model. Pick up a subscription of the ABC - it’s well worth it. But also take the time to follow Russell’s reporting at TechDrawl.

Taxing Health Benefits - Remember Section 89?

It was 1989 when I got into the health insurance business. A new law was coming on-line called Section 89. It was championed by Chicago politician, Dan Rostenkowski, who chaired the House Ways and Means committee.

This legislation was a small, almost ignored part of the massive Tax Reform Act of 1986. In a nutshell, Section 89 was designed to:

• limit the tax-favored status of health benefits for “highly compensated” employees (those earning $50,000 or more),
• discourage employers from offering health plans that favored “highly compensated” employees, and
• extend health coverage to the uninsured.

Taxing the health benefits of “highly compensated” employees to fund benefits for the uninsured - sound familiar?

Once the Internal Revenue Service got around to writing the administrative rules for the law, Section 89 went from being ignored to the biggest issue in human resources. Employers were forced to conduct complicated non-discrimination tests - and employees were exposed to taxes on their benefits.

The outrage was so great that in late 1989 Section 89 was repealed with a House vote of 390 to 36.

So now twenty years later as Congress and President Obama consider taxing health benefits you should remember Section 89. Remember that the paragraphs of legislation signed by a president become reams of policies and procedures once touched by the Internal Revenue Service. Remember that it is you, the employer, who must comply these new rules. And, it will be your clients and employees who will bear the ultimate cost.

Contact your senators and congressman and let them know what you think.

National Healthcare?

Unless your name is Chuck Nolan you’ve heard that our government is working to fundamentally change our healthcare system.  For the past 40 years there has been a steady march towards nationalized healthcare.  We are now closer than ever to that end. 

38 trillion reasons to nationalize healthcare

In 1965, Medicare was signed into law by President Johnson.  Medicare is the government-run, single-payer health plan which covers the country’s elderly population. 

People think that their Medicare payroll taxes are held in some "lockbox" and invested until it is time to retire and collect benefits.  Sadly, Medicare is run as a "pay-as-you-go" system.  The taxes taken from your paycheck today are spent on a retiree’s healthcare costs tomorrow. 

Because there are fewer and fewer workers to support an increase number of retirees Medicare is approaching insolvency.  It would reportedly take $38 trillion to fully fund Medicare.  Is that likely with the US GDP at $13.8 trillion?

So, if you are the Federal government, and your Bernie Madoff moment is less than 8 years away what do you do?

Nationalize Healthcare

Make no mistake, Medicare for All - a single-payer system - is their stated goal.  Your ability to obtain affordable, quality healthcare will be dependent on the government.

Former White House economic adviser Keith Hennessey has summarized the competing House versions here.  The Wall Street Journal reports that Obama wants to raise $634 billion in new taxes to pay for the expansion.  Here are some highlights of what we might expect:

• A government mandate that employers provide and contribute towards their employees’ health insurance or be subject to a tax penalty.  Think of your neighborhood restaurant.  To cover the extra cost for health insurance they will charge more for your meal.  Could you consider this new cost a tax increase?  How many people will be laid off because of this mandate?
• Tax employer-sponsored health insurance.  Currently the value of health insurance is not taxable to either employees or employers.  This benefit may be eliminated or reduced.
• Increase sin taxes - new taxes on sugary drinks, tobacco and alcohol products.
• Higher premiums for Medicare recipients.
• Reduced payments to medical providers.  If doctors and hospitals receive less payment will patients receive less care?  Will there be less incentive for experienced doctors to remain in practice?  Will the innovation of life saving techniques and products suffer because of a diminished profit potential?
• Reduced tax advantages for health savings accounts, flexible spending accounts and itemized medical deductions.
• A government mandate that each individual have insurance - or be subject to a tax penalty.  Note that the LA Times reports the insurance industry is receptive to this mandate.
• Add a health insurance "exchange" where people can compare and purchase a new government sponsored "public plan" alongside  products from private insurers.  This public plan is a major bone of contention between Democrats and Republicans.  It is described as the proverbial camel’s nose that could lead to a single-payer system in the US.  I wrote about Georgia’s brief consideration of an exchange here.
• Guarantee issue and guarantee renewability of insurance policies.
• No exclusion for pre-existing conditions.
• A prohibition of insurers from charging higher premiums based on health status.  This seems ideal, but understand then that healthy people will significantly subsidize the premiums of the unhealthy.

Could the medicine be worse than the disease?

An Alternative

So our politicians have gotten underwater to the tune of $38 trillion.   The government currently covers about 92 million Americans through Medicare, Medicaid and Tricare.  Should they be trusted to provide quality coverage for the other 208 million?

If you were to get yourself in deep debt, what options would you have but to reduce costs and live within your means.  Maybe our Federal government should take steps to reduce its own footprint and properly fund its obligations (Medicare, in this case). 

Conclusion

If you are so inspired, contact your senators and congressman and let them know what you think.  Opposing the "public plan" option, in my mind, is our best bet in maintaining competition and quality of care in our healthcare system.

Two Lemonade Stands

The kid down the block has a lemonade stand which serves 208.5 million customers and has expenses of $1.05 trillion. Your lemonade stand only serves 92.7 million customers, but has expenses of $1.35 trillion and you are in debt to the tune of $68.1 trillion. Wouldn’t a hostile take-over look attractive to you? Wouldn’t you be calling for “reform?”

Behind closed doors do our politicians have the same bug-eyed look Madoff must have had on December 10th?

How to Own Your Own Company in 5 Easy Steps

Why struggle for years grovelling at your boss’ feet for whatever tidbit is thrown your way? There has to be a better way! Now this may sound like a ShamWow commercial, but you can own your very own company in just five easy steps:

1. Get fired from your job.
2. Have your former employer fail to notify you of your COBRA or state continuation rights (thus you become uninsured).
3. Come down with a terrible illness or injury and incur thousands of dollars in uninsured medical bills.
4. Sue your former employer for failing to notify you of your right to continue on the company health plan.
5. Take stock ownership of your former employer because they don’t have the cash to pay off your Mac-Daddy judgment!!!

Yep, it’s that easy. You just have to work for a company that doesn’t take its fiduciary duties seriously. President Obama just signed into law the American Recovery and Reinvestment Act (ARRA) which mandates that taxpayers cover 65% of COBRA premiums for involuntarily terminated individuals.

There are new Department of Labor notices that must be mailed to everyone who lost coverage since September 1, 2008. The deadline to send these notices is April 18, 2009. Let me know if your company might need some help (or not if you aspire to own them one day)…

The Cabin Project

People have asked about pictures I’d posted on a little cabin I built a couple summers ago. Seeing as I’m very tired of writing about insurance, now seemed like a perfect time to take a break and write about something fun.

My mom owns some timberland near Millerville Alabama. We were attracted to the property because it has some great views of the Talladega range, it is mainly hardwood as opposed to planted pine, and there are a number of streams running throughout.

The previous owner had built a cabin about 25 years ago aside the Hillabee creek. All the locals had told the guy he was crazy to build there, but he did so anyway. As it turns out, he picked the lowest spot within in several square miles - the junction of three creeks. When Hurricane Opel passed through many years ago the high water mark was about first floor ceiling level. To make a long story short, as pretty as it looks you would not want to spend the night in it (unless you like mice and don’t have any mold allergies).

So, building a new cabin was high on my list of things to do. Learning from the mistakes of my predecessor I picked a site on the highest hilltop. For most weekends throughout the spring and summer of 2007 my mother, son and I would put in six or eight hour days sawing and hammering. The site has no electricity so all the work was done with hand tools.

It is a simple 12 by 12 single room with a vaulted ceiling that holds a small loft. We wrapped it with plenty of porch so you would have room to enjoy the view and to grill up something tasty to eat.

The work I’m sure will never be finished. For example, after waking up a couple months ago with the inside temperature at 30 degrees, I finally put insulation in the ceiling but still have yet to drywall it.

It was a great project - one that brought good friends and family together. And, now we have a cool get-away where we can hunt, shoot, hike, scratch, and spit ’til our hearts content. A nice change of pace from Atlanta…

More Liability for Employers with less than 20 Employees

Much has been made about the changes to COBRA that are contained in the American Recovery and Reinvestment Act of 2009, but not too many people realize that every employer with less than 20 employees has obligations under this law too. These are not insurance company obligations but employer responsibilities.

Responsibility combined with inaction equals liability.

Basically, the law mandates that certain employees who were involuntarily terminated between September 1, 2008 (yes, 2008) and December 31, 2009 be made to pay only 35% of their state continuation premiums starting March 1, 2009. The special open enrollment provision in the law applies only to COBRA groups, not those subject to state continuation.

So, if you have less than 20 employees and have terminated or will terminate someone do you know how to properly offer them continued health coverage? If not, let me know and we will give you a hand.

Will EMR Give Us Tort Reform?

Currently a doctor may be exposed to a malpractice suit if he overlooks something in a patient’s file and the individual suffers because of it. Now imagine that the doctor is hooked up to a national electronic medical records (EMR) database which includes all of that patient’s records - from all the doctors he has ever seen. Is the current doctor going to be held liable for missing a key piece of information held in the volumes of past doctor notations?

Ahhh, the law of unintended consequences. Is this an avenue for tort reform? Here’s to Hope…

NICE?

As part of Obama’s stimulus bill, it sounds like the US is going to get its version of the UK’s NICE (National Institute for Health and Clinical Excellence) or what I call the Department of Health Care Rationing.

In October 2007, a client who has offices in the UK called for help. A dear friend of his was suffering from breast cancer and had been told that the drug Lapatinib might offer her some hope (it goes by the trade name of Tykerb and is produced by GlaxoSmithKline). Unfortunately, England’s National Health System (NHS) would not cover the drug basically saying that the cancer needed to spread more before it would be appropriate for use.

To add insult to injury if the lady bought the drug herself then she would lose her national health care:

However, with another breast cancer drug Tykerb (Lapatinib) shortly to be licensed, a debate has arisen over the rights of patients to pay for their own treatment. The new drug would cost a patient about £25,000 a year, and anyone choosing to have it would have to pay for the rest of their treatment privately, as ‘topping up’ NHS treatment is not allowed.

In the end, I was unable to do much more than confirm that NICE isn’t. His friend wasn’t going to get the drug she needed.

Several months later I followed up with my client. Here is his reply: “Hey Angus, my friend got Lapatinb - good eh? Thanks for your encouragement. Eventually she got it through a foreign country. Anyway, here’s hoping.”

So, my friends, keep your passports up-to-date. Before long, you may need to sneak out of the country to get some meds…

SCHIP Signed: Doctors Get a Pay Cut

Yesterday President Obama signed the 2009 reauthorization bill for the State Children’s Health Insurance Program (SCHIP) program. This legislation will reportedly make about 4,000,000 individuals now eligible for that taxpayer funded health coverage at a cost of $33 billion over four and a half years. Many of these people moving onto the SCHIP plan will be leaving their private insurance.

Combine that news with the recent Milliman report which shows that over $88 billion dollars is cost shifted from government sponsored plans (Medicare, Medicaid/SCHIP) to private sector plans and you can easily see that the doctors who treat these new SCHIP patients will be getting a pay cut.

About now you are asking, “What the heck is cost shifting and why should I care?” Let’s say a doctor would normally charge $125 for an office visit. SCHIP, however, will only reimburse the doctor $100 for the visit. In order to make up the loss, the doctor charges $150 to the patient with private insurance. Thus, in essence, cost shifting is a tax on people with private insurance (individual medical policies or ones offered through a person’s employer).

On another note, I’m still trying to figure out the math on this. Please let me know if you find an error in my logic:

$33,000,000,000 - cost of program, divided by
4.5 years - equals
$7,333,333,333 - annual costs to cover 4 million kids through SCHIP.

But, one can purchase an individual Aetna policy for $78/month ($936/year), so correct me if I’m wrong, but couldn’t the government the go into the private sector and cover over 7.8 million kids for the same amount of money?

$7,333,333,333 - annual cost to cover 4 million kids through SCHIP, divided by
$936 - annual cost to cover an individual under an Aetna policy
7,835,000 - kids covered by a private sector solution

So, it looks like our elected officials have taken a route that will grow government and cover fewer of the people they say they are trying to help. At the same time, (i) doctors will get less reimbursement for the patients who switched from private insurance to SCHIP, (ii) many doctors will quit seeing Medicaid/SCHIP patients because they get lower compensation, (iii) individuals and employers who have private insurance policies can expect an incremental increase in their premium rates, and (iv) taxpayers can expect a bill from the government when this underfunded coverage needs another cash infusion.

What’s there not to like? Your thoughts?