The 2011 Towers Watson Health Care Trend Survey, released in late August, found that the annual cost of medical and pharmacy coverage would increase to $11,204 per employee for active coverage in 2012 (an increase of 5.9% versus 7.6% for 2011). According to the survey, roughly two-thirds of employers (66%) will increase employees’ share-of-premium contributions for single-only coverage for 2012, and 73% will increase them for dependent coverage.

The promise of lower health insurance premiums due to a Georgia health insurance exchange is in question. Aside from the fact the law necessary to govern such an entity has yet to be enacted, recent news articles indicate that consumer level premium savings just aren’t there.

Expect plenty of volatility in the health insurance marketplace over the next several years. As a leading health insurance broker in Atlanta know that you can call on us to develop a proactive strategy to deal with these important changes.

The Internal Revenue Service just issued additional interim guidance in the form of Notice 2011-28. This notice grants transitional relief for employers that in the previous calendar year issued fewer than 250 Form W-2s.

For these smaller employers, reporting is now required starting with W-2s for the 2013 tax year, which would be issued in 2014.

This relief will continue at least through the 2012 Forms W-2 which are required to be furnished to employees in January 2013. In other words, smaller employers that are required to file fewer than 250 2011 Forms W-2 will not be required to report the cost of health coverage on any forms required to be furnished to employees prior to January 2014.

Additionally, Notice 2011-28 provides more clarification on how employers can calculate the cost of coverage to meet this reporting requirement. Reference questions 24 – 27 and question 31 in the Notice 2011-28. The guidance reaffirms that this is a reporting requirement only and does not impact employees’ taxable wages.

As always, please give us a call if you need help understanding your responsibilities under PPACA.

Dr. Bill Custer, Director of the Center for Health Services Research at Georgia State University, provided me with some figures about the distribution of where the non-elderly (under age 65) in Georgia found health insurance coverage in 2009:

The totals are greater than 100% because people were during the course of the year covered by more than one policy.

How many employers will drop their health insurance plans, thus forcing their employees onto the exchange or into the private individual health insurance market? Will we see a reduction of the number of uninsured in Georgia? How many people will opt to be uninsured (and therefore have to pay a fine to the Feds)?

Stay tuned and I will give you my best estimates in a later blog post.

Massachusetts Medical Benefit Form (MBR)

The state of Georgia will have to have a similar form in place when PPACA goes online in 2014. Review the “Working Income” section found on page 2 and imagine the difficulty people will have in interpreting these questions – and the processes that will be necessary to audit and correct these form submissions.

So to put it bluntly Georgia has more less-educated, lower-income people dispersed over a wider area than does Massachusetts. None of this bodes well for having a health insurance premium subsidy form filled out correctly.

This is just one of the challenges the state of Georgia faces as it builds its health insurance exchange. It also highlights the fact that the knowledge and expertise possessed by Georgia health insurance agents will be in great demand. But will the exchange invite Georgia health insurance agents and brokers to the party?

Take the time to read and comprehend Jeffrey Rogers Hummel’s article, Why Default on U.S. Treasuries is Likely and you will come to understand the motivation that will drive politics over the next several years. Hummel describes two firewalls separating us from default:

• The first is the trust funds of Medicare and Social Security. Tax income into these two programs is expected to be outstripped by claims in 2017 and 2037, respectfully. Once this happens the Fed will have to dip into general revenue – thus depriving politicians the largess they are famous for tossing about. And, if investors in U.S. Treasuries sense weakness they will demand a risk premium. If this happens Hummel then considers a collapse similar to that of the Soviet Union a possible scenario.




• The second firewall involves hyperinflation and is a resulting choice between preserving the value of the dollar and defaulting on the debt. Hummel predicts that the Feds would choose to save the value of the dollar and would therefore default.

Why is a single-payer plan sacrosanct to liberals? Single-payer provides a form of dollar cost averaging whereby the unprofitable Medicare / Medicaid plans absorb the profitable private sector plans thus affording the financial cushion the Feds so desperately need.

Hummel concludes with:

What will ultimately kill the welfare State is that its centerpiece, government-provided social insurance, is simultaneously above reproach and beyond salvation. Fully-funded systems could have survived, but politicians had little incentive to enact them, and much less incentive to impose the huge costs of converting from pay-as-you-go. Whether this inevitable collapse of social democracies will ultimately be a good or bad thing depends on what replaces them.

Who holds the almost $12 trillion in US debt? $4.3 trillion is held by the US government. $4 trillion is held by the public (individuals, corporations, state or local governments) and $3.3 trillion is held by foreigners.

So, in the end, may the desperate motivation to enact ObamaCare really be to placate these debt holders? Said another way, is providing coverage to 47 million uninsured the goal or the excuse? What do you think?

In an interview with David Lionhardt of the New York Times, President Obama said the following with regard to end-of-life care:

“So that’s where I think you just get into some very difficult moral issues. But that’s also a huge driver of cost, right? I mean, the chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here. Well, I think that there is going to have to be a conversation that is guided by doctors, scientists, ethicists. And then there is going to have to be a very difficult democratic conversation that takes place.”

So, when President Obama says these words one could reasonably conclude that he is speaking of a new system of limiting care because Medicare and Medicaid already have an exclusion for “experimental and investigational” services (Section 411.15(o)).

What might such a system look like? We only have to look as far as the UK for the answer. Compare President Obama’s comments to the words found on the web page of National Institute of Health and Clinical Excellence (NICE), the rationing board for the NHS:

With the rapid advances in modern medicine, most people accept that no publicly funded healthcare system, including the NHS, can possibly pay for every new medical treatment which becomes available. The enormous costs involved mean that choices have to be made.

The NHS employ a tool called a QALY (quality-adjusted life years measurement) to help decide whether a person is deserving of a particular medical treatment. So, what we really are discussing is whether or not, as a society, we want ObamaCare to include a QALY-type system of limiting treatment and services to our citizens.

A person may look at a committee at a private insurer deciding on experimental or investigational medical treatments and equate that to a QALY system under ObamaCare but there are differences.

• Under a QALY system we are talking about denying to people proven treatments (read not experimental or investigational). Contrast that to a denial of payment for an experimental or investigational treatment. These would include procedures that have not been approved by the Food and Drug Administration or treatments that have not been proved effective in clinical studies.




• Frequency. The vast majority of people covered by private insurance are under age 65 (read much younger than today’s life expectancy of 77.9 years). Whereas, people on Medicare are quickly approaching or even exceeding 77.9. The introduction of a QALY-type system will, by its very nature, impact more senior citizens than the under age 65 crowd currently covered by private insurance.




• You can sue a private insurance company! When is the last time you heard of a successful suit against the Federal government? Private insurers have an incentive to make their product attractive to the buying public. A government-run, single-payer plan has no such worries.




• Look at what has happened in the UK. Britons were promised a plan of benefits. That became expensive and rationing ensued. People demanded that they have access to these denied treatments. So, now in the UK you get to pay the taxes for your “free” government insurance – and, if you want it (and can afford it) you can “top-up” and the government will allow you to pay for that life saving drug out of your own pocket!

Conclusion

A friend wrote, “…being skeptical of a public plan is not the same as being against health-care reform.” There are a number of things that can be done to make coverage more affordable and accessible. A QALY-type system of rationing care would come as a rude shock to Americans. We are a society of achievers who possess a “can-do” attitude. To throw up our hands and take an easy approach of just letting the government handle things is a mistake.

So, now that you understand the difference between “experimental and investigational” exclusions and a QALY system, when politicians speak of “cutting wasteful spending” be careful. They may be speaking of me-ma, you, your spouse or your child.

Isn’t it ironic that doctors will be paying the way to see more lower profit margin patients? Who knew that making health insurance affordable could be so expensive?

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.

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.