This Week in Health Care Reform

How A Defined Contribution Plan Can Lower Business Benefit Costs
From:  Real health Care Reform

If you are a business owner, you have plenty to do simply running your business.  Do you also have to be in the health insurance business?  With ObamaCare requirements, it is going to become increasingly expensive to provide group health insurance coverage.  One strategy many business owners are taking is setting up Defined Contribution Plans.
Defined contribution plans can be set up with a Health Reimbursement Arrangement, or HRA.  This allows your business to reimburse employees for their health insurance or other medical expenses, as a tax-free fringe benefit.  A health reimbursement arrangement (HRA) can provide employees with a monthly allowance with which they can buy coverage through a state health insurance exchange.  An HRA can act as a business expense account specifically for health care.
The biggest hurdle involves HIPAA privacy obligations for dealing with personally-identifiable health information (PHI).  These obligations apply to employers offering HRAs, which are basically self-insured health plans.  And, failure to comply with HIPAA can subject a company to up to $100 per violation in civil penalties.
To avoid that, have medical expenses substantiated by a third-party.  Substantiation must confirm that the expenses have a medical basis, which means dealing with the specifics that get into the realm of privacy violations.
Thus, your business must have written PHI privacy procedures and must also appoint a privacy officer.  That officer needs to set up how employees can file complaints and a process for responding to complaints.  It’s that officer who will be responsible for ensuring PHI is kept separate from decisions about benefits and employment.
With that handled, your business can use an HRA to reimburse employees for dental and health care on a 100-percent tax-free basis.  That includes the cost of health insurance premiums.  When an HRA meets three requirements, the HRA money employees receive is deductible for the business and it’s excluded from gross income for employees. Here are those requirements:
1.    A medical connection must exist.
2.    Employee expenses must be substantiated.
3.    Employees must return amounts they receive that exceed actual expenses.
The steps to set up an HRA are straightforward:
1.    Choose an administrator.
2.    Setup the plan by specifying what makes employees eligible, how reimbursement works, and a monthly allowance.
3.    Then, provide HRA documents to employees and enroll them.
Having employees selecting their own policy greatly reduces administrative overhead, as does having third-party oversight.  HIPAA-compliant claims officers can substantiate and process employee requests for reimbursement up to the HRA balance.  Once the initial set-up work is finished, the business can maintain the HRA with a minimum of time to free up HR for other work.

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California Insurers Planning To Raise Rates.

The Sacramento (CA) Business Journal (12/3, Robertson, Subscription Publication), Kathy Robertson writes, "Anthem Blue Cross, California's largest for-profit insurer and leader in the individual market, is seeking an average rate hike of 26 percent for 340,000 members, effective Feb. 1. Another 296,059 may get an average increase of 24.6 percent the same day." Another group of 1,659 members may get a 2.1 percent cut in their rate. Aetna proposed an average 18.8 percent hike in rates while Kaiser is seeking to increase rates by an average of 7.7 percent. Regulators at the California Department of Insurance and the California Department of Managed Health Care will review the plans but "cannot set rates or deny them."

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How State Exchanges Are Playing Out
From: Real Health Care Reform

The all-too-quickly-approaching deadline is approaching for state officials to declare whether they’ll run an exchange for their state of let the feds do it.

This deadline has actually come and gone, but Health and Human Services announced a new deadline to give officials more time to decide. By February 2013, all states must declare whether they plan to create their own exchange or let the federal government do it for them.

Whether the state or the federal government end up hosting the exchange for your state, time is running out to get the works in place. You’re supposed to be able to check out a new exchange in less than a year. The coverage you select is supposed to be in effect by January 2014. And it looks like many states, and the Federal government, will have a hard time being ready by these deadlines.

The new exchanges are envisioned as online marketplaces where small business owners and individuals can shop for affordable and quality health insurance products. We’ll continue to monitor the coming changes and look for insights that can help you navigate the new ways health insurance and health care may become available.

Some changes are already apparent. Florida Republican Gov. Scott, for example, has said he wants to negotiate with federal officials to try to help nearly four million uninsured Florida residents. Scott was one of the strongest opponents to the health care reform law.

In Iowa, Governor Branstad said that he is delaying a decision about running the state exchange, but his spokesman said the Governor is considering a partnership with other states in order to run an Iowa exchange. Florida and Ohio officials may take the same path.

Mississippi Republican insurance commissioner Chaney has already notified the Obama administration that his state will proceed with a state-run exchange. Republican Governor Martinez of New Mexico has also agreed to run an exchange.

There are a number of potential benefits available to state governments that build their own health-insurance exchange. One of the biggest is that this would help keep state officials involved when it comes to coordinating Medicaid. And, many people may be moving between Medicaid and state-exchange private coverage.

The states that stay “in the loop” will have choices to make, like whether to allow all insurance companies to participate in the exchange. They can opt to only allow in companies that agree to meet their criteria.

Other state officials in places like Kansas, Louisiana, Missouri, South Carolina and Texas seem unlikely to participate in the state exchanges. That leaves it up to the federal government to take responsibility. The previously Republican-led state of Virginia has also left running its exchange to the federal government.

Obamacare and the Small Business Owner

Small Business Owner?  How To Avoid Obamacare Tax Hits

The provisions of the Affordable Care Act will be kicking in starting in 2014.  Small business owners are now doing a lot of research on how to avoid taking a severe tax hit from the law.  You often hear independent business groups complain about the additional taxes and penalties Obamacare will create.  But what type of businesses will the provisions of Obamacare exactly target?

If you are a small business owner, here are a few facts you should know:

1.  Business owners with more than 50 employees will be faced with the decision of whether to sponsor a health insurance plan for all of their workers or pay the federal government $750 per employee if the business owner chooses not to sponsor a health insurance plan.

With the poor economy, a business owner should do the math in order to find out which option would save him money, paying for a health plan for his employees, or paying the corresponding tax penalty to the government.  Some business owners would likely pay the penalty since it is a lot cheaper compared to paying for an employee health plan.

2.  Small business owners who employ 25 to 49 employees are not required to sponsor an employee health benefit plan.  Those who do have health plans for their employees will likely be burdened with a health insurance premiumincrease.  There is not a cap on health insurance premiums, thus insurers can now choose to increase premiums before the start of open enrollment.

3.  Small business owners with employees fewer than 25 will actually get some tax relief if they are offering employee health plans.  In 2014, 50 percent of the total premiums paid will be given in the form of tax credits if the business owner acquires insurance plans from the Small Business Health Options Programs.

It should be noted, however, that this tax incentive is not available to businesses with sole proprietorship, but only to corporations or Limited Liability Companies.


From: Real Health Care Reform

Where Will Your State Fit into Health Care Reform?

Provisions of the Affordable Care Act require health insurance in all states to cover at least ten broad categories of health care. Doctor appointments, maternity care, and prescription drugs are among required benefits. In addition, state officials must use an existing health plan as a template upon which to base standard coverage

The packages being selected by state officials look pretty similar for standard doctor and hospital care, but a lot of variety is appearing when it comes to what’s often referred to as alternative treatments. As you can imagine, a multitude of special interests are lobbying to make sure that their preferred treatment be part of the mandated coverage. The more successful they are, the more expensive coverage will be.

For instance, an advisory board for the Virginia health insurance exchange wants to include chiropractic services and speech therapy in mandated coverage. In California, the legislature agreed to include acupuncture as an essential health benefit, while other states, like Oregon, have already ruled out including acupuncture, chiropractic services and fertility treatment.

Oregon officials have also excluded bariatric surgery and other stomach-reduction procedures. Instead, they want to focus on preventing obesity. Coverage for mental health services is likewise less than uniform among the states

In some states, there remains. disagreement over whether to define a benchmark policy at all. The alternative is to rely on the federal government. In that case, the benchmark will default to match the largest small-group plan offered in the state.

What will happen if state officials try to set a benchmark that fails to meet federal requirements? We’ll have to see how that turns out because Utah officials have already upset advocacy groups by defying one federal mandate. They’ve approved a policy without coverage for substance abuse treatment, which is at odds with federal requirements. Advocacy groups are also alarmed because beginning dental coverage at age three may not be in line with federal requirements to cover pediatric dental care.

There are going to be a lot a “growing pains” between now and next October when the state exchanges are scheduled to be available over the Internet. We’ll follow the news to keep you informed about what’s happening in your state and what it may mean for your future health care.


From: Real Health Care Reform

Medicare Premiums on the Rise.

Medicare Premiums To Rise By $5 A Month In 2013.


The AP  (11/16, Alonso-Zaldivar) reported Medicare premiums "are going up $5 a month in 2013, the government said Friday. It's less than expected, but still enough to eat up about one-fourth of a typical retiree's cost-of-living raise next year. Medicare chief Marilyn Tavenner said the new 'Part B' premium for outpatient care will be $104.90 a month. In most cases, it's deducted directly from a beneficiary's monthly Social Security check. Currently the premium is $99.90 a month."



Modern Healthcare (11/16, Zigmond, Subscription Publication) reported, "The Medicare Rights Center, an advocacy group, issued a statement that said Friday's announcement should remind lawmakers during deficit-reduction negotiations that seniors and persons with disabilities already pay a lot for healthcare."


The Wall Street Journal (11/19, Radnofsky, Subscription Publication) and CQ (11/19, Subscription Publication) also reported the story.

California and the Health Care Reform

California Finalizes Exchange Blueprint. The AP    (11/15) reports, "The board overseeing California's efforts to establish an insurance marketplace for providing affordable health care approved its operational blueprint Wednesday, an essential step toward meeting a key deadline under the federal health care reform law." Governor Jerry Brown "is expected to forward the plan to the Obama administration on Friday, the deadline for states to notify the federal government about whether they plan to establish health care exchanges."

Health Care Reform and the Small Business Owner

Your Business Can Turn Red Into Black Before 2014

From:  Real Health Care Reform

With years of double-digit rate hikes pumping up the cost of providing employees with group health insurance coverage, a solution is long overdue. More and more small businesses are struggling to move employee health benefits out of the red. The other side of the equation is how to attract the talent needed to make your business out-perform competition, so dropping benefits completely also comes with long-term consequences.

One solution that I’ve seen small business owners use successfully again and again is to move out of the group plan market. Instead of group health insurance, your business can help employees obtain coverage through the individual health insurance market at a much lower cost. There is one caveat: pre-existing health conditions are not guaranteed to be covered in the individual market until 2014.

An HRA is a means to reimburse whatever employee medical expenses you choose to cover, including the cost for their individual health insurance. The flexibility of HRAs makes them suitable for various types of businesses. Flexibility is also advantageous for employees with divergent health care wants and needs. We’re seeing a great interest in alternative therapies as appreciation grows for the positive patient outcomes produced.

And, since employees are reimbursed, there’s little upfront funding required with an HRA. Of course, you can combine an HRA with Health Savings Accounts. These offer employees more incentive to save for retirement costs, while keeping funds available to cover routine out-of-pocket health care costs. You can find the details of how both options work here on our website.

The simplicity of an HRA keeps administrative costs down, too. A third party will review and approve employee requests for reimbursement to maintain impartiality, and tax-free reimbursements can go paperless with direct deposit or go through another payroll system. Overall, the HRA and the HSA are helping small businesses remain competitive. They incorporate tax advantages and flexibility that make both the employer and the employee happy.




Business Owners and Health Care Reform

How Business Owners Pick
"Play" or "Pay" in 2014 Healthcare Reform
From: Real Health Care Reform

If your business requires more than 50 workers, you have a decision to make about the approaching health care reform changes.  The Affordable Care Act is on track to enforce a penalty for failing to provide minimal health insurance coverage.  The first step is to see whether your company fits the definition of what firms can be penalized.

The actual language of the act is not that clear in a couple of ways.  It refers to employers with at least 50 full-time “equivalent” employees, and indicates there’s a penalty if the employer does not offer “qualified” and “affordable” health insurance to employees.  Here’s the translation.

It’s simple if you only employ staff on a full-time basis.  Otherwise, the “full-time equivalent” can refer to the full-time equivalent of your company’s part-time employees.  This is used to calculate the size of a business based on the number of hours worked by all W-2 employees. That makes the number of full-time equivalent employees roughly equal to the full-time employees plus full-time equivalent part-time employees.  The result is rounded to the lowest whole number, and here’s an example to make that more clear.

Start with the actual number of employees who work 40 or more hours a week. Then, determine how many employees work less than 40 hours a week. You can do that by summing the hours for which wages were paid to part-time employees, and dividing the total by 2,080.

If your company faces a penalty, the next hurdle is to deal with which health insurance plans are “qualified.”  One way to look at that is to consider the set of health care services that are designated as minimum essential health benefits (EHB). Although these must be covered by certain plans in 2014, state insurance departments will have some discretionary power to modify the EHBs.  So, I’m afraid we’ll have to wait for that, and for the affordable definition to be ironed out before 2014.

Once the actual coverage and cost is definite, it’s just a matter of figuring whether the cost or the penalty is higher, right?  Like most important decisions, this is more of an “if, and, or but” analysis than it is an “either/or” choice. Your business may depend on attracting and keeping innovative and responsible staff.  A competitive health benefits program certainly helps, but the cost of employer-sponsored health insurance is a major drain on the company. There are options, and one that’s becoming increasingly popular is health care reimbursement.

You could provide employees with tax-free contributions to use for an individual health insurance plan.  These are available at a much lower cost than group plans.  And, Health Reimbursement Arrangements allow for tremendous flexibility, which can benefit both the company and the employees

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Employer Penalties Starting in 2014 Under Obamacare
From: Real Health Care Reform

The 2010 health care reform law does not mandate employers to provide health care coverage to their employees.  However, starting January 2014, large employers will have to face penalties if they do not offer affordable health insurance coverage to their employees.

Small business owners with less than 50 employees are exempted from penalties. They can even get tax credits toward their health insurance costs.  Tax credits are only available to small businesses with 25 or less workers with an average wage of $50,000 or less.   For employers having full-time workers not exceeding ten with an average wage of $25,000 can get full tax credits. Non-profit employers can get a maximum tax credit of 35 percent of the employer’s premium contributions while for-profit employers can receive at most 50 percent.

You might be wondering why only small employers will be given tax credits.  Based on a survey conducted by the Kaiser Family Foundation, only 49 percent of employers with three to nine employees offer employer-sponsored health care coverage compared to the 95 percent of large employers with more than 50 employees.  If tax credits are provided, small employers will be motivated to provide health insurance policies to their employees.

There are two different scenarios for large employers who do not provide affordable health insurance to their employees:

  • Large employers that do not provide health care coverage and have at least one full-time worker getting health insurance via the exchange.  For this scenario, the employer will be fined an annual fee of $2,000 for every full-time worker but the first 30 employees will be excluded.
  • Large employers who do not offer adequate or affordable coverage with at least one full-time worker getting health insurance via the exchange.  Employers in this situation will have to pay an annual fine of $3,000 for each full-time worker getting a premium credit, with a maximum penalty equal to $2,000 for each full-time employee, but the first 30 employees will be excluded.

What do you mean by unaffordable and inadequate coverage?

Coverage is considered unaffordable if the employee needs to contribute more than 9.5 percent of their family income to employer coverage.   Coverage is inadequate if the insurance does not pay for at least 60 percent of health care costs.

The Day After the Presidential Election....Health Care Reform News.

Obama's Reelection Ensures Affordable Care Act Will Remain.


Amid the Presidential election coverage, many front-page stories made mention of President Obama's healthcare policies, namely the Affordable Care Act, concluding that his reelection means the reform law is here to stay. Several outlets also devoted articles exclusively to examining how the ACA will be implemented now that the President has won a second term. All acknowledged that though the law is almost certain to remain in place