We Get (e)Mail!

Recently, reader Brad F wrote to us with a dilemna:

"First of all, I enjoy your site [ed: /blushes].

I think other readers (and employees of your clients) may face the same issue I now face. Later this year, I am getting married. After the wedding, we planned to consolidate our health coverage with her employer. Unfortunately, my HR department just informed me I will face “tax consequences” if I leave my high-deductible plan for her PPO before the end of 2008. Although I can avoid the penalty by staying with my plan for a few extra months, it was a definite unexpected surprise."

In general, if one leaves an HSA/HDHP (Health Savings Account/High Deductible Health Plan) mid-year, one has a number of issues. From a coverage standpoint, there's a new deductible to satisfy. Although it's likely to be (much) lower than the High Deductible plan's, it does start at "$0 met" on the first day of coverage, previous HDHP-covered expenses notwithstanding.

From a tax standpoint, there are also some speedbumps:

1) You can't make any more contributions (dunh!)

2) You may well have overfunded the account. This is kinda screwy: if you start an HSA mid-year, the contributions aren't pro-rated (that is, you can still fund the max, if you want). But it doesn't work in reverse: you'll have to withdraw the excess contributions, and there are some taxes to be paid on those.

Curiously, you can still use the HSA to pay for qualified medical expenses. That is, even though the underlying plan isn't HSA-qualified, you can still use the account itself to pay for most medical expenses, with no tax or other penalties.

But I wasn't the only one who responded to Reader Brad. Co-blogger Mike Feehan offered a different perspective:

I don't see this as a now-or-never choice. (I)t appears to me that the basic amount at stake here is

(a) the difference (presumably a savings) between the payroll deduction in his own plan and the dependent deduction in his new wife's plan vs.

(b) the "tax consequence" (i.e., a cost) for dropping his employer's plan before year end.

So it boils down to the customary question: is the savings bigger than the cost?

First of all, I think the correspondent should ask his employer to tell him, in dollars and cents, exactly what the "tax consequence" will be to him in 2008. He can then judge whether it's better for him to disenroll before year-end and eat the tax consequence, or stay in his own plan until the end of the year and pay his own premium contribution for those few months.

No matter what, he [should] be able to enroll in his new wife's plan effective January 1, if he wants to, during the open enrollment period later this year.

What is the tax consequence anyway? I've understood that IRS allows certain tax advantages in group "cafeteria" plans - - subject to certain conditions, one of which is that there can be only one benefit election or open enrollment for any taxable year. To the insured person, the tax advantage is that premiums are paid or deducted from payroll on a pre-tax basis, which reduces one's taxable income. So from IRS' standpoint, you've agreed to a tax deal when you enroll in a cafeteria plan, and breaking the terms of the tax deal forfeits the tax benefit. You point out that the tax deal includes the employee's own contributions to the HSA (which also reduce one's taxable income) so those contributions would also become subject to tax if one were to drop out mid-year.

An employee who chooses not to enroll during the open enrollment, can enroll later but only under certain circumstances permitted by IRS. An employee who enrolls but then later decides to drop out can do that, too, but in that case the cost is forfeiture of the tax advantages for that taxable year. (The forfeitures don't apply to employees who "drop out" because of retirement, or termination of employment, or death.)

I may not have all the details 100% but I think this is pretty close.

PS - I certainly hope we are not getting to the point where our choice of wedding day is influenced by the tax treatment of our medical insurance premiums!

So there you have it! Thanks to Brad F for the great email, and to Mike for his help in answering it.

Playing Along at Home

It's that time of year again, where millions of employees begin to make their health insurance choices for the following year. As I mentioned at this time last year, our family's benefits come to us courtesy of the Fortune 500 company which employs my better half. And once again, in addition to the usual co-pay type plans, the company is pushing HSA-compliant High Deductible Plans. Unlike last year, however, the folks in HR (or at least those advising them) have finally "gotten it," and have done a pretty good job.

To wit: they've put together a menu of choices (hence the over-used term "cafeteria plan") whose centerpiece is the HSA. And they've done a masterful job of selling it, as well. You may recall that, last year, the HSA was clearly an aferthought, with no effort made to make it the least bit attractive. For an extremely modest premium savings, one was presented with an over-the-top out-of-pocket exposure. There was little (if any) effort made to explain the myriad benefits accruing to HSA's, perhaps because most of these were absent from last year's model.

But what a difference a year makes. Several weeks ago, for example (and well before "election time") we received a colorful, interesting, and helpful guide to HDHP/HSA's, with practical, real-world examples (which reflected real-life numbers, as well). I especially appreciated the approach: it closely tracked my own HSA sales shpiel. It was also pretty fair to the other models, explaining differences in out-of-pocket, savings and claims issues.

I'm still not thrilled with the configuration: a high deductible, yes, but they've kept the 80/20 coinsurance "corridor" in place, which I think unnecessarily complicates the product. They have priced it appropriately, though: folks who choose the HSA route pay the least in additional premium contributions. For our family, that represents $800 (minimum) annual savings versus a co-pay plan. The deductible is modest: $1200 for singles, $2400 for families. That's actually towards the low end of the deductible choice spectrum, so it's a great "introductory" program for folks who are unfamiliar with the concept.

The powers that be at the home office must be closet IB readers, because they obviously understand that rate increases on HDHP's are substantially lower than their co-pay cousins. To that end, they've offered a deal that would be difficult to refuse, even if one were so inclined: in addition to the premium break, they're "seeding" employees' HSA's with real, up-front, cash money: $400 for individuals, $800 for families. Wow!

We've also written about the new product trend towards preventive care. To that end, the carrier-of-choice (one with which I'm very familiar, and have had good experience) covers routine, preventive items (e.g. cancer screenings, vaccines, etc) at 100%, regardless of whether or not the deductible has been met. In fact, that same benefit applies to folks in co-pay plans, as well. We elected to contribute the max to the loss-fund (Health Savings Account), based on previous years' usage. It's a great deal, of course: if we end up not using it all, it rolls over (one of the great things about HSA plans).

In the event, we're looking forward to being a part of the new health insurance evolution, and I'll be sharing our experiences with it throughout the coming year. Cheers!

On ObamaCare Messaging and Strategy

It's no secret that, like most Americans, we're no fans of Obamacare. So it's frustrating to see the political party that did not ram it down our throats being so weak-kneed in its opposition as it's being rolled out.

The latest tactic would delay the Exchanges for a year. How stupid is this? The administration is already accusing the Republicans of everything short of murdering people by not wanting them to have insurance. The one aspect of Obamacare that gets positive polling is people getting covered. Delaying that a year would be terrible press going into an election year, press the Media will heap on them gleefully. In the end they aren’t going to win that fight.

So what should they do? I have some suggestions:

1 - Waive the individual mandate for 1 year after the employer mandate is enforced

2 - Allow exchange subsidies but fund it with;

    a. Elimination of government contribution to Congress and staff premiums

    b. Force executive & Judicial branch and all staff to buy their coverage through the exchange with no subsidy from the tax payors

    c. Require passage of Keystone pipeline immediately with small small tax on oil passing through it earmarked for exchange subsidies

    d. Eliminate PCORI and allocate all collected money to exchange subsidies

Now instead of Republicans not wanting people to have insurance it will be on the administration to give up graft or shut down the government. None of the items are meaningful to the public; the majority of people would argue they should be sacrificed to fund the subsidies.

Alphabet Soup News

From our friends at FlexBank:

■ "The IRS announced [last October] the ability to permit employees to carryover up to $500 of an unused health FSA balance. IRS Notice 2013-71 now offers an employer the option to amend their Section 125 plan to allow up to $500 of unused funds remaining at the end of a plan year to be carried forward into the following plan year."

This is significant because these plans have traditionally been "use it or lost it," and now participants may have the opportunity to roll-over unused dollars.

 ■ "The IRS released a memorandum on March 28, 2014 that confirms that employees participating in a general purpose health FSA, and who have carryover from a prior year, cannot contribute to an HSA for the entire following year."

General Purpose Flex Spending Accounts are those which cover any so-called 213(d) expenses (a laundry list of eligible expenses) as opposed to a Limited Purpose FSA which covers only those specifically stated in the plan document. This is significant because it may severely limit one's participation in a Health Savings Account.

 ■ "Section 125 Plans (also known as a Cafeteria Plan or Premium Only Plan (POP), must follow the general principle that employees' pre-tax elections are irrevocable for the plan year, except under certain conditions"

Generally speaking, you only get to change your "cafeteria plan" choices once a year - at Open Enrollment. But there are exceptions to these rules, although they're quite limited. These would include a "Change in Status" (eg marriage, adoption, etc), as well as a few others. The fine folks at FlexBank offer you this link for an overview of the permitted election changes.

Health Wonk Review: Happy New Year! edition

Welcome, friends, to 2016-style health care wonkery. Later this month, we'll be celebrating our 11th anniversary here at IB; it's fascinating to look back over almost a dozen years of posts (and quite a few 'Reviews hosted) to see how much has changed, and how much hasn't.

But no time for waxing nostalgic, let's get on with the show:

■ First up is our good friend (and colleague) Jay Norris. Jay was recently appointed to the Board of Directors of Connect for Health Colorado, the Centennial State's exchange. He's concerned about a policy decision made by the Exchange to begin blocking enrollments from out of state brokers at the beginning of open enrollment. Here he explains why.

■ Over at Health Affairs Blog, Susan DeVore writes about six big trends to watch for in health care for 2016, including MACRA, telemedicine, value-based contracting, specialty pharmaceuticals, and others. She notes that with the upcoming Presidential election, health care is once again keeping us up at night. How much of the current debate is hyperbolic rhetoric? What policy changes are realistic in an election year? What market trends in the private sector will drive the most change?” Good questions, Susan.

■ At Workers Comp Insider, 'Review coordinator (and all-around gracious lady) Julie Ferguson lets us in on the depressing fact of the week:  In 2014, there were approximately one and a half times more drug overdose deaths in the U.S. than deaths from motor vehicle crashes. She looks at developments in the nation’s opioid and prescription drug epidemic via a pair of recent studies on the topic, as well as a roundup of some other noteworthy writing on opioids.

■ For the next few months, Health System Ed's Peggy Salvatore will be blogging on digital strategy for healthcare organizations in preparation for a pharmaceutical conference on digital health (the ePharma Summit 2016). This is the first post in the series, which is about how pharma spends a lot on marketing and provides a necessary product, and that as an industry it the means and the clout to make a positive difference. But will it? Stay tuned...

■ Longtime foil Wendell Potter notes that all of the Republican presidential candidates have condemned the Affordable Care Act and pledged to replace it as soon as they’re elected. But with what? Wendell runs down their likely replacement proposals, which he’s dubbed “The Faulty Five."

■ Dr Jaan Sidorov is one of my very favorite wonk-bloggers and. as usual, he doesn't disappoint. This week, he likens mHealth to dashboard tachometers, arguing that when mHealth is "smart, synergistic and scalable," the tachometer can improve insurer/vehicle performance.  Without those features, however, there's enough about mHealth to make it very attractive to consumers on a retail basis. Vroom, vroom!

■ I've only recently been following Charles Gaba, and I regret having missed his insights over the years. Here, he acknowledges that the ACA mandate penalty costs less than the premiums for some people, but... Well, he offers some important clarifications regarding the case studies quoted in a recent NY Times story about people deliberately choosing to pay the Individual Mandate penalty rather than sign up.

■ Like Peggy S, Joe Paduda has put together a series; his is on how he thinks the ACA's getting along, from enrollment to costs. As usual, he's concise and on-point. Part One is here, and Part Two here.

■ Longtime HWR contributor David Williams has been following Republican presidential candidate Ted Cruz, specifically his proposal to speed up FDA approvals, which has been garnering a lot of criticism, much of it deserved. But why do opponents have to go all the way back to 1956 for evidence against the plan? Instead, asks David, shouldn't we use the proposal as an opportunity to debate the role of safety and efficacy in approvals, and to examine why some parts of the FDA work better than others? Another good question.

[ed: Do I sense a theme?]

■ Uber-wonk Roy Poses alerts us to the new CDC draft guidelines that urged more conservative use of narcotics for non-malignant chronic pain, and which immediately attracted a barrage of criticism. His take? Those arguments against them were underwhelming. Click through to learn why.

■ Dr Brad Flansbaum addresses a recent New Yorks Time article about whether doctors should unionize, and comes away unconvinced either way. What's so great about this post is the series of insightful questions he poses to both sides of the debate.

[ed: Yup]

■ And now for something completely different. Our own post examines CanuckCare©'s rather lackadaisical view of death: as in the Canadian Medical Association considering allowing doctors to LIE about patients death to cover up euthanasia. Spoiler Alert: at least one Canadian med school's already doing so.

Thanks for tuning in, and please join us at Joe P's place on the 28th.

Alphabet Soup Update

■ First up, courtesy of our friend Joe Kristan, next year's Health Savings Account (HSA) contribution limits:

For singles, the max you can drop in will be $3,100 (up $50 from this year); for families, it's $6,250 (up $100). Remember, you need to be covered by a qualifying High Deductible Health Plan (HDHP) to make contributions. The 2012 minimum deductible for these plans remain at the 2011 level ($1,200 for singles, and $2,400 for families).

Some HDHP's include additional out-of-pocket requirements above the deductible (I hate these). These will increase $100 for singles and $200 for family coverage next year.

■ FlexBank's Lou Gellenbeck sent along this helpful info on how ObamaCare©'s new W-2 reporting requirements affect Health Reimbursement Arrangements (HRAs). The key take-away is that they're "exempt from the new W-2 reporting requirements for group health plans."

But what's that really mean?

Lou explains:

"Starting in tax year 2012 ...employers that file 250 or more Forms W-2 for the preceding calendar year [must] report the aggregate reportable cost of applicable employer-sponsored health insurance coverage provided on each employee's annual Form W-2...

Aggregate reportable cost does not include amounts contributed to a Health Savings Account (HSA), the amount of any employee salary reduction election to a health Flexible Spending Account (FSA), or the cost of coverage under a Health Reimbursement Arrangement (HRA). This reporting will be for informational purposes only and will not affect tax liability.

Specifically noted in the legislation is the requirement that employer contributions to a health FSA (i.e. matching contributions or where the employer seeds the health FSA with funds) must also be reported in certain situations. FlexBank's FSA clients will receive additional information on this part of the ruling in the near future under separate cover."

See why one's choice of administrator for these kinds of plans are local and accountable? Did your admin alert you to these changes?

She also reminds us that "comprehensive guidance on the W-2 reporting requirement may be found here."

Thanks, Lou!

Election Time...

No, not that election: employee benefits election time. Our family’s benefits come courtesy of my better half’s employer, and last night was THE night to make our choices for next year.

Why last night, you ask? After all, most employers have weeks and weeks available for Open Enrollment. Well, hers is no different: OE has been on-going for some time. Last night marked its end (well, actually, it ends today, but last night was the first opportunity we’ve had to get those elections made). If you’re thinking “hey, the Prof, guru extraordinaire, is a procrastinating SOB,” well, you’ll get no argument from me.

In any case, I’ll share one of the choices we made, because it's illustrative of how I try to live what I preach: consumer empowerment.

The employer in question offers several health plan options (known in “the biz” as a “cafeteria plan”). Some are high-end, soup to nuts plans, some are “in the middle,” and there were even two HDHP (High Deductible HSA-compatible Health Plans). When I saw that, for the first time, we could choose an HSA, I was thrilled. I couldn’t wait to jump on board that train.

Our current plan is one of those “middle of the roaders:” a modest deductible, 20% co-pays at network doc’s, a prescription drug card. Nothing too fancy, and priced accordingly. Our maximum exposure (OOP) for a catastrophic claim is $4,000 (that number is important; we’ll be coming back to it).

We were offered two HDHP choices: a $2400 family deductible, and a $5,000 family deductible. Neither of those was particularly frightening, until I read on: in addition to the deductible, the plan also added a co-insurance layer of 20%, bringing the max OOP to $7,200 and $10,000 respectively. Yikes!

To put this in context: one of the reasons I like HDHP plans so much is that one can delete the co-insurance (the confusing 80/20, 70/30, 60/40, what day is it?) component altogether. This makes for a simple, and usually inexpensive plan design. In fact, I often tout the lack of co-insurance as the best feature of such plans.

So of course, the HDHP that we were “offered” included a substantial co-insurance chunk, bringing the max exposure on a large claim to over $7,000. But we’d be saving big bucks, right? Well, if by “big bucks” you mean $240 a year well, then, yeah.

Needless to say, we opted again for the “generic” plan. I was quite disappointed: I would really prefer to go the HDHP route, for a number of reasons, but there has to be some “reward” for such a “risk.”

So, am I a hypocrite for pushing HDHP’s? Not at all. If, for example, that was all I ever recommended – a “one trick pony” – then no question, a hypocrite would I be. But I don’t do that; when it’s appropriate, I recommend such plans to my clients, and I continue to blog on their merits (and disadvantages, of course). It’s really up to the carriers to “get it,” and come up with product designs and pricing that make sense.

Must Be an Election Year, II

[Welcome Insurance Forums readers!]

[UPDATE & BUMP: See below]

"New York Attorney General Andrew Cuomo plans on Wednesday to announce the launch of an industrywide investigation into health-care insurers, his office said."

Wow, an industrywide search. Pretty impressive (if a bit overwhelming). And what's Mr Cuomo's beef with insurers?

"Attorney General Andrew M. Cuomo today announced that he is conducting an industry-wide investigation into a scheme by health insurers to defraud consumers by manipulating reimbursement rates. At the center of the scheme is Ingenix, Inc., the nation’s largest provider of healthcare billing information, which serves as a conduit for rigged data to the largest insurers in the country."

Oooh, "rigged data!" Nothing loaded about that phraseology, is there? The issue is how folks are covered for non-emergency out-of-network care. Traditionally, reimbursement rates for these services are paid as a percentage of "usual and customary" (UCR). And who decides what's UCR? Well, apparently Ingenix does.

Which raises an important, if impudent, question: so what?

Someone has to set these rates, else what's the benchmark? And imagine the hue and cry if the carriers themselves did so. Kind of a "darned if you do..." scenario. According to the company's website, over 1,500 insurance companies and health plans utilize these services (that number's important: it represents the vast majority of carriers). Interestingly, over 200,000 health care providers also use this service.

Wonder when Mr C's going to investigate them?

And since he apprently doesn't think that little effort's going to take some doing, the Empire State's AG plans to sue one of our favorite targets, United HealthCare, for allegedly engaging in "deceptive practices."

And what practices are these, you may wonder?

In order to rein in out-of-network costs, UHC chose to "keep their reimbursements artificially low and force patients to absorb a higher share of the costs."

A higher share of the costs for choosing to go out of network? Heaven forfend!

For its part, UHC (in an email I received this morning) says they use such tools "to set their own reimbursement schedules, establish fees for non-network care, negotiate provider service contracts and review claims for their members and consumers."

Seems inocuous enough to me. But then, I actually favor consumers being more proactive, and taking more personal responsibility for their health care and how it's financed.

(Hat tip: Industry Radar)

UPDATE: Bob sent me this link to an LA Times article which reports "City Atty. Rocky Delgadillo has assembled a team of investigators and prosecutors to probe industry practices such as canceling patients' coverage after they get sick." This is of a piece with what Bill has written about recent efforts in this area.

Health Wonk Review: Puppies and Kittens edition

After a contentious election season, where my preferred candidate didn't even show up, I thought it'd be nice to focus on something a bit more pleasant. And nothing quite brings the smiles like pics of our little furry friends [ed: bonus points to anyone able to guess the significance of the first one].

And so, without further ado, this week's hectic, eclectic, fur-bally HWR:

■ HWR co-founder Joe Paduda  offers the first two entries in his new series The Flash vs Spiderman "Getting Serious About Health Reform" (Part 1 here, Part 2  here), wherein he offers his own suggestions about where we go from here. As usual, interesting stuff.

■ One of our favorite wonks, David Harlow is actually traveling quite a bit lately, most recently to an innovation in healthcare convo in The Big Apple. He graciously took time out to send in his take on how the election will likely affect not only the ACA, but what the various pols are likely to propose.

■ It's been a while since Adam Fein's participated in the HWR, but he's back and in fine form with this post on "The 2025 Payer Market for Prescription Drugs" (wait, Adam's the new Dr Who?). 
 

■ The Health Affairs blog's Karen DeSalvo and Georges Benjamin offer their thoughts on what the future of public health will (should?) look like, including how to compete in a global economy.

■ Our good friend David Williams sends in this post on  legalizing marijuana, both for recreational and medicinal purposes. Considering how well pot-related ballot issues did this year, it's likely to be a hot topic for a while. In his post, David interviews a "marijuana entrepreneur" about implementation.

■ Another HWR favorite, Louise Norris, looks past the election results to dispel some misinformation currently making the rounds: she thinks it's likely that the mandate/tax will still be in force for 2017, and explores what that means to thee and me.

■  Uber-wonk Roy Poses submits his take on the "Bio Telemetry Settlement" (see, I told you he's an uber-wonk 😊), wherein he continues his long-standing exploration of ethics (and/or the lack thereof) in healthcare, this time specifically about physician kickbacks and medical devices.

[ed: And pay special attention to the sidebar pic for that post]

■ Dr Jaan Siderov, still another long-time 'Review regular, takes a respectful (and insightful) look at the potential winners and losers in the upcoming ACA battles, focusing specifically on "organized medicine" and mHealth.

■ Our very favorite Healthcare Economist, Jason Shafrin, talks about "Precision Medicine" and how it potentially offers both vast benefits for patients and challenges for providers (and government regulators).

■ Peggy Salvatore waxes philosophical about the "Healthcare Industry in an Age of Uncertainty;" her concern about special interests is quite thoughtful, especially when we really don't know how things will ultimately shake out.

■ Our dear friend Julie Ferguson asks "what's in store for OSHA and the Department of Labor under the new administration?" Reading the tea leaves in her crystal ball [ed: heh], she takes the President-elect at his word about the ACA being on the chopping block, and what that may portend for OSHA and worker's comp.

■ Our own post explores the changing landscape of specialty prescription meds, specifically the effect of   manufacturers' coupons on claims and balances.

And please tune in again on the 15th, when Julie Ferguson works her own Health Wonk Review magic.

The Stupidity of The GOP Congressman

AHCA. Another acronym that falls short on facing the real problem with our health care system.

Republicans' latest attempt to change Obamacare is nothing more than misdirection. It replaces "subsidies" with "tax credits", continues Medicaid expansion until an election year (when nothing gets done), and keeps the most costly items such as guaranteed issue, community rating, and no pre-existing conditions exclusion in place.

It eliminates the individual mandate and creates a new continuous coverage rule allowing insurers to charge 30% higher premiums for up to 12 months to those who have a break in insurance coverage greater than 63 days. The new rule, like the mandate tax, has no teeth.

Speaking of taxes, it eliminates almost $600 million over ten years - which is a good thing. Except for the fact that over half of that amount does nothing to reduce or influence costs of health care or health insurance. More than half ($275 million) is going back to high income earners who are currently paying more in taxes for Medicare and investment income. We should also note these two taxes aren't indexed so as incomes rise more of us would pay these over time.

For Medicaid, it would roll back the enhanced matching rate for the expansion population. This has serious implications for states who fell hook, line, and sinker for the bait of government funding that they knew wasn't financially sustainable.

Think about it: traditional Medicaid funding for those the program was intended to help is paid at roughly a 63%/37% federal to state ratio. By law the range is set at 83% all the way down to 50%. Under expansion the funding started at 100% federal and will reduce to no lower than 90%. Not only is the expansion paid at a higher level, it is also paid to fund able bodied, working adults.

With Medicaid expansion running significantly over budget already it's amazing that the GOP hasn't pushed this financial disaster to the forefront. They should be putting pressure on the other side of the aisle to address how Obamacare gives more to fund those who can work while penalizing states for trying to care for those who need help most. Instead these clowns roll out cuts to the program without explaining why they might be necessary or focusing on who the cuts are geared towards.

We should have known this was going to be a poo-poo platter. Anything short of full repeal - which takes 60 senators to accomplish - is nothing more than lip service.

Going forward my advice to Congressman Ryan, Secretary Price, and President Trump is simple: Stop pretending you can do something that we know you can't. Be truthful. Democrats own Obamacare. They used a supermajority to pass a bill on a party line vote. They then used the Nuclear Option to push it through. Retaliation isn't the answer. Instead it ensures an endless cycle of political warfare that leaves constituents in the crossfire.

You owe it to the people who elected you to stand up and say that because Democrats are being obstructionists there is nothing you can do to make our health care and health insurance systems better. While you would like to see things change for the positive it falls on Democrats to come up with solutions that can come as a compromise. The compromise can't include their go-to move of throwing more money or expanding an entitlement program that is already financially unsustainable.

It must be the opposite, which is coming up with a solution to the real problem: how do we control costs of care and what ways are best to utilize insurance to help protect us from health issues that we can't control or predict.

Hey DOI, Where'$ The Money?

Insurance agents make their living from the commissions that they earn on policies they sell. Those commissions are "baked into the cake;" that is, they're already included in the premium (except for certain group plans that are essentially fee-based). Some commissions are calculated as a percentage of the premium, others are a flat amount. Until recently (past 3 or 4 years), individual health insurance almost always used the percentage of premium model; that changed and most (all?) now pay a flat fee.

The key point to keep in mind is that the commissions are already included in the premiums, which are filed with and approved (or not) by the 58 state Departments of Insurance.

Come now carriers that have decreed that they will no longer pay those commissions (at least on plans written between Open Enrollment seasons), and the question arises: what happens to those commission dollars?

If you answered "well, since the agent's not getting them, then the consumer must be" you'd be wrong. Sure, it makes sense, but that's not what's happened. Instead, the carriers are keeping these dollars allegedly to offset other costs. But they'd already (ostensibly) calculated those costs, and priced their products accordingly. So in reality, this is just pure profit for the carrier.

But Henry, you may note, if that's true, then why isn't the Department of Insurance stepping in and making them reimburse that excess back to the policyholders?

Good question, and one I decided some months ago to pursue. I reached out to my own state's Department of Insurance seeking an answer.

Multiple times, with no response.

Finally, frustrated, I contacted every state representative and senator associated with my zip code, as well as the chairman of the Insurance Committee, asking them for assistance.

To his credit, and all the others' shame, only State Representative Niraj Antani replied. He (like his colleagues) was unaware of the conflict, and agreed to look into it.

Which he did, relentlessly. Over the course of several months he reached out to the Department of Insurance (DOI). I don't know that they're connected, but it was after Rep Antani began his quest that I finally received an answer from the DOI; unfortunately, they answered only a few of my questions, completely ignoring the most important one: where's the money going?

[ed: For those interested, I've posted the letter here]

Eventually, Rep Antani got an answer from the DOI's Deputy Director, who told him that she was aware of the issue, but that the rates were already filed and couldn't be changed at this time. Which is nice and all, but irrelevant: no one's asking Anthem (for example) to change their rates, only to refund to consumers the amount that should have been paid out as commissions. She also said that the Department has no power to "compel" carriers to do so.

Hunh.

Seems like government agencies have a lot of power to force other industries to toe the line, just not insurance? Interesting.

So here's where we are: carriers priced commissions into their rates and aren't paying them to agents or reimbursing them to their insureds. And from the media? /crickets. I know that Rep Antani also broached this to the Ohio Consumers Council folks, but that seems to have gained no traction.

Why isn't this a bigger issue, especially in an election year? One would think that it's custom-tailored for state and national candidates: most folks have to buy insurance, and here's a very obvious, and easily fixed, rip-off.

Well?

[Special IB thanks to Rep Antani and Lindsay S]

If you like your (Medicare Advantage) plan, you can keep it. Not:

From email:

"Did you know that the 236,000 displaced Private Fee for Service members nationwide are eligible for an SEP (Special Election Period) and can enroll now?"

This is an announcement (from Anthem) about the upcoming Special Election Period (no, not that election - although it's relevant); HHS Secretary Shecantbeserious has ordained this unique opportunity for folks being booted from their preferred plans.

This "special" opportunity actually began a few weeks ago (on October 1st), and extends through the end of the year.

Which is convenient for those unfortunate seniors who actually believed DC.

It’s a Wash, Right?

Met with one of our clients today; he’s 62, his spouse is 65. A retiree, he’s concerned about making the right choice for his health insurance. Having just gone through a similar election process myself, I was only too happy to help him noodle it through.

Mort (not his real name) was debating between staying with the generic PPO plan, or switching to the new HSA (Health Savings Account) option. On the one hand, this is pretty momentous: leaving the low deductible “generic” plan with its prescription drug card and (seemingly) low out of pocket, and moving to a high deductible plan can be scary.

On the other hand, he can switch back next year, so even the worst-case scenario really isn’t a big deal.

Still, it’s a paradigm shift, and there are some complications [ed: aren’t there always?]. For one thing, his wife is Medicare eligible, which means that (in this case), she really can’t take advantage of the plan. However, this is still considered “family” coverage, so we had to use the family (i.e. 2x) rate for the deductible and coinsurance calculations. Ouch!

Another “twist” is that, if Mort goes with the PPO plan, he’ll be required to contribute almost $1,000 in premium over the course of the year. If he chooses the HSA plan, no such contribution is required; in fact, he could dump the whole thing into the loss-fund account itself. Sweet.

So why was this a difficult decision? Well, the numbers kept canceling each other out. It was the weirdest thing: my typical experience with group HSA’s is that usually there’s a big difference in what comes out of the client’s pocket (a lot) and how much he saves (not so much). This, in fact, has been my primary complaint with HSA’s in the group market: there just isn’t enough play in the premium to make them attractive (yes, broad brush, but true nonetheless).

In this case, though, something interesting happened: turns out that, when we looked at the worst case scenario (maximum OOP for a catastrophic claim), the HSA plan saved Mort almost $1,000; and if he had a “normal” year (some meds and office visits), he essentially comes out even.

Which will he choose? Don’t know, but he’s supposed to call me when he decides. I’ve got own guess, of course, but I’ll have to wait.

Flex Plan Dilemna

Bob recently had an interesting email "discussion" with a colleague, and since I was tangentially involved, he's asked me to tell our readers about it (Bob's "out of pocket" today).

The other day, I received this email from him:

"Having a disagreement with another agent over health insurance under a flex plan. Figured your buddy Pete would know. Can an employee who is covering dependents opt out of a plan off anniversary by claiming hardship? Premiums are too much, and wants to change to an individual plan. My understanding is they cannot. Even if they did, I am under the impression they cannot change their contribution (assuming they are pre-taxing premiums or benefits) until the anniversary. Do you know the answer?"

[ed: "Pete" is our colleague Pete Deist, about whom we've written before]

I replied that "on the one hand, it doesn't seem "right" to force someone to buy insurance (hello Massachusetts?!); OTOH, rules is rules, and I've never heard of "hardship" as a qualifying event (or would that be non-qualifying event?).

Probably some arcane Section 125 rule about this.

Really two questions though: plan rules and IRS rules.

I'm going to feel REALLY silly when Pete says "oh, that's an easy one, it's..."

In the event, I forwarded Bob's request on to Pete, and here's his reply:

"Your buddy [Bob] is correct.

The legal: Hardship is not a qualifying event permitting a change in a premium election mid-year. He can drop the insurance but cannot stop the withholding until the end of the year. The practical: I don't know of many groups that enforce this rule as it relates to premium"

One wonders, though, how often this comes up. Perhaps more often than we think.

On the Record with Joe Wilson

This morning, I was privileged to participate in a blogger teleconference with Rep Joe "You Lie!" Wilson (R-SC) about health care and the War on Terror. We'll focus primarily on the former, but I learned something very interesting about the latter which I'll share at the end of this post.

Rep Wilson began by acknowledging the terrible events at Ft Hood yesterday, and expressing his concern about the victims and their families. He then spoke about yesterday's demonstration in Obamington, and segued into his support of HR 3400 (a Republican version of health care "reform"). He spoke about "limited government and expanded freedom," which he believes is in direct contravention to PelosiCare.

Tuesday's elections, he observed, marked a watershed moment for those opposed to government take-over of our health care system. Given the results in Virginia and (especially) New Jersey, he thinks that Blue Dog Democrats have to be concerned about backing that kind of effort at their own re-election expense.

He spoke a bit about Afghanistan and Iraq, and then took questions from the half dozen or so of us on the call.

I had the privilege of asking the first one. Truth be told, I had at hand a number of questions, some my own, some from Mike, and chose to ask about his amendment that would require CongressCritters to go on the Public Option if it's passed. I pointed out that, two years ago, then-Senator John Edwards had proposed an essentially similar idea, which was deemed to be unenforceable. I asked Rep Wilson what he thought the chances were of its passing (slim-to-none) and whether it would be practical if it did.

He answered that the way his was worded was enforceable; that a specific class of "employee" could be carved out and put on that plan.

I followed up by asking why Speaker Pelosi was in such a rush, since Sen Reid was on record that no Senate bill exists and that they wouldn't even be considering the matter until after the first of the year. He replied that he believed that Nancy and her allies are obsessed with the government takeover of health care, in a continuing bid to "grow government." She knows that this may well be their last real chance at passing something, based on what they saw Tuesday.

Jim Hoft of Gateway Pundit then asked about Rep Wilson's take on Sen Alan Grayson's recent outbursts regarding Republican efforts. He replied that "Sen Grayson speaks for himself...truly outrageous and insulting." For those who liken Sen Grayson's comments to Rep Wilson's outburst at SOTU, he pointed out that his own was a "townhall moment;" that is, spontaneous and unscripted. By contrast, Sen Grayson spoke with the aid of storyboards, and were obviously not spur-of-the-moment.

Publius Forum's Warner Todd Huston asked if the Republican caucus had pushed any further on the constitutionality of many of the ObamaCare provisions (e.g. mandates, jail time, etc). Rep Wilson said that, should it pass, it would take litigation to determine that. He also took to task those who would equate auto insurance to health insurance; these folks point out that auto insurance is mandatory, but neglect to finish the sentence: "if you want to drive." But no one is required to own a car, whereas we are all "required to breathe." Thus, it becomes a tax simply for living.

I then asked about his thoughts on tomorrow's (potential) vote. Rep Wilson believes that the Democrats are counting on winning with a "one vote margin," but that there's not much assurance they'll have even that [ed: see link re: "(potential")]. He said that so-called "Blue Dogs risk becoming Lap Dogs" if they toe the party line.

He also pointed out that it wasn't until July that folks began to understand the "squeeze on Medicare and the elderly" that ObamaCare represents. The other major problem, he said, was how it would adversely affect small business, "the backbone of our economy." He then praised groups like the National Federation of Independent Businesses (NFIB) for their efforts to educate the public, pointing out that the additional taxes which would accrue would likely result in at least "another 1.6 million jobs lost."

Next up was Jeff Poor from NewsBusters, who stayed on the unemployment theme, quoting (Sheriff) Joe Biden's claim about the mess this administration had inherited. Rep Wilson took that as an opportunity to point out that, in hard economic times, history has shown that tax cuts are the way to go, citing both Presidents Kennedy and Reagan. He also had little use for the "Porkulus" which, he said has cost more jobs than it's saved [ed: a claim borne out by this chart].

Richard Zuendt, from Conservatives with Attitude, spent some time reviewing the profound impact of the election results in New Jersey. He was quite concerned about how the draconian cuts in Medicare will fall to the states to make up. He and Rep Wilson agreed that governors from both parties are justifiably concerned about this increase in states' costs, especially in a troubled economy.

Rep Wilson then pointed to Tenncare as a failed example of government-run health care, one which nearly bankrupted the Volunteer State.

Finally, The Hill's Tony Romm asked about the "one vote margin" which Rep Wilson had mentioned early on. He wanted to know if the vote was really going to happen tomorrow [ed: doubtful], and Rep Wilson was skeptical. He believes that Tuesday's vote put a real damper on that effort. He also pointed out that the political class was surprised at the intensity of the Republican base, as well as the cooling off of the corresponding Democrat's.

In a followup from Mr Romm, Rep Wilson was asked about AARP's endorsement of Pelosicare. The Congressman replied that folks should cut up their AARP cards, and send them back with a letter as to why [ed: sound familiar?]. He then named some other seniors' organizations that more accurately reflect their members' needs.

I mentioned at the top of this post that I learned something interesting about Afghanistan, and that country's economic woes. Rep Wilson told us that there is obviously concern about continued poppy (and thus heroin) production, but that Afghani's actually have an attractive alternative: apparently, Afghani pomegranates and grapes are highly prized in the Arab world, and are actually more profitable than poppies. There's now an effort to move Afghanistan's poppy farmers to these more profitable (and safer) crops.

And that's that. Our very Special Thanks to Lyndsi Thomas for making this happen. And again, I'll be updating this post with names and links as they become available.

UPDATE 1: Conservatives With Attitude reports on the call here.

UPDATE 2: Names and links are now in place.

ERRP - We have to pass this bill so that you can find out what is in it.

This is a follow up to Bob’s Tapped Out post of December 13.

HHS has now reported that, thru December 2, the Early Retiree Reimbursement Program (ERRP) has paid out just over $4.5 billion or almost 91% of the authorized funds. This total amount was distributed among approximately 2,700 group sponsors of pre-Medicare retiree plans.

The HHS report shows that the UAW retiree trust has received over $387 million - which is, all by itself, 8.5% of the total distributed.

Other facts revealed in the report:

• There are 17 plans that each received more than $50 million, and together these 17 plans account for a bit over $1.9 billion, or about 42% of the total ERRP payments.
• Only 3 of these top 17 are corporate plans (Boeing, Verizon, and AT & T) - - the remaining 14 are either union funds or public employer retiree plans.
• There are 66 plans (including the top 17) that each received $10 million or more, and together these 66 plans account for almost $2.9 billion, or about 63% of the total ERRP payments.

If you scroll thru the entire HHS report, you'll see a large number of plan sponsors that are clearly union funds. Some of the corporate retiree plans in the report likely contain a lot of union retirees - for example, Verizon and AT & T probably contains a significant number of retired members of the Communication Workers of America; Boeing probably contains a large number of IAM and other union retirees too. You'll also see a large number of state and municipal plans that I'm sure also contain a lot of public employee union retirees. In other words, while it's not possible using this HHS report to pin down the exact share of the $4.5 billion that was paid to plans covering union retirees - it seems very unlikely that share is less than 50%.

About 12% of the US workforce is represented by unions.

Recall that ERRP's $5 billion funding was part of the health care reform act. The administration says that these funds were intended to provide financial assistance for pre-Medicare retiree group plan sponsors thru 2013 - keeping in mind that the exchanges and other main provisions of the reform act become effective in 2014. The attached document states that HHS stopped accepting new applications for these funds after May 6, 2011 - not even a year after the first applications were accepted. HHS has now announced that even the plans already approved will not be reimbursed for any claims incurred after December 31, 2011.

So how did it happen that the funding was exhausted so quickly? Was it just sloppy actuarial work?

I don't think so. Here's my guess – ERRP was never intended to do what the administration told us. Instead, it was intended all along as a big "thank you" to the unions (including public unions) that had helped with the 2008 election. I recall that the UAW submitted its complete application almost immediately - almost as though they knew in advance what to do. Other types of plans found out about ERRP in due course but in my opinion, payments to other plans were not part of the main intent. However those payments did serve a useful purpose as a smoke screen; I mean, an extra couple billion might cover the tracks nicely and what's another couple billion anyway?

Here’s an additional observation regarding the HHS notice. Its cover text includes 4 whole examples - count 'em, 4 - to illustrate how the ERRP payments "significantly benefitted employers across the country."

And here, verbatim, is what HHS says about these 4:

1. The City of Minot in North Dakota has over 2000 plan participants and has received $112,933 in ERRP reimbursements. As a direct result of these reimbursements the City was able to reduce 2012 premiums by 17 percent.

2. Silgan Containers Manufacturing, located in California, has received $246,152 in ERRP reimbursements. Silgan will use funding to offset claims costs by about 5 percent.

3. To date, Elkhart County in Indiana, has received $84,175 in ERRP reimbursements. They have been able to use this funding to help maintain coverage, and keep costs down, for over 1400 plan participants. Specifically, with the help of ERRP funds, Elkhart County was able to reduce employee and retiree premiums for 2011 and maintain that lower rate for 2012.

4. In Minnesota, East Central Energy has over 250 plan participants and has received $13,272.37 in ERRP reimbursements. East Central Energy has used ERRP funds to offset increases to claims costs by 7 percent.

These 4 plan sponsors appear to include fewer than 5,000 people and the total ERRP payout for these plan sponsors was less than $500,000. Yet the HHS report claims "ERRP has benefited over 5 million people to date" and has issued payments in excess of $4.5 billion..

Why does HHS offer examples including only one-tenth of one percent of the people it claims to have "benefitted ??? Why does HHS offer examples that comprise only one one-hundredth of one percent of the total payments? Is it because HHS tried but could not find better examples among the dozens of large plans that cover many thousands of people? Is it because HHS wants the public to believe that most of the money is going to small plans--rather than to the giant plans such as UAW and The Ohio Public Employee Retirement System? Is it because (as I suspect) there was some hidden agenda behind ERRP that has now been carried out? I doubt we’ll ever know why HHS chose such lame examples or learn whether there was, in fact, some hidden agenda.

Regardless, and whatever the explanation may be, the examples HHS offers are at BEST laughable.

"We have to pass this bill so that you can find out what is in it"

Yes ma’am, we remember. True then, true now.