There are 5 primary reasons why health insurance premiums have already increased and will continue to increase since the passage of the PPACA. And, why insurers like Aetna are expecting some premiums to double after 2014.
1.) My Blue Cross Group clients have received policy renewal rate increases since the passage of the PPACA of up to 46% for the first time in 17 years. See just a few of them here. Their prior premium increases were nothing near this amount. This is not isolated to Blue Cross either. These premium increases are happening in many markets across the United States in both the Individual and Group health insurance markets. Even though Barack Obama promised “my health care plan will save the average family $2,500 on their premium.”
And then their was this quote from Barack Obama: “It’s estimated that your employer’s premiums will fall by as much as 3,000% which means they could give you a raise.”
These premium increases are due in large part to the fact that multiple new “Preventative Care” mandates were imposed upon all “non-grandfathered” health insurance plans as of 9/23/2010 under the PPACA (Patient Protection & Affordable Care Act). A “Non-grandfathered” health insurance plan is a plan that was purchased after the PPACA (a.k.a “Obamacare”) was signed in to law on March 23, 2010. Keep in mind, these were ALL mandated to be covered no later than 1/1/2011 WITHOUT a co pay or a DEDUCTIBLE (a.k.a. “free”). The entire list is as follows:
15 Covered Preventive Services for Adults:
- Abdominal Aortic Aneurysm one-time screening for men of specified ages who have ever smoked
- Alcohol Misuse screening and counseling
- Aspirin use for men and women of certain ages
- Blood Pressure screening for all adults
- Cholesterol screening for adults of certain ages or at higher risk
- Colorectal Cancer screening for adults over 50
- Depression screening for adults
- Type 2 Diabetes screening for adults with high blood pressure
- Diet counseling for adults at higher risk for chronic disease
- HIV screening for all adults at higher risk
- Hepatitis A
- Hepatitis B
- Herpes Zoster
- Human Papillomavirus
- Influenza (Flu Shot)
- Measles, Mumps, Rubella
- Tetanus, Diphtheria, Pertussis
Learn more about immunizations and see the latest vaccine schedules.
- Obesity screening and counseling for all adults
- Sexually Transmitted Infection (STI) prevention counseling for adults at higher risk
- Tobacco Use screening for all adults and cessation interventions for tobacco users
- Syphilis screening for all adults at higher risk
22 Covered Preventive Services for Women, Including Pregnant Women
- Anemia screening on a routine basis for pregnant women
- Bacteriuria urinary tract or other infection screening for pregnant women
- BRCA counseling about genetic testing for women at higher risk
- Breast Cancer Mammography screenings every 1 to 2 years for women over 40
- Breast Cancer Chemoprevention counseling for women at higher risk
- Breastfeeding comprehensive support and counseling from trained providers, as well as access to breastfeeding supplies, for pregnant and nursing women*
- Cervical Cancer screening for sexually active women
- Chlamydia Infection screening for younger women and other women at higher risk
- Contraception: Food and Drug Administration-approved contraceptive methods, sterilization procedures, and patient education and counseling, including abortifacient drugs – some religious organizations are now exempt from this mandate
- Domestic and interpersonal violence screening and counseling for all women*
- Folic Acid supplements for women who may become pregnant
- Gestational diabetes screening for women 24 to 28 weeks pregnant and those at high risk of developing gestational diabetes
- Gonorrhea screening for all women at higher risk
- Hepatitis B screening for pregnant women at their first prenatal visit
- Human Immunodeficiency Virus (HIV) screening and counseling for sexually active women*
- Human Papillomavirus (HPV) DNA Test: high risk HPV DNA testing every three years for women with normal cytology results who are 30 or older
- Osteoporosis screening for women over age 60 depending on risk factors
- Rh Incompatibility screening for all pregnant women and follow-up testing for women at higher risk
- Tobacco Use screening and interventions for all women, and expanded counseling for pregnant tobacco users
- Sexually Transmitted Infections (STI) counseling for sexually active women
- Syphilis screening for all pregnant women or other women at increased risk
- Well-woman visits to obtain recommended preventive services
26 Covered Preventive Services for Children
- Alcohol and Drug Use assessments for adolescents
- Autism screening for children at 18 and 24 months
children of all ages
Ages: 0 to 11 months, 1 to 4 years, 5 to 10 years, 11 to 14 years, 15 to 17 years.
Ages: 0 to 11 months, 1 to 4 years, 5 to 10 years, 11 to 14 years, 15 to 17 years.
- Cervical Dysplasia screening for sexually active females
- Congenital Hypothyroidism screening for newborns
- Depression screening for adolescents
- Developmental screening for children under age 3, and surveillance throughout childhood
children at higher
risk of lipid
Ages: 1 to 4 years, 5 to 10 years, 11 to 14 years, 15 to 17 years.
- Fluoride Chemoprevention supplements for children without fluoride in their water source
- Gonorrhea preventive medication for the eyes of all newborns
- Hearing screening for all newborns
Weight and Body Mass
Ages: 0 to 11 months, 1 to 4 years, 5 to 10 years, 11 to 14 years, 15 to 17 years.
- Hematocrit or Hemoglobin screening for children
- Hemoglobinopathies or sickle cell screening for newborns
- HIV screening for adolescents at higher risk
children from birth
to age 18 —doses,
- Diphtheria, Tetanus, Pertussis
- Haemophilus influenzae type b
- Hepatitis A
- Hepatitis B
- Human Papillomavirus
- Inactivated Poliovirus
- Influenza (Flu Shot)
- Measles, Mumps, Rubella
Learn more about immunizations and see the latest vaccine schedules.
- Iron supplements for children ages 6 to 12 months at risk for anemia
- Lead screening for children at risk of exposure
Ages: 0 to 11 months, 1 to 4 years, 5 to 10 years, 11 to 14 years, 15 to 17 years.
- Obesity screening and counseling
assessment for young
Ages: 0 to 11 months, 1 to 4 years, 5 to 10 years.
- Phenylketonuria (PKU) screening for this genetic disorder in newborns
- Sexually Transmitted Infection (STI) prevention counseling and screening for adolescents at higher risk
testing for children
at higher risk of
Ages: 0 to 11 months, 1 to 4 years, 5 to 10 years, 11 to 14 years, 15 to 17 years.
screening for all
for the policy “design”
Mandates. Blue Cross outlines
3.) The recent inclusion of PPACA mandated “Essential Health Benefits”. Among these are the following:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
including oral and vision
4.) Now we come to reason number four. The rapid implementation of the PPACA mandated Medical Loss Ratios – which were implemented on 9/23/2010 - have resulted in more than 13 health insurance carriers closing their doors or refusing to sell health insurance again.
This has left thousands of American’s either uninsured or without the plan they had prior to the passage of the PPACA. Here’s sample letter that many of my clients received when Guarantee Trust Life insurance company ceased providing health insurance to my clients around the country.
This is exactly the opposite of what President Obama promised when he said in his speech to the AMA on June 15, 2009 “If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what.” Watch him make this promise below:
Find out the names of the carriers that have left the industry since the passage of the PPACA as well as all the other damage done to the health insurance industry since the passage of the PPACA by reading the new study completed by the Galen Institute on December 1, 2011 entitled “A Radical Restructuring of Health Insurance.”
World Insurance company in Omaha, Nebraska and it’s subsidiary American Republic insurance company is the latest carrier to succumb to the PPACA’s onerous Medical Loss Ratio requirement. Read the story here. Both companies will be purchased by Celtic Insurance company of Chicago Illinois. This the THIRTEENTH company to pull out of Iowa’s health insurance business since June 2010. This again, is all due to the onerous MLR’s (Medical Loss Ratios) implemented on 9/23/2010 under Obamacare.
Other companies that have either closed their doors entirely or stopped selling health insurance since Obamacare was signed into law are as follows:
2.) American Republic
3.) American Medical Security
4.) American Community Mutual
5.) Standard Life & Accident
6.) Principle Financial
8.) World Insurance
10.) Guarantee Trust Life
Other carriers are slowly withdrawing State by State. Page 7 of this white paper dated September 6, 2011 from the North Carolina Department of Insurance details exactly why the majority of all health insurance carriers that offered health insurance in their State have already exited and why even more are considering doing so shortly.
Millions more Americans will lose their Employer Sponsored health insurance come 2014. This is due to the fact that the ‘fine’ (Roberts Tax) on employers – with 50 more more full time employees – who do not offer HHS approved health insurance to their employees is only $2,000 annually. This is far less than the cost to provide health insurance. So, many employers will simply choose to pay the ‘fine’ and push their employees onto the ‘health insurance exchanges’. For the full impact of the PPACA “Roberts Tax” on Individuals, Taxpayers & Employers visit this link.
Historical precedent proves that forcing mandate after mandate and new regulation after regulation on to the health insurance industry does nothing but increase costs. In 1979 there were 252 mandates forced upon the health insurance industry, by 2007 there were nearly 1900. With the implementation of the PPACA we have tipped the scales at nearly 2,262 mandates. Keep piling them on and costs will continue to rise.
5.) Premiums will continue to increase when the following additional PPACA imposed requirements begin on January 1, 2014
“minimum actuarial value”
requirement that forces insurers
to provide more financially
generous coverage with fewer
co-pays and deductibles.
B.) The “community rating” provision that forces young Americans to pay far more for health insurance in order to subsidize older Americans. This was included in the PPACA even though historical data points to the catastrophic failure of ‘community rating’.
C.) The “guaranteed issue” provision that forces insurers to take all comers, even if they are already sick.
D.) The “essential health benefits” mandate that forces insurers to cover health-care services that many customers wouldn’t otherwise want to pay for.
The sad truth is, even though the President promised ‘affordable health insurance for all Americans‘, many Americans will not receive health insurance at all. In fact, according to the Congressional Budget Office’s latest assessment, 30 million Americans will remain uninsured even after full implementation of the PPACA. Worse yet, 17 million more will simply be enrolled in a Government Welfare program called Medicaid. Many who do receive health insurance will receive a very large tax payer funded subsidy, which will continue to detach the consumer with the true cost of health insurance. To find out what health insurance will cost you in the PPACA ‘Health Insurance Exchanges’ click here.
What will health insurance cost in the new health insurance exchanges?
If you want to see just how expensive government approved health insurance will be in the new health insurance exchanges. Just click on the Kaiser Family Institute’s Exchange Calculator here. Then, enter an income of $50,000 for a family of four. First, look at the “unsubsidized health insurance premium“. This is the actual premium for the health insurance. As you can see, the cost of these policies are extremely expensive. Why? Because the “Affordable Care Act” mandates that all of these Preventative Care benefits must be provided to the policy holder with no copay, deductible or any other out of pocket expense. Add to all of those newly mandated Preventative Care benefits, the recently added “Essential Health Benefits” which will also now be included on all health insurance policies sold inside and outside of the health insurance exchanges.
As I have mentioned many times before, government imposed mandates on health insurance carriers are the primary driver behind high health insurance costs. Historical precedent proves this. In 1979 there were a total of 252 mandates forced upon the health insurance industry nationwide, by 2007 there were nearly 1900. Today, there are more than 2,262 mandates. The new “Affordable Care Act” mandates will drive up health insurance costs even higher.
Still using the calculator, take a look at how much the consumer will actually pay for their health insurance once the few, the proud, the 51% of us who still pay income taxes have subsidized their premium. The “Affordable Care Act” doubles down on what I call “Consumer Detachment Syndrome”. This ‘syndrome’ is a result of WW2 era legislation that tied health insurance to employers. Since many employers pay much of the cost of health insurance for their employees as an added benefit. Many consumers have no idea what health insurance truly costs until they lose their job and receive a COBRA continuation premium that rivals the size of their mortgage payment.
This “Detachment Syndrome” will continue with the “Affordable Care Act” since many consumers will not see these massive new tax payer subsidies when they purchase health insurance in the exchanges. Instead, they will believe that the “Affordable Care Act” magically reduced the cost of health insurance, just like the President promised. And, the burden on the tax payer will continue to increase. Sadly, there are not enough producers to tax to sustain this massive new entitlement for long. This means that the printing and borrowing will continue at the Federal level and the cost of all of this will be passed on to our children and grandchildren. Either way, the “Affordable Care Act” is unsustainable.
States like Massachusetts have already developed a state-based health insurance exchange. In fact, the exchange in Massachusetts is the prototype that will be used to develop other health insurance exchanges under the PPACA. There’s only one problem, the cost to taxpayers. At last count, the Massachusetts health care overhaul initiated by Mitt Romney has cost taxpayers more than $8 Billion. The Federal tax credits provided to other states who make the catastrophic budgetary mistake to develop a state-based PPACA exchange should be equally staggering.
Still have that calculator open? Enter $30,000 for a family of four and $15,000 for an individual. As you can see, those people will not be getting health insurance. In fact, according to the latest CBO assessment, 17 million of them will receive a government welfare program called Medicaid instead. Medicaid is the worst and most dangerous health care program ever devised by man. Even though President Obama promised “Affordable Health Insurance for all Americans.”
Beginning January 1, 2014 the PPACA (a.k.a. ‘Obamacare’) legislation levies a brand new tax – the “Roberts Tax”. A tax aptly named after U.S. Supreme Court Chief Justice John Roberts who created this new tax all by himself. It is neither an excise tax, nor a capital gains tax or any other kind of defined tax. It is instead a new tax, a tax for doing nothing and it will be levied on nearly all Americans including small and large business owners whether they do offer health insurance to their employees or they do not. To find out if you will pay the ‘Roberts Tax’ see chart below:
The best way to describe this new tax is to imagine walking into a grocery store and the clerk asks if you would like to purchase a pack of gum. You politely decline the offer and are then forced by a new tax law – as defined by John Roberts – to give that clerk a tax for refusing to purchase that pack of gum. This, my fellow Americans, is how unmoored from our Constitution that our Federal Government has become.
It is important to note that this new ‘Roberts Tax’ is a tax that was vehemently denied by President Obama on multiple occasions as being a tax at all. In the interview below with ABC news, President Obama passionately refutes the very definition of a tax, as defined in the dictionary, in order to continue to message this new tax as a ‘fine’ and not a tax.
The reason President Obama so passionately refuted the fact that this new ‘Roberts Tax’ is indeed a tax and instead messaged it as a ‘fine’ is because he made a ‘firm pledge’ (in the video below) to the American people in Dover, New Hampshire, prior to the passage of the PPACA. “I can make a firm pledge. Under my plan, no family, making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.” – Barack Obama.
Beginning January 1, 2014, this new ‘Roberts Tax’ will affect nearly all Americans. None more onerously than small business owners with 50 or more full-time employees who do not offer health insurance to their employees. Or, do not offer a health insurance plan that includes the new PPACA mandated “Essential Health Benefits Package“.
These small business owners are referred to by the Obama administration as ‘Large Employers’. The Obama administration considers a ‘Large Employer’ as one with more than 50 full-time employees in calendar year 2013. Thanks to a ‘new rule’ written by HHS, a full-time employee has now been REDEFINED as one who works 30 hours or more each week (traditionally ‘full time’ employee has been one who works 40 hours per week). Full-time seasonal employees who work for less than 120 days during the calendar year are excluded from any PPACA ‘Robert’s Tax’ calculations. However, the hours worked by part-time employees are included in the calculation of a ‘Large Employer’, each month, by dividing their total number of monthly hours worked by 120.
A ‘Large Employer’ has 35 full-time employees (who work 30 or more hours per week). That ‘Large Employer’ also has 20 part time employees who each work 24 hours per week. This equates to 96 hours each month. These part-time employee hours would be equal to 16 full-time employees. Here’s how that is calculated:
20 employees multiplied by 96 hours = 1920 total hours worked. 1920 hours divided by 120 = 16 full time employees. Isn’t this fun? Oh wait, there’s more!
How the new
‘Robert’s Tax’ a.k.a.
Clause” is triggered for
Beginning in 2014, many
employees who are not
offered health insurance
through their employer
and who are not eligible
for Medicaid may be
eligible for “Advanced
Premium Tax Credits” for
coverage through a PPACA
The PPACA empowers the Internal Revenue Service to allot ‘Advance Premium Tax Credits’ to childless adult individuals with incomes surpassing 138% of the Federal Poverty Level and families 400% of the Federal Poverty Level. Using 2012 FPL, this would mean that individuals in 48 contiguous states & D.C. making $42,680 annually and families making $92,200 would now qualify for an ‘Advance Premium Tax Credit’ in state-based PPACA “Health Insurance Exchanges”.
The IRS has released additional ‘guidance’ related to the PPACA “Employer Shared Responsibility” rules. The guidance includes proposed regulations published in the Federal Register on Wed. January 2nd, 2013 and a series of questions and answers published on the IRS website. For the most part the new guidance closely follows previous guidance released by the IRS. However, there are a number of clarifications and some important new information for employers to consider.
Beginning in 2014, an “applicable large employer” may be subject to a “Shared Responsibility Payment” (i.e. Robert’s Tax) under one of two different circumstances:
4980H(a) liability – Applies if an employer fails to offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage (MEC), and any full-time employee is certified as having received a subsidy (i.e. a premium tax credit or cost sharing reduction) when purchasing individual health insurance through a public Exchange. In this case the employer may be liable for a penalty of $2000 per year times the total number of full-time employees (not counting the first 30).
4980H(b) liability – Applies if the employer does offer its full-time employees (and their dependents) MEC, but the plan is unaffordable or does not provide minimum value, and at least one full-time employee is certified as having received a subsidy when purchasing individual health insurance through a public Exchange. In this case the employer may be liable for a penalty of $3000 per year times the number of full-time employees who are certified to receive, and purchase, subsidized individual health insurance through a public Exchange
An applicable large employer is an employer that employed an average of at least 50 full-time employees during the preceding calendar year. See below for additional details on how related organizations and corporations under common control will be treated for the purpose of this rule.
The IRS guidance provides transition ‘relief’ for non-calendar year plans. Employers who sponsor non-calendar year plans will not be liable for any 4980(H) liability until the first plan year beginning after January 1, 2014.
To be eligible for this transition ‘relief’, an employer must have maintained the non-calendar year plan as of December 27, 2012 (the day prior to the initial release of the rule). This provision eliminates the opportunity for an employer to change plan years in an attempt to delay being subject to 4980(H) liability.
Offering Coverage to all Full-time Employees – The 95% Rule
As stated above, an employer faces potential penalties under 4980H(a) if it fails to offer minimum essential coverage to all full-time employees. The IRS has previously commented that the penalty should not apply in the case of an employer that intends to offer coverage to all its full-time employees, but fails to offer coverage to a few full-time employees. IRS Notice 2011–36 initially addressed this issue by indicating that the IRS was contemplating a rule stating that an employer offering coverage to “substantially all” of its full-time employees would not be subject to a 4980H(a) assessable payment. In the new guidance the IRS allows a margin of error regarding this requirement, and has introduced a “95%” standard.
An applicable large employer will be treated as offering coverage to its full-time employees if it offers coverage to all but 5% (or if greater, five) of its full-time employees. This rule alleviates employer fears that a small administrative mistake could trigger significant employer penalties.
Entities under Common Control
All entities and organizations treated as a single employer under the rules contained in Code §414 are combined in determining if an employer is an “applicable large employer.” Consequently, a number of smaller organizations (that may not each have 50 FTEs) could be subject to 4980(H) liability if they are considered under common control according to §414 rules.
The new IRS guidance defines each company that is part of a control group as an “applicable large employer member” and applies special rules to each separate member of the control group:
Penalties will apply separately to each member organization of a control group. For example, if one member organization fails to provide MEC to all its full-time employees, the penalty would be based on the number of full-time employees in that particular organization, not the total number of employees in the entire control group.
In calculating the 4980H(a) liability, the “not counting the first 30 rule” would apply proportionality to each member entity. For example, a member entity that accounts for 50% of the total full-time employees in the control group would pay a penalty of $2000 per year times the number of full-time employees in that specific entity not counting the first 15 (50% of 30).
To avoid 4980(H) liability, employers must offer coverage to all full-time employees and their dependents. It is important to note that the cost of the dependent coverage is not used in determining the plan’s affordability under 4980(H). Plan affordability for employer penalty purposes is based only on the amount the employee must pay for self-only coverage.
In what was a surprise to many observers, the requirement to offer coverage to dependents does not apply to spouses. The proposed regulations define an employee’s dependents for purposes of 4980(H) as an employee’s child who is under 26 years of age.
Affordable Coverage Safe Harbors
Employers face potential liability under 4980(H)(b) if the employer coverage is not affordable to an employee.
Coverage is affordable if the employee’s required contribution for self-only coverage does not exceed 9.5% of the employee’s household income.
Household income is defined as the modified adjusted gross income of the employee and any members of the employee’s family (including a spouse and tax dependents) who are required to file an income tax return
Recognizing that employers will generally not know an employee’s household income, the IRS outlined a proposed affordability safe harbor (referred to as the W–2 safe harbor) in prior notices. The proposed regulations provide two additional safe harbors for determining affordability.
W-2 Safe Harbor – An employer will not be subject to an assessable payment if the required employee contribution toward the self-only premium for the employer’s lowest cost coverage that provides minimum value, does not exceed 9.5 % of the employee’s W–2 wages.
Rate of Pay Safe Harbor – An employer can take the hourly rate of pay for each hourly employee and multiply that rate by 130 hours per month to determine a monthly “rate of pay.” The employee’s monthly contribution amount (for the self-only premium of the employer’s lowest cost coverage that provides minimum value) is affordable if it is equal to or lower than 9.5% of the computed monthly wage estimate. For salaried employees, monthly salary would be used instead of hourly salary multiplied by 130.
Federal Poverty Line Safe Harbor – An employer may also rely on a design-based safe harbor using the Federal Poverty Level (FPL) for a single individual. Coverage offered to an employee is affordable if the employee’s cost for self-only coverage does not exceed 9.5% of the FPL for a single individual. For example, in 2012 affordable coverage under this method would have been set at a monthly contribution in the lower 48 states of $88.43 for self-only coverage (FPL is slightly higher in Alaska and Hawaii)
Election Changes under Section 125 Cafeteria Plans
Employees enrolled in a non-calendar year Section 125 Cafeteria plan who are eligible on January 1, 2014 for subsidized coverage when purchasing health insurance through a public Exchange may wish to drop the employer plan during the plan year. However, current Section 125 rules would not permit a mid-plan-year election change in this situation.
The proposed regulations allow an employer to amend their Section 125 plan to permit this change. Interestingly, the rules do not require the employer to allow this election change. Some employers may be inclined not to permit such a change if an employee moving to subsidized individual coverage triggers employer liability under the shared responsibility rules.
Additional Guidance on Definition of Full-Time Employees
In August 2012 the IRS released significant guidance on defining an employee’s full-time status, including an optional look back measurement period and corresponding stability/eligibility period. The new proposed regulations clarify and expand on a number of issues related to these full-time employee rules.
The guidance clarifies that that an employer can use the standard look back measurement period each year to determine the full-time status of all ongoing employees. However, for new employees, an initial measurement period can be applied only to “variable hour” and seasonal employees. A plan may not have a waiting period of more than 90 days for all other employees expected to work 30 hours or more per week.
When determining eligibility for 2014, an employer who plans to use a 12-month measurement and stability period is allowed to use a shorter measurement period in 2013, which will apply to the 2014 stability period. However the 2013 one-time “short” measurement period must be at least 6 months long and begin no later than July 1, 2013.
An employee hired to work an average of at least 30 hours per week cannot be treated as a variable hour employee simply because they are hired into a high turnover position. These employees must be treated as full-time employees and can have no more than a 90-day waiting period before being eligible for coverage.
The guidance clarifies how hours of service must be counted toward an employee’s full-time status, including a requirement to count all paid leave as hours of service
These new ‘Interim Final Rules’ contain other miscellaneous guidance, including rules of special interest to staffing firms. One such set of “anti-abuse” rules is designed to limit an employer’s ability to use temporary staffing arrangements to avoid 4980(H) liability.
Extra Large Employers
Finally, ‘Extra Large
Employers’ that offer
health insurance to more
than 200 full-time
automatically enroll new
full-time employees in a
plan (and continue
employees). Many of
these ‘Extra Large
Employers’ offer ‘self
funded plans’ with ‘stop
loss arrangements’ and
points’. For now, these
employers are in luck
for they are EXEMPT from
many of the more onerous
regulations imposed by
the PPACA. For an
excellent break down of
the regulations these
employers are required
to comply with
visit this link.
is this expert’s opinion
that among the reported
regulations that have
been written since the
passage of the PPACA.
There will most likely
be regulations that
change the exemptions
that employers who offer
‘self funded’ plans
currently enjoy. As
begin to offer newly
designed ‘stop loss’
points’ to attract
smaller employers. In
is already a ‘PPACA
panel’ exploring this as
I write this article.
You can not get around the “Roberts Tax”
Let’s say you’ve read the above information and your brilliant mind starts devising an easy way out. For example, you decide it would be prudent to split up your company of 50 employees into 2 separate companies with 25 employees each. Great idea! The only problem is the Statist attorneys who helped craft the PPACA already thought of that.
The IRS will still consider both of your companies as one company. That’s because the ‘Robert’s Tax’ relies on “controlled group” provisions. These provisions focus on who controls the company. If you are the named owner of those 2 companies, the IRS will combine all employees under both corporations and hit you with the ‘Robert’s Tax’.
“Controlled group” provisions are meant to prevent skirting around the law” said Christopher Condeluci, a Washington D.C. attorney at the law firm Venable who helped draft the rule for the Senate Finance Committee. “These rules are intended to snuff out this type of abuse,” Condeluci said. “You cannot get around the employer mandate.”
Let’s say your a business owner who employs 50 or more employees at completely different companies. You have 25 employees at a car repair shop and 25 at a restaurant. You would have to provide insurance or pay the “Roberts Tax” at both, even though each or your separate company has less than 50 employees. Again, it’s the named owner of those combined companies that the IRS looks at under ‘controlled group’ provisions.
Worse yet, Married couples may also find themselves impacted by ‘controlled group’ provisions, since IRS law generally assumes an individual owns interest in their spouse’s business. Oh, it’ just keeps getting better doesn’t it?
Get ready for
more paperwork and new
Beginning March 1, 2013, employers must provide employees written notice of the following:
Of the existence of a PPACA “Health Insurance Exchange’
Of their potential eligibility for federal assistance if the employer’s plan is “unaffordable”
And that they may lose the employer’s contribution to health coverage if they purchase health insurance through a PPACA ‘Health Insurance Exchange’.
Besides the 20 new or higher taxes imposed by the PPACA which are listed at the end of this article. The non-partisan Government Accountability Office (GAO) compiled a list of 47 new regulations the IRS is empowered to administer in overseeing the PPACA.
1.) Prohibits group health plans from discriminating in favor of highly compensated individuals.
2.) Establishes a temporary reinsurance program to provide reimbursement for a portion of the cost of providing health insurance coverage to early retirees.
3.) Imposes a penalty on health plans identified in an annual Department of Health and Human Services (HHS) penalty fee report, which is to be collected by the Financial Management Service after notice by the Department of the Treasury (Treasury).
4.) Requires state exchanges to send to Treasury a list of the individuals exempt from having minimum essential coverage, those eligible for the premium assistance tax credit, and those who notified the exchange of change in employer or who ceased coverage of a qualified health plan.
5.) Provides tax exemption for nonprofit health insurance companies receiving federal start-up grants or loans to provide insurance to individuals and small groups.
6.) Provides tax exemption for entities providing reinsurance for individual policies during first 3 years of state exchanges.
7.) Provides premium assistance refundable tax credits for applicable taxpayers who purchase insurance through a state exchange, paid directly to the insurance plans monthly or to individuals who pay out-of-pocket at the end of the taxable year.
8.) Provides a cost-sharing subsidy for applicable taxpayers to reduce annual out-of-pocket deductibles.
9.) Outlines the procedures for determining eligibility for exchange participation, premium tax credits and reduced cost-sharing, and individual responsibility exemptions.
10.) Allows advance determinations and payment of premium tax credits and cost-sharing reductions.
11.) Authorizes IRS to disclose certain taxpayer information to HHS for purposes of determining eligibility for premium tax credit, cost-sharing subsidy, or state programs including Medicaid, including (a) taxpayer identity; (b) the filing status of such taxpayer; (c) the modified adjusted gross income of taxpayer, spouse, or dependents; and (d) tax year of information.
12.) Provides nonrefundable tax credits for qualified small employers (no more than 25 full-time equivalents (FTE) with annual wages averaging no more than $50,000) for contributions made on behalf of its employees for premiums for qualified health plans.
13.) Requires all U.S. citizens and legal residents and their dependents to maintain minimum essential insurance coverage unless exempted starting in 2014 and imposes a fine on those failing to maintain such coverage.
14.) Requires every person who provides minimum essential coverage to file an information return with the insured individuals and with IRS.
15.) Imposes a penalty on large employers (50+ FTEs) who (1) do not offer coverage for all of their full-time employees, offer unaffordable minimum essential coverage, or offer plans with high out-of-pocket costs and (2) have at least one full-time employee certified as having purchased health insurance through a state exchange and was eligible for a tax credit or subsidy.
16.) Requires information reporting of health insurance coverage information by large employers (subject to IRC 4980H) and certain other employers.
17.) Offers tax exclusion for reimbursement of premiums for small-group exchange participating health plans offered by small employers to all full-time employees as part of a cafeteria plan.
18.) Subjects new group health plans to certain Public Health Service Act requirements and imposes the excise tax on plans that fail to meet those requirements. (Conforming amendment)
19.) Authorizes IRS to disclose certain taxpayer information to the Social Security Administration (SSA) regarding reduction in the subsidy for Medicare Part D for high-income beneficiaries. (Conforming amendment)
20.) Requires the independent institute partnering with the National Academy of Sciences (NAS) to implement a key national indicator system to be a nonprofit entity under section 501(c)(3).
21.) Imposes a fee through 2019 on specified health insurance policies and applicable self-insured health plans to fund the Patient-Centered Outcomes Research Trust Fund to be used for comparative effectiveness research.
22.) Imposes a 40 percent excise tax on high cost employer-sponsored health insurance coverage on the aggregate value of certain benefits that exceeds the threshold amount.
23.) Requires employers to disclose the value of the employee’s health insurance coverage sponsored by the employer on the annual Form W-2.
24.) Repeals the tax exclusion for over-the-counter medicines under a Health Flexible Spending Arrangement (FSA), Health Reimbursement Arrangement (HRA), Health Savings Account (HSA), or Archer Medical Savings Account (MSA), unless the medicine is prescribed by a physician.
25.) Increases tax on distributions from HSAs and Archer MSAs not used for medical expenses.
26.) Limits health FSAs under cafeteria plans to a maximum of $2,500 adjusted for inflation.
27.) Imposes additional reporting requirements for charitable hospitals to qualify as tax-exempt under IRC 501(c)(3) and requires hospitals to conduct a community health needs assessment at least once every 3 years and to adopt a financial assistance policy and policy relating to emergency medical care.
28.) Imposes a fee on each covered entity engaged in the business of manufacturing or importing branded prescription drugs.
29.) Imposes an annual fee on any entity that provides health insurance for any U.S. health risk with net premiums written during the calendar year that exceed $25 million.
30.) Allows the deduction for retiree prescription drug expenses only after the deduction amount is reduced by the amount of the excludable subsidy payments received.
31.) Increases the threshold for the itemized deduction for unreimbursed medical expenses from 7.5 percent of Adjusted Gross Income (AGI) to 10 percent of AGA (unless taxpayer turns 65 during 2013-2016 and then threshold remains at 7.5 percent).
32.) Denies the business expenses deductions for wage payments made to individuals for services performed for certain health insurance providers if the payment exceeds $500,000.
33.) Imposes an additional Hospital Insurance (Medicare) Tax of 0.9 percent on wages over $200,000 for individuals and over $250,000 for couples filing jointly.
34.) Limits eligibility for deductions under section 833 (treatment of Blue Cross and Blue Shield) unless the organizations meet a medical loss ratio standard of at least 85 percent for the taxable year.
35.) Allows an exclusion from gross income for the value of specified Indian tribe health care benefits.
36.) Allows small businesses to offer simple cafeteria plans—plans that increase employees’ health benefit options without the nondiscrimination requirements of regular cafeteria plans.
37.) Establishes a 50 percent nonrefundable investment tax credit for qualified therapeutic discovery projects.
38.) Requires employers to provide free choice vouchers to certain employees who contribute over 8 percent but less than 9.8 percent of their household income to the employer’s insurance plan to be used by employees to purchase health insurance though the exchange.
39.) Imposes a tax on any indoor tanning service equal to 10 percent of amount paid for service.
40.) Excludes from gross income amounts received by a taxpayer under any state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health care services in underserved or health professional shortage areas.
41.) Increases the maximum adoption tax credit and the maximum exclusion for employer-provided adoption assistance for 2010 and 2011 to $13,170 per eligible child.
42.) Extends the exclusion from gross income for reimbursements for medical expenses under an employer-provided accident or health plan to employees’ children under 27 years.
43.) Imposes an unearned income Medicare contribution tax of 3.8 percent on individuals, estates, and trusts on the lesser of net investment income or the excess of modified adjusted gross income (AGI + foreign earned income) over a threshold of $200,000 (individual) or $250,000 (joint).
44.) Imposes a tax of 2.3 percent on the sale price of any taxable medical device on the manufacturer, producer, or importer
45.) Amends the cellulosic biofuel producer credit (nonrefundable tax credit of about $1.01 for each gallon of qualified fuel production of the producer) to exclude fuels with significant water, sediment, or ash content (such as black liquor).
46.) Clarifies and enhances the applications of the economic substance doctrine and imposes penalties for underpayments attributable to transactions lacking economic substance.
47.) Increases the required payment of corporate estimated tax due in the third quarter of 2014 by 15.75 percent for corporations with more than $1 billion in assets, and reduces the next payment due by the same amount.
What about that Small Employer Health Insurance Tax Credit?
The tax credit is available from 2010 through 2015. For 2010 – 2013 the maximum credit is 35% of qualified premium costs paid by for-profit companies, and 25% for non-profits. The maximum credit is only available to employers with no more than 10 full-time equivalent employees (FTE’s), who are paid average annual wages of $25,000 or less. A reduced credit is available on a phase-out basis for employers with between 10 and 25 FTE’s, who are paid average wages of $25,000 to $50,000. In effect, the credit is reduced by 6.667% for each FTE in excess of 10, and by 4% for each $1,000 in average annual wages paid above $25,000. For example, an employer with 13 full-time equivalent employees who are paid average annual wages of $45,000 will not receive a tax credit. No tax credit is available for employers with 25 or more FTE’s, or who pay average annual wages of $50,000 or more.
In 2014 through 2015, the credit increases to 50% of the amount of qualified premium costs paid by for-profits, and 35% for non-profits, however by then, the employer must participate in a state insurance exchange in order to obtain the credit. [Note: Each state is required to create an insurance exchange by January 1, 2014 which must include an American Health Benefit Exchange, as well as a Small Business Health Options Program (SHOP) Exchange.]
Have you noticed a common theme regarding the above new PPACA ‘Roberts Tax’ rules and regulations? That’s right, the fine for both the individual and for the employers is a fraction of the cost to purchase and maintain health insurance. This is not only why many employers will have a strong impetus to push their employees off of their health insurance plans but it is also why individuals will gladly pay the ‘Roberts Tax’ of $95 in 2014 (which graduates to $695 by 2016) instead of paying for a far more expensive health insurance plan. Worse yet, since the criminal fines (imprisonment) were removed from the PPACA legislation prior to passage. The only recourse that the Federal Government has to collect the ‘Roberts Tax’ is to hold one’s tax refund. Since nearly half of our nation pays no income taxes, how exactly will the IRS hold a tax refund from someone who pays no income taxes?! So, once again, who’s really going to be paying for all of this? That’s right! The few, the proud, the 53% of us who already pay all of the income taxes.
discussed the impact of
the “Roberts Tax” and
other issue pertaining
to the impact of the
PPACA on Small Business
owners for the Fox News
network on March 28,
Now that we’ve discussed the impact of the “Roberts Tax” on Individuals, Taxpayers and Business Owners. Let’s take a closer look at all of the 20 new or higher taxes levied upon taxpayers via the PPACA. Arranged by their respective effective dates, below is the total list of all $569 billion in tax hikes (over the next ten years) in the PPACA, where to find them in the bill, and how much your taxes were scheduled to go up based on initial projections by the CBO – Congressional Budget Office in the year 2010.
Taxes that took effect in 2010:
1. Excise Tax on Charitable Hospitals (Min$/immediate): $50,000 per hospital if they fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by HHS. Bill: PPACA; Page: 1,961-1,971
2. Codification of the “economic substance doctrine” (Tax hike of $4.5 billion). This provision allows the IRS to disallow completely-legal tax deductions and other legal tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owed. Bill: Reconciliation Act; Page: 108-113
3. “Black liquor” tax hike (Tax hike of $23.6 billion). This is a tax increase on a type of bio-fuel. Bill: Reconciliation Act; Page: 105
4. Tax on Innovator Drug Companies ($22.2 bil/Jan 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year. Bill: PPACA; Page: 1,971-1,980
5. Blue Cross/Blue Shield Tax Hike ($0.4 bil/Jan 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services. Bill: PPACA; Page: 2,004
6. Tax on Indoor Tanning Services ($2.7 billion/July 1, 2010): New 10 percent excise tax on Americans using indoor tanning salons. Bill: PPACA; Page: 2,397-2,399
Taxes that took effect in 2011:
7. Medicine Cabinet Tax ($5 bil/Jan 2011): Americans no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin). Bill: PPACA; Page: 1,957-1,959
8. HSA Withdrawal Tax Hike ($1.4 bil/Jan 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent. Bill: PPACA; Page: 1,959
Tax that took effect in 2012:
9. Employer Reporting of Insurance on W-2 (Min$/Jan 2012): Preamble to taxing health benefits on individual tax returns. Bill: PPACA; Page: 1,957
Taxes that take effect in 2013:
10. Surtax on Investment Income ($123 billion/Jan. 2013): Creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single). This would result in the following top tax rates on investment income: Bill: Reconciliation Act; Page: 87-93
*Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations. It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income. It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans. The 3.8% surtax does not apply to non-resident aliens.
11. Hike in Medicare Payroll Tax ($86.8 bil/Jan 2013): Current law and changes:
Obamacare Tax Hike
Bill: PPACA, Reconciliation Act; Page: 2000-2003; 87-93
12. Tax on Medical Device Manufacturers ($20 bil/Jan 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax. Exempts items retailing for <$100. Bill: PPACA; Page: 1,980-1,986
13. High Medical Bills Tax ($15.2 bil/Jan 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI). The new provision imposes a threshold of 10 percent of AGI. Waived for 65+ taxpayers in 2013-2016 only. Bill: PPACA; Page: 1,994-1,995
14. Flexible Spending Account Cap – aka “Special Needs Kids Tax” ($13 bil/Jan 2013): Imposes cap on FSAs of $2500 (now unlimited). Indexed to inflation after 2013. There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education. Bill: PPACA; Page: 2,388-2,389
15. Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D ($4.5 bil/Jan 2013) Bill: PPACA; Page: 1,994
16. $500,000 Annual Executive Compensation Limit for Health Insurance Executives ($0.6 bil/Jan 2013). Bill: PPACA; Page: 1,995-2,000
Taxes that take effect in 2014:
17. Individual Mandate Excise Tax (Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following
Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS). Bill: PPACA; Page: 317-337
18. Employer Mandate Tax (Jan 2014): If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees. Applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000. If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer). Bill: PPACA; Page: 345-346
Combined score of individual and employer mandate tax penalty: $65 billion/10 years
19. Tax on Health Insurers ($60.1 bil/Jan 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. Phases in gradually until 2018. Fully-imposed on firms with $50 million in profits. Bill: PPACA; Page: 1,986-1,993
Taxes that take effect in 2018:
20. Excise Tax on Comprehensive Health Insurance Plans ($32 bil/Jan 2018): Starting in 2018, new 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). Higher threshold ($11,500 single/$29,450 family) for early retirees and high-risk professions. CPI +1 percentage point indexed. Bill: PPACA; Page: 1,941-1,956
2012 updated CBO & JCT projections reflect a doubling of initial PPACA tax projections.
As is the case with nearly all Government data houses, initial projections are rarely on target. Now, less than 2 years after initial 2010 projections. The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) confirm what America already knew – that the Democrats’ health care law is actually a $1.058 trillion tax hike that families and employers simply cannot afford. The recent Supreme Court ruling left in place 21 tax increases enacted as part of that law, a dozen of which – marked with an asterisk (*) below – target Americans earning less than $200,000 per year for singles and $250,000 per year for married couples, in clear violation of the President’s pledge to avoid tax hikes on low- and middle-income taxpayers. According to the new CBO and JCT estimates, the gross tax increases in the law now total $1.058 trillion over 2013-2022. That new amount is nearly twice the “advertised” ten-year tax hike amount claimed when Democrats originally pushed the law through Congress.
Additional 0.9 percent payroll tax on wages and self-employment income and new 3.8 percent tax on dividends, capital gains, and other investment income for taxpayers earning over $200,000 (singles)/$250,000 (married)
“Cadillac tax” on high-cost plans *
Employer mandate *
Annual tax on health insurance providers *
Individual mandate *
Annual tax on drug manufacturers / importers *
2.3 percent excise tax on medical device manufacturers / importers *
Limit FSAs in cafeteria plans *
Raise 7.5 percent AGI floor on medical expense deduction to 10 percent *
Deny eligibility of “black liquor” for cellulosic biofuel producer credit
Codify economic substance doctrine
Increase penalty for nonqualified HSA distributions *
Impose limitations on the use of HSAs, FSAs, HRAs, and Archer MSAs to purchase over-the-counter medicines *
Impose fee on insured and self-insured health plans; patient-centered outcomes research trust fund *
Eliminate deduction for expenses allocable to Medicare Part D subsidy
Impose 10 percent tax on tanning services *
Limit deduction for compensation to officers, employees, directors, and service providers of certain health insurance providers
Modify section 833 treatment of certain health organizations
Other revenue effects
Additional requirements for section 501(c)(3) hospitals
Employer W-2 reporting of value of health benefits
1099 reporting for small businesses
Repealed by P.L. 112-9
Prepared by Ways and Means Committee Staff – July 24, 2012
1 Includes CBO’s $216.0 billion estimate for “Associated Effects of Coverage Provisions on Tax Revenues” and $6.0 billion within CBO’s “Other Revenue Provisions” category that is not otherwise accounted for in the CBO or JCT estimates.
Dr. Jill Vecchio breaks
down the impact of the
PPACA on employers:
Under a clause of President Obama’s health care law called the “Shared Responsibility Penalty“. Employers with 50 or more full-time employees – are now incentivized to reduce full-time worker hours to part-time hours. For many years, a full-time employee was considered an employee who works 40 hours or more per week. Now, because of a ‘new regulation’ written by HHS, a ‘full-time employee’ has been redefined as one who works 30 hours or more per week.
Under the PPACA, any employer with 50 or more full-time employees who does not offer PPACA approved MEC – “Minimal Essential Coverage” must pay an annual, non tax deductible penalty of $2,000 to the IRS for each full-time employee. Starting with the 30th full-time employee on up.
Beginning in 2014, full-time employees who are not offered MEC – ‘Minimal Essential Coverage’ through their employer and who are not eligible for Medicaid may be eligible for “Advanced Premium Tax Credits”. These ‘Advanced Premium Tax Credits’ will be provided by the taxpayer to artificially lower the extremely expensive coverage that will be provided in the new “Health Insurance Exchanges”.
The PPACA empowers the Internal Revenue Service to provide these ‘Advance Premium Tax Credits’ to childless adult individuals with incomes surpassing 138% and families making up to 400% of the FPL – Federal Poverty Level. Using 2012 FPL, this would mean that individuals making $42,680 annually and families making $92,200 would now qualify for an ‘Advance Premium Tax Credit’ in the new “Health Insurance Exchanges”.
On Wednesday, January 2, 2013 the IRS released proposed new regulations related to the PPACA “Employer Shared Responsibility” rules. There is important new information for employers to consider.
Beginning in 2014, an applicable ‘Large Employer” may be subject to a “Shared Responsibility Payment” under one of two different circumstances:
liable for a
- 4980H(b) liability – Applies if the employer does offer its full-time employees (and their dependents) MEC – Minimum Essential Coverage – but the plan is ‘unaffordable’. ‘Unaffordable’ means that the employer requires their full-time employees to contribute more than 9.5% of their annual adjusted house hold income towards the cost of self-only MEC coverage, and at least one full-time employee is certified as having received an ‘Advance Premium Tax Credit’ subsidy when purchasing individual health insurance through a public Health Insurance Exchange. In this case, the employer may be liable for a penalty of $3000 per year times the number of full-time employees who are certified to receive, and purchase, subsidized individual health insurance using an ‘Advance Premium Tax Credit’ through a public Health Insurance Exchange.
In summary, employers with 50 or more full-time employees must either pay 90.5% of the cost to provide extremely expensive PPACA approved MEC – which includes the “Essential Health Benefits Package“, 65 Preventative Care tests and must conform to ‘Community Rating’ and ‘Guaranteed Issue” clauses. It is important to note that these clauses have already destroyed the individual health insurance market in all 8 states they were implemented in. Or, the employer must pay a $2,000 fine for each full-time employee (excluding the first 30 full-time employees).
Or, the employer can simply move full-time employees to part-time employees (less than 30 hours). In doing so they would then avoid both the massive cost to insure everyone and the $2,000 fine for not doing so. Tell me, which action do you think employers will take?
Medicaid expansion places governors, tax payers and employers between a rock and hard place.
Arguably the only ‘good thing’ about U.S. Supreme Court Justice John Robert’s decision in July 2012 to not strike down the PPACA was his decision to provide governors a choice to expand their Medicaid rolls to the levels specified in the PPACA. In fact, this part of Robert’s ruling has been referred to by many as the only ‘silver lining’. In the end, however that perception depends upon who you ask. Many taxpayers are against the expansion because it will most certainly massively inflate state budgets all across the country. Many of which already point to Medicaid as their biggest line item.
Whether you use the Kaiser Family Foundation estimates, the Cato Institute estimates or the Congressional Budget Office. The expansion of Medicaid under the PPACA will put a significant new burden on the taxpayer. This is because the PPACA promises 100% matching federal Medicaid dollars for years 2014 through 2016 and 90% for years 2020 onward for states that elect to expand their Medicaid rolls. Even President Obama’s Medicare Actuary Charles Blahous doubts that promise. Most especially since the President’s own submitted budgets, as well as the bipartisan Simpson–Bowles Commission, and the budget resolution passed by the House of Representatives in 2012 already call for trimming Medicaid spending by a minimum of $100 billion.
And, unlike Supreme Court justice Elana Kagan who famously said during PPACA oral arguments: “It’s just a boatload of federal money to take and spend on poor people’s healthcare. It doesn’t sound very coercive to me.” We taxpayers realize that ‘a boatload of federal money‘ comes from taxpayers and taxes themselves are inherently coercive.
Whilst the Obama administration touts the fact that the PPACA calls for the aforementioned matching federal funding for those who will be newly eligible for Medicaid in 2014. It is far less vocal about the fact that it only provides the existing or Traditional FMAP percentage match rate for the millions of Americans who were always eligible for Medicaid but either never knew they were or never bothered to enroll. These ‘old eligibles’ will now be required by federal law to maintain ‘minimum essential coverage‘ via Medicaid. Which means that they will all be enrolling in 2014 in order to avoid problems with the IRS. How much will the Traditional FMAP federal percentage match be in 2014? In states like Illinois and others it will be only 50%.
Who picks up the other half? That’s right, the state tax payer. Keep in mind Illinois taxpayers that this new tax increase will be in addition to the 66.66% tax increase Governor Quinn already imposed upon you in January 2011 and the $350 million additional tax increase in May 2012. How much will picking up the other half of the cost to enroll ‘old eligibles’ cost Illinois taxpayers? See the chart below. I’ll bet it’s closer to the CATO institute’s estimate of $10.1 billion.
The Illinois Policy Institute predicts that 1 in 3 Illinois residents will be Medicaid recipients by 2019 if Governor Quinn’s desire to expand Medicaid under the PPACA becomes law in Illinois. Worse yet, on January 30, 2012, the Civic Federation released its “Budget Roadmap” for the coming fiscal year. In it, they highlight the fact that state officials now believe that the Illinois Medicaid program will have between $21 and $23 billion in UNPAID bills by 2017. ‘Forward’…. to bankruptcy.
However, that’s just the cost to Illinois taxpayers. How many people nationwide are ‘old eligibles’? This 2010 article in the New England Journal of Medicine estimates that number to be 9 million Americans. Total cost to the states to enroll all of these ‘old eligibles’ on to Medicaid nationwide will be $931 Billion according to the Congressional Budget Office’s latest assessment. Keep in mind that those CBO assessments are only for years 2014 through 2022. What many governors are concerned about is what such a new commitment will cost state tax payers after the first 8 years? Well, we know what will happen after the first 6 years because beginning in 2020 the 100% federal Medicaid match rate for newly eligible recipients drops to 90%. This means that state taxpayers will pick up the other 10%. That alone will add billions to state budgets. However, a far more important question governors should be asking is what happens after the first 2 years?
You see the PPACA’s answer to improving Medicaid is to raise the amount the federal government pays to doctors who take MedicAID patients to a level commensurate to what the federal government pays to doctors who take MediCARE patients. Their thought process behind doing so is that more doctors will accept Medicaid under this arrangement because the reimbursement rate will be far higher. There’s only one problem. The federal government only provides funding for this massive increase in Medicaid reimbursement ratios for the first 2 years. Afterward, state tax payers are on the hook for the rest.
This, more than anything else related to Medicaid expansion is a fiscal ticking time bomb for state budgets and one that is not being discussed nearly enough. Furthermore, just wait until hospitals – who are forced to treat emergency patients under EMTALA – start pressuring states for reimbursement of more than $11 billion in annual federal payment cuts for uncompensated care. Hospitals are a powerful lobbying force and they will lobby hard for that money.
GOVERNORS AND EMPLOYERS STUCK BETWEEN A ROCK AND A HARD PLACE
Recently Republican governors John Kasich of Ohio and Jan Brewer of Arizona and Rick Scott of Florida have decided to expand their Medicaid rolls under the PPACA. This has left many conservatives scratching their heads since both governors have been vocal public opponents of the PPACA. A closer look at the choice they faced sheds light on their decision. To understand it, we must first understand specifically how the PPACA expands Medicaid.
Prior to the passage of the PPACA, Medicaid was largely used to provide health care services to children of the indigent, their mothers, the disabled and seniors who spend down all their assets to qualify for long term care services. Under the new law childless adults will also be eligible for Medicaid with incomes at or below 133% of the federal poverty level – FPL. Since the PPACA disregards 5% of one’s income, the actual new eligibility level is 138% above the FPL. Using the Kaiser Family Foundation’s “Health Reform Subsidy Calculator” we can determine that a childless, adult would be eligible for Medicaid in 2014 if their annual income is at or below $15,302. For a family of four, their income would need to be at or below $31,155. This is a significant new burden on the taxpayer. Not only because 15.1 million childless adults would now be eligible for Medicaid but also because prior to the PPACA, Medicaid eligibility levels were set at 100% of the FPL. In 2012, that was $11,170 for an individual and $23,050 for a family of four in 48 contiguous states and D.C. It is this new annual income level ‘eligibility gap’. Specifically, income levels that fall within 100% and 138% of the FPL that creates yet another new problem for employers.
If a governor chooses to expand Medicaid under the PPACA, all of the newly eligible Medicaid recipients would simply be auto-enrolled onto Medicaid via the new ‘Health Insurance Exchanges’. And, since their income levels will be too low to qualify for a ‘Health Insurance Subsidy’. There will be no ramifications to employers if their employee’s annual income levels fall into this new ‘eligibility gap’. These new eligibles would simply enroll in Medicaid and eliminate the risk to their employers of being fined $2,000 annually for each of them under the PPACA “Employer Shared Responsibility” clause.
However, if a governor chooses not to expand Medicaid, employers in their state with 50 or more ‘full time equivalent’ employees would have to provide PPACA approved health insurance for all of their employees with income levels that fall into this new ‘eligibility gap’. Or else, pay a “Shared Responsibility” annual penalty of $2,000 for each employee (excluding the first 30 employees). Many employers will simply pay the annual penalty instead of providing PPACA compliant health insurance since the law mandates that employers can not require employees to pay more than 9.5% of their annual household income in cost sharing to help them pay for their health insurance. For example, if the cost to insure a single employee is $5,000 annually. The employer can not legally require the employee to pay more than $475 each year to help him/her pay for their health insurance coverage. This means the employer’s annual out of pocket cost to insure that employee would be $4,525. In this near future common scenario, paying the $2,000 ‘Employer Shared Responsibility’ penalty just makes better business sense.
Whilst certain Conservative governors may feel pressured to expand Medicaid because of the above scenario. It is crucial that they stick to their principles and not give in to requests from employers who are seeking relief on a micro level. For expanding Medicaid will do nothing but increase health insurance costs to everyone else, further burden taxpayers of other states. And, require employers to pay much more on a macro level as their tax burdens increase to pay for yet another massive entitlement.
Small Group Health Insurance can be a Small Business KILLER
I received a phone call at my agency on Friday by a client who is a friend of an attorney in Chicago who is paying $1,000 a month for individual employees on his group health insurance plan and nearly $3,000 a month for employees with dependents. And, he only has 5 employees. This phone call provided the impetus behind the following lengthy but valuable commentary.
Group Health Insurance – pros
Group health insurance provides ‘Guaranteed Insurability’ under 1996 HIPAA Portability law. This means that at the time of policy purchase – termed the ‘Initial Underwriting’ period – all applicants – regardless of their health history – must be provided ‘Guaranteed Insurability’. Meaning that the insurance company must cover each insured regardless of their medical history, height and weight, smoker status etc. And, depending on how long they have had continuous coverage prior to enrollment, the Group insurance policy either has to cover their preexisting conditions immediately – if they provide proof of continuous prior coverage of at least 18 months or more with no lapse in coverage of more than 63 days. Or, if they can not provide such proof, via a ‘Certificate of Creditable Coverage’ their preexisting conditions must be covered after a short waiting period, no longer than 12 months. That’s the pro part.
The con part is, in most states – like Illinois – the underwriter can increase the base health insurance premium required for that group by 67% based on one or more applicant’s adverse health history such as Cancer, Diabetes, Heart Attack, Heart disease etc. And, they can also increase the premiums by 1.25% each year that the employer owns that group policy. In some states like Indiana, underwriters can increase group premiums by as much as 108%. In other states, it’s as high as 300%.
Now, because all employees insured on a group health insurance policy are insured on the same policy, this 67% ‘Underwriting load’ is applied across the board to the premiums required to insure all those insured on the same group policy. Let’s say you have 5 attorneys insured on a small group policy. 4 are perfectly healthy with no adverse health history, normal height and weight and none are smokers. But, one employee is an overweight, diabetic smoker. Even though the 4 other employees are healthy. All of them will pay up to 67% more for their health insurance because they are on the same group policy as our morbidly obese smoker.
alternative to Small Group Health
What is the alternative to this common problem experienced by small employers all across the nation?
Very simple. Consider terminating your group health insurance policy. Here’s why I recommend doing so. Since you have less than 20 employees, you are under no obligation to provide Federal COBRA continuation coverage. And, under the aforementioned 1996 HIPAA Portability law, once your employees lose their group health insurance, they are immediately qualified to purchase another “HIPAA qualified” plan elsewhere on a guaranteed issue basis. Meaning, that they can not be denied coverage regardless of the severity of their preexisting medical conditions. Since we have had High Risk Health Insurance pools or guaranteed issue individual mandates in 45 states for many years, your employees with serious preexisting conditions are automatically qualified to purchase health insurance in one of these High Risk Health Insurance Pools because they have now lost their employer sponsored group health insurance ‘to no fault of their own’.
Risk Health insurance pools:
A high risk health insurance pool is nothing more than a pool of money that the state of Illinois requires insurers who operate in our state to contribute to in order to cover Federally eligible individuals - those who have lost Group health insurance coverage or have exhausted Federal COBRA coverage. Or, individuals who apply for an individual health insurance policy and are denied coverage due to a preexisting condition. In Illinois our high risk pool is called ICHIP. ICHIP is an acronym that stands for the “Illinois Comprehensive Health Insurance Pool” – www.chip.state.il.us
ICHIP is not Medicaid or any other federal or state entitlement program. It is instead a fully insured major medical health insurance policy issued to an individual applicant. High Risk pools are normally administered by the largest health insurance carrier in the state. In our state, that administrator is Blue Cross Blue Shield of Illinois. As such, all Illinois ICHIP policy holders carry a Blue Cross Blue Shield of Illinois insurance ID card and have access to hospitals, physicians, specialist and other Blue Cross PPO network providers. The difference is that whilst Blue Cross will apply their network PPO discounts to all claims that occur within the Blue Cross network. The ultimate payer of ICHIP policy holder claims is the state of Illinois High Risk health insurance pool - which also receives small Federal grants at certain points.
The process for enrolling in ICHIP:
In Illinois, the process involved for former Group insured applicants with adverse health histories to enroll in our state’s high risk health insurance pool is as follows:
The employer or group policy holder would write a signed ’letter of intent’ on company letterhead to ICHIP stating that is their intent to terminate their group health insurance policy for all employees as of a future date. That letter would be submitted to ICHIP along with that employee’s application. Once the employee is enrolled on ICHIP – again their enrollment is guaranteed – then the group is promptly terminated and the aforementioned ‘Certificate of Creditable Coverage” is submitted to ICHIP as proof that the former Group insured employee has had at least 18 months of prior coverage with no lapse in coverage of more than 63 days. This entitles them to immediate coverage for their preexisting conditions under the aforementioned 1996 Federal HIPAA Portability law
To view the
qualification requirements for
ICHIP’s Traditional, Medicare
and Federally qualified plans click:
To view the
ICHIP plans brochure click here:
To view the premiums required for all ICHIP plans click below and select “HIPPA” before running quotes: http://www.chip.state.il.us/rateinq.nsf/inquiry?openform
To view the
Blue Cross PPO network for ICHIP
plans click here:
Isolating your risk factors:
The ICHIP premiums for an individual may be similar or even higher than your current group premium for an individual insured - depending on the deductible you chose. However, the point here is that you are isolating your risk factor by insuring formerly insured group members who have adverse medical histories on ICHIP. This thereby allows you to ’free up’ other formerly insured group members and allows them to apply for individual health insurance policies which are always far less expensive because the rates are based upon the zip code demographic in which the applicant lives. This puts them into a pool of hundreds of thousands instead of only 5 people on one Small Group policy. In other words, your former employees who do not have adverse health histories will no longer be paying significantly more because they are insured on a Small group policy with an ‘underwriting load’ that is based on one person’s adverse health history.
Securing coverage for healthy employees without creating a taxable event:
One of the major problems with the American health insurance system is that we are still operating on out dated World War 2 era policies that allow employers to deduct their Group Health insurance premiums but do not allow individuals and families to do so when they purchase their own individual health insurance policy outside the Group arena. The solution to this is to put in place an FSA – Flexible Spending Account. Doing so allows the employer to pay for each employees health insurance policy premium – in whole or in part – without creating a tax liability for their employees. Doing so does not violate ERISA laws, Department of Labor laws or any insurance laws that exist now or will exist after 2014.
If you would like to begin the exploration process and find out how much premium this intelligent design option will save your company please contact us.
Health Insurance Tips &
Advice For Self Employed and Small
I have been a health insurance broker for more than 17 years now and every day I read more and more "horror" stories that are posted on the Internet regarding health insurance companies not paying claims, refusing to cover specific illnesses and physicians not getting reimbursed for medical services. Unfortunately, insurance companies are driven by profits, not people (albeit they need people to make profits). If the insurance company can find a legal reason not to pay a claim, chances are they will find it, and you the consumer will suffer.
However, what most people fail to realize is that there are very few "loopholes" in an insurance policy that give the insurance company an unfair advantage over the consumer. In fact, insurance companies go to great lengths to detail the limitations of their coverage by giving the policy holders 10-days (a 10-day free look period) to review their policy. Unfortunately, most people put their insurance cards in their wallet and place their policy in a drawer or filing cabinet during their 10-day free look and it usually isn't until they receive a "denial" letter from the insurance company that they take their policy out to really read through it. The majority of people, who buy their own health insurance, rely heavily on the insurance agent selling the policy to explain the plan's coverage and benefits. This being the case, many individuals who purchase their own health insurance plan can tell you very little about their plan, other than, what they pay in premiums and how much they have to pay to satisfy their deductible.
Excellent Health Insurance Advice from Dateline NBC
|Excellent Health Insurance Advice from Doctor Jennifer Ashton on the CBS Morning Show 4/9/09|
For many consumers, purchasing a health insurance policy on their own can be an enormous undertaking. Purchasing a health insurance policy is not like buying a car, in that, the buyer knows that the engine and transmission are standard, and that power windows are optional. A health insurance plan is much more ambiguous, and it is often very difficult for the consumer to determine what type of coverage is standard and what other benefits are optional. In my opinion, this is the primary reason that most policy holders don't realize that they do not have coverage for a specific medical treatment until they receive a large bill from the hospital stating that "benefits were denied." Sure, we all complain about insurance companies, but we do know that they serve a "necessary evil."
There are so many variables that consumers have to be aware of when it comes to buying health insurance. These variables, and confusing insurance terminology, are often difficult for the average consumer to understand which is why many small business owners actually put off looking for a new health plan until their rates have skyrocketed to the point that they can no longer afford the monthly premiums. Business owners, who find themselves in this position, often place a greater emphasis on how much the new plan will cost, rather than placing an emphasis on what benefits the new plan will actually offer.
Quite often, consumers that base their purchasing decision entirely on price, don't even realize that their new plan may not provide coverage for specific medical conditions or that the amount allotted for certain treatments may be extremely limited. And, it usually isn't until they receive a large bill from a medical provider which states that "claims were denied" that they realize that they made a critical mistake in plan selection.
As a small business owner, myself, who primarily deals with other small business owners, I have come to the realization that part of the problem is that it is extremely difficult for individuals purchasing their health plan on the open market to distinguish the difference among health plans. It is also equally difficult for consumers to determine what type of health insurance coverage they actually need for their particular situation.
Remember, there is a big difference between the type of health plan consumers actually "need" and the type of health plan consumers actually "want." Let me explain.
Recently, I have read many blog articles that seem to stress that consumers should purchase health plans that offer 100% coverage with a very low deductible. 100% coverage means that after the deductible is met, usually $250, the plan will pay 100% of all covered medical expenses.
Although I agree that these types of health plans have a great "curb appeal." I can tell you from personal experience that these plans are not for everyone, nor are they affordable.
Will a low deductible plan that offers 100% coverage offer the policy holder greater peace of mind? Probably. But is a low deductible health plan that offers 100% health insurance coverage something that most consumers really need? Probably not.
In my professional opinion, consumers must achieve a balance between four important variables; wants, needs, risk and cost when they purchase a health plan. Just like the car analogy, it is important for healthcare consumers to understand what type of health insurance benefits are automatically included or standard and which health insurance benefits are optional. For example, on most health plans, maternity and prescription drug coverage is optional.
With this in mind, if one is healthy, takes no medications and rarely goes to the doctor, do they really need a 100% plan with a $5 co-payment for prescription drugs if it costs them $300 dollars more a month?
Would it benefit a person to pay
$200 more a month to have a
90/10 plan with a $250
deductible, or should they
purchase an 80/20 plan with a
$2,500 deductible which allows
them to save $200 a month?
Wouldn't the 80/20 plan still
offer you adequate coverage?
Isn't it more cost effective to
put that extra $200 that would
be spent on insurance premiums,
totaling $2,400 per year in
their bank account,
"just in case"
they may get sick or injured and
might need to pay their $2,000
Isn't it smarter to keep your hard-earned money yourself, rather than pay higher monthly premiums to an insurance company for an illness or injury that may never happen?
This is just one example of consumer-driven health care. Another example is an HSA qualified HPHP. A HSA qualified HDHP (Health Savings Account qualified High Deductible Health Plan) may offer a more affordable healthcare option to individuals that are searching for a health plan with very low monthly premiums. Typically, these plans offer policyholders greater flexibility and control in where their health care dollars are spent. Plans often come with a fixed aggregate family deductible, which mean that a separate deductible does not have to be met for each family member on the plan.
In addition to the significant cost savings, policyholders can fund their Health Savings Account (HSA) to pay for routine medical expenses or alternative medical therapies, like acupuncture. Any money in the HSA that is not used for medical expenses can be rolled over to the next year and excess funds can be transferred to a tax deductible, tax deferred, interest bearing account, commonly referred to as a "Medical IRA." These types of health plans can offer tremendous tax advantages to policyholders. Not only can policyholders save money on their health insurance premiums, but they also can use this savings to build a nest egg for retirement. Many HSA administrators now offer thousands of no load mutual funds to transfer your HSA funds into so you can potentially earn an even higher rate of interest.
For more information on HSA qualified HDHPs, click here.
In my experience, I believe that individuals who purchase their health plan based on "wants" rather than "needs" feel the most defrauded or "ripped-off" by their insurance company and/or insurance agent.
In fact, I hear almost identical comments from almost every business owner that I speak to about health insurance.
Comments, such as:
"I have to run my business; I don't have time to be sick!"
"I think I have gone to the doctor 2 times in the last 5 years" .......and
"My insurance company keeps raising my rates and I don't even use my insurance!"
Again, as a small business owner myself, I can understand the frustration that many small business owners express. So, here is the $64,000 question:
Q. Is there a simple formula that everyone can follow to make health insurance buying easier?
A. YES. Become an INFORMED insurance consumer!
If you are wondering what I mean by this, let me explain:
Every time I contact a prospective client or call one of my client referrals, I ask that person a list of questions about their current health insurance policy. You know, that policy that is in their dresser drawer or filing cabinet.
That same policy that they bought to protect themselves and their family from that "worse case scenario" so they wouldn't have to file bankruptcy or lose their home due to unpaid medical debt.
That policy that they thought promised coverage for that $500,000 life-saving organ transplant, for the 40 chemotherapy treatments that they may have to undergo if they were diagnosed with cancer or the many months of physical and/or speech therapy that they might need to fully recover from a stroke.
Q. So, what do you think happens almost 100% of the time when I ask these individuals "BASIC" questions about their health insurance policy?
A. They almost always do not know the answers!
The following is a list of 10 Questions that I routinely ask a prospective health insurance client.
1. What Insurance Company are you insured with and what is the name of your health insurance plan? For example, Blue Cross Blue Shield-"Basic Blue."
2. What is your Calendar Year Deductible and would you have to pay a separate deductible for each family member if everyone in your family became ill at the same time? For example, the majority of health plans have a per person yearly deductible, for example, $250, $500, $1,000, or $2,500. However, some plans will only require you to pay a 2 person maximum deductible each year, even if everyone in your family needs extensive medical care.
3. What is your Coinsurance percentage and what dollar amount (stop loss number) is it based on? For example, a good plan design works this way. After you have satisfied your calendar year deductible, the insurance company will pay 80% ($8,000) and you will pay 20% ($2,000) of the first $10,000 in medical bills that you incur each year. This first $10,000 is termed the "stop loss number." After this brief sharing arrangement is over, the insurance company pays 100% up to the Maximum Lifetime Benefit, which is typically, $2-5 Million per insured for the rest of that calendar year. Then, everything starts over again on the first day of each subsequent calendar year. Stop loss numbers can be as little as $5,000 or $10,000 or as much as $20,000. However, be aware that there are some policies on the market that have NO stop loss number at all! Therefore, it is critical that you ask what your stop loss number is before you purchase a plan.
4. What is your Maximum Out of Pocket Expense per year? Keep in mind that the Maximum Out of Pocket Expenses per year includes all deductibles plus all coinsurance percentages plus all applicable access fees, service deductibles or other fees.
5. What is the Lifetime Maximum Benefit the insurance company will pay if you or someone in your family becomes seriously ill and does your health plan have any "per illness" maximums or caps? For example, some plans may have a $5 Million Lifetime Maximum, but there might be a benefit cap of $100,000 per illness. This means that you would have to develop many separate and unrelated life-threatening illnesses costing $100,000 or less to qualify for the $5 Million of Lifetime Coverage.
6. Is your plan a Schedule Plan, in that it only pays a certain amount for a specific list of procedures? For example, Mega Life & Health & Midwest National Life, endorsed by the National Association of the Self-Employed, (N.A.S.E.) endorses schedule plans under the name "Health Markets." Another one to watch out for is the AIM limited benefits plans:
7. Does your plan have Doctor Copays and are you limited to a certain number of doctor co-pay visits per year? For example, many plans have a limit of how many times you go to the doctor per year for a copay and, quite often the limit is 2-4 visits.
8. Does your plan offer Prescription Drug Coverage and if it does, do you pay a co-pay for your prescriptions or do you have to meet a separate drug deductible before you receive any benefits and/or do you just have a discount prescription card only? For example, some plans offer you prescription drug benefits right away, while other plans require that you pay a separate drug deductible before you can receive prescription medication for a copay. Today, many plans offer no copay options and only provide you with a discount prescription card that only gives you a 10-20% discount on all prescription medications. This is a dangerous policy design that can lead to catastrophic out of pocket expenses if you were to contract any one of a host of major medical conditions such as, Multiple Sclerosis or Rheumatoid Arthritis that require expensive outpatient maintenance medications which are usually not available in Generic form.
9. Does your plan have any reduction in benefits for Organ Transplants and if so, what is the maximum your plan will pay if you need an organ transplant? For example, some plans only pay a $100,000 maximum benefit for organ transplants for a procedure that actually costs as much as $500K or more. In addition, this $100,000 maximum may also include the cost of expensive anti-rejection medications that have to be taken after a transplant. If this is the case, the insured will often have to pay for all anti-rejection medications (a.k.a. Immunosuppressants) out of pocket. Keep in mind that these medications are among the most expensive medications which individuals requiring an organ transplant will have to take for the rest of their life.
10. Do you have to pay a Separate Deductible or Access Fee for each hospital admission or for each emergency room visit? For example, some plans, like the Assurant Health's "CoreMed" plan have a separate $750 hospital admission fee that you pay for the first 3 days you are in the hospital. This fee is in addition to your plan deductible. Keep in mind that many plans have benefit "caps" or "access fees" for out-patient services, such as, physical therapy, speech therapy, chemotherapy, radiation therapy, etc. Benefit "caps" could be as little as $500 for each out-patient treatment, leaving you a bill for the remaining balance if the fee for that particular service exceeds $500. "Access fees" are also additional fees that you are required to pay per treatment. For example, for each outpatient chemotherapy treatment, you may be required to pay a $250 "access fee" per treatment. So for 40 chemotherapy treatments, you would have to pay 40 x $250 = $10,000. Again, these fees would be charged in addition to your plan deductible.
Now that you have read the list of questions that I ask a prospective health insurance client, ask yourself. How many questions you were able to answer?
If you were not able to answer all ten, don't be discouraged. That does not necessarily mean that you are not a smart consumer. I am sure you comparison shop for everything else. Maybe you were just extremely confused by all of the insurance terminology or you had a "bad" insurance agent who did not take the time to really explain the type of coverage you were purchasing.
So how would you know if you dealt with a "bad" insurance agent? Because a "great" insurance agent would have taken the time to help you really understand your insurance benefits and s/he would have answered all of your questions about your health plan purchase BEFORE you signed on the dotted line.
Remember, insurance agents are
not different from any other
professional. There are "great"
insurance agents and brokers
that care about clients and
offer exceptional customer
service, and then there are
agents that avoid answering
questions and typically don't
return phone calls when clients
leave messages about unpaid
claims or skyrocketing health
Q. How do you know if you have a "great" agent?
A. A "great" agent will recommend a health insurance plan based on all four variables; wants, needs, risk and cost. A "great" agent gives you enough information to weigh all of your options so you can make an informed purchasing decision. And, lastly, a "great" agent looks out for YOUR best interest and NOT the best interest of the insurance company.
Another way to tell whether or
not you have a
"great" or a
insurance agent is to determine
how many of the ten questions
you were actually able to answer
without looking at your health
If you were able to answer all ten questions, you have a "great" insurance agent.
If you were able to answer at least seven out of ten questions, you probably have a "good" insurance agent. But, if you were only able to answer a few questions or less than seven out of the ten, you most likely have a "bad" insurance agent.
Always keep in mind that your
health insurance purchase is
just as important as purchasing
a house or a car, if not more
important. So don't be afraid to
ask your insurance agent a lot
of questions to make sure that
you understand what your health
plan does and,
does not cover.
If you don't feel comfortable with the type of coverage that your insurance agent suggests or if you think the price for the plan is too high, ask your agent if s/he can select a comparable plan so you can make a side by side comparison before you make a purchase.
And, always make sure that you read all of the "fine print" in your health plan brochure and please remember to take the time to read through your policy during your "10-day free look period."
Remember, if you don't understand something, or aren't quite sure what the asterisk (*) next to the benefit description really means in terms of coverage, call your insurance agent or contact the insurance company directly to ask for further clarification. Furthermore, make sure you take the time to perform your own research on the Internet.
For example, if you research Mega Life and Health and Midwest National Life Insurance Company, endorsed by the National Association for the Self Employed (NASE), you will find out that there have been multiple class action lawsuits brought against these companies since 1995. Many health insurance companies, especially the ones that have to pay huge insurance fines often change their name and target more unsuspecting consumers. In fact, today these companies are selling health insurance under the name "Health Markets."
So please perform your own due diligence and ask yourself, "Is this a company that I can trust to pay my health insurance claims?"
Additionally, find out if your agent is a "captive" insurance agent or an insurance "broker."
"Captive" insurance agents can only offer ONE insurance company's products. In contrast, an "Independent" agent or insurance "Broker" can offer you a variety of different insurance plans from many different quality carriers.
Over the years, I have developed
strong and trusting
relationships with my clients
and I am constantly developing
new clients through existing
client referrals. This
is partly because of my level of
insurance expertise and
primarily due to the level of
personal service that I provide.
Because personal service is extremely critical to building long-term client relationships, this is the main reason that I caution people to be very careful when using online quoting engines and online applications to buy health insurance on the Internet.
Again, in my professional opinion, there are too many variables to consider when shopping for health insurance. Therefore, I am a firm believer that a health insurance purchase requires the level of expertise and personal attention that only an insurance professional can provide. And, since it does not cost a penny more to purchase your health insurance through an independent agent or broker, my advice to you would be to use Ebay and Amazon for your less important purchases and to use a knowledgeable, ethical and reputable independent agent or broker for one of the most important purchases you will ever make....your health insurance policy.
Lastly, if you have any concerns
about an insurance company,
contact your state's Department
of Insurance BEFORE you buy your
policy. Your state's Department
of Insurance can tell you if the
insurance company is registered
in your state and can also tell
you if there have been any
complaints against that company
that have been filed by
Also, if you suspect that your agent is trying to sell you a fraudulent insurance policy, for example, you have to become a member of a union to qualify for coverage, or s/he isn't being honest with you, your state's Department of Insurance can also check to see if your agent is licensed and whether or not there has ever been any disciplinary action previously taken against that agent.
In closing, I hope I have given you enough information so you can become an INFORMED insurance consumer and you can understand why "The Best Policy Is A Great Agent." Whatever decision you make in regards to your health insurance, please always remember to heed the following words of wisdom.
"If it sounds too good to be true, it probably is!" ..........and
"If you only buy on price, you get what you pay for!"
What Do Women Really Want? Watch The Video Below To Find Out.
COBRA Stimulus has ended. What are your Health Insurance options now?
If you are one of the many American's who elected to take advantage of a 65% reduction of your COBRA continuation premiums under the "American Recovery and Reinvestment Act Of 2009" your reduced COBRA premium would have increased substantially in the month of December 2009 when the "Cobra Stimulus" was originally planned to come to an end. However on December 21st 2009, President Obama signed an extension to the ARRA "Cobra Stimulus" which continues the 65% reduction until February 28th. 2009: Following are the key provisions of the COBRA subsidy extension:
The amount of time an AEI can receive a subsidy increases from nine to 15 months.
The subsidy eligibility period is expanded to include the period that begins with September 1, 2008, and ends with February 28, 2010 (formerly December 31, 2009). Significantly, the new rule does not require that COBRA coverage begin by the end of the period (February 28). Instead, the person is an AEI as long as the COBRA qualifying event (involuntary termination of employment) occurs by February 28, 2010 and is entitled to COBRA coverage as a result of that event.
For any AEI for whom the premium subsidy now applies due to the extension, there is a transition period consisting of any period of coverage that begins before the extension's enactment date. Any period during which the applicable premium had been paid is to be treated as a period of coverage, irrespective of any failure to timely pay the applicable premium for such period.
Plan administrators must provide a notice on extension rights to AEIs who did not timely pay the COBRA premium for any period of coverage during their transition period or paid the full (non-subsidized) premium without regard to the subsidy rules. The notice must be provided within the first 60 days of their transition period, and must include information on the ability to make retroactive premium payments as a result of the transition period.
In the case of any premium for a period of coverage during an AEI's transition period, an AEI shall be treated for purposes of any COBRA provision as having timely paid the premium amount if he or she: (a) was covered under the COBRA coverage to which such premium relates for the period of coverage immediately preceding the transition period; and (b) pays, not later than 60 days after the extension enactment date (or, if later, 30 days after the new notices are provided) the amount of the subsidized premium.
In the case of an AEI who, during his or her transition period, paid the full premium amount for such coverage without regard to the subsidy amount, ARRA's rules allowing for that AEI to be reimbursed for the excess premiums will apply.
Plan administrators must provide notices of the new extension rights to individuals who became AEIs on or after October 31, 2009, or experience a qualifying event (consisting of termination of employment) relating to COBRA coverage on or after that date. The notice must be provided within 60 days after the extension's enactment date or, in the case of a qualifying event occurring after the enactment date, consistent with the timing of COBRA notices.
The question that everyone is asking now is, "If I can't afford my Cobra premium once the Stimulus expires what are my options?" Kimberly Langford at Kiplinger's Personal Finance discusses:
|Excellent Advice on what to do after your Cobra subsidy ends from Kimberly Lankford at Kiplinger's Personal Finance on CNBC May 16th, 2009|
As Kimberly mentions, there are several lower cost alternatives to paying high priced COBRA continuation premiums. Depending on what State you live in, there may be other health insurance options that you can select when you first lose your job, when your 9 month subsidy expires or when COBRA finally runs out at the end of 18 months. They are as follows:
1.) State Continuation of Coverage
3.) Small Group Health Insurance Plan
4.) State Risk Pool Coverage
Let's take a look at these alternative plans:
1. The first option is "State Continuation of Coverage." This option can only be elected when you first lose your employment. State Continuation of Coverage does not follow Cobra continuation laws, it does however allow you to continue your employer sponsored group coverage for up to 9 months even if your former employer employed less than 20 employees. This law does not apply to self-funded plans, so make sure to check with your State's Department of Insurance to see if your State mandates State Continuation of Coverage.
2. The second option, an "Individual Health Insurance Policy" is typically the best and most affordable alternative for relatively healthy individuals. An individual health plan can be purchased at any time and is a great way to maintain many of the same kinds of benefits that you had through your former employer sponsored group health plan.
However, an Individual Health Insurance policy has to be "underwritten" before it is issued. During the "underwriting" process, the insurance company scrutinizes the applicant's health history to determine if it will extend an offer for insurance coverage. This process allows the insurance company to "decline" coverage to applicants with serious pre-existing or chronic medical conditions or to modify the coverage it extends to the applicant.
Today, the "Individual" health insurance market has become quite competitive; therefore, many insurance carriers are willing to offer health insurance coverage to individuals with certain controlled pre-existing medical conditions, like high blood pressure or high cholesterol.
Other times, the insurance company will offer the applicant coverage, but will refuse to cover a specific body part or pre-existing condition. In these cases, the insurance company issues what is known as an "exclusion rider." An exclusion rider is a way for the insurance company to exclude coverage for a specific body part or a specific medical condition (e.g. right knee, uterine fibroids). Exclusion riders can be permanent (body part or condition excluded from coverage for the life of the policy) or temporary, (body part or condition excluded from coverage for a specific period of time.)
Often, if an exclusion rider is placed on a body part and the insured receives no further treatment on that body part or if the rider is in place to exclude a pre-existing medical condition and the insured's condition completely resolves, the policyholder can request that the insurance company remove the exclusion rider from the policy. Typically, requests to remove a rider can be made after one or two years. Ultimately, the insurance company will make the final decision on whether the exclusion rider will be removed.
An HSA qualified HDHP (Health Savings Account qualified High Deductible Health Plan) may offer a more affordable consumer-driven healthcare option to individuals that are searching for a health plan with very low monthly premiums. Typically, these plans offer policyholders greater flexibility and control in where their health care dollars are spent. Plans often come with a fixed aggregate family deductible, which mean that a separate deductible does not have to be met for each family member on the plan.
In addition to the significant cost savings, policyholders can fund their Health Savings Account (HSA) to pay for routine medical expenses or alternative medical therapies, like acupuncture. Any money in the HSA that is not used for medical expenses can be rolled over to the next year and excess funds can be transferred to a tax deductible, tax deferred, interest bearing account, commonly referred to as a "Medical IRA." These types of health plans can offer tremendous tax advantages to policyholders. Not only can policyholders save money on their health insurance premiums, but they also can use these savings to build a nest egg for retirement. Many HSA administrators now offer thousands of no load mutual funds to transfer your HSA funds into so you can potentially earn an even higher rate of interest.
For more information on HSA qualified HDHPs, click here.
3. The third option is a "Small Group Health Insurance Plan." This type of plan can be purchased immediately and might just be the answer for those individuals that that have been "declined" coverage for an "Individual" health plan. It might also be another option for individuals who are looking for coverage without an "exclusion rider" on a pre-existing medical condition. This is so because group health insurance provides "guaranteed insurability," which means that all applicants and their families will receive health insurance coverage for all pre-existing medical conditions. However, the price can be exorbitant. Most States allow the insurance company to place an "underwriting premium load" as high as 67% on to a Small Group Health Insurance plan specifically because they can not exclude coverage for pre-existing conditions. In Indiana that load can be as high as 108% and in Michigan as high as 300%. Make sure to ask your Broker or Agent what the maximum underwriting load allowance is in your State BEFORE you apply for a Group Health Insurance Plan. In most States you must have a corporate Tax I.D. number and one other person (employee, Business Partner or Spouse) to enroll in the Group Health Insurance Plan with you. There are States such as Colorado that have "Self Employed Groups of One". Check with your Broker or Agent for more information on what is available on a Guaranteed Issue basis in your State. Or call your State's Department of Insurance.
On a Small Group Health Insurance plan, a large portion of the monthly premiums are determined by the health status of those individuals participating in the plan. This is important to remember as your company grows. Even if only one individual has a serious medical condition, that individual's condition is likely to adversely affect everyone's health insurance premiums. This means that even healthy group participants will pay a higher monthly premium. It may also mean that premiums can increase dramatically (up to the aforementioned 67% or higher) if someone covered on the group plan develops a serious condition or if an individual with a serious medical condition is hired at a later date.
The main advantage of a Small Group Health Insurance Plan is that it provides seamless continuation of coverage for those individuals who have pre-existing conditions such as Diabetes or Cancer providing that they have a minimum of 18 months of prior continuous health insurance coverage with no lapse in coverage of more than 63 days.
4. The fourth option is a "State Insurance Risk Pool." This option is primarily for individuals who have serious medical conditions and who have been "declined" individual health insurance coverage. Many states, but not all, provide individuals with pre-existing conditions the opportunity to obtain seamless continuation of health insurance coverage after their COBRA continuation expires, or if they lost their employer sponsored group coverage due to a policy cancellation and they were unable to obtain an individual health insurance policy on the open market because of their pre-existing conditions.
State Insurance Risk Pools often offer immediate coverage to individuals with pre-existing conditions that would normally render them "uninsurable" on the individual health insurance market. To qualify for a State Insurance Risk Pool, applicants must have elected Cobra continuation coverage and exhausted that Cobra continuation coverage for the full 18 months. Or, they must have lost their former employer sponsored group health insurance coverage through NO FAULT OF THEIR OWN. Meaning, that the employer cancelled the group health insurance policy altogether, thereby leaving the former employee with no Cobra (or State) continuation options. Although Risk Pool coverage is also available to those who have been "declined" coverage on an Individual Health Insurance policy, there is usually a 6 or 12 month waiting period before pre-existing conditions will be covered. There can also be waiting lists for this second type of State Risk Pool Coverage. To find if your State has a State High Risk Insurance Pool, click here
Ten Questions You Should Ask Your Agent Before You Buy A Policy
If you are a business owner, self-employed or an employee of a company that is not offered medical coverage through your employer, you may have to undertake the frustrating, daunting and time consuming task of purchasing health insurance on your own. If this is the case, there are certain things that you can do become an informed consumer so you can ensure that you are purchasing the type of health insurance coverage you really need at a price you can afford.
When you purchase a health
insurance plan, it is
important that you balance
wants, needs, risk and cost, before you spend your money.
Although you may "want" a health plan that offers you 100% coverage and a $5 Copay for prescription medications, you may not "need" this type of health plan if you are healthy, take no medications and do not have any significant health related "risk" factors.
Since a 100% health plan will "cost" significantly more than an 80/20 Plan, it may not be in your best interest to pay higher monthly premiums for 100% coverage if you are currently healthy.
Although no one knows exactly when they will actually use their insurance coverage, considering these four key variables prior to purchasing a health plan is a good rule of thumb.
It is also critical for health insurance consumers to understand that all plans, even 100% Plans, have some form of coverage limitations. Knowing what your policy DOES NOT cover, is more important than knowing what it DOES cover.
Many plans also have a separate deductible for emergency room visits. These deductibles are in place to discourage policyholders from using the emergency room as a doctor's office. Typically, these ER deductibles are waived if the patient is admitted to the hospital.
The following is a list of 10 key questions that should help health insurance consumers to better understand the coverage limitations of the plans they are considering purchasing. Make sure you ask your insurance agent these questions BEFORE purchasing a health insurance policy.
1. What insurance company do you represent and are you a "captive" agent, "independent" agent or an insurance "broker?" "Captive" agents represent ONE insurance company's products only.
An "independent" agent or insurance "broker," on the other hand, typically represent many quality insurance carriers and can sell a variety of different insurance products without any contractual restrictions.
BEWARE! Dealing with a "captive" agent may limit your choices, since these agents can only sell that particular insurance company's health plans.
2. What is the plan's calendar year Deductible and would I have to pay a separate deductible for each family member if everyone in my family became ill at the same time? The majority of health plans have a per person calendar year deductible, for example, $250, $500, $1,000, or $2,500. Some plans are designed so in a "worse case scenario" only two family members will have to pay their deductible in any given calendar year.
BEWARE! Some plans will require each person in the family to pay their calendar year deductible. This can be a huge financial burden if everyone in the family was involved in an accident or if members of the family became ill at the same time. Many plans have a separate drug deductible before the plan will pay for any medications. Make sure you know what deductibles you will be responsible for before you buy a health plan.
3. What is the plan's Coinsurance percentage and what Stop Loss Number is this percentage based on?
These percentages are typically based on a specific dollar amount, known as the "stop loss number." Here's where it get's tricky. Quite often, health insurance plans have different "stop loss numbers".
I have seen some plans that have a "stop loss number" as low as $2,000 and as high as $25,000 or some with none at all.
Let's figure out the insured's maximum out of pocket on an 80/20 plan that has a $1,000 deductible and an 80/20 split of the first $5,000 ("stop loss number.")
$1,000 + 20% of $5,000 ($1,000) = A Maximum Out of Pocket of $2,000.
Now, let's figure out the insured's maximum out of pocket on an 80/20 plan that has a $250 deductible and a $10,000 "stop loss number."
$250 + 20% of $10,000 ($2000) = A Maximum Out of Pocket of $2,250. (Note: Total does not include any separate "service deductibles" or access fees. Many low quality plans also have these.)
Again, after this brief 80/20 cost sharing with the insurance company, also know as a the coinsurance percentage split, most major medical plans will pay 100% of in-network covered charges up to the Lifetime Maximum amount that is specified in the policy.
BEWARE! Some policies on the market are sold with NO stop loss, but still list a coinsurance percentage. Therefore if you purchase an 80/20 with no stop loss, you will actually be paying 20% of all of your medical bills each calendar year. So unless you want to be responsible for 20% of all of your bills, make sure you find out what the "stop loss number" is BEFORE you purchase a health plan!
4. What is the plan's Maximum Out Of Pocket Expenses per year? This expense is a total of all deductibles, plus all coinsurance percentages, plus all applicable "access fees", "service deductibles" or other "fees" outlined in your policy.
BEWARE! Quite often agents neglect to tell prospects about hidden fees, so make sure you have a good grasp on the basics, like deductibles, coinsurance & stop loss numbers. Always ask about additional "fees" BEFORE you purchase the plan!
5. What is the plan's Lifetime Maximum Benefit if I become seriously ill and does the plan have any "per illness" maximums or caps? The majority of health insurance plans have a two million or five million dollar Lifetime Maximum Benefit. The Lifetime Maximum Benefit is the maximum amount the insurance company will pay if you or someone in your family becomes seriously ill.
BEWARE! Some policies will stipulate that there is a maximum benefit cap of $100,000 per illness. This means that you would have to develop many separate and unrelated life-threatening illnesses costing $100,000 or less to qualify for the five million dollar Lifetime Maximum Benefit. Mega Life & Health, Midwest National Life a.k.a. Health Markets, formerly U.I.C.I., endorsed and promoted by the National Association for the Self Employed (N.A.S.E) and the Alliance for Affordable Services are known for selling "schedule" plans with "per illness caps."
6. Is the plan a Schedule Plan, in that it only pays a certain amount for a specific list of procedures? Some health plans only pay a specific dollar amount for certain procedures, despite the fact that the procedure often cost more than the plan stimulates.
BEWARE! Mega Life & Health, Midwest National Life a.k.a. Health Markets, formerly U.I.C.I., endorsed and promoted by the National Association for the Self Employed (NASE) and the Alliance for Affordable Services are known for selling "schedule" plans.
7. Does the plan have unlimited doctor copays or is there a limited number of doctor copay visits allowed each year? Many quality plans have no limit on the number of times you can use your doctor copay.
BEWARE! Several plans have a limit of how many times you can go to the doctor each year for a Copay. Quite often, the limit is 2-4 visits per year.
8. Does the plan offer Prescription Drug Coverage and if it does, what type of coverage? Some plans offer prescription drug benefits on both generic and brand name medications right away. Other plans will require you to pay a separate outpatient prescription drug deductible before you can obtain your prescription medication for a Copay.
BEWARE! Today, many plans offer NO outpatient prescription drug Copay options. Typically, these plans only provide the insured with a discount prescription card which only offers the insured a 10-20% discount on prescription medications. This can lead to catastrophic out of pocket expenses to the insured.
9. Does the plan have any reduction in benefits for Organ Transplants and if so, what is the maximum the plan will pay out for an organ transplant? The majority of quality major medical plans treat organ transplants as any other illness. This means that the insurance company will cover the insured until the Lifetime Maximum Benefit of the plan is reached. Again, in most cases, this Lifetime Maximum is five million dollars. You should accept no less than one million dollars of coverage for Organ Transplants.
BEWARE! Today, some plans only pay a $100,000 maximum benefit for organ transplants. Plans that offer limited organ transplant coverage are extremely risky, since organ transplant procedures often range in the neighborhood of $350-$500K. In addition, it is not uncommon for a transplant patient to need a second organ transplant. Keep in mind, that the $100,000 maximum payment for organ transplants on many plans also includes the cost of expensive anti-rejection medications. If you have an organ transplant, you will quickly reach the $100,000 maximum benefit, which means that you will be required to pay for costly anti-rejection medication out of pocket. This can lead to catastrophic out of pocket costs to the insured.
10. Does the plan have any separate "services deductibles" or "access fee" for each hospital admission or for each outpatient test? Some plans, like Assurant Health's "CoreMed" plan have a separate $750 hospital admission fee for the first three days of each hospital stay. These hospital admission fees may also be called "Access Fees" on other policies. Typically the insured is responsible for paying these access fees for each hospital admission in addition to their calendar year health plan deductible.
BEWARE! "Access fees" and "service deductibles" are separate from your plan's calendar year health plan deductible. Be aware that many plans now have benefit "caps" or "access fees" for out-patient services, such as, physical therapy, speech therapy, chemotherapy, radiation therapy, etc. These "benefit caps" could be as little as $500 for each out-patient treatment, which will leave the insured responsible for the remaining balance that is over $500.
Again, "access fees" are additional fees that you may have to pay per treatment before the insurance company will pay the provider. These fees can quickly add up. For example, if you need to have 40 outpatient chemotherapy treatments, and you must pay a $250 "access fee" per treatment, you would have to pay an additional 40 x $250 = $10,000.
Remember, purchasing a health plan is the most important purchase you will ever make. Insist that your insurance agent explain to you exactly what your health plan does and does not cover and take the time to read the "fine print" in the plan brochure and ask questions about terminology you don't completely understand.
In addition, when you receive your health insurance policy in the mail, don't just detach your insurance cards and place them in your wallet or purse and then throw your insurance policy in your desk drawer or filing cabinet. Take the time to sit down and read your policy page by page.
Once you receive your policy, you have a 10-day free look period, so if your coverage is not what you thought you purchased, you have time to call the insurance company and cancel the policy without incurring any fees.
Finally, if your being pitched a health plan that seems to good to be true (e.g. all pre existing conditions are covered, the plan is significantly cheaper than all other plans) contact your state's Department of Insurance BEFORE you buy the policy. Your state's Department of Insurance can tell you if the insurance company is registered in your state and can also tell you if there have been any complaints against that company that have been filed by policyholders.
Remember, if you suspect that your being scammed or you think the agent is trying to sell you a fraudulent insurance policy, (e.g. you have to become a member of a union to qualify for coverage) your state's Department of Insurance can also check to see if any prior disciplinary action has been previously taken against that agent.
Don’t Fall Victim To A Health Insurance Scam 10 Red Flags To Watch Out For
In today's fast paced world, business owners don't often have the time to thoroughly check out the companies they rely on to provide goods and services. In many cases, a determination of product/service quality can be made at the time goods are delivered or services are rendered. If goods or services do not meet expectations, there is often an immediate remedy available. For example, poor quality goods can be shipped back to the supplier and/or payment for services can be withheld until services are satisfactorily rendered.
Unfortunately, business owners do not always purchase items that are tangible items, in the sense that they can immediately determine the quality of the goods and/or services at the time of purchase. One example of such a purchase is health insurance. Since health insurance is not usually used immediately after purchase, the quality of care or the legitimacy of the policy may not even come into play until the business owner, or a family member, actually needs to have medical treatment. This is one of the primary reasons that many companies, often appearing legitimate, can get away with selling bogus health insurance coverage to unsuspecting business owners.
In most cases, fraudulent health insurance policies are sold to business owners by telemarketers or "agents" through bogus Associations and Unions. In that, the buyer must join a professional and/or trade association or become a union member to qualify for health insurance. In fact, in a study published by the U.S. General Accountability Office (GAO) in 2004, the GAO found that association schemes ranked at the top of the marketing methods followed by bogus health insurers. According to the report, "Employers and Individuals Are Vulnerable to Unauthorized or Bogus Entities Selling Coverage, between 2000 and 2002, the U.S. Department of Labor and state insurance regulators identified 144 unauthorized entities selling health insurance unlawfully. These entities defrauded 15,000 employers and more than 200,000 policyholders out of $252 million."
However, it is important to mention that many individual and group health insurance products are endorsed by reputable Associations, such as the AARP and the American Bar Association and, many reputable Unions, such as the AFL-CIO and the Teamsters. These organizations have long been recognized for bringing a common class of professionals or citizens together for other purposes that have very little to do with health insurance. Membership commonly includes a wide range of other benefits in addition to discounted health insurance. Typically, the organizations have a governing organization, a constitution and bylaws, a set of officers, voting rights, regular membership meetings and a professional code of conduct.
Unfortunately, most individuals do not find out that they were making hefty monthly payments or premiums to fraudulent Associations or Unions until they have a severe condition that requires medical treatment. Usually, it isn't until after they receive treatment that they receive notice from their medical provider that the claim that was submitted to the insurance company was denied and that all the medical charges that were incurred are now their responsibility.
Often, the scheme starts when business owners are contacted by telephone or approached by someone who claims to represent a certain, official sounding, Association or Union. The business owner is then informed that if s/he becomes a member of the Association or joins the Union, s/he could qualify for a low cost group or individual health insurance plan. Typically the Association or Union is promoted to represent self-employed individuals and small business owners. The low cost health insurance is usually presented as one of the many "perks" that the business owner can qualify for, in addition to many other "member" benefits, like discounts on other services, such as dental, eyeglasses, office supplies, hotels, rental cars, etc.
In many instances, these bogus companies involve licensed health insurance agents to sell their fraudulent health insurance products. Sometimes the "agents" know the products are fraudulent, other times, the "agent" also falls prey to the scheme. Often, the schemes prey upon consumers who have been previously declined insurance coverage or suffer from a pre-existing condition. Since these consumers have very limited options to purchase private health insurance coverage, the benefits of an Association or Union membership that offers health insurance coverage for a "membership fee" or "union due" is enticing. To the unsuspecting consumer that has a pre-existing medical condition or is paying high premiums for coverage, the "membership fee" or "union due" is a small price to pay for what they believe will be a quality health plan that provides "guaranteed" coverage with no "pre-existing condition exclusions" and no "waiting periods."
In many circumstances, the print materials that are left with the consumer are very well designed, however, the majority of the time, the language in the "health plan brochure," if there is one, is very unclear. The literature may name the entity that is authorized to act as the health plan administrator of the plan, but neglect to name the actual insurance company that is providing the health insurance coverage. Unfortunately, it is often difficult for the consumer to separate the illegitimate companies selling official sounding health plans from the legitimate ones. Typically fraudulent health plans have many commonalities.
Here are 10 "Red Flags" that may indicate health insurance fraud:
1.) The "agent" is not a licensed insurance agent but an "enrollment" or "membership" coordinator.
2.) The term "discount plan" is written in the product literature, but the term health plan, health insurance or policy is frequently used by the plan promoter. Discount plans often provide nothing more than a discount for medical services, such as prescription medications, eyeglasses, dental, etc. These plans are not designed to offer major medical health insurance coverage.
3.) The official sounding "Association or Union" is one that you have never heard of before.
4.) The plan is referred to as an ERISA plan. The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that allows employers to set up employee benefit plans for employees and their dependents. ERISA plans are not subject to state regulation and are not regulated by the state insurance commissioner. ERISA plans are normally not sold as health insurance, but are instead, established by employers, unions or groups acting on behalf of employers. Therefore, unsuspecting buyers believe these plans actually offer health insurance coverage, when if fact, they do not.
5.) The buyer is told that the "membership fee or union dues" includes the health insurance premium, but there is no mention of the word "premium" in any of the plan literature.
6.) The plan offers "guaranteed" insurance coverage with no exclusions for "pre-existing conditions" and no "waiting periods."
7.) The plan is significantly cheaper in price than other health insurance plans.
8.) The term "reinsured" is used in regards to the plan. Reinsurance is something insurance companies buy to protect themselves against their own risks. It is insurance for insurance companies. Licensed insurers rarely have their agents mention any of their reinsurance arrangements during a sales presentation.
9.) The Association or Union is comprised of members from all walks of life and/or requires its members to state that they belong to a certain trade, class or group of professionals that they have no affiliation with, for example, the Association or Union is said to be comprised of "Food and Beverage" workers, but "Florists" and "Machinists" are allowed to enroll as members.
10.) If the Association or Union is said to have a special arrangement with a health insurance company, a plan administrator or another third party that has designed the plan using a legal "loophole" that allows members to purchase health insurance at a discounted rate or to purchase a individual or group health insurance policy.
So how can you protect yourself from falling victim to a fraudulent insurance scam? Make sure you contact your state's department of Insurance to determine if the health insurance company and the third-party administrator are licensed to do business in your state and make sure that the "agent" selling the plan is a "licensed health insurance agent." Additionally, make sure that health insurance company has been approved to sell the particular policy that is being offered. Since it may be difficult to tell if fraud is involved, always put off buying your health insurance policy until you have had the opportunity to perform your own due diligence.
If you are one of the 46.6 million Americans that have joined the ranks of the uninsured, what you may not know is that you may have to pay more for your medical treatment than your privately insured counterparts. If those without insurance get sick, they usually have to pay much more for the same medical services, since insurance companies can negotiate discounts with doctors, hospitals, pharmacies, and others health care providers. This means that the average uninsured working man or woman who suffers a mild heart attack can be stuck with a hospital bill that is in excess of $30,000 compared to the $10,000, negotiated rate, which is charged to an insured patient's private insurance carrier. In many cases, uninsured individuals are charged 3-4 times more for the exact same medical treatment that is administered to patients with private insurance.
Additionally, uninsured patient with huge medical bills are usually aggressively pursued by collection agencies and new bankruptcy laws make it extremely difficult to discharge medical debt. If you don't have health insurance coverage, you have a 25% greater chance of developing a life-threatening disease or condition than those with health insurance. Here are some startling statistics from the National Institute of Medicine (IOM) - an arm of the National Academy of Sciences:
Lack of health insurance causes 18,000 unnecessary deaths per year
Adults without health insurance coverage have a 25% greater chance of dying from a disease or condition than those with health insurance coverage
The nation spends $65 to $130 billon a year in lost resources because of diminished health and premature deaths relating to uninsured Americans
Today, there are more uninsured Americans than any point in history. According to the U.S. Census Bureau, approximately 15.9 percent of Americans are walking around without health insurance coverage and paying for medical expenses out of pocket. Although treatment for a sore throat or broken ankle can be a manageable medical expense for some families, more expensive treatments like surgery or chemotherapy can be financially devastating. If you are the type of person that wouldn't risk driving your vehicle without car insurance, consider the fact that there is a statistically greater chance that you will suffer from an illness or injury than an auto accident.
© Copyright 2000 S.B.I.S. Inc.
© Copyright 2000 S.B.I.S. Inc