HSA for America Hosts New Webinar on How Health-care Reform Changes Coverage

July 5th, 2013

HSA for America is hosting a new Health Care Reform webinar on July 9 at 7 pm EST. Long-time health savings account expert Fred Adams will answer live questions about how leading private health insurance companies are conforming existing policies to comply with health-care reform. Free registration is available to the public at http://www.HSAforAmerica.com/teleseminar.htm.


People who purchase their own health insurance face many challenges in 2014. They must have a government approved plan, or pay a tax penalty. Many people will not be able to keep what they have, and will have to convert to a new plan next year. Many people will be facing significant rate increases, and some will qualify for government subsidies to help them pay for coverage.


After a brief overview, callers will be able to talk live with Adams about specific coverage questions. Participants will also receive a complementary bonus report titled “6 Smart Strategies to Keep Your Health Insurance Premiums Low.”


One key strategy involves health savings accounts. With one of these accounts, taxpayers are exempt from the requirement that they spend at least 10 percent of annual income on medical costs in order to claim a tax deduction. Many expenses that are not covered by insurance, from dental care to the cost of “alternative medicine,” can be used to reduce taxable income.


People may also claim a deduction for health savings account deposits not needed for health care expenses. Those funds can double as a retirement account because they earn untaxed interest or dividends like traditional retirement accounts.


This year, individuals under age 55 may shelter $3,250 from taxes, and families may shelter $6,450. Those who are at least 55, may shelter an extra $1,000.


Webinar participants must register to reserve their space, and may join the webinar online or via telephone. HSA for America receives regular updates from the leading health insurance companies regarding changes to existing coverage and what new options will provide. The webinar is a chance to clarify what’s happening to health insurance next year and what types of coverage will be available in October.


About HSA for America:


As the nation’s leading independent HSA expert, HSA for America has earned a reputation for providing superior educational resources for individuals, families and small businesses. With its comprehensive website, the public can evaluate health insurance plans that allow them to establish an HSA.


People may access HSA for America’s instant quote engine and online applications at http://www.HSAforAmerica.com/ or request individualized assistance. Confidential consultations regarding HSA plans and Health Reimbursement Arrangements may be arranged by calling 1-866-749-2039 from 9 AM through 11 PM Eastern.


Guidelines for selecting an HSA administrator based on fees and investment options are also available at http://www.HSAforAmerica.com/admins.htm.


Why 2014 Rates Are Not Really “Lower Than Expected”

May 30th, 2013

You may have seen the headlines, such as this one from the Washington Post:


“California’s likely health insurance rates under new law are lower than expected”


California announced to great fanfare that insurance premiums in 2014 would range from 2% higher to 29% lower than in 2013.


This was greeted with surprise by many of the economists that were predicting higher rates in 2014. I was pretty skeptical myself. And of course, many of the supporters of the healthcare reform law were crowing.


And as it turns out, it was a fraud.


What the state actually did was compare 2013 small group rates, to 2014 individual rates. Group rates are always much higher than individual rates. An analysis by Lanhee Chen published in Bloomberg.com, showing that the actual rate increase a 25-year-old male might expect for comparable coverage is 38 to 53 percent.


The other under-reported news out of California is that several prominent health insurers have decided not to participate in California’s market. These include the nation’s largest health insurance company, UnitedHealth, along with Aetna and Cigna. Generally speaking, less competition will lead to higher premiums.


There is about to be a massive public relations campaign, where certain government officials and their advertising agencies will spend our tax dollars to convince everyone what a good deal they are getting – and reminding them the punishment they will face if they refuse to participate.


The fact that the state of California would have the audacity to put out this kind of fake comparison – simply in order to make things look better than they really are – hints at the kind of spin and distortion that is likely to be coming our way very shortly.

Obama’s Plan to Restrict the Size of Your HSA

April 29th, 2013

budget cutsIn President Obama’s recent budget proposal, he proposed capping tax-favored retirement accounts at $3 million.  No contributions would be allowed if the account value is over this amount.  This wording is from page 18:


Prohibit Individuals from Accumulating Over $3 Million in Tax-Preferred Retirement Accounts. Individual Retirement Accounts and other tax-preferred savings vehicles are intended to help middle class families save for retirement. But under current rules, some wealthy individuals are able to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving. The Budget would limit an individual’s total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, or about $3 million for someone retiring in 2013. This proposal would raise $9 billion over 10 years.”


This prohibition would apparently apply to all of your tax-favored accounts, including IRAs, Roth IRAs, 401ks, pension plans, and HSAs.


What is “Reasonable”


In this proposal, President Obama wants to restrict you to what he considers to be a reasonable retirement funding of $205,000 per year (much less than that which he will retire on). One can easily argue that the $205,000 limit is not at all a reasonable limit. It is estimated that the average couple will need $270,000 just to cover medical expenses during retirement.  But many couples, particularly those with chronic conditions needing long-term care, are way above average.  For instance, nursing home care can easily cost $150,000 a year or more.


And inflation can quickly wipe out the value of a $205,000 annuity. If you are fortunate to live another 30 or 40 years in retirement, that $205,000 may eventually be worth just $50,000 a year in today’s dollars.


Unforeseen circumstances such as the need to support a family member, or sustain business losses, or expenses involving any number of potential disasters, may further one’s need for money.


As technology progresses, tomorrow’s seniors will face a multitude of expensive life-extending and life improving options.  But I wouldn’t count on the government paying for it all. In fact, their response to the problem will be to ration what is covered.  Consider that your 95 year-old body might be needing some serious medical attention that you’ll need to pay for out-of-pocket, and there goes the rest of your bingo spending money.


But really, trying to figure out how much is “reasonable” is not the question to ask. The government should not even be deciding what is a reasonable amount of retirement savings, and then trying to put a cap on it. It is your life, and only you have the right to determine, for yourself, what is a “reasonable” amount for you to be spending each year.


The Wrong Incentives


Social Security is basically structured as an unstable Ponzi scheme.  According to Congressional Budget Office calculations, the fund will run out of money by 2031, just 18 years from now.  And the 2012 Medicare Trustees Report projects Medicare running out of money in just 10 years. So now, more than ever, it is important to encourage people to save for their own future, rather depending on government to provide for them.


The answer is not to punish the savers and inhibit how people can prepare for their retirement.  Instead, legislation should encourage savings, and offer even more tax incentives to help people put away money for future years.  For instance, HSA contribution limits should be substantially raised, and should be made available to all.


A nation of savers and investors, with money in their IRAs, 401ks, and HSAs, is a strong nation. Our future lies not in increasing dependency on government to provide for our retirement and our medical care. Instead, let’s do everything we can to encourage everyone to save for future medical and retirement expenses in these tax-favored accounts.  We’ll all be better for it.

Recent News About Obamacare – Here’s What You May Have Missed

April 10th, 2013

obamacareEveryone has an angle or bias.  Here is mine: I want to take this complicated topic of healthcare reform, and distill it down so you can understand to what it means to you.  I’m finding that much of the information I’ve been sharing has come as a surprise to many of my readers, and I think I now know why-


The major media is not covering the story.  Here’s some of what you may have missed.


Major Tax Repealed


33 Senate Democrats joined 45 Republicans in voting to repeal a 2.3 percent sales tax on medical equipment.  This law would not only have been damaging to medical equipment makers, but it would have raised medical costs for us all.  According to the Media Research Center, ABC, CBS, and NBC all chose not to cover this


Sebelius Admits that Premiums May Rise


Secretary of Health and Human Services admitted that many people will be paying higher premiums on the new healthcare plans that begin in 2014.  This is the first time that an administration official has admitted that premiums will go up, not down, on at least some policyholders.  This was also not covered by any of the big 3 networks.


Society of Actuaries Release Study Predicting 32 Percent Rate Increase


This study estimates rates will rise as high as 80 percent on some policyholders (young males, likely).   This membership and educational organization of nearly 17,000 actuaries was formed in 1889, and regularly releases research analyzing public policy issues.  Once again, there was no mention of this study by the 3 major networks.


Group Health Insurance Exchanges Being Delayed Until 2015


In a move that may portend what is going to happen in the individual market, the administration announced that this system of exchanges will not be ready in time to implement for 2014.   They are still planning on moving forward with individual exchanges, though.


At a recent conference we were at, Henry Chao, heading up the technological implementation of the individual exchanges, expressed great doubt that they would be ready.  “Let’s just make sure it’s not a third-world experience”, he said.


All of this is bad news for the healthcare reform law.  But I have a feeling we’re in for a much more dramatic – and visible – mess, as we get closer to 2014.

Group Plans Will Offer HSAs With Higher Deductibles

April 5th, 2013

good news!The Affordable Care Act (ACA) states that health insurance deductibles will be lowered to $2,000 per person, or $4,000 per family, in group plans. But a deductible that low would change the structure of an HSA plan you already have, making it less favorable as an investment tool and a security against health emergencies.


Employers Will Run from ACA Regulations


Actually, employers are likely to switch to HSA-qualified plans with even higher deductibles… That’s because there’s a loophole in the law.


The fact is the ACA cannot lower the deductible on Health Savings Accounts that far and still allow a plan to meet other conditions of the law. It’s true that the law states in one area that a group plan should have a maximum deductible of only $2,000 for an individual. But the law also says the following in another section:


“Section 1302(c)(2)(C) of the Affordable Care Act directs that the limit on deductibles described in section 1302(c)(2)(A) for a health plan offered in the small group market be applied so as to not affect the actuarial value of any health plan…we propose that a plan may exceed the annual deductible limit if it cannot reasonably reach a given level of coverage (metal tier) without doing so.” (The emphasis is mine.)


In other words, the law waffles, stating that the deductible can be raised above $2,000 if the actuarial value of the plan won’t meet the minimums for a bronze plan, for example.


The Simple Meaning of “Actuarial Value”


You’re going to hear the term “actuarial value” more in the news in coming months, so here’s what it really means. It means that the government figures the amount of money that a typical policyholder will receive in medical services in an average year—that’s the actuarial amount.


Then, the metal tiers in the ACA pay different percentages toward meeting that value; for example, the bronze tier pays for 60 percent  of the actuarial value—60 percent of the yearly amount that the average policyholder spends. And the policyholder pays the other 40 percent.


Good News for HSA Policyholders


But the math simply doesn’t work to create the actuarial value if the deductible is set at the low $2,000 level on an individual bronze plan. So people will be allowed to purchase a policy with a higher deductible, such as an HSA plan.


This is good news, because HSA plans typically cost at least 30 percent less in premiums than traditional copay plans. And having been in the HSA business since they first became available in 2004, we know that people with Health Savings Accounts spend their money carefully, because it is their own money.  With an HSA you also have a tax-advantaged savings account to pay for services when you need them most—and to grow into an additional retirement account if you stay healthy.


What’s interesting to me is that our high-deductible HSA plans will meet the guidelines of the ACA better than the typical plans that the law proposes. The wisdom of saving money for yourself and building it tax-free is clearer and clearer, and real reform is still possible if more people do this.

A Lot of Talk About Rate Increases

April 1st, 2013

rate increasesI’ve been talking for a long time about how rates are going to be going up as the “Affordable” Care Act gets further implemented. And gradually, the truth is coming into clearer focus for more and more people.


Last week the Society of Actuaries released a study that predicts a 32% increase in claims cost under the new healthcare reform law. They believe that the large number of sicker people entering the market will drive this increase in claims.


Unfortunately for everyone in the individual market, this is going to further drive up premiums. To the shock of many, Kathleen Sebelius actually admitted the same. She told reporters “there may be a higher cost associated with getting into that market”.


She also noted that people will receive government subsidies to help pay for their health insurance: “But we feel pretty strongly that with subsidies available to a lot of that population that they are really going to see much better benefit for the money that they’re spending.”


She didn’t seem to even consider the millions of hard-working middle-class citizens who are buying their own health insurance, without having someone else pay for it. These are of course the same citizens who are paying the taxes that fund these subsidies.


And lastly, she admitted that young people will pay even higher premiums in order to subsidize older policyholders; and that men would pay more in order to subsidize women’s premiums.


The big question related to this issue, is whether the young, the males, the healthy – are going to be willing and able to pay these higher premiums. Those who don’t will have to pay a tax-fine in 2014 ($95, or 1% of income).


If large numbers opt out, those still in are paying even more.


The administration is hoping that competition among insurance companies will bring down premiums. But all signs are that competition will actually decrease, as it becomes more difficult for smaller insurance companies to manage the more highly regulated business climate.


The very best option at this point remains going with a high deductible HSA plan, fully funding it, and paying for it (if you qualify) through your Health Reimbursement Arrangement. If you currently have a grandfathered plan, consider keeping it.

Obamacare Will Swamp the IRS

March 30th, 2013

Many people have heard there will be 20 new taxes under Obamacare. But the actual amount of new taxes and regulations is 47.


These include penalties on employers who don’t offer the right coverage to their employees, higher income taxes for certain employees, and the elimination of certain tax deductions people use. But of course there are many more we don’t have space for here.


The Real Problem with 47 New Taxes and Regulations


The IRS won’t be able to keep up with all the new audits that will be required on these new taxes and regulations, according to the Treasury Inspector General for Tax Administration, J. Russell George.


Mr. George testified to the House Appropriations Committee on March 5, 2013, stating, “It is unprecedented in recent history, the amount of responsibility the IRS is being given in an area that most people don’t think of as an IRS function.”


He explained that U.S. citizens will practically overrun walk-in and call-in tax centers with questions about new tax penalties and credits. “This is going to lead to problems, sir,” he stated.


Mr. George continued, “They have to determine what enforcement mechanisms they’ll employ…how they go about determining who to audit and who not to.”


In other words, this large increase in their workload will lower the IRS’s ability to pursue tax fraud. They’ll have to calculate the costs and benefits of auditing various people and simply make a choice, allowing some to go free and some to be prosecuted. So some fraudsters will go free because the IRS doesn’t have enough time.


The Truth of the Testimony–and Why it Matters


Mr. George intimately understands the IRS’s workload, because he oversees 800 agents who provide independent oversight of the IRS.


It’s not easy to investigate about 100,000 IRS employees. Among other duties, his people investigate IRS employees who ask for bribes or who misuse citizens’ private information. Also, Mr. George reports directly to Congress, to our lawmakers, who depend on him to understand the state of affairs at the IRS.


If Mr. George believes that these new taxes are too much for the IRS to handle, that raises an important question: how can Obamacare work if the IRS can’t even keep track of collecting taxes to fund it?


Preparing for the Future


I’ll be paying close attention to how this plays out. And, while the government determines how to solve their problems, I am holding on to my grandfathered HSA plan for as long as possible, legally saving money and watching it grow tax-free for medical emergencies and for retirement.

How Rates On Young People Will Be Affected By Obamacare

March 8th, 2013

The official name of the health care reform legislation that President Obama signed into law in 2010 is the Patient Protection and Affordable Care Act.  This has led many to believe that health insurance premiums will go down.  Unfortunately this is not the case, particularly for younger policyholders.


This is going to be a surprise for many people.  In 2009, supporters of the proposed law were bringing out economists that were actually claiming that the law would cause health insurance costs to go down.  President Obama was claiming that the law would “bring down premiums by $2,500 for the typical family”.


Young Must Subsidize the Old


Most experts are now expecting premiums to increase 30 – 50 percent, on average.   But for the younger policyholders (who are more likely to be healthy and less likely to need their coverage), premiums will be going up a lot more.


This is because the law states that an insurance company can charge an older policyholder no more than three times what they charge a younger policyholder.  Since the typical 64-year old has way more than three times as much health care spending than the typical 18 -ear old, it is the 18-year old is going to be the one paying for it.


Some early projections are showing that starting in 2014, a new plan may cost as much as 300% what it does now, for a young male in his mid-twenties.  The big questions is – will young people be willing to pay this much?


Potential Death Spiral


When the government manipulates pricing so that something costs more or less than it is really worth, there are always unseen consequences.  One possibility is that young people will choose to go without coverage.  In 2014, they will only face a $95 penalty for not having coverage, so this may be an option that many take.


If that happens, then premiums will have to go up more on everyone else, since we don’t have the young healthy policyholders to foot the bill.  If that were to happen, the entire system could collapse.


Congressmen Jim Matheson (D-UT) and Phil Gingrey (R-GA) have introduced H.R.455, which would change the age rating band from 3:1 to 5:1, or allow states to determine their own age band.  (In reality, there should be no age band, and young people should not have to subsidize older policyholders).


What Should You Do


You will not be required to purchase a new plan until the anniversary date in 2014 of your existing plan.  So you may want to hold on to your current plan, or get a new plan prior to the beginning of the year.


If you have coverage that initially went into force prior to March 23, 2010, it is considered to be a “grandfathered” plan, and you will not be required to purchase a new plan.


If you do have to get a new plan, and are under age 30, you can choose a catastrophic plan that will cost less (we don’t know how much less, yet).


Finally, if you currently have coverage with us we will be providing you details about your options as that information becomes available.

Health Care Reform and Smokers Insurance Rates

March 5th, 2013

smoking cessationOne of the promises of the health care reform laws that take effect starting in 2014 is that people can no longer be declined or charged more because of pre-existing health conditions.  Even if you are morbidly obese, have diabetes, or are an alcoholic – you cannot be denied or charged more.  The one group that can be charged a premium though, is smokers.


The law allows health insurers to charge smokers up to 50 percent more for their health insurance.   This is on top of rate increases that are already expected to exceed 30 to 50 percent or more.


People who are covered under group plans can avoid the penalty by joining a smoking cessation program.  But once again purchasers of individual health insurance are discriminated against in this area, and do not have this option.


Tax Credits and the Smoking Penalty


Tax credits will be available to help people that are making less than 400 percent of the federal poverty guidelines pay for their health insurance.  But these tax credits can not be used to pay the smokers penalty.


It is expected that older smokers will be charged the highest smoking penalty.  Because premiums will be going up substantially due to the mandates of the health care reform law, this could mean a smoking penalty of $5000 a year or more.  Many smokers will probably find health insurance completely unaffordable starting in 2014.


Use Your HSA to Pay for Smoking Cessation Classes


Of course, quitting smoking is a great idea. If you have a Health Savings Account, you can withdraw money from that account tax-free to pay for smoking cessation counseling or classes.  However, you cannot use the money to pay for over-the-counter medications like nicotine gum, without a prescription from your doctor.

Higher Deductible HSA Plans Will Be Available

March 4th, 2013

availableThere has been concern and confusion over whether HSA plans will still be available in 2014, and at what deductible level.


The answer is Yes, HSA plans will remain available.  Deductibles on individual plans should be similar to what they are now, though in some states maximum deductibles may be as low as $4500 or so for an individual (compared to $6250 now).


Deductibles on Group Plans


For group plans, the legislation sets the maximum deductibles at $2000 for individuals, and $4000 for families.  For this reason alone, many small groups may instead let their employees get coverage in the individual market.


However, this is in conflict with another part of the law, which states that people can choose a Bronze, Silver, Gold, or Platinum plan.  The bronze plans have a 60 percent actuarial value, meaning they will pay 60 percent of a typical policyholders medical bills during an average year.  This actuarial value cannot be reached with a deductible as low as $2000.


On page 70,671 of the law (yikes!), there is a regulation that allows deductibles to go higher:


“(3) A health plan’s annual deductible may exceed the annual deductible limit if that plan may not reasonably reach the actuarial value of a given level of coverage as defined in § 156.140 of this subpart without exceeding the annual deductible limit.”


So this is good news for all – high deductible HSA plans look like they’re here to stay.

Why You Will See Fewer Doctor Choices Under Obamacare

February 17th, 2013

health insuranceAs I’ve discussed before, the Affordable Care Act is going to (perhaps ironically) cause health insurance to become less affordable for most people.  One way insurance companies may try to counteract these rising costs is by narrowing the number of available doctors and hospitals that policyholders can use.


Return of the HMO


In the 1980s, Health Maintenance Organizations, or HMOs, were promoted as a way to keep rising health costs under control.  The way they attempted to do this was to require policyholders to go to a primary care physician first, before they could see any specialist.  Only when the primary care physician approved a visit to a specific specialist, would the care be covered under the policy.


The primary way the HMO tried to reduce expenses was by limiting coverage, and allowing policyholders to only see a small set of physicians that had contracted with the HMO.  As you can imagine, most of these plans became highly unpopular as people had to jump through hoops to get their health care.


With the full implementation of the health care reform law in 2014, these narrow networks are coming back.


Why Networks Will Be Smaller


Starting in 2014, everyone who does not have a grandfathered health insurance plan that went into effect before Obama signed the act into law March 2010 will have to switch to a new government-approved plan.  And, it looks like most of the PPO networks will be much smaller than those currently available to most policyholders.


As you can imagine, the reason smaller networks save insurance companies money is because the companies contract with the least expensive providers.  So, as a policyholder, if you have a major or complicated health situation, you may end up not being able to see the physicians that may offer you the best chance of a successful outcome.


Another reason carriers will be offering less attractive networks is because they will want to discourage the most unhealthy applicants for applying for coverage.  Starting in 2014, anyone can purchase health insurance, regardless of pre-existing conditions.  An insurance company trying to avoid business is one of the perverse consequences of this misguided law.


What This Means to You

If you are one of the millions of people that will be forced to choose a new plan in 2014, in addition to your new premium, you should make sure your physician is in the network, and then look at the size of the network itself.  The plans with the most narrow networks are likely to be least expensive, but balance the money saved against the increased risk you’ll face in a smaller network.


The reason I carry health insurance is to protect against the major unexpected health situations that can wipe out my savings.  I’m not too worried about paying for checkups.  If something major does happen, I want to be able to go to the best doctors out there.


This may not be possible even in the best networks, which is why I’m happy to have a sizable savings built up in my Health Savings Account.   But, I’m still going to be looking very closely at any changes in the PPO network I have access to as I move into 2014.


For all clients of HSA for America, we’ll be sharing detailed information about network availability as that information becomes available.

Why Are Rate Increases Happening Now?

February 13th, 2013

health care dollarsThe past few years, we have seen low price increases on medical care, with costs growing less than 4 percent a year over the past three years.   Though various political groups may want to take credit, the main reason that medical inflation has slowed is the sluggish economy.  People are getting laid off, cutting costs, and putting off medical care.  As demand drops, so do prices.


So… why are health insurance rates increasing?


Health insurance rates have been increasing substantially, all across the country.  Ten- to 20-percent rate increases are not uncommon right now.  Some people are attributing this to “greedy” insurance companies, but the situation is actually not so murky.


As families look for ways to cut their costs in a slowing economy, one item that may end up on the chopping block is health insurance.  People who are in good health and not using their coverage much may decide to take a chance, but people with chronic health conditions are more likely to keep their coverage.


As healthy people drop their coverage and unhealthy people retain insurance, the average health of the pool (all those covered) goes down, and the people still insured use more services.  Thus, the rates increase.


What This Has to Do with The Potential Collapse of Obamacare


The next implementation of the Affordable Care Act in January of 2014 will eliminate most underwriting by insurance companies.  Anyone will be able to sign up for a plan, regardless of pre-existing conditions.  An increase in unhealthy people in the insured pool will put further upward pressure on premiums.


In an effort to counter this math, Obamacare is requiring all healthy people to purchase coverage.  It is also requiring the youngest (and generally healthiest) applicants to pay higher premiums in order to subsidize the premiums of older policyholders.  I will not be surprised to see premiums double or even triple for young men.


This system may work out (well, except for the young healthy people facing the biggest rate increases) – but only if everyone plays the game.  If enough people drop out and decide not to carry coverage, then rates further increase for everyone else.


If that happens, then look out.  We could have a big mess on our hands.

Should You Keep Your Grandfathered Health Insurance Plan?

February 9th, 2013

grandfathered health insurance plansGrandfathered plans may be the most misunderstood part of health care reform. If you bought a policy before health care reform was enacted, it’s not subject to all the new mandates. That’s all the term “grandfathered” means in this case. Whether you keep one of these policies or upgrade to a new policy can make a world of difference in your health care. Here are the main questions you need to consider.


Would You Benefit from More Fully Covered Health Care?


Grandfathered plans do not have to cover recommended preventive health care. These services are recommended specifically because research shows they help prevent major medical problems, and major expenses, in the long run.  But keep in mind that you are paying for this extra coverage, and many people may be better off with a less expensive plan, and paying for their own preventive care.


How Do My Current Premiums Compare to New Plans?


A grandfathered plan could offer lower premiums because it doesn’t have to include all health care reform required benefits.  The numerous mandates and requirements on new plans are expected to result in large premium increases in 2014.


I recommend being cautious about dropping a grandfathered plan because you won’t be able to get it back once you cancel it or stop paying the premiums.  I think new plans will be more expensive than many grandfathered plans because applications from people who are sick cannot be declined in 2014.  The huge influx of people who need health care is going to put massive upward pressure on premiums.  But the only way to make a smart decision is to compare your current rates with what a new plan would cost.


There’s a similar issue, though not as immediate, with grandfathered plans.  Because these policies are no longer being sold to new applicants, the premium rates for grandfathered policies will probably ultimately rise.  No healthy, young people will be buying those plans, but aging policyholders will need more health care. So ultimately, you may end up eventually changing to a new plan anyway.


Will My Present Plan Qualify for Minimum Coverage in 2014?


Essential benefits to be offered by all newly issued plans next year are still being debated. States have already begun to make different decisions about what basic coverage will be required from plans in their territory.  Some changes taking place in 2014 may be limiting. Your current policy may offer you greater options with provider choices, prescription benefits and more.


If you have a grandfathered plan, then you can keep it even though it will not meet minimum coverage requirements in 2014.  If your coverage started after March of 2010, then you will be forced to get a new plan.


Right now I’m keeping my grandfathered plan.  We’ll see how things play out…

Five Ways To Start Fixing Health Care

February 5th, 2013

fixing healthcareHealth care reform has been implemented in phases beginning in 2010, but major reforms are still to come in 2014. Unfortunately, the incoming system is going to make many problems worse, including the out-of-control cost of healthcare and health insurance.  The only true solution is market competition and price transparency.  Here are five ideas that would make a big difference, and help us all save money:


Tax Fairness. People who choose to buy their own health insurance usually end up paying unfair tax penalties compared to companies that purchase coverage for their employees. If the law would level out the playing field when it comes to paying taxes, it would make a huge difference to individuals who purchase insurance coverage.


Allowing Insurance Companies to Sell across State Lines. Aside from the federal mandates on health care coverage, states also have their own mandates that are accompanied by increases in insurance premiums. Ending state insurance monopolies and allowing people to get coverage across state lines could result in more affordable premiums because the plans would cover fewer services.


Promoting Health Savings Accounts. Consumer-directed health plans, such as Health Savings Account plans, make people pro-active when it comes to managing the cost of their own health care.  Since these policies have higher deductibles, they encourage the consumer to become involved in the purchase decision.  Consumer involvement always leads to better results for the consumer.


Increasing Transparency. When patients have time to plan for treatment, they can shop for lower health care prices. Making pricing transparent would go a long way toward lowering health care costs by enabling patients to see where to find reasonably priced services. I challenge you to find a price list at your locals doctor’s office…


Managing Malpractice. Malpractice lawsuits have clearly driven up the cost of medicine, and created a system where doctors over-treat simply to avoid being sued. Denmark has a unique system to manage malpractice costs.  Patients don’t need to file expensive lawsuits.  They fill out a form online for free.  Their doctor may even help them.


Since doctors aren’t being sued, they don’t need the costly malpractice insurance that’s common in the U.S. In Denmark, a panel comprised of different professionals evaluates the evidence and awards compensation to injured patients or their families.


These are not new ideas.  They are ideas that will work a lot better than what we’re about to try.

Your Business Can Use A Secret Weapon For Health Care Costs

February 1st, 2013

HRAIt’s 2013 and the economy isn’t where we’d like it to be. And, health care costs are “through the roof.”  So, what can business owners do?


A Health Reimbursement Arrangement or an HRA can be the best secret weapon your business can use right now to save on health care costs. With an HRA, you can give employees a monthly allowance to spend on their own health insurance policy, and reap major savings. On the individual market, health plans are much less expensive than group coverage.


Structuring an HRA


An HRA is an agreement that allows your business to cover employees’ health care expenses, including individual health insurance premiums.  An HRA needs to comply with IRS requirements to maintain preferred-tax treatment.  To be in compliance:


  • A medical connection must be present for HRA reimbursement
  • Proof for medical expenses that are reimbursed must be kept (i.e. a receipt)
  • Any excess amount reimbursed that exceeds actual expenses must be returned to the employer.


If the above requirements are met, then the money received by employees under the HRA is excluded from their gross income and it’s tax deductible to your business.


Special HIPAA Privacy Rule Requirements


HRAs are also bound by the HIPPA Privacy Rule.  Employers are not permitted access to HIPAA-protected medical cost details. That includes the medical expenses covered by health insurance. To avoid HIPPA violations, most companies use a third-party to handle the medical expense substantiation process.


Setting up an HRA


Here are the steps you need to set up your company’s HRA:


1. Develop your HRA plan. Set employee eligibility requirements, determine what expenses are reimbursable, and state the amount of the monthly HRA contribution.

2. Enroll eligible employees.  Send required plan documents and notices to eligible employees.

3. Employees can buy their own individual health insurance policy and submit proper documentation for reimbursement.

4. Use a HIPAA-complaint claims processor to review reimbursement requests.

5. Reimburse employees for approved claims up to the available HRA balance.


It may only take about five minutes online every month for HRA administration. And, employees can buy their own health insurance on the individual market. Employees earning below 400 percent of the federal poverty level (that’s about $92,000 for a family of four) annually may be able to get federal premium subsidies if you do not provide a group health insurance policy.


If you decide to set up an HRA, HSA for America has a systemized and inexpensive way to do it all online.  You can read more about HRAs and how to establish one online at www.HSAforAmerica.com/HRA.htm.

How To Lower Taxes With An HSA + HRA

January 28th, 2013

tax deductionsWith taxes increasing this year, it’s time to get the most in tax deductions and two simple things can help you do that: Health Savings Accounts and Health Reimbursement Arrangements.


New Tax Increases


The Medicare payroll tax has gone up 0.9 percent on wages over $200,000 for individuals and on wages over $250,000 for joint filers. If you’re in a high-income bracket, you also have an additional 3.8 percent net investment income tax on interest, dividends, and capital gains.


In addition, there’s a 2.3 percent medical device excise tax now and next year, health insurance plans will carry an annual $63-per-person fee. That’s meant to cushion the cost of covering pre-existing health conditions when insurance companies are required to cover people who need lots of health care, but it is going to drive costs up on everyone.


Increase in Income Threshold for Medical Expense Deductions


Last year, it was possible to get a tax deduction for medical costs that exceed 7.5 percent of adjusted gross income.  That threshold is higher now.  You will only be allowed to claim 2013 medical expenses as tax deductions if the total amount exceeds ten percent of your adjusted gross income.  But, there is a way around that.


How People Are Fighting Back


One way to fight back is with plans that have low-end premiums and high-end tax deductions.  The policies with the lowest premiums have high annual deductibles.  And, some of these plans are known as Health Savings Account (HSA) qualified. It’s the HSA plans that allow you to claim tax deductions for saving money or for paying medical bills.


Surveys have found that most employees could have saved if they had a high-deductible plan instead of a traditional PPO plan.  That’s from a new white paper by Change Healthcare, a health care cost transparency company. They say employees could have saved an average of $55 per month, while families could have saved $140 per month. The savings are on premiums, co-pays, and co-insurance.


How Small Business Owners Can Fight Back


Over the past two years, the number of employers offering high-deductible plans has increased from 17 to 22 percent. It’s estimated that employers can average saving 20 percent every year with this option.  And, setting up a health reimbursement arrangement adds on significant tax advantages.  And, yes, you can combine HSA-qualified health insurance plans with an HRA to get the maximum savings possible.  Go here to read more information about HRAs.

Five Answers To Your Health Care Reform Questions

January 22nd, 2013

health care reform questionsWhen talking about health care reform, there are still areas about the law that are filled with uncertainties.  Below are the five commonly asked questions about the Affordable Care Act:


1.    What is the individual mandate?


The individual mandate by the health care reform law requires every American to have a health insurance plan in place by 2014 or pay a penalty.  The annual penalty is $695 or up to 2.5 percent of your income (for 2016 and beyond).


2.    Could I have a waiting period before employer coverage is available?


Companies subject to the employer mandate of the health care reform law (those with 50 or more full-time employees) will have a grace period of 90 days before offering new hires minimum essential coverage without incurring any penalties starting January 2014. On day 91 onwards, failure to offer affordable and adequate employer-sponsored healthcare coverage would mean paying a per person penalty.


3.    What if employers offer coverage that’s unaffordable?


Employers with 50 or more full-time employees offering unaffordable health care coverage to their workers with at least one full-time employee getting health insurance via the exchange would still have to pay a penalty.  Employers will be fined an annual penalty of $3,000 per full-time employee (the first 30 workers will be excluded).


4.    How does household income determine if a plan is affordable?


Coverage is said to be unaffordable if the employee have to contribute more than 9.5 percent of their family income to employer coverage.  According to the IRS, an employee’s household income will be verified using your tax filings.  For individuals with income levels below 400 percent of the federal poverty guidelines, you’re qualified to get federal premium subsidies in the form of tax credits or free choice voucher.  Under the law, the health insurance exchange will be ready by January 1, 2014.


5.    What is a free choice voucher?


If your employer offers adequate coverage but is not affordable, you can request a free choice voucher from your employer to get health insurance coverage through the state-based health insurance exchange. The amount of the voucher is equal to the amount contributed by your employer for an individual or family plan. The voucher would still be tax deductible for employers.  Take note that you can choose either the premium tax credit available via the exchange or get the free choice voucher from your employer.  You cannot get both at the same time.

Who Is Running Your State’s Health Insurance Exchange?

January 18th, 2013

health insurance exchangeWith all state’s health insurance exchanges supposed to open this October, there’s speculation about which states will be late. And, that may depend on which route your state officials take to the opening.  Different governors are:


1. Creating a health insurance exchange run by state officials

2. Partnering with the federal government to jointly run an exchange

3. Turning the whole deal over to the federal government.


First, by exchange, I mean the government-run marketplace where people who qualify for subsidized coverage will get their coverage. And they will be able to use their same insurance broker after the exchange is open.  Those who qualify for help to afford health insurance will have to use the state exchange, but everyone else has additional options.


Some States Will Run Their Own Exchange


Only 18 states and the District of Columbia have decided to create their own health insurance exchange. These officials submitted a blueprint showing how they planned to run an exchange before December 14 last month.


Preliminary approval was given to Colorado, Connecticut, Maryland, Massachusetts, Oregon and Washington by Kathleen Sebelius, the Health and Human Services Secretary. Kentucky and New York were also given conditional approval.  And, California, Hawaii, Idaho, Minnesota, Mississippi, Nevada, New Mexico, Rhode Island, Utah and Vermont were already busy preparing to open an exchange in October.


Who Has a State-Federal Partnership?


As for states wanting to partner with the federal government, they have until February 15 to make arrangements. So far, seven states have partnership plans, including Arkansas, Delaware, Illinois, Iowa, Michigan, North Carolina and West Virginia.


The remainder of the states have decided that they want no part of running an exchange, so the federal government will be running the exchanges in those states.


Will Exchanges Be Ready in Time?


About 26 million people across the country, based on the Congressional Budget Office’s estimate, will get coverage through the online health insurance marketplaces. And, starting in 2014, almost all U.S. citizens need health insurance to avoid a penalty.


It is extremely unlikely that all, or even most of the exchanges will be fully functional by October 1, the date open enrollment begins.  We don’t yet know what that means for people who are expecting to qualify for a subsidy for their coverage.

Two Troubling Health Care Reform Questions for Business

January 14th, 2013

Whether health insurance offered to full-time employees is deemed to be affordable is critical to determining if employees are eligible for premium tax credits.  That also affects whether employers face the play-or-pay penalty.


Defining Affordability in Health Insurance Premiums


Health care reform provisions cite coverage as unaffordable when the cost is greater than 9.5 percent of an employee’s household income. How are you going to collect information on all of your employees’ total household income?  That can be based on your employees’ spouse and dependents.  And, it’s not something that’s going to be readily available.


Fortunately, the IRS will allow employers to use workers’ W-2 earnings rather than household income to assess insurance affordability.  This should overcome practical problems and simplify the process.  With this provision, employers can determine that an employee’s payment for self-only premiums for the company’s least-expensive policy does not exceed 9.5 percent of W-2 wages.  If that’s true, employers aren’t subject to play-or-pay penalties even when employees qualify for the premium tax credit or a cost-sharing reduction.


Reconciling Wellness Programs and the Americans with Disabilities Act


Aware of how preventive action can control health care costs, employers have been implementing wellness programs to encourage employees to lose weight, stop smoking, exercise, etc. And, health care reform permits employers to offer rewards of as much as 30 percent of the cost of premiums as an incentive when 2014 arrives. This year, current rules hold that down to 20 percent of premiums.


The federal law enforcement agency that deals with workplace discrimination is the U.S. Equal Employment Opportunity Commission (EEOC).  It’s been somewhat ambiguous about how to apply the Americans with Disabilities Act (ADA) to standard-based wellness programs like those employers are currently embracing.


The EEOC says its position has not changed on this issue, and it has previously stated programs that include disability-related inquiries or require medical exams do violate the ADA. The EEOC still hasn’t officially ruled on whether wellness programs requiring medical exams for financial  incentives are considered to be “involuntary.”  A definite statement is called for to help employers avoid ADA problems.


These are only two of the many problems and challenges business owners will be facing in implementing these new rules.  A bigger problem may be the question of whether 9.5% of wages is really affordable.  Premiums are going to be substantially more expensive starting in 2014, and many small businesses are expected to drop their group coverage plans.

Does Your Business Face Health Care Reform Penalties?

January 10th, 2013

health care1. How do you know if your business is subject to the employer mandate?


The threshold for compliance can be determined with this formula, which you calculate on a monthly basis:


Take the number of employees working full-time (those who average more than 30 hours a week for the month) and add that to the number of hours part-time employees worked during the month plus 120 hours. That’s how to figure the full-time equivalence or FTE for employees who don’t work at least 30 hours a week.


2. How much will it cost to meet the new coverage requirements?


That can differ depending on your operation, as well as how minimum coverage is defined through the regulatory process.


3. What is the premium tax credit?


There is a federal subsidy to be used by those earning an amount up to 400% of the federal poverty level to help them afford coverage. The tax credit is available through the state health insurance exchanges, which play a vital role in certifying whether people are eligible for the premium tax credit.


4. Do all small businesses have to provide coverage?


No, only some do.  Employers who have less than 50 full-time-equivalent employees cannot be subjected to the employer tax penalties.


5. Does the new law require part-time workers to be covered?


No, not necessarily. Part-time employees (those working an average of less than 30 hours per week) are counted only to determine whether a small business owner meets the 50 full-time equivalent threshold that’s required under the law. The employer responsibility section of the law does not require employers to provide health care coverage to part-time employees, or to pay health care penalties.


6. Who will have to pay a penalty for not providing health care coverage?


That will fall on employers whose business meets that 50 full-time equivalent standard. Those employers may opt not to provide health care coverage to full-time employees, but it could result in a penalty. If at least one employee uses a premium tax credit to get coverage at a state exchange, the employer will be subject to pay a penalty of $2,000 per full-time employee per year (or $167 per month).


Small business owners may exclude the first 30 full-time employees when calculating this penalty. For example, let’s say an employer has 60 full-time employees and does not offer health insurance coverage, but one or more employees use a premium tax credit on the state exchange.  That employer could face a yearly penalty of $60,000, assuming a constant workforce.  That would be figured as 60 total full-time employees minus the 30 full-time employees excluded from the calculation.  The result would be 30 employee times the $2,000 penalty giving a $60,000 penalty.  And, it should be noted that the penalty is computed and assessed on a monthly basis.


7. What type of health coverage would need to be offered to full-time employees?


Business owners who employ more than the 50 full-time equivalent of employees need to provide affordable “minimum essential coverage” with at least a 60-percent actuarial value in order to meet what the law requires. “Minimum essential coverage,” however, is still being defined through the regulatory process.  We’ll keep you informed here as more details become clear.