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Should You Keep Your Grandfathered Health Insurance Plan?

Saturday, 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

Tuesday, 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

Friday, 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

How To Lower Taxes With An HSA + HRA

Monday, 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

Tuesday, 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?

Friday, 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

Monday, 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?

Thursday, 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.

How Will Health Care Reform Affect My Business In 2013?

Sunday, January 6th, 2013

small business ownersWith 2013 just around the corner, how will the mandates of health care reform affect your business, and what do you need to change about the way you provide health care benefits? Here are answers to some of the most commonly asked questions to help you decide.


1. What’s my deadline for complying with health care reform?


For businesses with 50 or more full-time employees, you have until 2014 to provide “adequate” and “affordable” health care coverage or face penalties. If your business employees less than 50 full-time workers, you are exempt from penalties, but you are still required to carry personal health insurance.


2. Will I be required to provide health care benefits to all employees?


You are required to provide affordable “minimum essential coverage” to workers if you have 50 or more employees working full time beginning in 2014. Failure to do so would mean paying a $2,000 “per person” penalty (although the first 30 workers are not included in that).


For part-time employees, you are not required to provide health care coverage, but remember there is a full-time equivalent of part-time workers.


3. How do I figure the full-time equivalent?


To get the FTE, determine the number of employees who work 40 or more hours weekly.  Then, add up wages paid to part-time employees, and divide the total by 2,080. The FTE is equal to the number of full-time employees and full-time equivalent part-time employees, and the total is rounded to the lowest whole.


4. Is my business eligible for small business tax credits, and when do those start?


Certain small businesses with up to 25 full-time-equivalent (FTE) workers that contribute to employees’ health insurance are eligible to get tax credits.  That began January 1, 2010. To learn more, you can visit the IRS website


5. Are health benefit costs reported on W-2 forms taxable?


Health benefit costs reported on the W-2 are not taxable.


6. Are my two companies each considered as separate employers?


Not necessarily. Check with your tax advisor if you are defined as a single employer under the “Common Control” clause found in the tax code [IRC Sections 414 (b), (c), (m), (o)]. If you’re considered as a single employer, all your full-time employees in both companies will be combined together. If the number totals 50 or more, you will have to provide affordable coverage with minimum essential benefits.

Under 30? Here’s What You Need To Know On Health Care Reform

Wednesday, January 2nd, 2013

acaThe health care reform law, according to the Congressional Budget Office (CBO), tends to increase health insurance premiums for people who are young and healthy. According to the CBO, health insurance premiums will rise ten to thirteen percent, unless you qualify for the subsidy, while you’re still shy of 30.  I predict that for most, it will unfortunately be much ore than that.


The CBO estimates about 57 percent of customers will receive federal tax credits that will cover almost two-thirds of their total premiums. This could reduce costs below what is being charged for such policies now, depending on your income level. The law has set up four levels of health benefits: bronze, silver, gold and platinum. Tax credits are intended to cap health insurance premiums at between two percent and 9.5 percent of your income, based on the cost of the silver option.


New Special Rules For Young Adults


If you’re under 30, you have an option that’s not available to older people under Obamacare. High-deductible plans that aren’t generally available will continue to be for young adults. That’s true, in part, because it’s anticipated that most of them will require less health care than older individuals who develop chronic, expensive health problems. And, since high deductibles equate to lower premiums, the writers of this law are hoping this will convince healthy young people to invest in coverage.


Even though the state health insurance exchanges, which will start operation in October, will be offering catastrophic health plans with minimal coverage for persons under 30, tax credits won’t be available to offset the price of premiums. Catastrophic coverage prices are typically on the low end, anyway.


Existing Rules That Remain In Force


Like all other plans, these policies will completely cover recommended preventive health care services even when the deductible has not been met if: (1) you go to an in-network doctor, and (2) the services are billed by the provider as preventive, instead of diagnostic.


Once someone reaches age 30, they will be required to purchase a more expensive, lower deductible plan.

Will Your Health Insurance Premiums Be Higher In 2014?

Saturday, December 29th, 2012

savingsToday, you have access to plans catastrophic plans with high deductibles, but many such plans will disappear in 2014. Fortunately, catastrophic plans with more limited benefits will still be available for people under age 30. According to a senior fellow at the Urban Institute, Linda Blumberg, adding more benefits is tantamount to premium hikes. Premiums will also increase on younger people, because they will be subsidizing older insureds.  Young men will also be subsidizing the premiums for women, so they can expect the largest rate increases.


The health care reform law also mandated a lot of added health care benefits that are responsible for some of the increases in health insurance premiums. The removal of underwriting starting in 2014 will also result in much higher claims, and are expected to further drive costs up.


And, that’s not all that’s changing in 2014.  Preventive care services are already covered with no out-of-pocket costs, but people are treated quite differently once they get sick. If they have to buy their own policy on the individual market, applicants with pre-existing conditions may find their application is denied.  That’ll change as of 2014 and they’ll have guaranteed acceptance then. But, insurance companies will increase premiums in
order to cover added claims.


For those who find it impossible to pay for health insurance, the Affordable Care Act provides federal subsidies. Tax credits will be provided to individuals with incomes below 400 percent of the federal poverty level if they get health care coverage via a state exchange. According to the Department of Health and Human Services, compared to the cost of health insurance under the current rules, the tax credits could help a family of four with an income of $33,525 save $14,900.


How to Save on Health Insurance Right Now


Of course, with 2013 just rolling into view, you have opportunities to save on your health insurance right now.  We offer our Annual Comprehensive Policy Review to see if a plan is available that has either a lower premium or more comprehensive coverage than your current plan.  This is a free service and it comes with no obligation. December is one of the best times to compare health insurance.  That’s because companies hand out rate hikes for Jan. 1.  If you find a plan with 2012 rates this month, you can probably avoid switching to higher premiums for a whole year.


If you qualify, we can also help you establish a Health Reimbursement Arrangement.  This can enable married self-employed people to legally run all their medical and insurance expenses through the business, saving potentially thousands in taxes every year.

Self-employed? Here’s How to Manage Health Care Reform

Wednesday, December 26th, 2012

taxUnfortunately, we expect health insurance premiums to take substantial jumps over the next year or two.  Since everyone will be required to carry approved coverage, the potential impact to business owners is quite large.  Here are some strategies you may want to consider as a way to keep your costs down.


If you’ve been doing without regular check-ups, flu shots, etc., you now have access to health insurance to cover that kind of preventive health care immediately even with a high-deductible plan that has premiums on the low end.  New plans don’t leave you with a co-pay for these services, either.


In case a pre-existing condition has blocked you from getting any coverage, Pre-existing Condition Insurance Plans have been set up that will cover you after you’ve been denied coverage for six months. Subsidies for these plans are scheduled to stop in 2014 when health insurance companies will be required to accept applicants with pre-existing medical conditions.


Benefits and Premiums Have Risen


The Affordable Care Act removed lifetime coverage limits so a major illness doesn’t carry the same threat of medical bankruptcy so prevalent in the past.  Annual limits are being phased out and will also be eliminated in 2014.  More coverage means higher premiums, but there are ways for the self-employed to save on health care expenses.


Two Tax Strategies to Consider


1.  Investigate small business health care tax credits.  If you provide health insurance to no more than 25 workers, you may qualify for a tax credit for your health insurance expenses.


2.  If you have employees, or are married, consider setting up a Health Reimbursement Arrangement, or HRA.  This would enable the business to reimburse for medical expenses and health insurance premiums.  Since employees may qualify for a subsidy on individual health coverage, this could be a much less expensive way for them to obtain benefits than through group health insurance coverage.  Anything the business reimburses is considered a tax-free fringe benefit.  And if you are setting it up just for your spouse, you can run all the family’s medical and insurance expenses through the business, lowering your tax bill by potentially thousands of dollars.


You have until the end of December to start an HRA for 2012, and it’s a lot simpler than you’re probably thinking.  We’ve done all of the hard part for you.  All that’s left is to answer a few questions, let one of our experts draw up your paperwork and go over it with you. It’ll be that quick and easy every year, too, because you’ll get paperwork to just hand to your accountant or CPA.  More information on HRAs, including quick online applications, is available at

What Are The Next Big Questions In Health Care Reform?

Tuesday, December 18th, 2012

If you think that the election marked the end of the health care reform debate, then you will be surprised to find out that the decisions that affect your coverage are still being debated.


What will your health benefits look like?


To avoid tax penalties, you are required to purchased a government-approved plan that provides certain minimum standards of coverage. This is going to be the case whether you are purchasing your health plan from a state exchange, a broker, or directly from an insurance company. It holds true for individual plans that you acquire for yourself, and for group plans sponsored by your employer. And, it would still be the case if you get coverage through the Medicaid expansion.


This minimum standard of coverage required by the health care reform law involves 10 health care categories known as the “Essential Health Benefits.” Some states have gone ahead setting their own benchmarks for coverage, but everyone is still waiting for the administration to provide clearer guidelines to help the states come up with these essential benefits.  The typical plan will be more benefit-rich than that which most people currently purchase, so premiums are expected to go up also.  We don’t know how much yet, but expect it to average 30-50 percent.


Who is going to be covered?


The decisions of the state governors and the Obama administration will help determine who will benefit from the provisions of the Affordable Care Act. The act allows those earning more than $11,170 a year, but less than 400 percent of the federal poverty level, to use subsidies to purchase coverage from state health insurance exchanges.  And anyone with pre-existing conditions will qualify to purchase coverage starting in October.


In the wake of the Supreme Court’s decision upholding the legality of most provisions of the law, states now have the option to reject the Medicaid program expansion, which would provide affordable health care to adults below 65 earning roughly $1,300 or less in a month. The law does not explain what will happen to states that do not participate in the Medicaid expansion.


When are we going to get answers?


Enrollment through state exchanges will start October 1, 2013 and coverage will take effect January 1, 2014. This means that state exchanges have to start operation in less than a year. States have the option to run a fully state-based exchange, enter into a state-federal partnership exchange, or default into a federally-facilitated exchange.  I predict a total mess, with many states and the federal government not being ready when the time comes.


The Affordable Care Act mandates that the Secretary of Health and Human Services (HHS) establish a federally-facilitated exchange in any state that is either not able or willing to establish a state-run exchange. In a federally-facilitated exchange, HHS will be performing all exchange-related functions. States entering into a partnership with the federal government to operate the exchange may administer plan management functions, in-person consumer assistance functions, or both. HHS will perform the remaining exchange-related functions.  We expect the premiums to be higher in states with federally run exchanges, though the governors of those states may be making very smart financial decisions for their state budgets.

Two Big Health Care Reform Changes for 2013

Friday, December 14th, 2012

A lot of attention has been focused on the requirement to be insured in 2014, but a couple a big changes are coming much sooner.


Flexible Spending Accounts Will Be Worth Less


Annual contributions to a medical flexible spending account (FSA) will be limited to $2,500 beginning in 2013. For certain employers, that’s down from $3,000 or $4,000. FSA balances don’t roll over from year to year, so that $2,500 will be all that’s available for the whole year.


Some employers are allowing staff until March 15, 2013 to use up the balance that’s left from 2012, since the 2013 balance will be reduced. If you know you need a medical procedure and you’re relying on an FSA, you can plan accordingly.


Tax Deductions for Medical Expenses Will Be Harder to Claim


Next year, we’ll also see a change in whether medical expenses are deductible. In 2012, you can claim a tax deduction when your medical costs exceed 7.5 percent of your adjusted gross income. Next year, you’ll only have that deduction if your medical expenses are more than 10 percent of adjusted gross income.


One Solution to Both Problems


Your solution to both problems could be a Health Savings Account (HSA). In 2013, an individual is allowed to contribute up to $3,250. A family can contribute up to $6,450. Those who are at least age 55 are also permitted to deposit an extra $1,000. Both individuals and their employers can make those deposits. In fact, family members may contribute to another member’s HSA.


An HSA can offer you other savings to help with the rising cost of health care, too. Money deposited in an HSA is tax-free, and so are withdrawals to pay for qualified health-related products and services. Since you can only open an HSA when you have insurance that’s qualified, you’ll need a plan with a deductible. Those plans typically cost less in premiums, but HSA-qualified plans can have lower out-of-pocket maximums than many other policies. That maximum lets you know what you’d have to spend on covered health care in a worst case scenario, and HSA-qualified plans must limit that to $6,250 for an individual or $12,500 for a family in 2013. To put that in perspective, chemotherapy can run $11,000 per session.

One Thing Health Care Reform Did Not Change For Your Business

Tuesday, December 11th, 2012

Under federal regulations, businesses are prohibited from directly paying for employees’ individual health insurance premiums and medical expenses without the use of an HRA (Health Reimbursement Arrangement), or another tax-free arrangement that is IRS/HIPAA/ERISA qualified.


The two main reasons for this are that 1) Such payments make it would look as if the company is endorsing an individual health insurance policy, and 2) These direct payments would be taxable income to employees.


By paying directly for workers’ individual health plans, according to federal law, a company is treating the policy as if it’s part of an employer-sponsored plan that is regulated by ERISA (Employee Retirement Income Security Act).  The problem here is that your company can be out of compliance with the act because many policies fail to meet the minimum ERISA requirements for group plans.


Your company can also be in violation of HIPAA-privacy requirements because employers are not permitted access to their staff’s HIPAA-protected medical cost details.  That includes the medical expenses covered by health insurance.


The federal government has developed guidance explaining how companies can avoid ERISA and HIPAA regulation violations.  And, to ensure your company does, set up an HRA that is HIPAA and ERISA compliant.  With an HRA, your company can legitimately reimburse employees for medical costs and for health insurance premiums.


Even though, this is the very last month of the year, businesses still have until December 31 to set up an HRA for 2012. This can allow the business to reimburse for the entire year’s health insurance expenses.  Small business owners can see how to establish an HRA, which may help cut health insurance expenses in half, at 105 HRA Plans for Small Business Owners. An HRA is also an option for certain sole proprietors, who can learn more about this at 105 HRA Plans For The Self-employed.


Once established, very minimal administration is required to maintain an HRA.  And, employers have a lot of flexibility in how they wish to structure arrangements.  Employees can also be easily added or removed from HRAs, and because these are reimbursement plans, little upfront funding is involved.

The Surprising Question Health Care Reform Poses For Women

Saturday, December 8th, 2012

preventive carePreventive care is covered under the health care reform law, but for women, the question being posed is who will provide this care: general practitioners or ob-gyns? While men usually have a single primary-care doctor, women frequently see both a primary-care doctor and an obstetrician-gynecologist. What does that mean to the cost of health care for women?


Needing more than one doctor could change however, since health care reform defines some of the services women need as preventive care or primary care. Yet, it is still not clear what type of doctor is to provide services such as Pap tests. Would it be a general practitioner, internist, or another specialist?


New health insurance plans cover preventive care services, including cervical cancer screenings, mammograms, and prescribed contraceptives. And, all of this is free from co-pays, co-insurance or having to meet a plan’s deductible.


Medicaid expansion, at least in some states, is expected to expand coverage for such preventive health care. So, another question centers on how to give more people access to the same number of doctors. The Affordable Care Act also includes loan repayment programs to encourage medical students to go into primary care, instead of specialties. But, what about the shortage of practicing ob-gyns? And, should women see ob-gyns instead of other doctors?


Brietta Clark is a professor of law teaching at Loyola Law School, but she has some insight into the answer to that question. She says even apparently healthy women should see ob-gyns regularly because they can find problems primary care doctors and other mid-level providers can miss.


Clark suffered from fibroids that her primary care doctor did not detect even after multiple exams. When she saw an ob-gyn, though, that doctor immediately caught the problem.
It makes sense that ob-gyns are more likely to recognize the types of problems they encounter more often than other doctors. That goes for fibroids and it may be true for certain types of cancer.


Even though coverage for recommended preventive is the law, it may not apply to your plan if you’ve had it since before the Affordable Care Act became law.


However, the “grandfathered” plan may be less expensive, because it does not include all of the mandated coverage under Obamacare. Also, with a grandfathered plan you will not be forced to purchased a Bronze plan starting in 2014 – so it may be best to keep what you’ve got.


Insurance companies raise premiums January 1. Requesting an effective date for your policy to begin before the end of the year will get you 2012 rates that you can probably keep for another year. But if you’re not sure if it is a right move for you, make sure you talk to a professional who can help you make the right decision.

How A Defined Contribution Plan Can Lower Business Benefit Costs

Friday, December 7th, 2012

If you are a business owner, you have plenty to do simply running your business.  Do you also have to be in the health insurance business?  With ObamaCare requirements, it is going to become increasingly expensive to provide group health insurance coverage.  One strategy many business owners are taking is setting up Defined Contribution Plans.

Defined contribution plans can be set up with a Health Reimbursement Arrangement, or HRA.  This allows your business to reimburse employees for their health insurance or other medical expenses, as a tax-free fringe benefit.  A health reimbursement arrangement (HRA) can provide employees with a monthly allowance with which they can buy coverage through a state health insurance exchange.  An HRA can act as a business expense account specifically for health care.

The biggest hurdle involves HIPAA privacy obligations for dealing with personally-identifiable health information (PHI).  These obligations apply to employers offering HRAs, which are basically self-insured health plans.  And, failure to comply with HIPAA can subject a company to up to $100 per violation in civil penalties.

To avoid that, have medical expenses substantiated by a third-party.  Substantiation must confirm that the expenses have a medical basis, which means dealing with the specifics that get into the realm of privacy violations.

Thus, your business must have written PHI privacy procedures and must also appoint a privacy officer.  That officer needs to set up how employees can file complaints and a process for responding to complaints.  It’s that officer who will be responsible for ensuring PHI is kept separate from decisions about benefits and employment.

With that handled, your business can use an HRA to reimburse employees for dental and health care on a 100-percent tax-free basis.  That includes the cost of health insurance premiums.  When an HRA meets three requirements, the HRA money employees receive is deductible for the business and it’s excluded from gross income for employees. Here are those requirements:

1.    A medical connection must exist.
2.    Employee expenses must be substantiated.
3.    Employees must return amounts they receive that exceed actual expenses.

The steps to set up an HRA are straightforward:

1.    Choose an administrator.
2.    Setup the plan by specifying what makes employees eligible, how reimbursement works, and a monthly allowance.
3.    Then, provide HRA documents to employees and enroll them.

Having employees selecting their own policy greatly reduces administrative overhead, as does having third-party oversight.  HIPAA-compliant claims officers can substantiate and process employee requests for reimbursement up to the HRA balance.  Once the initial set-up work is finished, the business can maintain the HRA with a minimum of time to free up HR for other work.

What’s Your Best Move During Health Care Reform?

Monday, December 3rd, 2012

health care reformWith the election behind us, there’s more certainty about the direction of health care reform, but it’s not over yet. State officials got an extension. They have until December 14 to decide whether to run their state health insurance exchange or let the federal government run it. And, all the work to open the exchanges has to be completed by October 2013.  That’s when the exchanges are to be open for business with coverage going into effect January 1, 2014.


More than 30 million people who need health insurance are projected to be able to get coverage then, but more of us are underinsured than uninsured. So, what’s happening to help us?


Policies no longer limit the amount of coverage available per lifetime. By 2014, they won’t limit the amount of coverage available per year, either. There’s still the issue of out-of-pocket costs for most of us, though.


You’ve probably noticed that policies requiring you to pay for health care until it adds up to a certain amount, or a deductible, tend to charge some of the lowest premiums.  These plans pay for recommended preventive care before you’ve met the plan’s deductible now, so opting for one of the low-premium policies may work for you. In that case, you need to know two other things.


If you had a plan with a deductible prior to health care reform, you may not have this expanded coverage.  Find out before you end up paying for something you thought was covered.  If your old policy doesn’t have to provide the new coverage, you have the option of upgrading to a new plan that will, as long as your health is good.  And, if you have health problems, companies will have to accept your application in 2014.


The other thing you need to know is that only one type of health insurance helps you reduce the taxes you owe.  Certain of the high-deductible health plans let you open a Health Savings Account or an HSA.  I know, who has much to save now days, but this is not your average savings account.  If you aren’t saving and you are paying for dental or health-related care, you can run those payments through your HSA to claim a tax deduction for just about all these bills.


These expenses don’t have to be any percentage of your income to qualify.  And, it doesn’t matter what your annual income is, either.  Of course, if you can save, the IRS lets you claim a deduction for that, too, as long as you save in an HSA.  The net effect is that most people will owe less in federal and state taxes thanks to this type of coverage. Then they can use the money they save on taxes to pay for health care or get tax-free earnings by keeping that money in their HSA.


You can claim these tax deductions for 2012 even though the year is just about gone. You need an HSA-qualified health insurance plan by Dec. 1, and then you have until April 15, 2013 to open a Health Savings Account.  We’re here to help you with all of that.

How State Exchanges Are Playing Out

Friday, November 30th, 2012

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


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


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


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


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


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


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


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


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


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

Where Will Your State Fit into Health Care Reform?

Monday, November 26th, 2012

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


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


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


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


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


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


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