The Patient Protection and Affordable Care Act (PPACA), otherwise known as the “Health Care Reform Act” was signed into law on March 23, 2010 by President Obama. Most of the initial provisions did not go into affect for 6 months, or September 23, 2010. The bill is a whopping 2000+ pages long, with a 14-page Table of Contents! It’s no wonder that most employers have little comprehension of what is contained in the bill, and less understanding of how the bill will affect their business. To understand the impact of the bill on your business, you should contact a specialist who is an expert on small business medical insurance plans and is familiar with the Act.In the meantime, we will take a cursory view of health care reform, and a year-by-year snapshot of changes to come. Hopefully, it will provide a starting part for discussion.The Act contains five key provisions:1. The requirement for all US citizens and legal residents to have health insurance;2. Penalties for employers who do not offer health insurance for their employees;3. State Based Health Exchanges created to offer cost effective insurance options4. Premium credits for low income individuals;5. Eliminates pre-existing condition and annual/lifetime benefit limitsA Year by Year Look at Health Care ReformSome changes went into effect in 2010, such as coverage for adult dependents (dependents until age 26), and several more will happen in 2011. The most significant changes, however, will not go into effect until 2014. Below is a snapshot of key changes that will be going into effect in the coming years:2011· No pre-tax reimbursements from “health accounts” for non-prescribed, over the counter medications,· 20% tax on nonqualified HSA withdrawals,· Reporting the value of employer sponsored coverage on w-2′s (delayed)· Automatic enrollment in long term care program, employer may opt out (delayed),· Drug company fees: $2.5 billion in 2011, $4.2 billion in 20182012· Uniform explanation of coverage,· Pre-enrollment document sent explaining benefits and exclusions,· 60 day notice for material modifications, if not provided in uniform explanation of coverage,2013· FSA contributions limited to $2,500,· New federal employer tax, $2.00 per covered individual per plan year· Medicare payroll tax increase from 1.45% to 2.35%,· Employer notice to employees of exchanges, premium subsidies, and free choice vouchers,2014· Individual mandate – every citizen must have coverage,· Individual penalties for not purchasing coverage,· Guaranteed issue,· State health exchanges effective· Standard benefit plans, (bronze, silver, gold, platinum),· Waiting period not more than 90 days,· Employer penalties for not offering coverage or at least one FTE receives a tax credit,· Health insurance company fees: $8 billion 2014, $14.3 billion 2018, 2019 prior year amount increased by premium growth rate.2018· Cadillac Tax. 40% tax on plans value in excess of $10,200 single, $27,500 family.Penalties for Non-CoverageAs stated, most of the act’s important provisions will become effective in 2014. The most relevant law for employers is the penalty they will face for non-coverage of employees. The exact penalties are complicated to calculate, base on numerous factors. Some of the basic guidelines are outlined below:Employers with more than 50 employees: · If coverage is not offered by the employer and even one full-time employee (FTE) receives a premium tax credit, the employer will pay a fee of $2,000 per FTE, excluding the first 30 ee’s.· If “affordable” coverage is not offered and one FTE receives a premium tax credit, the employer will pay the lesser of $3,000 for each employee receiving a tax credit, or $2,000 for each FTE. Affordable coverage is defined as an employee cost of health insurance, less than 9.5% of household income and the actuarial value of plan is at least 60%.· A Voucher will be required if the employee contribution exceeds 8% of household income.All Employers: · Employers that offer coverage are required to provide a free choice voucher to employees with incomes less than 400% of the Family Poverty Level (FPL), whose share of premium exceeds 8% but less than 9.8% of their income and who chose to enroll in a plan in the Exchange.· A Voucher equals to what the employer would have paid to provide coverage under the employer’s plan. Employers providing free choice vouchers are not subject to penalties.Employers with 200 or more employees· Required to automatically enroll employees into health plans offered by employer. Employees may opt out.If the provisions of the health care reform act sound complex, they are! We highly recommend you consult with a specialist who is an expert on small business medical insurance plans and is familiar with the Act. Feel free to contact CPEhr’s benefits specialist with any health care reform questions.
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Insurance Companies and Universal Health Care
Insurance companies serve a very important function in our society. The purpose of insurance is to share risk. Risk is the amount of economic loss that someone is willing to assume in an activity. For instance, a bank would not loan money for the purpose of buying a house, unless the house was protected against losses such as fire, wind and other perils. That protection is provided by a Homeowner’s policy.A loan to purchase an automobile would not be available unless the car was insured for losses by theft or collision. That protection is provided by an auto policy.Health insurance is a policy that shares the risk of losses caused by injuries or illness. A share of the risk is assumed by the individual through a deductible or co-pay. In-other-words, if someone visits the doctor, that individual may be required to pay the first $15 or $20 of the visit. The health insurance company assumes the risk of the remainder of the cost.That shared risk comes about through an exchange of ‘consideration’. Consideration is value. The insured pays a premium in exchange for the promise of the insurance company to pay certain costs associated with the insured’s health care. Which brings us to the controversy surrounding the government’s efforts to institute what some call universal health care.No matter what side of the argument you are on, in favor or against universal health care, one issue has been settled. President Obama stated publicly that it is impossible to insure the ‘uninsured’ without additional costs. So, the idea that this will be a ‘deficit neutral’ policy has been debunked by the administration itself. Either taxes go up to pay for the program, or health care will have to be rationed to keep costs neutral, or bring them down.In response to the public out-cry about a government health care program, the administration has called the insurance companies villains. After all, insurance companies exclude preexisting conditions for some period of time when an individual enrolls (however that is not always the case with group policies), and insurance companies are making a ‘profit’.PreExsiting ConditionsThink about the concept of risk and preexisting conditions. An individual has a home that has been damaged by fire. Would a homeowner’s insurance company now write a policy that would cover the repairs to home caused by the preexisting fire? Of course not! That is not shared risk, that is bad business.An individual has a preexisting health condition, say diabetes. Purchasing a policy that would exclude the treatment for diabetes for a limited period of time (usually two years), now results in a shared risk. The health insurance company will cover the person for other perils, and if that individual pays the premiums over time, that exclusion regarding the preexisting condition is then dropped.Is it possible for the government to insure everyone in the United States and force insurance companies to provide policies without regard to preexisting conditions? It is possible, but not without driving the cost of health-care way up. After all, the money to pay the doctors and hospitals have to come from somewhere and President Obama stated that ‘We are out of money’. Since the government doesn’t earn money, its only source of revenue is taxes.ProfitInsurance companies are being cast as the bad guy since companies make a profit. Which do you prefer, companies that are well run that make a profit, or a company like General Motors that required billions of dollars of taxpayer money to bail the company out? A profit is what allows companies to expand services and provide jobs. Companies that fail to make a profit, go out-of-business.The government not only fails to make a profit, as a well run business entity should, it runs at a deficit. The latest example is Cash for Clunkers. Not only was taxpayer money used to subsidize auto sales, now car dealers are complaining that the government is not sending the checks for the Clunkers that were promised. It appears that many buyers will have lost their old cars and now face repossession of the new cars purchased since the money for the program did not actually exist.This does not bode well for a government run health care system.Tort ReformDoctors and hospitals must practice defensive medicine. People will sue for anything. Tort lawyers use a ‘shot-gun’ approach when filing a malpractice lawsuit. All doctors, nurses, technicians and hospitals involved in a case are named as a defendant, whether that party had any actual responsibility for the claimed injury and damage.We need a loser pay system, which provides that anyone who brings a lawsuit and loses, is required to pay the other side’s attorney fees and expenses. That would do away with most frivolous lawsuits and bring the costs of health care down.Big Government SolutionGovernment should be required to live within its means. It does not, and the government, not insurance companies, is the villain in this scenario.The founding fathers did not foresee a large, powerful centralized government. That is what was the war of independence against England was all about. The US Constitution delegated specific powers to the Federal Government, and it does not specify taking over any private sector industry.Medicare and Medicaid are government health care programs on the verge of collapse. Even President Obama admits Medicare cannot be sustained. No program can be sustained when it runs at a deficit and all government programs run at a deficit.Universal Health Care will run at a deficit from day one and that is just bad business.