CBO Releases Updated Score of AHCA – 51 Million to Be Uninsured, Government Savings of $119 Billion

CBO Releases Updated Score of AHCA – 51 Million to Be Uninsured, Government Savings of $119 Billion

National Association of Health Underwriters Washington Update

May 26, 2017


The Congressional Budget Office (CBO) released their highly anticipated updated report on the American Health Care Act (AHCA) on Wednesday, showing that the bill would save the government $119 billion and that an additional 23 million would be uninsured to bring a total of 51 million Americans without insurance. This amounts to a net increase of 3 million additional uninsured from before the ACA was signed into law, when 48 million didn’t have coverage. The previous score released in March projected that the bill would save the government $150 billion (revised down from an initial savings of $337 billion) and would lead to 24 million newly uninsured. The CBO is the nonpartisan group tasked with determining the cost of legislation to the federal government, both in a loss of revenue and increase in spending.
The updated report was necessitated by the adoption of several amendments to the AHCA from the last time the bill had been scored. The most prominent of these was the amendment offered by Representative Tom MacArthur (R-NJ) to allow states to receive a waiver to opt out of the ACA’s essential health benefits and age and community rating provisions. These waivers would be contingent on reducing average premiums, increasing enrollment, stabilizing the market, stabilizing premiums for individuals with pre-existing conditions, or increasing the choice of health plans. In turn, states could propose one of the following:  
  1. Increase the state’s age-rating bands. The state must specify a higher age-rating band, generally defaulted at 5:1 under other sections of the AHCA, although states could opt for higher ratios.
  2. Establish state-based requirements for essential health benefits (EHBs) in the individual and small group markets beginning in 2020. The state must precisely specify both the benefit categories and the specific benefits within the categories. This could include overriding the ACA’s prohibitions of lifetime and annual limits and cap on out-of-pocket expenditures, which could also be applied to large group and self-insured employer plans.
  3. Permit insurers to price policies based on health status. This substitutes the AHCA’s original continuous coverage incentive’s late-enrollment penalty to allow insurers to charge higher premiums for consumers who do not maintain continuous coverage (defined as a lapse of 63 days+ over 12 months). It is important to note that the amendment would not allow states to automatically rate up consumers with pre-existing conditions. The amendment only allows for insurers to underwrite consumers with pre-existing conditions if they do not have continuous coverage in states where a waiver has met all conditions to be approved.
Waivers may be approved for a period of up to 10 years, providing they continue to meet the conditions of the waiver, and any waiver submitted by a state would be automatically approved if they are not notified of a denial within 60-days of submission. Waivers that seek to permit health status underwriting would also be contingent on the state providing financial assistance to high-risk individuals to obtain individual market coverage, providing incentives to appropriate entities to help stabilize premiums, and participating in the “Federal Invisible Risk Sharing Program,” which includes $15 billion in federal funding between 2018 and 2026 as a reinsurance mechanism to reimburse insurers for high-cost plan enrollees.
The invisible risk sharing funding was joined by two additional high-risk funding pools to bring a total of $138 billion in the amended bill overall. The original bill included $100 billion over 10 years for the Patient and State Stability Fund, and in addition to the $15 billion in invisible risk sharing, the two other amendments passed since the bill was initially considered in March include $15 billion for funding for maternity, mental health, and substance abuse care, and $8 billion specifically added for additional high-risk pool funding as a result of the MacArthur Amendment. The CBO report cautions that this funding would have a small effect and not be sufficient to reduce large increases for high-cost enrollees. For comparison, the report notes that the ACA’s pre-existing condition insurance pool covered 100,000 enrollees at a cost of $2.5 billion over two years. Further, the Patient and State Stability Fund would require significant funding by states in the out-years; states would initially only be required to provide 7% of matching funds, but this would grow to 50% required by 2026.
With these amendments and the increased state flexibility for how the AHCA would now be implemented at the state level, the CBO performed an extensive analysis of the impact of the legislation. Overall, the CBO found that it would result in a net savings to the federal government of $119 billion, a result of $1.1 trillion in reduced spending over 10 years while revenues would be reduced by $992 billion. The bulk of the reduced spending, $834 billion, comes from repealing the ACA’s Medicaid expansion and another $236 billion comes from replacing the current advanced premium tax credits ($665 billion) with less generous tax credits in the AHCA ($375 billion).
The reduced revenue is largely due to repealing the majority of the ACA’s taxes (a loss of $664 billion in revenue), of which $275 billion would come from eliminating the net investment tax, $145 billion from the health insurance tax (HIT), and additional lost revenue from taxes unrelated to health coverage proposals. The CBO also projects that delaying the Cadillac/excise tax until fiscal year (FY) 2025, as written in the AHCA, would cost the federal government $49 billion in lost revenue. Revenue would further be reduced by effectively eliminating the ACA’s individual and employer mandates by reducing those penalties to $0, although they would still statutorily exist. The employer mandate makes up most of this at $171 billion, while individual penalties would result in $38 billion in lost revenue.
The biggest cause of the increase in the uninsured rate is due to the elimination of these penalties. As with the previous report, the new report estimates that 14 million Americans would become newly uninsured next year under the AHCA, gradually increasing to 23 million for a total of 51 uninsured by 2026. The AHCA as amended would not result in as many individuals losing employer-sponsored insurance (ESI) as previously estimated. The CBO projects that there would be 1 million fewer people enrolled in ESI in 2020 (compared to 2 million in the previous estimate) and by 2026 there would be 3 million fewer enrolled in ESI, compared to 7 million as previously projected. The revised estimates are largely due to individual health insurance being far less comprehensive and individuals opting to enroll in employer coverage instead to avoid higher out-of-pocket expenses.
The employer-based market currently enrolls more than 175 million Americans in health insurance coverage and NAHU strongly supports measures to maintain this system. As with the previous CBO report, NAHU remains concerned about the impact of the AHCA on ESI. The new report reiterates the previous assumption, which projected a gradual erosion of ESI, stating that over time, some employers would decline to offer insurance to their employees due to the loss of the mandate penalties and because the AHCA’s tax credits would be available to a broader group of individuals than those under the ACA. It expects that both employers and employees would decide against coverage, with some employers opting to drop coverage as employees would be eligible for tax credits, and some individuals who are offered ESI choosing not to enroll given the absence of tax penalties for being uninsured. Notably, previous CBO reports similarly expected that the ACA would result in a drop in employer-based coverage, a projection that has not materialized.
The report notes that premiums would generally be lower in the individual market because the health plans would be less comprehensive and cover fewer benefits and a smaller share of healthcare costs for the consumer. Additionally, there would be considerable cost-shifting on enrollees with significantly more out-of-pocket expenses, particularly those enrollees who use services that are no longer covered by plans, who would see substantial increases in out-of-pocket expenses. The CBO projects that consumers in this situation, such as those who require expensive prescription drugs no longer covered by health plans, could have increases of thousands of dollars in out-of-pocket expenses each year. Some consumers may choose to purchase policies with riders for specific conditions for this reason, particularly for maternity coverage.
The report notes that while premiums would generally go down for individual market insurance, net premiums after factoring for tax credits would range considerably depending on the particular consumer. Older people with lower incomes would see dramatic increases in their net premiums, while younger people with lower incomes would see little change, and people with higher incomes would see their net premiums reduced as they could access tax credits previously unavailable to them. And while overall more individuals will be able to access the tax credits under the AHCA, those subsides are far less generous than those under the ACA. The report illustrates the effect on a 64-year-old at 175% of the poverty level; under current law with a $15,300 premium, they would have a tax credit of $13,600 and a net premium of $1,700; under the AHCA’s flat tax credits, they would only be eligible for a tax credit of $4,900 and with an adjusted premium of $21,000, they would face a net cost of $16,100 in premiums alone—nearly ten-fold over the ACA and roughly 60% of their total annual income on health insurance premiums alone.
Additionally, some individuals may be able to purchase policies that would have no net cost to them, as the existence of a baseline level of tax credits could encourage some insurers to offer skinny plans at the value of the tax credit. However, the CBO cautions that these plans would effectively not provide enough financial protection in the event of catastrophic care needs to legitimately be considered insurance.
The CBO effectively made three separate estimates based on how states could respond to the AHCA as passed with the MacArthur Amendment. The first is the group of states that choose not to apply for waivers, which cover roughly half of the population, and would likely be among the seven states that prohibited medical underwriting before the ACA. The second is those that apply for limited waivers, which cover a third of the population, and would be likely be among the 11 states that had limitations on medical underwriting. And the third is states that apply for waivers to significantly modify EHBs and community rating rules, which cover a sixth of the population, and are among the 32 states that had no limitations on medical underwriting. States with lower premiums would generally fall with those that eliminate one or more EHB categories that were not typically available prior to the ACA.
The AHCA would bring needed stability for much of the country’s health insurance markets; however, states that choose to pursue the waivers created under the MacArthur Amendment would conversely become more destabilized. The states that opt for waivers to allow for medical underwriting or to modify their EHBs to eliminate the ACA’s ban on annual and lifetime limits would lead to significant increases in expenses for some consumers. The CBO notes that many of these individuals with pre-existing conditions could face markets where coverage would be either prohibitively expensive or they might not be able to purchase coverage at all. Additionally, many consumers move in and out of the individual market as access to insurance changes and many of these could fail to meet the continuous coverage requirement. As healthier consumers move to medically underwritten plans, the community-rated plans will become increasingly filled with less healthy consumers, and therefore become increasingly more destabilized. 
The updated CBO report marks an important milestone for the AHCA. Republicans tasked themselves with coming up with a reconciliation bill that would reduce the deficit by a minimum of $2 billion over 10 years. After passing the AHCA as amended without an updated score, the House had initially delayed sending it over to the Senate to ensure that it would meet the benchmarks laid out in the reconciliation instructions. Had the CBO report indicated that the bill didn’t meet these requirements, the House would have had to once again vote on an updated bill that would meet them. And had the bill already been enrolled by the Senate with a score that didn’t meet the requirements, they would no longer have been able to use the FY 2017 reconciliation vehicle for healthcare and either would have had to use the FY 2018 reconciliation vehicle they planned for tax reform, or wait until next year to try again. Because the new score by the CBO meets the requirement by projecting a net savings of $119 billion, the bill can now be enrolled with the Senate and they can formally begin deliberations on their version of health reform.

The American Health Care Act (AHCA) Passes the U.S. House


From CIGNA Informed on Reform           


Today the U.S. House of Representatives passed an amended version of the American Health Care Act (AHCA) by a vote of 217-213. House Republicans crafted the AHCA as a budget reconciliation bill to repeal parts of the Affordable Care Act (ACA). The bill was previously debated on the House floor, but pulled before a full vote on March 24. Since that time, several amendments were added to the bill, paving the way for Republican leadership to reintroduce the bill for a successful vote.

Passage of the bill in the House marks a milestone in the Republican efforts to repeal and replace the ACA; however, the bill will face new challenges in the Senate. Here’s what we currently know — and don’t know — about the next steps to help you stay informed.

What’s Next: AHCA Moves to the U.S. Senate
Without bi-partisan support, Congressional Republicans cannot fully repeal the ACA in one action. By using the budget reconciliation process, only a simple majority (51 votes) is needed for passage in the Senate — and there are 52 Republican senators. Even with a Republican majority, the bill faces an unclear path forward.

The Republican leadership in the Senate will first need to decide if they want to consider and amend the House bill, or substitute their own version of a reconciliation bill, which may contain parts of the House bill.

Additionally, the Senate must follow procedural rules that don’t apply in the House. Under Senate reconciliation rules, the nonpartisan Senate Parliamentarian must first review and confirm the bill and any amendments comply with the rules for reconciliation, known as the Byrd Rule. For example, insurance market reforms that are currently in the AHCA may not be allowable under the Byrd Rule, if it is determined they don’t have direct spending impact.

The Parliamentarian’s analysis requires a Congressional Budget Office (CBO) score (cost estimate). While the CBO scored an earlier version of the AHCA, the recent amendments require the CBO to update its cost estimate, meaning it could be a few weeks before the Senate can bring a bill to the floor for debate and an eventual vote.

Identical versions of the bill must pass both chambers before being signed by the President and becoming law. If the Senate passes a bill that isn’t identical to what the House passed, there are two paths forward: 1) the House could pass the Senate bill and send it to the President; or 2) a bicameral conference committee can meet to negotiate a new compromise bill. That negotiated bill would then have to be passed by both chambers, before sending it to the President for signature. It is unclear which option might be used in this instance. 

Timing is unclear for these next steps to occur, but there continues to be support from the Administration to move forward with repeal and replace of the ACA this year.

Reminder: ACA Compliance is Required Until Official Guidance Otherwise
As a reminder, ACA compliance is required until official guidance to the contrary is issued. The House passage of the AHCA is the first of several required steps before any official changes are enacted. For a customized timeline and more information about ongoing annual responsibilities and applicable employer deadlines under the ACA, visit YourACARoadmap.com


Staying Informed
To stay up to date on the evolving state of health care reform, visit www.InformedOnReform.com, including the new Repeal and Replace Update webpage. This page offers a snapshot of the latest regulatory and legislative activity. 

Republicans Moving Forward on AHCA with Possible Vote Next Week

Republicans Moving Forward on AHCA with Possible Vote Next Week


From the National Association of Health Underwriters Washington Update, April 28, 2017 


House Republicans are continuing their efforts to pass the American Health Care Act after they were unable to hold a vote on the bill last month due to a lack of support within the caucus. An amendment introduced this week to allow states to opt out of parts of the ACA could help increase support for the package, although whether it will be enough to pass with a majority of the House remains unclear. At least 15 House Republicans have publicly stated they will still not support the bill even with the current amendment, and another two dozen are leaning no or are undecided, some of whom previously publicly supported the bill. This continues to cast doubt on the ability to reach the necessary 216 votes for passage in the lower chamber as Republicans can only afford to lose 22 votes. Late yesterday, House Republican leadership announced that after initially considering a vote this week at the White House’s request, they would postpone a vote until next week at the earliest.

As we noted last week, the amendment to allow for more state flexibility in the ACA requirements would join an earlier amendment already approved by the House Rules Committee creating a $15 billion “Federal Invisible Risk Sharing Program.” The new amendment was worked out between Representatives Tom MacArthur (R-NJ) and Mark Meadows (R-NC), who lead the centrist Tuesday Group and far-right Freedom Caucus, respectively. The amendment would allow states to receive a waiver from the Department of Health and Human Services to opt out of the ACA’s essential health benefits and age and community rating provisions by proposing at least one of the following: reduce average premiums for coverage, increase enrollment, stabilize the market, stabilize premiums for individuals with pre-existing conditions, and increase the choice of health plans. The waiver would be contingent on the state setting up a high-risk pool for consumers with preexisting conditions.

The amendment was a welcome change for the House Freedom Caucus, the group of the most conservative members of the Republican Party, who largely opposed the last iteration of the AHCA for failing to fully repeal the ACA. Notably, Representatives Jim Jordan (R-OH), Raul Labrador (R-ID), Dave Brat (R-VA) and Scott DesJarlais (R-TN), all who vehemently opposed the previous bill, now have publically stated they will support the bill with the amendment. The group made a tepid but official endorsement of the amendment this week, acknowledging that while the bill with the amendment still falls short of their demands, it does help to deliver on their promise to repeal key provisions of the ACA and they would work with the Senate on other ways to improve the bill. The Freedom Caucus requires that 80% of its members support a legislative item in order to garner an official endorsement.

The tradeoff to garnering the support of the Freedom Caucus and its roughly three-dozen members is that it threatens the lukewarm support of more moderate members, as well as potential support from Republicans who previously opposed the AHCA for dropping ACA coverage and consumer protections for their constituents. The Congressional Budget Office had already released a report claiming that as many as 52 million Americans would be uninsured under the AHCA, and the new amendment is likely to further increase the number of uninsured while also eroding the ACA’s consumer protections. The CBO has yet to release an updated score of the new bill with the latest amendments, and many centrist Republicans are unlikely to support the bill without a new score.

The centrist Tuesday Group, led in part by MacArthur, has not offered an endorsement of the deal brokered by its leader, and the Freedom Caucus and many of its roughly 50 members continue to express reservations about the bill and claim that negotiations are moving further away as concessions are made to the far right of the party. Among the biggest objections is over consumers with preexisting conditions, as Representative Mario Diaz-Balart (R-FL) said this week: “My concern has always been [about] what a lot of us talked about: people with pre-existing conditions, the elderly. Where is the part that is better for the folks I’m concerned about it? I’m not seeing it at this stage.”

The hesitation among centrists is in part coming on the waves of fervent opposition of many industry groups that are continuing to push hard against the bill. AARP claims that the amendment would cause premiums for the sickest patients to increase to more than $25,000 per year and the Catholic Health Association stated, “the recent amendments…are even more disastrous for people who have just gotten healthcare. This is contrary to the spirit of who we are as a nation, a giant step backward that should be resisted.” Additionally, the American Medical Association, American Hospital Association and America’s Essential Hospitals all voiced strong opposition to the bill. The AMA claimed that the amendment to the bill “could effectively make coverage completely unaffordable to people with preexisting conditions” while the AHA said that the amendment would “dramatically worsen the bill.” And health economist Craig Garthwaite noted, “This reads like another example of a policy written by people who either don’t know or don’t care about how health markets work.”

The continued outside pressure among industry groups on centrist Republicans to oppose the bill with the recent amendments continues to put into question whether House Republicans will be able to pass the AHCA out of the lower chamber and send it to the Senate for consideration, where the bill is even more in question. Both centrist Republicans and far-right members had previously expressed strong reservations about provisions of the AHCA. This includes Senators Rob Portman (R-OH), Lisa Murkowski (R-AK), Susan Collins (R-ME), Ted Cruz (R-TX), Rand Paul (R-KY), Mike Lee (R-UT), James Lankford (R-OK) and Tom Cotton (R-AR), all of whom have expressed concern either for the AHCA going too far or not far enough. There is an even narrower margin for passage in the Senate, where Republicans can only afford to lose two votes, assuming that Vice President Mike Pence would cast a tie-breaking vote. 

As the negotiations continue, it is becoming increasingly clear that Republican voters are holding the Administration and Congress accountable for the future of health reform. A new poll shows that a majority of Republican voters (53%) now believe Trump and congressional Republicans are responsible for the ACA, up from just a third of respondents only two weeks ago. Fully three in four voters overall say that the president and Congress should focus on making the ACA work and they are responsible for any consequences of health reform moving forward. Previously, the president had said he would cast blame on Democrats for any of the law’s failures and would use them as leverage for passing his own priorities. But with Republicans now placing the onus on their own party, there will be more of an incentive to ensure that any reforms put forward will not cause any further harm on their constituents.


Congress Returns: Planning Another Vote on the AHCA as Government Shutdown Looms

Congress Returns: Planning Another Vote on the AHCA as Government Shutdown Looms


From the National Association of Health Underwriters Washington Update April 21, 2017




Following their two-week recess, Congress is set to return on Tuesday and will possibly hold a vote on the American Health Care Act (AHCA) as soon as Wednesday. After a push from the Trump Administration to hold a vote on the bill before the president’s 100th day in office (April 30th), House Republicans have been working to find an agreement within their party to be able to bring the ACHA for consideration again following decision last month to scrap the vote on the bill. An amendment this week could help win support from several “no” votes, but it is unclear if it will be enough to pass the chamber ahead of this week’s deadline. And while House Republicans work on this deal, they must also face a tighter deadline to avoid a government shutdown on Friday.

The new text of the bill has not yet been released, but is expected to include an amendment to the AHCA worked out between Representatives Tom MacArthur (R-NJ) and Mark Meadows (R-NC), who lead the centrist Tuesday Group and far-right Freedom Caucus, respectively. The AHCA currently strips out the ACA’s essential health benefits, but this amendment would reinstate them as a measure to win support from centrist Republicans. And in an effort to win support from far-right Republicans, the amendment would grants states waivers to create their own essential health benefits and allow insurers to charge consumers with pre-existing conditions higher premiums, contingent on the state setting up a high-risk pool for these consumers.

Before the AHCA was pulled from a vote last month, there were upwards of 50 House Republicans who were voicing opposition to the law or strong reservations about voting for it for a myriad of reasons. However, it is not clear whether this amendment or the amendment creating a $15 billion “Federal Invisible Risk Sharing Program” will be enough to win support of enough House Republicans to be able to reach the necessary 216 votes for passage. With 238 Republicans in the House, Republicans can only afford to lose 22 votes for the bill to pass the lower chamber. And assuming that it passes the House, it will still need to make its way through the Senate, where it can only afford to lose two votes, while as many as six Republican senators have expressed reservations over the bill.

Representative Meadows claims that the new amendment will bring along as many as two-dozen members of the Freedom Caucus. But many members of both the Freedom Caucus and Tuesday Group have said the amendments don’t address the things they had concerns about, they weren’t part of negotiations on these amendments, and neither Meadows nor MacArthur got approval of the changes from their groups before agreeing to the deal. Further, these amendments had previously been rejected by Republicans in the lead-up to the AHCA last month.

While House Republicans continue working on negotiations ahead of a White House imposed deadline to hold a vote this week, they must also contend with another more pressing deadline of keeping the government funded. Without legislation to keep the government open or a short-term stop-gap, government funding is set to expire next Friday. And after the government shutdown of 2013 when Democrats held the Senate and White House and both parties faced blame for the shutdown, now that Republicans control both chambers of Congress and the White House, the pressure falls entirely on them.

In recent years, Republicans in the House have largely been unable to win support from enough of their members to pass a continuing resolution (CR) without the support of Democrats. There are several key points of disagreement that currently threaten the passage of the current spending bill: funding for a border wall, preventing federal funds from going to “sanctuary cities,” additional defense spending, benefits for coal miners, and funding for the ACA’s cost-sharing reduction (CSR) program.

As we noted last week, the CSR program is being considered in negotiations by both parties and both are hoping to use the program as leverage in their negotiations. The Trump Administration is currently defending a lawsuit by House Republicans that the subsidies, which help offset out-of-pocket expenses for silver-tiered plans purchased through the marketplaces for households with incomes up to 250% of the federal poverty level, are illegal. And they have until May 22 to determine if they will continue to defend the lawsuit. If not, then the payments made by the government to insurers would cease, while insurers would still be required to provide the subsidy amounts owed to individuals—an amount of roughly $7 billion annually across all insurers. This could result in many insurers opting to immediately withdraw from the marketplaces and leaving millions without coverage.

Democrats are threatening to withhold support of the spending bills, and thereby jeopardizing a government shutdown, if funds for the CSR program are not included in the spending bills. Yesterday, Director of the Office of Management and Budget Mike Mulvaney indicated that the White House is willing to negotiate on funding the subsidies in a spending package if Democrats will go along with several of the White House’s legislative priorities, such as increased defense spending and border security funding.

Earlier this week, a group of health insurance officials met with Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma to discuss the subsidies. The group reported that they didn’t get clarity from Verma that CMS would continue to fund the CSR program, with Verma noting that she doesn’t have the power to make the decision. America’s Health Insurance Plans led the meeting and was joined by the Blue Cross Blue Shield Association and several large regional health plans, including Molina Healthcare, Geisinger Health Plan, Oscar Insurance Company, Kaiser Permanente and Health Care Service Corp.

As negotiations continue on both the AHCA and legislation to avoid a government shutdown, NAHU will continue to advocate for legislation and regulation to stabilize both the individual and employer-sponsored health insurance market for the coming years. This includes working to make changes to the parts of the ACA for which we are able to get consensus on a bipartisan basis, such as permanent repeals (or short of that, continued delays) of the Cadillac/excise Tax and the Health Insurance Tax (HIT). We will also continue to work with Health and Human Services Secretary Tom Price to improve market stability through regulations, and with our state chapters to pursue 1332 Waivers for the states.

Pulling the plug on Healthcare in the US – Dissecting the Regular Facts from the Alternative Facts

Dismantling the employer option . . . and then there were none    There is a well known English nursery rhyme by Mother Goose, about an egg that sat on a wall and had a great fall.  All the king’s horses and the all king’s men could not put that poor egg back together again. As we have been following the repeal and replace of the Affordable Care Act (ACA) or aka – Obamacare, the elimination or capping of the employer tax-exclusion on employer sponsored benefit programs, has been brought up again.  This idea has been floating around for the last couple of years as a way to increase revenue and now looked at as one potential revenue funding option in a replacement to the current Affordable Care Act (ACA). So what is the employer tax – exclusion? Currently employees are NOT taxed on the employer paid portion of their benefits for income and payroll tax purposes. Under this new regulation, the employer paid portion of premiums could end up being considered taxable income.  In addition, the employer could face higher FICA (Federal Insurance Contributions Act) matches, which would be an added financial burden to the employer.   FICA is made up of the employer and employee both contributing equal shares of Social Security Tax (6.2%); Medicare Tax (1.45%) for a total of 12.4% and 2.9% respectively.  Currently there is a cap on Social Security, so once you have paid this tax on $127,200, you no longer pay the 6.2% Social Security tax.  You can find more information on this and additional taxes HERE. We are sitting in a precarious situation if we start to look changing or altering the current employer model, as part of the repeal and replace.  The Kaiser Foundation has data showing 156 million Americans covered through employer based plans through the end of 2015.  As of 2017, approximately 175 million Americans receive healthcare through the employer based model. Remember the risk pools?  The employer based market is heavily involved in helping to balance risk pools by spreading out the costs of the healthy and unhealthy covered employees. If the employer has no incentive to offer these benefits to their employees, or they end up costing both the employee and the employer more money, the employer could easily have their employees go to the individual marketplace to purchase their coverage by offering a salary increase to the employee to offset some of the costs.  This would mean higher income taxes to the employee.  The costs in the individual market are higher; the choices are lower and employees would lose the benefit of having their employer advocate in coverage disputes. If Congress decided, instead, to cap the employer-tax exclusion, this would in turn, cause the employer to look at providing less rich benefit to employees, to stay underneath the maximum premium cap so not to trigger a tax.  This would push employees to higher out of pocket costs and possibly shift the cost of the premium from the employer to the employee at a faster rate then we are seeing today. The employer-sponsored health insurance is a valuable benefit and a keystone to the American worker and a financial foundation for the healthcare system today.  If we attempt to upset this model, while undergoing additional repeal and replacement options, we run the risk of the entire system breaking, just like that egg.  And there is not a king nor a horse strong or powerful enough to be able to pick it up, once the system has fallen off the wall.   ]]>

You think you are going to touch my MOTHER’S Original Medicare? Have you met my Mom? Didn’t think so. . . .

You think you are going to touch my MOTHER’S Original Medicare? Have you met my Mom? Didn’t think so. . . .

Posted: 05 Feb 2017 04:14 PM PST 

Rob Bujan

Original Medicare, as I introduced it in my post Turning Alternative Facts to Actual Facts, was rolled out in 1965.  We have Part A for hospital coverage, Part B for outpatient and doctor care.  Most Medicare participants also choose to enroll in either a supplement plan that will supplement (no insurance carrier network – but the doctors/hospitals have to accept Original Medicare).  The supplement will cover the gaps in coinsurance (percentage of coverage by Medicare versus what you would be responsible for) & deductibles (first dollar costs that you are responsible for) or a Medicare Advantage Plan, where the insurance carrier will take on the risk and you are normally going to navigate within a local or regional network, sometimes with coverage for doctor’s who do not participate in the network.  You would normally have copays if you are staying within the network. Paul Ryan, R-WI & the Speaker of the House, has a proposition on the table to change Original Medicare.  He has put forth a plan to privatize Original Medicare.  Speaker Ryan would replace the current program with vouchers.  It’s interesting to see how everyone is all about these ‘vouchers’ to replace what we have today.  The healthcare industry, as you can tell, from my previous posts – it not easy to navigate.  It takes someone with the time and background to really figure out how to make the system work for them.  So, instead of providing more ease of use, it seems the answer is the voucher and making seniors, in this case, more participatory in their healthcare process.  Why do you need to upend a system that has worked for seniors and replace it with a privatized program?   The answer that we are given is that Medicare is on its last legs.  It is on life-support and we have to do something before it collapses and leaves Granny Nan & PePa out in the cold.   Quick reality check.  Medicare’ has IMPROVED in the last couple of years, not gotten worse.  As a matter of fact, it is funded through 2029 and 79% funded through 2040, which can be made up without privatization.  Medicare Trustees Report (page 29).   Medicare is one of the programs that will find a hard time getting approval to change it, under the current Administration.  It is also NOT tied to the ACA issues.  Remember, Medicare has been around since 1965.  The current Administration ran on a platform promising not to touch Medicare.   One might argue that Medicare is an entitlement but I disagree.  An entitlement is the having a right to something or the believe that one is inherently deserving of privileges or special treatment.  We all pay into Medicare while we work and once we retire, we have to pay into Part B Premiums.  2017 Part B Premiums.   Seniors have a very strong voice and membership association, in AARP (American Association of Retired Persons).  They are 38M members strong and they have the resources to fire up their base.  And let me tell you, don’t screw around with their healthcare, golf tee time or cruise ship schedule.  Trust me, my mom would be the first to tell me that!  So, let’s not pull Part A & B away from our loved ones, let’s find ways to enhance the program to make it easier to gain access to incentives for better outcomes within the healthcare delivery system.   ]]>

Republicans Face Dilemma on Timing of Health-Law Replacement

Do they act before or after the 2018 midterm elections? Either choice carries political risks

The Wall Street Journal
By Stephanie Armour and Kristina Peterson
Dec. 9, 2016 7:00 a.m. ET

WASHINGTON—Republicans united in their desire to overturn the Affordable Care Act are divided over whether to replace it before or after the 2018 elections, a choice that holds political peril either way.

Waiting until after the midterms could pose a political risk to the most conservative Republicans who campaigned on the repeal and whose constituents want the law to be gone as quickly as possible.

But passing a hastily-written replacement for the complex law could create chaos in markets and leave millions without health insurance. Some Senate Republicans believe putting a new system in place could take until 2019 or longer.

Along with likely legislative action by Republicans in January to dismantle parts of the ACA, President-elect Donald Trump is expected to take executive action that would weaken parts of the law. House Republicans also are likely to seek to cut off federal funding for Planned Parenthood Federation of America.

Midterm elections tend to disfavor the party that controls the White House, and Republicans are aware of the drubbing Democrats took in 2010, after they enacted the law with almost no Republican support.

“One of the lessons we learned from Obamacare is that partisan legislation is not sustainable and what we need to do is go back to the old-fashioned way” of reaching bipartisan consensus, Senate Majority Whip John Cornyn (R., Texas) said this week.

A transition period would be aimed at preserving health insurance for the roughly nine million consumers who get tax credits to offset premiums. “There needs to be a reasonable transition period,” House Speaker Paul Ryan (R., Wis.) said Thursday. “It’s just premature to suggest that we know exactly how long this transition will last.”

Some House Republicans insist a replacement can be done in two years or less. Their calculus is that getting rid of the law early in 2017 with a short or no transition period would force action on its replacement. “The only way this gets done is if our backs are against the wall,” said Rep. Mark Meadows (R., N.C.), chairman of the conservative Freedom Caucus.

Senate Republicans have indicated they want Democratic buy-in for their health-care overhaul. Finance Committee Chairman Orrin Hatch (R., Utah) said “three years would be better” for a transition, but acknowledged there is pressure from the House to move faster.

If House Republicans who want a speedier replacement defect, the House could lack enough votes to push through a three-year replacement plan. The clash also reflects the difficult path ahead for Mr. Ryan, who wants to keep the GOP united in its repeal and replacement plan.

“This election showed that people want things done now,” said Rep. Roger Williams (R., Texas). “People in America deal in real time and they want real-time solutions.”

Democratic leaders have signaled they are unlikely to cooperate, at least in the initial repeal phase, while some in the party up for re-election in 2018 in conservative-leaning states may feel pressure to fill the void if the law has been repealed.

“They have nothing to put in its place, and believe me, just repealing Obamacare even though they have nothing to put in its place and saying they’ll do it sometime down the road will cause huge calamity from one end of American to the other,” said Sen. Charles Schumer of New York, the next Democratic leader.

Each party will face political headwinds going into the 2018 midterms. Senate Democrats will be defending 25 of 33 seats in play, putting them at a disadvantage.

But Republicans will have political ownership of the health-care law at a time it is likely to still be in flux—and possibly in turmoil. And because they will control Congress and the White House, any voter angst could favor the Democrats in a sort of reverse dynamic of 2010

Senate Republican Leaders Vow to Begin Repeal of Health Law Next Month

DEC. 6, 2016

WASHINGTON — Senate Republican leaders, after meeting with Vice President-elect Mike Pence, said on Tuesday that they would move immediately next month to start repealing the Affordable Care Act, despite qualms among some of their members.

“The Obamacare repeal resolution will be the first item up in the new year,” said Senator Mitch McConnell, Republican of Kentucky and majority leader.

Republicans have not fleshed out a plan to replace the 2010 health care law, President Obama’s signature legislative achievement. But on Tuesday they laid out their principles for a replacement plan and said they would try to minimize disruption for the 20 million people who have gained coverage under the law.

Senate Republican leaders appeared to agree with House Republican leaders on a “repeal and delay” strategy, which could keep parts of the health law in place for several years, as Congress works with the administration of Donald J. Trump to devise a replacement.

The Senate Republican strategy would start the repeal process in early January and could defer the effective date for several years, but not all party members were on board.

“They have to be done together,” said Senator John McCain, Republican of Arizona, referring to efforts to repeal and replace the health law. “We don’t want to have people left out.”

Democrats vowed to fight for preservation of the health law, on which public opinion has been deeply divided for six years.

“Bring it on!” Senator Chuck Schumer of New York, the next Democratic leader, said to Republicans. “Just repealing Obamacare, even though they have nothing to put in its place, and saying they’ll do it sometime down the road will cause huge calamity from one end of America to the other.”

Many health policy experts say the law has been beneficial. But Senator John Thune of South Dakota, the No. 3 Senate Republican, said: “It’s well documented, everybody agrees, both Republicans and Democrats, that Obamacare has serious problems. I would say it’s been a failure, and I think the American people agree.”

After repealing the law, Mr. Thune said, Republicans will proceed step by step to develop a replacement, built around four principles: States, not the federal government, should have the primary responsibility for health policy. Patients and doctors should be “in control.” There should be more competition among health plans, so consumers would have more choices. And small businesses should have more discretion and flexibility to configure health benefits for their employees.

After their lunch on Tuesday with Mr. Pence, many Senate Republicans were energized. After the inauguration of Mr. Trump, the schedule will be “very aggressive,” said Senator Michael Rounds, Republican of South Dakota.

But other Republican senators were still mulling their strategy.

Senator Bob Corker, Republican of Tennessee, suggested that it might make sense to repeal and replace the heath law at the same time, and that there could be pitfalls in deferring a replacement for several years.

“People are trying to figure out the best route,” Mr. Corker said. “It’s not really repeal if it’s still in place for three years.”

Senator John Barrasso of Wyoming, a member of the Senate Republican leadership, said Congress would need time to develop a replacement.

“Health care has been driven into the ditch by President Obama and this health care law,” Mr. Barrasso said. “It will take time to get the cart out of the ditch.”

Senator Susan Collins, Republican of Maine, said she supported efforts to repeal and replace the health law, but not Republican efforts to cut off federal funds for Planned Parenthood clinics. Last December, she voted against a budget bill that would have repealed major provisions of the health law because it would also have terminated funds for Planned Parenthood.

“Under the incoming administration, Republicans and Democrats will have a new opportunity to fix Obamacare, and there is a lot to fix,” Ms. Collins said on Tuesday, noting that premiums for health plans on the exchange in her state were increasing an average of 22 percent next year.

BE PREPARED: New Overtime Rules Go into Effect on December 1, 2016

On May 23, 2016, the U.S. Department of Labor issued updated regulations governing the white collar exemptions. The updated regulations go into effect on December 1, 2016.


The Fair Labor Standards Act (FLSA) requires that most covered employees be paid at least the federal minimum wage for all hours worked, and receive overtime pay at time and one-half the regular rate of pay for all hours worked over 40 in a workweek. However, § 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for bona fide executive, administrative, professional, and outside sales employees. Section 13(a)(1) and § 13(a)(17) also exempt certain computer employees. These exemptions are generally referred to collectively as the “white collar” exemptions and include the following:


• Executive exemption.

• Administrative exemption.

• Professional exemption (learned and creative).

• Computer employee exemption.

• Outside sales exemption.

• Highly compensated employee (HCE) exemption.


Highlights of the Updated Regulations


Under current FLSA regulations, an employee must generally satisfy three tests to qualify for one of the white collar exemptions:

The Salary Basis Test. The employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed.

The Salary Level Test. The amount of salary paid must meet a minimum specified amount.

The Duties Test. The employee’s job duties must primarily involve those associated with exempt executive, administrative, professional, outside sales, or computer employees.


The updated regulations focus primarily on updating the salary and compensation levels in the salary level test that employees must meet to qualify for the executive, administrative, or professional employee exemption. Specifically, the updated regulations:

• Set the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South, which is $913 per week or $47,476 annually for a full-year worker. The current salary level is $455 per week ($23,660 per year).

• Set the total annual compensation requirement for highly compensated employees (HCEs) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally, which is $134,004. The current compensation requirement is $100,000.

• Establish a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles.


The updated regulations also amend the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level. Note that the regulations make no changes to the duties tests.


Steps to Take Now


If you haven’t started planning for the changes, don’t panic; but it’s time to get started. Here are some steps you can take to prepare for the changes.


Financial Preparations


Analyze the salaries of employees who may be affected by the final rule and start forecasting for increased salaries and overtime costs. Suggestions include:


1. Determine which employees are exempt at an annual pay rate of less than $47,476, including up to 10 percent of nondiscretionary bonuses.

2. Consider whether to raise these employees’ pay to meet the new threshold of $47,476 to maintain exempt status or budget for potential additional overtime expenses with the reclassification to nonexempt status.

3. Review with your managers or exempt staff the average hours that each employee in the above group works beyond 40 hours per week, or other state hours worked requirement triggering overtime eligibility. Don’t forget to include meal and rest periods, travel time, training time, and other hidden overtime in that analysis.

4. Calculate the average number of overtime hours of your current nonexempt workers on an annual basis.

5. Based on these two numbers (from steps 3 and 4 above), determine the average number of hours that would be considered as overtime (over 40 hours in a workweek, or eight hours in a day for some states) for the exempt workers; the aggregate of both is an estimated average of overtime hours that the exempt worker may work if reclassified as nonexempt.

6. To calculate the overtime budget, take the average hourly rate of all exempt workers at the annual rate of less than $47,476, multiply the hourly rate by 1.5, and multiply that number by the estimated average overtime hours calculated in the last step to determine the proposed overtime budget for the current exempt workers that may be reclassified as nonexempt.


Consider requiring exempt employees earning less than $47,476 per year to start tracking their weekly hours worked. Since exempt employees do not typically record their work hours, it may be difficult for them to accurately estimate the overtime hours they have worked and anticipate working in the future. Having them track their work hours will provide the employer with valuable information when it comes to budgeting.


Benefits Preparations


Review your group benefits plans and your paid time off and leave policies (for example, sick and vacation) and assess how each may be impacted as they pertain to eligibility and accrual differences for exempt and nonexempt workers and how the company will best manage the transition from one accrual method to another.


Communications Preparations


Plan your communications strategy carefully. This is a great opportunity to talk with your employees about your pay strategy and what your organization values, and you can reinforce that the regulatory definitions of overtime exemption status are not important to your evaluation of each employee’s worth to your organization.


How the changes in classification status and rates of pay are communicated to employees will have a lot to do with your company culture, pay philosophy, and style of communication. Face-to-face communication is generally the ideal method when discussing compensation. Follow up with written documentation confirming your discussion with each impacted employee that shows the new classification status, rate of pay, and the overtime rate of pay that will apply. Some states already require employers to notify nonexempt employees in writing any time a change in rate of pay occurs, including California, District of Columbia, New York, and Pennsylvania.


Keep Managers in the Know


Train your management team about the changes you are making, including not just the “what,” “how,” and “when,” but also the “why” so that the company’s intentions are communicated in a way that demonstrates thoughtful consideration of the alternatives, respect for your employees, and alignment with your company’s culture and strategic objectives.

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