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

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

 

With all cards on the table, is this Pay or Play 2.0?

 

Where do we stand now?

New changes in the last 24 hours were made among them:

1. Repeal the 10 essential health benefits mandate (Conservative Caucus)
2. Add an addition $15B into a flexibility fund (for states to manage Medicaid) (Coverage Caucus – side note here – Senator Cassidy R-LA – who worked with Senator Collins R-ME on a separate bill is heading the coverage caucus as they are working to keep coverage in the Medicaid programs)
3. Keep the .9% Medicare tax for high-income earners making over $200,000 filing single for six more years – this would be to keep bringing in new revenue (This was originally in the bill to sunset as of 2018, then adjusted to sunset this year but looks to be sunsetted in 6 years)

 What else did I miss?

Earlier this week, additional changes were made to the bill as it was attempted to garner enough votes to pass on the floor of the House.  Most of these are changes in implementation dates to appeal to different parts of the House GOP.

1. Moving the repeal of the Tanning & Medical Device tax from 2018 to 2017
2. Moving the repeal of the business tax cap for executives in health insurance companies from 2018 to 2017
3. Sunset new Medicaid expansion for states that have not expanded from 2020 to 2017 (Kansas is currently trying to expand Medicaid as we speak)
4. NY Representatives add an amendment to move $2.3B Medicaid costs from local (county – excluding large metropolises like NYC) to the State Budget
5. Lower the medical expense deduction from 7.5% under the original bill now to a new low of 5.8% and to move up implementation from 2018 to 2017
6. Delay Cadillac tax from 2025 now pushed out to 2026
7. Repeal the maximums and over the counter medication bans on Flexible Spending Accounts from 2018 to 2017
8. Increase the HSA limits to maximum out of pocket costs from 2018 to 2017

What does this all mean?  Well, to be absolutely frank – not much, if they don’t have the votes today.  What does it mean in the future, though, EVERYTHING.  

I don’t think you will find someone who doesn’t think we have work to do on the ACA.  I am the first to say it.  I also think that we have to get a bi-partisan committee to work together with consumer groups; AARP; AHIP; AHA; AMA and the healthcare consulting (i.e. the broker) community.  We are in the battle on a daily basis.  We know what can work and what should work and this needs to be done right and it needs to be done soon.

There are good ideas out there and we have to approach this on a more macro level and look at the outside forces that are affecting the current delivery system, i.e. lowering the cost of pharmaceuticals by introducing competition; providing incentives for smaller companies to do more development on generic alternatives; banning pharmaceutical companies from shelving generic patents when they become available; more efficient medical record data sharing; cutting out redundancy; providing affordable medical malpractice insurance programs to incent OBGYNs and other speciality providers who want to provide care but can’t afford the malpractice premiums; identifying high-cost chronic conditions and look at possibly pooling them into a national program such as Medicare, as we do with End Stage Renal Disease; providing TRANSPARENCY to the consumer by giving them the means to shop for a procedure with outcomes and cost as easily as they can today with houses; technology and cars; getting more funding and education to fight the opioid epidemic.

We cannot continue to kick the can down the road, adjust the programs to suit a small group of interest.  The health of this country is at stake; the health of its citizens are at stake and millions of jobs are at stake.  We need to pull this out of the halls of Congress and get the experts, who manage this, at the table now before it is too late.  

There are solutions, there is a way – but we have to do this together with experts and support it as a country.  This is one thing neither party should own but every party should want to see succeed.  


 

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.   ]]>

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

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

The 21st Century Cures Act

By Rob Bujan    Oh goody!  Another bill to repeal and replace the ACA!   nope, wrong. This is one of the last bills that President Omaba signed into law before leaving office.  The 21st Century Cures Act is packed with investments for improved healthcare.  There are some great programs to address the heroin and prescription opioid epidemic; improve mental health; improve the timing on drug trails within the FDA and accelerate cancer research discoveries. It also had a program included that allows employers to provide an account to give to employees to shop for their health insurance plans in the marketplace or directly with an insurance carrier in the individual market. For many years, brokers have been using  Health Reimbursement Arrangements (HRA) coupled with a high-deductible plan.  An employer would put a plan with a $4000 deductible for hospital care, for example, have copays for medication and doctor visits. About 20% – 25% of employees in a group setting drive approximately 80% of high-level (inpatient) claim costs, so the employer could fund the deductible for the employee if they had a claim that processed against the deductible, which would normally be less frequent than office visits or pharmacy claims.  The premium would be lower, and the employer would use those savings to fund the deductible.  The HRA money was used only if a claim entered the deductible mode.  The money was not taxable money to the employee if they used it. Some employers also used these accounts to allow employees to purchase individual health plans to give employees a choice and not administer benefits.  These were also known as Premium Reimbursement Accounts (PRA)  The ACA actually did away with this program as they did not want employers to adversely select against folks who could drive up claim costs, and they did not want employees who could get a subsidy in the marketplace to use that subsidy and receive tax free money from their employer.   The new bill allows HRA stand alone account to pay for premiums for employers with less than 50 employees.  With some new mandates, they can curb some of the abuse that they felt could occur under the original model.  If an employer decides to offer this, the employer must offer it to all their employees (no discrimination).  They are NOT allowed to offer a group product next to this reimbursement program (to protect the risk in the group market), and employees must identify they have this reimbursement if they shop in the marketplace and get an advance premium tax credit (APTC).  The APTC would be reduced dollar by dollar so there is no double dipping.  The maximum amounts that employers could provide to employees would be $4,950 for employee-only coverage and $10,000 for employee/spouse; employee/child or full family coverage.   The goal of this was to get more small group employers who might not be participating in offering group coverage, to do so.  It would also increase the individual market and strengthen it by adding more individual to the risk pool, again keeping that pool full.  The reality is though; this might be a fix that is a little too late.  The individual markets in many states have been hit hard with carriers dropping out; rates increasing due to the medical loss ratios (claims paid versus premiums received) running higher than expected; and an overall lack of choice in the individual marketplace.  Most individual plans are in-network only; have local networks with only national coverage in case of a true emergency. Group coverage offered through an employer is still going to give you larger network access; more carrier offerings and in most cases, lower group rates.   While the 21st Century Cures Act looked good on paper, it is not going to be enough to breathe life back into the individual market without incentives for more competition and a leveling off of rates.  The individual market needs both the state and the federal government to come together to work on a better program for those that don’t fall into Medicaid; Medicare or have employer-based coverage.  Why don’t we get a discussion about this going and work on fixing one piece of the market at a time?  That is how we really could provide a safe and thoughtful way to enhance and adjust our current state of the ACA. ]]>

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

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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