The Game has Changed – Have you?

 Or, how to stop complaining about ObamaCare and start using it to increase profit

 When people talk about the The Affordable Care Act (aka ObamaCare) they could be thinking of a lot of different aspects.  Like it or hate it, there is only one area that can revolutionize the way “Benefits” are provided.  So while there are important financial, political, constitutional, regulatory and taxation issues that exist, let’s focus on those changes that will make a positive impact on your bottom line.  Specifically, changes that have taken place in the individual health insurance market that will provide a major competitive advantage to those business owners willing to do something different.

 A competitive advantage because you can spend less and your employees can get more.

 There are two categories of health insurance today:

 1)    Group Health means an employer sponsored health insurance plan – typically one carrier, one plan, one network.  The employer picks the plan, pays the bills and decides how much to deduct from employees who wish to participate.

2)    Individual Health means the health insurance that covers individuals, their children and spouses/partners and purchased via the Public Exchange/Marketplace, direct for carriers, from local agents or from private exchanges.

 If you are one of the few business owners who feel that the group health insurance market has worked well for you and your people you can stop reading here.  The other 99.9% should proceed.

 

Positive Changes for those who purchase their own health insurance

 

In 2013 about 180 million people purchased health insurance through their employer and 12 million who purchased their own coverage.  Prior to 2014 those purchasing their own coverage were able to save 30-70% over those who purchased via their employer.  Why? Because you must have been healthy at the time you applied for coverage.  ObamaCare changes all of that.  Yes the cost goes up compared to pre-2014 individual plans, but according a PwC’s Health Research Institute (February 2014) report the premiums found on the “Exchanges” were 4-20% below comparable group health plans.  And now everyone gets covered.  This is why experts expect a major change away from group health over the next decade.

 How many businesses are offering group health insurance because they felt this was the only way to provide quality coverage at an affordable price to their employees?  Many.  How many of these businesses would be better off dropping their group health plan. Most.

 So where do you get this coverage?  Most people think that they must purchase coverage from one of the 51 unsecure, dysfunctional ObamaCare websites – generically referred to as “Exchanges”.  This is not so.  Purchases can certainly be made from a public exchange like healthcare.gov or newyorkstateofhealth.com but the same rates can be found directly from the carriers (Blue Cross, United Healthcare, etc), from local agents, “web” brokers like eHealth.com and private exchanges such as the Simplifi Benefits Exchange ™.

 Add in expanded Medicaid and significant financial assistance for people not offered affordable group health and you have the foundation for changing the game at your business.

 Bottom Line-

 1)    Everyone gets covered – no pre-existing conditions excluded

2)    Rates based on age/area/smoking status only (except NY which has 1 rate for all)

3)    Same Benefit levels in group and individual markets

4)    Expanded Medicaid means free coverage for those earning $15k or less per year

5)    Financial Assistance (Premium Tax Credits/Subsidy) means $25 or less per week for good (Silver) plans for those earning under $20k and less than $50/week if earning under $30k per year.

 

Our firm, Simplifi Benefits, LLC was formed in 2012 to help employers of any size leverage the changes in ObamaCare to increase predictability in labor/health care costs.  Employers with less than 50 employees working 30+hrs per week have no Employer Shared Responsibility (aka tax or $2,000 fine) to navigate.  If you have over 50 there are very simple solutions that allow you to take advantage of these changes without spending the additional $2,000/employee.  Either way, here are a few ideas that you can put to use in your business today.

 Changing the Game to increase profits and increasing take home pay

 Do you or don’t you?  60% of small businesses don’t… Offer health insurance.

 Study after study shows that if you do not offer benefits (health insurance, etc) you will not be a top tier employer.  Simply put, that means your cost of labor is higher than your competition – have to pay higher wages, attract fewer applicants, hire lower quality candidates, higher turnover and etc.  But who said “Benefits” were limited to the health insurance plan that the employer picks?

 If you offer a health plan you have seen your costs and hassles double every 7 or 8 years.  And that is not sustainable.  Add in that most employees have unrealistic expectations; do not want to pay for health insurance and expect that this free health insurance will pay 100% for everything.  How can they be anything but disappointed while you spend all that money. You don’t need to do a lot of fancy employee engagement/benefit surveys to come up with this truism:

1)    Almost everyone hates health insurance

2)    Everyone loves more money in their pocket at the end of the month

 If you can afford to pay 100% for a plan that reimburses employees 100% that is great.

For the rest of you, it makes sense to at least consider giving employees the freedom and responsibility of choosing their own health insurance.  They use the income they receive from you to make purchase decisions on everything else – house/apartment, cars, auto insurance, etc.  Your employees can do this they just need some help.

 

Here are three critical elements that will allow you to turn the individual insurance market changes required under ObamaCare into a competitive advantage:

 

1)    Defined Contribution Funding

  • Sounds fancy but it is just you deciding how much you want to provide employees – think of this as a health care expense allowance
  • Employees decide if they want to add any of their own money into the mix
  • Make this tax preferred (business deduction + tax free income + pre-tax employee contributions) by establishing IRS approved Portable Healthcare Accounts

2)    Personalized Benefits

  • Don’t make people feel like they are being “dumped on the Exchange”
  • Utilize a Private Health Insurance and Benefits Exchange that provides education and personalized consultations so people who want health insurance can make purchase decisions stress free
  • Make sure services include enrollment into Medicaid, CHIP and Premium Tax Credits to help employees on low end of income ladder
  • Round out the package by providing access to voluntary benefits such as life, accident, critical illness, dental and vision that can be purchased directly by the employee and paid via pre or post tax payroll deduction

3)    Provide 24/7/365 Support for navigating the health care system once they have insurance

  • Telemedicine – US Doctors on call to provide diagnosis, advice and prescribe medicines
  • Personal Health Advocate to help navigate “The System” – find providers, schedule appointments, search for lowest cost treatments and negotiate bills

 

In theory you could put this together yourself but that is most likely a less effective and more costly approach.  Plus it still keeps you attached at the hip to health insurance. The above approach will provide you with considerably less headaches and increased profits because you retain the two most important aspects of group health insurance: business tax preferences and payroll tax preferences, while offloading the responsibility and burdens.  This is a no brainer for any company that does not offer benefits now.  For those of you who offer benefits, changing your approach allows you to stop being responsible for something everyone HATES and start being appreciated for something everyone LOVES.  Bet you didn’t think ObamaCare would give you that?

must read blog if you want to start figuring out how to navigate the health care system

THE SOVEREIGN PATIENT

I love to comparison shop; especially when it comes to electronics and computer stuff. I compare all the specifications, acronyms and numbers. I’ve even been known to immerse myself in Consumer Reports, with all the gusto of researching a doctoral thesis, before buying home appliances. The word nerd comes to mind. I confess, it was a pretty intense two weeks leading up to the purchase of our washer & dryer a few years ago. But, I am happy to report that the pair has worked flawlessly, thanks to my meticulous scrutiny.

Trying to find better ways to do things has always intrigued me. It seems this tendency to compare and want the best carries over into my professional life as a doctor. Deep down, I suppose I knew early on in my career that there was a lot of dysfunction and really messed up processes going on in health care…

View original post 1,100 more words

10 Months and counting

Are you ready for Affordable Care Act implementation at your organization?  The good news is that it will finally be easy for individuals to apply and enroll for health insurance – be it employer based, via the public Exchange or the personal insurance market.  

The bad news – if you run a business or not for profit with under 100 employees not being prepared with a strategy can cost you greatly – up to $3000 per employee.  That means lower profit margins, less competitive offerings or less money going toward your organizations mission.

We are prepared to help organizations of any size map out a strategy that works for them from a budget and benefit philosophy.  Check out our website to schedule a free evaluation.

As to play “Fact Checker” to a few of the health care related items mentioned at the debate last night.

1) Pre-Existing Conditions

This problem was handled in HIPPA and the reality is each state must provide a system that provides coverage (High Risk Pool – HIPPA COverage) for anyone who has been continuously insured for 18 months. So since at least 2006 the only people who really had issues with Pre-Ex are those who waited until they got sick or injured to buy “insurance”.  You can’t insure your house while it is burning. 

2) Expansion of term dependents

For the most part carriers and states allow this for those who are truly dependents already.  For the past two years this has been pretty much a free ride for parents (at least those already with family coverage when adding one more person doesn’t increase the cost share).  For 2013 and beyond look for larger companies to start charging on a per “child” basis.  

3) Insurance purchased “Across State lines”  

Thankfully this only came up once.  While it would be an improvement to have uniform benefit provisions and regulations for at least a small segment of plans, the idea that a New Yorker will be able to buy a “Kansas City” plan (and rate) is misleading.  Maybe there will be a great plan or company that operates in Kansas City, but they rates for residents in NYC would be a lot higher for all the other reasons that goods and services delivered in New York are a lot higher.  

Who wouldn’t love to have a Park Avenue address at the “Kansas City” price?

4) Medicare “Vouchers”

This proposal is a voucher program only if you believe ObamaCare is a voucher program.  It is a Defined Contribution program that will ultimately have to be means tested if anyone under 55 wants to have some sort of health care safety net when they retire.

Health care costs will continue to rise and individuals will continue to be at the mercy of the payor as long as we have a 3rd party payment system.  So I guess the immediate debate is who do you want to ration your care?  Your choice now is the insurance company who sells you a policy (aka contract) that says what wil be paid and what won’t.  When they deny a claim it doesn’t mean a person can’t have the treatment.  While not having the money to pay for a particular treatment may be the same as not being able to have it, there is at least an option.  

Since ObamaCare sets the standard for essential benefits, the government will dictate which services are covered.  While there are still “insurance” companies the system will look like it does today – meaning the insurance company may say “we don’t cover that” but you still get the treatment.  When ObamaCare evolves to the models in Canada and England (which it will have to) the government will decide if you can have a service and when you can have it.  

The fact of the matter is that in any 3rd party payment system their will have to be rationing of care.  No one has proposed infinite resources, so any government managed/controlled system will make rationing choices.  One former administration official has some ideas about this now.

 

The health care question is not – which 3rd party should pay for my health care consumption. What we need to figure out is how to help individuals finance a lifetime of health care consumption.

General Verrilli made a comment that illustrates a lack of understanding of both the individual insurance market and current tax code.  He claimed that that the individual market does not provide affordable care because subsidies are not available.

The most recent Kaiser Foundation study on group and individual premiums shows that in every state the average individual premium rate is lower than the average group insurance rate.  This spread can be as low as 3-4% in states like Massachusetts and Vermont to as high as 60-65% in states like Alabama and California.

The reasons for the differences in premium can be attributed to carrier risk selection, greater choice in plan designs and greater competition among carriers.

I am assuming that the  “lack of subsidies” comment means that the employer is not contributing to the individually purchased health insurance.  It is true that the employer can not directly pay for an individual health insurance policy, it is not true that it is not possible for an employer to provide funding for an employee’s health care and insurance expenses.  Section 105 of the IRS code permits employer funding of insurance premiums and any other section 213d expense via an employer funded Health Reimbursement Arrangement (fancy name for Section 105).  The accounts are subject to ERISA and offer the same tax advantages to the employer and employee as a traditional plan.

Setting up a benefit program in this way is the same thing as offer a 401(k) instead of a Defined Benefit Pension plan.  Employers can still provide compensation that is specifically targeted to health care expenses, but employees get to make their own choices in a personal and private setting.

I can wait to get past the first 30 seconds of the General’s open remarks from Tuesday.

General Verrilli offered up the primary reason so many people can’t afford health insurance.

He said that “insurance has become the predominant means of paying for healthcare”. That is not what insurance was designed to be. Here is the dictionary.com definition:

in·sur·ance   [in-shoor-uhns, -shur-] noun
1.
the act, system, or business of insuring property, life, one’s person, etc., against loss or harm arising in specified contingencies, as fire, accident, death, disablement, or the like, in consideration of a payment proportionate to the risk involved.
2.
coverage by contract in which one party agrees to indemnify or reimburse another for loss that occurs under the terms of the contract.
3.
the contract itself, set forth in a written or printed agreement or policy.
4.
the amount for which anything is insured.
5.
an insurance premium.

How much would auto insurance cost if it were required to “cover” such losses as gas, oil changes, wash, wax, dings and etc. ?  Would the Prius driver be happy paying the same premium as the Hummer driver?

 

I think a lot of the people behind the PPACA are really for a “Single Payer” system.  So am I.  Of course I believe the single payer should be the same single payer who makes the utility payment, car payment, TV purchase and food purchase.  

Even in the ultra regulated insurance market there exists a path to allow all of us to pay for routine care, accumulate the wealth required for more expensive procedures, purchase the catastrophic protection required for the $50K+ claims and not have to spend 30% of our take home for “insurance” that covers items that are easily budget-able.

The 60 years of 3rd party payment have brought us where we are today and it is unsustainable.  Stop arguing about whether your boss or your neighbor should pay for your health care expenses.  Let’s debate who the Single Payer should be – the individual/consumer or the federal government.

Just keep in mind that when someone else pays they bills they get to set the limits.

Testing the new http://www.simplifibenefits.com site and getting ready to set entreprenuers free, no matter what SCOTUS decides on ObamaCare.

Just started a huge project to move a large , multi-site employer from a traditional group health insurance plan to a Defined Contribution personal choice program. Will be blogging on the progress starting next week.

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