Whatever the disadvantages of the new health care law, Obamacare proponents appeared to be on solid ground when they said that it would extend affordable health insurance to millions of Americans.

No longer.

At yesterday’s hearing of the health subcommittee of the House Committee on Oversight and Government Reform, Cornell University economics professor Richard Burkhauser showed that in 2014, millions of low-income Americans may be unable to get subsidized health insurance through the new health care exchanges.

It’s true that under Obamacare, firms with more than 49 workers have to offer affordable health insurance coverage to full-time employees or pay a penalty. But the coverage only has to be for an individual policy, not a family policy.

And what most people don’t know is that if a worker receives coverage for a single person from his employer, his family will not be able to get subsidized health insurance coverage under the exchange.

This is because, if one member of a family receives employer-sponsored health insurance, other members of the family cannot receive subsidized coverage under the exchange.

Other family members would have to purchase full-price health insurance, which would be prohibitively expensive for those at low incomes, those who are supposed to be protected.

Burkhauser testified that, for a four-person family at 133 percent of the poverty line earning $28,000, purchasing a family health insurance plan would cost 43 percent of family income, without government subsidies.

If that family earned $53,000, reaching 250 percent of the poverty line, the plan would cost 23 percent of their income.

About 13 million dependents of workers with single coverage would potentially be affected, according to Burkhauser. That’s 26 percent of the estimated 50 million uninsured workers.

This perverse incentive has a number of consequences, none of them foreseen by Obamacare architects.

Workers with families will prefer to work for firms that do not offer health insurance. In that way, they can qualify to purchase family coverage through the exchange, using government subsidies. For a family at 133 percent of the poverty line, premiums will be capped at 2 percent of income.

If the firm does offer health insurance, the worker with dependents will prefer that the coverage is unaffordable. That’s not a typo — if the coverage is unaffordable, then the employee will be able to buy health insurance for his family on the exchange.

A firm that offers unaffordable coverage will have to pay a penalty of $3,000 per worker. But workers would prefer to receive a lower salary, have the employer pay the $3,000 penalty, and be able to buy subsidized health insurance on the exchange.

This causes substantial disincentives to marriage. Say that Jeff, who receives health insurance from his employer, wants to marry Jane, who is buying her health insurance from the exchange. If they married, then Jane would no longer be able to buy subsidized coverage from the exchange.

Or, take Sally and Steve, married with two children, earning below 400 percent of the poverty line (about $90,000 for a family of four). Sally is a stay-at-home mom.

Come 2014, Steve’s employer will only be required to provide affordable coverage for him. If they were to get divorced, Sally could buy subsidized family coverage through the exchange.

The Congressional Budget Office estimated that in 2019 another 3 million people will be covered by the health exchanges because of employers dropping coverage.

But with employer affordable health coverage only applying to singles, this number will be far greater, resulting in higher costs for the new law and higher federal budget deficits.

Yes, health care will be affordable for low-income Americans — but only if they’re unmarried.

Examiner Columnist Diana Furchtgott-Roth (dfr@manhattan-institute.org), former chief economist at the U.S. Department of Labor, is a senior fellow at the Manhattan Institute for Policy Research.

 By: Diana Furchtgott-Roth | Washington Examiner | 10/27/11 8:05 PM

1. Maximize your benefits, by making changes that use every advantage the tax code, state and federal law can give your plan.  Section 125 of the Federal Tax Code allows employees to pay for benefits with pre-tax dollars.  This seems like a no-brainer, but surprisingly, we find relatively large employers that aren’t taking advantage of this.  Another important tool in the battle is the implementation of a Health Reimbursement Arrangement (HRA).  These flexible, tax advantaged accounts can be used to lower premium costs, preserve cash flow, and avoid the “use it or lose it” provisions of Flexible Spending Accounts.  Although they use strictly employer funds, HRA strategies can be quite useful in lowering total costs to both employers and employees.
2. Offer multiple plan designs, and build in heavy disincentives for employees to choose “Cadillac” plans.  Almost without exception, plan designs that reimburse virtually all expenses from the first dollar are a waste of money.  Insurance companies know these plans appeal to “high utilizers” and they charge more than is actuarially necessary. Consider implementing a plan with at least a $1500 deductible for hospital expenses and then use an HRA to reimburse part of it. If getting rid of a rich plan design isn’t politically feasible for your company, offer it as a buy-up and let them pay the difference through pre-tax payroll deduction.
3. Carefully monitor developments in health care reform, but adopting a ‘watch and wait’ position is the best approach for 2012.  The legislation, if it remains intact, will have far-reaching effects on every enterprise in the country.  There is no need to panic, however. So far, most of the compliance burden has fallen on insurance companies.  The major provisions of PPACA (health reform bill) take effect in 2014, and will require close analysis from a benefit professional to determine the specific impact on any particular business.  Many provisions are subject to repeal and spending large sums on analysis should be delayed until the picture is clearer.
4. Make sure your broker is providing you with the help you need. The economy has squeezed the HR functions in most small businesses, and HR personnel have typically taken on increased responsibilities. Compliance with health reform and increased regulation has multiplied the problem.  Your health insurance broker should provide assistance with compliance, enrollment, communication to employees and much more.  These functions are the minimum you should expect, and can go a long way toward easing the work load on your HR staff.
5. Implement an incentive-based wellness program.  Emerging data shows these programs can have a significant impact on costs if implemented correctly.  Incentive based plans use a “carrot and stick” approach to encouraging participation in a variety of wellness programs, from biometric screening to weight loss and smoking cessation programs.  Typically, the incentive to participate is created in the contribution to the medical plan premium.  For instance, if an employer contributes 50% of the premium for employee coverage, the percentage will be moved up to 80% or 90% if the employee agrees to participate in a program that will usually have measurable results.  The ROI on incentive-based plans is reported to be between 2.5 and 4 to 1.  These are impressive numbers that are finally emerging as confirmation that incentive plans work.  A disincentive plan penalizes employees for not participating, although the potential for savings is greater, there is often perceived damage to company culture as a result.  Many health insurers offer various programs at a fraction of the actual cost, as they stand to gain on fully insured contracts as well.

Although costs continue to rise and the conversation continues to gain complexity, there are concrete actions you can take to make sure your company has done everything possible to fare better financially than your competition in offering meaningful benefits to your employees.

The 2010 Employer Health Benefits Survey by the Kaiser Family Health Foundation was recently released and found that while premiums for family coverage rose a modest 3% last year, employers did not increase the percentage they contribute. According to the study results, the average total cost of family medical benefit coverage stands at an astounding $13,770 per year, or $1147.50 per month. Of this total, employees on average are paying $4000 per year through payroll deduction for family coverage. This means employers are still carrying about 30% of the family health insurance cost burden.

Although the study claims to be based on a cross section of all employers nationally, the anecdotal and other evidence suggests that employees are, on average, paying a much higher percentage of family coverage at smaller companies. In Virginia, it’s estimated that less than half of employers with less than 25 employees contribute anything toward dependent coverage.

The average cost for employee-only coverage stands at $5,049, or $420.75 per month. Of the total, employees are contributing an average of $899 annually, or about 18% of the cost of coverage. On a monthly basis, the $74.91 contribution is about 14% higher than 2009.

Fully 30% of the firms responding to the survey indicated they had either reduced the scope of benefits or increased employee cost-sharing over the past year. In addition to changing contribution schemes, employers are raising deductibles and co-pay levels in an attempt to stem the tide of increases in health care costs

Many billions of dollars are wasted on unnecessary visits to emergency rooms and doctor’s offices for treatments that would not have been sought if it wasn’t cheap and easy to utilize. It is a thin line to tread between discouraging unneeded care and encouraging essential care.

Physician visit co-pays were a consumer hit when introduced on HMO plans 20 years ago. Now that employees have come to expect this low cost of utilizing health care, it has proven difficult to move in a more reasonable direction. An analogy I have frequently used is: “You don’t expect your car insurance to pay for an oil change, do you? Then why have we come to expect our health insurance to pay for every treatment? That is where we have been over the past 20 years with health insurance.”

Out of necessity, employers are being forced to make changes that aren’t popular with workers. However, there are strategies that, when thoughtfully implemented, can reduce premiums without completely “gutting” a plan. For instance, Health Reimbursement Arrangements (HRAs) are an excellent tool for companies to use in combination with higher deductible plan designs to provide essential coverage while retaining co-pays for some services.

Consumer-driven health plans such as Health Savings Accounts and Health Reimbursement Arrangements are proving to be an increasingly important tool for employers to use in the battle against rising costs. The percentage of employees covered by such plans has increased from 8% in 2009 to 13% in 2010.

Smart employers are having success embracing consumer-driven plans and implementing wellness programs with heavy disincentives for non-participation. Emerging statistics indicate that strong wellness programs are producing dramatic results for the relatively few employers that have plunged into the world of essentially mandated wellness programs.

While it is understandable why businesses are passing along health cost increases to employees, the pace of rising costs is unsustainable. The burden of Health Care Reform falls largely on employers and offers no real help with controlling costs. Until government and private industry get serious about cutting waste instead of simply shifting costs, employees will continue to see their benefits erode and contributions increase.

Gregg Kennerly is a Principal with Advanced Benefit Strategies of Virginia, LLC and can be reached at (757) 536-4554 or at www.absofva.com.

By: Health Care Cost Expert Gregg Kennerly

As health care costs continue to rise, it´s become even more popular to cast Health Insurers as rapacious villains in the struggle to make health care more affordable to Americans. But what do the facts tell us?

According to Morningstar, Health Insurers in 2009 ranked 87th out of 215 industries ranked in net profit margin, with an average of 3.3%. This compares with some industries at the top of the listings such as #1 Beverages (brewing) with a 25.9% profit margin and #7 Drug Manufacturers at 16.5%. It seems Health Plans are at the bottom of the profit hierarchy in the health sector.

To be sure, health plans are making money, with market share leader United Health Group earning $3.48 billion in 2009 on revenue of $84.27 billion, for a net profit margin of 4.14%. With millions of Americans uninsured and unable to afford health insurance, are these numbers inflammatory to many regulators and citizens? Absolutely. Is it fair to expect health insurers to take on the risks of an uncertain market for a break-even result at best? There are differing opinions.

While President Obama and HHS Secretary Sebelius have made Health Insurers their whipping boy for reform, other typically liberal-leaning outlets have a different view. From the Boston Globe, 11/01/2009, “Hyperbole in the health debate”: “For all the impassioned talk about obscene profits and bodies piling up, health insurance profit margins typically run about 6 per cent of revenue, a return that is anemic compared to other forms of insurance and a broad array of other industries.”

Administrative costs are targeted as out of control and a waste of money in the industry. Where a brewery may have glass bottles or grain as its most costly line item, what do insurance companies do but administer payments? To those outside the insurance industry, it´s not possible to understand the vast array of transactions performed, services rendered, and data collected that goes into making a health care payment. Insurance companies want health care costs reduced, and have developed sophisticated programs to measure the cost, efficiency, and outcomes of care. Even the most cynical would have to admit that paying everything that comes in the door without review or comparison is not a reasonable path to controlling costs.

So what´s the answer? California Democrat Henry Waxman has embarked on a campaign of requesting corporate details of executive pay, perks and junkets to industry meetings. Is this the answer to the nation´s health care woes? I don´t think so. Perhaps Bill Freeza of RealClearPolitics.com expressed it best: “If you took all the profits that all the health insurance companies made in 2009 and used them to pay for medical care in 2010 you would cover the country´s medical bills for … two days. Then what?”

I don´t know- but I know it´s not as simple as mandatory limits on insurance company profits.

Gregg Kennerly is President of Advanced Benefit Strategies of Virginia, LLC. Reach him at (757) 536-4554.

The economy remains weak. Employers are wary of adding staff too quickly in an uncertain environment. Add the significant financial requirements of Health Care Reform (ARRA) to the mix of obstacles facing business and it´s no surprise that employers are reluctant to absorb additional health care cost increases.

The 2010 Employer Health Benefits Survey by the Kaiser Family Health Foundation was recently released and found that while premiums for family coverage rose a modest 3% this year, employers did not increase the percentage they contribute. According to the study results, the average total cost of family medical benefit coverage stands at an astounding $13,770 per year, or $1147.50 per month. Of this total, employees on average are paying $4000 per year through payroll deduction for family coverage. This means employers are still carrying about 30% of the family health insurance cost burden.Although the study claims to be based on a cross section of all employers nationally, the anecdotal and other evidence suggests that employees are, on average, paying a much higher percentage of family coverage at smaller companies. In Virginia, it´s estimated that less than half of employers with less than 25 employees contribute anything toward dependent coverage.

The average cost for employee-only coverage stands at $5,049, or $420.75 per month. Of the total, employees are contributing an average of $899 annually, or about 18% of the cost of coverage. On a monthly basis, the $74.91 contribution is about 14% higher than 2009.

Fully 30% of the firms responding to the survey indicated they had either reduced the scope of benefits or increased employee cost-sharing over the past year. In addition to changing contribution schemes, employers are raising deductibles and co-pay levels in an attempt to stem the tide of increases in health care costs

Many billions of dollars are wasted on unnecessary visits to emergency rooms and doctor´s offices for treatments that would not have been sought if it wasn´t cheap and easy to utilize. It is a thin line to tread between discouraging unneeded care and encouraging essential care.

Physician visit co-pays were a consumer hit when introduced on HMO plans 20 years ago. Now that employees have come to expect this low cost of utilizing health care, it has proven difficult to move in a more reasonable direction. An analogy I have frequently used is: “You don´t expect your car insurance to pay for an oil change, do you? Then why have we come to expect our health insurance to pay for every treatment? That is where we have been over the past 20 years with health insurance.”

Out of necessity, employers are being forced to make changes that aren´t popular with workers. However, there are strategies that, when thoughtfully implemented, can reduce premiums without completely “gutting” a plan. For instance, Health Reimbursement Arrangements (HRAs) are an excellent tool for companies to use in combination with higher deductible plan designs to provide essential coverage while retaining co-pays for some services.

Consumer-driven health plans such as Health Savings Accounts and Health Reimbursement Arrangements are proving to be an increasingly important tool for employers to use in the battle against rising costs. The percentage of employees covered by such plans has increased from 8% in 2009 to 13% in 2010.

Smart employers are having success embracing consumer-driven plans and implementing wellness programs with heavy disincentives for non-participation. Emerging statistics indicate that strong wellness programs are producing dramatic results for the relatively few employers that have plunged into the world of essentially mandated wellness programs.

While it is understandable why businesses are passing along health cost increases to employees, the pace of rising costs is unsustainable. The burden of Health Care Reform falls largely on employers and offers no real help with controlling costs. Until government and private industry get serious about cutting waste instead of simply shifting costs, employees will continue to see their benefits erode and contributions increase.

Gregg Kennerly is a Principal with Advanced Benefit Strategies of Virginia, LLC and can be reached at (757) 536-4554.

The impact of working caregivers on employers is becoming more dramatic every year. The MetLife Mature Market Institute & National Alliance for Care Giving survey from 2006 estimated the cost to employers of eldercare as $33.6 billion or $2110 per full-time employed caregiver. The costs are specifically from absenteeism, replacing of employees, workday interruptions, unpaid leave, and care crisis work related absenteeism.

Presenteeism is relatively new term used to describe employees who are at work, but are not productive due to a variety of external forces. Studies by the National Alliance for Caregiving also found that caring for a loved one caused poor health for the caregiver. Sleep deprivation, depression, and higher incidences of diabetes, heart disease and high blood pressure have all been observed in caregivers stressed by the demands of working full time and caring for a loved one.

A few employers are beginning to offer eldercare as a benefit, realizing that baby boomers need help with caring for their parents and that productivity can be vastly improved by keeping employees focused. Emerging products offer benefits ranging from in-home services for small fixed co-pays, to legal advice and services. The Metlife report notes that 20% of employers with 500 or more employees offer eldercare referral services, and15% eldercare leave. Only 2% offered subsidized eldercare and 1% paid for eldercare or provided on-site eldercare services.

A “Silver Tsunami” of retiring baby-boomers is coming, and the crushing burden of caring for elderly parents is just beginning to emerge. The numbers prove there is much to be done in the area of assisting employees with these responsibilities so they can focus on being productive. Benefits “products” designed to meet this need will undoubtedly be developed over the next decade. Employers who address this need will be on the road to limiting the financial impact of an Aging America on their business.

Gregg Kennerly is a Principal at Advanced Benefit Strategies of Virginia, LLC. He can be reached at gregg@absofva.com.

www.absofva.com

Here are the top five reasons:

#1: Decreased Health Care Costs

Although definitive studies have been difficult to quantify in the past, evidence is currently emerging that strong incentive wellness programs can significantly lower employer health care costs. The key to success lies in getting the participation of all employees. Significant financial incentives such as a $500 cash incentive for completing an evaluation, or significantly lowering contributions for participants who meet certain goals has proven to be cost effective.

#2: Increased Productivity

Healthier employees are productive. With the Great Recession still upon us, employees are being asked to be more productive than ever, just as business owners must be more productive with the resources they have to stay competitive. Keeping you human resources (people) in top shape with preventive maintenance is a common sense way to gain an edge on the competition.

#3: More Responsible Employees

It´s been proven that employees utilize medical care more efficiently when they have "skin in the game". In other words, people care more making smart choices when they have a financial stake in the outcome. Wellness Programs demonstrate to employees that the employer cares about their well being and that their actions have an impact on the company. The movement toward "Consumer Driven" health plans with higher deductibles that give employees a greater stake in their care are perfect partners for Wellness Programs. Employees easily see the advantage of becoming healthier and spending less on out-of-pocket costs.

#4: Reductions in Absenteeism and Sick Leave

This may seem to be common sense, but absenteeism and sick leave costs are significant and improving the health of employees is proven to lower the rate of absenteeism. Wellness Programs educate employees extensively as to avoid illness and often provide personal health improvement strategies that engage employees on a specific level that can reduce sick days for a large portion of the employee population.

#5: Intangibles

Although difficult to put a price on, employers implementing Wellness Programs report a surge in employee morale and loyalty to the company. When employees feel their employer is truly interested in their best interest, they tend to be loyal, hard workers in return. Reduced turnover and recruiting costs are also part of this equation, as a happier workplace results in less turnover.

Many companies that implement wellness tied to meaningful incentives are experiencing double digit decreases in health insurance costs and sick leave. Legal concerns about strong incentive-based wellness programs have been a deterrent to the adoption of programs by some companies. The Obama administration´s Health Reform guidance that permits and actually encourages tough requirements for wellness programs has reinvigorated the market for employer-sponsored wellness plans.

If you are not yet a client or not sure if you have a Section 125 plan- contact us and we will be happy to guide you and take care of the details.

This is just another example of how ABS strives to give you more value from your relationship with us.

Locally, Anthem has agreed to immediately begin allowing currently covered dependent children to continue coverage to age 26. Optima Health is studying the regulation and has indicated it will make a decision soon on how it will implement this extension of coverage. In any event, it will become effective on your first renewal following 9/23/2010.

We will continue to keep you updated as guidelines are issued by federal regulators. Please feel free to share this chart with your business associates and friends. Please call or email us with ANY questions.

Mistake 1. “Cadillac Plans”

Rich benefit plans are always a crowd pleaser… and why not? It´s only money. If your company is obligated by a labor union agreement to provide a plan that reimburses most every medical expense, then you have no option. Otherwise, the money spent on a “Cadillac”health plan is a waste. Congress has put overly-generous plans in the spotlight recently by proposing to tax them to pay for part of the reform effort.
There is much “trading dollars” on these plans. This is where payments are sent to the insurance carrier, and sent back in small amounts when claims are filed. The difference in cost between effective plans and “Cadillac” plans is 20% or more in Virginia. How many doctor visits can be paid for with the difference? 20% of the employee cost of around $400 per month is $80 or $960 per year. That will pay for quite a few visits. Why pay for these potential visits in advance? The insurance carrier isn´t going to return the dollars if they aren’t used.

Mistake 2. Employees Don´t Have “Skin in the Game”

Employees have understandably developed a sense of entitlement concerning benefits. In my benefits practice, I encounter employees every month who believe employers must provide health benefits under state law. They are shocked to learn that their company is not obligated to provide benefits at all. This entitlement mentality is further ingrained by “Cadillac” plans discussed above.

“Consumer driven health plans” give employees “skin in the game” by using financial incentives to encourage employees to seek better value in healthcare spending. They link lower cost high-deductible health plans with cash accounts that give employees greater control over their healthcare spending. Studies generally show these are effective in lowering the overall costs of healthcare and, when properly designed with preventive care incentives, don´t reduce the quality of care. Forward thinking companies have embraced these tools as a method of recapturing funds needlessly paid to insurance carriers through “trading dollars” on small claims while preserving the protection from catastrophic loss employees need… but don´t always appreciate.

Mistake 3. Working with an Incompetent Broker

Work only with professionals who specialize in healthcare and employee benefits. Employee health insurance is a complicated, heavily regulated industry that requires the expertise of a specialist.

When your company receives a rate increase, don´t just accept the increase and the options for “buy down” plans. Get a real explanation of why your rates increased from your broker. The renewal rates should be available a minimum of 45 days prior to your renewal date, and you should never have to ask for the numbers. Your broker should not only search the market for the best rates, he or she should provide strategies that meet your objectives. He should discuss contribution strategy, offer an HSA or HRA option, and confirm your company´s competitive situation. If he or she simply hands you a spreadsheet and points to the lowest number, get a new broker….. FAST.

Call Advanced Benefit Strategies of Virginia: (757) 536-4554