Health Care Reform – Small Business Tax Credits

One of the first impacts of the new health care reform law is actually a tax credit, rather than a tax increase. Small businesses with 25 or fewer FTE (full time equivalent) employees who offer health insurance to their employees may be eligible for some tax relief. A tax credit for up to 35% of the cost of providing coverage will provide an incentive for small businesses, the drivers of our economy, to help reduce the uninsured in America. After all, group health insurance already has protections for guaranteed coverage, pre-existing conditions, and the inability to cancel your coverage if you become sick. The same cannot be said for individual and family plans.

The tax credit calculation is explained in detail on the IRS website via this link:

http://www.irs.gov/newsroom/article/0,,id=220839,00.html

One thing to be established before these credits actually start hitting our balance sheets is what is an average premium for small group in a given market? A list of average premiums by state is to be published by the IRS later this April.

If you would like to see how simple and affordable it is to offer group health insurance to your employees, please feel free to give us a call.

Kelly D. Moore, CEBS
Moore Benefits, Inc.
(877) 872-2080

Moore Benefits on CNBC

Update on Health Care Reform

Even though the federal version of health care reform is stalled, the states are still working on these issues. After a lengthy and heated debate, the California Senate last week passed a single-payer bill. As with past incarnations, the bill passed on a party-line vote. Previous attempts to advance single-payer legislation have been vetoed by Governor Arnold Schwarzenegger. Supporters of the bill claim it would actually cost the state nothing, despite a Senate Appropriations Committee analysis that pegs the cost at $200 billion. Republicans decried the bill as a government take-over of health care.

In other news, California in 2011 will become the first state to set legal limits on the time patients must wait to see their HMO doctors. The Department of Managed Health care has announced there will be a maximum wait time of 10 business days for an appointment to see a family practitioner, 15 days to see a specialist, and 48 hours for people seeking urgent care. In addition, doctors’ offices must return telephone calls within 30 minutes. The time limits apply only to doctors in HMOs, which officials say will cover 21 million Californians. A 2002 state law mandated timely access to medical care, and the specifics were worked out after years of negotiations with doctors, hospitals, HMOs and consumer groups. Also, the CEO of the California Medical Association, Alfred Gilchrist, has announced his resignation after serving for just over 2 months. Gilchrist is returning to his former role as CEO of the Colorado Medical

States Consider Their Own Health Reform Ideas

Medical News Today covers some news about states considering their own health reform ideas.

Drug Company CEOs Under Pressure

Medical News Today covers this issue:

In a separate article, Dow Jones Newswires/The Wall Street Journal reports on a high and “generational” turnover among pharmaceutical CEOs. “The new leaders are taking over an industry under pressure. The past decade has brought heightened scrutiny of drug safety, government probes of sales and marketing practices, and greater pricing pressure from drug-benefit plans and generic competitors. Drug makers feel compelled to control costs and do more to get results from the billions of dollars they pour into their research labs”

Poll: Health care bill won’t help Democrats

Politico writes about this issue:

“At this point, it looks like the political damage for Democrats on health care has been done, whether they end up passing the bill or not,” said PPP President Dean Debnam. “Republican support for this fall is identical with, or without it.”

The Debate Over Selling Insurance Across State Lines

Kaiser Health News writes about this issue:

Congressional Republicans have proposed the concept in the past and Sen. John McCain, R-Ariz., embraced it as part of his 2008 presidential campaign. Advocates – including some insurers and small business groups – say it would give the more than 17 million Americans who buy individual coverage a greater choice of plans and the possibility of lower prices. (The measure does not apply to the 159 million non-elderly Americans who obtain insurance through their employers.)

But critics — including consumer watchdog groups and the National Association of Insurance Commissioners — say the provision would erode many state government consumer protections, leave policyholders with inadequate coverage and could actually lead to higher premiums for some people.

New Study Raises Questions about Government-Run Public Insurance Plan

A government-run public health insurance option for middle-class families could help cover the uninsured, but it may well put private insurers out of business, a respected consulting firm concluded in a study released on April 6.The report by the Lewin Group, a public policy firm that serves government and private clients, stated the outcome of a public health insurance system depends on details that lawmakers are far from deciding. Nonetheless, the report could provide ammunition for critics who say a public plan would move in the direction of government-run medicine.President Obama and many Democrats want to create a government insurance plan to compete with private plans that now cover about 170 million Americans. The issue is a major sticking point for Republicans and the insurance industry.The Lewin study found that if such a plan were open to all employers and individuals and paid doctors and hospitals the same as Medicare, the government plan would quickly grow to 131 million members, while enrollment in private insurance plans would plummet.“The private insurance industry might just fizzle out altogether,” said John Sheils, a Lewin vice president and leading author of the study.By paying Medicare rates, the government plan would be able to set premiums well below what private plans charge. The study estimates that monthly premiums for family coverage would be $761 in the government plan, compared with an average of $970 in private plans. Employers and individuals would flock to the public plan to cut costs.President Obama has not spelled out in detail what he would like to see in a public plan. As a candidate, he said it would only be open to small employers, individuals and the self-employed. When Lewin ran the numbers for that limited scenario, the results were not as sweeping.A government-run public plan for small employers and individuals that paid Medicare fees would have nearly 43 million members. If it was designed like a private plan and paid higher fees to doctors and hospitals, it would only enroll 17 million members.The study found that a public plan would help reduce the number of uninsured to 28 million people, cutting the current uninsured population by nearly 50%, depending on how it was designed. The main reason not all the estimated 48 million uninsured would be covered is that President Obama’s health care proposal does not require all Americans to obtain coverage.Sheils said the study is meant to give lawmakers a feel for the options. “Our paper is more or less written as a ‘how to’ manual,” he explained.

Full Speed Ahead for Bill To Expand Eligibility for Cal-COBRA Coverage

The Assembly Health Committee has approved a measure (AB 23) that would expand COBRA eligibility to workers at California firms with fewer than 20 employees and forwarded the measure to the Assembly Appropriations Committee, the Los Angeles Times reports. The measure was introduced last week.

Currently, only workers at firms with at least 20 employees are eligible for health insurance coverage through COBRA, a federal law that permits laid-off employees to maintain the health insurance coverage they had through their employers so long as the laid-off workers cover the full cost of the premiums.

The bill, by Assembly members Nathan Fletcher (R-San Diego) and Dave Jones (D-Sacramento), would expand eligibility for California’s COBRA program, Cal-COBRA, and require health insurers to inform previously insured workers about a federal subsidy for COBRA coverage.

A provision in the federal economic stimulus package would subsidize 65% of the cost of COBRA coverage for some laid-off workers for up to nine months (Zwahlen, Los Angeles Times, 3/31).

Tracking COBRA Stimulus Payments and Tax Credits

Obama’s cushion for COBRA will soon hit full swing. As part of the American Recovery and Reinvestment Act of 2009 (ARRA), anyone laid off or involuntarily terminated 9/1/08 – 12/31/09 gets a 65% reduction of their COBRA premums. The law was signed 2/17/09, and effective date is 3/1/09. This is the fastest I have ever seen a new benefits law be enacted, and I have been in the benefits business over 18 years!

Any day now, notices will start flying from employers, COBRA administrators and insurance carriers, notifying people of the COBRA tax subsidy. As long as one was INVOLUNTARILY terminated during 9/1/09 – 12/31/09, he or she may receive a 65% subsidy on COBRA premiums for up to 9 months. This subsidy applies to all eligible family members, even if the employer was not making a contribution to their costs while working.

This would not apply to employees who are eligible for Medicare, Medi-Cal, a spouse’s employer plan or any other group plan. Also, if they earn more than $145,000 ($290,000 for joint filers), or quit voluntarily, they would not be eligible for the subsidy.

NEXT STEPS: Who is administering this? Businesses are. Our clients, who are small and mid-sized businesses, rely on us to work with them to identify the affected individuals, discuss the notification process, and identify the procedures for tracking subsidy payments and tax credits. Last night, I read all the new DOL notices, and created a spreadsheet to track the subsidy payments and the offsetting tax credits.

For companies too small for federal COBRA, and are subject to state continuation Cal-COBRA, the insurance carriers will be making those subsidy payments, rather than the employers. There still may be some identification and/or notification responsbilities, which is yet to be seen.

If you need more information about how this all works, go to the DOL website at or let us know if we can be of assistance. Call us at (877) 872-2080 or email HQ@MooreBenefitsInc.com.

- Model notices (available at http://www.dol.gov/ebsa/COBRAmodelnotice.html )

- FAQs for Employers on the COBRA Premium Reduction (available at http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionER.html )

- Expanded FAQs for Employees on the COBRA Premium Reduction (available at http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionEE.html )

- Updated FAQs for Employees on General COBRA Provisions (available at http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.html )