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 )

The Economic Stimulus Package and How It Addresses Cobra Subsidiary

Economic Stimulus Update – COBRA

Yesterday, the stimulus package made it through the Conference Committee and now heads back to the House and Senate for a final vote. The legislation prepared by Congressional staff indicates that the agreement calls for the following with respect to COBRA:
A 65 percent premium subsidy for eligible workers for 9 months.

The Department of Treasury will administer the subsidy through a mechanism that allows employers (or health plans if they administer COBRA benefits) to receive a credit against payroll taxes.

Individuals with annual incomes above $125,000 (single) or $250,000 (couples) would be eligible, but they can be taxed, and subject to a recap of the subsidy.

There is nothing in the summary to indicate that the agreement retains the House 55/10 provision allowing for the extension of COBRA coverage. The 55/10 provision would allow individuals 55 years or older and individuals who were employed 10 years or longer to remain on COBRA until they are eligible for Medicare.

It appears that the March 1st effective date is still intact, but with a 60 day grace period to perform retroactive adjustments. We will continue watching and let you know the outcome, and how it affects your business.

Employee Benefits in Terms Business Owners Can Appreciate

2009 Benefits Guide
This guide allows business owners to see whether your company is maximizing available health care products in the ever-changing world of employee benefits. The approach here is understandable, since the examples are in terms that everyone can relate to—- Ice Cream!

If you are starting from scratch, be sure to implement these strategies over time, rather than all at once. A trusted insurance broker, who is competent and caring, and understands your needs, will make this journey much more fulfilling. Chocolate, Vanilla and Swirl – plus Strawberry! What flavor is right for you? Take a look at the terms below and decide what blend will work for your unique situation.

Chocolate, Vanilla and Swirl – plus Strawberry

Chocolate: You have funds to lure the best and brightest, how do you maximize your dollar?

Vanilla: You want the best protection for your employees at the lowest cost.

Swirl: You need to be creative in what you choose from the Chocolate menu.

Strawberry: You have no interest in offering a real benefits plan, yet you are willing to offer voluntary plans that pass the smell test.

HINT: You can mix and match to make your own Benefits Sundae.

Chocolate. $$$$
- Health plans that maximize both tax advantaged plans and traditional choices. Employer contribution: 75% EE / 50% Dep. (or more)
- Disability plan, employer-paid, with executive carve out, and business overhead protection for key employees.
- Retirement plan, with match, possibly ESOP.
- Life plan, basic life and voluntary; key man life to protect the business.
- Voluntary (employee-paid) plans (accident, specified illness) that are administered through payroll with minimal effort.
Vanilla. $$
- Basic health plan that covers preventive care, catastrophic loss, and some level of day to day expenses. Employer contribution: 50% EE / 0% Dep.
- Ancillary package including dental, vision and life, which could be employee-paid (voluntary or employer-paid).
- Direct deposit voluntarily from employees to IRA, savings or credit union.
Swirl. $$$
- Upgrade health plan dollars from Vanilla program. Offer one traditional copay plan in HMO and PPO, and one maximized tax-advantaged plan. Employer contribution: 75% EE / 25% Dep.
- Add in disability insurance, either employer-paid or voluntary.
- No match 401k, or safe harbor 401k, if owners are profitable.
- Voluntary (employee-paid) plans (accident, specified illness) that are administered through payroll with minimal effort.
Strawberry. $
- Employer contribution: $10
- Access to government-sponsored programs (MediCal, AIM, Health Families) through community specialist contact.
- Offer TeleDoc, and NurseLines telephononic access systems.
- Offer limited medical plans which are NOT major medical, but help for uninsured who cannot be covered by government programs.
- No match 401k, or safe harbor 401k, if owners are profitable.
- Voluntary (employee-paid) plans (accident, specified illness) that are administered through payroll with minimal effort.

Top 3 Ways Employers Can Cut Health Insurance Costs

Instead of layoffs and unemployment, here are key ways for companies to save money and keep employees insured, while still staying competitive!

1. Replace co-pay plans with high deductible plans and health savings accounts. Passed by legislation in 2004, this is a good idea for employers who currently offer co-pay plans with relatively low out-of-pocket costs. Many employers have realized a 20-30% reduction in premiums. Part of the savings can be used to put money into an account “Health Savings Account” tax-free, which can then be used tax-free to cover a expenses going toward the higher deductible. If the money is not used this year, it rolls over into consecutive years. This is also purported to be a way to slow down the inflationary trend of health care costs. One reason health care costs are out of control is that there is no consumerism in health care. This allows employees to see the real cost of using the healthcare system, which is more than a small co-pay. There is an incentive to actually shop around or to make a decision on whether a certain expensive medical test is really necessary.

2. Increase co-pays and deductibles and/or increase the percentage an employee pays to buy the insurance. This is shifting costs back to employees in the form of either premiums or co-pays, or both. In this environment, the same $20 co-pay this year buys fewer services than it did last year, so it makes sense to increase the co-pay to $30. This, despite personal income has not kept up with the rate of healthcare trends. This is the most common way employers cut health care costs. Also, remember to use a Section 125 Cafeteria plan to allow the premiums and
co-pays to be paid by employees pre-tax.

3. Use a smaller network. Many insurers have a full HMO network, and then a more restrictive network from which to choose. The more restrictive network allows for the same
co-pay levels, but at a much lower premium. This type of network would eliminate visiting the highest cost providers and medical groups in a given geographic area.

Which is best…COBRA or Individual Coverage?

With so many people out of work, people are faced with the question of continuing coverage under COBRA or purchasing their own insurance policy. Here is the BIG question:

1. Are you insurable? If you are healthy, your best bet is to shop for your own plan. If not, individual insurance carriers may decline to offer your coverage, or increase your premium.

In group plans, the insurance carrier must accept all applicants, as long as they qualify as an employee or dependent, and enroll in a timely manner. This is not so on individual plans. The plans are individually underwritten with detailed health questions and a review of your medical records.

IRS Guidance on Health Savings Accounts

For all the companies out there trying to determine the exact rules of how much an employer may contribute toward Health Savings Accounts, and how to avoid violating non-discrimination rules, the IRS released this advice today:

http://www.treas.gov/press/releases/hp1056.htm

Employer matching contributions to the HSA through a cafeteria plan are not subject to the comparability rules, but cafeteria plan nondiscrimination rules apply. Contributions cannot be greater for higher paid employees than they are for lower paid employees, but contributions that favor lower paid employees are OK.

Moore Benefits Inc. on CNBC Live

Companies are looking for creative ways to cut costs in light of skyrocketing health care expenses.

American Business Bank is one of my clients who offers a high-deductible health plan, with a Health Savings Account, alongside traditional plans. Since most employees selected that plan, the bank actually reduced their expenses this year, whereas most companies are having significant increases.

CNBC interviewed Kelly Moore while we were enrolling these plans last week. Check out the video by clicking this link:

http://rs6.net/tn.jsp?e=0019C4O5USEFgNcxIriCt4ZwzBE9RQarenauhHtRaEqBiTl60t2YQqeWhOJydBU-5f9YE7XNFHL73x0K7amqcid3fyY1RfNkwmVn5bFrK-bj1568Iuh66KSWoQpnyfyp-NyeAbh8YRfoFDFbqyh0o8ldw==
Isn’t that great! Let me know if you have any questions, or need information.