Choosing Benefits

Did you know that a survey from Aetna finds that Americans rank choosing health care benefits as the second most difficult major life decision behind saving for retirement?

Survey participants reported that choosing health care benefits is more difficult than purchasing a car, making decisions about medical tests or treatments, parenting, and selecting homeowners, renters or auto insurance. Consumers who found health care benefits decisions difficult cited these reasons: the available information is confusing and complicated (88 percent), there is conflicting information (84 percent) and it is difficult to know which plan is right for them (83 percent).

The survey also finds consumers also remain in the dark about health reform. More than three-quarters of consumers believe that all of the key elements of reform are important for their families or them. However, 41 percent of respondents said they need more information on health care reform to understand its impact.

Why should you care?
Most companies feel that their employee benefit program is an important recruiting and retention program. Also, since healthcare premiums are a major expense for most companies, they want to ensure that the benefits are perceived as benefit by their employees.

So how do you help?
Communication is key elements in helping your employees understand their benefits and making wise decisions. Larger companies have specialists in their HR department that communicate the benefits and help the employees make informed decisions.

But what does a company do if they do not have the resources to have a specialist on staff?
Find broker who provides these services. My company is not only available for the open enrollment presentation, but we provide the opportunity for the employees to spend time discussing their needs to ensure that have a benefit package that works for them and their family.

Remember if your employees do not value your benefit package, then your company is not getting value for the premiums they are paying.

Can Not Blame Everyone

During the healthcare debate, I believe that two groups are at times unfairly blamed as part of the problem: employers and health insurance brokers.

A recent article mentioned that the latest National Federation of Independent Business survey reveals more than half of small business employers view the cost of insurance as their “most critical problem.”

“Fears over increasing health insurance costs continue to dominate the list of concerns for small businesses, very much in spite of the president’s health insurance reform law—certainly not an endorsement of the policy, nor a good sign for the future of the sector,” says Holly Wade, senior policy analyst and survey author.

Please remember that employer in California pay for at least 50% of the cost of the employee premium, and in many cases more.

So who do the employers turn to for help? The health insurance broker.
Our job is to help the employer review the 100’s of plans available and help them find value for the premium that they pay. A good broker will show you that they researched the market and provide you information necessary to confirm that you are getting value. For example, when I meet with a new or existing client about their renewal, I am armed with a 100+ page report that shows every carrier available to that client sorted by carrier and by premium costs based on their unique situation.
And how do most agents get compensated? Commissions, in other words, if we do not perform and provide quality service, we do not get paid.
So next time you hear our Insurance Commissioner blame employers and insurance agents (trying to cut our commission or us out of the process) for high costs of health insurance, maybe you should ask has he ever had to make payroll or has ever been paid for performance?

Spreading the Risk

In my last blog “Better Benefits Less Cost”, I discussed the concept of Risk Pools. One on the ways to reduce premiums is to spread the risk of the high benefit users over greater number of low to no use premium payers.

The healthcare reform law states that in 2014 the insurance companies will have to accept everyone without regard of pre-existing conditions. Most experts believe that this will increase the amount of unhealthy into the system.

On the other hand, the individual mandate is suppose to increase the overall pool with healthy premium payers. These are the individuals that could currently get insurance today and choose not to. So why would they? The Supreme Court ruled that if they do not, then they could be charge a tax.

The starting point for tax in 2014 is $95 per year. So will the young healthy person choose to pay the premiums of the tax? Well if the health insurance premium continues to cost around $100+ month for the young person, which do you think they would choose? Even when the tax increased to $295 per year, would they choose the tax or the premium?

This scenario is why many experts expect the rates to increase: more unhealthy people in plans without the large number of healthy people to offset the costs.

Better Benefits Less Cost

I am often approached by people who say that say they are excited that in 2014 healthcare reform will provide better plans for less money. I assume that by better plans they mean more benefits.

When I hear that I simply scratch my head. Insurance is a risk pool, which means that lots of people put in a little amount of money to cover large expenses for a few. As far as health insurance goes I hear that only about 8% are the heavy users that account for over 90% of the costs.

The Affordable Care Act has already set the Medical Loss Ratio (the amount insurance companies can use to administer policies) at 20% for individual and small group plans and 15% for large groups plans. With that in mind, premiums are continuing to rise. And when you hear about rebates (normally in other states) they are far less that the annual premium increase. 

Then if you increase the benefits that are being paid out by the insurance company, what will happen to premiums? They have to go up.

The solutions are getting more healthy (not using benefits) people into the system or reduce benefits paid (reduced services or reduced payments to providers). We will discuss getting the healthy to buy insurance and reducing payments in the future blogs.

Who’s going to pay for health reform’s taxes?

Who’s going to pay for health reform’s taxes?

Here the taxes, who pays them, and when it goes into effect.

Higher Income Individuals & Families
Who pays: About 2.5 million households — individuals making more than $200,000 per year, couples $250,000.
How much: A 0.9 percent Medicare tax on wages above those threshold amounts; an additional 3.8 percent tax on investment income.
When: 2013

Artificial-sun worshippers
Who pays: The 28 million people who visit tanning booths and beds each year — most of them women under 30, according to the Journal of the American Academy of Dermatology.
How much: A 10 percent tax on the price of tanning.
When: Took effect in 2010.

'Cadillacs' coverage
Who pays: Insurance companies or businesses that provide plans with premiums of more than $10,200 per person or $27,500 per family, not including dental or vision coverage.
How much: 40 percent excise tax on any amount of premium that exceeds the threshold.
When: 2018

Health industry
Who pays: Insurers, drug companies, medical device makers. And some of their customers.
How much: More than $165 billion over 10 years
When: Began last year for drug companies; starts in 2013 for device makers, 2014 for insurance companies.
Comment: How will this reduce costs for consumers?

Flexible Spending Accounts
Who pays: People who set aside tax-free savings to pay for health care.
How much: About $33 billion over 10 years
When: Contribution limit begins in 2013.
Comment: if you are big user of these accounts, you will have use after tax dollars for these treaments.

Taxpayers who take write-offs
Who pays: People with big medical or dental bills who itemize deductions.
How much: Taxpayers have to spend more than 7.5 percent of their adjusted gross income on medical care to qualify for a deduction. The threshold will rise to 10 percent. So a household with income of $50,000 would have to spend $5,000 on health care before deducting amounts above that.
When: 2013 (delayed until 2017 for taxpayers age 65 or over)
Comment: Like the Flexible Spending Account reduction, people to use their plans (the sick) are unfortunately losing tax breaks. Why?

Information was obtained from the following article: http://Here the taxes, who pays them, and when it goes into effect. ?

Healthcare Reform Timeline

2010

• No Lifetime or Annual Limits – No lifetime or annual maximum limits on essential benefits.
• No Preexisting restriction for children – No children under 19 can be denied coverage for preexisting conditions.
• Tax Credits for Small Employers – Employers with fewer than 25 employees and average annual wages of less than $50,000 may be able to claim a tax credit on 2011 tax return.
• Preventive Service Coverage – Plans must cover preventive services without members sharing costs.
• Nondiscrimination Testing – Employer plans are barred from favoring highly compensated employees.
• Reinsurance for employers with retirees – Program for employers providing insurance to retirees over 55 not eligible for Medicare.

2011

• New Restriction in HSA, FSA and MSA Fund Use – Over the counter drugs can no longer be reimbursed and tax for non-medical is 20%.
• Wellness Grants for Small Businesses – Employers with fewer than 100 employees can tap into over $200 million in federal grants.
• W-2 Reporting – Employee’s W-2 must report health coverage that is excluded from employees’ gross income.
• Community Living Assistance – Assistance for those with limitation encouraging employers to auto enroll employees in program.

2013

• Administration Simplification – Rules established making payments, enrollment claims and authorization process simpler.
• Medicare Tax Increase - Part A tax rate on wages goes up from 1.45% to 2.3% for certain individuals.
• Employers Must Inform Employees of Health Options – Employers must provide info on employer plans, health exchanges, and subsides.

2014

• Individual Mandate – Everyone must have insurance or pay a penalty.
• Employer Mandate – Employers with more than 50 employees must provide coverage pay penalty if any employee receives a subsidy.
• Large Employers Auto Enrollment – employers with more than 200 full-time employees that offer coverage must auto enroll employees. Employees can not opt out.
• Health Insurance Exchanges – State must have exchanges up and running by 2014 or the federal government set it up.
• Wellness Incentives - Employers can offer rewards of up to 30-50% of premiums to employees who take part in wellness and meet health standards.
• No Preexisting Condition Exclusions – Coverage can not be denied for those with preexisting conditions.
• Comprehensive Coverage Requirement – Individual and small group plans must include essential benefits.
• Limits on Deductibles and Copayments – Group health plans deductibles are limited to amounts allowed for HSA plans.
• Ban on All Annual Limits – Plans may no longer impose any annual benefits limits.

2018

• Cadillac Plan Excise Tax – Tax on employer plans valued at over $10,200 for individuals and $27,500 for families.

Information provided by the Word & Brown Companies

Healthcare Tax Credits

Here is some of the basics of the healthcare credits available for small businesses (see linked article for more information http://www.lifeandhealthinsurancenews.com/News/2010/5/Pages/IRS-Releases-Small-Group-Tax-Credit-Examples.aspx?nul ):

For tax years 2010 to 2013, the maximum credit is 35% of premiums paid by eligible small business employers and 25% of premiums paid by eligible employers that are tax-exempt organizations,” officials write in a summary of the notice.

Employers with 10 or fewer FTE employees that pay annual average wages of $25,000 or less can qualify for the maximum credit.

Employers with 10 to 25 FTE employees that pay annual wages of $50,000 or less can qualify for a smaller tax credit.