Humor Helps Illustrate Need for Employee Education of Healthcare Costs

Sometimes a quick joke illustrates an important point better than anything else.  Here's one I heard that is particularly salient on the issue of controlling corporate medical costs.


A woman brought a very limp duck to her vet.  As she laid her pet on the table, the vet pulled out his stethoscope and put it to the bird's chest.  After a moment or two, the vet shook his head and sadly said, "I'm sorry, your duck, Cuddles, has passed away."

Distraught, the woman cried, "Are you sure?"

"Yes," the vet said, "you're duck is dead."

"How can you be so sure," she said.  "You haven't done any tests or anything.  He might just be in a coma."
The vet excused himself, and left the room.  A minute or so later, he returned with a Labrador retrieiver.  As the duck owner looked on in amazement, the dog stood on its hind legs, put its paws on the examining table, and sniffed the duck.  He then looked at the vet, and with sad eyes, shook his head.

The vet left the room again, but soon returned with a cat.  The cat jumped on the table and likewise sniffed the bird from head to foot.  Quietly, he sat back on his haunches, meowed softly and then jumped down and left the room.

The vet looked at the woman and said, "I'm sorry, but as I told you before, this duck is definitely, 100% certifiably, dead.

The vet turned to his computer, punched a few keys and printed a bill.  Handing it to the woman, he said, "That will be $150.00."

The woman, now in greater shock than before, said "150.00?  Just to tell me that my duck died?"  The vet shrugged his shoulders and said, "I'm sorry, if you had just taken my word for it, the bill would have only been $20, but with the lab report and the cat scan, it's now $150.00"

Understanding utilization, and it's impact on medical costs, is important.  In fact, it's possibly more important than the discounts your plan may be getting from its network arrangements.  If your administrator isn't providing you with tools to keep down unnecessary medical costs, or to control those costs that are necessary, it won't matter how good the discounts are, your organization will be spending money it shouldn't.

Companies should have programs in place to educate their employees on the appropriate use of the healthcare system.    HBUS Inc has a great program in place to help you address this and all issues with health care reform.  Contact us today for more information. 

Health Care Reform - Timeline for Small Businesses

The new healthcare reform law will be implemented over much of the next decade. From 2010 to 2013, changes largely involve new taxes, fees and mandates on individuals and small business. Most healthcare system changes begin in 2014 and later years.

This article presents a timeline of some major provisions. 

Please note:  The timeline goes well into 2018, due to space limitations we didn't list the entire timeline in this post. Please contact your HBUS Inc representative for a copy of the entire timeline.

 

2010

• Small business tax credit: A temporary small business tax credit is available for some firms who provide qualified health coverage. However, the credit puts small business owners through a series of complicated tests to determine the actual amount of the credit. (1) Very few small firms will receive the full credit (only firms with 10 employees or less). For firms with 11-25 employees, the credit is reduced per employee. Firms with more than 25 employees get NO credit. (2) Only firms who pay their workers an average of $25,000 or less are eligible for the full credit. The credit is reduced as the average wage goes up, stopping when it reaches $50,000. (3) Only firms covering 50% or more of insurance costs will be eligible. (4) The credit is only available for a maximum of six years. There are additional provisions for start-up firms beginning business after the enactment of this law.
• Age 26: Children may stay on their parents’ policies until age 26.
• Tanning salon tax: A 10% excise tax on indoor tanning services begins July 1.
• Economic substance doctrine: The bill alters long-standing judicial doctrine in ways that could reduce tax-planning options and increase litigation.

2011

• W-2 reporting: Employers will be required to report employees’ health benefits on W-2s.
• Brand-name drug tax: Manufacturers and importers of brand-name drugs will pay a tax of $2.5 billion in 2011, $3.0 billion per year for 2012 through 2016, $3.5 billion for 2017, $4.2 billion for 2018, and $2.8 billion for 2019 and thereafter.
• HSA & FSA limits: Consumers are prohibited from using HSA and FSA funds to purchase non-prescribed items, including over-the-counter medication (except insulin).
• HSA penalty: The penalty for using HSAs for non-qualified purchases increases to 20%.
• Federally subsidized long-term care: Employers may voluntarily participate in the CLASS long-term care program. Participating firms’ employees will be automatically enrolled and subject to payroll deductions unless they choose to opt out. This program will almost certainly cost the federal government far more than what the payroll deductions will cover. So this entitlement is yet another unfunded liability to add to federal deficits for decades to come.
• Cafeteria plan safe harbor rules added: Employers will have to meet minimum contribution requirements to receive protection from nondiscrimination requirements under cafeteria plans.

2012

• 1099 reporting: Businesses will have to send Form 1099s for every business-to-business transaction of $600 or more – a tremendous new paperwork burden for small business.

2013

• Medical device tax: Manufacturers and importers of certain medical devices will face a 2.3% excise tax.
• Fewer deductible medical expenses: New limits are placed on the deductibility of medical expenses on individual income tax returns. This provision raises the 7.5% AGI floor on medical expenses deductions to 10%. The AGI floor for those 65 and older (and their spouses) remains at 7.5% through 2016.
• “Medicare” payroll taxes: The Medicare payroll tax on wages and self-employment income in excess of $200,000 ($250,000 joint) will increase to 2.35% and is not indexed to inflation. This tax marks the first time that funds designated for Medicare will be diverted elsewhere – specifically to pay for the insurance policies of people under the Medicare age. This establishes a precedent for treating this payroll tax as a revenue raiser for other purposes.
• “Medicare” investment tax: In addition to the payroll tax, there will be a 3.8% tax on investment incomes for higher-income taxpayers (“higher-income” is based on wage and self-employment income plus other factors). Like the payroll tax, these funds are officially designated for Medicare but will be spent elsewhere.
• FSA limits: Cafeteria plan FSAs will be limited to a maximum of $2,500 (inflation-adjusted after 2013).

A Transformed Employer Health Care Market

Yes! We are helping companies reform
and save thousands of dollars.

Health care reform fundamentally alters the social contract inherent in employer-sponsored medical benefits and how employees value health insurance as a form of compensation. The new law guarantees the right to health insurance regardless of an individual’s medical status. In doing so, it minimizes the moral obligation employers may feel to cover the sickest employees, who would otherwise be denied coverage in today’s individual health insurance market. Reform preserves the corporate tax advantages associated with offering health benefits—except for high-premium “Cadillac” insurance plans.

Starting in 2014, people who are not offered affordable health insurance coverage by their employers will receive income-indexed premium and out-of-pocket cost-sharing subsidies. The highest subsidies will be offered to the lowest-income workers. That reduces the social-equity advantage of employer-sponsored insurance (ESI), by enabling these workers to obtain coverage they could not afford on today’s individual market. It also significantly increases the availability of substitutes for employer coverage.

As a result, whether to offer ESI after 2014 becomes mostly a business decision. Employers will have to balance the need to remain attractive to talented workers with the net economics of providing benefits—taking into consideration all the penalties and tax advantages of offering or not offering any given level of coverage.

What the law says

Health care reform imposes several new requirements on employer health benefits. Some changes will be incremental; for example, annual and lifetime limits on care must be eliminated, and coverage must be offered to dependents through age 26. Plans with premiums above certain levels will be subject to a so-called Cadillac tax.¹

Other requirements are game changing and could prompt employers to completely reconsider what benefits they offer to employees. Reform requires all employers with more than 50 employees to offer health benefits to every full-timer or to pay a penalty of $2,000 per worker (less the first 30).

The benefits must provide a reasonable level of health coverage, and (except for grandfathered plans) employers will no longer be able to offer better benefits to their highly compensated executives than to their hourly employees. These requirements will increase medical costs for many companies. It’s important to note that the penalty for not offering coverage is set significantly below these costs.

Reform also offers options for workers to obtain affordable insurance outside the workplace. Individuals who are unemployed or whose employers do not offer affordable health coverage, and whose household incomes are less than 400 percent of the federal poverty level,² are eligible for subsidies toward policies they will be able to purchase on newly created state insurance exchanges. These will offer individual and family policies of set benefit levels (bronze, silver, gold, and platinum) from a variety of payers.

The subsidies will cap the amount lower- and middle-income individuals and families will have to spend on health coverage, to 9.5 percent of household income for those at 400 percent of the federal poverty level and less for those at lower income levels. The subsidies will keep the cost of insurance coverage from the exchanges below what many employees now pay toward employer-sponsored coverage, especially for those whose earnings are less than 200 percent of the federal poverty level.

For more information and to get a complete, free copy of a recent Health Care Reform survey, contact  Health Benefits US, Inc today.

Do the New FHA Loan Limits Spell Trouble?

Most people don’t realize that on Oct. 1, we will see the maximum loan sizes for FHA loans reduced back to the original loan levels prior to the run-up in home prices. While this may seem insignificant, realtors, buyers and sellers would be best advised to follow this change carefully and plan accordingly.

While many want to cast their vote for fiscal responsibility and praise this move, there are many others who understand that the housing market drives the economy and anything that prohibits getting the inventory sold will surely slow the recovery of housing.

Make no doubt about the position I am in. As a mortgage banker who relies on home sales to make a living, I do understand the economics of these changes and what it will do to existing homes for sale, especially in the $300,000 range.

This is the sector of our market that is being hurt most. Homes under this price range are being picked off by investors and those who can still afford the 3.55 percent down payment, while the remaining homes stand idly by waiting for a buyer. These were the 2003-06 homes that people flocked to.

But let’s not focus entirely on the new loan limits. They are only one of the many initiatives that threaten our recovery. The real issue is that while government stood haplessly by allowing the meltdown to occur and then rewarded those who created the 36-48 month disaster, they are again looking at ways to scale back the ability of buyers to come into the market.

Consider the many variables that are now beginning to create a barrier to home buying. The United States has allowed thousands upon thousands of jobs to go overseas.  The United States has allowed manufacturing to practically die. The boomers from up north have watched their pensions be erased or shrink to nothing.

The housing disaster will produce more non-buyers than in any time, and further consider that the proposed home mortgage interest tax deduction is on the table as a loophole and eyed to be cut.

The lowering of the HUD (FHA) loan limits is but one of many changes headed our way and combined could spell disaster for an economy in dire need of a housing rebound.

There are no simple answers to our ailing economy, but watching how some became multi-billionaires and those same people want to now lobby for us to cut back the opportunities to the lower and middle classes somehow does not sit well in my camp.

My advice is to watch the politicians carefully as they will decide whether housing ever recovers.

Christopher Murray, Sr. Loan Officer at CIMG, Inc., can be reached via email.

How US Health Care Reform Will Affect Employee Benefits

Editors Note: We’re helping small employers who dropped their group plan give employees tax-free funds to purchase their own individual policies. Our business is growing rapidly since 2010 when children and some others received guaranteed coverage regardless of preexisting conditions, and now the largest employers in the U.S. are adopting the software to administer their own defined contribution plans by 2014.

Call HBUS Inc today for your Defined Benefits Solution -and be ready for Health Care Reform2014 now.

The shift away from employer-provided health insurance will be vastly greater than expected and will make sense for many companies and lower-income workers alike. 

US health care reform sets in motion the largest change in employer-provided health benefits in the post–World War II era. While the pace and timing are difficult to predict, McKinsey research points to a radical restructuring of employer-sponsored health benefits following the 2010 passage of the Affordable Care Act.

Many of the law’s relevant provisions take effect in 2014. Our research suggests that when employers become more aware of the new economic and social incentives embedded in the law and of the option to restructure benefits beyond dropping or keeping them, many will make dramatic changes.

The Congressional Budget Office has estimated that only about 7 percent of employees currently covered by employer-sponsored insurance (ESI) will have to switch to subsidized-exchange policies in 2014.

However, an early-2011 survey of more than 1,300 employers across industries, geographies, and employer sizes, as well as other proprietary research, found that reform will provoke a much greater response. More information about the survey methodology is available on the McKinsey & Company Web site.

• Overall, 30 percent of employers will definitely or probably stop offering ESI in the years after 2014.
• Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional ESI.
• At least 30 percent of employers would gain economically from dropping coverage even if they completely compensated employees for the change through other benefit offerings or higher salaries.
• Contrary to what many employers assume, more than 85 percent of employees would remain at their jobs even if their employer stopped offering ESI, although about 60 percent would expect increased compensation.

As employers consider their post-2014 options, they should take a dynamic view by considering how competitors for talent—other employers—and their own employees will react. Many employers will be shifting from ESI; it is unlikely that only one company in an industry or geography will move away from it.