Views Limiting the employer tax exclusion for healthcare is the wrong idea

The article below was published on June 7, 2017 by Employee Benefit News, written by Craig Hasday.

The Republicans are looking everywhere for funds to fix healthcare, as well they should. This problem is not an easy one to solve, however. Under the Affordable Care Act, employers were faced with the Cadillac tax. As a result, they wasted no time planning to mitigate the effect. While the Democrats seemed to believe that this was a pot of gold available to solve some of the cost issues, the reality turned out much differently.

Consultants, like me, have spent the last few years planning for our clients to avoid ever paying the Cadillac tax. Employers fled to health savings accounts, self-insured plans and any strategy that would reduce costs below the taxable threshold. Instead of a pot of gold, there was a leprechaun at the end of the rainbow waiting to laugh at the CBO scoring, which had predicted billions in revenue.

Now, some prominent Republicans are looking to limit the employee health insurance tax exclusion or its counterpart, the employer deduction, to fund healthcare for the uninsured. I am hopeful that they take the time to look closely at the potential impact of this decision.

Peeling back the onion, altering the tax-favored status of employer-provided benefits will have the same effect as the Cadillac tax — employers are going to plan around it. More than 175 million Americans get healthcare through their employer, and this is not a progressive benefit. If the employer exclusion is eliminated there would be little incentive for employers to continue to provide benefits — and if they do, the pressure to reduce costs, and thus benefits, will be intense. The impact on lower-paid workers would be far greater than the more highly-compensated group.

Finding the pot of gold

Politicians may not be listening, but the effect of this change in tax treatment would be the opposite of what is desired. We need to go after the cost of healthcare. That’s the pot of gold.

Here are some suggestions to go after cost:

  • Further encourage the shift from pay-for-volume or pay-for-services-rendered to reimbursement of providers based upon value and the outcome of treatment.
  • Make drug pricing fairer; eliminate rebates which obscure real prices and regulate obscene pharmaceutical profits for patent-protected drugs.
  • Introduce meaningful tort reform.
  • Expand Medicaid in every state. This is the platform that should be used for subsidized care.

Each one of these changes is going to require a great deal of effort, but they are better than an ill-fitting Band-Aid which is just going to make healthcare even more expensive for the individual.

why-diversified-group

On the Horizon: Compliance Issues

The article below was published on June 2, 2017 by BenefitsPRO, written by Nathan Solheim.

In several “Star Trek” series, an alien villain known as the Borg travels the galaxy, assimilating creatures from all walks of life into its space-borne collective. Serious fans know that it’s almost impossible to escape the Borg and its nefarious designs. The Borg’s catchphrase, “resistance is futile,” has since been assimilated into the lexicon.

When it comes to the matter of compliance, benefits professionals across the nation must be feeling exactly like those brave men and women from Federation starships who had the misfortune of coming across the Borg. From the Affordable Care Act to ERISA to the EEOC to a number of other alphabet-soup agencies and regulatory bodies, 2017 is shaping up to be the year of compliance.

Brokers and agents simply need to accept it.

Immediate issues

For most benefits professionals, the ACA will dominate compliance issues that are top of mind. The ACA, at least for the time being, is still the law of the land. While House Republicans tried earlier this year to repeal and replace the ACA with the American Health Care Act (AHCA), they came up short thanks to internal disagreements. After the initial failure, they redoubled their efforts and passed the American Health Care Act. The AHCA will now head towards the Senate, where its future is impossible to predict.

While the political wrangling makes for an uncertain compliance environment, brokers and agents should keep their clients in compliance with the ACA.

“No matter what you predict, it will not happen that way,” says David Contorno of the Hilb Group’s Lake Norman Benefits in Mooresville, North Carolina. “We have a set of rules and we operate within those rules—that’s our obligation to clients. That’s our job. Our job is not to predict what will happen, it’s to help advise our clients on their options and what they should be doing at the end of the day.” Continue reading

Health care reform: Don’t wait for the politicians

The article below is from BenefitsPRO written by Dinesh Sheth on May 16, 2017.

dgb-sales

Let the politicians argue about who is going to pay for health care and who is not.
Photo: Getty Images

Business owners across all industries are facing uncertainty surrounding the status of current laws and regulations. A Republican majority in Congress and the new presidential administration have created a climate of de-regulation. Luckily, or perhaps unluckily, depending on your view, U.S. employers of all sizes are currently facing a potentially major regulatory change with U.S. Republicans attempting to replace the Affordable Care Act (ACA) with their own bill: the American Health Care Act (AHCA). Now, the big question is: “What will be next?”

Aside from the implications this holds for the health care industry, enacting the ACHA would have a tremendous impact on employers by repealing the mandate that requires certain businesses to offer health insurance to their employees. While most businesses would likely support fewer regulations, repealing this mandate would do little to help them encourage healthier behaviors amongst their employees; and at the end of the day, that is the only true way to lower health care costs. Rather, repealing the mandate simply means that fewer Americans will be insured and that the cost-burden will shift to employees and their families.

Whether or not the current administration or even the public at-large wants to admit it, someone is going to pay for the costs of health care. All current or proposed laws and regulations do is juggle who is going to pay and who is not. Behind all these changes, however, it’s necessary to understand that employers need healthy, productive employees in order for their business to function, In addition, they want them to be insured at a reasonable cost, while also staying healthy and avoiding getting sick or injured. If the goal really is to lower actual costs, then this is where the real debate must be focused. Since it’s impossible to predict exactly how legislative initiatives will play out, employers should double down on their approach to employee wellbeing and examine how a holistic approach to wellness will improve the health of their workforce and bottom line, independent of laws or mandates from Washington. Continue reading

Tell your Senators to Preserve the Employer-Based System and Permanently Repeal the Cadillac/excise Tax!

The National Association of Health Underwriters (NAHU)

Operation Shout!

DGBTakeActionOn May 4, the House of Representatives passed H.R. 1628, the American Health Care Act (AHCA), a reconciliation bill to repeal and replace portions of the ACA. It will now be considered by the Senate, where it is expected to be significantly altered, including possibly addressing two critical NAHU policy priorities: the employer exclusion of health insurance and the Cadillac/excise Tax. NAHU strongly opposes any efforts that would undermine the employer-sponsored health insurance system by eliminating or placing a cap on the employer-tax exclusion of health insurance and is strongly advocating a full repeal of the Cadillac/excise Tax, which under the AHCA would only be temporarily delayed.

More than 175 million Americans currently receive their coverage through the employer-based system, largely due to the tax exclusion where employers provide contributions for an employee’s health insurance that are excluded from that employee’s compensation for income and payroll tax purposes. Proposals that would cap the exclusion would devalue the benefit and serve as one of the largest tax increases in history for middle-class Americans, forcing many to drop employer-sponsored insurance, including dependent coverage, and be forced to seek coverage in the volatile individual market, where premiums are ever-increasing. Employers would be incentivized to only offer coverage to their employees that would fall below the value of the cap in order to avoid paying any increased taxes, potentially resulting in a race to the bottom for employers to sponsor insurance that wouldn’t meet the cap’s thresholds and further shifting costs onto employees.

In addition to opposing proposals to cap the exclusion, we are strongly advocating a complete repeal of the Cadillac/excise Tax. Currently set to take effect in 2020 under a two-year delay, this tax calls for a 40% excise tax on the amount of the aggregate monthly premium of each primary insured individual that exceeds the year’s applicable dollar limit, which will be adjusted annually to the Consumer Price Index plus one percent. Given that the pace of medical inflation is well beyond that of general inflation, the tax is destined to outgrow itself in short order and many employers will be impacted by the cost of the tax and the enormous compliance burden that the tax creates. The AHCA, as passed by the House, would only delay the tax until fiscal year 2026.

Over the coming weeks, as the Senate debates the AHCA and the other healthcare-reform proposals, we urge all agents, brokers and your clients to tell your senators not to do anything that would undermine the employer-sponsored health insurance system and to fully repeal the Cadillac/excise tax. You can help us spread the message by taking action below:

  1. Contact your senators. Send an Operation Shout today asking your senators to oppose any changes the employer tax exclusion and to support a full repeal of the Cadillac/excise Tax. You can also call your senators at the numbers below.
  2. Tell your employer clients to take action. Your employer clients would be most directly impacted by the elimination or cap of the employer tax exclusion and are seeking a full repeal of the Cadillac/excise Tax. Tell them to take action here.
  3. Share your story. As a licensed insurance specialist who works closely with employers to help them offer and utilize employer-sponsored health insurance, stories about how the employer tax exclusion directly impacts your clients will demonstrate the value of the exclusion and the need to preserve it, as well as the need to fully repeal the Cadillac/excise Tax. We will share your stories with appropriate legislators and staff. You can share your story here.

Take Action today and tell your senators to preserve the employer-based system and permanently repeal the Cadillac/excise Tax!
DGBTakeAction

Don’t want to send an email? No problem, you can also reach your senators by phone:
Sen. Richard Blumenthal (D) can be reached at (202) 224-2823.
Sen. Christopher Murphy (D) can be reached at (202) 224-4041.

This call to action is designed as an email message to your legislators. You are welcome to use the prepared text as talking points to call your legislators, or to expand on the prepared message to share your personal story on how this issue will impact you and your clients.

What the new GOP healthcare bill means for employers

The article below was published on May 5, 2017 by the Employee Benefit Adviser, written by Phil Albinus and Nick Otto.

The House of Representatives passed the American Health Care Act Thursday, which will be sent to the U.S. Senate for debate and amendments and then a vote. Here’s what employers need to know about the revamped healthcare plan.

It gets rid of the employer mandate

The American Health Care Act (AHCA) eliminates the controversial requirement under the ACA that employers provide health insurance to employees. However, this is unlikely to have a significant impact on most organizations, which will continue to offer health benefits to attract and retain top talent. “I don’t envision a mass exodus of employers offering their employees healthcare coverage,” says Chatrane Birbal, senior adviser, government relations, for the Society for Human Resource Management.

It pushes back implementation of the Cadillac tax

Like the original GOP health plan put forth in March, the AHCA bill that passed the House pushes back implementation date of the 40% excise tax on employer-sponsored health plans that exceed $10,200 for individuals and $27,500 for families. This so-called Cadillac Tax was set to take effect in 2020 and will now begin on Jan. 1, 2026. The delay of the Cadillac tax is a relief for most employers, but fees and other forms of levies may replace it in future revisions of the bill, or after the law is passed, to help fund the Republican plan.

It gives states greater control over what’s included in health plans

The AHCA gives the states more power over what type of health insurance is offered in their domains. AHCA critics are concerned that states would allow carriers to offer stripped-down policies. However, the move could allow national employers looking to cut costs to opt out of the “essential health benefits,” or EHBs, that are required under Obamacare — such as maternity care, mental health and drug addiction treatment — and offer employees low-cost, low-benefit plans.

It gives states a say in pre-existing-conditions coverage

Pre-existing-conditions coverage, one of the cornerstones of the ACA, will now be under the guidance of the states. The AHCA still requires insurers to cover sick people, but it allows states to get waivers that would allow the plans they oversee to charge higher premiums to those with pre-existing conditions who let their coverage lapse.

It opens up HSAs

The AHCA repeals the taxes on health savings accounts and the limits on contributions to flex-spending accounts. Under the House’s GOP plan, individuals can put $6,550, up from $3,400, and families can put $13,100, up from $6,550, into a tax-free HSA. Like HSAs, the AHCA would remove the cap on contributions to health FSAs starting on December 31, 2017. Under the ACA, the maximum contribution limit was $2,600. The moves should encourage more employees to take advantage of these employee benefits.

why-diversified-group

Bill headed to Senate would provide ‘safety blanket’ for benefit plans

The article below was published on May 1, 2017 by the Employee Benefit Adviser, written by Brian Kalish.

Nearly half of all employees are covered by a self-insured group health plan. Many companies that offer these plans have separate stop-loss insurance policies to protect them against the risk of catastrophically high claims. Some states and the Obama administration have attempted to regulate stop-loss insurance; a move the Self-Insurance Institute of America says would render it unaffordable.

To provide more certainty in the marketplace, the SIIA — a Simpsonville, S.C.-based member-based association — worked to introduce the Self-Insurance Protection Act.

The bill on April 5 passed the House of Representatives in a 400 to 16 vote and is now expected to be introduced in the Senate in the next few weeks. EBA spoke with SIIA’s CEO, Mike Ferguson, to understand more about the legislation. What follows is an edited version of the conversation.

EBA: What is the background on this bill?

Mike Ferguson: Shortly after the passage of the Affordable Care Act, there were policymakers within the Obama administration that became concerned that the growth of the self-funded market was coming at the expense of the public exchanges. The analysis was that the self-funding market is growing and the employers in the self-funding market are scooping up the good risks — their employees — and leaving the bad risks to go into the exchanges, which would create structural problems for the exchanges.

They further believed that the self-funded market was growing artificially, characterizing their analysis, facilitated by stop-loss insurance with relatively low attachment points. They believed that many of these self-funding plans were trying to look for an escape hatch out of the ACA requirements.

Really, these were fully-insured arrangements and they should be treated and defined as such for purposes of the ACA. There was discussion within the administration and a formal request for information was issued by HHS and DOL, which asked very pointed questions about self-funded insurance and stop-loss insurance. It was clear from the line of questioning that regulators were looking to try to show that employers were moving in this direction as a way to game the system and get out of the ACA mandates.

Subsequent to that, we learned there was discussion within the Obama administration on, ‘What do we do about this and how [do we] get our arms around these self-funded plans,’ because theACA did not provide any particular recourse.

EBA: How did the talk on Capitol Hill progress?

Ferguson: The discussion that we become aware of was, ‘What if we just take an aggressive definition of what insurance is and bring those employers back in as regulated entities as fully-insured employers or health insurance issuers?’

That was the internal discussions that were going on within agencies. A couple of years ago, in recognition of this, we said how do we address this because once you have a regulatory process commence, it is very difficult to push back on that. What we did, we worked with friends on the Hill to get legislation introduced, which would head off a regulatory interpretation of the definition of health insurance and health insurance coverage to specifically exclude self-insured plans with stop-loss insurance. This was in anticipation of potential regulatory action.

The previous version of that bill, like most pieces of legislation, ultimately did not move. This year, it has. And to put it in context, given the changes in the presidential administration, that threat is not at our doorstep anymore. But, our view is administrations can change in as early as four years. We don’t know who will be in the White House in three years and 10 months, so let’s go ahead and make sure that we get this done so that a future administration that might be unfriendly to self-insurance, does not have that avenue to disrupt the marketplace.

EBA: What does the legislation mean for employee benefit brokers?

Ferguson: It provides more certainty in the marketplace that stop-loss insurance will be available to self-funded plans. It does not change the current landscape of the self-funded marketplace. It is a safety blanket.

For employers that go to self-insurance, it is designed to be a long-term risk management strategy. Self-insurance is not designed for when an employer received a high quote on their health renewal premium and says, ‘OK, I’m going to pop over and be self-insured this year, but then switch to fully-insured two years down the road.’ That is not what employers should be looking at.

They should be looking at if they want to take a proactive long-term strategic risk to managing their healthcare risks, self-insurance can provide that option. But, it is most effective when it is an option that is deployed over multiple years. This legislation is a safety blanket for those advisers working with employers, because it takes one variable out of the regulatory environment going forward. It makes it almost impossible for anything at the federal level to disrupt their ability to self-insure to the extent that they have to access stop-loss insurance.

EBA: What is the bill’s future?

Ferguson: As a general matter, it is always tough to get anything through the Senate. That being said, since we had such a large vote margin out of the House, the Senate does, in many cases, look at that as a consideration on how it wants to move things.

Given that, we are cautiously optimistic. Cleary, we have full expectations that President Trump would sign the legislation to the extent that it is voted out of the Senate. The Senate is tricky to get anything done, even small rifle shot bills, like ours.

We have a lot of friends in the Senate. We expect the companion bill will have several prominent co-sponsors when it is announced and given that there was minimal Democratic opposition in the House, we hope that will translate to a similar dynamic in the Senate.

House Passes Bill to Protect Access to Affordable Health Care Options

Press Release from Education and the Workforce Committee Chairwomen Virginia Foxx on April 5, 2017.

The House today passed the Self-Insurance Protection Act (H.R. 1304), legislation that would protect access to affordable health care options for workers and families. Introduced by Rep. Phil Roe (R-TN), the legislation would reaffirm long-standing policies to ensure workers can continue to receive flexible, affordable health care coverage through self-insured plans. The bill passed by a bipartisan vote of 400 to 16.

“By protecting access to self-insurance, we can help ensure employers have the tools they need to control health care costs for working families,” Rep. Roe said. “Millions of Americans rely on flexible self-insured plans and the benefits they provide. Federal bureaucrats should never have the opportunity to limit or threaten this popular health care option. This legislation prevents bureaucratic overreach and represents an important step toward promoting choice in health care.”

“This legislation provides certainty for working families who depend on self-insured health care plans,” Chairwoman Virginia Foxx (R-NC) said. “Workers and employers are already facing limited choices in health care, and the least we can do is preserve the choices they still have. I want to thank Representative Roe for championing this commonsense bill. While there’s more we can and should do to ensure access to high-quality, affordable health care coverage, this bill is a positive step for workers and their families.”

BACKGROUND: To ensure workers and employers continue to have access to affordable, flexible health plans through self-insurance, Rep. Phil Roe (R-TN) introduced the Self-Insurance Protection Act (H.R. 1304). The legislation would amend the Employee Retirement Income Security Act, the Public Health Service Act, and the Internal Revenue Code to clarify that federal regulators cannot redefine stop-loss insurance as traditional health insurance. H.R. 1304 would preserve self-insurance and:

  • Reaffirm long-standing policies. Stop-loss insurance is not health insurance, and it has never been considered health insurance under federal law. H.R. 1304 would reaffirm this long-standing policy.
  • Protect access to affordable health care coverage. By preserving self-insurance, workers and employers will continue to benefit from a health care plan model that has proven to lower costs and provide greater flexibility.
  • Prevent bureaucratic overreach. Clarifying that regulators cannot redefine stop-loss insurance would prevent future administrations from limiting a popular health care option for workers and employers.

For a copy of the bill, click here.

For a fact sheet on the bill, click here.

obamacare-whitepaper