Two Minute Drill

A travesty or a typo?…and its effects on employers

If it were not my job to understand as much as possible about the Affordable Care Act, I would not even take note of the US Court of Appeals decision earlier this week. I promise I won’t be wonky.

Here is what The Washington Post had to say about contradictory rulings this week.

The law was passed in large measure by protecting each State’s autonomy in implementing ACA. All money had to flow to the States, then the States distribute it. That was the intention and much of the sustainability of the fragile support that led to its passage.

What no one expected was for the States (36 of them) to punt on setting up their own exchanges. No exchange, no place to put the money. So, the federal government stepped in and pumped the money into their exchange.

Is the Affordable Care Act in jeopardy?

Is the Affordable Care Act in jeopardy?

At first glance, a reasonable response could be…”What’s the big deal?  A state exchange or federal exchange, who cares?”

However, the law doesn’t allow it.

Amend it? No way will this law be amended (it is toxic for both sides to open up that can of worms).

How will it go down? What happens next?

  1. It will just be accepted as the law that the intentions of ACA are being followed and nothing will happen (legalists should worry about this, because laws should matter). However, this accommodation will keep the ACA train rolling.
  2. Money will be stripped away from the 36 states and subsidies will be lost. It will erase the biggest success so far for the proponents of ACA (making healthcare affordable for low income individuals).

As an employer, what does this mean?

If the subsidies go away, then the whole thing will need to be re-thought. The taxes, fees, community rating and other things that have added cost to employer health insurance were to SUBSIDIZE the exchanges. If the feds can’t subsidize, then why pay these these costs?  Will they go away?

If the subsidies stick, then the options you are considering now (dropping insurance because of the subsidies, especially) will still be an option. The taxes, fees and costs will also keep rolling along.

Sorry, I did get a little wonkish. I guess what I mean to say is that something that appears almost to be a typo in the law is in fact a big problem. Having it out there now as a question mark creates uncertainty for employers (and everybody).

We will do our best to stay on it.

More Clouds on the Horizon: Fate of Obamacare Subsidies Up in the Air

We’ve long contended that it will take years for all the implications of the Affordable Care Act to play out. There’s still so much to be determined and so many factors, moving parts and unintended consequences that will ultimately shape the outcome.

On the heels of last week’s Supreme Court ruling in favor of Hobby Lobby (the court ruled that Obamacare’s contraceptive mandate violates the Religious Freedom Restoration Act with regards to closely held for-profit corporations) looms a series of potentially even more far-reaching court challenges to a major tenet of Obamacare — premium subsidies.

Photo credit: Reuters/John Gress as seen at TheFiscalTimes.com

Photo credit: Reuters/John Gress as seen at TheFiscalTimes.com

The arguments are now at the Appellate Court level and center on very specific language in the Affordable Care Act. The challenges contend that the subsidies cannot be provided to people in states aligned with the federal exchange; and, further, only those who signed up for coverage through the state insurance marketplaces are entitled to subsidies.

Who knows how the courts will rule? If they do rule against the government like they did in the Hobby Lobby case, the potential impact looms large. Only 14 states set up their own insurance marketplaces. 36 other states opted to let the federal government build and run their exchanges.

It will also probably take any rulings that go against premium subsidies as much as a year or more to play out. And, no doubt they will be challenged by the government — all the way to the Supreme Court, if necessary.

One thing’s for sure, any Appellate Court rulings against the subsidies will almost certainly make an already cloudy picture even cloudier.

There have been many challenges to Obamacare — some real, some grasping at straws. This one is garnering some serious attention from both sides of the fence lending credence to the belief that the fate of the subsidies for now could be very much up in the air.

For more details, read Court Challenges Subsidies, Threaten Obamacare and Halbig and King – a Simple Case of IRS Overreach

See our previous article regarding Hobby Lobby: Hobby Lobby Politics-Will The Brand Win or Lose?

Did You Receive an MLR Rebate Check from Your Insurance Carrier?

Wondering What to Do With It?

To comply with provisions of healthcare reform, insurance carriers and health plans have to provide rebates to policyholders if their medical loss ratio – the percentage of premiums spent on reimbursement for medical services and related health care quality activities – does not meet the minimum standards for a given plan year as defined in the Affordable Care Act.

Some employers will be receiving checks this month. If you receive a check and are wondering what to do with it, refer to our primer summarizing key points that may help guide you.

Example Rebate Check

Example Rebate Check

For those of you who want to drill into more technical details go to: http://www.dol.gov/ebsa/pdf/tr11-04.pdf

The IRS guidance on tax implications of the rebates can be found at: http://www.irs.gov/uac/Medical-Loss-Ratio-(MLR)-FAQs

Swedish Retail Giant IKEA – Raising the Bar for US Retailers?

According to an article in The Huffington Post today, Ikea plans to increase the minimum wage for all employees of its US stores, and in doing so, will likely raise the bar for other American retailers.

Well known for their “ready-to-assemble furniture and home goods” Ikea plans to tie wages to MIT’s “Living Wage Calculator.” The calculator tool estimates the base salary a worker needs to make in order to live in a particular geographic area.

The article says that this move by Ikea will boost the average minimum wage to $10.76, a 17% increase, and also means about half of the store’s 13,650 employees will be getting a raise. Rob Olson, Chief Financial Officer and acting president of Ikea US says the rates will go into effect Jan 1, 2015. Olson also told The Huffington Post, “It’s all centered around the Ikea vision, which is to create a better everyday life for the many people.”

Using a living wage calculator to determine salaries based on geographic location seems to be a first for major American retailers. The new minimum wage will vary from $9 to just over $13 among Ikea’s 38 retail stores, plus several distribution and service centers and one manufacturing plant based here in the US.

Olson says the new wage structure is part of Ikea’s effort to attract employees by making its pay and benefits plan more appealing. The company recently expanded its benefits package by increasing the employer match on its 401k plan and launching a separate retirement account for employees that have been with the company for at least five years.

IKEA GIVES HALF ITS US WORKERS A 17% RAISE

The company has decided to focus solely on the co-worker, rather than follow the lead of the competition – other US retailers. Bold move. The article goes on to point out, however, that Ikea is not the only retailer to raise wages across the board for its employees. Gap Inc. announced earlier this year that it would raise wages affecting more than two thirds of its 90,000 workers.

As the article points out, this will undoubtedly become a talking point as the national debate heats up over increasing the federal minimum wage, currently $7.25 per hour. It hasn’t been raised since 2009. Olson asserts that Ikea’s decision should not be read as an endorsement of any legislative proposals regarding minimum wage.

Read the full article, Ikea To Raise Minimum Wage For U.S. Workers With Tie To Living Wage Calculator

Wondering How Long You Can Keep Your Pre-2014 Plan?

The answer: Probably at least through 2017. The time table for small employers still offering a health plan issued prior to 2014 (and technically doesn’t comply with all the provisions of the Affordable Care Act) could extend well into 2017.

In March, the Obama administration released guidance extending the renewal of health insurance policies that don’t meet all the ACA standards through October 1, 2016. This means that health policies that exist today, but do not comply with ACA provisions that went into effect in 2014, can be maintained through 2017.

It’s up to the individual states and respective insurance companies to adopt the extension.  Those states (all but a handful) that have chosen to allow carriers to renew non-compliant policies for policy years starting after January 1 of this year are likely to adopt the extension.

To read more about this extension go to The Extended “Fix” for Cancelled Health Insurance Policies: Latest State Action on the The Commonwealth Fund Blog.

June 12 Post - Map

Getting ahead of ACA Strategies

The IRS is trying to keep employers in the group health market. The new ruling is somewhat complicated. What a big surprise, huh?

The IRS is saying that the ACA requires that plan sponsors ensure that there are no limits on the mandatory essential health benefits ACA requires, also known as “lifetime maximums.” If a group plan does not guarantee that the insured has all the essential health benefits required by ACA, then the plan is not qualified.

This article seems to be based on a premise that the plan sponsor, in this case, the employer, has no idea what the insured actually has. Therefore, if a benefit is issued, but th member does not have the ACA essential health benefits, then the plan does not qualify and is subject to tax.

But, if the plan sponsor does guarantee that the insured does possess the ACA minimum benefits, then the group sponsor is compliant.

The administration does not want employers simply giving money to employees to pay claims. This will get them further, rather than closer, to achieving their goal that Americans have coverage that will not run out due to lifetime limits.

To read the entire article, read IRS Bars Employers From Dumping Workers Into Health Exchanges.

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Lawsuit filed by patients against narrow network of major PPO – isolated or bellwether?

Something’s gotta give…….. and apparently it is.

Patients want to receive quality care from familiar providers on a timely basis at lower costs.

Doctors and hospitals want to maintain and increase current levels of reimbursement.

Insurance companies needing to comply with the new ACA requirements and control costs are squeezing provider reimbursement rates and eliminating those providers that won’t accept lower rates.

With all this going on employers and their employees are more concerned than ever about cost, coverage, and access to doctors and hospitals. Some feel cornered and are starting to take action.

A lawsuit was recently filed by some new customers of a major California PPO. The outcome of the suit, and others like it that are to follow, could signal how things will take shape down the road in terms of reliable and continued access to a given doctor or hospital at any point in time.

According to the suit filed against Blue Shield of California, the customers did their homework before signing on with one of Blue Shield’s narrow network products. Before purchasing their plans they checked the insurance carrier’s website directory and called the insurance carrier, the respective treating providers, and the providers from whom they would be seeking treatment to confirm participation in the specific network. Later they came to find out that those providers were either dropped from the network without notice or were never considered in the network at all.

In layman’s terms the lawsuit appears to center on a combination of misrepresentation, false advertising, and lack of good faith effort to communicate changes as it pertains to provider network composition and how services will be covered.

We’ll report back on anything significant as this story plays.  In the meantime look for a series of posts from us highlighting pragmatic and creative approaches taken by some engaged employers to maintain employee and dependent access to key providers without increasing costs. If you have something you’d like us to address or have your own story to share please drop us a line.

You can read more about the California lawsuit in When a PPO isn’t.”

Repair, Not Repeal.

That is the conundrum now over Obamacare, or the Affordable Care Act (ACA). It appears Americans are coalescing around the idea of fixing or repairing the unpopular parts of ACA rather than repealing it. So far, the law has been rolled out with the following popular and unpopular components:

Popular

  • children stay on parents plans to age 26
  • elimination of pre-existing condition clauses
  • guarantee issue for individual policies
  • free “wellness” programs
  • subsidies based on income

Unpopular

  • individual mandate
  • emerging “narrow networks” trend
  • employer taxes (still largely unknown to the population at large)

So does repair mean…

  • richer subsidies?
  • elimination of the individual AND employer mandate?
  • regulation of carriers to offer more robust choices?
  • elimination of employer taxes?
  • repeal of the “cadillac” tax?

Reading the law and seeing how the financing of it is projected, it seems more unpopular items need to be implemented. The law’s taxes, mandates and medicare cost reductions will not be popular, but are essential. If you see another way of stabilizing this law over the long run, please let me know. Perhaps a single payer system? Maybe Google will come to the rescue.

To read more on this topic, Americans want to Fix, Not Repeal Obamacare, or Politifact’s Truth-o-Meter on Which is more unpopular: Obamacare or repealing Obamacare?

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