Concerns of small businesses in response to the president’s executive order on health care

On October 12, 2017 the president issued an executive order that directed federal government agencies to explore ways to loosen niche types of health insurance. My annotated copy of the execuive order is posted on my web site at http://tonynovak.com/annotated-health-care-executive-order/.

The executive order does not address these immediate concern to small businesses and individuals:

1) Indicate any change in state insurance regulations that prohibit the use of short term medical or limited benefit insurance plans within its borders. This is of special importance in states with the most restrictive and most expensive insurance.

2) Predict how state insurance regulators will react to the sale of already approved limited benefit or short term medical insurance across state borders to residents within its jurisdiction.

3) Indicate how state insurance prohibiting the use of association insurance plans will be affected or persuaded to ease in conjunction with this executive order.

Freedom Benefits is working with insurance companies, business associations and individual business clients to address these issues and close the gap in knowledge where specific health plan solutions are needed. We are especially focused on solutions for New Jersey small businesses since this state has the most restrictive insurance laws in the nation in this market niche.

Freedom Benefits acts as an adviser but not an insurance company, agent, broker, insurance exchange, association health plan or other entity affected by the executive order. We may be paid paid to perform support functions for any of these entities.

States most hurt by Trumpcare

Associated Press reports that 70 percent of those who will be hurt by the cut in Cost Sharing Reductions health care subsidies announced this week live in states Trump won in his election. This underscores the political risk for Trump and the Republican  party for the move that is largely condemned y voters in both parties and called “ill-advised” by his own party leaders. It seems clear that Americans will blame the president for increased costs and chaos in the insurance marketplace in the future. The cut affects only low income workers who struggle to afford health coverage, not poor people who are covered by Medicaid.

Lower income residents of the following states are listed as being among the most hurt by the cuts according to the Centers for Medicare and Medicaid:

  • Alabama
  • Idaho
  • Florida
  • Georgia
  • Louisiana
  • Massachusetts
  • Nevada
  • Mississippi
  • North Carolina
  • Oklahoma
  • South Carolina
  • South Dakota
  • Utah

Residents of my local area in New Jersey and Delaware and southeastern Pennsylvania are not as likely to be affected. Residents of rural Pennsylvania will be affected and I anticipate blogging about that soon.

Effects of Trump refusal to pay low-income health benefits

The Trump administration will not pay scheduled benefits called Cost Sharing Reductions for low-income workers beginning this week. The “ill-advised” and unpopular move by the president is condemned by 2 out of 3 voters even though far fewer people are actually affected. Here are six things for consumers to know about the Trump refusal to pay health insurance benefits for low-income people:

  1. The action does not affect the amount of your premium tax credit that you ultimately receive on your tax return.
  2. The amount of payments for expenses that would other wise be ‘out-of-pocket payment’ could be reduced. If so, it might be possible to adjust payroll tax withholding to nullify the change by an insurer.
  3. Some insurance companies say they already anticipated Trump’s move when they set their 2018 premiums. Premiums in the future will increase as a result of this change.
  4. Many states granted insurance companies an extra rate increases to make up for the lost federal funding.
  5. PA and NJ are among the many states who will sue Trump to get the payments restored.
  6. No insurance companies have announced their attention to withdraw from any market because of the Trump action.
  7. Employers that want to help employees make up the difference have a range of tax-free options that allow them to do so.
WSJ reports that insurers anticipated the president’s flaming of payments

Despite the strong consumer disapproval of the president’s action, it might have minimal impact. The larger danger is that low-income individuals will become frustrated or confused and choose to not enroll in subsidized insurance coverage next year.

Four health care savings you can implement now

Following the signing of the president’s executive order on health care today, much of the news coverage focused on the fact that it will take time for full implementation of the order and it is uncertain whether some provisions will ever be implemented. This blog post focuses on the opposite angle: the topics covered in the executive order that are already available and may be used to lower health costs immediately.

Consider the following four possibilities that may apply individually or to your small business right now:

1) Short term medical insurance is available in 34 states. Policies are issued immediately online with coverage starting as soon as the next day. Extended 11 month policies are already available in about 14 states.

2) Health Reimbursement Arrangements are available to all businesses with employees. Their use was expanded under the 21st Century Cures Act in December for 2017 to allow employers to pay for individual medial insurance. Special purpose HRAs can expand their usefulness of the plan.

3) Health Savings Accounts are available to everyone with qualifying primary high deductible insurance coverage.

4) Limited benefit or mini-med insurance is already available in most states.

I am happy to discuss the applicability of any of these to your situation. My older web site FreedomBenefits.net has more information.

Profiting from the new Trump administration health plan rules

New opportunities for small business planning

(This post is speculative based on an announcement that is expected in the near future. The content is therefore valid only if regulations are changed as predicted).

Later this week the Trump administration is expected to roll back  range of restrictive regulations on health insurance that will open the door to new opportunities for saving. These are actuarial principles that Freedom Benefits has endorsed since the 1980s.

The core concept is shockingly refreshing: small businesses should focus on serving the immediate needs of their most productive workers.  The new regulations allow and even encourage small business employers from trying to solve all of our ailing health car system’s woes. That means giving up and releasing outlier health care risks. It means analyzing and addressing the core medical needs of your small group of employees.

The new plans will make broad use of short term medical insurance for new or transient employees who do not have pre-existing medical conditions. This one change can save an average of half of the insurance cost compared to Obamacare era health plans.

Small businesses will again be attracted to limited benefit mini-med insurance that focus on the “sweet spot” of medical costs incurred by the majority of employees. The most important difference is that they eliminate the deductibles that employees hate. These plans are priced at least 15% lower than traditional major medical plans but have some glaring holes in coverage, like prescription drugs, that some people have come to expect. Fortunately today’s flexible small business health plans like those offered by Freedom Benefits allow individual employees can weigh the pros and cons on an individual basis.

High tech, construction and agricultural businesses that traditionally rely on temporary international workers will save money by using insurance that is specifically designed for inbound immigrants.

Most importantly, employers will be empowered to design health benefits that are independent of insurance companies. Health Reimbursement Arrangements, Health Savings Accounts and Flexible Spending Accounts will play a larger role for employers who want to take control and directly address employees’ health care concerns. Freedom Benefits offerers these customized plans on an affordable basis that fit the budget of small business employers.

 

Forecasting health care expenses

My friend works under the trademark name “The retirement quarterback”. He reminds us that he can plan out your retirement finances with perfect precision if you can give him one peice of critical information: the month and year of your death. what he does instead is use a maximum lifespan probability in his financial planning calculation that ignores the relatively small risk of living beyond that estimate.

The same concept applies to health care planning. If we can forecast our future health care expenses then we can plan out insurance coverage perfectly. Without that information, we are taking some unnecessary risk or overspending on insurance.

Most of us have under $1,000 in annual medical expenses. A small portion have expenses that run over $100,000. How much should we spend on insurance? The only accurate answer relies on information that we do not have available.

There is a growing belief among health insurance professionals I know that that small business health insurance works best to insure expenses perhaps up to $100,000. Expenses above that are best paid through some government-coordinated plan (and distributed as a social cost) rather being forced as a premium rate cost on the small business employer. If we adapt this paradigm that eliminates outlier medical costs then it becomes much easier to forecast the actuarial medical costs of the group. That would be a major cost-reducer on commercial medical insurance.

One way or another, the only way to accurately estimate medical costs is to isolate and remove the small chance of catastrophic upper outlier costs.

Understanding this concept is essential to maximizing the financial planning opportunities that will soon be made available under the Trump administration.

Why the (.ORG)?

I am sometimes asked why Freedom Benefits uses a .org web site that is traditionally used for nonprofit organizations. The issue was raised by a Yahoo Finance reporter in 2013 and later picked up by the BBB. The short explanation is that it just evolved that way without much consideration.

There are actually three reasons that led up to this:

Freedom Benefits formerly used several different web sites to distinguish between unrelated lines of business. The .org was used as described below as an online industry library, the .net was used to compile insurance listings and the .com was used for the consulting business.

The intention and original use of the .org web site was to host an serve a library of public domain employee benefit documents that could be used by industry professionals n serve to build PR for my own practice. That plan ran into trouble when some abused the service and one professional regulatory organization challenged the service as an unauthorized practice of law. Rather than risk these consequences in the line of “no good deed goes unpunished” I removed the online employee benefits document library. That meant that the .org domain was temporarily idle and unused. Some educational materials under the brand name “Freedom Benefits University” were added in the interim.

Then I accidently lost the .com domain to cybersquatters during a period of medical  disability and refused to pay the ransom to get the domain back. So I mover the consulting services to the .org site.

Small business HRA services

Freedom Benefits offers three levels of service for self-directed small business Health Reimbursement Arrangements:

BASIC: 

Design of an HRA plan through an in-person interview

Recommended sample documents for limited use

ADVISORY:

Answers to benefits questions throughout the plan year

CLAIMS ADMINISTRATION:

Claims administration and preparation of summary report to the payroll administrator

 

A difficult COBRA question

Most questions we receive about COBRA benefits are straightforward and easy to address. This one was more difficult:

My spouse will be retiring this summer at age 65 and will qualify for Medicare. I have applied for my disability and have been told there is up to a 2 year waiting period for a court date even with my attorney. My question is, would I qualify if needed to have COBRA for the 39 months if needed?

This is a technically difficult question that I did not feel comfortable addressing online. The web page https://www.cms.gov/CCIIO/Programs-and-Initiatives/Other-Insurance-Protections/cobra_qna.html suggests that you email your question to phig@cms.hhs.gov.