Healthcare costs top 18% of our economy

Plain and simple: this dramatic spending shift is screwing every other sector of our economy. WSJ: “health-care spending across the economy reached 18.2% of gross domestic product as of June, up from 13.3% in 2000”. The Affordable Care Act was clearly and deliberately designed to accelerate the spending trend, despite the political rhetoric about cost savings.

Mini-med insurance plans OK per court

This week the Court of Appeals for District of Columbia affirmed a lower court’s earlier decision on litigation affecting the fixed indemnity health insurance. The ruling reaffirms that  the Department of Health and Human Services (HHS) may not require consumers purchasing fixed indemnity health insurance policies to certify that they have other health insurance coverage that qualifies as under the provisions of the Affordable Care Act. The common term for these policies is “mini-med insurance”. While many, like this Consumer Reports writer, predicted the death of this type of insurance, the opposite actually happened. This type of coverage has become more popular since passage of the Affordable Care Act.

While these plans do not help an individual or company avoid penalties for non-compliance with Affordable Care Act, they may be a more attractive option to the millions who are exempt from the health care law’s requirements.

Earlier HHS had proposed that only individuals who have qualified plans (aka “Obamacare”) could buy these policies. The court seems to uphold the rights of individuals who avoid  Obamacare for any reason and want to maintain their non-compliant health plan.

The courts seem to say that consumers can purchase any insurance they want and deal with the consequences later.

Insurance is the business of mirage

“Insurance is the business of mirage” -a theme of my law professor many years ago. Life experience has proven him correct time and again. 

I suppose that most of us involved in the field of advising formerly affluent clients in financial distress have seen more collapses due to not having insurance coverage they thought they had than all other causes combined.

Refund of health insurance premium

This first question is about a money-back guarantee that often implies that the consumer does not really know what to expect from their new coverage. This is not surprising, given the complexities of health insurance. Some do not know that all insurance companies are covered by the same refund laws, it is not dependent on the individual insurer.


“Hello. I am wondering what is the best way to get coverage with a money back guarantee. For evrything, with a no waiting period, and a on the minute knowledge base plus see same doctor group.”


All policies listed on web site or a state exchange come with a “10 day free look” which means that if you notify the insurer’s customer service office of your intent to cancel coverage within 10 days after receiving the physical policy in the mail, you get a full refund. The guarantee does not apply to the application fee, if any, that some companies charge when you apply. Insurance companies generally execute this provision in favor of the consumer so the only complaint I hear from people who requested a refund is that it takes longer than they would prefer, sometimes up to a few weeks.

I do not understand your second sentence: “For everything, with a no waiting period, and a on the minute knowledge base plus see same doctor group.” but you are welcome to call (800) 609-0683 to ask additional questions.

Tony Novak support

Why more health insurers will exit this year

Health insurance companies facing large claim losses caused by the legal mandates of recently enacted federal health care law have two primary options: petition for a large rate increase or leave the market. (A third option, cutting claim payouts, is more complex and not discussed here).

The Affordable Care Act (ACA) requires health insurance companies seeking more than a 10% increase in year-to-year premium rates must seek approval from state insurance regulators. Regulators are often unwilling to approve such requests based on fear of political implications that indicate the failures of health care reform. Even if such requests were granted, it seems unlikely that customers could handle the rate increased that in many cases would exceed 20% for 2017.

The other option – withdrawing from the market – is the path that will be chosen by more companies this year. Minnesota’s largest individual health insurance plan became the latest to announce its exit.

I expect similar news will continue around the country. United Healthcare, the nation’s largest provider of individual health insurance on the Obamacare exchanges, has already announced that it is considering leaving the insurance exchanges.

Consider that health insurance companies are quite sophisticated enterprises. Most have a plan in place to re-enter a more profitable segment of the market long before they announce their withdraw from the state insurance exchanges. Such is the case in Minnesota and with Unitedhealthcare. In other words, these companies want to play but not by under the rules laid out by ACA.

Three approaches to 2017 health insurance rate increases

Small business facing steep health insurance rate increases for 2017 health insurance may take one of three possible approaches to the problem:
1. Some will drop the group coverage and send employees to the exchange. Some employers will increase employee pay to compensate for the change. A few will attempt to reimburse employees for insurance at significant risk of IRS penalties.
2. Some will switch to a bronze insurance plan with a Health Savings Account. This generally saves some money and increases the overall benefit payout ratio of the health plan.
3. Firms with more than 20 employees may consider using a type of self-insurance with hybrid insurance plans. It is impossible to know whether this will save money until after all the employee claims are processed for the year.

With rate increases threatening to be more than 20% in some states, I doubt that many firms will renew existing insurance coverage without changes.

Health insurance stipend reimbursement

A person using the free OnlineAdviser service sent an email today asking for more information on her employer’s “insurance stipend reimbursement”.

First, this term “insurance stipend reimbursement” is not commonly used in the industry. The term is not used by the Internal Revenue Service (IRS) and is generally avoided by employee benefits professionals. The Affordable Care Act (ACA) includes steep penalties (known as “4980D excise tax penalties“) against employers who reimburse the cost of individual health insurance. The intent of this penalty is to prevent employers from pushing people toward subsidized individual insurance plans (referred to here as “Obamacare” for simplicity) that would drive up the government’s cost. In this context it would be silly of me or any other professional to introduce a term that could raise IRS concern and possibly trigger an employer penalty. IRS officials have repeatedly stated verbally and in writing that the Service is aware that one insurance sales firm – the same firm that has published materials using this term – is misleading insurance agents and small business employers about the risk of ACA. Unfortunately these small firms typically lack the resources to have their own independent employee benefits advisers of the insurance sales representatives. Non-specialized small business tax advisers like CPAs and Enrolled Agents typically avoid offering a professional opinion on employee benefit plan issues like this. The small business employers are not paying their advisers for employee benefits tax advice so the misinformation is classified as a market conduct issue within the insurance sales process. I have no knowledge of any IRS enforcement action taken against that firm or any of the unfortunate employers who might have fallen prey to the false sales rhetoric poised as tax advice.

Second, let’s be clear that the tax penalty risk is entirely between the IRS and the employer. The employee bears none of the tax penalty risk. The employee’s only risk – assuming the employee is enrolled in Obamacare policy – is limited to possible retraction of the amount of the insurance premium subsidy in the event that the IRS later determines that the employee was not eligible for the Obamacare financial assistance. This could happen for a number of reasons. The reason I would be most concerned about is that the IRS might determine that the employer’s “insurance stipend reimbursement” was actually an employer sponsored health plan under their specific definition. In this case, all of the employees eligible for the employer plan could be deemed ineligible for individual Obamacare insurance coverage.

Beyond these two basic points we would next need to look at the plan documentation (assuming that it exists and is available) and the specific payroll practices in use in order to offer a professional opinion on the health plan in question.

I do offer litigation support services to the attorneys of employers and employees who may be misled by improper insurance sales techniques. Hopefully this user’s question doesn’t lead down that path.

How to cancel health insurance (before it even starts)

I received an odd question from a guy asking how to cancel his health insurance before he even submitted the application for the new policy. He explained that he needed coverage for only 3 months and he did not want to be charged for overlapping coverage after that date.

The underlying issue is that insurance companies always do (at least all I’ve ssem is recent years) honor requests for cancellation of coverage as of your date of requests.

Some years ago I wrote this page specifically for the single popular insurance called Core Health Insurance:

Ready to take the next step toward keeping more of what you earn? Please describe how I can help you. Do you live outside the Delaware Valley region? No worries, I work with clients throughout the U.S.

Name (required)

Email (required)

Phone #

How can I help you?

Tax preparers on the front line of health insurance sales

The nation’s income tax preparers have been thrust into the front line of the health insurance enrollment battlefield whether they wish to be there or not.

Under new tax rules ushered in through implementation of the Affordable Care Act, these accountants are now charged with the responsibility of explaining the health insurance requirement, the government’s expectation of budget allocated for health insurance, the consequences of not having health insurance, how the subsidy works, what happens with out-of-pocket medical bills, what happens when Obamacare doesn’t work as planned, how to handle employer medical reimbursements, and the list goes on. It is a huge responsibility and significant burden on income tax preparers. Taxpayer clients are generally unaware of these new compliance burdens on the tax preparer and simply wish to see the same tax preparation service provided at nearly the same price as in prior years.

Meanwhile, health insurance agents are no longer compensated for providing this service to consumers and small businesses. The commissions that were formerly built into the premium have been reduced or removed for a majority of the nation’s most popular insurance products. Insurance carriers have taken a deliberate stance that they no longer wish to solicit business through insurance agents.

So the problem is that these tax accountants are not paid for all of this extra work dealing with health insurance issues. Their client contract remains the same – to prepare the tax return.  Neither the government nor the insurance companies – both of whom benefit from the accountants’ efforts – bother to pay the accountants anything for their time.

In addition to individual health insurance issues, many tax preparers uncover additional small business health insurance-related problems for small businesses like potentially huge excise tax penalties. Yet they simply don’t have the time, resources of financial motivation to delve into these issues in order to help clients cope with health care reform.

This caused me to question why tax preparers aren’t receiving any portion of the huge revenue stream currently being generated for health insurance enrollment. There is no simple answer. There are many contributing factors including health insurance company transitions, structure of the navigator system, insurance licensing rules, removal of insurance agent commissions, fear of unintended consequences and a lack of resources.

But is it possible to reallocate some of this insurance enrollment revenue to tax preparers? I’ve had a series of meetings and conversations recently on this issue with marketing executives in the health insurance and employee benefits field. These discussion have evolved into an early-stage business plan. The discussion is ongoing and the Freedom Benefits insurance marketing associates I work with are generally optimistic about the idea. It may be possible to compensate tax preparers for their role as referrors in the insurance enrollment process. It will not be easy and the details are not visible yet. As I see it, this strategy would require a fully accountable multi-carrier referral tracking system for unlicensed referrers – something that is not does not exist in the health insurance marketplace now. My general belief about technology is that is will naturally evolve when there is a market demand.

Would tax preparers be interested? Based on initial response to this single blog post, it seems clear that this is a topic of interest to tax preparers. The next logical step is to gauge tax preparers willingness to become more involved in the health insurance enrollment process. I’m not proposing taking this step on my own but I would support insurance companies that choose this path. I’ll likely be posting more about this as soon as I hear more feedback.