Review of Core Health Insurance 2017

I last reviewed Core Health Insurance in 2010 before the implementation of the Affordable Care Act. This review is being update in anticipation of a growth in popularity following the expected eventual cancellation of our current national health plan laws.

This is the old review not yet updated:

Core Health Insurance is the only insurance available today that offers this unique combination of features: 1) the plan is available on a universal basis without regard to medical history, employment status or other demographics 2) four different levels of benefits offered allow you to select the plan that that matches a price level that you can afford, and 3) benefits are “assignable” to a doctor or hospital so that you do not need to handle the claim paperwork, unlike most types of limited benefit insurance. This policy provides more liberal coverage for pre-existing medical conditions than most other types of individual medical insurance. Like other supplemental insurance plans, it may be combined with other insurance and benefits are paid in addition to other benefits. The primary complaint is that due to the liberal eligibility and pre-existing condition coverage the price for the highest level of benefits is as expensive as many major medical insurance plans. It is important to understand the differences between traditional “major medical” type health insurance and the newer types of “mini-med” type policies including Core Health Insurance.

Intended Use
Almost half of all Americans have significant gaps in their health insurance. Many cannot find affordable health insurance at all due to pre-existing medical conditions. Core Health Insurance provides limited benefits at an affordable price. It is available to all applicants without regard to medical history so this plan is attractive to people with significant pre-existing medical conditions. Core Health Insurance can be combined with other insurance, including  high deductible Health Savings Account (HSA) type insurance,  to increase the overall level of coverage. Core Health Insurance is not full coverage insurance and should not be used to replace major medical insurance.

General Eligibility
All applicants residing in approved states under age 65 are eligible for this coverage. U.S. citizenship is not required. “Child only” policies are not available; dependent children must be covered with an adult on the policy.

Since this is an association type health plan, applicants must join the Association of United Internet Consumers (, included with the insurance application.  The benefits association cost of $2 per month is built into the premium cost as quoted.
Medical Eligibility
Applicants are eligible without regard to medical history. There are no medical questions on the application and an applicant cannot be declined for insurance due to medical history.

Approved States
46 states have approved this coverage as of the date of this article’s most recent revision:
Alabama, Alaska, Arizona, Arkansas, California, Colorado, District of Columbia, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Mexico, New York, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin, Wyoming.

Application for approval to offer insurance has been made in the following states but is not approved as of the date of this article: Connecticut, Maryland, New Jersey, Vermont, and Washington.

Covered Charges

THIS IS LIMITED INDEMNITY COVERAGE. IT IS NOT MAJOR MEDICAL COVERAGE and is not intended to replace other medical coverage. There is a 30-day waiting period for Sickness benefits. A 12-month Pre-existing Condition Limitation applies to the following benefits: Hospital, including First Day Admission, Hospital Standard room, Intensive Care/Cardiac Care Unit, Surgery and Anesthesia. Please see the listing of exclusions and limitations.

Hospital First Day Admission: After the first 12 months that the policy is in force, you will have coverage up to the amount shown in the benefit schedule of the plan You select.

Hospital (Standard): After the first 12 months that the policy is in force, you will have coverage up to the amount shown in the benefit schedule of the plan You select, for standard, board, miscellaneous medical Hospital charges, and general nursing services for each day You are Confined to a hospital due to a covered Injury or Sickness. This benefit is paid in lieu of a benefit payable for Intensive Care/Cardiac Care Confinement.
Intensive Care/Cardiac Care Unit: After the first 12 months that the policy is in force, you will have coverage up to the amount shown in the benefit schedule of the plan You select, for each day You are Confined to a Hospital in an Intensive Care or Cardiac Care Unit due to a covered Injury or Sickness.  This benefit is paid in lieu of a benefit payable for a standard Hospital room.
Maximum Benefit for ALL First Day Admission, Hospital and Intensive Care/Cardiac Care Unit Confinements is 31 days per person per Policy Year.
Surgery: After the first 12 months that the policy is in force, you will have coverage up to the amount shown in the benefit schedule of the plan You select, for surgery performed while Confined to a Hospital or in an Outpatient Surgery Facility resulting from a covered Injury or Sickness. Limited to 1 surgery (Inpatient or Outpatient) per person per Policy Year.

Anesthesia: After the first 12 months that the policy is in force, when a covered surgical procedure is performed, You will have coverage up to the amount shown in the benefit schedule of the Plan You select, for anesthesia and its administration during the surgery. Limited to 1 (Inpatient or Outpatient) per person per Policy Year.
Doctor’s Office Visits: You will have coverage up to the amount shown in the benefit schedule of the plan You select, for a Medically Necessary Doctor Visit due to a covered Injury or Sickness, visits will also be for newborn well-care and routine health examinations and immunizations for children aged 5 and under. Limited to 5 visits per person per Policy Year.
Wellness Visits: You will have coverage up to the amount shown in the benefit schedule of the plan You select, for a routine health examination. Limited to 1 visit per person per Policy Year.
Basic Diagnostic Testing: You will have coverage up to the amount shown in the benefit schedule of the plan You select, for x-rays, laboratory and other diagnostic tests, ordered or performed by a Doctor that are Medically Necessary due to a covered Injury or Sickness. Limited to 5 sittings per person per Policy Year.
Advanced Diagnostic Studies: You will have coverage up to the amount shown in the benefit schedule of the plan You select, for Medically Necessary EEG’s, EKG’s, CT Scan’s and MRI’s.
Emergency Room: You will have coverage up to the amount shown in the benefit schedule of the plan You select, for Medical treatment received by a Doctor in a Hospital Emergency Room for a Medical Emergency due to a covered Injury or Sickness. Limited to 1 visit per person per Policy Year.
Accident Medical Expense Benefit: You will have coverage up to the amount shown in the benefit schedule of the plan You select, for an accidental Injury that requires Medically Necessary care. Initial treatment for the Injury must be received within 30-days of the date of the Injury. Limited to 1 treatment per person per Policy Year and subject to a $100 deductible.
Accidental Death & Dismemberment: You or Your beneficiary will be paid, up to the amount shown in the benefit schedule of the plan You select, ranging from $625 to $10,000, for a covered Injury that results in accidental death. Dismemberment is paid as a percentage of the amount shown in the benefit schedule, please see dismemberment table for specific benefits and limits.

Coverage details may vary from state to state and may change over time. See your own policy for details.

Maximum Benefit

Maximum overall policy benefit is $1 million. In addition, each type of benefit is subject to the maximum benefit amount listed in the chart below.

Value Plan Silver Plan Gold Plan Platinum Plan
   First Day Admission (Semi-private room or ICU/CCU): $300 $400 $750 $1,000
   Semi-Private Hospital Room and Board per day: $200 $200 $500 $750
   Intensive Care Unit (ICU/CCU)per day: $400 $400 $1,000 $1,500
   Combined Maximum number of covered days (per person per policy year): 31 31 31 31
   Inpatient $500 $1,000 $2,000 $3,000
   Outpatient $200 $500 $1,000 $2,000
   Maximum number of surgeries (per policy year): 1 1 1 1
   Inpatient $100 $200 $400 $600
   Outpatient $40 $100 $200 $400
   Combined Maximum number of treatments (per policy year): 1 1 1 1
Doctor Office Visits $50 $50 $100 $100
   Maximum number of visits (per person per policy year): 5 5 5 5
Wellness Visit     $50 $50 $50 $50
   Maximum number of visits (per person per policy year): 1 1 1 1
Diagnostic Testing, X-Rays & Laboratory:
    Basic: $30 $50 $100 $100
   Maximum number of visits (per person per policy year) 5 5 5 5
   Advanced Studies: $250 $500 $750 $1,000
   Maximum number of visits (per person per policy year): 1 1 1 1
Emergency Room $100 $150 $300 $300
    Maximum number of visits (per person per policy year):

For Medical Emergency Only

1 1 1 1
Accident Medical Expense $500 $500 $2,500 $2,500
    Deductible: $100 $100 $100 $100
    Maximum number treatments (per person per policy year): 1 1 1 1
Accidental Death & Disbursement
Primary Insured Covered up to: $2,500 $5,000 $7,500 $10,000
Covered Spouse up to: $1,250 $2,500 $3,750 $5,000
Each Covered Dependant up to: $625 $1,250 $1,875 $2,500

* Subject to waiting period exclusion for pre-existing conditions.

Benefits will not be paid for charges or loss caused by, or resulting from, any of the following:
(1)  Suicide or any intentionally self-inflicted Injury;
(2)  Any drug, narcotic, gas or fumes, or chemical substance voluntarily taken, administered, absorbed or inhaled unless prescribed by, and taken according to the directions of, a Doctor (accidental ingestion of a poisonous substance is not excluded.);
(3)  Commission, or attempt to commit, a felony;
(4)  Participation in a riot or insurrection;
(5)  Driving under the influence of a controlled substance, unless administered on the advice of a Doctor;
(6)  Driving while Intoxicated.  “Intoxicated” will have the meaning determined by the laws in the jurisdiction of the geographical area where the loss occurs.
(7)  Declared or undeclared war or act of war;
(8)  Nuclear reaction or the release of nuclear energy.  However, this exclusion will not apply if the loss is sustained within 180-days of the initial incident and:
(1)  The loss was caused by fire, heat, explosion or other physical trauma which was a result of the release of nuclear energy; and
(2)  The Covered Person was within a 25-mile radius of the site of the release either:
(a)  At the time of the release; or
(b)  Within 24-hours of the start of the release; or
(c)  Occurs while he is in the issue state of this Certificate;
(9)  Routine health checkups or immunizations for Covered Person aged 6 and older except as specifically provided; allergy testing;
(10) Surgery to correct vision or hearing; eyeglasses, contact lenses and hearing aids, braces, appliances, or examinations or prescriptions therefore;
(11) Dental care, x-rays, or treatment other than Injury to natural teeth and gums resulting from an accidental Injury and rendered within 6-months of the Injury;
(12) Spinal manipulations and manual manipulative treatment or therapy or phisotherapy;
(13) Weight loss or modification and complications arising therefrom, including surgery and any other form of treatment for the purpose of weight loss or modification;
(14) Rest cures or custodial care, or treatment of sleep disorders;
(15) Treatment, services or supplies received outside of the U.S. except for acute Sickness or Injury sustained during the first 30-days of travel outside the U.S.;
(16) Normal pregnancy or childbirth, except for Complications of Pregnancy;
(17) Any drug, treatment, or procedure that either promotes or prevents conception or childbirth regardless of what the drug, treatment, or procedure was originally prescribed or intended for;
(18)  (19) Treatment of temporomandibular joint (TMJ) disorders involving the installation of crowns, pontics, bridges or abutments, or the installation, maintenance or removal of orthodontic or occlusal appliances or equilibration therapy;
(20) Cosmetic surgery.  This Exclusion does not apply to reconstructive surgery:
(a)   On an injured part of the body following trauma, infection or other disease of the involved part;
(b)   Of a congenital disease or anomaly of a covered dependent newborn or adopted infant; or
(c)   On a non-diseased breast to restore and achieve symmetry between two breasts following a covered Mastectomy;
(21) The repair or replacement of existing artificial limbs, orthopedic braces, or orthotic devices; dentures, partial dentures, braces or fixed or removable bridges;
(22) Treatment or removal of warts, moles, boils, skin blemishes or birthmarks, bunions, acne, corns, calluses, the cutting and trimming of toenails, care for flat feet, fallen arches or chronic foot strain;
(23)  (24) Treatment of Mental or Nervous Disorders, or alcohol or substance abuse, unless specifically provided for under this Certificate;
(25) Prescription medicines;
(26) Any Injury that is caused by flight or travel in, or upon:
(a)   An aircraft or other, craft designed for navigation above or beyond the earth’s atmosphere except as a fare?paying passenger;
(b)   An ultra light, hang?gliding, parachuting or bungi?cord jumping;
(c)   A snowmobile;
(d)   Any two or three wheeled motor vehicle;
(e)   Any off?road motorized vehicle not requiring licensing as a motor vehicle;
(f)     Any watercraft or other craft designed for water use above or beneath the water, except as a fare-paying passenger;
(27)  Any accidental Injury where the Covered Person is the operator of a motor vehicle and does not possess a current and valid motor vehicle operator’s license;
(28)  Services, treatment or loss:
(a)   Rendered in any Veterans Administration or Federal Hospital, except if there is a legal obligation to pay;
(b)   Payable by any automobile insurance policy without regard to fault. (Does not apply in any state where prohibited);
(c)   Which a Covered Person would not have to pay if he did not have insurance;
(d)   Provided by a Doctor, Nurse or any other person who is employed or retained by a Covered Person or who is a member of a Covered Person’s Immediate Family;
(e)   Covered by state or federal worker’s compensation, employers liability, occupational disease law, or similar laws;
(f)     Injury or Sickness sustained while on active duty in the armed forces of any country. Upon receipt of proof of service, we will refund, any unearned premium paid on a pro rata basis;
(29)  Hemorrhoids, tonsils, adenoids, middle ear disorders, any disease or disorder of the reproductive organs unless the loss is incurred at least 6-months after the Covered Person becomes insured under this Certificate;
(30)  Elective treatment or surgery and treatment, procedures, products or services that are experimental or investigative.  “Experimental or Investigative” means a drug, device or medical treatment or procedure that:
(a)   Cannot lawfully be marketed without approval of the United States Food and Drug Administration and approval for marketing has not been given at the time of being furnished;
(b)   Has Reliable Evidence indicating it is the subject of ongoing clinical trials or is under study to determine its maximum tolerated dose, toxicity, safety, efficacy, or its efficacy as compared with the standard means of treatments or diagnosis; or
(c)   Has Reliable Evidence indicating that the consensus of opinion among experts is that further studies or clinical trials are necessary to determine its maximum tolerated dose, toxicity, efficacy, or its efficacy as compared with the standard means of treatment or diagnosis. “Reliable Evidence” means (i) published reports and articles in authoritative medical and scientific literature; (ii) the written protocol(s) of the treating facility or the protocols of another facility studying substantially the same drug, device, medical treatment or procedure; or (iii) the written informed consent used by the treating facility or by another facility studying substantially the same drug, device, or medical treatment or procedure.

Waiting period for sickness benefits

There is a 30-day waiting period for sickness benefits under a newly issued policy. This means that expenses for the treatment of an illness are not available for the first month that your new Core Health insurance policy is in force. For example, if your policy starts on June 1 and you become sick on the next week on  June 8, then the medical expenses incurred to treat your illness would not be covered for the entire month of June but would start to be covered on July 1. After your policy has been in force for one month, this waiting period no longer applies.

All medical charges are grouped into one of three general categories: 1) preventative, 2) accident or 3) sickness. Perhaps a simple but  useful way to define a ‘sickness expense’ is to say that it is not a preventative expense nor an expense to treat an accident or injury.

Pre-existing conditions
A hospitalization caused by a pre-existing medical condition is covered only after the policy has been in force for 12 months. The 12-month Pre-existing Condition Limitation applies to the following benefits:  Hospital, including First Day Admission, Hospital Standard room, Intensive Care/Cardiac Care Unit, Surgery and Anesthesia.

There are no limits on other benefits for pre-existing medical conditions, so this makes Core Health Insurance one of the most liberal choices for coverage of pre-existing medical conditions.

PPO Network Providers
You have the freedom to choose any medical service provider. This insurance plan does not require network providers. The same level of benefits is paid to all providers regardless of their PPO network affiliations. Any doctor or hospital may be used. There is no “out-of-network” reduction in benefits.

If a Preferred Provider Organization (PPO) network is available in your area, then you might save money by using a PPO member provider. This feature is automatically added as an available option to your Core Health plan if a PPO network is available in your area.

Benefit payments may be made directly to your doctors and PPO member providers are more likely to accept assignment of benefits. Although the willingness to accept assignment is not controlled by the insurance company, this is frequently a practical advantage of using a PPO member provider. More information about using the optional PPO network is provided on the page “How Core Health Plans Work”.

This plan does not require referrals for treatment. Treatment provided by any doctor or hospital in the United States may be covered

This insurance requires pre-certification within 48 hours of an in-patient hospital admission.

This policy does not use deductibles. The benefits listed in the policy are the exact dollar benefits available; no adjustment is made for deductibles.

This policy does not use co-payments. The benefits listed in the policy are the exact dollar benefits available; no adjustment is made for co-payments.

This policy does not use co-insurance. The benefits listed in the policy are the exact dollar benefits available; no adjustment is made for co-insurance.

Length of Coverage
The minimum length of coverage is 30 days. There is no maximum length of coverage. Coverage is renewable until age 65 or until canceled by the insured.

Rate Increases

No individuals can be singled out for rate increase under the policy. Rates are anticipates to increase over time in step with overall price increases for health care.

Policy Cancellation

No individuals can be singled out for cancellation under the policy. The insurance company has the right to cancel the policy by providing at least 31 days notice to the association policyholder, AUIC, which, in turn, has 31 days to notify you of the cancellation of coverage. (To cancel your own coverage, see “To Cancel Coverage” below).

Insurance Company
United States Fire Insurance Company is a member of Fairmont Specialty, a division of Crum & Forster. 305 Madison Avenue, Morristown, NJ 07962  Phone: 973-490-6600  Fax: 973-490-6612 (This is the company’s legal address only and is not the address or phone number to use for routine correspondence about your health insurance).

Plan Administrator
Core Health Insurance is administered by SAS-ID, P.O. Box 1086, Janesville WI 53547-1086.  Tel. 877-279-7959, Fax 608-755-7955.  SAS-ID develops technologies and online marketing solutions for top insurance carriers and nationwide distribution networks. SAS-ID was founded in 1999 and has been a leader and innovator in developing and marketing insurance on the web. SAS-ID was founded by insurance professionals who have a passion to make insurance simpler and more accessible to everyone. SAS-ID is a member of the BBB Online Reliability program.

Financial Strength and Ratings
This insurance company is rated A- by A.M. Best, the third-highest rating of 15 possible ratings. with a Financial Size Category XIII ($1.25 Billion to $1.5 Billion). Outlook is listed as positive. This rating was affirmed effective May 4, 2007.

Consumer Complaints
The National Association of Insurance Commissioners (NAIC) collects data on consumer complaints against insurance companies and publishes compiled information on its Web site at . The NAIC assigns an “average complaint ratio” as 1.0 measurement. United States Fire Insurance Company received a 0.00 complaint ratio for 2004, 2005 and 2006 which means that there were no customer complaints for health insurance reported to the NAIC.

Consumer Reviews
Since this is a new insurance product, consumer reviews are not yet available. Reviews will be posted on the enrollment web site at in the near future. If you have a comment or product review, send an e-mail to Health Insurance at

Price is based on age, location (zip code) and sex of each applicant. Premium rates are available online at the link listed below. Monthly premium rates average about $50 for young adults selecting lower levels of benefits and go much higher ($400 per month or more) for older adults selecting the highest level benefits. The median insurance policy premium is about $200 per month – about half of the cost of major medical insurance but more than most typical limited benefit or supplemental insurance plans.

Enrollment Method
Secure online enrollment is available and this is the preferred method of enrollment. An immediate confirmation of enrollment is sent by email. Enrollment by mail is available by printing and mailing the application (taken from the online enrollment site) and sending with initial payment. No confirmation of enrollment is available for mailed applications; your proof of payment (cashed check or credit card charge) may be used as proof of application.

Billing Method
Most applicants elect to have the policy billed automatically to a credit card or bank account on month-to-month basis. Coverage continues until cancelled.

Another billing option is to have an invoice sent to your resident address.  A modal billing fee will be added to each bill and there is an additional one-time fee of $10 due at time of enrollment to stat the manual billing option.

Payment Method
Premiums may be paid by credit card, debit card, EFT, money order or personal check. Payment may not be made by business check because this would be a violation of many states’ business insurance laws. The most common method of payment is online credit card.

To Cancel Coverage
Mail or Fax a written request for cancellation a minimum of 5 days prior to the monthly billing date. The automatic billing date is the date of the 1st payment made. Any requests received less than 5 days prior to the current month’s billing date will be processed for cancellation before the next month’s billing date. If sending a request by mail, use delivery confirmation with the U.S. Post Office to ensure that the request is received at least five days before the billing date. If using an overnight delivery service, keep the tracking information. If cancelling by fax, call 800-279-2290 extension 207 to confirm receipt of your faxed request. Insurance cancellation requests cannot be accepted by telephone or e-mail.

Include all relevant information in your request: the policy holder’s name & address, the policy holder’s date of birth, the policy ID number, the date the policy is to be cancelled, the reason for cancellation, the policy holder’s signature.

The fax number is 608-755-7955,

The mailing address is SASid,  462 Midland Rd #100, Janesville, WI 53546

Online Quote and Application
Most short term medical insurance policies are priced and issued directly online. This policy is available through Freedom Benefits. The direct enrollment link is

A product brochure in PDF format is not yet available for download from this site and brochures are not available by mail. As a temporary alternative, the Web pages can be printed.

Paper Applications
Applications may be downloaded and then printed from the enrollment site above and are also available by fax from the enrollment adviser. Applications are not available by mail.

Fax Application
Faxed applications are accepted when paying with a credit card or pre-authorized electronic funds transfer (EFT). Applications may be faxed directly to (888) 581-0748 with assurance of privacy and security of data. When applying by fax, you should confirm receipt of the application separately by telephone or e-mail if an e-mail confirmation is not received within one business day.

Policy Issue Time
An online application is approved immediately at the time you apply for coverage and an acceptance e-mail is sent for confirmation of coverage, subject to the payment being approved.  In most cases the policy and ID cards are mailed in the next business day.

Child-Only Applications
Children can apply only with a covered adult parent or guardian. Child-only applications will not be approved.

ID Cards
This policy uses plastic ID cards that are sent by mail when the policy is issued, usually within one business day after online application. Temporary paper ID cards are available at the time of application by following the link on the confirmation e-mail.

Enrollment Support
Professional enrollment support by e-mail is provided without charge by OnlineAdviserTM at This service handles all applicant questions prior to the issuance of a policy.

Member Support
The toll-free telephone number for member support is 877-279-7959. This number is also listed on the insurance ID card.

Billing Support
Toll-free billing support for issued policies is available at 877-279-7959. The mailing address for customer service is SAS-ID, P.O. Box 1086, Janesville WI 53547-1086.  Fax 608-755-7955.

Claims may be submitted by either the policyholder or a medical service provider. Core Health Insurance is subject to the same 10 day response time laws and claim payment procedures as other health insurance companies. If a medical service provider wants to receive the payment directly from the insurer then an “Assignment of Claim” form signed by the policyholder is required. Otherwise all benefits payments are made to the policyholder.  The claims department phone number is 877-279-7959. The mailing address for claims is SAS-ID, P.O. Box 1086, Janesville WI 53547-1086.  Fax 608-755-7955.

We welcome policyholder comments about this policy at



Will the Affordable Care Act be repealed in 2017?

At this time it appears that Democrats have the political power to block any attempt to repeal of the Affordable Care Act in the US Senate and are expected to do so, according to policy experts who advise the health insurance industry. However, Republicans do have enough votes for a budget-related bill to remove funding for the cost-sharing federal subsidies and the expansion of Medicaid.

So it appears that coverage for the lowest income individuals is threatened but other parts of the law remain safe for 2017.

The new world of financial planning for small businesses

Financial planning has turned upside down this week for small business owners and most are still spinning to get a grip on the topic. Details of the new Republican road map will emerge over time but it t already clear that unprecedented opportunity to save money through proactive financial planning.

The most immediate areas of change and opportunity are:

  1. federal income taxes – significant tax reductions will be available for the most profitable businesses. These whose tax planning was restricted by the Alternate Minimum Tax will get a new lease on possible tax savings.
  2. employee benefits – fewer regulations will lead to more opportunity for creativity and savings. Freedom Benefits expects to re-introduce a wide range of cost-saving options that were retired with the passage of the Affordable Care Act in 2010.
  3. payroll taxes – adjustments will be needed for most firms and their employees. Fortunately today’s online tools reduce the cost while simultaneously improving the reliability of payroll services.

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.

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 used by the Internal Revenue Service (IRS) and is generally avoided by employee benefits professionals. The term is not commonly used in my profession because 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.

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.

When to avoid small business group health insurance

Employer-based group health plans are usually the preferred method of delivery of health care financing because of current laws and market efficiencies. But there are cases where individual insurance is a better option.

Employer-based employee benefit plans are usually preferred way to provide health insurance and supplemental health benefits to employees. In an ideal setting, group health insurance allows for the highest quality coverage to be made available at a competitive price through a combination of employer contributions and voluntary employee salary reductions. The use of common employee benefit plans makes the health plan a pre-tax benefit which significantly reduces the net cost.

However, there are exceptions. Certain work environments do not provide a suitable setting for employer-based insurance. The following list provides examples of situations where group health plans will not work. In those cases individual insurance exchange is a better option.

1. There is a high level of tension or distrust between the employer and employees. Certain industries are notorious for unsuccessful employee benefit plans and, unfortunately, that problematic climate is likely beyond our immediate control.

2. The employer does not offer or contribute to at least a basic health insurance plan. Most group health insurance companies require that the employer pay a portion of the cost in order to financially stabilize the insurance policy and deter adverse selection.

3. Payroll deduction accounting is not available. While we are able to help with the set up qualified benefits under any payroll system, the fact is that some employers do not use a payroll accounting system and other that do use a payroll system do not maintain a good working relationship with the service provider.

4. The employer is unwilling to pay the cost of setting up a pre-tax qualified plan to reduce benefit costs for the employees. The initial start-up cost is typically $300 at Freedom Benefits and similar additional expenses recur each year.

5. Management does not understand the benefit plans and does not take the time to learn how they work. An effective benefit plan relies on endorsement and a mentorship type environment within the workplace.

6. The workplace does not allow time and place for employees to learn about benefits. This is the underlying reason that group health plans do not succeed in some industries.

When one or more of these conditions are present, a group health plan will not likely be successful. In those cases the employer should focus on steering employees to a health insurance exchange and may want to consider paying for health benefits through the regular paycheck.

An employer may wish to consider any of the voluntary benefit programs offered by Freedom Benefits that combine individually selected health insurance with the tax advantages of group health plans.


Tax changes triggered by federal health reform

How the 2010 federal health reform laws changed the taxation of health benefits, health insurance and related benefit plans

Health care reform legislation passed in 2010 added new taxes and changed other aspect of tax law. This article summarizes the federal tax-related items from the health care reform legislation. Note that not all of the tax changes relate directly to health insurance or health benefits but were still included as part of the 2010 health reform laws. This article does not address state tax changes that followed as a result of the federal law.

Tax changes effective in 2010

Sec. 40 – Change to cellulosic biofuel producer credit

Excludes fuels that are more than 4% (determined by weight) water and sediment in any combination or have an ash content of more than 1% from the definition of cellulosic biofuel.

Sec. 45R – Small business tax credit

Small businesses with 25 or fewer employees and average annual wages of $50,000 or less would be eligible for a credit of up to 50% of nonelective contributions the business makes on behalf of their employees for health insurance.

Sec. 105(b) – Excluding from income amounts received under a health insurance plan

The definition of “dependent” now includes any child of the taxpayer who has not yet reached age 27.

Sec. 162(l)(1) Self-employed health insurance deduction

The definition of “dependent” now includes any child of the taxpayer who has not yet reached age 27.

Sec. 401(h) Benefits for retirees

The definition of “dependent” now includes any child of the taxpayer who has not yet reached age 27.

Sec. 501(c)(9) Benefits provided to members of a VEBA

The definition of “dependent” now includes any child of the taxpayer who has not yet reached age 27.

Secs. 501(r) – Charitable hospitals

New requirements for hospitals operating under Sec. 501(c)(3), also affects Section 6033(b)(15).

Sec. 5000B – Tax on indoor tanning services

A new 10% tax on amounts paid for indoor tanning services.

Sec. 6103 – Return information disclosure

Allows the IRS to disclose certain taxpayer return information if the taxpayer’s income is relevant in determining the amount of the tax credit or cost-sharing reduction, or eligibility for participation in the specified state health subsidy programs.

Sec. 7701(o) – Codification of the economic-substance doctrine

Creates the economic-substance doctrine under the law and makes underpayments due to transactions that do not have economic substance subject to the Sec. 6662 accuracy-related penalty.

Adoption credit and credit for adoption-assistance programs

Maximum adoption credit was increased and, for adoption-assistance programs, the maximum exclusion was increased. Expired at end of 2012.

Tax changes effective in 2011

Sec. 125 – SIMPLE cafeteria plans for small business

An eligible small employer is provided with a safe harbor from the nondiscrimination requirements for cafeteria plans as well as from the nondiscrimination requirements for specified qualified benefits offered under a cafeteria plan.

Sec. 223 – Tax on health savings account (HSA) distributions

The tax on distributions from an HSA or an Archer medical savings account (MSA) that are not used for qualified medical expenses is increased to 20% of the disbursed amount.

Sec. 223 – Restrictions on use of HSA and FSA Funds

Amounts paid for over-the-counter medications will no longer be reimbursable from HSAs, Archer MSAs, health FSAs, or health reimbursement arrangements.

Annual fee on pharmaceutical manufacturers and importers

Fee on each covered entity engaged in the business of manufacturing or importing branded prescription drugs for sale to any specified government program or pursuant to coverage under any such program.

Tax changes effective in 2012

Sec. 501(c)(3) – Community health needs assessment

New requirements applicable to hospitals, regarding conducting a community health needs assessment, adopting a written financial-assistance policy, limitations on charges, and collection activities. Also affects Section 6033(b)(15).

Sec. 4375 – Fees on health plans

A fee is imposed on each specified health insurance policy.

Sec. 6051(a)(14) – Information reporting

Employers must disclose the value of the employee’s health insurance coverage sponsored by the employer on each employee’s annual Form W-2. The effective date was later delayed until 2013 for most employers.

Tax changes effective in 2013

Sec. 139A – Deductions for federal subsidies for retiree prescription plans

Eliminates the rule that the exclusion for subsidy payments is not taken into account for purposes of determining whether a deduction is allowable for retiree prescription drug expenses.

Sec. 125(i) – Health flexible spending arrangements (FSAs)

The maximum amount available for reimbursement of incurred medical expenses under a health FSA for a plan year can not exceed $2,500.

Sec. 213 – Medical care itemized deduction threshold

Threshold for the itemized deduction for unreimbursed medical expenses is increased from 7.5% of adjusted gross income (AGI) to 10% of AGI for regular income tax purposes. This change is delayed until 2017 for certain taxpayers.

Sec. 1411 – Medicare tax on investment income

Imposes a tax on individuals equal to 3.8% of the lesser of the individual’s net investment income for the year or the amount the individual’s modified AGI exceeds a threshold amount.

Sec. 3101 – Additional hospital insurance tax on high-income taxpayers

Employee portion of the Medicare hospital insurance tax part of FICA is increased by 0.9% on wages that exceed a threshold amount.

Sec. 4191 – Excise tax on medical device manufacturers

A tax equal to 2.3% of the sale price is imposed on the sale of any taxable medical device by the manufacturer, producer, or importer of the device.

Tax changes effective in 2014

Time for payment of corporate estimated taxes for 2014

Corporations with assets of at least $1 billion,had estimated tax payments due in July, August, or September 2014 increased.

Expanded 1099 reporting

This change was repealed by the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, P.L. 112-9.

Sec. 36B – Premium-assistance credit

Refundable tax credits that eligible taxpayers can use to help cover the cost of health insurance premiums for individuals and families who purchase health insurance through a state health benefit exchange.

Sec. 125 – Cafeteria plans

A qualified health plan offered through a health insurance exchange is a qualified benefit under a cafeteria plan of a qualified employer.

Sec. 4980H – Employer responsibility for insurance

An applicable large employer that does not offer coverage for all its full-time employees, offers minimum essential coverage that is unaffordable, or offers minimum essential coverage that consists of a plan under which the plan’s share of the total allowed cost of benefits is less than 60%, is required to pay a penalty if any full-time employee is certified to the employer as having purchased health insurance through a state exchange with respect to which a tax credit or cost-sharing reduction is allowed or paid to the employee.

Sec. 6055 – Reporting requirements

Requires insurers and employers who self-insure that provide minimum essential coverage to employees to report certain health insurance coverage information to both the covered individual and to the IRS.

Tax changes effective in 2018

Sec. 4980I – Excise tax on high-cost employer plans

The “Cadillac tax” is an excise tax on coverage providers if the aggregate value of employer-sponsored health insurance coverage for an employee (including, for purposes of the provision, any former employee, surviving spouse, and any other primary insured individual) exceeds a threshold amount.

Other resources:

Taxation of amounts received through health plans (2012)