Small business’ role in children’s health insurance

What role do small business owners have in providing health coverage for children of employees?

This question is increasingly significant as the federal government stalls and is apparently unwilling to issue funding for ‘CHIP’ programs for moderate income families that have historically been supported by the majority of lawmakers. Recent news reports indicate that the Senate is unlikely to approve the funding so states and employee benefits advisers like us are beginning to investigate alternatives. This article is meant to provide a preliminary checklist.

  1. Small businesses are not required to provide health insurance to employees.
  2. Businesses that do provide health insurance to employees are not required to provide it (or even make it available) to employees’ children.
  3. Businesses that do provide employee health coverage typically cover children on the same plan and under the same terms as the employees.
  4. Until 2010, the United States was making strong positive progress in providing health coverage to low income children. I covered this topic here in 2011. Most of these initiatives were replaced by the Affordable Care Act (ACA).
  5. The implementation of the ACA dominated coverage from 2012 until this year, 2017. This federal law treated all low income people equally (although coverage varied depending on state and local markets).
  6. The rollback of funding for ACA is the primary factor affecting children’s health insurance for lower income families in 2018.
  7. The cost of children’s health insurance is less than the cost of adult coverage
  8. In many cases small businesses are wise, considering all the options and current laws, to provide supplemental health coverage and avoid providing primary health coverage to employees and their dependents.
  9. Employee health plans can be modified to provide relief for employees’ children in the event of a cancellation of CHIP programs without disturbing other employer policies that are currently in force.

This blog post offers generalized comments for public presentation. Discussion is not customized for each state’s laws. Some of these points may not apply to your firm. Please seek individual guidance that applies to your firm and your state’s laws.

2018 health insurance: 4 simple priorities to consider now

Health care can be complicated. It helps to stay focused on the big decision issues and know that help is available if you need it. It may help to focus on these four simple priorities this month:

  1. PLAN AHEAD: The cost of health coverage can be up to almost 20% of total household income for middle class people in the $50,000 to $100,000 income range. This is a tremendous financial burden that needs to be part of your overall long term financial plan. No political solution will make this problem go away; it is up to you. Take control now by doing what is necessary to protect yourself.
  2. QUALIFY FOR A TAX CREDIT: Most people – about 4 out of 5 people – who need health insurance qualify for reduced-cost coverage made possible by income tax credits that are advanced through your insurance company. It is important to have your online application for 2018 at healthcare.gov* complete by December 15 so get an early start.
  3. OTHER TAX PLANNING: For the 1 in 5 applicants who do not qualify for a premium subsidy (mostly self-employed people or early retirees with income over $100,000)  it takes serious financial planning to cover this expense. Some relief may be available through smart tax planning to cover the expense on a tax exempt basis that saves thousands.
  4. FIND AN ALTERNATIVE: If you can’t afford this type of Obamacare coverage, there are two important next steps are: 1) qualify for a waiver of the tax penalty, and 2) enroll in an alternate less expensive health plan that might cover less but is better than being unprotected.

Freedom Benefits can offer free help with any of these four priorities.

Introduction of Healthcare Market Certainty and Mandate Relief Act of 2017

I don’t normally spend much time commenting on newly proposed legislation in its earliest stages. However, the two separate major pieces of legislation introduced yesterday deserve some attention. The first piece was the tax reform legislation, I covered impressions of that “Tax Cuts and Jobs Act” bill here. The second proposed bill called “Healthcare Market Certainty and Mandate Relief Act of 2017” addresses health insurance issues by funding insurance subsidies and removing the individual and employer health insurance mandates.

The American Hospital Association published a press release that says:

“Senate Finance Committee Chairman Orrin Hatch (R-UT) and House Ways and Means Chairman Kevin Brady (R-TX) yesterday introduced the Healthcare Market Certainty and Mandate Relief Act of 2017 that would fund cost-sharing reduction payments to health insurers for two years and eliminate temporarily certain Affordable Care Act mandates. The leaders said the proposal would fund the CSRs through 2019. For 2018, carriers would have to meet certain conditions that would be determined in consultation with the secretaries of the departments of Health and Human Services and Treasury. The proposal also would eliminate the ACA’s individual mandate from 2017-2021; eliminate the ACA’s employer mandate from 2015-2017; and expand the use of health savings accounts.”

The link in the description above is to the Senate bill. The House version of the bill is here. I haven’t read either because we understand that the wording is still in flux. (I don’t understand the process of changing a filed bill or whether these are still considered unfiled).

It is significant to note that this bill is separate from the tax reform proposal and will likely proceed on its own route. It seems to me that the proposal, while unorthodox from an actuarial perspective, just might work.

As of November 5, 2017, the bill has not moved forward from The House Ways and Means Committee.

2018 online insurance enrollment web sites

Different enrollment web sites serve different purposes

Health insurance enrollment for 2018 opened on November 1, 2017. In previous years it was possible to enroll for multiple types of insurance on one web site portal that connected different types of insurance. This year, however, insurance companies have taken steps to separate their products. Freedom Benefits recommends that shoppers deliberately separate their online shopping rather than use a combined product portal in order to get the best service and range of product options. Using two different enrollment web services maximizes the different capabilities of each type of insurance. This is a potentially confusing issue that may come up in this year’s health insurance enrollment.

Regular individual major medical insurance (also known as Obamacare) is offered through Healthcare.gov. This is the government-run health insurance web site. Coverage is available in all locations across the United States. Enrollment is only available online and not by telephone.

Supplemental insurance, short term medical insurance, deductible supplement insurance and dental coverage are offered through commercial insurance exchanges like Smart Insurance Marketplace. Not all types of coverage are available in all areas. Enrollment and live support is available by phone but we recommend that you enroll online.

In the past Freedom Benefits pricing and enrollment support was offered together through one exchange portal service. While these older web sites do exist, we n longer endorse them. We do provide support to consumers with questions about any insurance enrollment decision, regardless of the point of enrollment.

Today’s the day!

All year people have asked me about open enrollment in health insurance. Today’s the day! Open enrollment goes until December 15. Coverage starts January 1, 2018. Most people are eligible for affordable coverage and the web site is quite impressive. But there are three things to watch out for:

1- Technical problems on Healthcare.gov. I’ve already been snagged on one technical issue this morning.

2-Lack of navigator help. If you have questions it may be harder to find help due to reduced funding for navigators.

3-Tax complications. The integration between Healthcare.gov and the IRS is stepped up this year. The result, for some people, is difficultly getting advance premium credits. If this happens, most people will need additional help from the exchange staff and this may take some effort.

I offer limited independent free help with health insurance questions through OnlineNavigator web site. This service is not associated with any government agency, program or insurance company. It’s just something that I do as a community service.

Update on the defunding of insurance subsidy payments

The president’s action appears to have backfired from a political perspective. Now up to 3.5 million middle-income Americans must deal with the severe financial consequences. On the other hand, the resulting premium increases from this government action make more low-income people eligible for free or reduced cost coverage in 2018.

Two weeks ago on October 13 President Trump followed through on his threat to remove cost subsidies to health insurance companies that offered coverage to low-income policyholders. The payments were intended to lower policy deductibles and out-of -pocket expenses for individual who cannot afford to pay these out-of-pocket costs.

Some members of Congress and public health policy experts denounced the move that was intended to hurt lower income policyholders.  Liberal-leaning news sharply criticized the move in this broadcast while some people, including Speaker of the House Paul Ryan publicly supported the cancellation of payments. I was outspoken in earlier interviews and blog posts against the change both from a public policy perspective and as a Republican political strategy. Announcements by the White House said that the move was designed to hasten the collapse the health insurance markets. Apparently President Trump or some federal strategists mistakenly thought that without the subsidies, insurance markets could quickly unravel. President Trump was taped said “this will cost the federal government nothing”. He was wrong. Those supporters failed to consider the ability of insurers and states to nullify the effect of this subsidy cancellation action by raising their premium rates for all policyholders. Most of those increases are mostly paid by the federal government through premium tax credits that Congress has already refused to cancel.

Health insurance companies said they will need much higher premiums to make up for the loss of subsidies. Most companies are now raising their rates for 2018 by an average rate of 20%. State insurance departments that regulate insurance premiums are likely to permit the rate increases. In my state of New Jersey the two largest individual health insurance providers (Amerihealth and Horizon Blue Cross Blue Shield of New Jersey)  will raise rates by  16 percent to 28 percent.  In Pennsylvania some premium rates will  rise by more that 30 percent. For discussion purposes, this might mean a $200 to $500 increase in monthly family premium.

Responses to the defunding

We have seen three primary effects of the president’s decision to defund the subsidy payments for low income policyholders:

1)  The states of California, Connecticut, Delaware, Illinois, Iowa, Kentucky, Maryland, Massachusetts, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington state and the District of Columbia sued the federal government to restore the health benefit payments. Yesterday a federal court judge blocked the lawsuit from moving forward so this action appears to be dead. See this link to the court ruling. Even though the lawsuit was unsuccessful, it’s filing by so many states shows the opposition of state governments to the federal government’s ‘slash and burn’ approach to health care reform.

2)  Insurance companies throughout the nation have raised premium rates on all individual health insurance in response to the executive order. Most states will grant the last minute rate increases for 2018 as requested to avoid risking companies from withdrawing and collapsing the insurance market.

3) More people are dropping coverage. The number of people without health insurance is rising again. In this recent coverage Fox News speculates that the increase is due to confusion created by the president. Last year the federal government spent $110 Billion covering people and reducing the number of uninsured Americans to a record low, Now the number of Americans without insurance may soon return to the previous high levels.

Effect of the defunding

We see three results so far in response to the defunding of subsidies:

1)  No insurers have pulled out of the market and no individual insurance exchanges have closed as the president intended.

2) The 20% of policyholders who pay the full cost of their policy, about  3,500,000 people in total, will be adversely affects. Many of those hurt are self-employed or early retirees living in suburban areas. News coverage this past week made a big deal of the observation that the strong majority of those financially punished by the President’s executive order are among the relatively small group of Americans who support the president.

3) More Americans will qualify for reduced cost and free coverage. The Wall Street Journal covered this topic today. Apparently insurers are now gearing up to market the “free insurance” and that might further deter the President’s efforts to undermine Obamacare. Even people with incomes up to $98,400 (assuming 4 people in the household located in the lower 48 states) receive some insurance premium tax credit.

Individual response to the executive order

Some middle-income people are concerned about the 15% to 20% increase in their health insurance rates as a result of this presidential action.

Lower income people will not likely be able to pay the deductibles on their policy. This does not affect the ability to access medical care but may affect the individual’s credit score. It seems unlikely that medical providers will take legal action against these low-income individuals.

What to do?

For those 3,500,000 Americans hurt by this presidential action, I advise addressing those options on a one-on-one basis with a health care expert as soon as possible. Health care planning should be the core of financial planning. In this circumstance where life and health are at stake, all options should be considered.

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.

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.