Affordable Coverage Under PPACA: 8%, 9.5%, W-2 Wages and Household Income Explained

Keith McMurdy at Fox Rothschild does a better job than any other I've seen making the complicated as understandable as possible.   

If the employee cost of obtaining "single coverage" is less than 9.5% of that employee's total compensation as reported in box 1 of that employee's W-2, that coverage will be 'affordable.'  Coverage generally has to be available to cover dependents, excluding spouses, but the cost of dependent coverage is not calculated in the determination of whether the employer is offering affordable coverage.  It may have an impact on the eligibility for subsidies of the employee, but not the employer.  So, as it presently sits, if the cost of single coverage to the employee is less than 9.5% of their compensation, it is affordable.

Now, from the employee's perspective, whether or not the coverage offered by the employer is affordable looks at total household income.  For the individual, their personal definition of whether they are being offered affordable coverage will be based on 8% of total household income.  By way of example, think of an employee making $30,000 a year.  The employer has to offer that employee single coverage for an employee contribution of $237.50 a month or less ($30,000 x 9.5% = $2850/12).  The employer would be OK because that coverage would be affordable. 

Now suppose that employee has two children.  The employer can charge more for the family coverage than the 9.5% because that limit applies only to the single coverage.  So let's assume the employer charges $500 a month to the employee for family coverage.  The coverage would still be affordable and the employee would not be subsidy eligible if they went to the exchange because the employer is offering affordable coverage.  The exchange coverage for the family might be a cheaper option and the employee could choose it, but they would not get subsidies.

Where things get interesting is when you consider non-covered spouse.  Assume the spouse is unemployed and the total household income is that same $30,000.  If the spouse goes to the exchange for coverage themselves, the spouse would be eligible for a subsidy because they are not offered any employer sponsored coverage and the total household income for the family is below 400% of the federal poverty level.  

Now it gets even more confusing.  If the employee decides to opt out of the employer coverage and the whole family remains uninsured, they would not be subject to the individual tax penalty for not having insurance because the cost of the employer coverage for the family is more than 8% of total household income ($2,400 versus $6,000).  But that total household income calculation applies to the employee and family, not the employer.  

As you can see, this means that it would be hard to argue that [the law] is going to make coverage more affordable for families.  And ... for employers, the point is you don't have to get caught up in trying to figure out the total household income of your employees.  Look only at their individual income and base your affordability measure on that figure (at least for now).  

Full article posted here.  

This Week's Stories Causing Atlas to Shrug

Denmark's Fat Tax Harms Economy 7% ate less fat & 80% made no change at all.  Ya still think that wellness program will make Jumbo skinny?  

Doctors brace for pain as 10% cut to Medi-Cal rates hits at same time as ObamaCare expansion of Medi-Cal patients by 35%   

California official recommends Anthem units be barred from exchange I'm busting out the popcorn to watch this one play out.  

States and employers are junking Obamacare 'calculators' because they are too riddled with errors, flawed assumptions and old data to be useful. 

PPACA's new subsidy for layoffs will make the ARRA debacle look like child's play. 

Letter from City to EEs Capping Variable Hour Workers to 28 Hrs in Response to Obamacare.  

Carl's Jr. CEO: ObamaCare Means Kiosks to Replace Workers & No Expansion in California

• Expects fast-food restaurants to deal with ObamaCare by replacing workers with kiosks.

• It takes 60 days to open a Carl's Jr. in Texas, 63 in Shanghai, and 125 in Novosibirsk, Russia. In Los Angeles, it's 285.

This is from Allysia Finley writing for the Wall Street Journal:

...The fast-food executive rattles off a list of market suppressants, including uncertainty over labor costs, commodity and food prices, and taxes. But his bete noire is ObamaCare. 

Mr. Puzder says his health-care consultants have calculated that it's cheaper to offer his company's 21,000 U.S. employees more expensive health-insurance plans than to drop them into state exchanges and pay the penalty for not covering what ObamaCare regulators deem are "essential health benefits." Yet his consultants can't figure out how many people will sign up under the new plans because the Health and Human Services Department hasn't issued final regulations.... 

"The ones who don't sign up are the young guys and gals who feel that they are healthy and if they get sick, they just go to the emergency room," Mr. Puzder says. Under ObamaCare, "people who were worried about getting stuck without insurance can still go to the emergency room for free and no longer have the incentive of catastrophic illness to sign up for insurance. . . . So the incentives to sign up for the plan just disappeared." 

About 40% of Mr. Puzder's employees are part-time and therefore exempt from ObamaCare's coverage mandates. "That percentage of employees will probably go up. Everybody is hiring more part-time employees," he says, though he is quick to add that "we're not firing anyone to hire" part-time workers. "Through attrition, three full-time employees go away and you hire four part-time employees who basically have the same hours." 

Mr. Puzder also expects fast-food restaurants to deal with ObamaCare by replacing workers with kiosks. "You're going to go into a fast-food restaurant and order on an iPad or tablet instead of talking to a person because we don't have to pay benefits for any of those things."... 

These days, California is one of the few states where the company isn't looking to expand. "Like many businesses, we love California and would love to build more restaurants," he says. But "California is not interested in having businesses grow," even though many multinational companies, including CKE, have headquarters there. 

Consider how long it takes for one of his restaurants to get a building permit after signing a lease. It takes 60 days in Texas, 63 in Shanghai, and 125 in Novosibirsk, Russia. In Los Angeles, it's 285. "I can open up a restaurant faster on Karl Marx Prospect in Siberia than on Carl Karcher Boulevard in California," he says. 

Then there are California's cumbersome labor regulations, which appear designed to encourage litigation. The company has spent $20 million in the state over the past eight years on damages and attorney fees related to class-action lawsuits.... 

The Free Market Healthcare That ObamaCare Outlaws

This is from Ed Morrissey writing at the Fiscal Times:  

 •  In Texas, 34 percent of doctors are not accepting new Medicare patients or have limited the number of patients. 

 •  In Iowa, 17 percent have shut out Medicare patients  

 •  The American Medical Association says 17 percent of more than 9,000 doctors surveyed restrict the number of Medicare patients in their practice. Among primary care physicians, the rate is 31 percent. ... 

The problem with all of the health-care industry reforms has been that precise goal: expanding insurance. The widespread use of comprehensive insurance policies insulates end users in the system from price signals, especially on routine care. That eliminates competition on price as insurers use their economic weight to pre-negotiate pricing on every kind of service and product under their coverage, from blood tests to setting broken bones. Providers locked into a specific schedule of reimbursements have no reason to innovate to either lower costs or increase value, and end up having to spend money and time dealing with insurance companies for delayed payments rather than focusing on the patients seeking treatment in their clinics. 

Ironically, the multiplication of mandates and other regulations in the ACA on both private insurers and government-run programs like Medicare and Medicaid have more doctors opting out of the third-party-payer system altogether. Earlier this week, CNN Money reported on the migration to cash-only services among health-care providers, driven by poor reimbursements, increasing regulation, and high overhead.  

Dr. Doug Nunamaker, a family-practice physician in Wichita, knows that his decision will eliminate some of his demand, but the cost savings and the freedom more than make up for any business lost over his refusal to take insurance. "The paperwork, the hassles, it just got to be overwhelming," Nunamaker told CNN. ... 

For most adults, the fee is $50; senior citizens pay $100, but membership for children costs only $10 per month. ... 

What happens when a patient needs services the clinic doesn’t provide? Nunamaker has created partnerships with providers at costs amounting to fractions of what insurance pays, CNN reports. A $90 cholesterol test can be purchased for … three dollars. An MRI normally would cost an insurance company $2000, but Nunamaker’s patients can access one for $400. ... 

[Lack of hospital care] limits the potential for physicians like Nunamaker, but it doesn’t bother him. He earns around $200,000 a year from his cash-only practice, but more importantly, he gets to focus on treating patients rather than fulfilling insurance-company demands. ... 

America's Decline - In Numbers

• 433: Total number of days it takes in the U.S. to start a business, register a property, pay taxes, get an import and export license and enforce a contract
• 368: Total number of days it took to do the same in 2006
• 7: U.S. ranking, out of 144 countries, on the World Economic Forum's 2012-2013 Global Competitiveness Index
• 1: U.S. ranking on the 2008-2009 Global Competitiveness Index
• 33: U.S. ranking for its legal system and property rights in 2010 on the Fraser Institute's Economic Freedom index, out of 144 countries
• 9: U.S. ranking for its legal system and property rights in 2000

Sources: 'Doing Business'; World Economic Forum; Fraser Institute as reported in the Wall Street Journal. 

Immigration and PPACA’s Employer Mandate

This is Philip Klein writing at the Washington Examiner:

Under the existing Senate immigration bill, immigrants who have been in the United States illegally can obtain a provisional legal status after paying fines and meeting certain preconditions. But this population would have to wait at least 13 years to be able to obtain full citizenship, and it isn’t until then that they could qualify for government benefits such as Obamacare.   

The problem arises when this rule interacts with another provision of Obamacare – the employer mandate. Starting in January, businesses with 50 or more employees who don’t offer workers health insurance that the federal government deems acceptable must pay a penalty if at least one of their workers obtains insurance on a new government-run exchange. The penalty is up to $3,000 per worker.    This means if the immigration bill becomes law, some employers could effectively face incentives of hundreds of thousands of dollars to hire newly legalized immigrants over American citizens, because the immigrant workers would not qualify for Obamacare benefits. 

This Week's Stories in the Dystopia of Government Healthcare

In 2012, the White House estimated that the first year of PPACA subsidies would cost $15.5 billion. The next year, it rose to $21.5 billion. This year, the estimated cost was roughly $32 billion. Don't you wish you had that kind of leeway in your budget?

California's state government has committed to a pension fund for teachers and has ginned up a phony surplus by underpaying into that fund.

Smokers cost employers $5,816 more than non-smokers.

California has decided to make it illegal to charge smokers more for healthcare even though ObamaCare encourages it.

US healthcare is not free market healthcare, but instead, is riddled with market failures. It is a combination of Crony Capitalism and socialism: an agreement among Big Pharma, Big Hospital, Big Insurance, Big Specialists and Big Government. (And more here.)

The IRS assumes that the cheapest (bronze) ObamaCare family plan will cost $20,000 a year in 2016.

Two-thirds of Americans who currently lack health insurance don't know yet if they will bother to fill out the 20-60 pages for the three gov't agencies by Jan 1 as ObamaCare requires for new coverage.

The IRS has already hired 1,024 new bureaucrats to collect fines and taxes for ObamaCare and this year they seek to hire 1,954 more. That is 2,978 new bureaucrats to collect 18 new taxes, fees and fines.

Applying for ObamaCare: It's still REALLY 61 pages

Turns out that new "shorter" form is fools gold: 

One big reason the new form is shorter: the type is smaller, with less space for answers.

The much-derided 21-page application was for families. It is now down to 11 pages, thanks to a trick. Eight pages in the longer application called for filling in information for four additional family members. The new form cuts these pages but says that if you have children, "make a copy of Step 2: Person 2 (pages 4 and 5) and complete." The work required of the applicant remains the same.

Then there's a 61-page online application form that is in the draft stage but hasn't been officially released. This is the drill-down version of the three-page and 11-page printed documents. It has all of the if-then questions the government may need to have answered before it can determine if an applicant is eligible for subsidies.

Full story.   

This Week's Stories in the Distopia of Government Healthcare

California is making PPACA exchange plans look cheaper by removing the highest quality providers from your list of options: Blue Shield is only offering one-third of their normal providers in the exchange. 

 

Medical device manufacturers not paying their 'fair share' of health reform because they are behaving like businesses and passing increases on in their pricing.  (What in the world did the bureaucrats think they would do?)  

 

Employers and other early retiree health care plan sponsors awaiting government payment from a health care reform law program are likely to be paid only a fraction of the $2.5 billion they are owed.

 

America will face a shortfall of 150,000 doctors over the next 15 years primarily because Medicare (the largest purchaser of medical services) only pays 53% of a physician's actual costs and Medicaid pays even less.   

Uh Oh. Corp. Wellness Plans Don't Work: RAND Study

(Reuters) - A long-awaited report on workplace wellness programs, which has still not been publicly released, delivers a blow to the increasingly popular efforts, Reuters has learned, casting doubt on a pillar of the Affordable Care Act and a favorite of the business community.

According to a report by researchers at the RAND Corp, programs that try to get employees to become healthier and reduce medical costs have only a modest effect. Those findings run contrary to claims by the mostly small firms that sell workplace wellness to companies ranging from corporate titans to mom-and-pop operations.

RAND delivered the congressionally mandated analysis to the U.S. Department of Labor and the Department of Health and Human Services last fall.

The report found, for instance, that people who participate in such programs lose an average of only one pound a year for three years.

In addition, participation "was not associated with significant reductions in total cholesterol level." And while there is some evidence that smoking-cessation programs work, they do so only "in the short term."

Most large U.S. employers believe the programs improve workers' health and reduce or at least keep the lid on medical spending. "Companies from the CEO on down feel that these programs are bringing value," said Maria Ghazal, a vice president at the Business Roundtable, the association of chief executives of big companies. "The criticism is surprising, because companies are not hearing that internally."

Some experts not involved with the new report say even the modest benefits RAND found need qualification.

"The strongest predictor of whether someone will lose weight or stop smoking is how motivated they are," said Al Lewis, founder and president of the Disease Management Purchasing Consortium International, which helps self-insured employers and state programs reduce healthcare costs. "Since the programs are usually voluntary, the most motivated employees sign up. That makes it impossible to credit the programs with success in smoking cessation or weight loss rather than the employees' motivation."

For its report, RAND collected information about wellness programs from about 600 businesses with at least 50 employees and analyzed medical claims collected by the Care Continuum Alliance, a trade association for the health and wellness industry....

SAVINGS OF $2.38 A MONTH

The report's conclusions about the financial benefits of workplace wellness programs are also grim. In theory, the programs should reduce medical spending as employees become healthier and thereby avoid expensive conditions such as heart disease, cancer and stroke.

In fact, workers who participated in a wellness program had healthcare costs averaging $2.38 less per month than non-participants in the first year of the program and $3.46 less in the fifth year. Those modest savings were not statistically significant, meaning they could have been due to chance and not to the program.

More surprisingly, workplace wellness did not catch warning signs of disease or improve health enough to prevent emergencies. "We do not detect statistically significant decreases in cost and use of emergency department and hospital care" as a result of the programs, RAND found.

The RAND report was mandated by the Affordable Care Act, the healthcare reform law known as Obamacare. Two sources close to the report expected it to be released publicly this past winter. Reuters read the report when it was briefly posted online by RAND on Friday before being taken down because the federal agencies were not ready to release it, said a third source with knowledge of the analysis....

$6 BILLION INDUSTRY

Workplace wellness is a $6 billion industry in the United States, with an estimated 500 vendors now selling the programs. Fifty-one percent of employers with 50 or more workers offer one, the RAND report found. Medium-to-large companies now spend an average of $521 per employee per year on wellness incentives (gift cards for losing weight, for instance), double the $260 in 2009, according to a survey by Fidelity Investments and the National Business Group on Health released in February.

For many employers, wellness programs are a recruiting and retention tool, attracting the health-conscious employees they prefer. The programs also promise to control an employer's healthcare spending. By getting workers to stop smoking they should reduce expensive emphysema treatments, for instance, and by nudging workers to get annual physicals they are expected to help companies avoid such financial black holes as cancer treatment and stroke rehabilitation.

Although the RAND report's conclusions seem counterintuitive - how can wellness programs not improve health? - other recent studies agree.

This year researchers at the University of California conducted an analysis of dozens of existing studies of workplace wellness programs at the behest of the California state senate. Based on gold-standard studies, similar to those that evaluate a new drug, participating in work-based wellness programs does not lower blood pressure, blood sugar or cholesterol and rarely leads to weight loss, said Janet Coffman, a health policy expert at the University of California, San Francisco, Institute for Health Policy Studies.

"Even in studies that found statistically significant weight loss, it was not always sustained," she said.

Similarly, after years in which vendors and others claimed that the programs return $3, $9 and more for every $1 invested, rigorous studies have found the opposite, also providing support for the RAND findings.

Earlier this year, economist Gautam Gowrisankaran of the University of Arizona and colleagues found that employees who participated in the wellness program at BJC Healthcare, a St. Louis, Missouri-based hospital system, had fewer hospitalizations for illnesses such as heart disease and diabetes. But their overall spending did not decrease, the researchers reported in the journal Health Affairs.

The main reasons, said Gowrisankaran, were that employees who fill out company surveys assessing their health risks ("what is your blood pressure?") or get health screenings at company-sponsored health fairs ("you better see a doctor about that") led to more office visits and medication use. In-patient costs fell $22 per employee per month, on average, but other costs rose $19. The program cost $500,000 per year.

"The wellness program just didn't save money," Gowrisankaran said.

To understand how that can be, experts offer the example of what happens when a workplace wellness program identifies hypertension (by requiring participants to get a physical) in someone who never suspected she had it. That might keep her from having a stroke in 20 years, but in the meantime it leads to physician visits and drugs to manage a condition that had gone untreated - and that therefore had previously cost the company or its insurer nothing, explained Vik Khanna, a benefits consultant in St. Louis....

Source: Reporting by Sharon Begley; editing by Prudence Crowther. Full text.

Employers Will Have to Complete Employee and Plan Data When Employees Apply for Exchange Plans

In last month's newsletter we notified you about the new "Notices of Exchange" that we will be preparing for you this Fall.  The next piece of the PPACA puzzle deals with a "Coverage Tool" that employees will ask you to fill out when they want to apply for an Exchange plan.  The level of detail sought will make it impractical for a broker to complete this on your behalf.  Hence, you will want to become familiar with what is required (see the third application down, beginning on page 9).  

In May, HHS issued a streamlined final application package to be used by individuals enrolling in health coverage through a public exchange.  

The HHS package of applications includes three versions. The below is from SHRM.

1. A five-page Application for Health Coverage & Help Paying Costs, which can be used by unmarried adults who are not offered health coverage from their employer, who do not have any dependents, who cannot be claimed as a dependent on someone else's tax return and who do not have items that can be deducted from their taxable income other than student loan interest.

2. A five-page Application for Health Coverage, which can be used by anyone who wishes to enroll in a health plan offered in the Health Insurance Marketplace, but who is not eligible for federal premium tax credits, cost-sharing subsidies, Medicaid or CHIP coverage. Individuals unsure about their eligibility can also complete this version of the application, and they will be contacted for additional assistance regarding eligibility and enrolling in coverage.

3. A 12-page Application for Health Coverage & Help Paying Costs, which can be used by single individuals, and those with a family, who are offered health coverage from an employer.

The long-version of the application includes an Employer Coverage Tool, which employers will be asked to complete to enable an applicant to answer specific questions in the application. The Employer Coverage Tool requests information on various elements of an employer's health plan eligibility, waiting periods, premiums for the lowest-cost, self-only health plan option, wellness program incentives, whether the plan meets the minimum value standards and what plan changes, if any, are contemplated for the new plan year.

Applicants are instructed to "take the Employer Coverage Tool on the next page to the employer that offers coverage to help you answer these questions." However, the employer's completed Employer Coverage Tool is not to be included when the application is submitted; instead, the applicant uses the information provided by the employer in the Employer Coverage Tool to respond to similar questions asked in the Health Coverage From Jobs section of the application.

The information provided by an employer in the Employer Coverage Tool, and the applicant's related responses on the application itself, will be relevant to a determination of whether the applicant is eligible for federal premium tax credits and subsidies and, in turn, whether the employer is liable for penalties under the play-or-pay requirements (e.g., because the employer did not offer a full-time employee affordable, minimum value coverage). Particularly noteworthy information requested in the application or the Employer Coverage Tool includes the following:

•  The applicant's before-tax wages and frequency of payment, which may be relevant to a determination of whether the applicant can qualify for federal subsidies and whether health coverage offered by the employer is affordable.

•  The average number of hours worked each week by the applicant, which may be relevant to determining whether the applicant is a full-time employee (i.e., working 30-plus hours per week).

•  If the applicant's income changes from month to month, the applicant is required to identify his or her "total income this year" and "total income next year (if you think it will be different)"—since the application will be submitted in the fall of 2013, the reference to "this year" appears to mean 2013, and "next year" is 2014.

•  The applicant's eligibility for coverage, including whether any waiting period applies.

•  Whether the employer offers a health plan that meets the minimum value standards, defined in the application to mean that "the total allowed benefit costs covered by the plan is no less than 60 percent of such costs."

•  How much the applicant would be required to pay in premiums for self-only coverage under the lowest-cost health plan offered by the employer. In addition, if the employer maintains wellness program incentives, the applicant is asked to provide the premium that the applicant would pay if he or she received the maximum discount for any tobacco-cessation program and did not receive any other discounts based on wellness programs. This description of the impact of wellness program incentives is consistent with regulations recently released by the federal government defining affordability of coverage.

•  What plan changes the employer will make to its group health plan for the new plan year (if known), such as the potential that the employer will not continue to offer coverage, or that the employer will start offering coverage or change the premium for the lowest-cost plan available.

The information provided in the application will be used to help determine the applicant's eligibility for federal premium tax credits or other federal subsidies for coverage in the Health Insurance Marketplace. In this regard, the application highlights that "you may qualify for a free or low-cost program even if you earn as much as $94,000 for a year (for a family of four)." Although the press release accompanying the revised applications is silent on this issue, it appears that the HHS-developed applications will be used in those states with a federally facilitated exchange (FFE), while states operating their own exchange will also have the option to use these applications.

Key Action Items

Employers with employees who may seek enrollment in the public Health Insurance Marketplace should become familiar with the content of the applications and with the information they will need to provide as part of the Employer Coverage Tool.

The application process will be an important step in the initial determination of an applicant's eligibility for federal premium tax credits and an employer's potential liability for penalties under the play-or-pay mandate. As such, ensuring that employees receive accurate and complete information up front regarding the health coverage offered to them could minimize the risk of misinformation being provided in the application, and the need for follow-up corrective communications by the employer.

Timing

The applications can be completed online, by telephone or on paper when the initial enrollment period for the Health Insurance Marketplace begins on Oct. 1, 2013. However, employers that anticipate that at least some of their employees will apply for coverage in the public Health Insurance Marketplace should begin reviewing the applications and Employer Coverage Tool as soon as possible. 

Stories Causing Atlas to Shrug - Memorial Day Edition

In 2012 California Fined, Penalized & Initiated More Actions vs Employers Than Ever Before

A new study finds that for every hour emergency department workers use a computer, they spend an average of 12 minutes on Facebook — and that time on the site actually 
goes up as the department becomes busier.  H/T: John Goodman.  

89% of already published articles, disguised & submitted again a year or so later are denied for 'serious methodological flaws'. 

Say goodbye to that $500 deductible insurance plan and the $20 co-payment for a doctor’s office visit: 1 in 6 Companies Already Cutting Benefits to Avoid ‘Cadillac Tax’
Smaller companies are so desperate to avoid the bite of ObamaCare that they are looking to self-insure all the way down to 10 employees; and carriers are providing stoploss for it.

Facelifts, tummy tucks & Lasik surgery could have guided free market healthcare reform if anyone bothered to look at their successes. 

Doctor: ObamaCare should cover weight-loss surgeries because southerners are submersed in a culture of sedentary eating.