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... an Employee Benefits, Health Care/Insurance/Funding, Consumer Driven Healthcare -  Trusted Advisor - helping organizations of all types and size reduce human capital related costs, improve morale, and maximize organizational objectives relative to wellness and health care. 

Monday, June 26, 2017

My 7-Point Health Care/Insurance Reform Plan

Ordinarily, this Blog site is used to provide information, ideas, strategies, explanations; in short - clarity - for health care/insurance stakeholders.  Today I'm departing from the usual fact based format to provide my thoughts and opinions on what would be a good way forward with respect to REAL healthcare/health insurance reform. These ideas are based on my 30-plus year career in healthcare financing and insurance, and are absent any political bent or particular bias.  Both the current House (passed) and Senate (proposed) bills are "patchwork efforts" designed in my opinion, to address some of the many critical issues facing healthcare delivery and healthcare financing, such as the crumbling individual health insurance markets.  But both bills, and most of what I've seen and read over the last seven years, fall perilously short of actually achieving the ambitious goals of:

1. Insuring more people
2. Lowering premiums making health insurance affordable
3. Maintaining and continuously improving quality of, and access to care 

Before I lay out my seven-point reform plan, it's important to review a very important reality.  The United States has chosen a for-profit, largely private sector, government regulated (as opposed to government controlled) healthcare system. (Note: Medicare, Medicaid, and Tricare are variations from this system, and in fact, resemble many socialized healthcare systems that exist throughout the world.)  Such a "free markets based" system differs greatly from the government run, single payer style systems implemented by our Canadian neighbors to the north, and most of Europe.  As such, we rely on, and very much need insurance companies to offer affordable coverage to the masses, in order to provide citizens with the ability to pay for their healthcare.  One of the unintended consequences of the Affordable Care Act (ACA) has been the mass departure of insurance companies from the individual market.  So priority one at this time, is to get the insurers back into the marketplaces.

Interestingly, there are discussions taking place to move our healthcare system away from its current format, to more of a "Canadian style", single payer; government-controlled system.  Such a system has numerous trade-offs associated with implementation and use.  Perhaps I will address these in a future blog post!

So here is my seven-point reform plan, for what it's worth...

1. Repeal of the more onerous provisions of the Affordable Care Act (ACA)...particularly those causing the collapse of health insurance markets (e.g. community rating, pre-existing condition ban, minimum essential health benefits mandate, standardized/metallic plans, taxes/fees, etc.)

2. Entice/encourage insurers to come back and offer affordable coverage to potential customers (Note: no.1 above will help accomplish this objective.).  One of the more urgent and important ways to do this, is to allow insurance companies to penalize, if not avoid the occurrence of individuals gaming the system and waiting to purchase coverage at the precise time they need it, only to drop coverage after all claims are paid.

3. Create separate insurance risk pools for the chronically ill and the rest of the insurance buying public. (Note: The top 1% of healthcare spenders consumes more resources collectively than the bottom 75%.)  Separating risk pools, along with no.1 above, will attract insurers back to the markets, and allow for more affordable priced coverage, and competitive insurance markets.  Appropriate funds for the creation of risk pools, reinsurance programs, and innovation of ideas to address the insuring and treatment of the chronically ill, high-risk population.

4. Reform Medicaid. Consider moving to a "block grant" funding mechanism at the federal level; and give states more autonomy and flexibility with respect to administration, innovation, and funding.  Under a block grant format, states would be given a fixed amount of funding based on spending levels, with associated annual increases tied to inflation, and the ability to determine things like covered services, eligibility for coverage, etc.

5. Continue implementing the ACA's healthcare delivery reforms, which seek to move reimbursements away from fee for service, to fee for value.  The so called Accountable Care Organizations (ACOs) created by the ACA seek to reimburse providers based on standards such as quality of care, outcomes, and patient satisfaction, instead of the sheer volume and amount of care provided.  As healthcare costs decline, health insurance premiums will follow suit.

6. Place a federal limit on medical malpractice punitive awards, and allow states the flexibility to have even lower ceilings based on merit and circumstances.  The mere threat of unreasonable medical malpractice litigation results in a chain of events which cause health care and in turn, health insurance costs to spiral.  In addition, healthcare providers are sometimes compelled to order/perform procedures they might not necessarily conduct, just to build a preemptive litigation defense. Part of this particular reform effort could include the creation of medical standards of care, which if followed, would remove any liability.

7. Expand upon the "consumer driven health" initiative, including the expansion and relaxing of the use of Health Savings Accounts (HSAs).  It's extraordinarily important for healthcare patients to act more like customers; and consider cost, quality, and outcomes in reaching important healthcare related decisions.  Also, creating multiple funding sources for both lower cost/predictable and higher cost/catastrophic healthcare expenses makes more sense for everyone.  For example, it makes absolutely no sense to "insure" and rely upon insurance, for a $4 prescription drug, a $125 physician consult, or a $50 chiropractic care visit.

Some of the aforementioned points are included, and/or addressed in the current House (American Health Care Act), and Senate (Better Care Reconciliation Act) bills.  For example, each of the bills addresses Medicaid and repealing most of the ACA's fees/taxes.  But in my opinion, these bills fall woefully short of achieving the comprehensive overhaul of our healthcare system that is so desperately needed.  Stay tuned!


Thursday, May 25, 2017

IRS Announces 2018 HSA Adjustments

Recently the IRS issued it's anticipated Health Savings Account (HSA) guidance for calendar year 2018.  Listed below are the changes to current IRS rules affecting HSAs, and qualified high deductible health insurance plans, effective in 2018:

  • HSA Contribution Maximum (Individual/Self Only Coverage): $3,450 ($3,400 in '17).
  • HSA Contribution Maximum (Family Coverage): $6,900 ($6,750 in '17).
  • HSA Annual "catch up" contribution amount for eligible individuals 55 years of age and older remains $1,000.

HSA Qualified High Deductible Insurance coverage changes:

- Minimum deductible/Self Only Coverage/Non-Embedded Deductible*: $1,350 ($1,300 in '17)
- Minimum deductible/Self Only Coverage/Embedded Deductible*: $2,700 ($2,600 in '17)
- Minimum deductible/Family Coverage/Embedded and Non-Embedded Deductible*: $2,700 ($2,600 in '17)

- Out of Pocket Maximum/Self Only Coverage: $6,650 ($6,550 in '17).
- Out of Pocket Maximum/Family Coverage: $13,300 ($13,100 in '17).

Note: The Affordable Care Act's (ACA) out of pocket limits placed on non-grandfathered health insurance plans impacts an HSA qualified plans family out of pocket maximum as follows:
  • For self-only and families with an embedded out-of-pocket maximum, the maximum amounts are: $6,650 individual and $13,300 family.
  • For self-only and family with a non-embedded deductible, the maximum amounts are: $6,650 individual and $7,350 family.
  • Note: the ACA's 2018 maximum out of pocket limits applicable to non-grandfathered plans increases to $7,350 for self only coverage (from $7,150 in '17); and $14,700 for family coverage (from $14,300 in '17).
* Plans with Embedded family deductibles only require a single covered family member to meet the individual deductible amount before coverage begins.  Non-embedded (sometimes called aggregate deductible) plans require one or more family members to meet the entire family deductible amount before coverage applies.


Thursday, May 11, 2017

PCORI Fee/CERF - payment schedule

Patient Centered Outcomes Research Institute (PCORI) Fee, also known as 
the Comparative Effectiveness Research Fee (CERF)
Fee periods and payment schedule

For CERF payments, ERISA plan year is important, and determines both the timing and amount of payment to the IRS. If your ERISA plan year and renewal date differ, the ERISA plan year should be used to calculate an employer's fee per covered life, and payment due date.  Absent an ERISA plan year, an employer should use the affected plan's renewal date.

·         Fee due July 31, 2017
Feb. 1, 2015–Oct. 1, 2015 $2.17
Nov. 1, 2015–Jan. 1, 2016 $2.26  

·         Fee due July 31, 2018
Feb. 1, 2016–Oct. 1, 2016 $2.26
Nov. 1, 2016–Jan. 1, 2017 To Be Determined (TBD) (Note: Amount increases by rate of medical inflation.)

·         Fee due July 31, 2019
Feb. 1, 2017–Oct. 1, 2017 TBD
Nov. 1, 2017–Jan. 1, 2018 TBD

·         Fee due July 31, 2020
Feb. 1, 2018–Oct. 1, 2018 TBD
Nov. 1, 2018–Future renewals Fee expires. No further payments required.

The CERF is self-reported on Excise Tax Form 720; and applies to:

Fully insured medical plans, including minimum premium plans; Self-insured group medical plans; Individual/family plans; Stand-alone behavioral health plans; Limited medical plans (also known as Voluntary or mini-med plans); Individuals on a temporary U.S. Visa who live in the U.S.; Medicare Surround and Medicare Expand policies; Retiree-only plans; Health Reimbursement Accounts (HRAs); and Flexible Spending Accounts (FSAs) if the employer contribution is greater than $500 and it is more than the employee contribution.

IMPORTANT:  Insurance companies remit CERF on behalf of fully insured group and individual plans.  Employers must calculate and remit CERF for self-funded plans and Health Reimbursement Arrangements (HRAs).


Thursday, May 4, 2017

ACA Update - Phase 1 of 3 Toward Change

Today (May 4, 2017), the U.S. House of Representatives passed an amended version of the "American Health Care Act" or AHCA, on a 217-213 vote tally.  In and of itself, this vote DOES NOT ALTER THE HEALTHCARE/HEALTH INSURANCE LANDSCAPE!  There are a number of phases (at least 3, but likely several more procedural steps) that must be completed in order for the Affordable Care Act (ACA) to be partially repealed.  And to be clear, the AHCA would represent a partial, piecemeal repeal of the ACA, and would in fact, retain much of the ACA.  So here's where we are and what we know, as of today...

First and foremost, the AHCA is most definitely NOT a full repeal and replacement of the ACA.  If it (or a replacement/amended version) passes in the Senate, and is signed by the President, it would make fundamental changes to the ACA, but also retain a fair amount of the insurance and healthcare delivery reforms that have been implemented over the last seven years.  Here are the highlights of what the House passed today, and what the AHCA seeks to accomplish.  Note: items in red are amendments to the original version of the AHCA that never made it to a floor vote:
  •   Eliminates the EMPLOYER and INDIVIDUAL coverage mandates.
  •   Ends Medicaid expansion funding. 
  •   Changes Medicaid from an open-ended program to one that gives states fixed amounts of money per person.
  •   Replaces the ACA's cost sharing and premium cost subsidies based mostly on consumers' incomes, with tax credits that are age based.
  •   Repeals many of the ACA taxes including the medical device tax, the health insurance sector tax, and the increased Medicare payroll withholding amount affecting high wage earners. (Note: the controversial "Cadillac tax" remains in the AHCA, but is deferred to 2026.)
  •   Consumers who let their coverage lapse for more than 63 days in a year would be charged 30% surcharges to regain insurance. This would include people with pre-existing medical conditions.
  •   State waivers would allow insurers to alter ACA provisions such as essential health benefits, community rating, and benefit limitations, if approved.
  •    $8 billion allocated to States, over five years, to finance high-risk pools that cover those with pre-existing conditions.
  •   $130 billion allocated to States, over a decade, to help those that can't afford coverage.
The House of Representatives has chosen the strategy of what is known as "budget reconciliation" to accomplish the objective of a partial repeal of the ACA.  In short, this means the provisions (see above) included in the AHCA are limited only to items that are deemed to have a "direct impact on spending".  As such, the ACA's "market reforms" are not affected by the AHCA.  Using this tactic, the AHCA only requires a simple majority vote from the Senate to make it to the President's desk for signature.

Stay tuned as there is much more to come in the days, weeks, months that follow.  In the meantime, the ACA is the law of the land, and must be complied with in every respect!


Thursday, April 6, 2017

Health Insurance Mandate(s) Still in Effect!

The Affordable Care Act's (ACA) “health insurance mandates” are still in effect, and have most definitely not been abolished.   Had the Republican party’s – The American Health Care Act (AHCA) – passed, it would have, among other things, retroactively eliminated both the Individual and Employer mandates.  As such, it did not go to a vote, and thus we still have the ACA, and its associated fees, taxes, mandates, regulations, etc.

The ACA requires taxpayers to show that they have minimum essential coverage, which includes but is not limited to Medicare, Medicaid, TRICARE, CHIP, and private health insurance obtained through an employer or the individual market. And, the individual mandate fee still applies to individuals who do not qualify for an exemption (e.g. certain hardships, some life events, health coverage or financial status, and membership in some groups). 

For both 2016 and 2017, the individual mandate penalty, if triggered, is calculated two (2) different ways, and affected individuals pay the HIGHER of :
A.      Percentage of income
·         2.5% of household income
·         Maximum: Total yearly premium for the national average price of a Bronze plan sold through the Marketplace; or
B.      Per person
·         $695 per adult
·         $347.50 per child under 18
·         Maximum: $2,085
The federal government (in this case, the IRS) has “relaxed” some of the enforcement of the individual mandate, and associated penalties.  Specifically, in February of this year (2017) the IRS stated that, starting this tax season, it will no longer systematically reject returns on which the taxpayer doesn’t indicate their coverage status. However, the agency may still follow up with questions directed to filers.

So unless and until there is a change in regulations, policy, and/or law, the individual mandate is the law of the land, and affected individuals are encouraged to comply.


Monday, February 27, 2017

ACA's Replacement...A Sneak Peek

Until recently (late February, 2017), talk of "repealing/reforming/replacing" the Affordable Care Act (ACA), aka Obamacare, has been largely speculative.  We now have our first look at draft legislation that aims to replace major aspects of the ACA.  It is important to note that what is being considered is not a wholesale repeal of the ACA, but rather a line item repeal/replace.  While I have been itching to publish my "2 cents" about where I think health care reform is headed, I forced myself to wait for actual legislation to do so (despite presenting my thoughts at presentations/lectures over the last several weeks). From what I've read, there are replacement aspects which link to each of the articulated repeals. So here are the highlights of what the draft legislation (emphasis on draft) includes:

  • The "REPEALs" - elimination of key aspects of the ACA including:
    1. The employer mandate (including fees, taxes, and associated reporting)
    2. The individual mandate (and the associated subsidies)
    3. Taxes/Fees (e.g., health insurance sector tax, Cadillac tax, comparative effectiveness research fee, tanning bed tax, medical device tax)
    4. Medicaid expansion and associated funding (largely impacting the states that expanded Medicaid)
    5. Medicare benefit enhancements (e.g. eliminating the Part D/Prescription Drug benefit's "donut hole", reducing benefit over payments)
    6. Mandatory/Minimum essential benefits

  • The "REPLACEMENTs" - provisions replacing those that are repealed, include:
    • The primary revenue generating sources included in the draft legislation, which would presumably fund the "high risk" pools, and offset new tax credits are:
      • A cap on the tax exemption for employer provided coverage attached to the 90th percentile of current premium costs.  Covered employees would be taxed on premium amounts in excess of this threshold.
      •  Individuals that allow coverage to lapse and subsequently re-enroll would be subject to a 30% , one-year premium tax.
    • Refundable premium tax credits to encourage the purchase of health insurance by individuals - $2,000/year for those under age 30; $2,500/year for those 30-40; $3,000 for those 40-50; $3,500 for those 50-60; and $4,000/year for those 60+ years old.
    • $100 billion to fund so called - "state innovation grants" - to address high risk insurance applicants.
    • Converting Medicaid funding to a capped, federal contribution model.
    • By modifying community rating, the current form of pre-existing condition ban, minimum/essential benefits, and standardized/metallic plans, insurance companies who have left markets would (hopefully) be encouraged to re-enter, and would be able to offer more flexible and affordable coverage options to applicants.
    • Expanding Health Savings Accounts (HSAs) to allow for higher contribution limits, and "cleaning up" some of the onerous restrictions.
Several of the insurance reforms included in the ACA would likely remain, including:

  • Coverage for pre-existing conditions
  • Guaranteed issuance of coverage (presumably under certain conditions)
  • Coverage available to dependent children on parents' coverage to age 26
  • Nondiscrimination of coverage (and premiums) on the basis of race, gender, disability
  • Caps on in-PPO network/out of pocket plan limitations (i.e., deductible/copay/coinsurance)
  • Continued ban on lifetime and (certain) annual benefit limitations
Importantly, some of the changes would take effect shortly (if not immediately) after potential passage of the law; while others would take effect in 2020.  The ACA replacement legislation is expected to be formally introduced to Congress in March, 2017.

As I write this blog post (February 27, 2017) the President is hosting a "listening session" with several health insurance leaders including the heads of Cigna, Aetna, United Healthcare, Humana, several Blue Cross Blue Shield plans and others).


Monday, December 19, 2016

21st Century Cures Act Becomes Law!

On Tuesday, December 13th, 2016, the President signed into law the - "21st Century Cures Act" - which includes a provision that will be very good news to many stakeholders, in particular, employers that have fewer than 50 full time/full-time equivalent employees.  Now law, the Act addresses a variety of issues including expanded treatment for mental health; resources to fight the so called "opioid epidemic"; hastening the time required for FDA approval of new drugs/devices; and additional funding to accelerate cancer research. Over $6 billion has been earmarked to fund the ambitious law, which received bi-partisan support in both the House and Senate.

Back in 2002, the IRS created Health Reimbursement Arrangements (HRA's), essentially building off a more popular and widely utilized tax preferred instrument known as a flexible spending account or FSA.  HRAs offer plan participants flexibility that FSAs did not, most notably the ability to carry over unused dollar allocations to subsequent benefit years.  The "21st Century Cures Act" has once again performed an "Adam and Eve like" creation by building off the HRA to create a new tax preferred spending arrangement called a Qualified Small Employer Health Reimbursement Arrangement, or QSE HRA.  Here's how the QSE HRA works, and more importantly, who is eligible to implement/offer the new tax preferred spending arrangement.


  1. Employers that do not meet the Affordable Care Act's (ACA) definition of an "applicable large employer", generally under 50 full-time and full-time equivalent employees (FTEs). (Note: employers who averaged less than 50 FTE's in 2016 or the entire prior calendar year would meet this test); and
  2. Eligible employers that do not currently offer group health insurance coverage to their employees.  Employers that offer coverage to a certain class or segment of their employed population would not meet this test, unless they terminated all inforce group health plans.
IMPORTANT: Employers seeking to implement a QSE HRA must provide written notice of availability to eligible employees 90 days prior to the beginning of the year the QSE HRA is offered. Employers are allowed transition relief of this requirement if notice is provided within 90 days of the Act's effective date.


QSE HRAs are established to reimburse eligible employees' medical expenses including:
  1. Premiums for individual health insurance coverage.
  2. Premiums for Medicare supplement or Medigap insurance
  3. Expenses heretofore allowed to be reimbursed under FSAs and Health Savings Accounts (HSAs), listed in IRS code section 213(d). Examples include health insurance plan related copays, deductibles, and coinsurance, and expenses related to services such as acupuncture, chiropractic care, dentures, corrective vision, etc.
  4. The maximum allowable QSE HRA amounts, which must be 100% employer funded, are $4,960 for individual only coverage; and $10,000 for individual plus dependent(s) coverage. Amounts can be prorated by employers based on employee hire dates.  Presumably the amounts would increase from year to year, similar to the increases announced by the IRS for annual HSA contribution limits.

There are a variety of compliance related considerations employers need to be aware of and address upon plan implementation, including:
  • Development of a plan document which outlines the parameters of the QSE HRA plan (Note: HRAs and QSE HRAs are ERISA governed plans, and must follow the same rules as a health insurance plan.)
  • Development/distribution of a summary plan description (SPD)
  • Distribution of the required "90 day" notice
  • Determining affordability relative to the ACA's individual mandate
  • Reporting QSE HRA amounts on employees' form W-2
  • Completion/Submission of the ACA's 1095-B data to plan participants and the IRS, along with transmission of 1094-B data to the IRS.