In the Trenches! Small Business & Employee Benefits

Solving the Healthcare Crisis in America Could be Very EASY

1. Tax Credits for businesses and the self-employed

2. Vouchers for the uninsured, issued on a sliding scale based on income

3. Vouchers for illnesses that are extremely expensive to take this burden off small and medium size businesses where an illness of this type will drive up the insurance rates to ‘unaffordable’

4. Electronic incentive to all healthcare providers that will create the need for everyone to adapt the available technology

5. Pay Doctors and healthcare providers for quality NOT quantity

6. Adopt system wide transparency including outcomes and cost after insurance!

7. Require insurance carriers to provide all businesses with loss information, loss information of the pool they have been assigned and large claim reports.  Without this information the business does not know what he/she is paying for.  No where else is business purchased blindly.

The solution is easy - unless you have a mind set that all government is good. I personally think limited government and the open market system are much more affordable.

Where is the Common Sense????

Why is the Congress so hell bent on providing answers to the uninsured in

America

?

 

Why are they proposing such massive change to the system?

 

Why not list the areas that need to be addressed and work on these rather than eliminate the entire system?

 

Where has the common sense gone in D.C.?

Cost of the Massachusets Connector

The proposed legislation is unaffordable to the American people.  Because of the Congress’ inability to hear the people and make appropriate adjustments to the current system, small businesses and the self-employed will again be left to deal with every increasing healthcare costs.

Why healthcare and health insurance now mean the same thing is beyond comprehension.

At the recent AHIP conference there was a class on the Connector, the system Massachusets put into place several years ago.  The individuals that run this system are proud of the fact they now have all but 3% of the population covered by insurance. 

Two things:
1. They cannot tell us if the overall health of their population has improved, that was not the goal
2. They are spending $8 million dollars a year to cover 180,000 people

It would seem to me, we could provide healthcare to the 180,000 people who either elect not to have health insurance OR cannot afford health insurance for much less than the cost of insurance.

Solving The Healthcare Crisis - It's not hard!

The answer to controlling healthcare cost, the percent of GDP and the continued increase in growth appears to be two fold:

a. Through the use of technology show the growth of healthcare costs down by at least 1% per year.  If we can do this, Medicare will be $1 billion in the black versus the current course of $660,000,000

b. Create a culture of wellness in the U.S. to the degree that people who make unhealthy and thus expensive personal decisions have to pay more for their healthcare. (Four of the top 6 medical conditions are lifestyle induced.)

c.  Create a tax incentive for small businesses when their premiums skyrocket due to an illness within their employee base.  This is where most businesses get into premium trouble.  We need to provide relief to businesses when they find themselves in this unfortunate situation.

d.  Create an alternative for individuals who see their premium sky rocket because of a medical issue.  When an individual premium goes from $252 a month to $735 to $1,260 it becomes unaffordable!  These premium increases are due to an illness this person experienced.

The answer is not creating another health insurance option, which puts more cost into the current system. 

The answer is in providing healthcare for those who cannot survive within the health insurance system. 

Open Letter Dr. Nielsen, President AMA

June 10, 2009

Dr. Nancy H. Nielsen
President
American Medical Association
Fax:  202-739-8400

Re:  Role of the Insurance Agent,

Dr. Nielsen,

I attended the AHIP conference, where you spoke, last week.  As an agent, I attended AHIP as I wanted a feel for how the industry was moving outside the insurance realm I am usually exposed to.

I was disappointed to hear your strong objection to agents and the value we bring to the industry.  Granted there are some slack agents but then there are also less than stellar doctors.

Interestingly, we work closely with our local hospitals both in providing wellness information to our client’s employees as well as working with the hospitals when they need background information to negotiate their contracts with the large insurance carriers. 

Piedmont Hospital, here in Atlanta, regularly has agents in for educational sessions, thus keeping us abreast of the work Piedmont is doing within cost containment and disease control.  They also seek agent input as to what local employers are looking for and how the hospital can better meet the demands of the marketplace.  I have also attended similar meetings at Emory.

What I wanted to share with you was a list we use with potential clients to explain the services and processes we, as an agency, provide.  When I think about my profession, I think of us much like a CPA or an attorney. 

Employee benefits is so complex, it takes a dedicated person, working full-time, to understand the nuances, to keep abreast of the changing laws, to know all the different insurance carriers and the pros and cons inside each carrier.  We work with approximately 50 small to medium size businesses of which I employee a staff of 7 people, which is what it takes to adequately meet the needs of our clients.

I am hoping this letter, along with the attached spreadsheet will open a dialog for us to educate each other.  It may be we are able to find common ground and possibly help each other in this quest to bring the best healthcare to all Americans at the most affordable costs.

Sincerely,

Victoria J. Braden
President/CEO

The Obama Administration HATES small business!

How can I say that?  Look at the more than 2,700 car dealerships that are no longer in business.  These small business owners woke up one day and out of the blue, lost their entire business.  Businesses that had been in families for decades – businesses that supported more than 200,000 Americans – GONE.

Now Obama is looking at new taxes – taxing healthcare.  If your employer is paying part of your health care premium, the Obama Administration now wants that to be considered a part of your net pay and therefore taxable income.

What we are missing here is the COST to the small businesses!

Right now every employer matches an employees FICA.  The employee pays 7.65% of their pay after deductions, of which one of these is medical premiums.  The employer then matches the employees FICA payment with another 7.65%. 

Both employer and employee do not pay taxes on Section 125 deductions which include the portion of the health insurance premium the employee pays with pre-tax dollars.

Example: 
Mary’s health insurance premium is $500 per month.  Her employer pays 50% of this cost.  Mary pays the other 50% pre-tax from her paycheck.

Now the entire $500 will be paid by Mary.  So the employers FICA on Mary just increased.  The employer is now paying 7.65% on $500.  BUT so is Mary!

Now Mary has increased income of $6,000 per year.  To this amount Mary will have to pay her Federal and State income tax plus the 7.65% FICA – if Mary is at the 21% tax bracket (assuming the additional $6,000 did not put her into a higher tax bracket) she will owe the Federal government an additional $1,260 income tax and $459 for FICA.

The employer will owe $459 FICA for this employee. 

If the employer has 20 employees, the increased tax burden is $9,180.

How many employees are going to be happy paying an extra $1,260 to the Federal government plus the $459 FICA, or a total of an additional $1,719?

How many employers can afford the economic hit of $459 or more per employee per month?

I am telling you, the Obama Administration has no respect for the economic engine that small business is in America!

Initial Impressions of the AHIP Conference

The majority of the stakeholders now agree that something must be done.  They appear to recognize if action is not taken, then the government will determine what is to be done and dictate terms.  It is the general consensus not to turn the issue over to the legislators.

1. Some type of legislation is going to pass.

  a. It is the liberal side of the Congress that wants the  legislation to be vague so they can come back and write each section of the law as it best fits the needs of the American people. (Tom Daschel, 6/5/2009)

  b. If there is no agreement, instead of a legislative solution the Dems will turn to a budgetary solution which they can pass with 50% of the Senate.  Problem with using this option is the requirement for them to balance the budget spending which will hamper their plans

2. Small Business Owners are being completely left out of the discussion as is the consequences legislation will have to the small business community.

  a. One of the discussion issues is the requirement of all Americans to have health insurance.  They can obtain insurance either through a Connector like program OR their employers program.  EEs get to chose based on what is best for their situation.

  b. There appears to be NO provision for an employers plan should they have a large claim within their employee population that subsequently drives up their insurance rates.  When this situation occurs, employees who are healthy and want a less expensive plan can go to the ‘Connector’ leaving just those employees with conditions to be on the employers plan.  Higher the claims the higher the premiums, it becomes a viscous circle.

  c. By structuring the healthcare programs in this manner, eventually small employers will discontinue their plans due to cost.  This would move everyone to a government run plan.

3. On the Liberal side of the legislator, there appears to be no distinction between healthcare and health insurance.

  a. Kevin Counihan, CMO for the Commonwealth Health Connector Authority and James Roosevelt, Jr., JD President and CEO, Tufts Health Plan gave a presentation on the Massachusetts Connector.  They touted the number of residents that are now covered by insurance.  I asked them what the Connector has done for the healthcare in their state; was the health of their residents better?  Could they make a claim to the improvement of the health of all now insured?

    i. The answer was they were not tracking this data.  BUT they did have a story of a young female who had breast cancer and would not have had coverage if it had not been for the Connector.  The entire focus appears to on signing residents up for insurance, NOT to increase the healthiness of the population.

    ii. Is there a better way to obtain healthcare for those who do not currently have coverage than through a government run health insurance program?

  b. The stated answer all through the conference is to take cost out of the system.  One of the ways the Massachusetts Connector did this was to cut Agent commission.  This does not eliminate cost, it just shifts costs. 

The remainder/majority of the Conference discussed real change using efficiencies that are available but not currently being used.

AHIP - America's Health Insurance Plans

I afforded myself the opportunity to attend the AHIP (America’s Health Insurance Plans) conference this week.  I was interested in seeing what the industry was saying about healthcare, the President’s plan and gaining ideas that would help our small business clients.

I was surprised to find the audience consisted primarily of insurance carriers, healthcare providers (hospitals and medical practices) and technology companies.  This gave me an entirely new prospective, these were stakeholders outside the small business clientele we serve, stakeholders with a different agenda than I am generally exposed to.

My quick take –  the issue is not insurance, it is the cost of healthcare delivery. 

The industry has been slow to adopt technology.  There is significant cost savings in every facet of the industry if available technology were implemented.

The second major issue to reigning in costs is the wellness component.  There is no question American’s have the worst diet of any civilized country.  Add this to our lack of physical activity and you have the answer to increasing medical costs.

It is in these two areas alone, that the increasing costs of healthcare could be brought completely under control.

I have a few other observations: 

• Small business is not being considered in the debate

• Health insurance and healthcare are two separate items

• The provider payment focus needs to change from quantity to quality

More later

Suspension or Reduction of Safe Harbor Non-Elective Contributions

From Seyfarth Shaw

IRS Issues Proposed Regulations For Suspension or Reduction of Safe Harbor Non-Elective Contributions

On May 18, 2009, the IRS issued proposed regulations that provide much-needed guidance for employers that sponsor 401(k) plans with safe harbor non-elective contribution features (e.g., a minimum 3% company non-elective contribution that is fully vested at all times).

The proposed regulations permit such an employer that incurs a substantial business hardship to suspend or reduce the safe harbor non-elective contributions. Such a change may now be made during a plan year in lieu of terminating the plan. The proposed regulations are generally consistent with final IRS regulations that permit an employer to suspend or reduce safe harbor matching contributions.

Under the proposed regulations, an employer can suspend or reduce safe harbor non-elective contributions mid-year only if it has incurred a substantial business hardship. The factors taken into account include (but are not limited to) the following:

    - Whether the employer is operating at an economic loss 
    - Whether there is substantial unemployment or underemployment in the trade or business and in the industry concerned 
    - Whether the sales and profits of the industry concerned are depressed or declining 
    - Whether it is reasonable to expect that the plan will be continued only if the safe harbor contributions are suspended or reduced
Similar to the IRS regulations for the suspension or reduction of safe harbor matching contributions, the plan must also comply with the following requirements:

All eligible employees must be provided a supplemental safe harbor notice of the reduction or suspension of the company contributions.
The reduction or suspension of safe harbor non-elective contributions is effective no earlier than the later of thirty (30) days after eligible employees are provided the supplemental notice and the date the amendment is adopted.

Eligible employees are given a reasonable opportunity (including a reasonable period after receipt of the supplemental safe harbor notice) prior to the reduction or suspension to change their deferral elections for pre-tax contributions .

The plan is amended to provide that the ADP and ACP tests will be satisfied for the entire plan year in which the reduction or suspension occurs, using the current year testing method.

The plan provides the safe harbor non-elective contributions for compensation paid through the effective date of the amendment.
If the plan would otherwise be top-heavy and was relying on the safe harbor to be exempt from the top-heavy rules, it will need to meet the minimum contribution and other top-heavy requirements.

For employers who wish to suspend or reduce their safe harbor non-elective contributions, the proposed regulations are effective for plan amendments adopted after May 18, 2009, and may be relied on pending the issuance of final regulations. If more onerous guidance is issued in the future, the IRS has indicated that it will not apply the more restrictive rules retroactively.

For more information, please contact the Seyfarth attorney with whom you work, or any Employee Benefits attorney on our website.

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