Tuesday, December 24, 2013

New HSA Guidelines for 2014

For those of you who have a Health Savings Account, here are the 2014 Guidelines.

New HSA Guidelines for 2014

Here are some highlights for 2014.

Minimum Individual Deductible
Minimum Family Deductible
Maximum Individual Out-of-Pocket (in network)
Maximum Family Out-of-Pocket (in network)
Maximum HSA Individual Contribution
Maximum HSA Family Contribution

  1. Maximum contributions are $3300 for an individual (up $50) and $6550 for a family (up $100). Person’s aged 55 years old and older can add an additional $1000/year as a catch up contribution (no change).

  2. Minimum Deductibles are the same. The minimum deductible for an individual plan is $1,250 and for a family it is $2,500.

  3. Catch up contributions for those 55 years old and older is still $1,000/year.

  4. Maximum out of pocket has changed. The maximum out of pocket (including deductible) on an individual plan is now $6350 (up $100) and for a family it is $12,700 (up $200).

Items that haven’t changed, but are beneficial to know.

  • You can put the full amount in immediately without waiting (This even applies to new hires or a person starting an HSA qualified health plan in the middle of a calendar year).

  • You can put the maximum contribution into your HSA account, regardless of your deductible.

  • A person can choose to accumulate HSA qualified expenses over the course of years (instead of taking the expenses out of the HSA account at the time of service). Every year they need to fill out a Form 8889 and carry the balances forward. At 65 years old, they can then take a distribution equal to the total amount of expenses incurred tax free.

  • An individual can take a one-time distribution from their IRA to fund their HSA account.

  • As always, you have until April 15th (or when you file your taxes) to contribute to your HSA savings account for last year.

Check with your accountant for more information on how this would specifically apply to you.

Here is a link to the original IRS announcement: http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.

Copyright 2013 Robert C Slayton

Monday, December 16, 2013

Have Children that are forced out of the Exchange due to not qualifying (or being forced onto Medicaid)? Read this.

If you are like many parents, you want your children to have good health insurance coverage. Yet due to the way the system is designed, ESPECIALLY in Illinois. You as parents can qualify for a subsidy, but healthcare.gov will not allow you to enroll your children in the exchange (due to them qualifying for Medicaid - in Illinois it's called AllKids).

There is also another obvious glitch. I've had multiple people who have had 3+ children all under the age of 18 where only the youngest qualifies for Medicaid and all the rest QUALIFY FOR NOTHING. The letter states that they should go to a local clinic.


  1. Remain on your existing plan (if possible). Sometimes this is the best option if the following options would be more expensive overall.
  2. Place the people eligible for a subsidy on a subsidy eligible plan. Next take the non-eligible children and purchase an off-exchange policy directly from the insurance company. Use an agent to help guide you how to do this. If this is cheaper/better coverage, this is a good alternative.
  3. Purchase one family policy off-exchange. It probably won't save you any money other than having the combined deductibles and out of pocket maximums and one bill.
  4. Do an expedited appeal through their secret special website: http://externalappeal.com/. It takes 72 hours (if you qualify to appeal) and may cost around $25. But $25 is better than having your children uninsured.
  5. If you don't want your children on Medicaid, you could estimate your income as higher for 2014. The issue with this is your family subsidy will go down when you boost your income up. The income guidelines are so generous for Illinois' AllKids (medicaid) plans, that you may wipe out the majority of your subsidy by boosting your income. See http://www.allkids.com/income.html. For example, a family of 4 would need to make over $74,892/year not to qualify for AllKids.


  1. If your eligibility letter stated that the children's applications have been submitted to your state Medicaid program, then follow up with your state program to make sure they actually made it. If you are unsure, apply directly to your state Medicaid office. Cross your fingers and hope for the best (and expect to hear 1 - 3 months later).
  2. Purchase an off-exchange policy for your children or keep your children on an existing policy until you receive a determination from Medicaid. You may be able to purchase a Short Term Medical plan instead of a full-blown policy. Realize that short term medical plans do not cover any pre-existing conditions, are of limited length
  3. Always consider talking to your state representative and see whether they can help facilitate your application. These politicians work for you and are happy to help you out. If you don't know who your local politician is, go to votesmart.org to find out.

If you find out any other options, please leave a comment or FB, G+, LinkedIn me to let me know what it is.

Thank you,


Friday, November 15, 2013

Obama's "You Can Keep Your Plan" Announcement Isn't Up to Him

It's been awhile since I've posted due to trying to see every client I have along with renewing most of my groups with a December renewal date, but I thought I'd jump into the fray.

1. I've been amazed at how many times the Oval Office has made an announcement changing the law without due process. If a law is passed and someone wants to amend it, typically an amendment needs to be written and approved. This has not been the case with the Affordable Care Act (sorry, it's a beef of mine - I believe in following due process).

2. Now that the President has stated that insurance companies may be allowed to continue their plans up to the end of 2014, both the Directors of Insurance of each state AND the insurance companies within each state now need to make decisions.

3. The Director of Insurance (DoI) is the person who can decide whether to allow insurance companies to continue existing plans within that state. If the DoI chooses to disallow it, then it will be as if the President didn't make that announcement.

4. If the DoI says yes, the individual insurance companies can still say no. Insurance companies need to weigh the split in risk pools this may cause (or if they are pooling the risk pools, how the decrease in premium for existing plans will impact it). One of the reasons to force people onto the new plans is to get enough healthy people in the risk pool to pay for the unhealthy people. The whole risk model will change if this is the case and insurance companies need to carefully assess whether this makes sense. Furthermore, if insurance companies have already cancelled plans or people have chosen plans to migrate to, will the insurance companies be willing to go back and allow people to back on their old plans?

5. Let's say that insurance companies choose to continue existing plans. Policyholders should still see an increase in their premiums due to the new taxes that the Affordable Care Act has imposed. You have the $5.25/month belly button tax (transitional reinsurance fee paid for each person on a health insurance plan), person's portion of the health insurer tax (around 3% - 4% of the cost of the plan), and patient centered research outcome fee of $2/year. For a family of 4 whose current premium is $1000/month, this will mean the following extra costs: $21/month, $35/month (estimated at 3.5% health insurer fee), and $0.17/month pcori fee ($57.17/month total) assuming no other items included.

Tuesday, October 1, 2013

New World, New Rates for Obamacare (Affordable Care Act). How it impacts Me.

The first thing I did this morning when I got to the office was to try to get into healthcare.gov. When that didn't work, I knew I could still get rates via each individual carrier. So I worked and got the three closest plans to what I have now to compare current plans and rates to plans and rates 1/1/2014. Here is what I found.

My current plan is a $5200 family deductible HSA plan via Blue Cross Blue Shield of Illinois. It pays 100% after I meet the deductible. My current premium is about $600/month for a family of 4.

Below is a snapshot of the three closest plans I could find. (Land of Lincoln, BCBS of IL, and Aetna respectively).

The first thing I noticed was that I COULD NOT find a plan similar to what I have now. Furthermore, the smallest out of pocket maximum for a family was OVER $12,000 for an HSA compatible plan.

You may say that $758.97/month is reasonable, but please remember that I was paying less than $600/month for better coverage ($5200 maximum out of pocket for everything instead of $12,700 maximum out of pocket).

I tried quoting Coventry, but their website said there were no plans available and Health Alliance's rates were high and not as graphic as above because they just have rate sheets. Of course those two carriers are not available in DuPage County, so that is another reason I didn't list them here. DuPage County only has BCBS of Illinois, Aetna, and Land of Lincoln.

Now you may be saying that these are unsubsidized rates and you'd be correct. We need to keep in mind that SOMEBODY is paying for the plan, even if your share is at 50%. Note also that two out of 3 plans are Bronze level plans meaning that the costs are less than a Silver plan. Unfortunately, there were no Silver plans that were similar to what I have now. They just weren't offered. 

I'll be curious to see the comparison once the government website is up and running. More posts as the time goes on.

Monday, September 30, 2013

How to Navigate the Health Insurance Exchanges (Marketplace)

As we haven't been allow to see the steps involved with the Marketplace website (healthcare.gov, in Illinois you can also try getcoveredillinois.gov), here are some general ideas for you to be aware of.

1. You can go directly to each health insurer's website (that is in the Exchange) and look for health insurance both within the Exchange and outside of the Exchange.

2. You can go to healthcare.gov for any Federally Facilitated Marketplace or State/Federal Marketplace.

3. You will need an idea of what you think you will make in 2014. The rules state income is based upon Modified Adjusted Gross Income. They did not give details as to what that means, but for all practical purposes, think "Adjusted Gross Income." Estimate conservatively. If your income is much greater, then inform the Exchange to dial back your subsidy. The reason to do this is because the subsidies are actually forward looking tax credits. This means that the IRS will settle up with you at the end of the year. If the government has overpaid for your health insurance, they will ask for the money back! Of course if you had a bad year, the opposite is true too.

4. BE CAREFUL OF THE PLAN DESIGNS!!!!! I cannot stress this enough. The plans you will be viewing will be DIFFERENT that what you are used to.

  • Some will include extremely high prescription drug deductibles (for example, you pay a $1500 drug deductible before the drug copay kicks in). 
  • Others will include PER OCCURRENCE DEDUCTIBLES. Simply put, you pay this IN ADDITION to your normal deductible for things such as hospitalization, outpatient surgery, etc. An example would be you'd pay an extra $1000 each time you were admitted into a hospital, then you'd pay your deductible. 
  • Silver level plans will have HIGH DEDUCTIBLES. Insurance companies did this to keep the costs down. You will need to choose between having a $4000+ individual deductible for a reasonable premium or a higher premium and lower deductible.
  • THERE IS LESS CHOICE in the Exchange. If you do not qualify for a subsidy (you and your family make over 400% of Federal Poverty Level), then search for NON-EXCHANGE plans. In DuPage County, there are 3 insurance companies on the Exchange. Off-Exchange there are at least 5 with many more plans available. The rates for the same plan on and off the exchange will be exactly the same.
  • PEDIATRIC DENTAL will be a question on the applications. If you say you do not have a dental plan, then they will charge you extra for including dental coverage for children. My best guess is that if you do not have children on the health insurance plan and don't have dental, you shouldn't be charged extra, but we won't know until tomorrow.
  • IF YOU DON'T QUALIFY FOR A SUBSIDY consider getting a plan that starts 12/1/2013 with one of the insurance companies that will allow you to keep the plan for 1 full year. This will delay the increase in costs due to Health Reform for that much longer.
  • PLEASE - USE AN AGENT!!! There is no cost to use an insurance agent certified to sell in the exchange. The rates are exactly the same and they will be able to help you avoid the pitfalls of choosing a plan that doesn't work for you. What you don't know WILL hurt you.
Please call me if you want help. My phone is 630-779-1144.


Robert Slayton

Tuesday, September 17, 2013

Why the Web Based Exchange is likely to blow up on Tuesday October 1st (A rant by Robert Slayton)

After spending weeks working with the Centers for Medicare and Medicaid Services (CMS.gov) to try to figure out whether I'm registered as an Agent on the Federally Facilitate Exchange, I had an epiphany of sorts. If they can't even get the training and registering part right for Insurance Agents, then how in the heck will they be able to get the web based Marketplace (Exchange) off the ground which will have tens of thousands more people trying to sign up for coverage?

Right now when you call CMS's help number for Insurance Agents, you receive a recording that the website has issues and that they are working on it. Ever since they opened up the website, (September 3rd), it hasn't worked correctly. When I talked to a CMS representative last week (30 minute wait, 15 minutes on the phone), they couldn't check my status or give me any information. They referred me to another website which just has general information. The worst part about that referral was the website had 98 characters (here it is: http://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/a-b-resources.html). Imaging trying to write down this website as they read it off to you.

Out of the hundreds of agents I track, only 2 have said they have gotten their FFM# (this allows them to write business within the exchange).

But wait, it gets better. Not only will you have no agents who can help until CMS resolves the registration issue, in Illinois, the Feds are saying rates and plans won't be released until October 1st, the very day the Marketplace opens.

How is ANYONE (Customer Service Reps working for the Exchange, Navigators, In Person Assisters, and Agents) going to be able to help people in the Marketplace if we don't have any time to review the plan designs and rates associated with the insurance before it goes live?

Maybe the government IS training their reps beforehand. Then they will be the ONLY ones who can answer questions on day 1, thereby increasing their call volume dramatically, thereby causing long wait times and unhappy customers.

Imagine if you ran a large corporation with thousands of sales people. Wouldn't you train them on the new product (plans available within the Marketplace) and give them pricing before launching? Doesn't this make sense? Apparently not for the Government.

In Politics, you can fudge a lot of things when it deals with people and paper. When it comes to technology, you can't fudge. Either it works or it doesn't work. Having worked for years for a technology company who has delivered "vaporware" to clients, I've been on the receiving end of the screaming and yelling when a product doesn't work.

It will be interesting to see whether the website works and can keep up with the traffic. If I were a betting person, I'd bet on the Exchange's portal not working smoothly the first day (and week).

Let's see whether my prognostication comes true. I sure hope not. . .

Monday, September 16, 2013

Explanation of Guidance on HRAs, Health FSAs and Certain Other Employer Healthcare Arrangement Options

Explanation of Guidance on HRAs, Health FSAs and Certain Other Employer Healthcare Arrangement Options

By Larry Grudzien
September 16, 2013 

On Friday, September 13, the Departments of Labor, Treasury and Health and Human Services provided guidance on the application of certain provisions of the Affordable Care Act (Act) on health reimbursement arrangements (HRAs), certain health flexible spending arrangements (Health FSAs) and employee assistance programs (EAPs).   The following reviews this guidance:

1. Since HRAs are group health plans under ERISA, they must meet the market reforms under the Act.

2. HRAs integrated with a group health plan will be treated as complying with both the annual dollar limit prohibition and the preventive services requirement if certain conditions are met, as explained below.

3. An HRA can be integrated with the group health plan of the employer or of another employer.

4. An HRA used to purchase individual market coverage is treated as not integrated for the annual dollar limit prohibition or the preventive services requirements. 

5. For an HRA to be except from these requirements it must qualify as either a retiree medical plan or an "excepted benefit" under HIPAA. 

6. Amounts made available under an HRA that is integrated with an eligible employer sponsored plan can be used for determining affordability or minimum value, but not both.

7. If an HRA is integrated with a plan offered by another employer for purposes of the market reforms, such an HRA cannot count toward the affordability or minimum value requirement of the plan offered by the other employer.

8. An HRA will be treated as integrated with another group health plan for purposes of the annual dollar limit prohibition and the preventive services requirements if the requirements of at least one of two integration methods, Minimum Value Not Required and Minimum Value Required, are met

Minimum Value Not Required:   This method is met if:

a)         the employer offers a group health plan (other than the HRA) to the employee that does not consist solely of excepted benefits;

b)         the employee receiving the HRA is actually enrolled in a group health plan (other than the HRA) that does not consist solely of excepted benefits, regardless of whether the employer sponsors the plan (non-HRA group coverage);

c)          the HRA is available only to employees who are enrolled in non-HRA group coverage, regardless of whether the employer sponsors the non-HRA group coverage (for example, the HRA may be offered only to employees who do not enroll in the employer's group health plan but are enrolled in other non-HRA group coverage, such as a plan maintained by the employer of the employee's spouse);

d)    the HRA is limited to reimbursement of one or more of the following-co-payments, co-insurance, deductibles, and premiums under the non-HRA group coverage, as well as medical care (as defined under Code Section 213(d)) that does not constitute essential health benefits; and

e)    under the terms of the HRA, an employee (or former employee) is permitted to permanently opt out of and waive future reimbursements from the HRA at least annually and, upon termination of employment, either the remaining amounts in the HRA are forfeited or the employee is permitted to permanently opt out of and waive future reimbursements from the HRA.

This opt-out feature is required because the benefits provided by the HRA generally will constitute minimum essential coverage and will therefore preclude the individual from claiming a premium tax credit.


Minimum Value Required. This method is met if:

a)    the employer offers a group health plan to the employee that provides minimum value;

b)    the employee receiving the HRA is actually enrolled in a group health plan that provides minimum value, regardless of whether the employer sponsors the plan (non-HRA MV group coverage);

c)     the HRA is available only to employees who are actually enrolled in non-HRA MV group coverage, regardless of whether the employer sponsors the non-HRA MV group coverage (for example, the HRA may be offered only to employees who do not enroll in the employer's group health plan but are enrolled in other non-HRA MV group coverage, such as a plan maintained by an employer of the employee's spouse); and

d)    under the terms of the HRA, an employee (or former employee) is permitted to permanently opt out of and waive future reimbursements from the HRA at least annually, and, upon termination of employment, either the remaining amounts in the HRA are forfeited or the employee is permitted to permanently opt out of and waive future reimbursements from the HRA.

9. An employee who ceases participation in a group health plan may use any remaining amounts credited in the HRA while integrated after being covered without causing the HRA to fail to comply with the market reforms.

10. If the requirements of Minimum Value Required Integration Method are met, an HRA integrated with that group health plan will not be treated as imposing an annual limit in violation of the annual dollar limit prohibition, even if that group health plan does not cover a category of essential health benefit and the HRA is available to cover that category of essential health benefits and limits the coverage to the HRA maximum benefit.

11. If a Health FSA offered by an employer does not qualify as excepted benefits, the Health FSA generally is subject to the market reforms. If they are not integrated with a group health plan, they will fail the preventive care requirements. There will be an exception for Health FSAs from the annual dollar limit prohibition that is offered under a cafeteria plan.

12.The above exception will not apply to HRAs that could be treated as Health FSAs.

13. An Employee assistance program will be considered to be an excepted benefit, but only if the program does not provide significant benefits in the nature of medical care or treatment. Since this term is not defined in the guidance, employers may use a reasonable, good faith interpretation of whether an EAP provides such care or treatment, until further guidance is released.

14. Premiums for coverage purchased on the marketplace cannot be reimbursed under a premium only plan under Code Section 125 for tax years beginning after December 31, 2013. For any premium only plans that have a noncalendar plan years as of September 13, 2013, this restriction will not apply before the first plan year beginning after December 31, 2013. Because of this, any individual may not claim a premium tax credit for any month in which he or she was covered by a qualified health plan purchased though a state marketplace and reimbursed under a premium only plan under Code Section 125.

This provision was added because several state marketplaces established before 2013 allowed individuals to be reimbursed for individual health insurance premiums purchased through a state marketplaces from premium only plan under Code Section 125.

These provisions apply for plan years beginning on or after January 1, 2014, but may be applied for all prior periods.
For More Information:
If you have any comments or questions regarding any of above information, please do not hesitate to call Robert Slayton at 630-779-1144 or Larry Grudzien at (708) 717-9638 

Friday, September 6, 2013

Model Exchange Notices are Required of ALL Companies who must comply with the Fair Labor Standards Act (FLSA) by 10/01/2013

Model Notices are Required of ALL Companies who must comply with the Fair Labor Standards Act (FLSA) by 10/01/2013

This document is for educational purposes only and is not intended, and should not be relied upon, as tax or legal advice. Recipients of this document should seek advice based on their particular circumstances from an independent tax advisor or legal counsel.  

Am I required to comply with the FLSA?

In general, employers who are engaged in interstate commerce OR engaged in the production of goods for commerce OR have $500,000 or greater GROSS revenues annually must comply REGARDLESS OF WHETHER YOU OFFER HEALTH INSURANCE.

What do I do if I offer Health Insurance?

Fill out and provide the following Model Notice. My strong recommendation is to work with your Insurance Broker on this. You should include the first 2 pages. The third page is optional and I usually recommend that employers not include it.

Page 1 – Fill out the contact information in the box at the bottom of the form.
Page 2 – Fill out the requested information. As for eligibility, my recommendation is to take the language directly from your Certificate of Coverage. DO NOT check the box stating that your plan meets both minimum value and affordability for EVERYONE unless it really does. It is okay not to check the box.

What do I do if I DO NOT offer Health Insurance?

Fill out and provide the following Model Notice. My strong recommendation is to work with your Insurance Broker on this. You should include the first 2 pages. The third page is optional and I usually recommend that employers not include it.

Fill out page 2.

Who do I give it to?

All of your employees (full time, part time, seasonal, student, mentally challenged, etc.). Interns, 1099 employees are not considered employees.

How do I distribute it?

It is best if you can attach it to a person’s paycheck. Other avenues are handing it out, mailing it, or providing it electronically (such as emailing it) PROVIDED you follow the Department of Labor’s electronic disclosure safe harbor.

Keep track of the date of distribution and a list of the people you distributed it to. If you are audited, this will be your lifesaver.

What about going forward?

You must provide this notice to ALL newly hired employees.

What else?

These model notices are only good through 11/30/2013. New notices should come out beforehand. 

Are there Penalties for not complying?

Yes, we guess it is $100/employee/day (nothing specific was mentioned, so we are using the general penalty).

What if I Need More Help?

Feel free to contact me.

Robert Slayton


Thursday, August 1, 2013

Pediatric Dental with the Affordable Care Act – What does this mean? Do I need to Buy it?

Pediatric Dental with the Affordable Care Act – What does this mean?

Today I will be talking about State Federal and Federally Facilitated Exchanges (also known as Marketplaces). State Based Exchanges will come up with their own rules so are not included here.
Pediatric Dental is one of the 10 Essential Health Benefits required to be on a health insurance plan starting in 2014. Below is what I've been able to figure out so far. As changes happen, this will be changing.

What is Pediatric Dental?

It simply means that all children under the age of 19 will have coverage for preventative, basic, major/restorative, and most will include “medically necessary” orthodontics. Picture your current dental plan. It usually looks like the following (this would be considered a “high plan” under the new rules):

e.g. Delta Dental
Deductible Individual/ Family
In Network/Out Network %
Preventative Care
Basic Care
Major Care
Annual Maximum
Lifetime Orthodontia  Max

Pediatric dental plans can be offered both as a standalone product (similar to the above) within the exchange or embedded within the medical plan.

Stand Alone

If the plan is offered as a standalone product, it will look similar to the above plan (with different percentages). The big difference is that the annual out of pocket maximum will be $700 for one child and $1400 for 2+ children. This means that if orthodontia is deemed as medically necessary, the most someone would pay in one year would be $700. Furthermore, there is NO ANNUAL MAXIMUM for children (not adults). So if a child needs $4000 of covered work done, then the child’s family would pay only $700 within that year.

Embedded within a Medical Plan

We are still waiting to see how this may look. A health insurance company can have pediatric dental’s deductible be the same as the medical deductible or have it be separate.

Do I need to buy Pediatric Dental?

Technically yes. Some states will be including it with all plans. Most states will offer a standalone dental benefit that can be combined with a separate medical plan. They will also be offering medical plans with dental included within the medical plan.

Technically, all states will require “reasonable assurance” that you own a dental plan that covers children. If you are on a Federally Facilitated Marketplace (Exchange) website, it will allow you select a medical only plan and check out without selecting a separate dental plan. It will ask you whether you have other dental and if you say yes, then you can continue. Currently there is no verification as to whether you actually have a pediatric dental plan.

If I don’t have Pediatric Dental, but do have Medical, will I be subject to the Individual Mandate?

Probably not as I believe the question on the tax return will be whether you have been covered by a health insurance plan and not ask whether your plan includes pediatric dental. Furthermore, people on grandfathered plans will not be required to have pediatric dental and will not be subject to the Mandate.

What if my company offers dental already?

Chances are that pediatric dental will NOT be part of your company’s medical plan in 2014 as the requirement states that if a company offers a standalone dental plan that covers children, then they do not need to include pediatric dental within their medical plan.

Thursday, July 18, 2013

Why the Individual Mandate won't work for Health Reform

We've heard a lot about the individual mandate in the Affordable Care Act. The first year it will be 1% or $95 (whichever is more). It then goes up to 2.5% or equal to the lowest cost Bronze Level plan (whichever is more). Refer to page 12 of the following: http://www.irs.gov/PUP/newsroom/REG-148500-12%20FR.pdf.

There are a number of exemptions available which people haven't talked about, but are very important. Here they are (taken from http://www.irs.gov/uac/Questions-and-Answers-on-the-Individual-Shared-Responsibility-Provision):
6. What are the statutory exemptions from the requirement to obtain minimum essential coverage?
  1. Religious conscience: You are a member of a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits. The Social Security Administration administers the process for recognizing these sects according to the criteria in the law.
  2. Health care sharing ministry: You are a member of a recognized health care sharing ministry.
  3. Indian tribes: You are a member of a federally recognized Indian tribe.
  4. No filing requirement: Your household income is below the minimum threshold for filing a tax return. The requirement to file a federal tax return depends on your filing status, age, and types and amounts of income. To find out if you are required to file a federal tax return, use the IRSInteractive Tax Assistant (ITA).
  5. Short coverage gap: You went without coverage for less than three consecutive months during the year. For more information see question 22.
  6. Hardship: A Health Insurance Marketplace, also known as an Affordable Insurance Exchange, has certified that you have suffered a hardship that makes you unable to obtain coverage.
  7. Unaffordable coverage options: You can’t afford coverage because the minimum amount you must pay for the premiums is more than eight percent of your household income.
  8. Incarceration: You are in a jail, prison, or similar penal institution or correctional facility after the disposition of charges against you.
  9. Not lawfully present: You are neither a U.S. citizen, a U.S. national, nor an alien lawfully present in the U.S.

Unaffordable Coverage Option (#7)

I'd like to focus on just one of the 9 exemptions, the Unaffordable coverage option (#7). If you surf out to the Kaiser Family Foundation's subsidy calculator (http://kff.org/interactive/subsidy-calculator/) and plug in a family of 4. The projected premium is $12,887/year for the second lowest Silver Plan. The projected premium for a Bronze level plan is $10,681/year.

If you divide $10,681 by 0.08, you'd need to make more than $133,512.50/year to receive a penalty if you decide to forego coverage (8% of $133,512.50 equals $10,681). That means there are a lot of people who will NEVER be faced with a penalty. Of course if you were, you'd just have to fill out the religious exemption section listing something like being a Christian Scientist or other religious organization that does not believe in traditional medicine.

How the IRS Collects the Penalty

Furthermore, the only way the IRS can collect this penalty is via your income tax return. If you don't pay income tax, then it's pretty hard for them to come after you as they are not allowed to garnish wages or freeze bank accounts. The last statistic I heard about the percentage of Americans who don't pay income tax was 47% (see http://abcnews.go.com/Politics/OTUS/mitt-romneys-47-percent-pay-income-taxes/story?id=17263629). So this mandate won't impact almost 1/2 the country.

So, whatever the CBO scores say about the number of people who will pay a penalty, my guess is that it will be much lower than expected.

Heck, if I were a young invincible, I'd happily pay the $95/year to save $2000/year in premium. That would be extra beer money. As I didn't have any assets and low income, there really is nothing for the doctors and hospitals to take from me if I had an illness (BTW, it's already a law that if you show up at the Emergency Room, they must treat you). The challenging part would be if I had expensive medications, but that's easily remedied through programs with the major pharmaceutical companies to supplement the cost to low income people. Then at open enrollment time, I'd sign up for a plan that starts January 1st of the following year. As there are no pre-existing conditions anymore, my conditions would be covered.

Of course if I wanted insurance sooner, I could just marry someone. This is considered a qualified reason (gaining a dependent) which allows me to get the insurance sooner. Once I had the insurance, we could get the marriage annulled (yet another qualified reason).

So why buy health insurance?

Health insurance is important because of the potential of taking your life savings on a major illness (I've seen it numerous times). It also helps give access to the top doctors and hospitals. If the government wants people to buy health insurance, they must focus on the reasons to buy and not on the penalties.

Frankly, there are three kinds of personal insurance coverage needed to protect against catastrophic loss due to health/death. The first is health insurance, the second is life insurance (to keep your beneficiaries living in the same lifestyle instead of having to sell everything), and disability insurance. The most overlooked is disability insurance.

Cash Machine

Imagine you had a cash machine in your home. It legally produced $1,000 -- $10,000/week every week of the year. My question is how much would you spend to make sure that income came in every week for the next 10 - 40 years? Would you spend $50/week?, $500/week?, or more to assure it keeps coming in?

If you would spend the money to protect the machine, then disability insurance makes sense. You are that cash machine. If you can't work, the money won't come in and you'll have nothing to live on.

The reason why people go into bankruptcy due to medical debt is because they have no income coming in during the illness. If you don't have money to pay for your premiums (because you are buying food or paying rent), then the policy lapses. Once the policy lapses, you are on the hook for all subsequent expenses. 


If you have questions on health reform, need a help with any of the above insurance products (for both individuals and businesses), please give me a call or shoot me an email.

Friday, July 12, 2013

Employer Mandate Delayed. Many Questions Remain

Posted: 11 Jul 2013 09:27 AM PDT
Copyright ©2013 Towers Watson. All Rights Reserved
Treasury Says No Impact on Any Other Provisions of the PPACA in 2014
The Obama Administration unexpectedly announced on July 2 that employers will be provided an additional year, until 2015, before any penalties are assessed under the employer play-or-pay mandate in the Patient Protection and Affordable Care Act (PPACA) (i.e., both the $2,000- and $3,000-per-year employer penalties are delayed until 2015).
In addition, the mandatory employer and insurer reporting requirements (including identification of full-time employees and their months of coverage) under Internal Revenue Code (IRC) Sections 6055 and 6056 are also delayed for a year. Thus, employers will not incur penalties for failing to provide affordable, minimum-value health coverage to their full-time employees in 2014, nor will insurers or employers be required to comply with the extensive information reporting requirements under those code sections for the 2014 calendar year.
In an unusual fashion, the Obama Administration announced the delay only via postings on the Treasury Department and White House websites. Mark Mazur, assistant secretary for tax policy at the Treasury wrote in a blog post, “We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively.” Mazur went on to write that “our actions today do not affect employees’ access to the premium tax credits available under the ACA (nor any other provision of the ACA).”
The Administration stated that the goals of the one-year delay are twofold. First, it will allow the government to consider ways to simplify the new reporting requirements, and second, it will provide time for employers to adapt health coverage and reporting systems. It is important to note that the delay also takes a controversial piece of the law off the table before the midterm congressional elections.
According to the Treasury, rules regarding the delay will be proposed this summer. Employers will be encouraged but not required to adopt and follow those reporting requirements in 2014. The full text of the announcement by the Treasury can be found at treasury.gov.

What Does This Mean?

Aside from the delay in employer reporting under IRC Sections 6055 and 6056, and the delay in the play-or-pay penalties, the Treasury says the delays will not affect employees’ access to the premium tax credits nor any other provision of the PPACA. Even if one accepts that statement at face value, employers need to begin considering the potential impact of the delay as we await details from the government that will provide answers to the following questions:
§ What is the practical impact of the delay in play-or-pay penalties on counting employee hours in 2014 (i.e., will employers be required to identify full-time employees in 2014 for any other reasons, aside from play-or-pay, such as inquiries from public health insurance exchanges)?
§ Will employers still need to distribute the mandatory notice to employees regarding public health insurance exchanges by October 1, 2013? If so, should that notice be modified to reflect the delay in the employer play-or-pay mandate? Similarly, what is the relevance of information in the government’s model notice regarding details of the employer’s group health plan in view of the delay in the play-or-pay mandate?
§ If employers will not be subject to the play-or-pay mandate in 2014, how will public health insurance exchanges determine eligibility for the premium tax credit (recalling that individuals are ineligible for the credit if they have been offered minimum essential coverage that is affordable and of minimum value)?
§ Will the public health insurance exchanges still be contacting employers in 2014 to verify employee information (in some cases) on employees’ full-time status and health coverage contributions (for purposes of the premium tax credit) — even though employers will not be subject to penalties under the play-or-pay mandate? If so, will the affordability and minimum value of employer coverage still need to be determined in 2014 for purposes of the premium tax credit if those same elements of the play-or-pay requirements are waived for employers in 2014?
§ How will the individual mandate be affected by the delay in the employer play-or-pay mandate? Will there now be political pressure to delay the individual mandate if the employer play-or-pay mandate has effectively been deferred to 2015?
Meanwhile, it seems relatively clear that other provisions of the PPACA that become effective in 2014 can proceed without being affected by the one-year delay in the employer play-or-pay mandate. For example, the annual distribution of Summaries of Benefits and Coverage (SBCs), compliance with the new out-of-pocket maximum limits and 90-day waiting period limit on group health plans, as well as the annual $63-per-covered-life, transitional-reinsurance fee do not appear to be affected by the delay.
Employers should anticipate questions and concerns from stakeholders about this latest development. Employees, vendors, line supervisors, senior management, board members and others will all react to media coverage of the delay, and some confusion should be expected. Employers should begin to consider some thoughtful messaging about this development even as we await details from the Treasury.


The main elements of the PPACA were designed to take effect in 2014 in a sort of health care reform grand opening. The announcement of the delay by the Treasury on July 2 appears to set the stage for a “soft opening” for health care reform in 2014. For employers, most of the implications will flow from the one-year delay in enforcement of the play-or-pay penalties and the delay in information reporting under IRC Sections 6055 and 6056. While nothing in this latest bit of drama suggests that health care reform is going away, further guidance will be needed from the government to understand the full implications of the delay for employers. That guidance is promised by the Treasury this summer, and Towers Watson will be following those developments closely in order to assist plan sponsors through this period.

Wednesday, June 19, 2013

What if you build it and NOBODY comes? What happens if you offer health insurance coverage to your employees and only a few take it? Will you be penalized?

What if you build it and NOBODY comes? What happens if you offer health insurance coverage to your employees and only a few take it? Will you be penalized?

Many Large/Small employers are sweating whether insurance companies will allow them to have a plan if they don’t meet participation guidelines (roughly a minimum of 50% of employees must enroll for coverage or else the insurance company will NOT offer coverage – it’s more complex than that, but good enough this post).

The short answer is that if you are a small employer, the answer is YES you will be able to offer coverage without meeting participation guidelines, BUT open enrollment will ONLY be November 15 through December 15th for a January 1st start date. If you do meet the insurance company participation guidelines, you can have any renewal date you choose (just like it is now).

What about large employers who have less than 50 employees who want coverage? I have a client who has 268 full time employees, but only 16 will take the coverage. Will they be penalized? The answer is “we don’t know.” The National Association of Health Underwriters is working with HHS to come up with rules surrounding this occurrence.  My best guess is that there will be something just like what will happen for a small group (above).  Of course if you can be creative with “Standard Measurement Periods” and the “Look Back Period” you may be able to say to an insurance company that you only have 16 employees eligible for coverage. Most insurance companies at this point would consider the group a “small employer group” as they’d only recognize the 16 employees as full time eligible (and meet the participation guidelines).

Now let’s say that out of the 16 eligible, only 2 want the insurance (meaning you DON’T meet the guidelines). They would not be allowed to have the November 15th – December 15th open enrollment period because this special “Open Enrollment” period due to lack of participation would most likely be done only within the SHOP (small employer group health insurance) Exchange. 

As it is in the Exchange, the Government would not allow this particular group to shop in the exchange because, according to the ACA formula, they are a “large group employer.”  See the very last sentence of this blog post as to why I say this.

Companies with 50+employees who take coverage have more flexibility when it comes to getting insured. Some insurance carriers will say 20% participation (with a minimum of 50 taking coverage) is okay.

Ultimately, this is another thing that was unforeseen by the lawmakers which needs to be resolved.   
Below is text I took that describes the participation/open enrollment guidelines.
The following excerpt is from the Federal Register, Vol 78, No. 39/ Wednesday, February 27, 2013/ Rules and Regulations, page 13416. Here is a link from the state of Kentucky or you can google it yourself. http://healthbenefitexchange.ky.gov/Documents/Guaranteed%20Availability%20of%20Coverage.pdf

Comment: We received a few comments about the proposal that issuers would be allowed to decline to offer coverage to small employers for failure to satisfy minimum contribution or group participation requirements under state law or the SHOP standards.

Several commenters expressed support for the policy and recommended extending it to the large group market. One commenter emphasized that minimum participation and contribution standards must be reasonable and not burdensome to the point that small employers are discouraged from offering coverage.

Response: Upon further consideration of this issue, we have determined that small employers cannot be denied guaranteed availability of coverage for failure to satisfy minimum participation or contribution requirements.

As in the case of the bona fide association exception discussed above, while Congress left in place an exception for failure to meet contribution or participation requirements under the guaranteed renewability requirement in section 2703(b), it provided no such exception from the guaranteed availability requirement in section 2702.

To the contrary, language in the guaranteed availability provision for group health plans that was in place before the Affordable Care Act was not included in section 2702.

Accordingly, the proposed approach would conflict with the guaranteed availability provisions in section 2702 of the PHS Act. Moreover, permitting issuers to deny coverage altogether to a small employer with between 50 and 100 employees based on a failure to meet minimum participation or contribution requirements could subject such employer to a shared responsibility payment under section 4980H of the Code for a failure to offer coverage to its employees.

While section 2702 contains no exception to guaranteed availability based on a failure to meet contribution or minimum participation requirements, section 2702(b)(1) permits an issuer to limit enrollment in coverage to open and special enrollment periods.

Under our authority in section 2702(b)(3) to define ‘‘open enrollment periods,’’ we are providing in this final rule that, in the case of a small employer that fails to meet contribution or minimum participation requirements, an issuer may limit its offering of coverage to an annual open enrollment period, which we set forth in this final rule as the period beginning November 15 and extending through December 15 of each year.

As such, the group market will have continuous open enrollment, except for small employers that fail to meet contribution or minimum participation requirements, for which the enrollment period may be limited to the annual enrollment period described above, from November 15 through December 15. This approach addresses concerns about adverse selection in a manner that is consistent with the statutory provisions. We do not extend this provision to the large group market because large employers generally do not present the same adverse selection risk as small employers.

Thursday, June 6, 2013

Updated IRS Form 720 available for Health Plans to Pay new ACA fee due July 31

Updated IRS Form 720 available for Health Plans to Pay new ACA fee due July 31

By Larry Grudzien , Attorney at Law

With health plans or policies facing a July 31 due date to pay the first patient-centered outcomes research fees, IRS has issued a revised Form 720 and instructions. Filers will enter covered lives subject to the $1 fee for the 2012 plan or policy year in Part II of Form 720 (line 133) to calculate the amount owed. Though Form 720 is used for quarterly excise taxes, filers should only complete line 133 when remitting the annual fee due July 31. Under the Affordable Care Act, the new fee applies to each plan or policy year that ends on or after Oct. 1, 2012, and before Oct. 1, 2019. 
Link to Full text of Form 720 (IRS, 3 Jun 2013) (PDF):
Link to Full text of Form 720 instructions for Part II, line 133 (IRS, 3 Jun 2013):

IRS webpage with Form 720, instructions, and related materials:

For More Information:
If you have any comments or questions regarding any of above information, please do not hesitate to call Larry Grudzien at (708) 717-9638 or Robert Slayton at 630-779-1144.

Friday, May 31, 2013

Affordable Care Act Open Enrollment FAQ for the Individual Market

Good stuff from BCBS of IL on when an individual can enroll in a health insurance plan.

May 29, 2013

Legislative Update
Affordable Care Act Question of the Week: Exchange Open Enrollment [All Markets]

We have received a number of questions about the initial open enrollment period for the Affordable Care Act (ACA). Beginning Jan. 1, 2014, most U.S. citizens and legal residents will be required to have a minimum level of health care coverage. If you have a general question about an ACA provision, contact your account representative.

Q: If an uninsured does not enroll through a health insurance exchange (also known as a health insurance marketplace) during the open enrollment period for coverage effective Jan. 1, 2014, under what circumstances may an individual enroll and receive coverage during 2014?

A: The initial open enrollment period for the exchange begins Oct. 1, 2013, and extends through March 31, 2014.

If an individual does not enroll during the initial open enrollment period or future enrollment periods (for plan years beginning on or after Jan. 1, 2015, the annual open enrollment period begins Oct. 15 and extends through Dec. 7 of the preceding calendar year), they can enroll if circumstances triggered one of the following events:

A qualified individual and any dependents losing other minimum essential coverage.
A qualified individual gaining or becoming a dependent through marriage, birth, adoption or placement for adoption.
An individual, not previously lawfully present, gaining status as a citizen, national or lawfully present individual in the United States.
A qualified individual experiencing an error in enrollment.
An individual enrolled in a Qualified Health Plan (QHP) adequately demonstrating to the exchange that the QHP in which he or she is enrolled substantially violated a material provision of its contract.
An individual becoming newly eligible or newly ineligible for advance payments of the premium tax credit or experiencing a change in eligibility for cost-sharing reductions.
New QHPs offered through the exchange becoming available to a qualified individual or enrollee as a result of a permanent move.
The individual is an Indian, as defined by the Indian Health Care Improvement Act. (We solicited comment on the potential implications on the process for verifying Indian status for purposes of this special enrollment period.)
A qualified individual or enrollee meeting other exceptional circumstances, as determined by the Exchange or Health & Human Services (HHS). Loss of coverage does not include failure to pay premiums on a timely basis, including COBRA premiums prior to expiration of COBRA coverage.
Unless specifically stated otherwise, an individual or enrollee has 60 days from the date of a triggering event to select a plan. Note: This 60-day Special Enrollment Period (SEP) window applies to the individual market. Group market is 30 days for the SEP window.

Wednesday, May 29, 2013

Latest News on the Affordable Care Act

I've compiled a series of interesting articles this week about different aspects of the Affordable Care Act.

First, this piece on the Federal Pre-Existing Condition Insurance Plan’s solvency (or lack thereof). The Federal Government totally under estimated the claims of those people who went on it.

Second is a study of the current cost of health insurance. Please look at the dollars that are currently being spent and tell me whether this is sustainable.

Third is Chicago Politics as its best. What do politicians do once they are elected? They hire all of their supporters of course. It looks like if you’d like a job as an assister, go talk to HHS.

Oops, the Government forgot that some people don’t have bank accounts with which to pay for their premiums.

Here’s something that came to my attention last week. This is in California, but may apply to other states. Doctors may be stuck with paying for patients’ care due to non-payment of health insurance premiums.

Unions are figuring out that they are being treated like everyone else in regards to Health Reform. Businesses don’t get special treatment, but Unions believe they should.

Here’s an interesting study on the impact of increasing premiums and young adults purchasing insurance. Note that this is from an organization that doesn't like the ACA.

Wednesday, May 1, 2013

Small Group and the Affordable Care Act - Do I really need to comply? NO!!!

You know how things kind of ruminate in the back of your mind for awhile before you "suddenly" have a realization? That's what happened to me a last week.

If your company is less than 50 employees (combining Full Time and Full Time Equivalents), then you are considered a "Small Group" under the definition set out by the Affordable Care Act. While everyone is talking about 30 hours this, Bronze, Silver, Gold, Platinum medal plans that, penalties for not offering minimum coverage and cost, etc. The reality is that you will not be subjected to the employer mandate and therefore will not face any penalties if you do not comply with that mandate such as not offering coverage, not making it "affordable", or not offering compliant coverage (Note that there are other items which you must comply with such as providing a Summary of Benefits of Coverage to each employee).

To be straight, I'm not talking about plan designs or things outside of your control. I'm talking about changing the amount you contribute to your employee's premium, number of hours they are required to work before they are considered full time, etc.

You don't have to offer a plan that meets one of the Medal plans even though the probability of a plan being available that doesn't meet the guidelines is close to zero. You don't have to offer coverage to dependents (BTW, spouses are, by ACA definition, NOT dependents). Of course you may not be able to

You don't have to make sure that the employee only pays no more than 9.5% of their income towards employee only coverage on your lowest compliant plan to meet "Safe Harbor." As a matter of fact, it's probably NOT in your best interest to do this. You may harm your employees unknowingly. For example, if you do offer a "Bronze" level plan and meet the "Safe Harbor" of the above for the employee and offer coverage to their dependents, then your employee is NOT ELIGIBLE FOR A SUBSIDY. If you have lower income employees, this could be bad as a plan within the individual/family exchange may be less expensive and cover more than the plan you offer. For higher income employees who are close to or over the 400% Federal Poverty Level for income, this doesn't impact them much.

What does this mean? It means you have more flexibility that you know. If you have 5 or more employees (for Illinois at least - every state is different, in New York, only employers with over 50 employees are allowed to look at the following plans), and your workforce is younger and healthy, then you may want to explore a "level funded benefit" plan. This is partially self-funding. In the eyes of the government, it is considered self funded and not subject to some of the restrictions of the ACA. In the eyes of your employees, it looks and works exactly like a fully insured plan except with the possibility of receiving money back after your plan year if claims were less than expected.

Also, if your agent hasn't mentioned that you can do an early renewal (this means renewing this year, then renewing again on 12/1/2013) to push off the reforms (including changes in plan designs) until the end of 2014, call and ask them about it.

In general, work with your agent, roll up your sleeves and see what works best for your business first, then employees (understanding that without happy employees, your business will go down the drain).