healthcare

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About 300,000 People Who Paid The Individual Mandate Penalty Probably Did Not Have To

One of the reasons I wrote the post, Affordable Health Insurance And The Individual Mandate, was to point out that if the lowest cost health insurance available on the exchange is greater than 8% of your income then you are exempt from the individual mandate penalty. Although the exemption was not applicable to me I was surprised that I would have been exempt from the penalty. That got me wondering how many people paid the penalty without checking first to see if they were exempt. According to this article, IRS: More paid Obamacare fine than expected, about 300,000 people likely made that mistake. Considering how easy it is to be exempt from the penalty and that 7.5 million people paid the penalty, I am surprised that only 300,000 made that mistake.

The Treasury Department said about 300,000 people who paid the penalty likely qualified for an exemption from having to have health coverage. There are a slew of exemptions from the Obamacare mandate based on income status or certain hardships.

“The IRS will be reaching out to these taxpayers to inform them about available exemptions and note that they may benefit from amending their tax return,” said Mark Mazur, assistant Treasury secretary for tax policy, in a blog post Monday. “This outreach will also help educate taxpayers about the options they have for future years.”

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Small Business Healthcare Relief Act Is Re-introduced

For those who are still interested in Health Reimbursement Accounts Zane Benefits posted an update on the legislation that has been introduced in Congress.

Two weeks ago, a group of legislators re-introduced the Small Business Healthcare Relief Act (S. 1697 and H.R. 2911). The legislation would allow small employers to once again use an HRA to reimburse employees for health insurance premiums and out-of-pocket medical expenses.

I was hopeful that Mr. Boustany  of Louisiana would re-introduce the legislation and that my Representative, Brad Wenstrup,  and my Senators, Rob Portman and Sherrod Brown, would step forward and co-sponsor the bill. This bill is a pretty simple, non-partisan health care reform. Although my representatives did not co-sponsor the bill I am pleased to see more sponsors and a Senate version of the bill. For more information about this bill you can read it at OpenCongress.org.

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Diverging Views On Health Care Reform

Now that the King v. Burwell case is over I was curious whether both sides would find common ground on meaningful health care reforms. I was surprised to hear that Kathleen Sebelius says the law is working as intended and we should use this new opportunity to build on its early success. She is not alone. Sara Rosenbaum provided this list of health care reforms in the article, Post-King: Moving Forward In A New Normal.

  1. Expanding Medicaid To Cover The Poorest People
  2. Making the ACA’s Private Insurance Provisions Work Better For Children, Low- And Moderate-Income Families, And People With Disabilities
  3. Making The ACA A More Potent Force For Cost Containment And Quality Improvement Building Primary Health Care Access For Medically Underserved
  4. Communities And Populations And Addressing The Underlying Social Conditions Of Health

John Goodman thinks there are some serious problems with the Affordable Care Act and lists these problems in the article,

Six Problems With The ACA That Aren’t Going Away.

  1. An Impossible Mandate
  2. Unworkable Subsidies
  3. Perverse Incentives For Insurers
  4. Other Perverse Incentives For Buyers
  5. Lack Of Access To Care
  6. Impossible Burden For The Elderly And The Disabled

It is interesting that neither side talks about the cost of health care for the middle class and the fact that the ACA has made health insurance unaffordable for unsubsidized people. In an ironic twist of fate the Affordable Care Act very existence depends on convincing these healthy, unsubsidized, middle class people to purchase health insurance from the exchange. When you look at the report from Avalere Health, Exchanges Struggle to Enroll Consumers as Income Increases, it is easy to anticipate a death spiral in the exchanges if only 2% of the eligible people with income over 400% over the federal poverty limit are enrolled in the exchanges. The problem for ACA supporters is no longer politics but math. As I wrote in a previous post the cost of health insurance from the exchange versus my grandfathered plan is a very strong incentive for me to keep my existing health insurance. Perversely if my health insurance is not grandfathered for another year, my second best choice is to go without health insurance since I am exempt from the individual mandate because “health insurance from the exchange is not affordable”. Everything is in place for the exchanges to fail and the ACA supporters say the law is working as intended. I guess we have to break it before we can fix it.

 

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Supporting H.R.5860 – Small Business Healthcare Relief Act of 2014

I finally got around to asking my senators and congressional representatives for their support of grandfathered health care plans and H.R.5860 – Small Business Healthcare Relief Act of 2014. This bill which is still in committee looks like it re-instates the Health Reimbursement Accounts for small businesses. The method I chose to ask for their support was to create a letter to representatives and let OpenCongress.org send it to them. The purpose of Open Congress is to:

OpenCongress makes it easy to follow legislation in Congress, from bill introduction to floor vote, as well as profiles for senators and representatives. You can use the site to learn more about issues you care about and connect with others who share similar views.

You can find my letter at the H.R. 5860 page.

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Affordable Health Insurance And The Individual Mandate

2015-06-25 09_54_46-Exemptions Screener _ HealthCare1.govMy biggest financial problem for 2016 is keeping my grandfathered health insurance plan and paying for it with pre-tax money. In 2014 and prior years my health insurance was affordable since it was completely paid for with money from a Health Reimbursement Account(HRA) set up by my employer. Health insurance for healthy people was affordable and the HRA allowed my employer to pay for my health insurance with pre-tax money. Like most health care decisions before the Affordable Care Act it was a no-brainer. Then we passed the Affordable Care Act and everything became complicated and more expensive. In 2015 HRA’s become an inadvertent casualty of the Affordable Care Act. The next casualty I suspect will be my grandfathered health insurance plan. So I have three options:

  1. Convince someone in government to allow me to keep my grandfathered health insurance for another year.
  2. Not carry any health insurance.
  3. Get health insurance from the exchange.

No one should be surprised that health insurance from the exchange is not affordable and the only happy customers are those getting subsidies. According to the HealthCare.gov Exemptions Screener, I should be paying no more than 8% of my income on health insurance. For a couple earning $63,721(400% of the federal poverty level) this is only $425 a month. Last November I looked up the lowest cost bronze plan and it was going to cost me $979 a month or $11,748 a year.  For a couple earning $63,721, health insurance would have taken 18.4% of their income. According to HealthCare.gov a couple like me would have to earn $146,850 a year before a health insurance policy from the exchange became “affordable”. Only the subsidized, wealthy, chronically ill, or naive would choose health insurance from the exchange.

With health insurance from the exchange costing $11,748 or more per year in 2016, self-insurance becomes a financially attractive option.  As a healthy family who has gone without health insurance in the past(1998-2008) and who is exempt from the individual mandate because I cannot purchase “affordable health coverage” from the exchange, the biggest financial risk is a hospitalization that costs more than $12,000. If you have the discipline to have a large enough emergency fund to cover future health costs then this is an attractive, financially efficient second choice. $12,000 per year will buy a lot of health care especially if you are a savvy buyer. If I could get a catastrophic care policy priced at 4% of my income this would be my number one choice since it would be the best of both worlds, encouraging both healthy living and saving for medical expenses.

My first choice is to keep my existing health insurance and to convince the government to reinstate HRA’s for companies with less than 50 employees. My health insurance plan is almost as affordable as the subsidized insurance from the exchanges. As a person who has not filed an insurance claim in the last 15 years, I am by definition the perfect health insurance customer. It is probably in the best interest of the insurance industry to do whatever it takes to keep me as a loyal customer. Although my employer gave me a $500 a month bonus this year to pay for my health insurance I would be financially better off if that money went into a HRA. Taxing a health care bonus is just plain stupid. Once again it is in the best interest of the insurance industry to bring back the HRA before I get comfortable going without health insurance.

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The Irony of 6.4 Million People Learning That They Cannot Afford Health Insurance From The Federal Exchange

The greatest failure of the Affordable Care Act is that it did not make health care more affordable. It is ironic that the 6.4 million people the Affordable Care Act tried to help the most may now be personally affected by this failure. If the Supreme Court decides that it is the responsibility of Congress to fix the bill and not the IRS, these 6.4 million people will wake up to learn that their health insurance is much greater than 9.56% of their income. However uncomfortable it may seem for these 6.4 million people health insurance is neither affordable or a wise use of their limited funds. Although misery likes company I doubt they will derive any enjoyment from being in the same unenviable position as the rest of the people who did not get a subsidy from buying health insurance from the exchanges.

Affordability was the one issue that had the potential of making the Affordable Care Act a great legislative achievement. So the health insurance rates in the exchanges is proof that the supporters either ignored the issue or are so incompetent that they should not be managing health care policy. Recently I completed some affordability calculations using the lowest bronze 2015 health insurance quote for a two person family. Using the $979 per month premium from last November health insurance from the exchange health insurance would be 18.4% of the income for a couple earning 400% of the federal poverty level. This couple would have to earn $122,887 before their health insurance premiums would be 9.56% of their income. It is highly likely that health insurance rates will be much higher for me this Fall so the decision for me is simple. Just like signing up for health insurance as recently as 2008 was a no-brainer, it is a no-brainer in 2015 for me to not purchase 2016 health insurance from the exchange. The Affordable Care Act has made our dysfunctional health care system more dysfunctional.

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Why Is Increased Health Care Spending “bad” And Increased Spending At Wal-mart “good”?

For those folks fascinated by increased health care spending in a stalled economy there is a nice article, Health Spending Unscathed In Shrinking Economy, at the NCPA Health Policy Blog. John Fembup asked the question why is increased health care spending “bad” and increased spending at Wal-mart “good”? Here is my reply.

Historically only a few sectors of the economy have a multiplier effect on the rest of the economy. The two best examples of this is housing construction and the growth of the Goods sector. Most economic recoveries have been led by one or both of these sectors. So when major companies in these sectors report increased sales, this is important economic news. The logic is that if GM, Target, Costco, and Wal-Mart are having good years then it is possible that a broad based expansion is underway.

Historically health care spending had a weak correlation with Personal consumption expenditures(PCE) growth. Until 2014 the Goods sector had a strong correlation with PCE growth. In 2014 the positions changed. Health care spending became the leading contributor to PCE growth and the rest of the PCE sectors look like they were in a stalled economy. Based on this limited data you would have to conclude that increased health care spending does not have a multiplier effect on the economy.

Finally most of the increases in our standard of living can be attributed to innovation and productivity gains in the Goods sector. Health care has a poor record for innovation and productivity gains. The most interesting productivity gain that I have seen in health care was a county project to manage diabetes. It provided better care and lowered costs. If health care acted more like a business then they would adopt a more distributed decision-making organization structure to encourage this type of productivity gain. Health care is inherently a local service requiring local decisions. Instead the government and industry have embraced a more command and control organizational structure that generally gets its productivity gains from economies of scale. Since the Affordable Care Act has not generated any cost savings and has blown every budget, it looks like we got the worst of both worlds, increased centralization with no cost savings. We tried, we failed! It is both sad and exciting to think that if we want to increase our standard of living then it has become imperative that the health care industry innovate and focus on productivity gains. If we want to grow the economy then we have to be smarter about our down health care spending so the sectors that have a multiplier effect can grow.

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Roberts Choice

Once again the Supreme Court will rely on Chief Justice Roberts to craft a political decision in the King v. Burwell case that no one likes but allows the federal government to subsidize health insurance in states that did not set up exchanges. In this case I would not be surprised that he leans with the conservative side. It is obvious that this bill needs to go back to Congress to fix and deferring to the IRS to authorize billions of dollars of subsidies without the very, very clear intention of Congress is just too big a step. Somewhere along the way the judicial system is going to remind Congress that there are consequences in writing ambiguous laws. The obvious choice is to make a Sophie’s Choice type decision and allow the people in those states that did not setup exchanges to avoid the individual mandate penalty and for companies to avoid the employer mandate penalty.  That is what the plaintiffs want. This decision would be the natural sequel to Roberts’ previous political decision on the Affordable Care Act. Like Sophie who had to send one of her children to the gas chamber, Justice Roberts may choose to send the subsidized exchange system to the gas chamber so that the subsidized health insurance lives. This decision has political value in that it allows each side to claim they won something. For the Affordable Care Act supporters they get federal subsidies for health insurance. For the Affordable Care Act critics they get out of the hated mandates and America gets another chance to see if exchanges are sustainable or just the most recent example of cronyism in health care leading to higher costs. If the Affordable Care Act supporters are right that both the individual and employer mandates are necessary for sustainable exchanges then they can make their case to the American people. If the critics are right then they can make the case that we should replace the exchanges with something that is more efficient and sustainable. The exchanges are dead! Long live the exchanges!

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Kennedy’s Dilemma, Is Deferring To The IRS A Wise Decision?

Nicholas Bagley highlighted the primary dilemma confronting the Supreme Court in the King v. Burwell case. I do not think anyone will argue that the Affordable Care Act is a fatally flawed bill. So how do we fix it? Here is what Justice Kennedy asked:

Well, if [the statute is] ambiguous, then we think about Chevron. But it seems to me a drastic step for us to say that the Department of Internal Revenue and its director can make this call one way or the other when there are, what, billions of dollars of subsidies involved here? … And it—it seems to me our cases say that if the Internal Revenue Service is going to allow deductions using these, that it has to be very, very clear.

Mr. Bagley argues that it is appropriate to defer to the agencies best judgment when it confronts big, difficult questions that arise in the course of administration. He argues in an amicus brief that:

It is then that the agency’s expertise and political accountability are most essential—and where the structure of the federal government most forcefully counsels judicial restraint.

If I follow his logic correctly then the agency’s expertise and political accountability must be beyond reproach if this is to work.  We recently learned that despite President Obama’s admonition that there is not “even a smidgen of corruption” in the IRS scandal, Ms. Lerner’s Lerner’s e-mail records were “right where you would expect them to be.” A year ago, the IRS claimed after two months of looking that the e-mail records were irretrievably lost so it is not surprising that the Inspector General is looking at a criminal investigation of the IRS for its role in obstructing an ongoing investigation.  Recently I looked at the Form 990 for the Clinton Foundation and for kicks I decided to compare it to one of the organizations that was targeted by the IRS, True The Vote. I was shocked to find out that True The Vote raised only $64,687 in 2010. This amount would be a round-off error on the transportation budget for the Clinton Foundation so I find it incredulous that the IRS decided to pursue them. Regardless of the legality it shows that the IRS was incredibly short-sighted politically. They gave their professional credibility away for nothing. Were there any adults in the room for that decision? So the Supreme Court justices are stuck with the dilemma of how to fix the Affordable Care Act if most of the people view the IRS as an incompetent if not corrupt organization? Are we comfortable with letting an organization who says it cannot find Ms. Lerner’s emails make a decision involving billions of dollars of subsidies? If you agree with Mr. Bagely’s argument that deferring to the IRS is okay, then you have to address the question under what circumstances should the Supreme Court send fatally flawed bills back to Congress to fix if billions of dollars of subsidies is not sufficient cause? If expediency is our only concern then the easiest solution is to send a box of blank paper to the IRS and tell them to fix the flawed legislation. Unfortunately the IRS cannot fix this bill or any other bill without input from Congress and their adversarial relationship with Congress should immediately disqualify them from this special task. To restore a less adversarial IRS-Congress relationship, Congress has to be very, very clear on the parts of laws involving the IRS. If we are to learn anything from the many mistakes made by the Affordable Care Act supporters, we need some adults in the room to craft bipartisan agreements that actually reform health care. As long as the American people want laws that work, the importance of the legislative process is not dead.

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Will Congress Help Small Businesses By Reviving HRAs?

Christina Merhar wrote a nice post over at Zane Benefits updating the status of reviving HRAs in the current Congress. Although I would like to move on from the HRA subject, I cannot. The most cost effective health care plan available is my grandfathered health insurance plan from Aetna-AARP and I would like to pay those insurance premiums with pre-tax money like I did in 2014. Although my company tried to make do with a bad situation by giving me a raise, the bottom line is that I will have un-reimbursed health insurance costs in 2015 because of the payroll taxes on the raise. For a healthy family that last made an insurance claim in the 1990s, this is unacceptable. Here is my reason to revive HRAs.

Yes, I think they should revive HRAs and allow them to pay for grandfathered health insurance plans. I will encourage my congressman to support the bill as one of those bipartisan changes to the Affordable Care Act that makes it less evil. I will go a step farther. I want to keep my existing plan and HRA until the Affordable Care Act reforms actually result in falling costs and more cost effective plans being offered via the exchanges. This is what the President promised and I think we should hold him to his promise.

Here is part of the press release from Representative Boustany(R-LA) web site in which he says, “ObamaCare Delay Not Permanent Solution.”

Boustany questions Treasury Secretary Lew on the Administration’s policy on HRA’s.

Last year Representative Boustany(R-LA) and Representative Mike Thompson (D-CA) introduced the Small Business Healthcare Relief Act last year that permanently reverses this guidance, giving employers and employees more flexibility in choosing coverage. This legislation is supported by the United States Chamber of Commerce, the National Federation of Independent Business (NFIB), the National Association of Manufacturers (NAM), the Retail Industry Leaders Association (RILA), the National Association of Homebuilders (NAHB), the National Association for the Self-Employed, and the Council for Affordable Health Coverage (CAHC).