Category Archives: Health Care Reform

5 Things the Oregon Medicaid Study Tells Us About American Health Care

This is a terrific eye-opening review of a recent study!  Very thought-provoking. – Reeve

By May 02, 2013 | Time U.S.

Among all the criticisms of President Obama’s health care reform law,
the most salient may be that the Affordable Care Act focuses on access
to insurance at the expense of cost and quality care. A new set of results
from a study on Oregon’s Medicaid program supports this critique and
offers a window into the broader shortcomings of the U.S. health care

The results, published this week in the New England Journal of Medicine,
found that in a randomized controlled trial, the health of Oregonians
on Medicaid did not differ significantly from a control group left off
the rolls of the public insurance program. Researchers looked at the
health of some 12,000 people, measuring their cholesterol and
blood-sugar levels, among other factors. The results also indicated that
Medicaid enrollees were less prone to depression, less likely to incur
catastrophic out-of-pocket health expenses and much more frequent users
of health care services. (Study participants were gathered from a group
of Oregon residents eligible for Medicaid and put on a waiting list for
the program. Those able to enroll in Medicaid were chosen by lottery and
compared against those left on the waiting list.)
These findings can tell us many things about American health care. Here are a few:
Preventive care isn’t all it’s cracked up to be. The
Oregon study found that people on Medicaid got more preventive care —
including mammograms, flu shots and Pap smears — than those in the
uninsured control group. While it might seem logical that heading off
and identifying potential health problems early through screening tests
and doctor visits will lead to faster, cheaper treatment, the truth is much more complicated.
Prevention as a population-based health strategy saves money only if
the savings generated by preventing or catching health problems early in
some people outweighs the cost
of all the doctor visits and screening tests performed on people who
are well and don’t need treatment. In addition, some screening tests —
particularly those intended to catch certain cancers early — lead to
lots of unnecessary harm and false positive tests.
We need more quality control in medicine. The
Affordable Care Act includes programs and funding to add more quality
control to health care, but this priority is eclipsed by the law’s
emphasis on expanding health-insurance coverage, largely through
Medicaid. The fact that payments to doctors and hospitals don’t depend
on health outcomes in most cases is an enormous problem. As the Oregon
results showed, Medicaid enrollees got more care, in doctor’s offices in
particular, when they had insurance but didn’t necessarily have better
health. This is partly because their doctors got their Medicaid payments
regardless of whether the care they provided was effective.
This leads directly to another insight we can glean from the Oregon results: patients need to be more involved in managing their health.
Chronic conditions like hypertension and diabetes have a lot to do with
weight, diet and adherence to medication regimens, which patients can
control. Without a patient’s commitment to carefully manage these
factors, the best and most available doctor on the planet won’t make
much difference in the overall health of many people. It’s hard to think
of a way that the government can address this. Revoking insurance for
patients who don’t take good of themselves would never fly, although the
Affordable Care Act does allow insurers to charge smokers higher
premiums and some corporations offer cash payments or breaks on
insurance premiums if workers participate in wellness programs.
Medicaid is not enough. The Medicaid and control
groups in the Oregon study are statistically identical in terms of race,
age and gender. In addition, everyone in the study was eligible for
Medicaid, meaning they were all poor. But as policy experts know, poor
people have health risk factors that don’t include access to insurance
and doctors. Getting on the Medicaid rolls doesn’t automatically
eliminate factors like lack of education, lack of access to healthy food
and household financial strain that can impact health and health
Insurance is about health, but it’s also about money.
A major value of comprehensive health insurance is that it protects
people from financial ruin if they have a horrible health emergency or
an expensive long-term condition that requires treatment. A homeowner
living near a river doesn’t buy flood insurance to prevent floods or
protect his home if a flood occurs. He buys flood insurance so that if
his house is destroyed, he will be able to recover financially. This too
is a major purpose of health insurance. The latest results from Oregon
showed that being on Medicaid “nearly eliminated catastrophic
out-of-pocket medical expenditures.” This matters and may be part of the
reason earlier results from the ongoing Oregon study indicated that
those on Medicaid were happier.

Latest ACA Guidance Addresses HSAs, HRAs, and Wellness Programs

This article from Spencer Fane Britt and Browne, LLP is a good summary of the latest clarifications in this area – Reeve

Relevant Play-or-Pay Requirements

In general, an employee who is eligible for employer-sponsored health
coverage will not qualify for this tax credit unless that employer
coverage is either not “affordable” (because the employee’s share of the
premium for employee-only coverage would exceed 9.5% of his or her
income) or fails to provide at least “minimum value” (by covering the
cost of at least 60% of “essential health benefits”).  This means that a
large employer may avoid the play-or-pay penalties by demonstrating
that its coverage satisfies both the affordability and the minimum value requirements.

In making these two demonstrations, employers may wonder whether certain types of payments that are related
to a health plan may be considered.  These proposed IRS regulations
address the treatment of the following three types of employer payments:

  • Contributions employers make to their employees’ health savings accounts (“HSAs”);
  • Amounts that employers credit to their employees’ accounts under health reimbursement arrangements (“HRAs”); and
  • Monetary rewards provided to employees who satisfy the requirements of a wellness program.

This recent IRS guidance is summarized in the following chart:


Treatment of HSAs, HRAs, and Wellness Programs Under “Affordability” and “Minimum Value” Standards
  Affordability? Minimum Value?
Current-Year Employer HSA Contribution N/A (HSA may not be used to pay premiums) Yes
HRA Credit1
Yes, if amounts may be used to pay premiums or medical expenses Yes, but only if amounts may not be used to pay premiums
Wellness Program Incentive2 – Tobacco Usage Yes, if reward = premium reduction (or avoidance of premium surcharge) Yes, if reward = reduced cost-sharing
Wellness Program Incentive2 – Other No3 (i.e., must assume employee will fail to satisfy program requirements) No3 (i.e., must assume employee will fail to satisfy program requirements)

1 HRA must be integrated with eligible employer-sponsored health plan.


2 Wellness program must satisfy HIPAA nondiscrimination requirements.

3 Exception: For plan years beginning before January 1, 2015, incentives under any
nondiscriminatory wellness program may be considered if a program was
in effect on May 3, 2013, and an employee is in a category that was
eligible to participate in the program on that date.

addition to the information set forth in this chart (including its
footnotes), employers should keep the following information in mind.

HSA Contributions

amounts held in an HSA may not be used to pay insurance premiums, HSAs
do not enter into the affordability analysis.  However, any current-year employer HSA contributions may be used to show that the employer’s health plan satisfies the 60% minimum-value threshold.

HRA Credits

analyzing current-year credits to an HRA, the key question is whether
the HRA document allows those amounts to be used to pay premiums under
the employer’s health plan.  If so, the employer may use those credits
to help show that its plan is affordable (but may not use them in the minimum value analysis).  By contrast, if the HRA is limited to the reimbursement of medical expenses
– and does not allow for the payment of premiums – the employer HRA
credits may be applied toward the 60% minimum value threshold.

Wellness Programs Incentives

proposed regulations divide wellness programs into two major categories
– those that are designed to prevent or reduce tobacco usage, and all
other programs.  For both affordability and minimum value
purposes, an employer may assume that all employees either do not use
tobacco or have successfully completed whatever alternative is made
available to tobacco-users.  Thus, if the wellness program provides a
premium discount to non-tobacco-users, the discounted premium amount may
be considered when conducting the affordability analysis.  Similarly,
any cost-sharing reduction granted to non-tobacco users (such as lower
deductibles, co-payments, or co-insurance) may be considered when
applying the minimum value standard.

Except as provided in the following paragraph, other wellness programs – those having nothing to do with tobacco usage – must be treated in exactly the opposite fashion.  That is, the employer must assume that employees will fail
to receive the wellness program reward.  Thus, any premium discount
must be disregarded when conducting the affordability analysis, as must
any cost-sharing reductions when testing for minimum value.

is an important exception to these wellness program rules for plans
years beginning before January 1, 2015.  For this limited period of
time, an employer may assume that all employees qualify for any reward
made available under any HIPAA-compliant wellness program – including
those having nothing to do with tobacco usage.  In essence, for the 2014
plan year, all wellness programs may be treated in the same way as
tobacco-related programs for purposes of both the affordability and
minimum value requirements.


most cases, it will be obvious whether an employer health plan
satisfies the minimum value requirement (at least to any insurer that
underwrites the plan), so this recent IRS guidance may not be all that
important for that purpose.  On the other hand, employers that wish to
minimize their share of their employees’ health premiums – while still
satisfying the affordability requirement – may want to take credit for
their HSA contributions, HRA credits, or wellness program rewards.
Those employers should pay particular attention to that aspect of these

Federal Pre-Existing Pool broke

I heard about this two weeks ago and called the Federal PCIP Plan.  Their message says essentially we have no money, cannot accept any new applications, and even if you have coverage with us we may not be able to pay your claims! – Reeve

Lack of coverage cover up?

By | April 17, 2013 •

Bet you never saw this one coming.

House Republicans burned the midnight oil this week to draft
legislation to actually strengthen the Patient Protection and Affordable
Care Act. After dozens of failed attempts to repeal the landmark
legislation– at a cost of God knows how much time and taxpayer money –
it look like House Republicans are taking the more practical, if
belated, approach to fixing this broken mess.

Congressmen drafted the House bill, dubbed the “Helping Sick
Americans Now Act,” to provide additional funding for the Pre-Existing
Condition Insurance Plan, the high-risk pool the new health law created
as a way of bridging the gap for those with pre-existing conditions
until the PPACA is fully implemented.

The legislation would simply transfer funds from the Public Health and Prevention Fund to PCIP.

After exhausting all other options, are they finally coming to terms
with the fact that this law’s here to stay? Or is it the fact that this
particular fund is already flat-broke? And a full year sooner than
expected? Seriously, the fund burned through a whopping $5 billion in
three years.

And what was the administration’s reaction to this “unexpected”
shortfall? Oh, well, to shut it down. Never mind that whole extending
health care coverage to all Americans business. The campaign’s over.
It’s time to get back to real life.

There are a number of unsettling things about this story. One, that
the administration was so quick to write off such a critical component
of this law. Two, according to published reports, the program actually
enrolled less than a third of the people they expected to – and the well
still ran dry in record time.

So, honestly, what kind of confidence can any of us have in the cost
(and coverage) projections for the rest of Obamacare? I know, I know.
We’ve gone down this road before, but this is a pretty solid test case
the law clearly failed. This does not bode well for January, when we see
this blown up on a much larger scale.

It’s worth commending, though, the House Republicans who stepped
forward to address this mess without letting it get swept quietly under
the rug. I’m sure they have their ulterior motives, but I can live with
that in this case. Who knows, maybe compassionate conservatism is back?

Speaking of which, just where is the mainstream media coverage of this debacle? That’s what I thought.

Nondiscrimination rules an elephant in the room

Posted April 22, 2013 by Benjamin S. Lupin, J.D., LL.M at 09:10AM

Health care reform is here, and benefits managers everywhere are
frantically planning to meet the new requirements. The problem is that
planning with the rules currently in place is like trying to build a
skyscraper on a piece of swampland in the Florida Everglades.

As most employers worry about whether to “pay or
play” as of 2014 and whether or not certain employees will need to be
counted as full-time for health care reform purposes, there is an
elephant in the room that is not yet getting enough notice. This
elephant is the approaching nondiscrimination rules that apply to all
health plans that are not grandfathered.

One of the most common  questions I receive from employers is, “can we offer different health
benefits to different employees?” For the better part of the last 20
years, the answer has been, “yes, as long as your plan is fully insured.”

Prior to health care reform, the law prohibited only self-funded health plans
from discriminating in favor of highly compensated employees with
regard to health insurance benefits. Employers were able to provide
executive medical plans, class-based benefits, and overall better
benefits packages to executives. But health care reform changes that,
applying nondiscrimination to all group health plans. This may not seem
that significant, but in reality, it changes the entire health insurance

The real problem with the extension of the  nondiscrimination rules is that the rules – as currently written – are
convoluted and hard to apply.

Under the current law applicable to self-funded health plans, the term “highly compensated” means:

  • The five highest paid officers of the company;
  • A shareholder who owns 10% in value of stock of the company; and
  • An employee among the highest paid 25% of all employees.

Once an employer determines who is a highly compensated employee
and who is not, the employer is then tasked with making sure that the
health insurance plan or plans being provided are not discriminating in
favor of those highly compensated employees as to either eligibility or

While eligibility is usually the easier part of the test
– a health plan that applies the same eligibility rules to all
employees regardless of compensation, position, etc. will pass this part
of the test – many plans treat different groups of employees
differently. This will need to end to avoid failing the
nondiscrimination test.

Another important aspect of the
eligibility rule is that it is applied on a “controlled group” basis.
This means that employees of another company in the same controlled
group must be considered in your company’s nondiscrimination testing
even if those employees are not eligible for the plan being tested. This
has always been a hassle for self-funded plan and will surely be just
as much of a hassle for all health plans in the future.

High penalties for noncompliance

What’s even worse than the current test provided under the law is that fully
insured plan sponsors that violate the nondiscrimination rules will be
subject to a $100 per day per failure penalty, which will likely apply
to each non highly compensated employee who is impermissibly excluded
under the plan. The employer could also be subject to a civil lawsuit to
compel it to provide nondiscriminatory benefits.

To put this in perspective, the penalty for non-compliance: $100 per day per non-highly compensated individual discriminated against
would mean that providing a “discriminatory benefit” to even one highly
compensated employee could trigger a penalty of $100 per day times 75%
of the total number of employees in the employer’s workforce (because
the top 25% are considered highly compensated under the current rules).
For an employer with 500 employees, this means a penalty of up to
$37,500 per day!

Rules don’t yet exist

The elephant in the room is that every aspect of future planning will
likely be affected by rules that do not yet exist in usable form.

For example, if an employer with a large population of variable hour
employees decides to provide an affordable minimum-wage-type of health
plan to that group of employees in order to avoid paying a penalty to
the government, then that would seem reasonable and is likely to be
quite common.

However, if all of those variable hour employees
actually enroll in that minimum wage plan, then it’s likely that the
benefits test will be failed by the employer because the highly
compensated employees are likely to choose a better plan, provided one
is being offered.   Planning to avoid one penalty will result in the
employer paying a different – and more substantial – penalty. How is
that fair?

There are plenty of other issues – how do you apply
nondiscrimination rules when one benefit option under a fully insured
plan is grandfathered but another benefit option is not? How do you
apply the rules when one employer maintains one plan that is fully
insured and another plan that is self-funded? Will you need to include
employees who enroll in a state or federal exchange in the testing?

Even if the rules get ironed out so they aren’t contradictory, many companies will have to undertake significant plan redesigns.

The government has said it will not impose any penalties until further
guidance is provided, and it has also said that it will provide time for
employers to adjust to comply with the new rules before it starts
sanctioning those that don’t comply. But, in the meantime, planning for
the eventual application of the nondiscrimination rules to fully insured
plans is virtually impossible, because at this point, no one knows how
similar the new rules will be to the existing rules.

To further complicate matters, there are many open questions regarding how to apply the current rules
to self-funded plans. Those regulations are now over 30-years-old.
Health plans have changed significantly in that time. Therefore, it is
possible, if not likely, that the IRS may issue guidance that addresses both the application of nondiscrimination rules to self-funded plans and the application of nondiscrimination rules to non-grandfathered fully insured plans.

So hold on tight and stay informed. Until we know more about the elephant
in the room, we are all in for a long and arduous planning process.

S. Lupin, an ERISA attorney, is the senior vice president of compliance
at Corporate Synergies Group. He can be reached

Blue Cross Product offers early renewal

In something that may well become a trend, Blue Choice of South Carolina is offerng all groups the option to renew December 1 of this year.  This, of course, means that Health Care Reform for those companies begins a year later on 12/1/2014.

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Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA. - SIPC - Brokercheck