Insuring Resources Commentary:
The article below provides a great analysis on small business decision-making as health care is implemented. Dr. Samitt does a great job of laying out the small business issues and also suggests that more could have been done on the quality and cost containment side but he notes that better coordination among providers is essential. He notes that Wisconsin is well-positioned in that regard.
I've highlighted a couple of noteworthy items within the article below. These pertain to small business decision-making on whether to offer coverage or pay the penalty and on quality and cost issues and Wisconsin's current insurance marketplace.
A couple of items the article does not touch on:
1. State creation of Health Insurance Exchanges (statewide or regional) and other important decisions
***(stay tuned for a post from me on implementing HIE's in a few days)***
2. Enhancement of Wisconsin's High risk pool- Expansion of HIRSP pre -2014 to provide coverage for those with pre-existing conditions
------------ -------------- -------------
Health Care Calculation for Businesses: Coverage Versus Paying the Penalty
June 1, 2010
In Business Madison Magazine- http://www.ibmadison.com/healthcare?id=514
Large and mid-sized businesses have some calculating to do regarding the recently enacted Patient Protection and Affordable Care Act, the federal health care law, but that calculation will not be entirely monetary, according to Dr. Craig Samitt.
Samitt, president and CEO of Dean Health System in Madison, said the comparison small and mid-sized businesses must begin to make is the respective cost of providing insurance versus the cost in penalties for not providing it. That final decision does not have to be made until January of 2014, but provisions clearly prescribe that employers will have this choice themselves. (Qualified small businesses would be able to purchase insurance for their employees through state-based Small Business Health Options Programs or SHOPs.)
Since the law goes into effect in stages, Samitt believes affected businesses should map out a strategy to take advantage of the various changes that occur each year leading up to full implementation. There is the immediate benefit of small business tax credits that are retroactive to Jan. 1, 2010, and then there is the aforementioned coverage question.
Large and mid-sized employers that fail to offer what the law calls "minimum essential coverage" would be liable for an additional tax. That penalty would equal the product of the applicable payment amount (with respect to any month, 1/12 of $2,000) and the number of full-time employees employed by the employer during such month.
The penalty would apply to employers with 50 or more workers, but would subtract the first 30 workers from the payment calculation. In a hypothetical example, a company with 51 full-time employees that does not offer the still-to-be-determined "minimum essential coverage" would pay an amount equal to 51 minus 30 (or 21) times the applicable per employee payment amount up to $2,000 per full-time employee. (Businesses with fewer than 50 employees would be exempt from any employer responsibility.)
If employer-provided insurance exceeds 9.5 percent of the employee's household income, or the employer plan has an actuarial value of less than 60 percent, the coverage will not qualify as minimum essential coverage.
So the question becomes, "Do you provide coverage to employees, or do you pay penalties and have [individual] employees enter into an exchange," Samitt noted. "Obviously, this will be a challenging call for employers because it's not just about cost."
More immediately, the Act provides a temporary, sliding-scale tax credit to help small employers offset the cost of employer-provided coverage. For the purpose of the credit, a small employer generally is defined as one with fewer than 25 employees and average annual wages of less than $50,000. From 2011 through 2013, eligible employers may qualify for a tax credit for up to 35 percent of their contribution toward the employee's health insurance premium.
In 2014 and beyond, eligible employers who purchase coverage through a state exchange may qualify for a credit for two years of up to 50 percent of their contribution. (Employers with 10 or fewer employees and average annual wages of less than $20,000 would be eligible for the full credit.)
If a business belongs to an industry where the provision of health benefits is a competitive advantage, enabling them to attract and retain quality employees, Samitt believes it may be in the businesses' best interest to provide health insurance even if it costs more than paying the penalty. "Those are the things that small employers are going to have to start thinking about in terms of options regarding reform," he stated.
In general, Samitt regards the Act as good law for small businesses and for people who want to start a business but can't due to their concerns about health insurance affordability. "Businesses have had this challenge of affordability as it pertains to health care," he noted. "With these tax credits in short term, and with exchanges in longer term, smaller businesses have an opportunity to insure their employees like large businesses do."
Reform Measures
The Act tried to accomplish three things which are important to reform: broadening access to coverage, where it scores more highly in Samitt's view; and improving quality and affordability, where the jury is still out. According to Samitt, the bill's strengths are really more on the coverage side, but there is much less detail and only references pertaining to quality and cost. "At this point, it's hard to predict the impact on insurance premiums in the short- or long-term," he opined. "It's in an area where there is a lot more detail that needs to be worked out in terms of what will actually be covered, and in terms of changes in the payment system."
There is a ripe area for cost control, however. Historically, Samitt said the health care reimbursement model has been more based upon the quantity of care rather than the quality of care; because quantity of care has been rewarded, costs have continued to rise. "There are references in this bill to rewarding the quality of care, not just the quantity of care," he noted, "and if reimbursement changes to reward value, this should bend the cost curve and the premium curve."
Citing information from the Organization for Economic Cooperation and Development (OECD) Samitt said the cost curve must inevitably be bent downward. The OECD notes that U.S. health care expenditures as a percentage of gross domestic product rose from about 5% in 1960 to a projected 18% in 2010. By 2018, health care expenditures are projected to grow to 20% of GDP.
"The cost of health care is rising at an exponential rate, and rising faster than inflation, so when we look at how much we, as a society, are spending for health care, that trend is unsustainable," Samitt opined. "We will have no choice but to find a way to bend the cost curve while improving quality at the same time."
Health Care a la Carte
Ideally, Samitt said health insurance should be structured with preventive care, regular check ups, pharmacy, and catastrophic coverage. Asked if individual consumers, in order to hold down costs, should be able to pick and choose the rest, paying a la carte for things like mental health coverage, Samitt said that would be problematic and weaken universal coverage principles.
"The cost of broader insurance coverage can only be managed if the risk is adequately spread among the population," he explained. "Allowing people to shop a la carte can work for items that are truly non-necessities, like cosmetic surgery and items like that. But mental health care is not a luxury. It's a real health care concern that must be part of the 'must-haves' like preventive care, regular check ups, and catastrophic care."
"You can't have people just pay a la carte when they get sick because it's not how current coverage works," he continued. "That would be equivalent of deciding to buy auto insurance only after accidents happen."
Dr. Samitt commented on a number of topics, including the following:
On whether the bill is structured, as critics contend, to drive private insurers out of business and health care consumers into the government's arms? "The bill is not intended to drive private insurers out of business. I don't think it's designed to nationalize health care. There is no public plan in the bill. What the bill does do, though, is bring more accountability to the insurance world. The ultimate goal of the bill is to provide more citizens with better care at a lower cost.
"On the health care delivery and insurance side, this will mean the need for more integration and coordination where physicians, hospitals, and insurance plans are all working together with patients at the center, and with a focus on managing quality and cost. So that accountability is critical and the pressure to integrate is essential. What's great about Wisconsin is there are so many integrated systems like Dean-St. Mary's that are already practicing these integrated models. But that level of integration is absent in many of the greatest population areas of the nation. In most other markets, what you see more often are independent, non-aligned entities, which may drive up health care costs while not necessarily delivering higher quality care."
On whether he has any issues with the Act's requirement for insurers to use at least 80% of premiums for care services rather than administrative costs or profit taking? "In my view, the more dollars that can be directed to heath services, the better off we'll be. What we see in many integrated systems like those in Wisconsin, is those administrative costs are already on the lower side. So if there are health plans that can deliver a high quality product and spend less on administrative services and reduce waste, then why can't all health plans achieve that same level of reduction in administrative costs? So yes, that is a good provision. We should be spending more on clinical services than less."
On whether the federal government will be back to address health care reform: "Whenever you can provide more coverage, that's good. The insurance provisions in the bill are the right things to do. They make sense. However, the concern everyone has is how are we going to pay for this? That's why a big part of reforming health care will require us to think more about prevention, wellness, the appropriateness of hospitalization, and the appropriateness of getting care in the doctors' office rather than the emergency room. Those are the parts of reform that actually have to happen that are not well-specified in the bill."
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COMMENTS
Showing posts with label small business. Show all posts
Showing posts with label small business. Show all posts
Wednesday, June 2, 2010
Sunday, May 30, 2010
Businesses find they may have unexpected costs as part of PPACA's reforms
Insuring Resources Commentary:
I've numbered the items within the MJ editorial so I can address them for you a bit easier:
1.This is very likely and a key reason why prices for health care will continue to increase as there are simply not enough primary care doctors as they seek to specialize and increase their earning potential.
3. Supposedly HHS (the agency that is writing the implementation rules) is working closely with insurers to get it right concerning what should be administrative costs and which should be left on the health care side of the ledger.
4. The smaller the plan, the higher the increase. Although in Wisconsin this mandate only impacts about 26% of all employer coverage. still for small groups, premiums will definitely rise because of this.
5. This will definitely lead the employers impacted to reduce benefits. This is not a great idea as part of the financing mechanism.
6. There are many reasons why wages may be kept lower. This is one of them but a larger one includes the tax credits available to businesses with salary's that average less than $50,000.
7. Employers will definitely cut hours of many workers to part-time so that they avoide the penalties within the bill related to their employees accessing the exchange if they don't offer health insurance.
Summary:
There are numerous problemns with this reform package. The essential component is that health care should be paid on a "episode of care" basis rather than the current fee-for-service basis. We also need greater incentives for providers to install lean efficiencies... this should have been written in the legislation.
---------------- ------------------
Businesses prepare to handle health care reform
Companies find they may have unexpected costs as part of legislation
Milw. Journal 5/29/10
Editorial by John Torinus
Seminars and webinars abound on how business can cope with the 2,300-page Obamacare, and attendees quickly learn that there are as many unintended consequences in the new law as intended and that there are as many unknowns as knowns.
It is an exceedingly complex bill, replete with unanswered questions that resulted from the unseemly way in which the House and Senate versions were mashed together.
Businesses, including those in the health care sector, also learn that, while the new law deals with the issue of the uninsured in the country, it deals minimally with their major issue: out-of-control medical inflation.
Human relations executives I talk to are predicting that costs and premiums will continue to rise sharply, even more so with the new law. Hence, the work of real reform of the way U.S. care is delivered and paid for continues, at least in the private sector.
Let's look first at some of the unintended consequences already discovered in the wet ink of the new law and then at the continuing real reforms outside the Washington Beltway.
First, an early list of unintended consequences:
1.• Because 32 million more people will be covered, because insured people use about twice as much health care as the uninsured, and because no increase in the supply of doctors was built into Obamacare, there will be a severe shortage of doctors to serve the newly insured. Doctors and dentists already are turning away Medicaid recipients because of below-market reimbursements. Some are spurning Medicare patients.
2.• Companies have already taken billions of dollars in hits on their financials because of the lost subsidies for retiree drug benefits. Accounting rules require that they recognize the higher future liabilities for their drug programs.
3.• The requirement that insurance companies serving small businesses must spend at least 80% of premiums on direct health care charges has them in a quandary. Depending on how the regulators define payouts, their overheads could be more than 20%. If they can't meet the new test, they will exit the business.
4.• Premiums could rise as companies are required to cover children up to age 26. That added coverage doesn't come without a cost, so companies may reset their premium schedules to say the more children, the higher the premium.
5.• The "Cadillac tax" on high-cost plans ($27,500 for a family plan) may drive companies and their unions toward consumer-driven health plans. Those plans are less expensive because they bring down costs and premiums. A consumer-driven health plan could keep premiums below the Cadillac level. An estimated 60% of all plans will face the 40% surtax when it takes effect in 2018.
6.• The 4% surtax will become a bargaining issue as part of total compensation, and therefore could have a downward effect on wages and other benefits.
7.• Employers will probably cut part-time employee hours to fewer than 30 hours per week to stay under the threshold for required coverage or penalties for non-coverage.
8• Some companies are calculating whether to keep or drop coverage and pay the low fines in the law. Some will get out of the health care game.
Meanwhile, of necessity, real reforms of the major issues facing health care continue, and even accelerate.
Wisconsin innovators are often in the lead. Among the reforms:
• Growth continues in people covered under health savings accounts, now estimated at 10 million, up from 8 million a year ago. Another 10 million are estimated to be covered in plans with health reimbursement arrangements. This is a new army of engaged consumers who will insist on better value. These plans work. They cut costs and premiums; employees love them; and they're becoming part of retirement planning, a companion to 401(k) plans.
• This month, 150 Wisconsin health care leaders held a summit to embark on payment reform. They seek an escape from payment by procedures - a poorly devised system - to payment by episode of care.
• Serigraph found a broker who has cut deals for bundled prices on elective procedures in hospitals across the country, proving such reform is possible. A medical bill doesn't have to be a Babel of line items.
A. • John Toussaint of ThedaCare in Appleton now has 27 health care systems across the country signed up to instill lean disciplines. Costs and errors plummet when that happens.
The president's people have a lot of work to do as they write the regulations that will shape Obamacare. They need to be careful not to do mortal damage to the insurance industry they bashed on their way to victory. Short of a complete national takeover, which didn't fly with the people and therefore Congress, they need the industry.
And his disciples need to let private sector reformers proceed without hindrance because there is not enough money in the country to pay for all the health care they have promised if costs aren't reined in. He needs the real reformers to succeed.
John Torinus is chairman of Serigraph Inc. of West Bend and a founder of BizStarts Milwaukee, a nonprofit organization dedicated to fostering entrepreneurship in southeastern Wisconsin.
I've numbered the items within the MJ editorial so I can address them for you a bit easier:
1.This is very likely and a key reason why prices for health care will continue to increase as there are simply not enough primary care doctors as they seek to specialize and increase their earning potential.
3. Supposedly HHS (the agency that is writing the implementation rules) is working closely with insurers to get it right concerning what should be administrative costs and which should be left on the health care side of the ledger.
4. The smaller the plan, the higher the increase. Although in Wisconsin this mandate only impacts about 26% of all employer coverage. still for small groups, premiums will definitely rise because of this.
5. This will definitely lead the employers impacted to reduce benefits. This is not a great idea as part of the financing mechanism.
6. There are many reasons why wages may be kept lower. This is one of them but a larger one includes the tax credits available to businesses with salary's that average less than $50,000.
7. Employers will definitely cut hours of many workers to part-time so that they avoide the penalties within the bill related to their employees accessing the exchange if they don't offer health insurance.
Summary:
There are numerous problemns with this reform package. The essential component is that health care should be paid on a "episode of care" basis rather than the current fee-for-service basis. We also need greater incentives for providers to install lean efficiencies... this should have been written in the legislation.
---------------- ------------------
Businesses prepare to handle health care reform
Companies find they may have unexpected costs as part of legislation
Milw. Journal 5/29/10
Editorial by John Torinus
Seminars and webinars abound on how business can cope with the 2,300-page Obamacare, and attendees quickly learn that there are as many unintended consequences in the new law as intended and that there are as many unknowns as knowns.
It is an exceedingly complex bill, replete with unanswered questions that resulted from the unseemly way in which the House and Senate versions were mashed together.
Businesses, including those in the health care sector, also learn that, while the new law deals with the issue of the uninsured in the country, it deals minimally with their major issue: out-of-control medical inflation.
Human relations executives I talk to are predicting that costs and premiums will continue to rise sharply, even more so with the new law. Hence, the work of real reform of the way U.S. care is delivered and paid for continues, at least in the private sector.
Let's look first at some of the unintended consequences already discovered in the wet ink of the new law and then at the continuing real reforms outside the Washington Beltway.
First, an early list of unintended consequences:
1.• Because 32 million more people will be covered, because insured people use about twice as much health care as the uninsured, and because no increase in the supply of doctors was built into Obamacare, there will be a severe shortage of doctors to serve the newly insured. Doctors and dentists already are turning away Medicaid recipients because of below-market reimbursements. Some are spurning Medicare patients.
2.• Companies have already taken billions of dollars in hits on their financials because of the lost subsidies for retiree drug benefits. Accounting rules require that they recognize the higher future liabilities for their drug programs.
3.• The requirement that insurance companies serving small businesses must spend at least 80% of premiums on direct health care charges has them in a quandary. Depending on how the regulators define payouts, their overheads could be more than 20%. If they can't meet the new test, they will exit the business.
4.• Premiums could rise as companies are required to cover children up to age 26. That added coverage doesn't come without a cost, so companies may reset their premium schedules to say the more children, the higher the premium.
5.• The "Cadillac tax" on high-cost plans ($27,500 for a family plan) may drive companies and their unions toward consumer-driven health plans. Those plans are less expensive because they bring down costs and premiums. A consumer-driven health plan could keep premiums below the Cadillac level. An estimated 60% of all plans will face the 40% surtax when it takes effect in 2018.
6.• The 4% surtax will become a bargaining issue as part of total compensation, and therefore could have a downward effect on wages and other benefits.
7.• Employers will probably cut part-time employee hours to fewer than 30 hours per week to stay under the threshold for required coverage or penalties for non-coverage.
8• Some companies are calculating whether to keep or drop coverage and pay the low fines in the law. Some will get out of the health care game.
Meanwhile, of necessity, real reforms of the major issues facing health care continue, and even accelerate.
Wisconsin innovators are often in the lead. Among the reforms:
• Growth continues in people covered under health savings accounts, now estimated at 10 million, up from 8 million a year ago. Another 10 million are estimated to be covered in plans with health reimbursement arrangements. This is a new army of engaged consumers who will insist on better value. These plans work. They cut costs and premiums; employees love them; and they're becoming part of retirement planning, a companion to 401(k) plans.
• This month, 150 Wisconsin health care leaders held a summit to embark on payment reform. They seek an escape from payment by procedures - a poorly devised system - to payment by episode of care.
• Serigraph found a broker who has cut deals for bundled prices on elective procedures in hospitals across the country, proving such reform is possible. A medical bill doesn't have to be a Babel of line items.
A. • John Toussaint of ThedaCare in Appleton now has 27 health care systems across the country signed up to instill lean disciplines. Costs and errors plummet when that happens.
The president's people have a lot of work to do as they write the regulations that will shape Obamacare. They need to be careful not to do mortal damage to the insurance industry they bashed on their way to victory. Short of a complete national takeover, which didn't fly with the people and therefore Congress, they need the industry.
And his disciples need to let private sector reformers proceed without hindrance because there is not enough money in the country to pay for all the health care they have promised if costs aren't reined in. He needs the real reformers to succeed.
John Torinus is chairman of Serigraph Inc. of West Bend and a founder of BizStarts Milwaukee, a nonprofit organization dedicated to fostering entrepreneurship in southeastern Wisconsin.
Wednesday, May 26, 2010
Small Business Tax Credit- Let's look at the fine print
Insuring Resources Commentary:
I may rename this blog- "The Devil is in the details"
For months administration officials have said most small businesses will receive the tax credit and most will be helped in providing their employees health care.
Ok, let's take a closer look as the article below does.
The tax credit applies to businesses with 50 or less employees whose wages are less than $50,000 on average.
BUT, that credit drops off sharply once a company gets above 10 workers and $25,000 average annual wages. Hmmm.
Let's take a small financial services company I know of that's located near Milwaukee as an example. XYZ Financial Services (name has been changed) has 27 employees who havge average earnings of $46,000. Based on the article below XYZ gets virtually no help.
Currently the employees contribute $400 a month for family coverage and have a $5000 family annual deductible with coverage thereafter of 100%. Obviously, the PPO health plan they already have is fraught with poor benefits and incentives to quality, cost effective health care. Basically, if a family reaches their deductible they can run wild for the remainder of the year with 100% coverage, but before meeting their deductible they probably avoid seeing a dr as much as possible.
***(That "running wild" scenario also likely causes increased premiums when they renew their coverage the following year.) That in turn may cause the employer to increase the employee's premium contribution and/or annual deductible. Vicious, meet cycle. ***
So, basically there are no tax credits to aid XYZ in making better health insurance purchasing decisions and the owner may decide to pay the fine for not offering any health insurance and let his employees get it through the state's health insurance exchange.
----------------------
FACT CHECK: Health care small biz tax cut elusive
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2010/05/20/national/w000842D50.DTL&feed=rss.news_nation#ixzz0p3Fvvp2r
By RICARDO ALONSO-ZALDIVAR, Associated Press Writer
Thursday, May 20, 2010
Zach Hoffman was confident his small business would qualify for a new tax cut in President Barack Obama's health care overhaul law.
But when he ran the numbers, Hoffman discovered that his office furniture company wouldn't get any assistance with the $79,200 it pays annually in premiums for its 24 employees. "It leaves you with this feeling of a bait-and-switch," he said.
When the administration unveiled the small business tax credit earlier this week, officials touted its "broad eligibility" for companies with fewer than 25 workers and average annual wages under $50,000 that provide health coverage. Hoffman's workers earn an average of $35,000 a year, which makes it all the more difficult to understand why his company didn't qualify.
Lost in the fine print: The credit drops off sharply once a company gets above 10 workers and $25,000 average annual wages.
It's an example of how the early provisions of the health care law can create winners and losers among groups lawmakers intended to help — people with health problems, families with young adult children and small businesses. Because of the law's complexity, not everyone in a broadly similar situation will benefit.
Consider small businesses: "The idea here is to target the credits to a relatively low number of firms, those who are low-wage and really quite small," said economist Linda Blumberg of the Urban Institute public policy center. The smallest businesses are at greatest risk of losing coverage — assuming they can afford it in the first place, research shows.
On paper, the credit seems to be available to companies with fewer than 25 workers and average wages of $50,000. But in practice, a complicated formula that combines the two numbers works against companies that have more than 10 workers and $25,000 in average wages.
"You can get zero even if you are not hitting the max on both pieces," said Blumberg. Being close to the upper limit on either of the two measures significantly reduces the credit, she explained.
Hoffman used an online calculator to figure his company's eligibility. At least four are available, including one from the House Energy and Commerce Committee, which helped write the legislation. All produced the same result.
"I think (the administration's) intentions are good, but the numbers and applications don't come out to what they intend," said Hoffman, part owner of Wiley Office Furniture, a third-generation family business in Springfield, Ill.
The Treasury Department, which administers the new credit, did not dispute the calculations.
"The small-business tax credit was designed to provide the greatest benefit to employers that currently have the hardest time providing health insurance for their workers — small, low-wage firms," said Michael Mundaca, assistant secretary for tax policy. "Small employers face higher premiums and higher administrative costs than large firms and in many cases cannot afford to provide coverage."
Small business owners are a pivotal constituency in the fall congressional elections, and Democrats are battling to win them over. Major benefits of the health care law — competitive insurance markets, more stable premiums and a ban on denying coverage to those in poor health — don't take effect until 2014. But the health care credit is available this year.
It can be a boon for smaller companies paying lower wages. Betsy Burton, owner of The King's English Bookshop in Salt Lake City, estimates that she will get a credit of roughly $21,000 against premiums of about $67,800. She has 11 full-time equivalent employees averaging $26,100.
"What it means is that I can afford to carry this insurance and insure people's families," said Burton. "I was afraid that we were fast approaching a time when I would have to choose between insuring my employees and closing my doors."
Burton believes offering health insurance is the right thing for an employer to do — and makes good business sense because it helps her retain valued employees. Except at the beginning, she has provided coverage for most of the 33 years the bookstore has been in business.
Hoffman, the furniture store owner whose business missed out, says he understands that lawmakers had a limited amount of money for the health care legislation. But his company's premiums rose 15 percent this year, and it's a struggle to keep paying.
To get the most out of the new federal credit, Hoffman said he'd have to cut his work force to 10 employees and slash their wages.
"That seems like a strange outcome, given we've got 10 percent unemployment," he said
I may rename this blog- "The Devil is in the details"
For months administration officials have said most small businesses will receive the tax credit and most will be helped in providing their employees health care.
Ok, let's take a closer look as the article below does.
The tax credit applies to businesses with 50 or less employees whose wages are less than $50,000 on average.
BUT, that credit drops off sharply once a company gets above 10 workers and $25,000 average annual wages. Hmmm.
Let's take a small financial services company I know of that's located near Milwaukee as an example. XYZ Financial Services (name has been changed) has 27 employees who havge average earnings of $46,000. Based on the article below XYZ gets virtually no help.
Currently the employees contribute $400 a month for family coverage and have a $5000 family annual deductible with coverage thereafter of 100%. Obviously, the PPO health plan they already have is fraught with poor benefits and incentives to quality, cost effective health care. Basically, if a family reaches their deductible they can run wild for the remainder of the year with 100% coverage, but before meeting their deductible they probably avoid seeing a dr as much as possible.
***(That "running wild" scenario also likely causes increased premiums when they renew their coverage the following year.) That in turn may cause the employer to increase the employee's premium contribution and/or annual deductible. Vicious, meet cycle. ***
So, basically there are no tax credits to aid XYZ in making better health insurance purchasing decisions and the owner may decide to pay the fine for not offering any health insurance and let his employees get it through the state's health insurance exchange.
----------------------
FACT CHECK: Health care small biz tax cut elusive
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2010/05/20/national/w000842D50.DTL&feed=rss.news_nation#ixzz0p3Fvvp2r
By RICARDO ALONSO-ZALDIVAR, Associated Press Writer
Thursday, May 20, 2010
Zach Hoffman was confident his small business would qualify for a new tax cut in President Barack Obama's health care overhaul law.
But when he ran the numbers, Hoffman discovered that his office furniture company wouldn't get any assistance with the $79,200 it pays annually in premiums for its 24 employees. "It leaves you with this feeling of a bait-and-switch," he said.
When the administration unveiled the small business tax credit earlier this week, officials touted its "broad eligibility" for companies with fewer than 25 workers and average annual wages under $50,000 that provide health coverage. Hoffman's workers earn an average of $35,000 a year, which makes it all the more difficult to understand why his company didn't qualify.
Lost in the fine print: The credit drops off sharply once a company gets above 10 workers and $25,000 average annual wages.
It's an example of how the early provisions of the health care law can create winners and losers among groups lawmakers intended to help — people with health problems, families with young adult children and small businesses. Because of the law's complexity, not everyone in a broadly similar situation will benefit.
Consider small businesses: "The idea here is to target the credits to a relatively low number of firms, those who are low-wage and really quite small," said economist Linda Blumberg of the Urban Institute public policy center. The smallest businesses are at greatest risk of losing coverage — assuming they can afford it in the first place, research shows.
On paper, the credit seems to be available to companies with fewer than 25 workers and average wages of $50,000. But in practice, a complicated formula that combines the two numbers works against companies that have more than 10 workers and $25,000 in average wages.
"You can get zero even if you are not hitting the max on both pieces," said Blumberg. Being close to the upper limit on either of the two measures significantly reduces the credit, she explained.
Hoffman used an online calculator to figure his company's eligibility. At least four are available, including one from the House Energy and Commerce Committee, which helped write the legislation. All produced the same result.
"I think (the administration's) intentions are good, but the numbers and applications don't come out to what they intend," said Hoffman, part owner of Wiley Office Furniture, a third-generation family business in Springfield, Ill.
The Treasury Department, which administers the new credit, did not dispute the calculations.
"The small-business tax credit was designed to provide the greatest benefit to employers that currently have the hardest time providing health insurance for their workers — small, low-wage firms," said Michael Mundaca, assistant secretary for tax policy. "Small employers face higher premiums and higher administrative costs than large firms and in many cases cannot afford to provide coverage."
Small business owners are a pivotal constituency in the fall congressional elections, and Democrats are battling to win them over. Major benefits of the health care law — competitive insurance markets, more stable premiums and a ban on denying coverage to those in poor health — don't take effect until 2014. But the health care credit is available this year.
It can be a boon for smaller companies paying lower wages. Betsy Burton, owner of The King's English Bookshop in Salt Lake City, estimates that she will get a credit of roughly $21,000 against premiums of about $67,800. She has 11 full-time equivalent employees averaging $26,100.
"What it means is that I can afford to carry this insurance and insure people's families," said Burton. "I was afraid that we were fast approaching a time when I would have to choose between insuring my employees and closing my doors."
Burton believes offering health insurance is the right thing for an employer to do — and makes good business sense because it helps her retain valued employees. Except at the beginning, she has provided coverage for most of the 33 years the bookstore has been in business.
Hoffman, the furniture store owner whose business missed out, says he understands that lawmakers had a limited amount of money for the health care legislation. But his company's premiums rose 15 percent this year, and it's a struggle to keep paying.
To get the most out of the new federal credit, Hoffman said he'd have to cut his work force to 10 employees and slash their wages.
"That seems like a strange outcome, given we've got 10 percent unemployment," he said
Wednesday, May 19, 2010
More on Small Business Health Care Issues
Insuring Resources Commentary:
As I stated in yesterday's blog entry small businesses with higher salary's appear to be on the outside looking in. This is all a work in progress so everything is up in the air on this proposal. I'll highlight the high points below.
------- --------- ---------
New tax break for health care gets mixed review
By RICARDO ALONSO-ZALDIVAR (AP) – 1 day ago
WASHINGTON — The Obama administration Monday unveiled a tax cut for small companies that provide health insurance, but business groups gave it a mixed review.
Even if it amounts to free money, many small businesses won't qualify for the tax credit.
The full benefit goes to companies that have 10 or fewer workers with average salaries of $25,000 or less. They can get Uncle Sam to pick up 35 percent of their premiums. But sole proprietors aren't eligible. And neither are firms with 25 or more employees, or average wages of $50,000 and above.
"We're thinking mom-and-pop shops with one or two employees," said James Gelfand, the U.S. Chamber of Commerce's health policy director. "For some businesses this will be helpful, but for many it will not be helpful. You have to be so small that it will be difficult."
Administration officials said they're trying to target assistance to those who need it most. "The Number 1 concern of small businesses is access to affordable health care," said Small Business Administration head Karen Mills, noting that only about half of businesses with three to ten employees offer coverage.
"People know this means money in their pockets," Mills added.
The major expansion of coverage under President Barack Obama's health care overhaul law isn't slated to happen until 2014. Congress included the small business tax credit as an immediate benefit partly in recognition of the political clout of small business.
Nonetheless, small business owners remain skeptical of the law. Last week the National Federation of Independent Business joined a court challenge seeking to overturn its requirement that most Americans obtain health insurance coverage.
IRS rules issued Monday resolved a range of questions about the tax credit that Congress didn't address. The agency generally worked to expand the number of companies that can qualify for the benefit.
For example, dental and vision benefits will be eligible, not just medical coverage. And companies that get state tax breaks to help pay premiums can also claim the federal assistance. Moreover, business owners' salaries won't be counted in figuring out the company's average wages — allowing more firms to stay under the cutoff for the federal credit.
Nonprofits — including churches and other religious congregations — will also be allowed to claim a partial credit.
The administration estimates that 4 million businesses are potentially eligible for the credit, but the NFIB says its own experts calculate the number is less than half that, about 1.8 million.
"It's difficult to know how many business owners will take this up, at this point," acknowledged Michael Mundaca, head of Treasury's tax policy office. "It can provide a good deal of incentive for those businesses not yet providing health care to take steps to do so."
Others expect the credit will mainly benefit companies that already provide coverage. Part of the reason is that it's temporary, expiring after six years.
"It's hard to imagine businesses creating health care benefits in response to this credit," said Gelfand, the Chamber of Commerce expert. "It's much more likely that this credit will offset the cost to businesses already providing coverage."
John Arensmeyer, head of the advocacy group Small Business Majority, said business owners have expressed strong interest in learning more about the credit. The IRS sent out 4 million postcards to companies that might be eligible.
"Would we have preferred a tax cut that was a lot bigger? Off course," said Arensmeyer, whose group supported the health care overhaul. "But we think it's a lot better than nothing — and a big piece of an overall solution. I never met a small business owner who turned their nose up at a tax credit."
As I stated in yesterday's blog entry small businesses with higher salary's appear to be on the outside looking in. This is all a work in progress so everything is up in the air on this proposal. I'll highlight the high points below.
------- --------- ---------
New tax break for health care gets mixed review
By RICARDO ALONSO-ZALDIVAR (AP) – 1 day ago
WASHINGTON — The Obama administration Monday unveiled a tax cut for small companies that provide health insurance, but business groups gave it a mixed review.
Even if it amounts to free money, many small businesses won't qualify for the tax credit.
The full benefit goes to companies that have 10 or fewer workers with average salaries of $25,000 or less. They can get Uncle Sam to pick up 35 percent of their premiums. But sole proprietors aren't eligible. And neither are firms with 25 or more employees, or average wages of $50,000 and above.
"We're thinking mom-and-pop shops with one or two employees," said James Gelfand, the U.S. Chamber of Commerce's health policy director. "For some businesses this will be helpful, but for many it will not be helpful. You have to be so small that it will be difficult."
Administration officials said they're trying to target assistance to those who need it most. "The Number 1 concern of small businesses is access to affordable health care," said Small Business Administration head Karen Mills, noting that only about half of businesses with three to ten employees offer coverage.
"People know this means money in their pockets," Mills added.
The major expansion of coverage under President Barack Obama's health care overhaul law isn't slated to happen until 2014. Congress included the small business tax credit as an immediate benefit partly in recognition of the political clout of small business.
Nonetheless, small business owners remain skeptical of the law. Last week the National Federation of Independent Business joined a court challenge seeking to overturn its requirement that most Americans obtain health insurance coverage.
IRS rules issued Monday resolved a range of questions about the tax credit that Congress didn't address. The agency generally worked to expand the number of companies that can qualify for the benefit.
For example, dental and vision benefits will be eligible, not just medical coverage. And companies that get state tax breaks to help pay premiums can also claim the federal assistance. Moreover, business owners' salaries won't be counted in figuring out the company's average wages — allowing more firms to stay under the cutoff for the federal credit.
Nonprofits — including churches and other religious congregations — will also be allowed to claim a partial credit.
The administration estimates that 4 million businesses are potentially eligible for the credit, but the NFIB says its own experts calculate the number is less than half that, about 1.8 million.
"It's difficult to know how many business owners will take this up, at this point," acknowledged Michael Mundaca, head of Treasury's tax policy office. "It can provide a good deal of incentive for those businesses not yet providing health care to take steps to do so."
Others expect the credit will mainly benefit companies that already provide coverage. Part of the reason is that it's temporary, expiring after six years.
"It's hard to imagine businesses creating health care benefits in response to this credit," said Gelfand, the Chamber of Commerce expert. "It's much more likely that this credit will offset the cost to businesses already providing coverage."
John Arensmeyer, head of the advocacy group Small Business Majority, said business owners have expressed strong interest in learning more about the credit. The IRS sent out 4 million postcards to companies that might be eligible.
"Would we have preferred a tax cut that was a lot bigger? Off course," said Arensmeyer, whose group supported the health care overhaul. "But we think it's a lot better than nothing — and a big piece of an overall solution. I never met a small business owner who turned their nose up at a tax credit."
Monday, May 17, 2010
IRS Lays Groundwork for Tax Credit For Health Insurance
Insuring Resources Commentary:
The rule development regarding the small business tax credit may ultimately be decided at the Supreme Court, rather than in a good dialogue between business interests and HHS, Labor, the IRS and others that implement and then ultimately enforce them. Check back often for more details on the impact of these rules as they are developed and implemented and their effect on small business interests and consumers. This is only the beginning and I will stay on top of this.....because,
the details are obviously lacking at this poin. Particularly, I wonder about small, professional oriented businesses who have less than 50 employees but have an average wage of more than $50,000. This appears to be a problem for small Arcitecture firms, law firms, dental and physician practices and fledgling health insurance consultants.
----------------------------------------
May 17, 2010 |
By ALLISON BELL - National Underwriter
The Internal Revenue Service has come out with guidelines for small commercial and nonprofit employers that want to take advantage of a new health insurance tax break.
The small employer health insurance tax credit guidelines, given in IRS Notice 2010-44, include examples that can help employers and their benefits advisors determine whether the employers are eligible for the tax break, and exactly how much of the new federal health insurance tax credit the employers can claim.
Calculating exactly how small an employer is for tax credit purposes will depend partly on the definition of “full-time equivalent” employee, officials write in the notice.
“In general, employees who perform services for the employer during the taxable year are taken into account in determining the employer’s FTEs, average wages, and premiums paid,” officials write.
But “partners in a business and certain owners are not taken into account as employees,” officials write. “Specifically, sole proprietors, partners in a partnership, shareholders owning more than 2% of an S corporation.
Owners and partners need not count family members or other dependents who are members of their households as employees when they are trying to qualify for the tax credit.
Season workers count toward the FTE total only if they work for an employer on more than 120 days during the taxable year.
IRS officials devote another section to computing workers’ hours.
The IRS issued the notice to implement a new tax law, Section 45R of the Internal Revenue Code, which was added by Section 1421 of the new Patient Protection and Affordable Care Act.
PPACA and a companion act, the Health Care and Education Reconciliation Act, are part of what federal agencies have dubbed the Affordable Care Act.
This year, the new ACA small business tax break will offer small employers a tax credit equal to at least half the cost of single coverage, if the employees earn average wages of less than $50,000 per year.
The tax credit is not available to ordinary government employers, but it is available to small businesses, small tax-exempt employers, and government-affiliated tax-exempt employers that can be described as section 501(c) organizations.
“For tax years 2010 to 2013, the maximum credit is 35% of premiums paid by eligible small business employers and 25% of premiums paid by eligible employers that are tax-exempt organizations,” officials write in a summary of the notice.
Employers with 10 or fewer FTE employees that pay annual average wages of $25,000 or less can qualify for the maximum credit.
Employers with 10 to 25 FTE employees that pay annual wages of $50,000 or less can qualify for a smaller tax credit.
WASHINGTON -- Pitching President Barack Obama's health care law to skeptical business owners, the IRS on Monday will announce ground rules for small firms wishing to claim a new federal tax credit for health insurance.
Created under the health overhaul law, the tax credit covers up to 35 percent of the premiums that certain small businesses pay on behalf of their workers. The IRS notice addresses unanswered questions about the benefit, which is available starting this year.
The agency's action comes days after the nation's largest small business lobbying group announced it was joining a lawsuit challenging the health care law. The National Federation of Independent Business argues that Congress overstepped its constitutional authority by imposing a requirement that most Americans obtain health insurance either through an employer, a government program or buying it directly.
The IRS notice clarifies that employers can apply the credit toward dental and vision benefits, not just medical coverage. A fact sheet released by the Treasury Department also says that employers can claim the federal benefit even if they receive state tax credits for their insurance premiums.
The White House estimates up to 4 million small businesses may qualify for the tax credit, but it's not clear how many will be eligible. To begin with, they have to provide health insurance _ and many small employers don't. To qualify, companies must pay at least 50 percent of their workers' premiums.
Eligibility is also limited by company size and wages. A firm has to have fewer than 25 full-time workers averaging less than $50,000 a year in pay.
The rule development regarding the small business tax credit may ultimately be decided at the Supreme Court, rather than in a good dialogue between business interests and HHS, Labor, the IRS and others that implement and then ultimately enforce them. Check back often for more details on the impact of these rules as they are developed and implemented and their effect on small business interests and consumers. This is only the beginning and I will stay on top of this.....because,
the details are obviously lacking at this poin. Particularly, I wonder about small, professional oriented businesses who have less than 50 employees but have an average wage of more than $50,000. This appears to be a problem for small Arcitecture firms, law firms, dental and physician practices and fledgling health insurance consultants.
----------------------------------------
May 17, 2010 |
By ALLISON BELL - National Underwriter
The Internal Revenue Service has come out with guidelines for small commercial and nonprofit employers that want to take advantage of a new health insurance tax break.
The small employer health insurance tax credit guidelines, given in IRS Notice 2010-44, include examples that can help employers and their benefits advisors determine whether the employers are eligible for the tax break, and exactly how much of the new federal health insurance tax credit the employers can claim.
Calculating exactly how small an employer is for tax credit purposes will depend partly on the definition of “full-time equivalent” employee, officials write in the notice.
“In general, employees who perform services for the employer during the taxable year are taken into account in determining the employer’s FTEs, average wages, and premiums paid,” officials write.
But “partners in a business and certain owners are not taken into account as employees,” officials write. “Specifically, sole proprietors, partners in a partnership, shareholders owning more than 2% of an S corporation.
Owners and partners need not count family members or other dependents who are members of their households as employees when they are trying to qualify for the tax credit.
Season workers count toward the FTE total only if they work for an employer on more than 120 days during the taxable year.
IRS officials devote another section to computing workers’ hours.
The IRS issued the notice to implement a new tax law, Section 45R of the Internal Revenue Code, which was added by Section 1421 of the new Patient Protection and Affordable Care Act.
PPACA and a companion act, the Health Care and Education Reconciliation Act, are part of what federal agencies have dubbed the Affordable Care Act.
This year, the new ACA small business tax break will offer small employers a tax credit equal to at least half the cost of single coverage, if the employees earn average wages of less than $50,000 per year.
The tax credit is not available to ordinary government employers, but it is available to small businesses, small tax-exempt employers, and government-affiliated tax-exempt employers that can be described as section 501(c) organizations.
“For tax years 2010 to 2013, the maximum credit is 35% of premiums paid by eligible small business employers and 25% of premiums paid by eligible employers that are tax-exempt organizations,” officials write in a summary of the notice.
Employers with 10 or fewer FTE employees that pay annual average wages of $25,000 or less can qualify for the maximum credit.
Employers with 10 to 25 FTE employees that pay annual wages of $50,000 or less can qualify for a smaller tax credit.
WASHINGTON -- Pitching President Barack Obama's health care law to skeptical business owners, the IRS on Monday will announce ground rules for small firms wishing to claim a new federal tax credit for health insurance.
Created under the health overhaul law, the tax credit covers up to 35 percent of the premiums that certain small businesses pay on behalf of their workers. The IRS notice addresses unanswered questions about the benefit, which is available starting this year.
The agency's action comes days after the nation's largest small business lobbying group announced it was joining a lawsuit challenging the health care law. The National Federation of Independent Business argues that Congress overstepped its constitutional authority by imposing a requirement that most Americans obtain health insurance either through an employer, a government program or buying it directly.
The IRS notice clarifies that employers can apply the credit toward dental and vision benefits, not just medical coverage. A fact sheet released by the Treasury Department also says that employers can claim the federal benefit even if they receive state tax credits for their insurance premiums.
The White House estimates up to 4 million small businesses may qualify for the tax credit, but it's not clear how many will be eligible. To begin with, they have to provide health insurance _ and many small employers don't. To qualify, companies must pay at least 50 percent of their workers' premiums.
Eligibility is also limited by company size and wages. A firm has to have fewer than 25 full-time workers averaging less than $50,000 a year in pay.
Sunday, January 10, 2010
Healthcare overhaul could save money and boost jobs, researchers say
Insuring Resources Commentary:
I have shared with readers recently my thoughts and numerous reports that suggest the health care reform bills under consideration would raise insurance premiums and not curtail the increases we've seen in health care costs.
In contrast, the report below argues that the health care reform bills will cut costs and lead to job growth.
Here's my analysis of their review:
This article lacks details but here is the full length report if you're interested:
http://www.americanprogress.org/issues/2010/01/pdf/health_care_jobs.pdf
***Note: I took items 1 and 2 below from the full length report***
For me, it is hard to believe that the taxes on cadillac health plans will have a positive effect so I agree with the Heritage Foundation on that point, as the article shows their viewpoint below. In addition the phased in penalties for businesses with payrolls over $500,000 annually could be a huge detriment to job growth in the all-important small business sector. The phased-in penalties will be key. If they are properly indexed they should have little effect, but if the penalties do not follow incremental and appropriate steps, the effect could be harsh for small business job growth.
In looking at the full length study here are some of the findings:
1) The study estimates that "insurance exchanges should lower average employer-paid premiums by about 2 percent".
2)"Aspects of the health reform legislation now before Congress that would promote more efficient care include bundling payments for different health care providers to encourage practice of more coordinated care, increased use of pay-for-performance systems for providers rather than the pay-per-visit system used by most insurers, and greater funding to support health care transitions, such as between hospitals and outpatient care, and for so-called medical homes, a primary care model that emphasizes coordinated care for the patient. These reforms would initially be implemented within the Medicare program, but are expected to extend to privately insured patients as reforms take hold, as has happened in the past."
The authors estimate cost reductions from these initiatives of about 0.75 percentage points annually after a phase-in period, or 6 percent by 2019. "Other work suggests savings as high as 1.5 percentage points annually are feasible. These cost reductions will enable employers who gain from these increased efficiencies to hire more workers and enable employees to seek higher wages as rising health care costs slow down."
My Final analysis: The authors acknowledge that the bundling cost savings an other reforms begin in Medicare, but they expect that they will be expanded to the rest of the health care system "as has happened in the past."
Here's the problem-- we have no idea when or if that will happen BECAUSE there is no timeframe for it in the bill. Saying it will happen is wishful thinking at best.
As I've argued from the beginning of this blog in August: payment reform and incentivizing lean processes is essential now for the whole system. Voluntary, Medicare programs will not get it done.
Details below from the Harvard/ USC study
--------------------------------
Healthcare overhaul could save money and boost jobs, researchers say
In a report to be released January 8, 2010, Harvard and USC economists say legislation being considered would slow cost increases and free up money for companies to raise wages and hire more workers.
National healthcare legislation in Congress could slow the growth of medical costs, allowing employers to create 250,000 to 400,000 new jobs a year over the next decade, economists from Harvard University and USC are predicting.
Wading into the hotly debated issue of whether the legislation is a job creator or a job killer, researchers from the two universities say that the reforms under consideration would slow the rate of cost increases and free up money for companies to raise wages and hire more workers.
Specifically, healthcare savings could be achieved through proposals for greater competition in insurance markets, better coordination of care and shrinking administrative expenses, they said in a report to be released today. With those changes, employers could then reallocate money now spent on ever-growing premiums to other business priorities.
"We could achieve huge productivity gains," said Harvard economist David Cutler, one of the study's authors and a senior fellow at the Center for American Progress, a liberal think tank.
But conservative economists and many business leaders contend that the proposed legislation would drive up costs by imposing billions of dollars in new taxes and penalties, killing jobs and hurting the economy as the financial burden of healthcare shifts to employers and workers.
One analysis from the conservative Heritage Foundation determined that higher taxes levied on the wealthiest Americans -- a proposal in the healthcare bill approved by the House in November -- would eliminate more than 450,000 jobs over the next decade.
The foundation and other critics of the healthcare overhaul say such taxes would have a particularly harmful effect on small businesses, which operate on smaller margins but have historically played key roles in renewing economic growth after recessions.
"If small businesses are not hiring, you'll have higher unemployment and slower wage growth," said Rea Hederman Jr., a senior policy analyst at the foundation.
Several California employers said they found the Harvard-USC study hard to believe, given that the average employer has paid double-digit annual increases in insurance premiums for several years and experienced other escalating business costs.
Santa Monica attorney Jeffrey Lee Costell, for one, says he will probably hold off hiring additional clerical workers if provisions remain in the healthcare legislation that require companies like his -- those with payrolls exceeding $500,000 -- to pick up the bulk of insurance premiums or face penalties.
"It's going to have a chilling effect," Costell said. "We're getting penalized because we are productive entrepreneurs."
Members of Congress are preparing to hash out a compromise between House and Senate healthcare bills. The measures would, among other things, require most Americans to have health insurance, expand coverage for the poor and stop insurers from denying coverage for preexisting conditions.
The bills also would impose billions of dollars in new taxes on the insurance industry, with the Senate bill including the "Cadillac tax" on more expensive healthcare plans.
The Harvard-USC report could be a boost for President Obama, who has made the economic benefits of health reform a top selling point in his administration's efforts to forge public support for the overhaul.
The president's Council of Economic Advisors said healthcare reform would increase domestic growth, raising family incomes substantially and leading to significant new hiring.
The Harvard-USC economists concluded that industries with high rates of employer-sponsored insurance -- including manufacturing, utilities and financial services -- would see some of the largest employment gains.
"If you have a strong bill that will promote control of healthcare costs, there will be an effect on the number of jobs," said Neeraj Sood, director of international programs at USC's Schaeffer Center for Health Policy and Economics.
How to achieve the savings remains a matter of heated debate in Congress and other quarters. Insurance industry executives maintain that reining in premiums without also addressing surging costs of hospitals and doctors will do little to stem medicine's drag on the economy.
"Unless you have the entire system reduce costs, you won't get premium relief," said Jay Gellert, chief executive of Woodland Hills-based Health Net Inc.
Relief can't come soon enough for San Francisco business owner Scott Hauge, who has seen health premiums for his 30-employee insurance brokerage rise 14% annually over the last seven years.
Hauge, president of advocacy group Small Business California, said he didn't expect much relief from Congress -- at best a slowdown in his costs, as the Harvard-USC economists predict. He said he might use any savings to replace computers, to pay employee bonuses or perhaps to help pick up insurance costs.
He is closely watching the legislation in Congress but can't get any firm sense of how the healthcare overhaul would affect his bottom line.
"There are a whole lot of unknowns out there right now," he said.
I have shared with readers recently my thoughts and numerous reports that suggest the health care reform bills under consideration would raise insurance premiums and not curtail the increases we've seen in health care costs.
In contrast, the report below argues that the health care reform bills will cut costs and lead to job growth.
Here's my analysis of their review:
This article lacks details but here is the full length report if you're interested:
http://www.americanprogress.org/issues/2010/01/pdf/health_care_jobs.pdf
***Note: I took items 1 and 2 below from the full length report***
For me, it is hard to believe that the taxes on cadillac health plans will have a positive effect so I agree with the Heritage Foundation on that point, as the article shows their viewpoint below. In addition the phased in penalties for businesses with payrolls over $500,000 annually could be a huge detriment to job growth in the all-important small business sector. The phased-in penalties will be key. If they are properly indexed they should have little effect, but if the penalties do not follow incremental and appropriate steps, the effect could be harsh for small business job growth.
In looking at the full length study here are some of the findings:
1) The study estimates that "insurance exchanges should lower average employer-paid premiums by about 2 percent".
2)"Aspects of the health reform legislation now before Congress that would promote more efficient care include bundling payments for different health care providers to encourage practice of more coordinated care, increased use of pay-for-performance systems for providers rather than the pay-per-visit system used by most insurers, and greater funding to support health care transitions, such as between hospitals and outpatient care, and for so-called medical homes, a primary care model that emphasizes coordinated care for the patient. These reforms would initially be implemented within the Medicare program, but are expected to extend to privately insured patients as reforms take hold, as has happened in the past."
The authors estimate cost reductions from these initiatives of about 0.75 percentage points annually after a phase-in period, or 6 percent by 2019. "Other work suggests savings as high as 1.5 percentage points annually are feasible. These cost reductions will enable employers who gain from these increased efficiencies to hire more workers and enable employees to seek higher wages as rising health care costs slow down."
My Final analysis: The authors acknowledge that the bundling cost savings an other reforms begin in Medicare, but they expect that they will be expanded to the rest of the health care system "as has happened in the past."
Here's the problem-- we have no idea when or if that will happen BECAUSE there is no timeframe for it in the bill. Saying it will happen is wishful thinking at best.
As I've argued from the beginning of this blog in August: payment reform and incentivizing lean processes is essential now for the whole system. Voluntary, Medicare programs will not get it done.
Details below from the Harvard/ USC study
--------------------------------
Healthcare overhaul could save money and boost jobs, researchers say
In a report to be released January 8, 2010, Harvard and USC economists say legislation being considered would slow cost increases and free up money for companies to raise wages and hire more workers.
National healthcare legislation in Congress could slow the growth of medical costs, allowing employers to create 250,000 to 400,000 new jobs a year over the next decade, economists from Harvard University and USC are predicting.
Wading into the hotly debated issue of whether the legislation is a job creator or a job killer, researchers from the two universities say that the reforms under consideration would slow the rate of cost increases and free up money for companies to raise wages and hire more workers.
Specifically, healthcare savings could be achieved through proposals for greater competition in insurance markets, better coordination of care and shrinking administrative expenses, they said in a report to be released today. With those changes, employers could then reallocate money now spent on ever-growing premiums to other business priorities.
"We could achieve huge productivity gains," said Harvard economist David Cutler, one of the study's authors and a senior fellow at the Center for American Progress, a liberal think tank.
But conservative economists and many business leaders contend that the proposed legislation would drive up costs by imposing billions of dollars in new taxes and penalties, killing jobs and hurting the economy as the financial burden of healthcare shifts to employers and workers.
One analysis from the conservative Heritage Foundation determined that higher taxes levied on the wealthiest Americans -- a proposal in the healthcare bill approved by the House in November -- would eliminate more than 450,000 jobs over the next decade.
The foundation and other critics of the healthcare overhaul say such taxes would have a particularly harmful effect on small businesses, which operate on smaller margins but have historically played key roles in renewing economic growth after recessions.
"If small businesses are not hiring, you'll have higher unemployment and slower wage growth," said Rea Hederman Jr., a senior policy analyst at the foundation.
Several California employers said they found the Harvard-USC study hard to believe, given that the average employer has paid double-digit annual increases in insurance premiums for several years and experienced other escalating business costs.
Santa Monica attorney Jeffrey Lee Costell, for one, says he will probably hold off hiring additional clerical workers if provisions remain in the healthcare legislation that require companies like his -- those with payrolls exceeding $500,000 -- to pick up the bulk of insurance premiums or face penalties.
"It's going to have a chilling effect," Costell said. "We're getting penalized because we are productive entrepreneurs."
Members of Congress are preparing to hash out a compromise between House and Senate healthcare bills. The measures would, among other things, require most Americans to have health insurance, expand coverage for the poor and stop insurers from denying coverage for preexisting conditions.
The bills also would impose billions of dollars in new taxes on the insurance industry, with the Senate bill including the "Cadillac tax" on more expensive healthcare plans.
The Harvard-USC report could be a boost for President Obama, who has made the economic benefits of health reform a top selling point in his administration's efforts to forge public support for the overhaul.
The president's Council of Economic Advisors said healthcare reform would increase domestic growth, raising family incomes substantially and leading to significant new hiring.
The Harvard-USC economists concluded that industries with high rates of employer-sponsored insurance -- including manufacturing, utilities and financial services -- would see some of the largest employment gains.
"If you have a strong bill that will promote control of healthcare costs, there will be an effect on the number of jobs," said Neeraj Sood, director of international programs at USC's Schaeffer Center for Health Policy and Economics.
How to achieve the savings remains a matter of heated debate in Congress and other quarters. Insurance industry executives maintain that reining in premiums without also addressing surging costs of hospitals and doctors will do little to stem medicine's drag on the economy.
"Unless you have the entire system reduce costs, you won't get premium relief," said Jay Gellert, chief executive of Woodland Hills-based Health Net Inc.
Relief can't come soon enough for San Francisco business owner Scott Hauge, who has seen health premiums for his 30-employee insurance brokerage rise 14% annually over the last seven years.
Hauge, president of advocacy group Small Business California, said he didn't expect much relief from Congress -- at best a slowdown in his costs, as the Harvard-USC economists predict. He said he might use any savings to replace computers, to pay employee bonuses or perhaps to help pick up insurance costs.
He is closely watching the legislation in Congress but can't get any firm sense of how the healthcare overhaul would affect his bottom line.
"There are a whole lot of unknowns out there right now," he said.
Wednesday, January 6, 2010
Effect on business- Senate and House health bill comparison
Insuring Resources Comparison:
The House and Senate Democrats are currently negotiating a compromise between the two health care reform bills that have passed. The result will most likely be a hybrid of the two on many issues, especially those impacting small business employer-sponsored health coverage. It is instructive, however, to look at those differences while the negotiations take place.
Both bills expand Medicaid in most states, but not in Wisconsin as we have BadgerCare Plus and Core which already expand coverage to families and childless adults up to 200% of the federal poverty level. The Senate and House bills only expand coverage up to 133% and 150% respectively.
The Senate Bill includes:
REQUIREMENTS FOR EMPLOYERS: Not required to offer coverage, but companies with more than 50 employees would pay a fee of $750 per employee if the government ends up subsidizing employees' coverage.
BENEFITS PACKAGE: All plans sold to individuals and small businesses would have to cover basic benefits. The government would set four levels of coverage. The least generous would pay an estimated 60 percent of health care costs per year; the most generous would cover an estimated 90 percent.
The House bill includes:
REQUIREMENTS FOR EMPLOYERS: Employers must provide insurance to their employees or pay a penalty of 8 percent of payroll. Companies with payrolls under $500,000 annually are exempt – a change from the original $250,000 level to accommodate concerns of moderate Democrats – and the penalty is phased in for companies with payrolls between $500,000 and $750,000.
Small businesses – those with 10 or fewer workers – get tax credits to help them provide coverage.
SUBSIDIES: Individuals and families with annual income up to 400 percent of poverty level, or $88,000 for a family of four, would get sliding-scale subsidies to help them buy coverage. The subsidies would begin in 2013.
HOW YOU CHOOSE YOUR HEALTH INSURANCE: Beginning in 2013, through a new Health Insurance Exchange open to individuals and, initially, small employers. It could be expanded to large employers over time. States could opt to operate their own exchanges in place of the national exchange if they follow federal rules.
BENEFITS PACKAGE: A committee would recommend a so-called essential benefits package including preventive services. Out-of-pocket costs would be capped. The new benefit package would be the basic benefit package offered in the exchange.
Background material source: The Huffington Post
The House and Senate Democrats are currently negotiating a compromise between the two health care reform bills that have passed. The result will most likely be a hybrid of the two on many issues, especially those impacting small business employer-sponsored health coverage. It is instructive, however, to look at those differences while the negotiations take place.
Both bills expand Medicaid in most states, but not in Wisconsin as we have BadgerCare Plus and Core which already expand coverage to families and childless adults up to 200% of the federal poverty level. The Senate and House bills only expand coverage up to 133% and 150% respectively.
The Senate Bill includes:
REQUIREMENTS FOR EMPLOYERS: Not required to offer coverage, but companies with more than 50 employees would pay a fee of $750 per employee if the government ends up subsidizing employees' coverage.
BENEFITS PACKAGE: All plans sold to individuals and small businesses would have to cover basic benefits. The government would set four levels of coverage. The least generous would pay an estimated 60 percent of health care costs per year; the most generous would cover an estimated 90 percent.
The House bill includes:
REQUIREMENTS FOR EMPLOYERS: Employers must provide insurance to their employees or pay a penalty of 8 percent of payroll. Companies with payrolls under $500,000 annually are exempt – a change from the original $250,000 level to accommodate concerns of moderate Democrats – and the penalty is phased in for companies with payrolls between $500,000 and $750,000.
Small businesses – those with 10 or fewer workers – get tax credits to help them provide coverage.
SUBSIDIES: Individuals and families with annual income up to 400 percent of poverty level, or $88,000 for a family of four, would get sliding-scale subsidies to help them buy coverage. The subsidies would begin in 2013.
HOW YOU CHOOSE YOUR HEALTH INSURANCE: Beginning in 2013, through a new Health Insurance Exchange open to individuals and, initially, small employers. It could be expanded to large employers over time. States could opt to operate their own exchanges in place of the national exchange if they follow federal rules.
BENEFITS PACKAGE: A committee would recommend a so-called essential benefits package including preventive services. Out-of-pocket costs would be capped. The new benefit package would be the basic benefit package offered in the exchange.
Background material source: The Huffington Post
Tuesday, October 20, 2009
More Small Business Stats- The Case for Reform
This is from a report from the U.S. Dept. of Human Services-
A new report, "Insurance at Risk: Small Business Employees Risk Losing Coverage" details how small businesses are increasingly dropping health insurance and why.
The report notes:
Employees of small businesses are 50 percent more likely to lose coverage as workers at large businesses. Half of workers in small firms that do not offer health benefits remain uninsured.
Premiums for employer-based health insurance have more than doubled since 2000, rising three times faster than wages. As a result, fewer small businesses provide coverage for their employees. In 2000, 57 percent of firms employing less than 10 workers provided coverage. In 2009, only 46 percent of similar-sized firms provided coverage.
In one national survey, nearly three-quarters of small businesses that did not offer benefits cited high premiums as the reason, and on average small businesses pay up to 18 percent more than large firms for the same health insurance policy. This is due in part to high broker fees (which can be up to 10 percent of premiums)and health plan administrative costs that are three to four times those in the large group market.
A new report, "Insurance at Risk: Small Business Employees Risk Losing Coverage" details how small businesses are increasingly dropping health insurance and why.
The report notes:
Employees of small businesses are 50 percent more likely to lose coverage as workers at large businesses. Half of workers in small firms that do not offer health benefits remain uninsured.
Premiums for employer-based health insurance have more than doubled since 2000, rising three times faster than wages. As a result, fewer small businesses provide coverage for their employees. In 2000, 57 percent of firms employing less than 10 workers provided coverage. In 2009, only 46 percent of similar-sized firms provided coverage.
In one national survey, nearly three-quarters of small businesses that did not offer benefits cited high premiums as the reason, and on average small businesses pay up to 18 percent more than large firms for the same health insurance policy. This is due in part to high broker fees (which can be up to 10 percent of premiums)and health plan administrative costs that are three to four times those in the large group market.
Tuesday, October 6, 2009
Small Business and Health Care Reform
Here are four statistics that make a tremendous case for the need for comprehensive, cost-cutting health care reform:
* 28 million American small-business owners, their employees and their dependents are uninsured.
* Insurance premiums have jumped 129 percent since 2000.
* Small businesses pay an average of 18 percent more than big businesses for the same amount of coverage.
* Small businesses represent 99.7 percent of all employers.
Source: Milwaukee Business Times
* 28 million American small-business owners, their employees and their dependents are uninsured.
* Insurance premiums have jumped 129 percent since 2000.
* Small businesses pay an average of 18 percent more than big businesses for the same amount of coverage.
* Small businesses represent 99.7 percent of all employers.
Source: Milwaukee Business Times
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