Delaying Medicare Part B: When Do You Enroll?

Choosing whether to enroll in Medicare Part B when you turn 65 can be a tricky business. It is evident that one should enroll in Medicare Part A upon turning 65; Part A (which provides hospital care and related benefits) is free for many over 65 or otherwise eligible for Medicare. There are a few situations in which Part A will not be free: if you or your spouse has not worked and paid Medicare taxes for at least 10 years or if you are under 65 and disabled, but returned back to work. If you buy Part A coverage, you may pay up to $426 per month (down $15 per month from 2013).

However, it is not as clear-cut when one should enroll in Medicare Part B coverage. Part B (medical insurance) is the part of Medicare that typically carries the highest premium. The premium is primarily dependent upon household income, marital status, and manner of filing tax returns, as is seen to the right. The greater one’s income, the more one has to pay for a Medicare Part B premium each month. For most people with Medicare Part B, this premium is $104.90 per month.

Why might you choose to delay your Medicare Part B enrollment past turning 65? For many who do not retire by the age of 65, employer group health plans are preferable to Part B. You and/or your spouse may choose to delay enrolling in Medicare Part B if your employer group health plans have better medical and prescription drug benefits and/or lower costs. It is a wise idea to speak with both your employer and insurance agent to help make the best decision.

It is possible to delay your Medicare Part B enrollment without penalties, but you must proceed carefully. You can sign up for Part B without penalty at any time that you have health coverage based on current employment or during the 8-month Special Enrollment Period that begins after employment ends or after the eligible group health plan coverage ends- whichever is earlier. Eligible health coverage based on employment does not include COBRA continuation plans.

If you delay Medicare Part B enrollment and fail to sign up during the Special Enrollment Period, you will be penalized. You will have to wait until the next General Enrollment Period for Medicare Part B- from January 1 until March 31 of each year; Part B coverage obtained through the General Enrollment Period is not effective until July 1 of that year. Also, not obtaining Part B coverage during your Special Enrollment Period will make you susceptible to the late enrollment penalty. This penalty is an extra 10% of your Part B premium added on for each 12-month period that you could have had Part B coverage but didn’t. 

Let us give an example: Sally was first eligible for Part B coverage upon turning 65 in December, 2009. However, she still was employed and chose to keep her employer group health plan until retiring. She knew that she would retire in January 2013, so she let the policy end in December 2012. She did not apply for Medicare Part B during her 8-month Special Enrollment Period, so she will have to wait until January 1, 2014 to apply for Medicare Part B coverage during the General Enrollment Period (with penalty). Since Sally had been initially eligible to obtain Part B coverage in December 2009, and since it is now December 2013, Sally had four full 12-month periods for which she could have had Part B coverage but chose not to. She fit into the lowest income bracket for Medicare, so Sally’s base Part B premium for 2014 is $104.90. However these four years without Part B gives a total of a 40% penalty ($41.96) added to the base premium each month. Hence, Sally will have to pay a total premium of $146.86 each month in 2014. The 40% penalty would be added to all of Sally's Part B premiums beginning on July 1, 2014 and continuing for the duration of her Part B coverage.

There are more factors to put in the equation when choosing whether to delay Part B enrollment. First, Medicare Part B processing can take up to 90 days. Also, one can only enroll into Medicare Part C (Medicare Advantage) or a Medicare Supplement policy after Medicare Part B coverage is in place. Delays in Part B processing could make it more difficult, or even make the beneficiary unable to obtain a Part C or Medicare Supplement plan at the desired time.

In delaying enrollment, one must also be wary of delaying Medicare Part D (prescription drug plans). If you are considering keeping an employer group health plan after turning 65, you should discuss with your provider whether your group health plan offers creditable drug coverage. If not, it is advisable to obtain a Part D plan during your initial enrollment period (around the time of turning 65). If your group health plan does provide creditable coverage, there is no penalty for not obtaining Part D coverage while maintaining your group health plan. As in delaying Part B enrollment, you must be careful of timing when delaying Part D enrollment. After your group health plan ends, you will have a 63-day Special Election Period during which you can obtain Part D coverage without penalties or a delay in coverage. If you fail to sign up for Part D coverage during your Special Election Period, you will have to wait until the next Annual Election Period (from October 15 until December 7 each year) to obtain Part D coverage. You will also be subject to a penalty of 1% of the premium for each month you delayed Part D enrollment.

There is a better way to proceed when choosing to delay Part B and/or Part D enrollment: plan ahead. The trick to delaying these enrollment periods without penalty is knowing when you need coverage and planning ahead accordingly. If you know when you are going to retire or have your group health plan end, you should apply for Part B coverage a few months in advance, requesting an effective date corresponding to the date of your terminating coverage. This will prevent you from being hit with any penalties, and will also get you through the processing period before you actually need new coverage to begin. Furthermore, you can specify the desired effective date for your Medicare Part B coverage and any additional coverage, such as a Medicare Supplement and/or a Part D prescription drug plan.

For complete information on Medicare Enrollment, you can download the 2014 Medicare and You booklet here.

Until next time,

Andrew Herman, President
AH Insurance Services, Inc.

ObamaCare - Delays and Deadlines

This is a final reminder! Today is the last day for you to purchase health insurance through the Health Insurance Exchanges (HIXs) for a January 1, 2014 effective date! If you purchase insurance through the HIXs after midnight tonight, your effective date will be in February 2014 or later. After the first of the new year, your effective date on the exchange will be the first of the month following purchase. Open enrollment for 2014 ends on March 31.

Initially, the deadline to purchase health insurance on-exchange with a January 1 effective date was December 15. In November, this date was postponed to December 23 after technical difficulties continued with the online enrollment processes. Since the inception of the HIXs, the government’s healthcare website has been fraught with problems, which have affected both consumers and the insurance carriers offering health plans on-exchange.

While the federal website seems to be functioning at this time, certain components of the enrollment process still do not work. One of the most important aspects of purchasing health insurance - making the initial premium payment - is still problematic. On Friday, an internal manager at Humana reported to me that less than a third of their on-exchange applications have been able to process the initial premium payment at the time of application. Consequently, health insurance carriers are extending the deadline for the payment of the first month’s premium until January 10, 2014 for on-exchange policies effective January 1.

Difficulties with other aspects of the ACA have prompted concessionary actions. As non-grandfathered health insurance plans must, from 2014 on, provide the benefits, rights, and protections mandated in the ACA, many consumers have had their health insurance plans cancelled as of the end of 2013. On December 20, 2013, the government responded to this widespread loss of coverage: those who had insurance plans cancelled due to ACA provisions will be eligible for a “hardship exemption” in 2014. This exemption will make them exempt to the tax penalty imposed for not having health insurance in 2014. This exemption is also extended to those who would need to pay more than 8% of their household income on health insurance, those with incomes below the threshold required for filing taxes, those qualifying for religious exemptions, undocumented immigrants, those who are incarcerated, and members of Native American tribes. Some argue that the penalty for not having an insurance plan in 2014 should be rescinded entirely; but as of the date of this post no announcement to that effect has been made.

The implementation of ACA has been anything but smooth, as evidenced by continuing technological difficulties, mass cancellation of existing insurance policies and large premium increases (typically about double the current cost) for those purchasing ACA-compliant plans without any federal subsidy. Many consumers enrolling into on-exchange plans are finding that their preferred medical providers are not in the network, so they would need to change their doctor(s) to use their insurance policy. As far as how the ACA will play out over time is anyone's guess; but so far the delays and "adjustments" to the rules do not portend success of the program, at least to the extent envisioned by its creators.

Here is a brief summary of the delays and new deadlines to date:

 The Small Business Health Options Program, known as the SHOP exchange, will not offer online enrollment until November 2014. This is a one-year delay from the initially planned launch for last month; however, small businesses still have the option to purchase SHOP plans through a broker or agent.

Employers buying on-exchange plans for their workers in states with federally-run HIXs need to work through an agent, broker, or insurance company. Technical problems have rendered the government website well-nigh impossible to use for employers.

A Spanish-language sign-up tool was to be implemented for individuals purchasing insurance through HIXs. It has been delayed, and has not yet seen the light of day.

 The last day to sign up for insurance effective January 1 was delayed from December 15, 2013 until December 23, 2013.

 The last day to pay the first month’s premium for an on-exchange policy effective on January 1 is January 10, 2014.

 The last day to sign up for insurance without penalty was delayed by six weeks (originally February 15, 2014 and now March 31, 2014).

 The Open Enrollment Period for 2015 coverage has been delayed by a month; it shall now open on November 15, 2014 and end on January 15, 2015.

Employers with more than 50 employees will have until 2015 to provide ACA-complying insurance without penalty.

Until next time,

Andrew Herman, President

AH Insurance Services, Inc.

Beware Part D Late Enrollment Penalties

The Part D Late Enrollment penalty is a penalty for not having a prescription drug plan (Medicare Part D) or some equivalent prescription drug coverage for more than 63 days any time after your initial enrollment period for Medicare is over. The late enrollment penalty will hit you if you have chosen not to obtain a Part D plan for some period of time after your initial enrollment period (perhaps due to a perceived lack of need), if your employer stops providing a plan with equivalent prescription drug coverage and you do not obtain another plan within 63 days, or even if you simply forget to or choose not to get a Part D plan in a given year.

The Part D late enrollment penalties will kick in when you (re)obtain Medicare Part D coverage. At that point, the penalty will be added to your Part D premium for the rest of eternity. The penalty is calculated as following:

(number of months without Part D coverage)*1%*(national base beneficiary premium)

The national base beneficiary premium is $32.42 in 2014, and it is projected to increase every year. Hence, the longer one waits, one will not only have to pay a higher percentage of the premium, but the higher percentage of a higher premium.

Let’s give an example: Mrs. Smith’s initial enrollment period for Medicare Part D ended January of 2009. However, she decides in January 2014 that she wants to get a Part D plan. Since she went for 5 years (60 months) without adequate prescription drug benefits, her penalty will be 60% of $32.42: this amount is $19.45. However, the late enrollment penalty is rounded to the nearest ten cent increment, so she will actually pay $19.50 per month. This amount will be added on to her Part D monthly premium perpetually.

The Medicare website gives a few tips on how to avoid a late enrollment penalty:

1.      Sign up for a Part D plan during your initial enrollment period.

2.      Don’t go for more than 63 days without a Part D plan or creditable coverage. Your plan must tell you each year if your drug coverage is creditable coverage.

3.      If you change plans, make sure to tell your new plan about all coverage, especially drug coverage, that you have had.

You do not have to pay a late enrollment penalty if you qualify for the Low Income Subsidy (LIS) program, also known as Extra Help. This is a program that provides people with low incomes with subsidies for drug plan premiums, deductibles, and copayments. For example, drug costs for LIS beneficiaries in 2013 were no more than $2.65 for a generic drug or $6.60 for a brand name covered drug.

You will automatically get Extra Help if you have both Medicare and Supplemental Security Income or both Medicare and Medicaid. If you automatically get Extra Help under these situations, your insurance provider should send you an LIS rider around September.

If you do not automatically get Extra Help, you can still complete an application if you fit the following criteria:

1.      You have Medicare Part A and/or Medicare Part B insurance.

2.      You live in one of the 50 states or in the District of Columbia.

3.      You have:

a.       Less than $26,580 in combined real estate, savings, and investments (not including your house, vehicles, personal possessions, life insurance) if married and living with your spouse.

b.      Less than $13,300 in combined real estate, savings, and investments (not including your house, vehicles, personal possessions, life insurance) if unmarried or if not living with your spouse.
c.   An income lower than 150% of the Federal Poverty Level ($17, 235 individually or $23,365 if married and living with your spouse).
 

If you meet the above criteria, you may apply for Extra Help at this site.

            It is ultimately your decision whether you obtain a Medicare Part D prescription drug plan. If you feel it is not beneficial at the time, you can save money on premiums in the short-term scope. However, you are likely to have heavier penalties if you delay getting a prescription drug plan for a significant period of time. It is also important to note that whatever penalty you may accrue would need to be paid every month perpetually.

Until next time,

Andrew Herman, President

AH Insurance Services, Inc.

Open Enrollment Periods on the New Health Marketplace

            The Department of Health and Human Services (HHS) has just announced further date changes to the Open Enrollment Period for health insurance plans offered through Health Insurance Exchanges (HIXs). The establishment of these marketplaces has been wrought with problems, from website issues to enrollment projection inaccuracies. Hence, the HHS announced today that the Open Enrollment Period will be modified.

             In recent weeks, the HHS announced that instead of February 15, the last day to sign up for insurance without penalty will become March 31, 2014. Today, HHS announced that people now have an extra 8 days- until December 23, 2013- to enroll for health coverage starting on January 1, 2014. All those that sign up before December 23 must pay their first month's premium by December 31 for the plan to take effect. In addition, the HHS announced yesterday that the Open Enrollment Period for 2015 will be further delayed; rather than beginning as planned on October 15, 2014, the Open Enrollment Period for 2015 will be pushed back to November 15, 2014, and will last until January 7, 2015.
 

            You are able to sign up for health insurance through the exchange via www.healthcare.gov. The Open Enrollment Period on the federal and state HIXs began this year on October 1, 2013, albeit to a rocky start. During the first week, many had difficulty signing up on the exchanges due to technical difficulties.  However, enrollment on the exchanges will soon be functional. If you wish to purchase private health insurance through the exchanges, you should pay close attention to the timeline below:

It is important to note that the ACA has extended the Open Enrollment Period not only to the HIXs, but also to the private sector of health insurance. Individual or family insurance plans bought off-exchange must also be purchased between October 1, 2013 and March 31, 2014. There are a few exceptions, such as significant changes in job circumstances or employer-provided health insurance.

The penalty for not having health insurance in 2014 is $95 or 1% of your 2014 income, whichever is greater. This amount is for each person- if you are an individual, this is it, but if you have a family, you must pay this amount for you, for your spouse, and for each child, up to the maximum penalty described in the chart below. This penalty is going to go up gradually in time; it is projected to be $695 or 2.5% of your income (whichever is greater) by 2016, and will be adjusted to reflect the cost of living past that point. The increase in penalties can be seen below.

From Kaiser Health News

Regardless of whether you purchase insurance on or off the exchange, you want to make sure you have insurance by the end of the Open Enrollment Period. If you have any questions about obtaining health insurance for 2014, feel free to call us at AH Insurance Services on 1(866) 500-4532 or locally on (727) 397-6932.

Until next time,

Andrew Herman
AH Insurance Services, Inc.

Medicare Part B Premium Stays Flat in 2014

The Centers for Medicare and Medicaid Services (CMS) announced earlier this week that the premiums for Medicare Part B will remain at $104.90 per month, the same as in 2013.  The Medicare Part B deductible also will remain unchanged at $147.

CMS stated that health care reform efforts are eliciting significant out-of-pocket savings for Medicare beneficiaries, pointing to zero growth in 2014 Medicare Part B premiums and deductibles, and more than $8 billion in cumulative savings in the prescription drug gap known as the “donut hole.”

According to CMS, since the Affordable Care Act provision to close the donut hole took effect, more than 7.1 million seniors and people with disabilities who reached the donut hole have saved $8.3 billion on their prescription drugs.  In the first nine months of 2013 nearly 2.8 million people nationwide who reached the donut hole this year have saved $2.3 billion, an average of $834 per beneficiary.  These figures are higher than at this point last year (2.3 million beneficiaries had saved $1.5 billion for an average of $657 per beneficiary).

The health care law gave those who reached the donut hole in 2010 a one-time $250 check, then began phasing in discounts and coverage for brand-name and generic prescription drugs beginning in 2011.  The donut hole ultimately will be closed in the year 2020.

Medicare Parts A and B Premiums and Part A Deductible

By law, the standard Part B premium represents roughly one-fourth of the average cost for beneficiaries aged 65 and over, plus a contingency margin to provide for possible variations between actual and projected costs.  Part B covers physicians’ services, outpatient hospital services, certain home health services, durable medical equipment, and other items.

Since 2007, Medicare beneficiaries have been subjected to higher Part B monthly premiums based on income.  These income-related monthly premiums, which affect approximately 5% of Medicare beneficiaries, also will remain the same as they were in 2013.

The Medicare Part A premium, which pays for inpatient hospital, skilled nursing facility, and some home health care services, will drop $15 in 2014 to $426.  Although nearly all Medicare beneficiaries do not have to pay a premium for Part A (since they have at least 40 quarters of Medicare-covered employment), enrollees age 65 and over and certain persons with disabilities who have fewer than 30 quarters of coverage pay a monthly premium in order to receive coverage under Part A.  Beneficiaries who have between 30 and 39 quarters of coverage may buy into Part A at a reduced monthly premium rate of $234 for 2014, which reflects a $9 decrease from 2013.

The Medicare Part A deductible that applies when beneficiaries are first admitted to the hospital will be $1,216 in 2014, which is an increase of $32 from this year's $1,184 deductible.

For additional information on Medicare, including the 2014 income-related monthly premium rates for Medicare Part B, please click here to read CMS' October 28th press release.

Until next time,


Andrew Herman
AH Insurance Services, Inc.

It's That Time Again!

Medicare's 2014 Open Enrollment Period Runs From October 15 - December 7

In just two weeks and two days, the Medicare Open Enrollment period will begin.  For Medicare Beneficiaries, this is the chance to change health and prescription drug coverage for 2014.  Detailed information on 2014 plans will be made available online at www.medicare.gov later this week.

If you are satisfied that your current plan meets your needs for next year, then you will not need to do anything at all.  Watch your mail for the Annual Notice of Change (ANOC) provided by your current Medicare plan, as this Notice shows exactly how your benefits will change starting on January 1st.

Medicare Beneficiaries often inquire if they will have the option during Medicare's Open Enrollment Period to voluntarily dis-enroll from their Medicare Advantage (Part C) plan, so that they can return to Original Medicare and buy a Medicare Supplement (also known as Medigap) policy.  The short answer is yes, but there are a few important qualifications:

• If you want coverage for medicines, you will need to enroll in a Standalone Part D Prescription Drug Plan (PDP) since Medicare Supplement policies do not include drug benefits

• In most cases, you must answer medical questions in order to qualify for the new Medicare Supplement policy (if you have recently been in the hospital, or have had medical services recommended but not yet performed, then you may be precluded from getting a policy)

• If you do qualify to purchase a Medicare Supplement policy, the monthly premium may be much higher as compared to the premium for your Medicare Advantage plan

According to Health and Human Services Secretary Kathleen Sebelius, the average premium of Medicare Advantage plans is projected to increase by $1.64 in 2014 from last year, coming to $32.60.  That is a small price increase, but you also should be on the lookout for benefit decreases.

As regards Standalone Prescription Drug Plans, monthly premiums are likely to remain in the neighborhood of $30 for a basic prescription drug plan. The maximum amount insurance companies can designate as the initial deductible actually decreases by $15 in 2014 (from $325 to $310).  Additionally, the infamous donut hole, or coverage gap in prescription drug coverage, will be reduced by $80 because coverage limits have changed.

The annual enrollment season to make change to Medicare health and prescription drug plans coincides with the scheduled launch of the new ObamaCare health insurance exchanges, yet these are two separate programs and should not be confused with one another.  If you are covered through Medicare, you will not need to purchase anything through the new health insurance marketplaces.

We strongly recommend that Medicare Beneficiaries review their Annual Notice of Change (ANOC), along with their Evidence of Coverage (EOC) provided by the carrier.  A simple change to the plan's drug formulary or to the network could have a big impact.

If you have questions or concerns about your Medicare benefits for 2014, please contact us by phone on 1-866-500-4532 or click here to email us.


Until next time,

Andrew Herman, President
AH Insurance Services, Inc.

Approaching 2014 and ACA's Individual Mandate

Starting on January 1, 2014, the Affordable Care Act (ACA) will require nearly all United States citizens to have health insurance coverage or pay a penalty.  If you are purchasing insurance as an individual or small business owner, you must ensure that your new plan complies with the ACA by having the following ten essential health benefits:

1. Ambulatory patient services

2. Emergency services

3. Hospitalization

4. Maternity and newborn care

5. Mental health and substance use disorder substances, including behavioral health treatment

6. Prescription drugs

7. Rehabilitative and habilitative services and devices

8. Laboratory services

9. Preventive and wellness services and chronic disease management

10. Pediatric services, including oral and vision care

Health insurance plans may differ to the extent in which these ten essential health benefits are offered, but in all cases must have benefits that are “substantially equal” to the essential health benefits outlined above.

There are a number of different ways that the individual mandate may be satisfied:

1.        Medicare meets the minimum essential coverage requirement. Both Original Medicare (Parts A and B) and Medicare Advantage (Part C) plans qualify.
2.        If you are covered by a grandfathered health plan (qualifying health insurance coverage in which an individual was enrolled on or before March 23, 2010), you can stay in your plan as long as you continue to pay premiums and do not make any changes that would defeat the plan’s grandfathered status.
3.       If you are covered by a non-grandfathered individual health insurance plan, you will not have to pay a penalty provided that the plan complies with requirements set by the ACA (including the ten essential health benefits).
4.       Employer plans (including retiree plans), with or without grandfathered status, are deemed sufficient coverage. If the employer is a small business, and it does not provide a grandfathered health insurance plan, it must provide the ten essential health benefits. Non-grandfathered large group plans are only expected to provide hospitalization, emergency services, physician and midlevel practitioner care, pharmacy benefits, and laboratory and imaging services in order to comply with the ACA.
5.      Medicaid beneficiaries are also covered, and do not need to pay the penalty. This includes individuals and families up to 138% of the federal poverty level in states that have chosen to expand Medicaid (Florida not included). 
6.       The Children’s Health Insurance Program (CHIP).
7.       TRICARE (for veterans and their families).
8.       Other veterans health care programs.
9.       Peace Corps Volunteer plans.
10.       Any health insurance plan purchased on the new health insurance exchanges will be sufficient coverage. The health insurance exchanges (HIXs) are scheduled to open on October 1, 2013 for purchase of health plans with an effective date on or after January 1, 2014. Health insurance plans on the exchange will be rated by the “metal system”, based on their benefits:

•      Bronze Level – The plan must cover 60% of expected costs for the average individual
•      Silver Level – The plan must cover 70% of expected costs for the average individual
•      Gold Level – The plan must cover 80% of expected costs for the average individual
•      Platinum Level – The plan must cover 90% of expected costs for the average individual

            It is important to look at your HIX (state or federal) to start researching plans as soon as possible, in particular if you may be eligible to receive a premium subsidy (available at 100% - 400% of the Federal Poverty Level) and/or a cost-sharing subsidy (available at 100% - 250% of the Federal Poverty Level).  While health insurance will continue to be sold off the exchanges in 2014, you must purchase coverage on the exchanges in order to receive any premium and cost-sharing subsidies.

The consequences for not purchasing health insurance in 2014 are modest; however, penalties will continue to rise until 2016.  In 2014, the penalty will be $95 or 1% of the family’s annual income- whichever is greater- per adult ($47.50 per child) or a maximum of $285 per family.  However, by 2016, this will have increased to $695 or 2.5% of the family’s annual income- again whichever is greater- per adult, or a maximum of $2,085 per family.

 There are a few groups who are exempted from the penalty, including those with income so low that coverage is considered unaffordable, those who qualify for expanded Medicaid but who live in a state that has chosen not to expand its Medicaid program, members of federally-recognized Indian tribes, and members of recognized religious sects with religious objections to health insurance.  For those who do not fit these exemptions and do not already have sufficient coverage, it is almost time to get the ball rolling if you wish to avoid paying the ACA’s financial penalty.

Until next time,

 

Andrew Herman

 

Employer Mandate Requirement Under ACA Delayed Until 2015

NEWS FLASH - AFFORDABLE CARE ACT (ACA)

White House Delays Employer Mandate Requirement Under ACA 
The U.S. Department of the Treasury announced today that the Obama administration won't be penalizing businesses that do not provide health insurance to their workers in 2014.  Instead, enforcement of ACA's requirement that employers with more than 50 employees provide coverage to their workers will be delayed until 2015.

The Obama administration said the move recognizes that the reporting requirements -- the steps businesses must take to show compliance -- are complex and that the administration will try to streamline them over the next year.  So, there will be no penalties the first year on large employers.  Small businesses with fewer than 50 workers already were exempt.

This surprise announcement does not affect other central provisions of the health care reform law, including the establishment of health care marketplaces where Americans without employer-based health insurance can shop from a menu of insurance policies.  Under those provisions, federal subsidies will be available for lower-income individuals (under 400% of the Federal Poverty Limit, which translates to about $46,000 annual income for a single person or $94,000 for a family of four).

It’s unclear what impact today's announcement will have on ACA's goal of providing coverage to uninsured Americans.  Workers whose employers do not offer coverage, and now have one more year to do so, seemingly will need to shop the individual market to get coverage next year.  Anyone seeking a federal subsidy will need to shop on the state exchanges; but for those not seeking a federal subsidy in 2014, individual health insurance can be purchased on or off the exchanges.

Here is today's announcement from the Treasury Department, posted by Mark J. Mazur, Assistant Secretary for Tax Policy at the U.S. Department of the Treasury.

Until next time,

Andrew Herman, President
AH Insurance Services, Inc.

What Makes Health Care Costs So High?

Dear Readers,

While the jury is still out on whether "Obamacare" will increase or decrease per capita health care costs in the U.S., this post identifies two cost drivers that have absolutely nothing to do with the controversial 2010 health care reform legislation known as the Affordable Care Act (ACA).

First, let us observe the Hospital CEO Pay And Incentives as recently reported by Kaiser Health News and ABC.  Most of the information on salary and bonuses received by sample Hospital CEOs and Presidents was obtained from IRS filings, so it would seem that the data are accurate.

While I have general concerns that hospital executive pay shouldn't be tied to profit and unsustainable expansion, I have more specific concerns about the amounts being paid to CEOs and Presidents of U.S. Hospitals.  Here are some examples of a year's pay, courtesy of Kaiser Health News:

George Halvorson of Kaiser Permanente (CA) - $7,936,510
Dr. John Koster of Providence Health & Services (WA) - $6,379,455
Jeffrey Romoff of UPMC, Pittsburgh (PA) - $5,975,462
Lloyd Dean of Dignity Health (CA) - $5,136,883
Michael Tarwater of Carolinas HealthCare System (NC) - $4,760,026

The compensation for these executives far exceeds the two million and change earned by Dr. John Noseworthy of the Mayo Clinic, arguably one of the best performing medical facilities in the country as measured by patient outcomes (that would seem to be a better driver of medical incentive pay).  But in my own subjective view, I tend to feel that two million is a bit on the high side anyway.

Click here to view Kaiser Health News' CEO compensation tracking chart

Second, I am watching much less television these days due not only to the diminishing quality of the programming, but also to the pervasive "ask your doctor" advertisements.  Encouraging consumers to speak with their physician about every medicine that comes on the market has a direct impact of increasing doctor's office visit costs, not to mention lining the pockets of pharmaceutical company executives.  Furthermore, medicines that are new to the market and rife with adverse side-effects carry their own risk of increasing patient morbidity and ultimately U.S. health care costs as well.

So, short of not using health care services, is there anything Americans can do?  Here are a few suggestions that I feel could go a long way:

For Consumers

• Shop for medicines & services like other consumer goods; i.e. compare quality, cost, outcome
• Minimize use of medications by improving diet, exercising more and trying stress reduction techniques such as professional massage, tai chi or yoga
• Turn the television off

For Doctors

• Place your patients before your pocketbook
• Reject incentives offered by the pharma companies, no matter how attractive
• Resist any temptations to add-on unnecessary services, medical testing and/or expensive prescription medication due to presence of insurance benefits

For Hospital CEOs

• To the hospital executives in the listing above, give some thought to the fact that you earn more than 100 times what your average patient makes in a year
• Focus on quality of services rather than growth of your empire
• Eliminate any bonus structure based on growth and profit; and instead follow the lead of your noteworthy peers such as Dr. John Noseworthy (Mayo Clinic) and Dr. Delos "Toby" Cosgrove (Cleveland Clinic) who reportedly do not receive any bonus compensation

Now that I've said my piece, I'm on my way to create a healthy concoction with my new juicer!

Until next time,

Andrew Herman, President
AH Insurance Services, Inc.

CMS Publishes 2013 Choosing a Medigap Policy Guide

The official 2013 Guide to Health Insurance for People with Medicare has been published by the Centers for Medicare and Medicaid Services (CMS).  This important guide covers topics such as:

• What is a Medicare Supplement Insurance (Medigap) policy
• What Medigap policies cover
• Your rights to buy a Medigap policy
• How to buy a Medigap policy

A Medigap policy is private health insurance that wraps around the Original Medicare Program (Parts A and B) by filling in gaps to the extent provided by the specific Medigap plan purchased.  This means it helps pay some of the health care costs that Original Medicare doesn't cover, such as copayments, coinsurance and deductibles.

Medigap plans sold in the U.S. are known by their "plan letter name" such as Plan F or Plan N.  Consumers who buy a Medigap policy typically also purchase a Stand-alone Medicare Part D Prescription Drug Plan (PDP) since today's Medigap plans don't offer prescription drug coverage.

A Medigap policy is different from a Medicare Advantage Plan (like an HMO or PPO) because those plans deliver all of your Medicare benefits, while Medigap just supplements your Original Medicare benefits.  Under a Medicare Advantage Plan (also known as the Medicare Part C Program), you have the convenience of having coverage for doctors, hospitals and prescription drugs all under one roof.  Medicare Advantage plans utilize provider networks, however, which can be more restrictive compared to the simpler requirement under Medigap policies to visit Medicare-approved providers.

Click Here To Download the 2013 Choosing a Medigap Policy Guide


Until next time,

Andrew Herman
AH Insurance Services, Inc.

Feds Say Health Exchanges to Open on Time, but SHOP Program Hits a Snag

Last week, U.S. Health and Human Services (HHS) Secretary Kathleen Sebelius assured yet another congressional panel that the Patient Protection and Affordable Care Act (PPACA) exchanges will be opening on schedule.

"We are moving ahead," Sebelius stated April 18^th at a House Energy & Commerce health subcommittee hearing on the HHS fiscal year 2014 budget request.  "We are definitely going to be open for open enrollment starting Oct. 1 of 2013."

State Health Insurance Exchange (HIX) programs are mandated under PPACA to provide competitive marketplaces in which individuals and small businesses can choose among private insurance plans; it is meant to be a “one-stop shopping” experience.  The HIX programs also are designed to assess individual financial need and determine federal compensation.  Health insurance plans offered in the insurance exchanges must reach certain levels of coverage and include PPACA-mandated options that other private, grandfathered health plans may be exempt from.

HIX programs can be set up in a few different ways.  First, states can run their own HIX programs; if so, they are eligible to receive federal grants.  States had until December 14, 2012 to submit plans for state-run HIX programs to HHS for approval.  Second, states can run HIX programs in conjunction with the federal government; plans for such programs had to be submitted to HHS by February 15, 2013.  Third, all states who either chose not to submit plans for health insurance exchanges or whose plans were not approved will have programs set up and run by HHS.  All HIX programs are meant to be fully operational by January 1, 2014; states that have declined responsibility or partnership can still choose to implement state HIX programs past that date.

Follow this link for a current map of state decisions regarding HIX programs

While implementation of the HIX programs may still be on schedule, exchanges will not be giving small businesses a full choice of plans in 2014.  At the April 18^th subcommittee hearing, Sebelius explained that HHS has decided to let the Small Business Health Options Program (SHOP) small-group exchanges put off giving employers a chance to offer employees a multi-carrier coverage option.

Each SHOP exchange will still offer the employers themselves a chance to choose from a menu that includes plans from all of the carriers that have agreed to sell plans through that exchange, Sebelius said.

Will the new health exchanges open on time, as Ms. Sebelius assured us last week?  We’ll all know for sure later this year; and by this time next year we’ll have a better idea whether these exchanges ultimately will be a success or a failure.

 

Until next time,

 

Andrew Herman, President

AH Insurance Services, Inc.

What Are the Obamacare "Essential Health Benefits"?

Essential Health Benefits

Section 1032 of the Affordable Care Act (ACA), also known as the "Obamacare" legislation, defines the following categories of benefits that individual and small business insurance plans must cover by January 1, 2014:

 

1.      Ambulatory patient services (these include outpatient services such as doctor office visits).

2.      Emergency services (these include care received in an Emergency Room).

3.      Hospitalization (these include medically-necessary surgeries and other inpatient procedures).

4.      Maternity and newborn care.

5.      Mental health services.

6.      Substance use disorder substances (these include behavioral health treatment).

7.      Prescription drugs.

8.      Rehabilitative and habilitative services and devices (rehabilitation covers services such as relearning how to walk after a stroke, while habilitative services involve learning a new skill such as speaking without a speech impediment).

9.      Laboratory tests and services.

10.  Preventive and wellness services and chronic disease management.

11.  Pediatric services, including oral and vision care.

 

Health plans are allowed to impose cost sharing obligations on plan members for most essential benefits, but those that qualify under a category of preventative health services will be provided without any cost sharing.

States are given the authority under ACA to specify details around these essential benefits.  Cost sharing for plan members will be limited by each plan’s need to cover sufficient benefit costs to qualify under the following four plan types:  Bronze plan, Silver plan, Gold plan and Platinum plan.  Surely, the writers of ACA like precious metals!

It is important to note that while these are categories of benefits that must be provided, health plans are not required to have unlimited coverage of all categories.  Rather, health plans must offer benefits that are “substantially equal” to the ten essential health benefits.  Plans will be able to adjust specific benefits, provided that all ten categories of essential benefits are still sufficiently covered.

More specific definition of the ten essential health benefits will be determined on a state-by-state basis. Each state may choose a benchmark from the following options:

 

·         One of the three largest small group plans in the state

·         One of the three largest state employee plans by enrolment

·         One of the three largest federal employee health plan options by enrolment

·         The largest HMO plan offered in the state’s commercial market by enrolment

If a state chooses not to make a selection, it will be held to the benchmark of the small group plan with the highest enrolment in the state.

The essential health benefits only apply to individual plans and small businesses.  Large group plans will be expected to provide hospitalization and emergency services, physician and midlevel practitioner care, pharmacy benefits, and laboratory and imaging services.

What do these essential health benefits mean for us?  First: a high probability of having more comprehensive coverage.  One study made by HealthPocket.com shows that less than 2% of existing plans meet the new ACA Essential Health Benefit Standards.  On average, existing health plans in the study provided 76% of the Essential Health Benefits, with the missing 24% generally concentrated around several categories:  pediatric dental and vision coverage, maternity, prenatal, delivery, postnatal, substance abuse and mental health coverage.

Of course, insurance premiums will likely increase due to the expansion of plan benefits.  A major factor even more likely to increase premiums starting next January 1st is the ACA's guaranteed issue requirement mandating that people with pre-existing health conditions can sign up for a health plan at any time.  Add to that the ACA's actuarial value requirements on the maximum out-of-pocket costs that can be charged, and we may be looking at some hefty premium increases for those who buy their insurance without a government subsidy!  That will be the subject of another post.

Until next time,

 

Andrew Herman, President

AH Insurance Services, Inc.

 

 

 

4/1 News Flash - CMS Reverses Course and Increases Medicare Advantage Payment Rate

4/1/13 - CMS Releases Final 2014 Medicare Advantage Payment Rates (Source - Reuters)

In a reversal that followed intense lobbying by the insurance industry and members of Congress, the U.S. government said it will increase the payment rate for health insurers that offer coverage through the Medicare Advantage (Part C) program that covers approximately 14 million Medicare beneficiaries.

The Centers for Medicare and Medicaid Services (CMS) announced yesterday that it will increase the payment rate by 3.3 percent in 2014, reversing a 2.3 percent cut announced in February.  CMS declared that the changes came "after careful consideration of public comments."

"The policies announced today further the agency's goal of improving payment accuracy in all our programs, while at the same time ensuring program stability and preserving beneficiary choice," Jonathan Blum, acting principal deputy administrator for the CMS, said in a statement.

Some insurers had hinted they would drop their Medicare Advantage plan offerings if CMS followed through with its initial proposal; which would, combined with other aspects of the new health care reform legislation, increase MA plan premiums between $50 and $90 per month according to actuaries at Oliver Wyman.

Lawmakers on both sides of the aisle took those concerns on board.  More than 160 of them joined an effort to reverse the previously announced rate cut, according to America's Health Insurance Plans (AHIP).

"We have concerns that if CMS does not make this adjustment, many Medicare Advantage enrollees in Massachusetts, and across the country, will face higher premiums and fewer benefits," said the Massachusetts delegation's letter, which was addressed to Marilyn Tavenner, acting CMS administrator, and dated March 27.

Earlier in March, a large bipartisan group of senators highlighted the threat of plans potentially exiting the Medicare Advantage market altogether.  And in recent months, "The Coalition for Medicare Choice," which is funded by AHIP and other private insurers, lobbied hard against the proposed Medicare Advantage cuts through television advertising and social media.  The Coalition posted on its website the Oliver Wyman study warning of a "significant amount of upheaval" if the original 2014 rate plan went through.

For further information, click on these links:

4/1/2013 Reuters Article

The Coalition for Medicare Choices Website


Until next time,

Andrew Herman
AH Insurance Services, Inc.

Will CMS Reconsider 2014 Payment Cuts to Medicare Advantage?

In a bipartisan effort, lawmakers are pushing the Centers for Medicare and Medicaid Services (CMS) to reverse proposed 2014 payment cuts for Medicare Advantage (MA) and Medicare Part D Prescription Drug Plans.  The proposed cuts would have a crippling effect on 2014 MA plan offerings and the more than 14 million Medicare beneficiaries on MA plans.

MA plans constitute the part of Medicare through which private health plans provide comprehensive medical and drug coverage to seniors and other Medicare beneficiaries.  CMS recently proposed a 2.3 percent reduction in MA payments for 2014 at a time when medical costs are projected to increase by three percent.  This is the lowest growth rate in the history of the MA program, and it is far below the 2.8 percent increase in payment rates for 2013.

Karen Ignagni, America's Health Insurance Plans (AHIP) President and CEO, recently stated, "The proposed changes to Medicare Advantage payments are a crushing blow to the millions of seniors and people with disabilities who count on this critically important part of Medicare."

The new proposed payment cuts are in addition to the MA cuts and new health insurance tax included in the Patient Protection and Affordable Care Act (PPACA).  AHIP hired actuaries at Oliver Wyman to assess the cumulative impact of all these changes; and Oliver Wyman estimated in its February 2013 report that the combined effect will be a 6.9 to 7.8 percent cut to MA plans in 2014, causing benefit reductions and premium increases of $50 to $90 per member per month.

Nearly 100 Members of the U.S. House of Representatives have urged CMS to reconsider the payment cuts.  In a letter to CMS earlier this month, lawmakers wrote that the payment cuts "will leave many vulnerable seniors with fewer benefits, higher out-of-pocket costs, and in some cases the loss of their current MA coverage."

Just the other day, I received the following communication from Congressman C.W. Bill Young, U.S. Representative for Florida's 13th district:


March 22, 2013

Because of your earlier support for private Medicare Advantage (MA) plans, I thought you might be interested to learn of recent events in this regard.

As a Representative of one of the largest number of Medicare beneficiaries in the Congress, you can be sure that I am greatly opposed to any reduction in service for our nation's seniors, particularly those with multiple chronic conditions as MA plans have a proven track record when it comes to coordinating care for chronically ill individuals. 

That is why I agreed to sign a letter along with more than 90 of my House colleagues that was sent March 15th to Centers for Medicare and Medicaid Services (CMS) Acting Administrator Marilyn Tavenner expressing serious concerns with the calculations that brought forth a February proposal by CMS to reduce MA payments by 2.3 percent for next year.  Combined with the huge reductions in MA payments that are planned over the next several years to help pay for the controversial 2010 Patient Protection and Affordable Care Act, this additional cut could very well lead to significant disruption for the 14 million beneficiaries enrolled in MA plans.  Specifically, it is estimated the cumulative impact of these changes will reduce MA payments by more than 8 percent in 2014.

This is a clear example of our efforts to prevent any further reduction in MA plans from taking place.  Of course, the solvency of the Medicare program is an issue that will remain under careful scrutiny by the Congress and you can be sure that I will continue to closely monitor the situation and will follow up with you on any new developments that occur.

As always, I greatly appreciate knowing of your support for my efforts on this important matter of mutual concern.  With best wishes and warmest personal regards, I am

Bill Young
Member of Congress


Andrew again.  This time, I'm 100% in agreement with Congressman Young!  Of course, that's not always been the case during the 15 years I've resided in Pinellas County.

Until next time,

Andrew Herman
AH Insurance Services, Inc.

 

Suspension of PCIP (Pre-Existing Condition Insurance Plan)

The Department of Health and Human Services (HHS) has suspended the Pre-Existing Condition Insurance Plan (PCIP) authorized by the Patient Protection and Affordable Care Act (PPACA).  This comes as a surprise, as the PCIP stop-gap program for uninsurable individuals was designed to accept new enrollments through the end of this year, prior to full implementation of PPACA guaranteed issue rules on 1/1/2014.

Why did HHS suspend PCIP enrollment?
The federal government states, on its official health care website, "PCIP is a temporary program for those locked out of the current insurance marketplace.  The program has a limited amount of funding from Congress.  Based on program experience and trends since the start of the program, PCIP enrollees have serious and expensive illnesses with significant and immediate health care needs.  This suspension will help ensure that funds are available through 2013 to continuously cover people currently enrolled in PCIP."

The federal website notes that individuals who recently lost PCIP coverage due to moving may be eligible to re-enroll in PCIP in their new residence state.  To learn more, click here to visit healthcare.gov.

From the viewpoint of many, including Rep. Morgan Griffith (R-Va.) the early shutdown of the PCIP program does not bode well for the fate of PPACA as a whole.  At a U.S. House of Representatives Energy and Commerce health subcommittee meeting today, Griffith remarked, "are we making promises we can't fulfill when we say we're going to cover everybody?"

Douglas Holtz-Eakin, a former Congressional Budget Office director, observed that PPACA defines "affordable" when a consumer spends less than 10% of income on health care.  Unfortunately, the U.S. as a whole now spends nearly 20 percent of national income on health care.  Based on that disconnect, the former CBO stated, "By definition, not all of us can have affordable health care... the law will never add up for everybody in the United States.  It cannot."

Regardless of how the numbers add up, it seems disappointing that PCIP enrollments were suspended more than nine months earlier than expected.  Clearly, this is detrimental to the 50-64 age group most likely to enroll into PCIP due to a pre-existing medical condition.  This demographic group often is described as vulnerable by proponents of PPACA, who advocate for the 3:1 rating rule that keeps premiums lower for older people but shifts those costs to younger people.

In my last blog post, I noted that actuarial studies suggest the average 64-year old exceeds a 5:1 cost ratio, as compared to the average 21-year old.  So while PPACA proponents are busy advocating for the 3:1 rating rule to protect the 50-64 demographic group, HHS strikes an even bigger blow to that same group by suspending PCIP enrollments - leaving newly uninsurable individuals with less options for the next nine months.  So much for early retirement!

Until next time,

Andrew Herman
AH Insurance Services, Inc.