The 5th U.S. Circuit Court of Appeals ruled December 18 that Obamacare’s individual mandate is unconstitutional, then kicked the case back to a lower court to determine which (if any) other parts of the Affordable Care Act (officially the “Patient Protection and Affordable Care Act,” or “PPACA”) can stand. With a lower court now needing to conduct an evaluation, the ACA will most likely remain in place until after the 2020 election.
A group of states led by California Attorney General Xavier Becerra is fighting to keep ACA in place while another group including Texas Attorney General Ken Paxton will be pushing for total repeal. The President termed the Court’s action “a win for all Americans” and “promised” to “deliver the best health care in the world.”
In my opinion, Trump’s promise would be easy to fulfill: simply get the federal government out of the issue and revert control back to individual states. Prior to ACA, that was how the system worked—with insurance company-funded “high risk” pools providing care for sicker individuals.
So what can we do in the meantime?
HEALTHY INDIVIDUALS are no longer required to sign up for coverage under Obamacare. To receive care, they can show up unannounced at major hospitals without coverage and wait—just as they always could. If however they want some “inexpensive” coverage, their first look should be to short-term insurance. Short term rates can be up to 80% cheaper than those under ACA or on corporate plans.
Short-term policies are selective: they require positive responses to several logical key medical questions and can be purchased for coverage periods from 12 to 36 months. By screening out serious medical conditions and limiting time exposure (lest serious conditions arise during the period of coverage) a number of quality companies are offering individuals coverage at significantly lower cost.
One of the best in this market is Pivot Health. You can get a short-term quote and apply HERE. (Linking coverage to Wayne allows him to assist you during the policy period, if necessary.)
UNHEALTHY INDIVIDUALS will usually find the best care through ACA: its plans cover nearly everything and do NOT exclude pre-existing conditions. However, as remaining healthy individuals continue to desert ACA coverage, the plans are increasingly burdened with serious medical conditions—guaranteeing a rising rate spiral.
If you’re looking for 2019 ACA coverage, start HERE. You will need a special condition to apply outside the open enrollment period, which ended December 15th.
The largest U.S. corporations will continue to do what they have always done: self-insure, covering employee costs and liabilities without the participation of any insurance company, while remaining relatively free from government control.
In an endeavor of major importance, Amazon has been working for over a year with Berkshire-Hathaway and JP Morgan to develop a more patient-centered health care system with substantially reduced cost, for the three companies—and as a potential model for national application.
Large employers usually partially self-fund their coverage, increasing control while they reduce cost. They involve insurance companies, but send them less of their money. No surprise then that this technique—in which the employer effectively shoulders a deductible on the entire program—is used by most large employers.
In partial self-funding, the sponsoring employer structures and manages its own program, determining benefits to be provided, selecting the network to be used, choosing an administrator and then competing the insured part of the coverage above a preset employer deductible, among a number of stop-loss insurance carriers. Self-funded plans are exempt from most state-mandated coverages (which generally add 10% or more to the cost.) The worst-case cost to run a self-funded plan is almost always lower than the best fully-insured quote, and in a good year a self-funded plan can actually become a profit center.
Until current legislation is repealed, employers of 50 or 100 (depending on the state) or more employees are required to either provide coverage or pay a substantial ACA penalty. And the insurance that is offered has to comply with a number of ACA requirements—unless the employer “grandfathered” coverage in 2010.
For businesses with less than 50 employees, there is no government requirement to carry group insurance. But neither is the employer allowed to assist employees with their cost of coverage.
One of the positive (and unintended) benefits of ACA is that insurance providers have learned how to provide partial self-funding to smaller businesses whose members are in good health. Generally, businesses with 10 employees in relatively good health can now qualify for partial self-funded insurance coverage.
Limited benefit plans reduce premiums substantially, in exchange for sharply restricted coverage for major medical conditions. Deductibles and copays are relatively low, which employees like, but coverage for surgeries and extended hospital stays is limited. To receive major medical benefits, concerned employees can add catastrophic individual policies or utilize community hospitals. These plans are most suitable for employers whose only other choice is dropping plan sponsorship altogether.
Health Savings Accounts (HSAs) are high-deductible programs that allow participants to defer pretax funds that will NEVER BE TAXED if they are used for medical, dental, vision and other approved expenses. The employer saves a little on premiums and the employee is given the opportunity to build a savings account that performs better than a 401(k) or IRA. HSA’s were at one time in line for a boost by the Trump administration.
Many small group carriers allow ‘split’ plans, with an HSA offered alongside a ‘premium’ plan, featuring a lower deductible and office visit copays. The employer pays against the HSA plan and allows employees to pay the full cost of the extra features in the upgrade.
Limited eligibility: group carveouts. Companies with at least 50 employees have the ability to select which classes of employees will be entitled to receive insurance coverage (non-eligible classes can be excluded). Insurance companies that will provide this type of coverage are limited, but it can be done—if employer flexibility and a savvy agent are combined.
Enhancing individual policies. Employers that don’t carry group coverage can assist their employees by installing a special form of ‘flex’ plan that allows employees to turn individual premium payments into pretax expenses.
Our recommended action for small business owners is:
- If you have a healthy group of 10 employees or more, look into partial self-funding.
- If less than 5, consider concierge-care for yourself.
- For serious healthcare issues at an elevated age, look outside the U.S.
There is one significant caveat to self-funding: if the business is likely to be heavily affected by deteriorating economic conditions, loss of medical insurance participation (through layoffs) could make it difficult for a company to live with a self-funded contract.
If you need help…
Wayne has been in the small group medical insurance business for 30-years and is licensed to help you directly, if you’re located in Texas. If you operate out of Dallas, Austin or nearby locations, he’d be happy to meet in person.
If you’re located outside Texas, our recommendation is to contact the closest NAHU (National Association of Health Underwriters) office for referral to an agent.
If you have questions that your current/local agent cannot answer, or just want to explore your current options, Wayne is available by telephone for limited consulting: $200/hour, with a $100 minimum. To schedule an appointment, send an email to: [email protected].
(Wayne Peterson publishes this blog weekly from time to time at his website.)
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