iLoveBenefits: Industry News Blog

Early estimates of the financial impact of parts of the ACA

Insurers who reported
that early insurance reforms in the Affordable Care Act had an effect on their
decisions to raise premiums said that new preventive and contraceptive services
for women were responsible for an average of 0.8% of the increases, while taxes
and fees related to the law were responsible for 1.5%.

Source: “First
Analysis of Insurer Rate Increases Above 10% in New Health Plans Finds Most
Driven by Medical Costs; Affordable Care Act Not a Major Factor in 2013,”
The Commonwealth Fund Press Release, December 19, 2013,

And on top of existing taxes . . .

Coming Soon: The Hidden Tax on Health Insurance

Posted on November 22, 2013 by AHIP

Coverage Amid the discussion of the changes to health care that will go into effect in just over a month on January 1, 2014, one key component is oft overlooked – the little-known health insurance tax. Described by the Wall Street Journal as the “hidden” tax component of the health reform law, this tax will start at $8 billion in 2014, rising to $14.3 billion in 2018, and will increase based on premium trend thereafter.

This tax is far-reaching, affecting a large swath of those purchasing coverage- those buying in the individual market, from small businesses, large employer groups, and those on Medicaid managed care and Medicare Advantage. As the Journal notes, “the Congressional Budget Office and industry experts say the expense will largely be passed on to small businesses and consumers who buy their own policies in the form of higher premiums.” The Journal also cites a report by Oliver Wyman examining the impact of the tax, which “is projected to raise premiums for small businesses by an average of 1.9% to 2.3% in 2014, or about $150 per employee and $360 per family… By 2023, the firm predicts the cost could rise to an average of $360 per employee and $890 per family for small businesses.”

See more at:



November 25, 2013 | Categories: Benefits,Cost,healthcare,insurance,tax | Tags: , , , , | Comments (0)

Not for profit hospitals provide uncompensated care in exchange for their tax advantaged status

Hospitals’ Uncompensated Care

According to the latest data from the AHA’s Annual Survey of Hospitals, U.S. hospitals provided $41.1 billion in uncompensated care in 2011 which was 5.9% of total expenses. That’s $1.8 billion and one percentage point  more than in 2010. The total includes “bad debt” and charity care. It does not include Medicaid and Medicare underpayment.

Source: AHA Annual Survey Data, 1980-2011, American Hospital Association

IRS Announces Changes in Retirement, Health Plan Limits for 2013

Each year, various dollar limits applicable to health and retirement plan contributions and benefits are adjusted for inflation.


On October 18, the Internal Revenue Service (IRS) released Revenue Procedure 2012-41, outlining the 2013 calendar year limits for high-deductible health plans (HDHPs) used in conjunction with Medical Savings Accounts (MSAs), as well as eligible long-term care premiums and transportation fringe benefits.


In News Release 2012-77, the IRS announced a series of retirement plan limits for Tax Year 2013. Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans.


Annual   Limit [Applicable Tax Code Section]



Maximum   elective deferral [401(k) and 403(b)]



Maximum annual pension benefit [415(b)] (The limit applied is actually the lesser of the dollar limit or 100 percent of the participant’s average compensation (generally the high three consecutive years of service))



Defined   contribution maximum deferral [415(c)]



Maximum   catch-up contribution for those age 50 and over [414(v)]



Qualified   plan compensation limit [401(a)(17)]



Highly   compensated threshold [414(q)]



Key employee   definition [416]



Deductible amount for individual making   qualified retirement contributions to an IRA [219(b)(5)(A)]




In related regulatory news, the Social Security Administration has announced that the Social Security wage base – also known as the “contribution and benefit base” – which is the amount of earnings subject to taxation for a given year, based on the average wage index – will increase from $110,100 to $113,700 in 2013.

How much is the public on the hook for State and Federal retirement promises to their workers

In 1994, FASB required private sector employers to begin to reflect the cost of future liabilities for retirement benefits on their balance sheets currently. The public sector did not immediately follow suit. In 2007, New York State required its government entities to total up their liabilities.

“Analysis from the Empire Center for New York State Policy, a conservative think tank, found the state is faced with $73 billion in unfunded retiree insurance costs. New York City’s bill is an estimated $84 billion, while the rest [of the States $250 billion dollar liability] is split between municipal and county governments, school districts and public authorities.”

“This is a massively expensive promise that has been made and stretches out 30 or 40 years into the future,” said E.J. McMahon, a senior fellow with the Empire Center.”

About 16 percent of city and village budgets in New York go toward health insurance, Baynes said. That represents about 42 percent of their property-tax revenue, he said.

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IRS guidance on comparative effectiveness fees released

United States: Health Care Reform: IRS Releases Guidance on Comparative Effectiveness Research Fee
The IRS issued proposed regulations on April 12, 2012 regarding the payment of fees by insurers to fund the Patient-Centered Outcomes Research Institute (PCORI), which was established by the ACA to conduct research to evaluate and compare health outcomes and the clinical effectiveness, risks, and benefits of medical services and products. The fees are $1.00 per covered life for the policy years beginning after October, 2012 and $2.00 for 2013, increasing thereafter. (Mondaq, May 10, 2012)

A tax by any other name is still a tax

July 7, 2011 ( – A new analysis from the nonpartisan Employee Benefit Research Institute (EBRI) finds that workers may prefer to enter insurance exchanges over keeping employment-based health coverage if the tax treatment for health benefits through work is eliminated or significantly cut back as part of the federal debt reduction effort.

Editor’s note: Just a few issues to consider. First Exchanges, while first available in 2014 will not be available to larger employers until 2016. Second, while lawmakers will not want to categorize this as a tax (for obvious reasons) it will be a huge incremental tax on everyone through the mandate requirement  as it now stands. All employer sponsored receipients will lose the pre-tax nature of their health benefits thereby paying more in the way of taxes on their gross wages — not a new tax lawmakers will claim, not an increase in taxes lawmakers will claim – just closing a loophole they will claim… A tax by any other name is still a tax.

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July 8, 2011 | Categories: Cost,healthcare,insurance,tax | Tags: , , , | Comments (0)

Can for profits and not for profits mix when it comes to ACO’s?

Nursing home and hospital provider groups have asked the Internal Revenue Service for clarification and guidance regarding the participation of nonprofit providers in accountable care organizations. Many nonprofit groups are concerned that collaborating with for-profit partners will cause them to lose their exempt status, the Bureau of National Affairs reports.

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The Medicare Debate: Who pays for care and how

Here is an excellent article written by Dick Quinn.

Read it here:

The article, “Medicare reform will shift costs to Medicare beneficiaries (and everyone else) regardless of the approach taken”, is an excellent explanation of what the politician are incapable (want to avoid telling you) of explaining.

The funds to pay for care come from four places – tax dollars, directly from patients, the reduction in the charges for each service, or in the reduction of the use of services.

Using tax dollars is a way to distribute the cost across the widest base of people. It also removes the decision making of a the consumer/patient when deciding whether to ‘purchase’ a service.

Having patients pay directly is the most direct method of payment. The individual makes their own economic trade offs, but few people can afford the true cost of catastrophic care.

Reducing the cost of each service is akin to price controls which time and again have proven ineffective. By reducing the reimbursement rates, the market is further distorted. There is an opportunity cost that society pays. With smaller rewards for work, bright people choose other professions that are more lucrative and the supply of labor to health care diminishes.

The reduction in services purchased occurs because people cannot afford to pay for the service (or don’t want to pay) that they perceive as a lower priority for the use of their dollars. Depending on what happens next determines if this is a good strategy. If people reduce the use of unwarranted services, that’s a good thing. However the ability of people to determine what is warranted in the long run is difficult at best. If they end up worse off, unable to pay for more intense care later on relying on the public to pick up these costs – at best we’ve only deferred the cost, at worst we increased the total lifetime costs versus what it would have been if services had been provided and paid for at the onset of a medical condition.

So these four approaches make up debate over how Medicare  is going to paid for by society.

Now, if you haven’t already, go read Dick’s article.

What to do with Social Security and Medicare to control budget deficit

 The following question was posed in a recent Harris Poll of of 3,171 adults surveyed online between February 14 and 21, 2011 by Harris Interactive:

“Because of the increase in life expectancy, there will be many more old people alive in ten and twenty years time than ever before. As the number of people over 65 increases substantially, the cost of Social Security and Medicare is likely to increase a lot if we do not change these programs. Which of the following do you think we should do in the next five years to control the budget deficit?”

Base: All Adults.

  Total Jan 2010 Total Feb 2011 Change 2010-2011
Encourage many more people over 65 to work 47% 40% -7%
Increase the age at which one is eligible for Social Security and Medicare 30% 37% +7%
Increase taxes 21% 27% +6%
Reduce Medicare benefits 9% 11% +2%
Reduce Social Security benefits 9% 11% +2%
None of the above 35% 33% -2%

 Note: Multiple responses allowed.

Source:  The Harris Poll, Harris Interactive.  “How To Slow Or Pay For The Increasing Costs of Social Security and Medicare?” March 9, 2011.

April 6, 2011 | Categories: Cost,healthcare,Medicaid,Medicare,tax | Tags: , , , , | Comments (0)
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