Pink Fire Pointer May 2010

Healthcare Reform Update - 18May2010

Healthcare Reform Impacts Agents’ Commission
  • A recent Wall Street Journal article highlights one of the overlooked repercussions of the healthcare reform law.
  • Insurance salespeople will be among the first to feel the effects of the new law, as their commissions for selling policies to individuals and small groups are changing.
  • The law requires that insurers use at least 80 percent of their premiums (85 percent in some cases) to pay for medical care for members, rather than for administrative costs and profit-taking.
  • This will put pressure on insurance companies to reduce administrative waste and other overhead, including commission paid to insurance agents/brokers.
  • Currently, commissions typically run between 4-6 percent of a policy's premium, but can be as high as 30 percent for the first year.
  • Companies are already beginning to change how they pay these salespeople. For example, beginning May 1, Independence Blue Cross stopped paying small-group agents a percentage commission and switched to a monthly flat fee for each contract sold.
  • Read more:

Healthcare Reform Update - 17May2010

IRS Issues Guidance for Small Business Tax Credits,,id=223577,00.html

  • Today the IRS issued new guidance regarding the small business tax credits provided for by the federal healthcare reform law.

  • The small business tax credit is one of the first healthcare reform provisions to go into effect, and is designed to encourage small employers to offer health coverage for the first time or maintain coverage they already provide.

  • The credit takes effect this year and is worth up to 35 percent of a small business' premium costs. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).The credit phases out gradually for firms with average wages between $25,000 and $50,000, and for firms with the equivalent of between 10 and 25 full-time workers.

  • The announcement makes it easier for small businesses to determine whether they are eligible for the tax credit and how large a credit they will receive. A “qualifying employer” must:

    • Cover at least 50 percent of the cost of healthcare coverage for some of its workers based on the single rate

    • Have fewer than the equivalent of 25 full-time workers (e.g., an employer with fewer than 50 half-time workers may be eligible)

    • Pay average annual wages of less than $50,000

    • The guidance makes it clear that both taxable and tax-exempt firms qualify, and that small businesses receiving state healthcare tax credits may still qualify for the full federal tax credit. The guidance also allows small businesses to receive the credit for add-on dental and vision coverage in addition to regular health insurance.

  • Read the IRS press release:

  • Read the IRS’s three simple steps for determining if your business qualifies for the tax credit:

Healthcare Reform Update - 12May2010

CBO Increases Cost Estimate for Healthcare Reform Law

On Tuesday, the Congressional Budget Office (CBO) released its latest estimate of the total cost of the healthcare reform law.
• The CBO predicts the healthcare overhaul will cost about $115 billion more in discretionary spending over ten years than the original cost projections.
• If approved over the years by Congress, the additional spending would bring the total estimated cost of the overhaul to over $1 trillion.
• The CBO estimated in March that the gross cost of the overhaul would be $940 billion over 10 years, but cautioned that it couldn’t make an estimate of the discretionary costs without more time and information.
• In its latest projection, the CBO included provisions that were not factored in the previous estimate.
• The new numbers reflect the costs of funding programs in the law that are authorized but not paid for. For example, the Department of Health and Human Services is expected to need $5 billion to $10 billion to implement changes in Medicare, Medicaid, the Children’s Health Insurance Program and insurance industry reforms.
• The CBO also expects federal agencies to spend $10 billion to $20 billion over 10 years on administrative costs to implement the overhaul.
• Many Washington insiders expect the numbers to continue to rise, since the CBO noted this new estimate does not include 38 sections of grant programs, which cover 406-pages of legislation.
• Read more:

Obama Administration Files First Response to Healthcare Reform Lawsuit

• Late on Tuesday, the Justice Department defended the legality of the healthcare reform law in its first response to a number of court challenges.
• This first argument came in a lawsuit that the Thomas More Law Center, a conservative group, filed in federal court in Detroit the same day President Obama signed the first part of the healthcare reform law.
• The group based its lawsuit on a provision that requires most Americans to buy health insurance or face a fine. According to the Thomas More Law Center, this provision is beyond the scope of Congress' power and is an unconstitutional tax.
• The group also holds that the law violates their constitutional rights because federal tax dollars will be used to fund abortions.
• The Justice Department responded by arguing that Congress acted to address a national problem and that the lawsuit was premature because no one had been harmed by the law.
• The Justice Department also argued that Congress did not exceed its authority because individuals who do not want to buy insurance may qualify for an exemption from any penalty, and that U.S. law prohibits lawsuits that are aimed at blocking the collection of taxes.
• Read more:

Missouri Poised to Become First State to Vote on Healthcare Reform Law

• On Tuesday, the Missouri House gave final approval to a measure that will appear on the state’s Aug. 3 ballot, allowing residents to vote on whether people and employers should be compelled to have health insurance.
• The referendum seeks to defy a provision in the new federal healthcare reform law that requires most Americans to have health insurance or face fines beginning in 2014.
• The legal impact of the Missouri measure is questionable, because courts generally hold that federal laws trump state laws.
• To date, roughly four-fifths of the states have proposed some sort of measure attempting to let people opt out of the federal health insurance mandate.
• Read more:

Healthcare Reform Update - 10May2010

New Regulations Announced for the Extension of Dependent Coverage
  • The Obama administration announced new rules that will allow unmarried young adults who are not eligible for coverage elsewhere to remain on their parents' insurance until age 26 beginning this month.
  • The extension of dependent eligibility is mandated as part of the new healthcare reform law, though the original effective date for this provision was Sept. 23, 2010. Moving the effective date up will permit young graduates and others to keep coverage following graduation.
  • In April, Kathleen Sebelius, the Secretary of Health and Human Services, wrote to insurers throughout the US requesting the move-up date; nearly 70 insurers agreed. Obama requested that employer-sponsored healthcare plans match the earlier date.
  • This announcement spells out more of the details surrounding this provision:
  • The option is only a requirement for plans that already offer dependent coverage.
  • The insurer is allowed to charge more for the adult's dependent coverage if "similarly situated" adults could be charged more.
  • The policy applies regardless of whether the dependent adult is married or single, but spouses and the dependent's own children do not have to be covered.
  • There's no requirement for employers to pay the premiums for an added dependent (the law's specifics have yet to be written), but the intention is for all dependents to be treated equally. So if an employer is paying 50 percent of dependent premiums on existing children, then adding an adult dependent should, theoretically, entitle an employee to 50 percent of their premiums being covered as well.
  • Employees can keep their adult children on their policy, even if they are not listed as dependents on their income tax return.
  • Read more:

Healthcare Reform Update - 5May2010

Department of HHS Issues Interim Final Rule on Early Retiree Reinsurance Program
  • On Tuesday, the Department of Health and Human Services (HHS) released an interim final rule (with comment period) implementing the Early Retiree Reinsurance Program established by the new healthcare reform law.
  • The statement answers many of the questions plan sponsors have been asking about the program, such as eligibility, how to apply and the reimbursement process.
  • Under the program, employers can be reimbursed for up to 80 percent of the cost of medical claims between $15,000 and $90,000 for their early retirees. The money can be used to reduce premiums for retirees or for employers to keep their own costs in check.
  • The law set aside $5 billion to finance the program. The program takes effect June 1, 2010 and ends when all funds have been exhausted but no later than January 1, 2014.
  • For more information:
  • Read the HHS final rule:

Healthcare Reform Update - 27April2010

 Tax-Free Employer-Provided Health Coverage Now Available for Children under Age 27
  • The IRS issued guidance today on the tax treatment of healthcare coverage for children under age 27, one of the first federal guidelines to be issued regarding the new healthcare reform law.

  • Health coverage provided for an employee's children under age 27 is now generally tax-free to the employee, effective March 30, 2010.

  • The favorable tax treatment applies to a provision in the healthcare reform law that requires plans that provide dependent coverage of children to continue to make the coverage available until the child turns 26. The extended coverage must be provided no later than plan years beginning on or after Sept. 23, 2010.

  • This means that employees with children who will not have reached age 27 by the end of the year are eligible for the new tax benefit from March 30, 2010 forward. This replaces the lower age limits that applied under prior tax law, as well as the requirement that a child generally qualify as a dependent for tax purposes.

  • The IRS notice says that employers with cafeteria plans can allow employees to immediately make pre-tax salary reduction contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been changed to cover these individuals. Plan sponsors must amend their cafeteria plan language to incorporate this change by the end of 2010.

  • Read the IRS press release:,,id=222193,00.html

  • Read the IRS notice: