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The Boomer Impact on the US Bottom Line: Examining the rising costs of an aging American population

As Featured in CSQ Corporate Benefits

For years, many have been predicting the federal budget would collapse under the aging boomers and we are here. The U.S. national debt is currently at $19,941,672 trillion, and President Trump is beginning where Obama left off, doubling from the Bush era that ended in just under $10 Trillion in debt in March 2008. The US Federal Budget deficit was just under $300 billion in 2008, it has almost doubled to just under $600 billion today.

While U.S. Revenue has increased through taxes, Federal spending has outpaced its growth. Debt to foreign nations has increased by $2.386 trillion. It is time for U.S. citizens to understand our country has serious concerns and managing our future is extremely important, so it’s necessary to see the truth. U.S. culture finds more young people in the Midwest moving away from their home areas, leaving parent’s care to others, such as nursing home care (expected to double in 2030 since 2013).  Other countries, such as China, for the first time in their history find themselves struggling with the same shifts in culture as their youth leaves home; and the care of their parents would go to others, thus causing them to begin to build nursing care facilities, as never needed before. The Boomers impact the world.

Our reality of Baby Boomers, who in 2016 were between the ages 52 to 70, account for 46 million in 2016. The Boomers’ children are expected to be 98 million by 2060.  Many studies have shown, boomers are working longer than previous generations, projected in 2022 to be 27% for men and 20% for women working past 65, impacting employer’s healthcare costs.

The average U.S. life expectancy increased from 68 years in 1950 to 76.3 for men and 81.2 for women, in 2017. Obesity rates increased 40% among those 65-74 years of age from 2009-2012, causing Medicare/Medicaid spending to increase, a trend experts expect to continue. In 2014, this aging population of women (27 percent) lived alone, increasing to 42% as women age to years 75-84, (56%-85% of women 85 plus). Alzheimer’s disease is expected to increase, possibly tripling by 2050 to 14 million from 5 million in 2013. Social Security has increased since 2008 by $329 billion, along with Medicare/Medicaid increasing by $560 billion. These demographics of the aging population and rising healthcare costs are not sustainable per the federal government’s fiscal policies.

Medicaid provides payments to managed care organizations (MCOs) and account for 43% of Medicaid spending. Kaiser Foundation tells us that elderly persons with disabilities make up one-quarter of all Medicaid enrollees and accounts for almost two thirds of Medicaid spending.  The GOP proposed legislation to grandfather in all with Medicaid today, until 2020 and then reduce the federal funding for the expanded pool to 90% in the states that chose to continue with the ACA Medicaid expansion. This percentage would stay in place with the state paying the remaining 10%.  Then, anyone new to the expansion of Medicaid assistance after 2020, would fall 100% to the state. For the 19 states that did not chose the Medicaid expansion, the Federal Government would give $10 billion over a five-year period. The entitlement would go away and it would cap at a pro-capita amount, depending on enrollment.

“Our reality of Baby Boomers, who in 2016 were between the ages 52 to 70, account for 46 million in 2016. The Boomers’ children are expected to be 98 million by 2060.”

Medicaid is the third largest domestic program in the federal budget following Medicare and Social Security, and the largest source of federal revenues for state budgets, creating positive effects for state economies. States have adopted an array of policies to control Medicaid spending growth and are concerned with the GOP pushing more spending on them, while the expectations of the US citizens are looking to our government to continue the promises made by the Affordable Care Act. The American Health Care Act, was proposed and presented by the GOP, included banishing the individual mandate-lessening tax burdens, continue with subsides in the free market- allocated differently with age and phasing out those with incomes over $75,000, rid of cumbersome IRS tax penalties, while keeping the employer and carrier reporting in place. The earlier Republican proposal to tax employer-provided health insurance over the 90th percentile of premiums was no longer a feature of the bill, a victory for employers. Recently, Anthem CEO Joseph Swedish told top House Republicans in a letter obtained by Morning Consult, that “Anthem supports the Obamacare repeal bill, and urged lawmakers to move the process forward, as quickly as possible.” The GOP has pulled the legislation for now.

Healthcare costs are rising for the US Federal government and states.  The cost of living has increased personal debt, by astoundingly $2.386 trillion dollars in the past nine years.  State revenue has increased in the past nine years; however, so has the debt grown.  This is why the state officials are arguing they cannot afford even a portion of the Medicaid expansion. It is a lose-lose situation, with nowhere to go, but to increase jobs to increase the US Federal and State Revenue. With the personal debt increasing so rapidly and the student loans increasing, now at $1.423 trillion, young people are unable to afford mortgages. The mortgage debt has decreased from 2008 by $84 billion, as the younger populations are strapped with student loans and increased expectations from employers requiring college degrees and MBAs in our technology/service age.  Credit card debt has increased by $57 billion since 2008. The total personal debt today is $56,216 per US citizen.  There is no room in the individual or family budget for increased healthcare costs, nor in the state or federal budgets, as our future spending emerges ahead of us. Understanding these factors should cause everyone to plan to decrease their personal debt, and the federal and state government to balance their deficits; however, the numbers show this is not the case, and is easier said than done. The tough, hard line- old school approach is not popular today. The Silent Generation born in (1925-1945) during the great depression (1929-39), and their parents who dealt with it- the Greatest Generation (1910-1924) knows what is looming ahead of the United States.  Therefore, the conservatives are pushing their agenda in a very expectant generation, and it’s not going over well. While impossible to satisfy everyone, the ACA is unsustainable, as the numbers dictate; therefore, the GOP pressed too hard on the states to care for their own in future generations, and hard lined conservatives, needed for the vote, wanted more, so it was not put to the final vote. This president struggles with inspiring the congress towards change so soon in his political career. Only time will tell the future of our healthcare, yet today, ACA it is.

New GOP Healthcare Plan Breakdown

In case you haven’t subscribed to the same “Google Alerts” we do and missed the countless push alerts about the news, House Republicans have unveiled their plan to repeal and replace the Affordable Care Act (or the “ACA” …also commonly called “Obamacare”).  There are plenty of opinion pieces out there—this is not one of those pieces.  This is an attempt to simply explain what, if ultimately enacted, the legislation would actually look like.  Remember, the reality is that as of this moment in time, this is not a new law yet.  This represents the wording for legislation that Republicans are going to attempt to get enough support for.  Things could still change, but exploring the proposed ins and outs of this starting point legislation is what this article is attempting to do.

As we begin to explore, let’s be clear that this is not a full-blown repeal of the ACA.  Rather, this proposal seeks to repeal and replace certain aspects of the ACA, while still actually preserving others.  The highlights of this reality are the GOP’s plan to repeal affordability provisions, individual and employer mandates, some taxes and Medicaid reforms, yet leave untouched what the ACA did to insurance carrier’s needs to cover children up to age 26, make policies guaranteed issue (no underwriting) and guaranteed renewal (can’t be cancelled for over-utilization), as well as prohibitions against lifetime and annual limits.  So, the truth is this bill is a mix of leaving certain ACA pieces intact, and then repealing/replacing other pieces.

One such key provision that this legislation would usher in would be a change to Medicaid.  Medicaid (or Medi-Cal here in California) is a jointly funded, Federal-State health insurance program for low-income people and people with certain other qualifying needs.  What this means is the way the program works is that States provide some of the money and also the Federal Government provides some of the money that pools together to fund the people who are covered under this program.  The ACA allowed States to make a decision on expanding the people who would be able to be eligible for Medicaid such that those who earned up to 138% of the Federal Poverty Limit would be able to qualify.  For States that chose this expanded eligibility option, the ACA dictated that the Federal Government would pay 100% of the costs of those people in that expansion pool from 2014-2016 and gradually phase down to 90% of the costs in 2020 and remain at that level.  The GOP plan would account for both the States that did choose the expansion and those who didn’t.  For States that did expand Medicaid, the new legislation would have the Federal Government continue to pay the same amounts it is currently paying until the year 2020.  In 2020, it would set funding at 90% of the added costs of the expanded pool and also it would only cover these costs for those who enrolled prior to 2020.  To put that more simply, if a State chooses to keep the Medicaid expansion beyond 2020, then a person in this income bracket who signed up prior to 2020 would have 90% of their costs paid by the Federal Government.  Conversely, in this scenario, a person who signed up after 2020 would be the financial responsibility of that State.  For the 19 states that did not expand Medicaid, the legislation would provide $10 billion, spread over five years, which States could use to subsidize hospitals and other providers of care that treat many poor patients.  Additionally, as a whole, the Medicaid program would convert from its current form of entitlement to anyone eligible into a per capita cap on funding to states, depending on how many people they had enrolled.

Another change that this GOP bill has the potential to usher in is the manner in which some people buy individual plans.  Currently, for those that are not offered “affordable coverage” (most typically an employer plan, or a Government plan like Medicaid/Medicare/some sort of Military plan etc.) they might (depending on their income) be eligible for a subsidy.  The subsidies are based on their income and also based on the cost of insurance plans available to them.  In other words, qualifying people have the total cost of an insurance plan capped at a certain percentage of their income, where they pay their part and the Federal Government sends a check to the insurance company to subsidize the remainder.  Under the GOP option, rather than subsidizing the plan, the person would see the full cost of the insurance product.  Having said that, not all people would have to pay that full cost out of their pocket because the Federal Government would issue a refundable advanced “tax-credit” (basically just a check from the Federal Government) that they would use to offset the cost of the insurance plan.  Under this proposed plan, the tax-credit would be a calculated amount based off of a blend of a person’s age and their income.  Beyond assistance with premiums (aka, what you pay on a monthly basis simply to be a member of the plan), the ACA also included a subsidy provision for utilization costs.  For those of a certain income level, the ACA had provisions that lowered the prices these individuals paid when they received medical care (plans had subsidies so that members saw lower co-pays, lower deductibles etc.), and the new GOP plan repeals this cost-sharing assistance without replacing it.

On the topic of individual plans, one of the changes that is generating the most, shall we say debate, is how the legislation deals with the individual mandate.  The ACA introduced an idea known as the “Individual Mandate.”  Essentially, what this part of the ACA did was to say to people they must have coverage or pay a fine—so, if they don’t have an employer health insurance policy, or they don’t qualify for a government plan, then they need to either get an individual insurance policy or face a tax penalty at the end of the year.  While the individual mandate wasn’t universally popular, it was an inextricable partner to another part of the bill that was—guaranteed issue.  Strictly speaking, the individual mandate was used to solve a key problem, which is that if you want to guarantee coverage for those with preexisting conditions, you need to protect the insurance carriers from adverse selection.  The long and the short of it is that if policies were always guaranteed to be issued, then too many people would wait until they are sick/in need of medical attention to pay into the system.  The individual mandate was an attempt to get a broader group of people paying into the system to protect the pool, and have a profitable mix of people paying and not using + people paying and needing care.  Without this protection, the fear is that the pool will be disproportionately unhealthy which means that insurance carriers would need to charge more and more to cover the claims utilization of the pool they insure—ultimately driving individual plan prices even higher, even faster.  The issue of needing to steer the healthy into the overall pool in order to contain costs remains a reality no matter who the majority party is in Washington, but the GOP bill seeks to repeal this provision and replace it with an alternative attempt to address the issue.  Under the GOP plan, rather than incenting people to get a policy by levying a tax penalty, they propose a system whereby individuals are charged a 30% increase on insurance premiums if they ever allow a policy to lapse and attempt to buy back in.  Put another way, if a person has continuous coverage, then they will only ever pay the going market-rate for insurance.  However, if a person allows coverage to lapse, and goes without insurance, when they do go to buy back into the system they will face a 30% “penalty” (in the form of increased premiums) for the first year that they are back under a policy.

What is important for employers to know is that the bill not only eliminates the individual mandate, but also seeks to eliminate employer penalties.  Under the ACA employers of a certain size are required to offer their full time employees affordable coverage or they face penalties.  This legislation retroactively eliminates these penalties (back to years beginning with 2016).  What this mean is that the new legislation would remove the potential $2,000 “pay or play penalty” some employers faced as well as the potential $3,000 affordability penalty that was also included in the ACA.  However, what employers will find significant is that the bill does not eliminate the ACA’s employer and insurer reporting requirements.  Speaking of things that are important to employers, while there were early drafts of the bill that leaked which implied an employer would possibly lose the ability to write off premiums, that sort of language is not included in this bill.

Some of the other aspects of the bill that are newsworthy are prohibition on Federal Funds going to Planned Parenthood, language that ensures tax credits won’t be available to pay for insurance policies if they include abortion coverage, and changes to HSA plans (where HSA dollars could be used to cover medical expenses up to 60 days prior to the HSA coverage, and the amounts one can set aside into an HSA would nearly double).

Lastly, of note, several taxes contained in the ACA would be repealed at the end of this year, including taxes on health insurers, pharmaceutical and medical device manufacturers and a further postponement of the “Cadillac-Tax” on high premium plans is included as well that pushes that back until at least 2025.
Again, it remains to be seen whether this proposal will make its way into law or not, but the key is to understand what major changes would result if it were to be enacted, and to prepare for them early.  What is also incredibly important to understand is that there is a degree of politicking that goes into the passage of any legislation.  Speaker Paul Ryan is largely credited as being the main force behind this particular initiative’s legislative push.  When he himself describes this bill, he points out that it was written so that it only includes language which would protect its ability to be introduced to a Senate vote in such a way that it only needs a simple majority, or 51 votes.  This gets a little technical, but the bottom line is that some legislation (depending on what’s included in the bill) can be passed with just a 51% simple majority vote and other legislation (again, depending on what’s included in the bill) can be blocked by just 41% of the Senators.  Because of the slim majority the Republicans have in the Senate, the concern is that if they included language that takes the bill outside of a 51 vote majority style bill, then the legislation will surely be blocked by the Democratic minority.  In order to account for other things that they (1) did actually want in the bill but (2) could not include (to protect its voting future), Paul Ryan talks about a secondary course of action that will effectively “round out” this legislative effort.  Long Story short, this bill (in and of itself) is admittedly an incomplete picture, and the rest of the changes will be introduced through alternative means.  This somewhat technical “Washington-ese” explanation gives us the rationale behind truths like an exclusion of any wording promoting “selling insurance across State lines” even though it’s been a major Republican talking point and might otherwise confuse people by its absence from this bill.  The expected course of action to get to a truly finalized “Post-ACA world” is to blend a mix of this legislation with orders from HHS (the Secretary of Health and Human Services, Tom Price, can issue edicts), and then voting 1 by 1 on other standalone items that they also want included in a finalized product.

There is an old adage that compares the legislative process to making a sausage—sometimes its better just to look at the final product than to consider all of the steps along the way that went into its creation.  The process can be a little convoluted and messy, but hopefully this article has shed a little further light on where we are today.

Risk and the High Cost of Insurance

As Featured in CSQ Philanthropy

Risk surrounds us everywhere—as we drive, at home, at work, purchasing assets, during disability, turning sixty-five, saving in banks, taking a loan, taking or losing a job—in almost anything we do (even in our death!) we are insured.  We are covered by multiple policies meant for peace of mind; many of the policies we purchase, others are purchased by banks, and others still are funded by our employers. They are meant for peace of mind; however, the question we need to ask is whether cost is outweighing the peace.

Often times these days, we as individuals, couples or employers look at our finances hoping to fit everything into our budget, and these multiple insurance plans simply scream at us.  We are seeing this money leave our budget, and what we see in return is not a fixed asset, yet increasing cost to cover the “what if”, which makes the importance of tough pricing negotiations more valuable than ever.  After 20 years as an insurance broker, I have just about seen it all at this point, and what I can tell you is that ensuring your employees, their families and your business have proper coverage is one of the most important things a broker does—from benefits and workers compensation, to professional liability and property/casualty coverages—you need to have the right policies in place.  The issue is that finding a broker who correctly suits you is a different challenge than it used to be with the ACA and large acquisitions cutting the number of Brokerage firms in half over the last 5 years.  However, this task is paramount, because partnering with the right brokerage firm directly correlates to your bottom line and added value for dollars spent.

The Committee for a Responsible Federal Budget (CRFB) is an independent, non-profit and they have estimated that a full repeal of the ACA would result in a $1.55 trillion savings.  As Joint Committee on Taxation explains, “they do their best to measure the macroeconomic effects—the effects a policy will have on the overall growth of the economy, these estimates always take into account the likely behavioral responses from taxpayers to proposed changes in tax law … [including] shifts in the timing of transactions and income recognition, shifts between business sectors and entity form, shifts in portfolio holdings, shifts in consumption, and tax planning and avoidance.”  The CRFB goes on to layout other costs from repealing ACA, with the tax portion provisions costing $800 billion.  Overall, in the estimated $1.55 trillion in savings, they state $900 billion comes from repealing insurance, cost-sharing subsidies and $1.1 trillion from the Medicaid expansion.

Having said that, repealing the ACA is no easy task—and the idea of developing a “detailed plan” within such a short time is unnerving to some of us in the industry.  We are tired of politicians, fees, fines and having to tell our employees their co-share, copays and deductibles are increasing.  The billions in unspoken costs from carriers, brokers and employers attempting to comply with all the changes, are the ones that cause a merry-go-round impact of lost dollars.  Broker-partners will assist employers as they navigate through upcoming changes.  Employers who have always offered employee benefits may see more competition, per Trump’s proposal (or so he says).  In California, our established HMO networks may create a barrier to entry for insurers in other states, if the state lines are erased, as Trump mentions selling insurance across state lines as one of his goals. With only three California carriers (AETNA, CIGNA and United HealthCare) selling on a national platform, this may take time as the “Blues” strategize to catch up.  With Anthem’s purchase of CIGNA falling by the wayside, certainly they are working on their plan B.

Employers who did not offer coverage before ACA may be pressured to continue to subsidize healthcare or lose employees—especially if the safety net of Medicaid changes too drastically. Since its expansion in 2014, Medicaid has covered most adults with incomes at or below 138% of the poverty level.  Under the ACA, 32 states expanded Medicaid to include adults who qualified.  Undocumented immigrants are ineligible for Medicaid or Marketplace coverage. Those who are lawfully present immigrants may be eligible for Medicaid if they qualify, per their state’s income rules. A five-year waiting period applies to lawfully eligible immigrants and pregnant women, making them ineligible for Medicaid until this is satisfied. However, they may apply for subsidy.  If they have an income below 100% of the Federal Poverty Limit, for the purposes of tax credits, they may pay no more than 2.4% of income for a silver plan in 2017.

Many people still do not have access to coverage through their job, or their employer coverage is considered unaffordable (requiring an employee contribution of more than 9.69% of their household income for the employee coverage—not including the cost of the family), possibly qualifying them for subsidy.  There are two types of subsidies: the first is called premium tax credit (reducing monthly costs for healthcare), and the second is financial assistance (cost-sharing designed to reduce out of pocket costs).  The GOP legislation does include mechanisms for saving qualifying individuals some of the cost of insurance as well.  Recently released drafts of the proposal base this on a mix of age and income.

In 2015, the survey from the National Center for Health Statistics showed 28.4 million Americans under 65 were uninsured.  According to 2015 Gallup-Heathway’s well-being index, 17.1% of national adults were uninsured which was reduced to 11% in the first quarter of 2016, showing a net change of 6.1%.

With the release of the GOP draft wording, some sigh relief that those with preexisting conditions still appear to be guaranteed a policy —the proposal also mentioned tax credits, higher pre-tax limits in health savings accounts, and a roll back of some of the taxes the ACA created, so we will have to see what shakes out.

As we sit today and review some figures from our current Healthcare landscape, whilst awaiting the pending changes from the new administration, one thing is clear—we can bear no more cost-wise!  Employers cannot handle more.  Healthcare costs are some of the highest expenditures next to a company’s payroll.  We have some of the best doctors in the world deserving fair pay, yet the cost of healthcare has skyrocketed, while the health in the US has plummeted.  Before we can cry out for change in the system, we must look within and see change in ourselves, as wellness initiatives are proving to move the needle on cost.  Finding the right broker-partner, who drives wellness so that changes can begin to lower cost, creating desirable outcomes, is more imperative to the C-Suite now than ever.

Montage Minute: EEO-1 Filing Due 9/30

The EEO-1 Form is a report filed with the Equal Employment Opportunity Commission (EEOC), mandated by Title VII of the Civil Rights Act of 1967, as amended by the Equal Employment Opportunity Act of 1972. The Act mandates that employers report on the racial/ethnic and gender composition of their workforce by specific job categories.

All employers located in the 50 states and the District of Columbia who have at least 100 employees are required to file EEO-1 Survey annually with the EEOC. Federal government contractors and first-tier subcontractors with 50 or more employees and $50,000 contracts must file as well. The US EEOC has opened the report and is ready for employers to start filing them.  Important to note that reports must be filed by September 30th each year. Employment figures from any pay period in the third quarter, July through September, may be used.

View the entire reporting system. If you would like instructions, click here.

If employers have filed an EEO-1 form in previous years, information on the form is pre-filled from the previous year and you can enter through the login.

First-time filers can find a simple registration form online at the EEOC web site at this link.  When this is submitted, the EEOC will issue a company number to the company, and filers can log into the system.

The Heart, Soul and Spirit of the company

As Featured in CSQ Philanthropy

There is a heart, soul and spirit in each of your companies.  It is important for each employee and vendor to understand your mission first and then each of these elements so all can work, delivering your way. The Spirit is the Leadership- CEO, the soul the CFO and the Heart is the Human Resources.  Why all are crucial to understand is because each has different needs.

The mission of the company is the guiding light and the company will be in disconnect until the mission is in the minds of all participants.  This is the core and all processes are established by this direction. This is historical, established in biblical principles.  The body.  It is a simple philosophy that translates well to companies. As minding the core is the main foundation of Yoga.  This begins with the first insight of a company.   The idea, the need and the delivery of products and services.  It can take time to establish or adjust the mission to keep up with the needs of your customers.  It is not to be taken lightly. Because in time every decision will be made based on this mission, then the values, principals and procedures follow suit.  This should be not only on your wall but established with each employee and new hire from day one.  And if the culture takes a tailspin, go back to the core- the mission always!

The Spirit of the company is the leader, the CEO establishing the goals, direction and needs.  The entrepreneur, who organizes and operates the business, taking on greater than normal financial risks in order to do so.  Why some are so against this today in the news is disturbing because while these individuals may earn more than others is because of this very reason.  Employees and clients can bind the leadership legally in their actions and the risk of starting or running a company from small to large is taking on the greatest risk, establishing jobs for others.  This is why Directors and Officers, Fiduciary, Cyber and Employment Practices Liability Insurance are key in todays environment.  This risk is far too great today to take without these coverages in place.

Tending to the soul of the company is what CFO’s do.  Tomas Moore describes “caring for the soul as almost a father-ship role”.  The CFO manages the leadership (the mission) from the point of view of the soul of the company, guiding and making everyone feel secure providing wisdom.  So the CFO brings not only balance to the books, but to the goals of the spirt of the company. As you know it is “never too late or too early to tend to the soul of the company.”  You must look backwards with key indicators to access where you came from and the look forward with projections to see where you are going.  This is not an easy balance, yet when done well the company as a full body heals, flourishes and grows.

The Heart- Human Resources manages the people and must understand not only the mission of the company to hire appropriately, yet to also assist supervisors in establishing goals for each individual no matter what industry to fully understand the “why” behind every task.  The policy and procedures are not merely a book of rules, but a handbook of “who” the company is, the “why” and the “how”. The HR executive, a strategic partner today more than ever, must embody the understanding of the in-use culture and the CEO’s needs, in assisting to establish the culture model taking us back to the mission and values of the company, which are all guided by the rules of the state.  Today more than ever this partnership in leadership must be in synch, as the Spirit, Soul and Heart of the company.  The depth of these three parts of your company is the essence of its existence as it is today.

Montage Minute: $650K Lesson in HIPPA

Catholic Health Care Services of the Archdiocese of Philadelphia (CHCS) settled potential violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Security Rule after the theft of a CHCS mobile device compromised the protected health information (PHI) of 412 nursing home residents. At the time of the breach, CHCS was the sole corporate parent to six nursing homes in the Philadelphia region for the elderly, developmentally disabled individuals, young adults aging out of foster care and individuals living with HIV/AIDS.

CHCS has agreed to pay a $650k settlement and implement an extensive corrective action plan.

to read more:  CHCS HIPPA Settlement
or to learn more about the settlement visit:  Business Associate’s Failure to Safeguard

“The importance of having cyber liability coverage is shown with these claim examples. A broad cyber liability policy would assist in covering the regulatory fines, privacy liability settlements and the huge expense of notification and credit monitoring.”

If you have any questions about cyber liability please contact: Margarita Laverde at [email protected] — Montage Insurance Solutions.