Together We’re Stronger

The reverend Martin Luther King Jr once said, “There comes a time where silence is betrayal.”

Those are powerful words and they are appropriate for a time like today.

As a country, as a member of the only race (the human race), and frankly as a world, we are witnessing the justified push back against ideas that seek to wrongly place one human’s value above another. While it is a travesty that we see an ideology of hate dying out slower than any reasonable person would wish for, we do retain hope that we can forge a better tomorrow.

As an employer, we’re well aware that we strive to be much more than just a job—heck, most of the time we strive to be a version of a “Montage Family.” With that one mind, it is non-negotiable that we, as a unified voice say, the Montage Family, in no uncertain terms, believes that any hateful ideology is wrong. We stand for justice, we rebuke the loss of innocent lives, we mourn Mr. Floyd, along with the many, many other victims, and we stand behind each and every one as we try to figure out the balance between “maintaining normal everyday life” and the realities of this emotionally shocking moment in history.

Montage has a long, proud history of hiring and doing business with people of all races, sexual orientations, creeds, and maintaining the belief that business is most properly conducted when there is simply no room for bigotry or exclusion of any kind.

In the name of love, in support of the moment,

Your Montage Family

Concerned about a Business Interruption loss from Coronavirus (COVID-19)?

Insurance is all about risk transfer where the risk of loss is transferred from your business to insurance. Unfortunately, currently, there are minimal options to transfer the risk of Coronavirus (COVID-19) to insurance. If you review your policy, you might see wording like:

Exclusion of Loss Due to Virus or Bacteria
“This endorsement makes an explicit statement regarding a risk that is not covered under your Commercial Property insurance. It points out that there is no coverage under such insurance for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease. The exclusion in this endorsement applies to all coverages provided by your Commercial Property insurance, including (if an) property damage and business income coverages.

Recently the ISO (Insurance Servicing Office) released two optional endorsements that can be used to provide limited Business Interruption coverage for businesses affected by Coronavirus. These endorsements only relate to civil authority business interruption losses (i.e. government denies access to your business property). These endorsements are not widely in use currently so stay tuned and we will keep you updated as more information becomes available.

Since the risk most likely isn’t transferred to insurance, we recommend avoidance of this exposure. To better protect your company, we recommend following the Centers for Disease Control and Prevention (CDC) guidelines for Prevention & Treatment of this virus:

Prevention & Treatment

There is currently no vaccine to prevent coronavirus disease 2019 (COVID-19). The best way to prevent illness is to avoid being exposed to this virus. However, as a reminder, CDC always recommends everyday preventive actions to help prevent the spread of respiratory diseases, including:

  • Avoid close contact with people who are sick.
  • Avoid touching your eyes, nose, and mouth.
  • Stay home when you are sick.
  • Cover your cough or sneeze with a tissue, then throw the tissue in the trash.
  • Clean and disinfect frequently touched objects and surfaces using a regular household cleaning spray or wipe.
  • Follow CDC’s recommendations for using a facemask.
    • CDC does not recommend that people who are well wear a facemask to protect themselves from respiratory diseases, including COVID-19.
    • Facemasks should be used by people who show symptoms of COVID-19 to help prevent the spread of the disease to others. The use of facemasks is also crucial for health workers and people who are taking care of someone in close settings (at home or in a health care facility).
  • Wash your hands often with soap and water for at least 20 seconds, especially after going to the bathroom; before eating; and after blowing your nose, coughing, or sneezing.
    • If soap and water are not readily available, use an alcohol-based hand sanitizer with at least 60% alcohol. Always wash hands with soap and water if hands are visibly dirty.
      For information about handwashing, see CDC’s Handwashing

For information specific to healthcare, see CDC’s Hand Hygiene in Healthcare Settings
These are everyday habits that can help prevent the spread of several viruses. CDC does have specific guidance for travelers.


There is no specific antiviral treatment recommended for COVID-19. People with COVID-19 should receive supportive care to help relieve symptoms. For severe cases, treatment should include care to support vital organ functions.

People who think they may have been exposed to COVID-19 should contact their healthcare provider immediately.

See Interim Guidance for Healthcare Professionals for information on persons under investigation.


If you have suffered a loss that you believe should be covered through insurance, discuss the situation with your insurance broker and have the claim filed with your insurance company as there may be some coverage available to you.

New HRAs Coming in 2020

By Tobias Kennedy

The New Year has a tendency to bring new regulations and the dawning of 2020 will be no exception. Today, we will highlight a couple new varieties of “HRA” that will be entering the benefits fold this coming January 1st. Broadly speaking, an HRA is an account/arrangement that offers some positive tax treatment, and employers have tended to leverage these (when it makes sense for them) as a means of (a) assisting employees with their health care costs while (b) having a helpful tool for navigating overall taxable liability. HRAs themselves are not really a new thing, but there are a couple new variations coming soon, so here’s the scoop on the new guys…

Individual Coverage HRA (ICHRA)
First and foremost the ICHRA is designed for employers that either do not have a group medical plan or, (probably more likely), have certain classes of their population who are not offered the group coverage.

If this describes you, then the ICHRA may be a useful tool for you to finally assist those employees for whom you’ve historically been unable to extend coverage. ICHRAs are used to pay individual medical insurance premiums (individual….so, again, not your group plan), or Medicare premiums, and some out-of-pocket costs. So, if you have employees who are not offered group coverage at work, and buy an individual policy (either on or off the Exchange, or Medicare) you can now have them set up with an ICHRA where the employer sets aside funds to help the employee pay for that expense. The IRS does stipulate that Employers who choose to offer an ICHRA must do so uniformly for all employees in a class.

Excepted Benefit HRA (EBHRA)
The second type of new HRA that will be allowed in 2020 is the EBHRA. Whereas the ICHRA targeted employees that were not offered the group’s health insurance, the EBHRA is specifically designed only for those employees New HRAs Coming in 2020 that are offered the employer’s health insurance coverage—so this new HRA serves a totally different population of your staff. This HRA allows an employer to set aside money to help employees pay for things like medical co-pays, deductibles and non-covered expenses, and even to go towards premiums for “excepted benefits” like dental and vision. So, while it cannot go towards medical premiums, the money can help employees cover utilization cost shares on the medical (co-pays, deductibles etc.) and, again, it can go towards premiums of non-medical products (like dental and vision).

The quirky thing about this version of the HRA that Employers really need to note is #1 it must be offered to all “similarly situated employees” and (here comes the curve ball) #2 employees may use these EBHRA dollars even if they do not enroll in the group’s health plan. In other words, if an employer decides to offer this type of an account, then they should offer it to all benefits eligible employees, and understand that folks who waived the coverage in favor of a spouse plan (or individual product) can still access the allotted funds to cover their costs on the separate policy they have. Employers can contribute a maximum of $1,800 per plan year to an Excepted Benefit HRA. This limit is indexed for inflation, and also do note, that the $1,800 limit does not include carryover amounts—so, in theory, participants could have more than $1,800 available to them during a plan year. As with every January 1st new things are coming down the pike and if you have any questions on these or any other benefits, please don’t hesitate to reach out!

Employers can contribute a maximum of $1,800 per plan year to an Excepted Benefit HRA. This limit is indexed for inflation, and also do note, that the $1,800 limit does not include carryover amounts—so, in theory, participants could have more than $1,800 available to them during a plan year. As with every January 1st new things are coming down the pike and if you have any questions on these or any other benefits, please don’t hesitate to reach out!

Our Client Hydra‐Electric Acquired!

By Danone Simpson

We at Montage Insurance Solutions are very proud to announce our client, Hydra Electric has just been purchased and are featured in the San Fernando Valley Business Journal.

When Gerry Schauer, the CFO called and asked me to assist him with risk management and their insurance needs I was happy to answer the call.

As told in their story recently published in the San Fernando Valley Business Journal it explains the executive team had a lot of work to do to get this aeronautical manufacturing business into shape after its owner passed away. The business was gifted to Cal Tech and the process to get it in shape to sell was a tall order for Mr. Schauer and his team. Their insurance had increased before we first met with Hydra almost $100k on P&C. We created a timeline for their safety and insurance needs from Employee Benefits to Property & Casualty.

We brought in our loss control and assessed their business needs from an insurance and risk management perspective. We did a walk through with our loss control expert and went to work to help them develop their Illness and Injury Prevention Program and a plan for quarterly safety meetings. Attending every safety committee meeting I along with my Property and Casualty Director or one or the other, we watched as they transformed their operations. Their sales increased and their first‐year premium reduced on their Property & Casualty, lowered on their Workers Compensation by $67k, despite their high mod. Their Property BI limits were increased, while their deductible was lowered from $50k to $5k with a savings of $24k. Other lines remained flat. Their Professional lines reduced by $10k despite the new Directors and Officers. The years afterwards brought flat renewals and further reductions in premiums and increased coverages.

On the employee benefits side we lowered their premiums, as they stayed with all carriers, then later changed a few carriers on the ancillary lines. A just under 1% renewal in 2017 and this last renewal the premium decreased by $65k under their original renewal. As they have been acquired, we are proud of our years with them during this successful transition.

Employer Solutions to FMLA Management

By Brian Lacher

FMLA claims are on the rise and its costing employers up to millions of dollars.

  • Employer cost is 2‐fold; 1) denial and mishandling of legitimate leaves result in costly legal affairs, 2) quality control issues can lead to approval of illegitimate leaves
  • There are FMLA technology and resources to mitigate these losses
  • At Montage Insurance Solutions, we regularly meet with subject experts to ensure we are up to‐date on these technology and resources. Just yesterday, we met with a leading provider of FMLA insurance to educate us on the latest policies and resources available in this space

The issues that arise from not having the right resources for FMLA review impact employers and employees on both sides: the denial of legitimate leaves and the approval of illegitimate leaves. When the employer mishandles legitimate leaves, it can result in costly legal negotiations and/or settlements. According to a recent article by Godfrey and Kahn S.C. in the National Law Review pertaining to FMLA, the number of lawsuits claiming employer violations has more than tripled since 2012. While most employers have EPLI coverage to protect from this type of catastrophic risk, those policies have retention limits (deductibles) and policy maximum limits leaving employers subject to out of pocket cost. On the other hand, when employers approve illegitimate leaves, they lose the valuable labor of that employee. This issue commonly arises when employers don’t have a formal FMLA solution and rely on makeshift Excel spreadsheets.

Given that the average cost of employee absences in the US is over 6% of payroll and that DOL fines can range into the hundreds of thousands, it’s imperative that employers utilize FMLA technology that can mitigate fines, legal fees and the often time hard to see cost of lost productivity. Formal FMLA programs usually only cost employers $1.50 up to $5.00 per employee per month. Startup fees can ran range from free up to $10,000. Although the cost is relative to the ROI, FMLA technology will almost certainly improve HR’s efficiency and give peace of mind to employers and employees that leaves are being handled appropriately. Recently at Montage Insurance Solutions, we had one of our trusted and valued carrier partners who is a leading provider of disability insurance and FMLA solutions at our office. They provided an update on FMLA and the resources available to employer groups of 100 or more employees. It’s important to Montage that we stay current on important topics like FMLA so that we can educate our employers on best practices and resources available to mitigate their risk of mishandling FMLA claims. As controlling the cost of absence management and increasing productivity become more complex, Montage is able to deliver solutions and technology that make absence management and FMLA a more polished process for both employers and employees.

Please feel free to contact myself or any other Account Executives at Montage Insurance Solutions to understand in more detail what FMLA solutions are available to you.

SDI Update and Disability Review

2018 is upon us, and the state of California Employee Development Department State Disability Insurance program (commonly referred to as SDI) has increased the disability maximum benefits and income replacement percentage.  Now that SDI is more comprehensive, have you reviewed your group Short and Long Term Disability (STD and LTD) insurance program, so that you or your employees are still receiving value for the premiums being paid to your private disability carriers?

So, what has changed with SDI?  SDI has increased the maximum weekly benefit amount from $1,173 to $1,216 (for all eligible claimants) and also increased the income replacement percentage from 55% to 60% or 70% (depending on an employee’s income prior to the disability).  If your highest quarterly earnings are between $929 and $5,229.98, your weekly benefit amount is approximately 70% of your earnings.  If your highest quarterly earnings are more than $5,229.98, your weekly benefit amount is approximately 60% of your earnings.  According to the Employee Development Department, 18.3 million California employees pay a mandatory contribution to the SDI program for Disability Insurance and Paid Family Leave coverage.  It is important to understand how a private employer or employee paid Short and or Long-Term disability plans could be affected by this.

Most private group LTD plans include a 60% income replacement, $6,000 maximum monthly benefit (or $1,386 weekly benefit), 90-day elimination period (amount of time an individual must be disabled before eligible to receive benefits) and offset with SDI benefits.  So, as an employer, if you are paying thousands of dollars in disability insurance premiums for employees to only receive $170 a week ($1,386 (Private STD Benefits)- $1,216 (SDI)) are you really getting your money’s worth?  This example is a maximum benefit example, so in reality most claimants earning moderate incomes would be receiving the industry standard minimum private STD benefit of $10 per week up to the best-case scenario of $170 per week.

With SDI paying $1,216 weekly up to 52 weeks, an individual could max out SDI benefits up to $63,232.  At 60% of an individual’s annual income, $63,232 would be adequate income protection for an individual making $105,386 or less annually.

Since SDI has a 52-week duration and now pays 60% or 70% of income up to $1,216 weekly, it might be time to examine lengthening the group LTD elimination period to 365 days so that employers can reduce disability premiums (lengthening elimination periods lowers LTD rates).  In situations where employees are earning $105,385 annually, it might even make sense to remove employer paid STD all together.  However, even for claimants earning minimum financial disability benefits, disability carriers provide exceptional rehabilitation, vocational services, transitional planning, occupational exploration, and return to work services.  Every business has unique needs and employees may be impacted differently by the changes, so please reach out to me or your Montage representative for a free consultation on your current disability offering to analyze what makes sense for your organization.

In situations where employers want to provide maximum employee income protection, Montage Insurance Solutions can evaluate private disability carrier options that include: Voluntary STD plans that pay in addition to SDI, increasing group disability income replacement percentages up to 70%, and increasing maximum benefits amounts so that the highly compensated employees are receiving adequate income protection.  In addition, there are Group Individual Disability options where the highly compensated can get Guarantee Issue (no medical questions) individual polices on a group basis.

As I learned from a previous and most charismatic mentor, (Marc Warrington, SVP of Sun Life Financial) “LTD doesn’t stand for Long Term Disability, it stands for Last Topic Discussed.” As brokers and consultants, it is our job to correct this market misconception and make employees’ paycheck insurance (AKA disability insurance) a priority.  An employee’s ability to earn an income is their greatest asset so it is critical to evaluate if employees and employers are still receiving value through their private disability coverage.

She’s Got Moxie

Catch Danone Simpson (Montage President & CEO) on Joy Chudacoff’s podcast, “She’s Got Moxie.”

Ms. Chudacoff is a leader, motivational speaker, coach, and author for those in business.

Show Notes:

  • How to keep your team/employees connected to your mission & vision
  • When you should consider borrowing money
  • How an acting career can prepare you to be an entrepreneur
  • Why it’s important to look forward when accessing your cash flow
  • Dealing with cash flow in a small business
  • Her greatest influences
  • Who she listens closely to when making decisions”

Listen to the podcast Here. For more information on this episode and to learn more about Danone and Joy Click Here!

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.