Category Archives: Health

Health Insurance

Govt Update: LB 486 & AHCA

LB 486

For local Nebraska insurance agents, you may want to pay attention to a bill making its way through the halls of the capital right now.

LB 486 (Kolterman) is a bill that would grant 6 hours of CE to Nebraska agents belonging to certain professional associations. The bill is currently in committee right now and needs priority to make it to the floor. If it does not receive priority, it rolls over to next year’s legislature.

To be eligible, association members would need to qualify with “active participation” as spelled out by the bill and guided by Director Bruce Ramge. I believe only four associations currently qualify for this, including my very own favorite, NAIFA.

I can speak from experience that involvement in a professional association (NAIFA in my case) has no doubt made me a better agent due to its focus on education, ethical conduct, and most importantly, political advocacy that protects our clients.


GOP Unveils the American Health Care Act

The American Health Care Act, or AHCA, was unveiled yesterday by house Republicans in their first attempt to replace for Obamacare (ACA). The draft needs some work and will undoubtedly be changed before it reaches the Senate.

What stays the same as Obamacare:
  • The ban on the use of pre-existing conditions
  • The ban on annual and lifetime benefit caps
  • The authority to keep adult children up to age 26 on a parent’s plan
  • The Medical Loss Ratio (MLR) requirement that insurance companies spend at least 80% or 85% of their premium revenue on medical expenses.
  • Agent compensation is not excluded from the MLR calculation
  • The “Cadillac Tax” that requires insurers (or self-insured plans) pay 40% tax on the amount by which premiums exceed statutory limits (deferred to 2025)
What has changed from Obamacare:
  • Elimination of the individual and employer mandate
  • Elimination of the (Bronze, Silver, Gold, Platinum) minimum essential benefit levels
  • A 30% annual surcharge on premiums paid by individuals who cannot prove continuous coverage
  • 5 age band will be used for premium pricing (Obamacare had 3)
  • Elimination of all Obamacare taxes except for the Cadillac tax (This includes a multitude ranging from taxes on high-income taxpayers, OTC medications, medical devices, HSA and MSA accounts, and deductibility limits)
  • Subsidies have been repealed in favor of an age-weighted and income-limited tax credit structure. Only individuals who are not offered coverage by their employer or the government are eligible.
  • Medicaid expansion has been repealed and replaced with block grant funding for states.
  • HSA expansion of contribution limits
Analysis & Opinion

Actuaries still have their hands tied, which is the primary reason premiums under Obamacare continued to skyrocket. Love them or hate them, pre-existing conditions, annual caps, and lifetime limits were the safety nets that allowed carriers to keep costs down.

We learned this lesson with unlimited Long Term Care insurance policies. The insurers drowned in claims, ultimately resulting in a mass exodus from the market and rate hikes. Similarly,  open-ended liabilities in health insurance plans are hidden grenades that must be accounted for.

The primary beneficiaries have shifted. Obamacare subsidy triggers focused narrowly on low-income households. AHCA tax credits are not as rich as Obamacare, but they have been broadened to include a greater portion of middle-income earners.

Personally, I liked the individual mandate from a math perspective; I was disappointed Obamacare didn’t have more teeth. It’s the only true way to avoid adverse selection. The 30% surcharge is a step in the right direction, but I’m concerned it doesn’t go far enough. For this to work, you have to have universal buy-in from healthy applicants.

I appreciate that the AHCA tries to address many big-picture budget and deficit problems, but that comes with significant sacrifice. Right or wrong, the AHCA tax credits become less useful over time. The credits available through the AHCA are tied to the consumer-price index plus 1%. Health care costs rise significantly faster than inflation, so the value becomes less over the years.

The AHCA repeals or freezes Medicaid expansion for states and switches over to block-grant type funding in future years. In other words, states would receive a fixed amount rather than a dynamic amount based on usage under Obamacare.

Democrat opponents are no doubt eager for a fight over benefits awarded to high-income earners and health insurance companies. The 3.8% tax on high-income earners investment income will be repealed.  The health insurance tax –a special annual tax on health insurers, will be rolled back in 2018. Further, executive officers will enjoy the repeal of limits on deductibility of compensation.

A welcome change is HSA expansion, which increases contribution limits across the board. Encouraging all families to save for medical expenditures by providing tax perks is a no-brainer.