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Healthcare Reform and What it means for Your Business and Your Employees – Phoenix 03.24.10

Many of you are wondering what the US House of Representative’s passage of the Health Care Reform bill (HR 3590) means. While we believe that this bill is counterproductive for the country as a whole, it should have limited direct effect on you or your employees for the next 4 years. Even though increased taxes and Medicare cuts are expected to start next year, the insurance enforcement provisions which include mandatory coverage, fines & subsidies, and insurance exchanges do not take effect until 2013.

Although insurance premiums will likely increase as a result of this bill, TAG will always continue to shop your plans and provide creative solutions to keep your costs down. Over the last year, TAG has introduced HSA and customized products that have lowered health renewals by 22% compared to the rest of the market. HSA plans are not dramatically impacted by the new legislation.

At this point, there are too many variables to reasonably predict the future. Having said that, below are my thoughts and answers to a few questions many are asking:

Can anything stop this bill?

Absolutely, there are many firewalls before the bill can be enforced.

  • Legal Challenges – This is the most favored solution. Several states have already passed resolutions authorizing litigation against the federal government for the bill’s violation of the 10th Amendment. The Republican Party and other citizen’s groups are also expected to take this matter to the Supreme Court on several constitutional grounds. Justice Anthony Kennedy will most likely be the deciding vote on these lawsuits.
  • Repealing the bill – The Republican Party is expected to pick up many seats in November. Unfortunately, even if Republicans take control of both Houses of Congress in 2011, they are highly unlikely to obtain the 2/3rds majority needed to repeal the bill and override a presidential veto. If Republicans maintain control of both Houses in the 2012 election and President Obama loses re-election, they would be able to repeal the law before the enforcement provisions take effect.
  • State Opt-Out – Several states are expected to opt out of the law. Arizona attempted to pass a constitutional amendment to allow its residents to opt-out of any federally mandated health programs. Although the ballot initiative was defeated in 2008, many expect it will be reintroduced this year with a higher likelihood of passage. The effects of opting out are unclear as Arizona residents will still likely be required to pay the increased federal income taxes.

How can I learn more?

What can I do?

Unfortunately, we have already learned that the Democrats have chosen to ignore the national polls and unprecedented outreach by the American population. The most practical steps we can take at this point would be to support a regime change in November. This means donating to candidates and encouraging voter turnout in several key states. Many strategies are discussed in http://blog.heritage.org/2010/03/22/morning-bell-repeal/.

What taxes will be increased?

  • As of 2013 – 40% excise tax on “Cadillac plans” with annual premiums of $10,200 for individuals ($27,500 for families). This is not likely to directly affect your policies as Arizona premiums are considerably lower than $850 per employee. Indirect results are unknown.
  • As of 2013 – Additional 0.9% Medicare tax on wages in excess of $200,000 ($250,000 for families).
  • As of 2013 – 3.8% surtax on investment income for individuals with Adjusted Gross Income above $200,000 ($250,000 for joint filers)
  • Phased in between 2014 & 2016 – Individual Penalty of the greater of $750 (up to $2,250 per family) or 2% of Adjusted Gross Income for not purchasing “acceptable” health insurance.
  • As of 2014 – Employer Penalty of $750 per employee for employers with over 50 employees that do not offer coverage to their employees

What are the consequences if the bill becomes the law of the land?

If the bill is enforced, insurance premiums will likely increase. Carriers will be required to offer coverage to all individuals, without price adjustment, despite any pre-existing health issues. At first glance, this concept may sound charitable; however, consumers are left with no incentive to purchase insurance until after they get sick. The “mandatory” insurance provisions of the bill result in minor fines that are far less than the cost of insurance. This situation has been likened to buying fire insurance after your house burns down.

As a result, insurance companies will have no choice but to charge their other policy holders the cost of insuring the disproportionately sick individuals. This is a self-defeating cycle that many believe is designed to ultimately guarantee a full government takeover of the health insurance system.

The bright spot is the law of unintended consequences. Even if the law is not struck down or repealed, the private market has often shown ingenuity in overcoming government intrusion. Many doctors and pharmacies are already dropping out of the Medicare system. Many doctors will likely not subscribe to the newest government program either. The proliferation of HSAs (Health Savings Accounts) and other alternative insurance financing programs allow many Americans to effectively opt out of the government system.

This individual opt-out will allow medical providers and medical consumers to transact 90% of medical care without the involvement of any insurance or government entity. Should this happen, medical costs will finally benefit from the market forces that have reduced the pricing of everything from a loaf of bread to a high-def TV. The rise of medical costs is not inevitable. One area that has already experienced limited government and insurance carrier involvement is the Lasik Eye industry. Despite major developments of new technology, Lasik procedures have gone down in the last 15 year from $5000 to $1500. Reintroducing free-market principals back into our healthcare system could have similar effect.

State Employees Find Success with HSA – WSJ 03.01.10
In a success story for consumer directed benefits published by the Wall Street Journal, the State of Indiana has seen huge savings and success by adding an HSA to their benefit package. The 70% of Indiana’s 30,000 state workers enrolled on the HSA option will collectively save more than $8 million dollars in 2010 effectively increasing their take home pay. The state itself has reduced their costs by 11%, saving the state itself over $20 million dollars.
TAG #1 Company In Arizona to make Inc. 500 List – Phoenix 08.13.09
Arizona Republic discusses the secrets behind TAG Employer Services’ top spot among eight Arizona companies to make the 2009 Inc. 500 list. Read
TAG Makes Inc. 500 – Phoenix 08.12.09  
TAG Employer Services is thrilled to announce their rank as #124 on the Inc. 500 list of the fastest-growing Private companies in America.
For the second year in a row, TAG joins the rarified company of enterprises that have appeared on the list multiple times, many of which have become national icons. Most important, the Inc. 500 companies were engines of job growth, having created more than 826,000 jobs since those companies were founded.
The Inc. 500 list measures revenue growth through a specific period of time. To qualify, companies must be U.S. – based and privately held, independent – not subsidiaries or divisions of other companies. View
TAG Introduces Joint Ventures at IPPA – Cambridge 08.12.09  
TAG Joint Ventures, a subsidiary of TAG Employer Services is a platinum sponsor and exhibitor at the 2009 Annual IPPA Conference in Cambridge, Mass. The IPPA Conference, held annually, is for the Independent Payroll Providers Association members to gain knowledge and insight into the Payroll Industry and get introduced to new ideas and concepts to aid in business growth.
TAG will be at the IPPA to work with other payroll providers to create partnerships for future opportunities utilizing the new TAG V4 software platform. This partnership is the foundation of the TAG Joint Ventures model where TAG plans to bring the success of the ASO market to our payroll peers.
Launching the New TAG Software Solution – Phoenix 08.03.09
TAG Back Office, a subsidiary of the TAG companies, released today its version 4.0 of the TAG Back Office Solutions (TAGBOSS) product. This product implements a number of groundbreaking features, including a semantic database, contextual data relationships, a fully data-driven calculation engine for payroll, benefits, taxes, and deductions, and a new web-based interface for both internal and client-entry access.
Also included in this release are the foundations for V4.1, scheduled for November of this year, which includes full job-costing for our construction clients, and fully integrated GL and AP processing for clients as well as for our service bureau operations.
TAGBOSS V4 maintains the groundbreaking technology first implemented by V3, including fully integrated payroll and benefit processing, integrated workflow for all payroll, client, employee, and carrier events, and intelligent “inheritance” that allows multi-site and multi-company clients to manage policies, common deductions and other functions, and maintain tailored functions for specific companies or locations.