Gov't Disability Benefits: Safety Net Turning to Hammock

• Since 1980, disability benefits grew by 82 percent and the termination rate fell by 42 percent.
• Furthermore, 50,000 awards to beneficiaries were paid per year on average in the past decade.
• That number peaked at 1.7 million awards after the economic crisis.
• The termination of benefits continues to fall, which allows people to stay on SSDI for a longer time -- 163 per 1,000 beneficiaries in 1982 compared to 74 per 1,000 in 2011.

More and more beneficiaries tend to receive awards as long as they are disabled or until they reach the full retirement age, at which point they'll receive retirement benefits.

• Less than 10 percent of individuals stop receiving disability benefits by improving their medical condition or returning to work.
• Of the 653,877 terminated benefits, 51.7 percent were due to a conversion to retirement benefits and 36.1 percent owing to death.

The current system incentivizes people to stay out of the labor force and defer termination of their disability benefits until they reach retirement age.

 

The result of this has been more backlogs in the application process, hurting the people that need SSDI the most. Furthermore, SSDI is becoming unsustainable as the trust fund is being used up at increasing rates. 

 

Source: Veronique de Rugy, "More Americans Dependent on Disability, Longer," Mercatus Center. 

2013 Health Plan Increases About 9% Nationwide (California Has Been A Bit Higher)

Trend is a forecast of per capita claims cost increases that takes into account various factors, such as price inflation, utilization, government-mandated benefits, and new treatments, therapies and technology. Although there is usually a high correlation between a trend rate and the actual cost increase assessed by a carrier, trend and the net annual change in plan costs are not the same. Changes in the costs to plan sponsors can be significantly different from projected claims cost trends, reflecting such diverse factors as group demographics, changes in plan design, administrative fees, reinsurance premiums and changes in participant contributions.

In California we continually suffer from the reality that our state mandates more benefits and implements more legislative change on average than just about any other state in the country.

With that said, here is Segal's 2013 Projection:

Sitting is killing you - even if you go to the gym 5 times a week

Get ready for treadmills and exercise bikes at your standing desk: 

[A] closer look at the accumulating research on sitting reveals something more intriguing, and disturbing: the health hazards of sitting for long stretches are significant even for people who are quite active when they’re not sitting down. That point was reiterated recently in two studies, published in The British Journal of Sports Medicine and in Diabetologia, a journal of the European Association for the Study of Diabetes.

Suppose you stick to a five-times-a-week gym regimen, as I do, and have put in a lifetime of hard cardio exercise, and have a resting heart rate that’s a significant fraction below the norm. That doesn’t inoculate you, apparently, from the perils of sitting.

The research comes more from observing the health results of people’s behavior than from discovering the biological and genetic triggers that may be associated with extended sitting. Still, scientists have determined that after an hour or more of sitting, the production of enzymes that burn fat in the body declines by as much as 90 percent. Extended sitting, they add, slows the body’s metabolism of glucose and lowers the levels of good (HDL) cholesterol in the blood. Those are risk factors toward developing heart disease and Type 2 diabetes. 

http://www.nytimes.com/2012/12/02/business/stand-up-desks-gaining-favor-in-the-workplace.html 

Want to Fire an FMLA-Abuser? Here Are Some Legitimate Reasons to Do So

The following appeals court rulings show that there are legitimate reason an employee can be fired if he or she is clearly using FMLA leave improperly. Here are some recent examples.

• Employee doesn’t adequately demonstrate a need for FMLA leave: After being passed up for a promotion, one employee said she developed post traumatic stress disorder and asserted her right for FMLA leave. The employer (U.S. Air Force) requested a DOL WH-380 medical certification form to support her FMLA request for leave. She refused to submit that form, and employer terminated her. The 9th U.S. Circuit Court of Appeals backed the Air Force.

• Employee uses FMLA leave for non-caretaker activities: In this case, an employee was not in Miami taking care of his injured daughter (which was the reason he claimed FMLA leave). Instead he was in Texas, taking care of his residence. After his company, McLane Foodservice, terminated him, the 5th U.S. Circuit Court of Appeals said he had no retaliation claim.

• Employee disregards workplace FMLA leave policies: An employee was dismissed after taking an unapproved week-long vacation in Mexico while on FMLA leave, supposedly to recover from surgery. She did not inform her employer she would be leaving the country, nor did she request permission to travel. This was significant, according to this ruling by the U.S. District Court for the Western District of Pennsylvania, because CWA’s work rules specifically required employees to “remain in the immediate vicinity” of their home while using sick leave.

• Employee abuses workplace FMLA leave policies: In another case, it became apparent that an employee was using FMLA leave to buttress holidays and vacations, under the pretext of a back injury. The employer counted 35 times that his back issues flared up on the days just before or after his previously scheduled time off, says this ruling by the federal district court in Utah.

Source: Thompson's Smart HR, October 5, 2011.  Link to Full Text.

This is What Free Market Healthcare Looks Like

This is from David Henderson at the Library of Economics and Liberty:  

…We were driving from Monterey to Santa Barbara to stay in a rented house for the week. Along the way, my wife had a symptom. I don't want to name the symptom because I want to respect her privacy. It was a more-extreme symptom than she had previously had of a disease that she had already been diagnosed with. It happened so suddenly that it scared us both. … 

But 2 months earlier, after much prompting from my students to get with the decade, I finally had bought an iPad. We had it with us. I was driving and so my wife got on the iPad and did a Google search. What came up was a site called "Just Answer." She clicked on the link for "Doctors and Nurses" and registered. She had two choices: (1) pay $24 and wait who knows how long for an answer or (2) pay $38 for an expedited answer. We were concerned enough that she did the latter. She keyed in her symptoms and some of her medical history. About an hour later, a specialist--a neurologist--was on her case and she and I my wife went back and forth on a "chat" feature on the site that also allowed my wife to "save" the conversation. Bottom line: deal with the symptoms while we were in Santa Barbara for a week and then get some blood tests when she returned. My guess is that she would have gotten a similar response from Doctors on Duty or Urgent Care. But we would have been slowed down, we would have paid a multiple of the $38, and we wouldn't have had a specialist….

Hat tip: Dr. John Goodman. 

Gov't Mandates to Carry Healthcare Simply Reduce Employee Wages

If an employer only has $30,000 to pay an employee; he only has $30,000.  So when an employer is forced to buy an $8,000 health insurance policy as opposed to a $5,000 policy the employee loses $3,000 in wages and must take that compensation as benefits even if he or she wanted it as pay. More government equates to less choice and less freedom.  But then again we all knew that. The below illustrates this point quite well.   

An NBER Working Paper  estimates that people who gained employer-supplied health insurance as a result of the Massachusetts mandate saw their wages fall by $6,055 per year, an amount only “slightly smaller in magnitude than the average cost of [employer supplied health insurance] to employers.”

Was it worth it? The authors estimate that workers value the coverage at only about 76 cents for every $1.00 their employer was required to spend. This implies that employees are worse off by more than $1,500 per year, on the average.

Source: Doctor John Goodman, September 20, 2012. 

The Hidden Risks of Voluntary Benefits

Unfortunately, most employers are only ever told one side of the story regarding voluntary (worksite) benefits.  They are told the benefits are free to the employer and make the employer offering look more robust while satisfying an employees' irrational need to avoid all forms of perceived risk against anything from pet calamities to cancer. 

I will never forget sitting in a meeting where a shameless voluntary salesman urged the crowd to purchase his cancer and critical illness policies by explaining that once skin cancer was found on his nose, he bought a new van with his worksite payout.  

Delightful.  We've now taken employee benefits the a new level of sophistication.

Aside from the never-ending administrative challenges of voluntary benefits (incorrect billing, only partial approvals for life amounts, and constantly changing premiums that blow up your payroll deductions), there are rock-solid legal reasons to avoid (or minimize) the prevalence of worksite benefits in your organization.

The conundrum an HR department faces is their natural instinct to make sure that voluntary benefits are vetted thoroughly, and rolled out to employees in a smooth, organized and controlled fashion just like the rest of your benefits.  However, it is precisely these instincts that will turn your voluntary benefits program into an ERISA Plan and embroil you in a compliance nightmare.  

If a voluntary plan is deemed to be an ERISA Plan, the employer must create a written Plan Document and distribute SPDs to its Participants. If the Plan has 100 or more Participants on the first day of the plan year, the employer must also file a Form 5500 with the DOL and provide a summary of it, called a Summary Annual Report (SAR), to its Participants.  

Once deemed and ERISA Plan, you vouch for the validity of your voluntary program as a plan fiduciary.  Be prepared to then get sucked into legal disputes between your employees and their voluntary provider, who likely sold the policy via a 1099 agent who is nowhere to be found years down the road when things hit the fan.

This is from: HR Benefits Alert:

For most firms, voluntary benefits are a win-win arrangement. But be careful. 

On the positive side, voluntary benefits cost employers next to nothing, yet boost employees’ morale and benefits satisfaction. An Aon survey found 77% of organizations offer at least one voluntary benefit. 

What happens if there’s a legal dispute between one or more of your employees and the vendor?  In some cases, employers unwittingly get dragged into court. The vendor could potentially argue that the plan is covered by ERISA, and the employee’s lawsuit should instead be filed against his or her employer. 

If the court agrees, the legal burden would shift to the employer.  Some courts have, in fact, ruled that a voluntary benefits may be covered under ERISA, even if it wasn’t an employer’s intention to formally “sponsor” the plan. 

If push comes to shove, vendors will protect themselves. In fact, some attorneys warn that a voluntary plan insurer’s first move if sued by one of your employees will be to try to get the legal burden shifted from itself to you. 

Two seemingly innocent things that can be turned against you in court:

• the written announcement to tell employees about the new voluntary benefit, and

• getting involved if there’s a dispute between an employee and the plan vendor.

Be careful with announcements 

When you offer a new voluntary benefit, the natural tendency is to try to get employees pumped up to participate. But you can get in trouble if people get the impression the firm endorses the plan. Helpful practices:

• Don’t put the announcement on organizational letterhead

• Put a disclaimer on the description

•  either exclude your voluntary offerings from employees’ benefits manuals or list them separately, and

• hold open enrollment at a different time than for ERISA plans (401(k), main health plan, etc.).

Also, if the vendor offering the voluntary plan has competitors, you may want to remind employees the vendor of the voluntary plan isn’t the only game in town. Some firms pass along lists of competing vendors. 

Avoid involvement in disputes 

As with your ERISA plans, chances are employees will come to you when they have a problem with a voluntary plan. Your first inclination is to help. 

But many experts warn it’s better to stay out. Reason: Courts see this as the action of a plan sponsor. But you can steer someone in the right direction (e.g., giving a contact name to call) while remaining neutral in the dispute. 

Good intentions gone bad  

From an ERISA standpoint, the most dangerous voluntary plan design is one that is partially paid by the company, even if employees pay the bulk of the cost. 

In a major ruling a few years ago (Burgess v. Cigna Life Insurance), a U.S. district court ruled against an employer with a voluntary supplemental disability plan in which the firm paid a portion of premiums on behalf of its lower-paid employees. 

While most employees paid the entire premium — and firm made clear to  people the plan was a voluntary benefit –the court said it didn’t matter. The act of contributing to some employees’ premiums made it an ERISA plan.

Bureaucratic Reality: Reform Mandate Won't Be Enforced Anyway

[The Health Reform Law] counts on most of the scofflaws turning themselves in. If you do not have insurance and think you owe the tax, then you will be asked to check a box to that effect on your tax return. If you choose to ignore the mandate, you might also choose not to check the box. But even those who do confess that they do not have insurance may not be liable for the new tax. Illegal aliens, Native Americans, prisoners, those who are without insurance for less than 3 months, those who do not have to file an income tax return, anyone who faces a hardship or cannot find affordable coverage, and others are all exempt.

Full Text: Joseph Antos and Michael R. Strain at The Health Care Blog.

More Than 10% of the Folks on Your Health Plan Are Fraudulent

Dependent eligibility audits are designed to ensure that every employee family member who receives health coverage is actually eligible for that coverage. Every employee, from CEO to chief surgeon to janitor, must show copies of their marriage certificates, their children’s birth certificates, and perhaps even the first page of their most recent tax returns, with numerical amounts blacked out, to demonstrate that they are currently married and are legally the parents of any children they claim as dependents on the health plan.

A typical dependent eligibility audit finds that between 6 and 16 percent of dependents are ineligible for the company health plan.     

The list of ineligible covered persons might include: 

• employee children who are older than 26;
• kids who aren’t legally an employee’s child; 
  
• a domestic partner’s child; or
• grandchildren.  

Audits also find that:

• employees haven’t really married; or
• people were married and divorced without telling human resoruces.   

For smaller companies with less than 1,000 employees, the human resources executive may handle a dependency eligibility audit, simply by making a list of employees with dependents on the company plan, asking for supporting documents, and checking them off as employees produce them. 

For an easier alternative, some firms simply ask employees for an affidavit stating that their dependents are legally theirs. But certification isn’t terribly effective as a willingness to lie may not be dissuaded.

Link to full text: http://www.benefitspro.com/2012/07/18/got-dependents-prove-it?utm_source=BenefitsProDaily&utm_medium=eNL&utm_campaign=BenefitsPro_eNLs 

Calorie Labels Could Be All Wrong

Sarah Kliff at Ezra’s blog. ... 

The new health-care law will soon require chain restaurants to post the caloric content of standard menu items. There’s just one problem: The methodology for determining caloric content, developed about a century ago, may not be all that accurate. That is what scientists are learning as they try to answer what seems like a pretty simple question: How many calories does an almond have?

Answer: 20% fewer than what is on the label. 

"What they found, as described by study author David Bear: “When people are consuming nuts, the amount of fat in the feces goes up. And that suggests that we’re not absorbing all the fat or calories that’s in the nut.”

In other words, there’s might be a whole lot of fat in almonds that shows up in a bomb calorimeter, but a good amount of it never gets absorbed by the body. As a result, the researchers concluded that almonds actually have 20 percent fewer calories than we currently think."  

Over Last 3 Years: 3.1 Mil. Gained Disability and 2.6 Mil. Got Jobs

• While the economy has created 2.6 million jobs since June of 2009, as many of 3.1 million people have become recipients of federal disability insurance.

• The economy created 80,000 jobs in June of 2012, the Bureau of Labor Statistics reported on Friday.  In contrast, 85,000 workers left the workforce to enroll in the Social Security Disability Insurance program that same month, according to the Social Security Administration.

Link to full text: http://www.dailymail.co.uk/news/article-2170044/85-000-Americans-went-disability-benefit-June-80-000-jobs-added-period.html#ixzz20tzwMtDv

Supreme Court Upholds Mandate as a Tax - Medicaid Restrictions Detailed

Overview

With the release of the Supreme Court ruling today you are likely to see a flurry of emails and updates on PPACA. The Court upheld the Sections of the law related to employers entirely. We are committed to providing accurate and timely information to our clients. We believe today’s ruling is merely the end of the beginning of the debate on the future of healthcare. Given the significant nature of the ruling we want to take some time to review and discuss internally what we believe are the best strategies going forward.

We will have a position paper out within the next day or two. Additionally we will have a comprehensive webinar to review the key elements of the law along with a calendar of compliance dates. No employer can afford to wait any longer before beginning the work of total compliance.

We fundamentally still think employers are likely to bear the majority of future costs associated with healthcare increases. The governments budgets are stretched to a breaking point and cost will be shifted to the private sector. Benefits remain a competitive business priority in today’s business climate.

We continue to emphasize that employers who proactively help their employees stay healthy and manage known conditions, have medical cost increases which are about half of their peers who do nothing. We will continue to bring new services and support you in these areas.

Ruling

Today's ruling is approximately 200 pages and it will take us some time to read, synthesize and digest.  (Ruling linked here). 

In short, the Supreme Court upheld the health care law in a splintered, complex opinion.  The justices said that the individual mandate -- the requirement that most Americans buy health insurance or pay a fine -- is constitutional as a tax.  In 2014, the penalty will be; 

• $285 per family or 1% of income, whichever is greater;
• by 2016, it goes up to $2,085 per family or 2.5% of income, whichever is greater. 

Chief Justice John Roberts provided the key vote to preserve the landmark health care law, which figures to be a major issue in the upcoming Presidential election.

The government had argued that Congress had the authority to pass the individual mandate as part of its power to regulate interstate commerce; the court disagreed with that analysis, but preserved the mandate because the fine amounts to a tax that is within Congress' constitutional powers. 

Justice Anthony M. Kennedy, the usual swing vote, spoke for the conservative dissenters and said the entire law should have been struck down.

Medicaid Issue

The ruling was not a total victory for the Obama administration.

Roberts said the law's required expansion of Medicaid violates states' rights.  In essence PPACA expanded a citizen's right to Medicaid if that person made up to 133% of the federal poverty limit (as opposed to 100% prior to the law).  The law further stated that if states did not take on this extra burden, all federal Medicaid assitance could be fully extracted from that state.  This appears to be a significant issue and we will be addressing it further in the upcoming weeks. 

"The states are given no choice in this case. They must either accept a basic change in the nature of Medicaid or risk losing all Medicaid funding," he wrote.

He said the federal government cannot require the states to follow this part of the law. States that want to take extra federal money may do so, he said, but they cannot be threatened with the loss of all federal funds if they refuse to expand the program as required by Washington.

Market Response

Since the decision issued, stocks have been dropping sharply.

The Dow Jones industrial average, which was down about 100 points before the court ruled, was down 133 points at 12,494 shortly before noon EST Thursday.

Stocks of major insurance companies fell sharply as analysts sorted through the ruling. Hospital chains rose.

Bank stocks were the biggest losers in the market. JPMorgan fell 4 percent after the New York Times reported that its loss from a complex trade could swell to $9 billion.

The Standard & Poor's 500 index fell 14 points to 1,318 and the Nasdaq composite index was off 40 points at 2,834.

Quantification of the Regulatory Burden on U.S. Business

The current regulatory environment places an enormous burden on the American economy by crushing small businesses with nonsensical rules and making the United States a toxic country in which to locate a business. 

• Last year alone, 3,807 new final rules were published in the Federal Register -- more than 10 per day.
• During that same period, Congress passed only 81 new laws. 
• Big businesses with more than 500 employees pay about $7,755 per employee to comply with federal rules each year, according to the SBA.
• But small businesses with fewer than 20 employees pay $10,585 per employee per year -- that's a built-in competitive advantage for big business of nearly $3,000 per employee.

For text:  http://spectator.org/archives/2012/06/05/washingtons-ten-thousand-comma 

Source: Ryan Young and Wayne Crews, "Washington's Ten Thousand Commandments,"American Spectator, June 5, 2012.  

How Much is that Free Healthcare Costing Your Plan?

As Kelly Kennedy in USA Today writes: 

A new report shows costs vary as much as 700% for some preventive examinations, and as the federal health care law increases demand for those procedures, it can mean an increase in premiums if employees don't pay attention to those costs.

So how many of us think we have employees who are going to shop around to get the best price for these "free" services? [Yes, it was impossible for me to keep a straight face as I typed that.] 

Test	Cost Range
Mammography	$169-$403
Type 2 Diabetes	$51-$437
Cholesterol	$117-$374
Colonoscopy	$786-$1,819
Pap Smear	$131-$476

Hat tip to Dr. John Goodman for the posting. 

The Government's Record in Providing 'Health Care'

U.S. government doctors once thought it was fine to experiment on disabled people and prison inmates. Such experiments included giving hepatitis to mental patients in Connecticut, squirting a pandemic flu virus up the noses of prisoners in Maryland, and injecting cancer cells into chronically ill people at a New York hospital. ... U.S. officials also acknowledged there had been dozens of similar experiments in the United States - studies that often involved making healthy people sick.  ...

Read the full story at the Washington Post.  

Carrier Logic: Utilization Up So Increase Premiums; Utilization Down So Increase Premiums

This classic carrier-spin points to a lose-lose for policy holders.  You have to love they way they operate.  

The New York Times and California Healthline report:

[E]ven as profits increase, insurers continue to push for higher premiums, citing the higher costs of care and the belief that demand for care will increase later this year as the economy improves.

Lonny Reisman, chief medical officer of Aetna, said, "I think there's a real concern about a bounce-back, a rebound, in utilization."

Heads means carriers win and tails mean you lose. 

Cost Control Requires Patients to Pay a Percentage of the Bill

The cost of employee benefits has risen by over 125% in the last decade. One of the myriad of challenges exacerbating this problem is that the end users of your benefit plan regularly have no financial incentive to make sure they are purchasing the most reasonably priced treatment available to them.  

Below is a great illustration of this point.  Hat tip to Jane Cooper of Patient Care and SHRM. Low cost plans with fixed co-pays as opposed to coinsurance percentages do not correct the below market failure.  

1 in 4 U.S. Adults on Government Health Insurance

Gallup finds that 1 in 4 U.S. adults are covered by Medicare, Medicaid or military/veterans' benefits.