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Unsettled Times Call for a Little Magic

What does the future look like for those of us in the Employee Benefit industry? Some wonder if there will even be a group health insurance market in a few years. Until the US Supreme Court makes their decision(s) regarding Patient Protection and Affordable Care Act (PPACA) later this year, that is a question which seems to hold credence with many when it really shouldn’t.

Don’t read this as a statement of affirmation of PPACA by any stretch of the imagination. I’m merely suggesting that whether PPACA is overturned or upheld…. There are viable solutions on both sides of the outcome and we should consider them.

PPACA is overturned, what then?

One might think business as usual would be the prevailing thought. I would like to think we are better than that. The United States is in the midst of an economically stressful time, our customers, and their employees need our help. The days of a low enough deductible to be considered useful by the insured does not need to be over. The days of employee benefits consuming fully 30% Plus of our customer’s bottom line needs to go…. And go quickly.

As to the “Great” plans that are out there; How many plans have what would be considered “great” benefits yet are cost prohibitive for family members to participate in due to cost?

Those types of benefits can still be delivered to your customers and their employees but not traditionally. (And why would you want to after considering the previous statement?) The best way to accomplish our customer’s wishes is to help fund their plan by taking back a portion of the insurance carrier’s profits and keeping those monies within the plan itself.

One method we can use to accomplish this is the Benefit Houdini Strategy. That strategy most simply stated is the use of a Fully Insured High Deductible Health Plan (HDHP) and a Health Reimbursement Arrangement (HRA) administered by a quality Third Party Administrator (TPA) and self insuring the gap with monies saved.

With Congress’s Medical Loss Ratio (MLR) mandate of 80% on small group. We can (and should) take full advantage. Put another way, as long as insurance carriers are still active and the 80% MLR mandate is in place; It is difficult to justify the risk of self insuring with the use of traditional stop loss coverage that is more expensive and has the ability to laser individual employees or their family members due to health conditions and probable claims costs.

The numbers with this strategy are striking and pose a strong argument for its use in most cases when the individual deductible is less than $3500.

PPACA is upheld, what then?

As long as there are things like: employees, and industry, there will always be a call for a method to incent and entice good employees for recruitment and behavior. In this scenario we are to assume PPACA is upheld in its entirety. Exchanges will be replacing group carriers in their current form shortly….. Or will they? It is pretty likely some will go away, but the American Spirit has never been one of rolling over and “Taking it” and there is a fight to be waged that will transform the landscape of employee benefits and health care in general in such a manner we can no more predict the next five years anymore than the average newlywed couple can appreciate the transformation their lives are about to go thru.

Wasn’t the quote “A little revolution every now and again is a good thing” attributed to one of our founding fathers Thomas Jefferson?

Competition and the will to survive are going to drive carriers to hold providers accountable like never before. They (the carriers) will do this by the way far better than any bunch of bureaucrats could ever dream, and possibly…. Just possibly with the help of some rules from the top. True reform like true competition and pricing transparency might actually happen. Imagine shopping your hip replacement surgery with knowledge of actual costs and outcome statistics. That doesn’t’ sound like doomsday really. A shame it will probably take something that big to make this happen…. But this is a likely outcome if PPACA is upheld.

Unsettled times do indeed call for a little magic.

What does the future look like for those of us in the Employee Benefit industry? Until the US Supreme Court makes their decision(s) we won’t know for sure, but regardless of that outcome I believe optimism should prevail.

The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

By Lance Wallach, CLU, CHFC
Abusive Tax Shelter, Listed Transaction, Reportable Transaction Expert Witness
Lance Wallach, National Society of Accountants Speaker of the Year and member of the American Institute of CPAs faculty of teaching professionals, is a frequent speaker on retirement plans, financial and estate planning, and abusive tax shelters. He speaks at more than ten conventions annually and writes for over fifty publications. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education's CPA's Guide to Life Insurance and Federal Estate and Gift Taxation, as well as AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and has never lost a case.

Copyright Lance Wallach, CLU, CHFC

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.

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