ARRA has been enacted and has some far reaching effects on the way your company will handle COBRA and Ohio's State Continuation requirements.  As you know, employers will be subsidizing 65% of the cost for individuals on COBRA and the 65% subsidy also applies to state continuation.  Under ARRA, employers are eligible for the subsidy for up to 9 months.

 

Model Notices are now available on the Department of Labor's website.  If your company does not use ESP Benefit Design as your COBRA administrator, you should follow the guidelines from the Department of Labor regarding ARRA requirements. 

 

ARRA also affects employers that do not have to adhere to COBRA notification mandates (less than 20 employees.)  Model notices for employers in states with state continuation are also on the Department of Labor website.  In Ohio, employers with fewer than 20 employees have had to provide continuation of coverage for 6 months.  Even though the subsidy is available for 9 months under ARRA, the 6 month State Continuation benefit period remains intact and the 9 month ARRA requirement does not superceded the current State Mandate.

 

Employers will receive the funding for the 65% subsidy by reducing Federal Payroll Withholding. Instructions are detailed at the IRS Website.

 

Under state continuation in the State of Ohio, the situation will be handled quite differently.  The employer will only pay the insurer 35% of the insurance premium and the health insurer will pay the difference and be reimbursed by Federal Government.

 

No matter which candidate wins the presidential election in November, employers’ involvement in health care will undergo fundamental changes if the next president’s proposals are approved by Congress.

Republican presidential candidate and U.S. Sen. John McCain stands behind a plan that emphasizes consumer choice by offering families and individuals tax credits to buy their own insurance. His Democratic rival, U.S. Sen. Barack Obama, promotes a health care plan that provides insurance to all Americans through continued employer-based private plans and a new public plan.

Obama’s plan strives to level the playing field among businesses through tax payments and subsidies, but companies with subpar insurance programs may end up paying more. If businesses do not now provide adequate comprehensive health care, they would have to pay a percentage of their payroll into a new public plan.

Keep or drop coverage

Under McCain’s plan, businesses may save expense and tax money by dropping employee insurance because the plan would eliminate the tax break employers receive for providing health coverage.

Some experts are concerned a drop in employee coverage would negatively affect overall employee wellness. Currently, employers focus on disease prevention and wellness in an effort to lower their insurance costs and increase productivity, said Dianne Kiehl, executive director of The Business Health Care Group. If employers no longer pay for health care, they potentially would have less incentive to offer wellness programs, Kiehl said.

Employers that drop insurance, yet continue offering wellness programs to ensure productive work forces, would have a difficult time focusing such programs on employees’ needs. This is because employers would lack data supplied by insurance providers on overall employee health problems, Kiehl said.

Despite her concerns about McCain’s plan, Kiehl and the coalition do not plan to officially endorse either plan.

While both candidates’ plans offer features that could benefit or hurt employers’ efforts to pay for health insurance, local health industry observers say not enough information is available to know for certain which plan is better for business.

David Newby, Wisconsin State AFL-CIO president, has endorsed Obama’s plan, but said it is hard to tell which candidate would be the best choice for businesses.

“The financing provisions are not clear for either plan,” he said.

Pay or play

Under McCain’s plan, businesses could save money by not offering health insurance and allowing employees to get it on their own. With Obama, businesses would have to choose to “pay or play” — pay into a fund for a national plan to cover people who don’t have insurance through an employer; or play by offering an employer-based insurance plan.

Both health plans fall short by not addressing the fundamental problem of rising health care costs, said John Torinus, chairman of Serigraph Inc., West Bend, and longtime activist on employer health care issues.

“That’s why people can’t afford health care and that’s what creates the access issue,” Torinus said. “The root problem is cost, and neither (candidate) ever talks about it.”

One issue both candidates do talk about is the need for health care change. About 47 million Americans are uninsured or under insured, and health care costs have risen four times faster than wages during the past six years.

“Our current system is not sustainable and we’ve got to fix it,” said the AFL-CIO’s Newby. “We’re wasting a lot of money and not getting enough for what we’re putting into the system.”

Newby supports a plan like Obama’s that attempts to provide complete coverage for everyone, which he said is better for unions, union workers and all employees.

In Obama’s plan, “if you have employer-provided health care that meets your needs, you can keep that or else you have the option of buying into a private or public plan for which you would be subsidized according to your income,” Newby said. “There would be a standard set of benefits and insurance companies would not be able to discriminate on the basis of age (or) pre-existing conditions.”

Power to negotiate

Newby said a national public plan would have the power to bargain with pharmaceutical companies to lower drug prices.

But under Obama’s plan, heavy regulation, coupled with the fallback national plan could undermine the employer insurance market, according to a study released Sept. 16 in Health Affairs, a non-partisan journal on public policy and research.

The September study featured independent reports on each candidate’s plan compiled by health care economists and analysts. Study authors included experts on both sides of the political spectrum. Health Affairs had opponents of Obama’s plan review his proposal and had opponents of McCain’s plan take a similar approach in their review of McCain’s plan.

The study also featured a compromise plan that incorporated the best elements of each candidate’s health care proposals. The study’s compromise recommended a plan that uses Obama’s public and private plans, and his increased subsidies for lower-income households. The compromise also supported McCain’s idea of separate insurance pools for high-risk patients and equal-value tax credits.

Tax credits are key

The idea of tax credits is central to McCain’s plan and an element emphasized by Wisconsin Republican Congressman Paul Ryan, who has endorsed McCain.

McCain’s plan “gives patients more power and choice to direct their health care,” Ryan said.

McCain would equalize the tax treatment of health care by offering the tax credit to those who don’t get insurance through their employer, he said.

Currently, “if you don’t get health care from your job, you don’t get a tax credit to purchase health care,” Ryan added. “The millions of people out there right now buying their own health care get no assistance. Under McCain’s plan, everybody gets the same tax benefit. Employers can still deduct insurance for employees. There’s no change in the incentive for employers to offer insurance.”

But Torinus doesn’t know if Serigraph would continue offering health care to its employees under the McCain plan, or if the company would let employees fend for themselves. But if more employers drop insurance under McCain’s leadership, Torinus does know McCain’s proposed $5,000 family tax credit would not be enough to cover insurance expenses.

“I don’t know anybody who’s buying health care for $5,000 a family,” said Torinus, who has not endorsed either candidate’s plan. “At Serigraph, we’re averaging $8,000 for a family.”

Ryan agreed cost is a legitimate concern, but only “if you accept the health care status quo. We need to change the market to make health care more affordable,” he said.

McCain’s plan does that partly by increased competition among insurers through interstate shopping. This means a Wisconsin resident could shop in any state for a cheaper health plan.

State regulation in doubt

Whether McCain’s approach by increasing competition would result in more Americans being insured over the long run is disputed by the Health Affairs study. While the McCain plan initially would lead to more people getting coverage, the number of uninsured likely would grow within five years as the tax credit’s value decreases compared with rising health costs.

“It’s going to make it difficult for people who are less well informed, or who have health problems or are older, to find reasonable insurance,” said Barbara Wolfe, an economics and health science professor at the University of Wisconsin-Madison.

Wolfe said she’s concerned that McCain’s plan, with its emphasis on less regulation of the insurance industry, would result in patients with high-risk medical conditions having trouble getting coverage.

On the other hand, Wolfe, who has not officially endorsed either candidate’s plan, does like McCain’s tax credit component. Of Obama’s plan, she especially likes his goal of getting everyone covered, starting with children.

“Having all children covered first may actually be a very pragmatic way to get everyone covered in the long run,” Wolfe said. “If you think about any practical implementation strategy, we can learn from that to get all adults signed up.”

 

---

DEBATE OVER DIFFERENCES

Although McCain and Obama agree on some points when it comes to health care reforms, their proposals are starkly different. McCain wants greater market competition and less government intervention. Obama foresees a “play or pay” scenario for employers and calls for the creation of a government health plan.

BOTH CANDIDATES

 

• Maintain private, employer-based coverage.
• Continue Medicaid, Medicare and the State Children’s Health Insurance Program (SCHIP).
• Guarantee access to insurance.
• Lower prescription drug prices through drug importation and quicker introduction of generics.
• Electronic record-keeping to reduce costs and streamline patient information.
• Transparency on treatments, doctors’ records, quality and costs through national standards reporting.

MCCAIN HEALTH PLAN

Projected annual cost: $10 billion

Projected annual savings to business: No figure available

Summary: Promote competition in the private market by allowing people to shop for their own coverage. Tax credit on employer-paid plans would be replaced by personal tax credits of $2,500 per individual and $5,000 per family. Risk pools would be created in each state for those denied coverage in the private market.

Type of benefit plan favored: High-deductible plan coupled with health savings account

Key points:

 

• Those without employer-based coverage receive tax credit of $5,000 for families or $2,500 for individuals to fund insurance costs.
• Allow competition among insurers across state lines to create lower prices.
• Create a federal, nonprofit guaranteed access plan to cover denied and low-income patients.
• Coordinated care to provide one bill to patients.
• Reform Medicare and Medicaid to compensate providers for costs from diagnosis, prevention and medical errors that could have been prevented or were mismanaged.

Sources: johnmccain.com; Journal of Health Affairs; The (Albany) Business Review

OBAMA HEALTH PLAN

Projected annual cost: $50 billion to $65 billion annually when fully phased in

Projected annual savings: $140 billion for businesses

Summary: Create national public plan to cover everyone not insured in the private market. Employers who do not contribute to their workers’ health coverage would have to put a percentage of payroll into a public plan. Small businesses would be exempt and receive tax credits to help buy coverage.

Type of benefit plan favored: Comprehensive, similar to the plan members of Congress have

Key points:

 

• National public health care program to guarantee access for self-employed, small business employees and workers without employer-based care.
• Federal regulation of public plan and increased regulation of private insurance, including mandatory benefits.
• Income-related subsidies to help individuals pay for public program or private plans.
• Employers without meaningful contributions to employee health care pay percentage of payroll to national plan. Small businesses with quality health care plans are exempt and receive Small Business Health Tax Credit.
• Mandatory child coverage through sign-up at birth.

Sources: barackobama.com; Journal of Health Affairs; Phillip Walzak, Wisconsin communications director for Obama for America; The (Albany) Business Review