California Health Insurance Information and News

On Thursday, April 22, 2010, Reuters reported that “WellPoint … has specifically targeted women with breast cancer for aggressive investigation with the intent to cancel their policies…” Wellpoint responded today by saying that “this is simply wrong.” Interestingly, as I write this, the Reuters article with the allegations has been removed.

Wellpoint has categorically denied the allegations and strongly defends its practices. Also, Angela Brayly, CEO of Wellpoint, wrote a powerful letter to Secretary of HHS, Kathleen Sebelius, clarifying the inaccurate accusations. Ms. Braly told Secretary Sebelius, “both your statement and (Reuters reporter)Mr. Waas’ piece are inaccurate and grossly misrepresent WellPoint’s efforts to help prevent, detect, and treat the 1 in 8 of our 34 million members nationwide affected by breast cancer.”

The issue of rescission gets lots of media attention. The accusations make front page news. Yet, the truth/reality is much different. Personally, I have only seen one case rescinded in my 17 year career as a health insurance agent. In that case a woman applied for coverage through our agency online. She gave birth to a full term, healthy baby 6 months after applying for coverage. The application for coverage asked specifically if a woman is pregnant and asked the woman to put the date of her last menstrual period. (The current application asks if it has been more than 40 days since the last menstrual period.) So, in this case, the woman could not have given birth to a full term baby 6 months after applying for coverage because the human gestation period is 40 weeks or 9 months.

Insurance companies ask medical questions (medical underwriting) to prevent people from waiting until they are sick, or pregnant, to apply for coverage. If they did not do this; people would sign up for health insurance at the doctors’ office or in the hospital. Get treatment paid for by others. Then, cancel the coverage and reapply when they get sick, injured or pregnant again. This process is called “adverse selection” and it effectively ends the ability of people to pool resources to pay for high cost medical care, as health insurance does.

Rescissions happen rarely. When they do, it is likely that the facts in the case are not as reported in the press and parroted by politicians.

In my opinion, the Reuters article and Secretary Sebelius’s letter to Wellpoint is an example of the fear mongering that enabled the Patient Protection and Affordable Care Act legislation to be signed into law.

The IRS has just issued preliminary guidelines on the health insurance tax credit for small businesses – and it looks good. This will make the cost of health insurance more affordable for many small employers. Of major importance is that the owner’s wages/salary are not included in the average wage calculation when determining one’s eligibility to qualify for the credit. (See answer to questions 13 & 14 in the IRS FAQ.)

Businesses with fewer than 10 employees whose average wages are $25,000/yr. or less will qualify for the full credit. The medical insurance tax credit gradually reduces but is available to employers with fewer than 25 employees and average wages that are less than $50,000/yr.

The maximum credit amount is 35% of the health insurance premiums paid by employer in 2010. This version of the small employer health insurance credit will be available for tax years 2010 – 2013. According to the IRS, “an enhanced version of the credit will be effective beginning in 2014. ”

Tax-exempt employers can also qualify for a “refundable” credit that is equal to 25% of the health insurance premium paid by the employer and capped by the maximum “amount of income and Medicare (i.e., Hospital Insurance) tax the employer is required to withhold from employees’ wages for the year and the employer share of Medicare tax on employees’ wages.” (See the answer to question #6 on the IRS FAQ.)

As with all things tax related – the explanations are a bit confusing and require one to read slowly, re-read, then seek professional guidance. The IRS will be releasing more information by the end of April and we will keep you posted. We don’t give tax advice at BenefitsCafe.com (we’re health insurance agents) but we will try to find out as much as we can about this valuable tax credit. We’re happy to share what we learn.

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