We also consider additional issues related to the new law, such as the pending legal challenge to PPACA before the U.S. Supreme Court; the ever-escalating cost of medical care; and the introduction of Accountable Care Organizations (ACO) as a method of containing the cost of health care.

By way of back ground; individual HMO dental plans require a fixed copayment by the member for child orthodontia. For example, the Anthem Blue Cross Select Net Dental HMO plan requires the member to pay $2,870 for child orthodontia. The monthly premium in Los Angeles County for a child on this plan is $17/month or $204/year. Blue Shield of California does not offer a child-only dental HMO plan in Los Angeles. Delta Dental offers two individual policies for children: CAA55 costs $7/month, $84/year and has an ortho copayment of $2900; CAA54 costs $8/month, $96/year and has an ortho copayment of $2800. The information is current as of May 2011.

Click here for an individual dental HMO plan quote.

One of the PPO dental plans we’ll look at closely is from Anthem Blue Cross of California (ABC) and costs $36/mo. The other plan from Blue Shield of California (BSCA) costs $40.60/month.

First you need to examine the detailed “certificates of insurance” or contracts for these plans. These contracts give the details of how ortho would be paid. In the ABC (Dental Blue Dental Enhanced) plan, pages 12, 13, 18 & 19 seem to describe the ortho benefits. In the BSCA contract (Smile PPO) pages 12, 13 & 22 describe the ortho benefits in most detail. You should look at the entire contract but these pages seem to refer specifically to the ortho benefit.

On the Anthem Blue Cross (ABC) plan, after a 12 month waiting period, the plan will pay a maximum of $500/year for ortho with a maximum benefit of $1000/lifetime. Certain restrictions and limitations apply and you should read about these. So, one would have to be enrolled for 3 years to get the full ortho benefit (1 yr. wait plus 2 years of treatment). 36 months x $36/mo = $1296 in premium. Of course the plan pays for other dental services (cleanings, fillings, etc.) Also the monthly premium may rise on this plan during the 3 year period.

The Blue Shield (BSCA) plan sets the member’s copayment for child fully banded ortho (24 month treatment period) at $2350, after a 12 month waiting period. I don’t know the full cost of ortho treatment and I imagine that it varies based on the patient and the orthodontist doing the procedure. To get the full ortho benefit one must be enrolled in the plan for 3 years (1 yr. waiting plus 2 yrs. Treatment.) 36 months x $40.60/mo = $1416. As with the ABC plan, this plan pays for other dental services (cleanings, fillings, etc.) and the monthly premium may rise on this plan during the 3 year period. So, the member payment for child orthodontia on this plan would be $3,766 ($2350 copayment + $1416 premium.)

Also, both plans restrict the providers to in-network orthodontists for full payment.

To accurately answer whether this is a good deal, we need to know the cost and duration of treatment for a child from an in-network orthodontist. With that information, we can determine whether paying the premium for 3 years and having the dollar benefit of the plan is less expensive than having no insurance.

This information should enable you to answer the question if it makes financial sense to purchase an individual dental plan for a child who need braces. Get the quote for the braces from the orthodontist. Make sure the orthodontist is “in-network.” Compare the discounted in-network rate to the dental insurance premium cost for 3 years and see the result.

If you determine that you do want to purchase a PPO dental policy, just click on this link, or contact us at BenefitsCafe.com 800-746-0045.

May 2011.

Agents can’t represent the PCIP plan so we are very hesitant to give info and advice – please keep that in mind. This is a government program. Still I’ve looked through the info and here’s what we understand:

As an example the PCIP premium will cost someone age 60-64 in Los Angeles County $638/month. The benefits seem very rich: $1500 deductible with on out-of-pocket (OOP) maximum (the most you’ll pay in a calendar year) of $2,500/calendar year. The $2,500 includes the medical deductible and the $500 brand name prescription (Rx) deductible. This is amazing. No commercial product for individual or employers with fewer than 250 employees has an OOP max that includes brand Rx deductible and very few have such a low OOP max. Here is the PCIP description of benefits.

In order to be eligible for this plan one must have been declined for individual health insurance and can not have been enrolled in a health insurance plan for the preceding 6 months. Also a California health insurance company must have declined to offer you health insurance. If someone has a surgery pending as an example, that would be reason for an automatic decline from an insurance company. If you qualify for an individual plan we can assist with that. Just click here for a quote for a California individual medical insurance plan.

Another option for people with pre-existing conditions is the State of California Major Risk Medical Insurance Plan (MRMIP). This plan is funded with taxes on tobacco. Note the big notice on their web site: if you enroll in MRMIP it will prevent you from qualifying for the PCIP plan.

Here is a comparison of the PCIP and MRMIP plans. MRMIP has a lower deductible however it also has a $75,000 annual cap on benefits and a $750,000 lifetime cap. The PCIP plan doesn’t have that limitation. MRMIP is significantly more expensive. The monthly premium for someone between the age of 60-64 in Los Angeles would be $1424.40/month, or $17,093/year – that’s the price of a new car, which is unbelievable. Compare that to the PCIP price of $638/month and the PCIP plan seems to make more sense – if one qualifies.

May 2011

Thank goodness that California legislators fixed the discrepency between Federal and State law regarding the deductibility of dependent health insurance premium. Allowing the deduction means that California forgoes the tax revenue on adult children’s health insurance premium. At the same time allowing the deduction removes a major head ache for employers who have been trying to comply with conflicting State and Federal guidelines.

I was very impressed with Ms. Kennedy. Anyone interested in the future of health insurance of California should watch the presentation. Hat’s off to the Milken Institute for putting on this event. The Milken Institute has an amazing ability to gather the people at the center of major public policy decisions and allow the public to watch, listen, and ask questions. All Californians and all Americans owe a huge debt of gratitude to the Milken Institute.

Ms. Kennedy said that the most important goal of the exchange is to control the cost of health insurance. She said that people will face sticker shock when they look at the premiums that they are required to pay in 2014. This may awaken people to the true cost of health care.

Ms. Kennedy pointed to the changes in the Workers Compensation system that drove millions of dollars of waste from the system. She’s hoping they can do that with health insurance.

To control costs, Ms. Kennedy said that the Exchange will be focused on not allowing adverse selection to occur. Accordingly, they want to make sure that the commercial/private market for insurance can only sell the same benefit plans for the same price as in the exchange.

I have heard legislators and staff voice the same fear: that health insurance companies will “dump bad risk into the exchange.” Ironically, in my opinion, the California Health Benefit Exchange should really fear itself more than it should fear insurance companies regarding adverse selection. Consider this:

1) On January 1, 2014, day 1 of the exchange, all of the enrollees in the MRMIP and PCIP high risk pools will automatically be enrolled in the exchange. By definition these enrollees will use lots of health care and will increase utilization and rates in the exchange.

2) Further, legislative staff and academics who drafted the California Health Benefit Exchange legislation want to encourage people to enroll at any point they touch the health care system: it can be through a broker; it can be on the government web site; it can be at the doctor’s office; at the hospital or a community clinic. Anyplace people want to enroll, the government wants to enable their enrollment. Here’s the problem: enrolling people at the hospital is THE definition of adverse selection.

Why would anyone ever purchase insurance if they knew that the hospital would enroll them after arriving in an ambulance? This sort of enrollment process encourages people to wait to enroll until – and only – when they are sick or injured. This will drive up rates in the exchange.

Personally, I wonder why an insurance company would want to participate in the exchange. Insurance only works when there are many more healthy people paying into the system to offset the cost of a few unhealthy people. Health insurance companies need healthy new members – NOT new members with pre-existing medical conditions.

An exchange that starts with a base of high risk members then enrolls people at the hospital; is likely to include mostly high users of health care services – this is expensive and the rates will reflect this.

I certainly hope that the exchange board succeeds in setting up a system where health insurance is affordable. They have their work cut out for them.

April 16, 2011

In response, Governor Schwarzenegger signed AB 2244 into law September 20, 2010. This new law requires all California health insurance companies to offer children only individual policies on a “guarantee issue’ (GI) basis beginning January 1, 2011. Failure to comply will cause the California health insurance company to be banned from selling individual health insurance plans for 5 years. This penalty is so sever that it forces insurance companies to either accept all children under these conditions, or go out of business.

AB 2244 creates a 60 day “initial open enrollment” period during which all children will be able to enroll in an individual health insurance plan without regard to pre-existing medical conditions. After this period, all children under age 19 will have an opportunity to enroll in an individual health insurance plan on a GI basis during the month of their birth.

Also, the responsible parent/guardian of a child will be able to enroll a child on a GI basis on a “late enrollment” basis within 63 days of one of the following situations:
“(1) The child lost dependent coverage due to termination or change
in employment status of the child or the person through whom the
child was covered; cessation of an employer’s contribution toward an
employee or dependent’s coverage; death of the person through whom
the child was covered as a dependent; legal separation; divorce; loss
of coverage under the Healthy Families Program, the Access for
Infants and Mothers Program, or the Medi-Cal program; or adoption of
the child.
(2) The child became a resident of California during a month that
was not the child’s birth month.
(3) The child is born as a resident of California and did not enroll in the month of birth.
(4) The child is mandated to be covered pursuant to a valid state
or federal court order.”

Further,
“(1) During any open enrollment period or for late enrollees, the
rate for any child due to health status shall not be more than two
times the standard risk rate for a child.
(2) The rate for a child shall be subject to a 20-percent
surcharge above the highest allowable rate on a child applying for
coverage who is not a late enrollee and who failed to maintain
coverage with any health care service plan or health insurer for the
90-day period prior to the date of the child’s application. The
surcharge shall apply for the 12-month period following the effective
date of the child’s coverage.
(3) If expressly permitted under PPACA and any rules, regulations,
or guidance issued pursuant to that act, a health care service plan
may rate a child based on health status during any period other than
an open enrollment period if the child is not a late enrollee.
(4) If expressly permitted under PPACA and any rules, regulations,
or guidance issued pursuant to that act, a health care service plan
may condition an offer or acceptance of coverage on any preexisting
condition or other health status-related factor for a period other
than an open enrollment period and for a child who is not a late
enrollee.”

The answers to questions #6 and # 7 in the FAQ seem to be the most helpful for a business owner or accountant trying to determine the amount of credit available. While I’m not an accountant and don’t give tax advice, here is my understanding of how the credit calculation works: 1) determine the full credit available as if your company had 10 employees and an average wage of $25,000/year/employee; then, 2) calculate the percentage difference your specific number of employees and average wages vary from the maximum available credit which is with 10 EEs and an average wage of $25,000/year.

The greater number of employees a company has above 10 EEs and the higher the average salary above $25,000/ee (or “full time equivalent” FTE) the less the tax subsidy.

Also, question #20 tells us that the health insurance premium deduction that small businesses get will be reduced by the amount of the tax credit. Specifically question #20 says “Does taking the credit affect an employer’s deduction for health insurance premiums?
A. Yes. In determining the employer’s deduction for health insurance premiums, the amount of premiums that can be deducted is reduced by the amount of the credit.”

The IRS also limits the amount that qualifies as EE health insurance premium. The government does not want employers to purchase richer benefit (more expensive coverage) for EEs so that they will get a larger tax subsidy. To prevent against this the IRS has guidelines which show the maximum allowable health insurance premium for an employee and employee plus one or more dependents.

The “average premium for small group market” health insurance in California is $4,628/year for employee only coverage and $10,957/year for an employee plus one or more dependents. This is the maximum amount allowed for the tax credit calculation in California. If an employer actually pays less than this average amount for employee health insurance, they use the lesser amount.

Interestingly, California is the 16th least expensive state for small group health insurance, according to this list. That’s pretty amazing when you consider that the cost of housing/living/etc. in California is usually the highest in the country. Even more interesting is that the most expensive state on the list is Massachusetts with average cost per employee at $5,700/yr. and $14,138/yr. for employee plus one or more. This is 23% higher than California. If you recall, many proponents of federal health insurance reform pointed to Massachuusetts as the model for the country. If so, get ready to pay more for health insurance.

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.

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.

Please give us a call if you would like to discuss 800-746-0045.