OBAMA HEALTH & HRA

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WHY
Why does President Obama want national health insurance? Well, at least why he says he wants it. The reasons touted are: Protect the Uninsured; Stop Companies Which Ration by Reneging on benefits; Reduce Costs.

UNINSURED.
The UNINSURED fall into three categories: 1. Those who lost insurance and have health issues (Portability Issue #1); 2. Those who relocated to another state for employment or domicile (Portability Issue #2); 3. Those who don't want it or can't get it due cost issues, preexisting health issues, age issues, or alternative use issues.

Portability Issue #1 Solution:
When individuals own their health insurance policies like the auto or homeowners policy then portability due to health issues is no longer a problem. Regardless of why they change employment they can go to any new job or retire and still own their policy. This is available now under the congress law signed by President Bush. It is called the Health Reimbursement Arrangement (HRA). More on this later.

Portability Issue #2 Solution:
Under an HRA where an employee owns the health insurance policy it makes no difference if the move from one state to another is do to an employment opportunity, retirement, or simply a domicile change. The policy is owned and the coverage remains in force. What may pose a difficulty would be the process of reimbursement or payment for medical services rendered. However, that situation now exists in an auto insurance policy when on is injured out of state so I don't imagine it a difficult problem with which to deal. Certainly not a deal breaker.

THOSE WHO DON'T WANT HEALTH INSURANCE:
This is quite misleading. What they really mean is that they don't want to pay for health insurance! This group can be comprised of the wealthy who desire to pay for their health needs from their own assets, or it can be those who would rather spend the premium dollars on something else thinking or gambling that they won't get sick or be injured. Regardless of their reasoning the fact remains that when a significant medical treatment has and equally significant expense other people will end up paying for the treatment.

For the wealthy a solution could be an option to purchase insurance with an extremely high deductible which would be collateralized with a bond or a CD or some other equity instrument.

For those who want to gamble or who are unable to purchase due to a citizenship issue a solution would be a requirement for a basic policy in order to obtain a job or a drivers license or automobile. I have to admit that this idea ruffles my libertarian feathers but so does the idea of having to pay for the irresponsibility of another person. Besides, it is more reasonable than debtors prison!

The Uninsurable - Preexisting Conditions
The solution for the uninsurable due to preexisting conditions again would fall under the HRA model. When a family owns its own policy their children are covered up to a certain age. If they have a preexisting condition at the age when they leave the parents policy, they could go into a pool much like the assigned risk pool for auto insurance. The pool would be funded by all insurance companies based upon a prorated share of their premium compared to the whole nationwide. Thus the cost could be determined by actuaries so a small premium would be included in every policy written.

The Uninsured due to Disability.
Another situation exists should one be sick or injured thus preventing their ability to earn a living. Well, life insurance has an answer to that which is a 'disability income endorsement or rider'. This simply provides payment for the premium should the insured become disabled and unable to pay the premium.

Companies That Renege on Claims.
Regardless of how and why insurance companies renege on claims based upon some medical history of the past, or how and why a claims adjuster attempts to get out of paying a claim with thin or nonexistent reasoning such practices could be handled with two provisions.

1. Bad Faith Laws. When a claim is denied and it is a result of bad faith then the penalty would be treble the reserves established for the particular medical procedure or situation from which they are trying to avoid payment. The amounts would go to the uninsured pool.

2. Further, like life insurance underwriters, medical insurance underwriters should have access to the Medical Information Bureau (MIB) records and the attending physician records. The underwriters must do due diligence in underwriting the case up front. Perhaps we could give them one year for discovery during which time they could change the rates or cancel their offer of insurance.

WHAT ABOUT COST SAVINGS?
Unlike what President Obama said, "cost for individuals are three times the costs for a large group", the HRA solution typically saves an employer health benefits package between 20% to 60%. Read the following to understand why.


THE HEALTH REIMBURSEMENT ARRANGEMENT (HRA)

1. An employer establishes the Health Reimbursement Arrangement (HRA) which is a legal document required by the IRS. It provides for reimbursement for specified medical expenses.
2. It provides for reimbursement for health insurance premiums.
3. Each employee reviews the options available in the health insurance policy and selects only those which apply. This provides cost savings. For example a 60 year old employee may choose to exclude maternity benefits.
4. After selecting, designing and paying for the policy the employee then submits a request for reimbursement.
5. After receiving medical services the employee submits the expenses to the insurance company. Those things not covered by the policy like co-pays or deductibles are then submitted for reimbursement.
6. After verifying the expense, the employer is instructed by a Third Party Administrator to provide the reimbursement.
7. The expense is tax deductible to the business.
8. The reimbursement to the employee is NOT taxable income.
9. The HRA can reduce an employers health care benefits program from 20% to 60%.
10. The premiums cannot be increased because of paid claims or health issues.
11. The policies cannot be cancelled except for non-payment of the premium.
12. The HRA works for large companies down to one employee.

Since early 1940's self employed persons could deduct medical expenses as long as a spouse was a formal employee. Since 2002 now insurance premiums can also be deducted. It is more than a great deal. Contact us to check it out.