Results of election 2012: economic outlook

This morning’s De Pere at Dawn was a great panel of  William Lepley, Associate Professor of Finance, School of Business Administration, University of Wisconsin, Green Bay; Wendy Scattergood, Assistant Professor of Political Science, St Norbert College; and Kevin Quinn, Associate Academic Dean and Professor of Economics, St. Norbert College discussed the economic outlook for the next bit of time based on the results of the election.  It was fun, fascinating and informative plus we gleaned a few tidbits about our panelists too!

So — from my notes!

Wendy Scattergood led off discussing the policy side of the election.  This just in … Wisconsin is a swing state.  Shocked.  You’re shocked aren’t you??  If you were like me (and admittedly I’m a bit of a wonk so I just *may* have followed all of this a bit too closely for my own mental health), but you were probably under the impression the “white male” voter was a staunch Republican and the “over 65″ demographic was Democratic.  WRONG!!  Those white male voters, largely 65 and over, college degree holding and living in the suburbs are switch-voters and just slightly more Republican.  And the 65+ demographic?  Welll .. in 2004, they voted largely Democratic; in 2008 they were split and in 2012 they were the only age demographic carried by the Republican Presidential ticket.  The 30-44 year old demo was largely split.  Minority voters were more Democratic and it was the first time in Wisconsin for minorities to be enough of a block to swing an election.  Some other wonk-y things of note:  Urban (large cities) voted Democratic; mid-size cities (Green Bay/Appleton) voted Democratic and suburbs & rural voted Republican.  In state legislative races, redistricting was viewed as a factor, but not the only factor.  The reality of legislative races in Wisconsin is we know our legislators and vote based on knowing them – not their party affiliation.

You may have noticed Wisconsin has an electoral split-personality of sorts.  At the federal level, Wisconsin elected Democrats Barack Obama and Tammy Baldwin and at the state level gave both houses of the legislature to the Republicans. The other new factor in Wisconsin is the “straight party” voting option no longer exists (and you may not have noticed this on your ballot).   The theory is that with that off the top of the ballot, voters chose by individual in the “down tickets” races and party affiliation, as a blanket, was removed from the equation for voting.

Dr. Scattergood also shared the perspective that 2010 was a case of “retrospective voting,” where the voters look at the economy as they felt it at that time, said “no,” and changed directions.  She also talked briefly about the Friday deadline for Wisconsin to decide if the state will set up the health care exchange or let the federal government do so.  The feeling was Wisconsin will design its own.

Fun fact about Wendy – she is a cellist and plays with the Manitowoc Symphony as her great escape!

Dr. Kevin Quinn was next up and is not only an interesting economist with a great sense of humor, but was fascinatingly understandable too!  With a quick nod to Europe’s past and current problems (Greece, Spain, Ireland, Italy…) He started with the old adage of “In war, truth is the first casualty,” (Aeschylus Greek tragic dramatist 525-456 B.C.) expanding it include the new old adage that in politics, like war, truth is the first casualty; but when it comes to economics in politics they don’t just lie, they make things up.    Kevin shared that really, the Great Recession of 2008, really had its beginnings much earlier in the decade and became very visible in 2005-2007 when all the growth was in the housing sector and that, “turned out to be illusory.”

ed note: my favorite word of the day!  Illusory (adjective):  causing illusion, deceptive; misleading.  Of the nature of an illusion; unreal.  I love college professors!

Dr. Quinn then talked about the “fiscal cliff,” which he believes we will look back on as this year’s Y2K panic.  He reminded us that over about the last decade, the US has run up a debt of about $15 trillion (FYI that is 15,000,000,000.00 and is the first time, in round numbers, since World War II that our debt has equaled our GDP), about a trillion to China and most to ourselves (2 wars, drug benefit for medicare and tax cuts).  He summed it up that we lowered our income while we increased our spending then put a very large bandage on a very hairy part of our National anatomy and the time has come to pull it off!  When is that time?  Well, approximately January, but then the debt ceiling conversation is due again in February/March.  Kevin is optimistic that, in the end, we will resolve this issue nationally and the hand-wringing will be largely much ado about nothing.  He does think there is a chance we will go “off the cliff,” but will do so attached to a bungie cord and bounce back up.

Bill Lepley reminded us of all the things that were not the fault of bankers!  (Much to the delight of our bankers in attendance!!)   He talked about the health care legislation, a/k/a the Patient Protection and Affordable Care Act or Obamacare, as well as the Dodd/Frank Act that are both now laws-for-certain and not for-maybe-until-Inauguration Day.  Interestingly, he described Dodd/Frank as a framework of “we want to look like …” and then pushing it to the regulatory authorities to write the law.   That said, with certainty, we will all now move forward.

Fun factoid about Bill!  Not only does he LOVE baseball (only 5 1/2 months until baseball season!), but he plays too!

After a question regarding the health care implementation and would it be an increase or drag on the national economy, the panel talked about the long-term result of the health care changes. First that providers will be paid more on quality therefore likely seeing a much greater use of “evidenced-based” medicine.  This lead to a bit of a discussion that paying doctors for the health results of their patients is often viewed with the same eyes as paying teachers for the test scores of their students.  (a discussion that fascinates me!)  The other synopsis is that the most likely positive is that we will see a lowering in the rate of increase of health care costs.  Did you follow that bouncing ball?  Costs won’t go up as much.  Not a great slogan true, but sounds like could be real money. 

All in all, even if I couldn’t get Bill to bite on giving his stock market response prediction … it was a fascinating morning and I’m very appreciative to our panelists for their time, talents and humor and to their institutions for loaning them to us for the morning!

Small businesses & health insurance

If you are  small businesses, with fewer than 25 full-time workers, pay average annual wages below $50,000, and provide health insurance while covering at least 50% of the premium cost you are probably eligible for a tax credit under the recently passed health care reform legislation.

An eligible small business could qualify for a tax credit of up to 35% of premiums paid in 2010.  With the cost of health insurance, that could be significant!

Go to this link at irs.gov for more information.  Additionally, Senator Feingold’s office has created a small business tax credit calculator to give you an idea of the credit amount for your business.  Click HERE to get to it.

Health Care Reform Legislation- 2017

Our friends at Hawkins, Ash, Baptie & Company, Tax Advisors & CPA’s have published a great chart showing the impacts of the health care reform legislation.

Today’s focus: 2017 – Whew!  This is the last piece!

States may elect to allow large employers (more than 100 employees) to purchase coverage through their exchanges.

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That concludes the information provided as of now.  If it changes, I’ll let you know with an update.  It was a massive piece of legislation and will effect every single one of us.  No matter what anyone believes about the final product, we can all agree the system, without change – and big change, was unsustainable and was unavailable to far too many Americans.

One of my former government & public policy professors told me that the hallmark of a good piece of legislation is when everyone walks away from the table a little ticked off.  We shall see if he was prophetic as it relates to this piece of law!

Health Care Reform Legislation- 2015

Our friends at Hawkins, Ash, Baptie & Company, Tax Advisors & CPA’s have published a great chart showing the impacts of the health care reform legislation.

Today’s focus: 2015

The Children’s Health Insurance Program must be reauthorized.

Tomorrow: 2017

Health Care Reform Legislation- 2014

Our friends at Hawkins, Ash, Baptie & Company, Tax Advisors & CPA’s have published a great chart showing the impacts of the health care reform legislation.

Today’s focus: 2014

The individual mandate requirement to purchase health insurance for all citizens and legal residents takes effect.  All employer plans, including self-insured plans, will have to provide documentation of coverage to all covered employees and their dependents and the IRS. The penalty structure for noncompliance to either a flat dollar amount per person or a percentage of the individual’s income, whichever is higher. In 2014, the percentage of income determining the fine amount would be 1%, then 2% in 2015, with the maximum fine of 2.5% of taxable (gross) household income capped at the average family bronze‐level insurance premium . The alternative is a fixed dollar amount that phases in beginning with $325 per person in 2015 to $695 in 2016.

The employer responsibility requirements take effect for companies that employ more than 50 FTEs (with no exemption for seasonal workers). Under current law, if an employer does not provide coverage and one or more employee receives a premium assistance tax credit to buy coverage through the exchange, the employers must pay a fine of $750 per year for each full time employee. Coverage must meet the essential benefits requirements in order to be considered compliant with the mandate.

An employer with more than 50 employees that does offer coverage but has at least one FTE receiving the premium assistance tax credit will pay the lesser of $3,000 for each of those employees receiving a tax credit or $750 for each of their full‐time employees total.

An individual with family income up to 400% of FPL is eligible for a premium assistance tax credit if the actuarial value of the employer’s coverage is less than 60% or the employer requires the employee to contribute more than 9.8% of the employee’s family income toward the cost of coverage.

When enacted, the reconciliation package increased the fine from $750 to $2000, but exempts the first 30 employees from the fine (i.e., if the employer has 51 employees and doesn’t provide coverage, the employer pays the fine for 21 employees). However, when determining whether an employer has 50 employees, both for the purposes of the fine and the responsibility requirements generally,  calculation of employees was changed so that part‐time employees must be taken into consideration based on aggregate number of hours of service.
It also revised the small employer exception to exempt all employers with 50 or fewer FTEs . The contribution threshold that makes an individual eligible for a premium assistance tax credit from 9.8% to 9.5%. For employers that have a waiting period for coverage for new employees, under current law if they have a waiting period of more than 60 days they will have to pay a $600 per FTE employee fine. Waiting periods of more than 90 days are prohibited and is extended to grandfathered plans.

All of the market reforms for all individual market and fully‐insured group markets take effect. All plans must be offered on a guarantee issue basis, preexisting condition limitations are prohibited, annual and lifetime limits will be fully prohibited, and the size of a small employer group will be redefined to 1‐100 employees (although states may elect to keep the size of a small groups at 50 employees until 2016). In addition, all fully insured individual and small groups up to 100 employees (and any larger groups purchasing coverage through an exchange) will have to abide by strict modified community rating standards with premium variations only allowed for age (3:1), tobacco use (1.5:1), family composition and geographic regions to be defined by the
states and experience rating would be prohibited. Wellness discounts will be allowed for group plans under specific circumstances. The lifetime and annual benefit limit prohibitions were extended  to grandfathered plans.

States are required to have their exchanges up and running. Each state can have a separate exchange for employers and individuals or merge their exchanges to include both markets. States can also apply for a waiver on their exchange design from DHHS, and currently operational state exchanges are exempt.

The standards for qualified coverage, which will apply to all fully insured group and individual products to be sold both inside and outside the exchanges, begin. The essential benefit standards will also used to determine if large employer coverage is sufficient enough relative to the employer responsibility requirements. The essential benefit standards include specific mandated benefits, cost‐sharing requirements, out-of‐ pocket limits and a minimum actuarial value of 60%. They also allow for catastrophic‐only policies for those 30 and younger.

The employee free choice voucher program takes effect. It requires employers that provides and contributes to health coverage to give vouchers to each employee who is required to contribute between 8% and 9.8% of their household income (indexed to the premium growth rate) toward the cost of coverage, if such employee’s household income is less than 400% of FPL and the employee does not enroll in a health plan sponsored by the employer. The value of vouchers would be adjusted for age, and the vouchers would be used in the exchanges to purchase coverage that would otherwise be unsubsidized. The employee can also keep amounts of the voucher in excess of the cost of coverage elected in an exchange without being taxed on the excess amount. The
amount of the voucher must be equal to the amount the employer would have provided toward such employee’s coverage (individual vs. family based on the coverage the employee elects through the exchange) with respect to the plan to which the employer pays the largest portion of the cost.

Employers of 200 or more employees will have to auto‐enroll all new employees into any available employer‐sponsored health insurance plan. Waiting periods in existing law can apply. Employees may opt out if they have another source of coverage. Important note: The effective date of this provision is unclear and may be determined via regulation to take effect earlier.

Employer‐sponsored wellness program rules for all employer‐group plans under HIPAA improve and employers can increase the value of workplace wellness incentives up to 30% of premiums with DHHS discretion to increase the incentives to 50%. In addition, a 10‐state pilot program to extend wellness programs to the individual market begins, with the potential expansion to the entire individual market in 2017.

Cooperative plans will be allowed to be sold. Multistate national plans will be offered to individual and small employers through the state‐based exchanges.

Premium assistance tax credits for individuals and families making up to 400% of FPL begin. These subsidies are available only for individual coverage purchased through the exchange, not employer‐sponsored coverage.

Expansion of the Medicaid program for all individuals, including childless adults, making up to 133% of the FPL begins. Mandatory state‐by‐state employer premium assistance programs begin for those eligible individuals who have access to qualified employersponsored coverage. States can also create a separate non‐Medicaid plan for those with incomes between 133‐200% of FPL that do not have access to employer‐sponsored coverage.

Under current law premium taxes on most private health insurers based on premium volume take effect, which can be passed directly down to fully‐insured plan consumers. This tax does NOT apply to self‐insured plans, governmental entities (other than those providing insurance through the Act’s community health insurance option), certain nonprofit insurers of last resort, and certain nonprofit insurers with a medical loss ratio of 90 percent or more.  

Tomorrow:  2015

Health Care Reform Legislation- 2013

Our friends at Hawkins, Ash, Baptie & Company, Tax Advisors & CPA’s have published a great chart showing the impacts of the health care reform legislation.

Today’s focus:   2013

FSA contributions for medical expenses are limited to $2500 per year, with the cap annually indexed for inflation.

Tomorrow:  2014

Health Care Reform Legislation – 2012

Our friends at Hawkins, Ash, Baptie & Company, Tax Advisors & CPA’s have published a great chart showing the impacts of the health care reform legislation.

Today’s focus:   2012

All group plans and group and individual health insurers (including self‐insured plans) will have to provide a summary of benefits and a coverage explanation that meets specified criteria to all enrollees when they apply for coverage, when they enroll or reenroll in coverage, when the policy is delivered and id any material modification is made to the terms of their coverage. The summary and explanation can be provided
electronically or in written form, and it must be no more than 4 pages in length with print no smaller than 12 point font written in a culturally linguistically appropriate manner. There is a $1000 per enrollee fine for willful failure to provide the information.

All group plans (including self‐insured plans) and all individual and group carriers will have to annually submit reports to the Secretary of DHHS on whether or not the benefits provided under their plans meet criteria to be established by DHHS on improving health outcomes, preventing hospital readmissions, improving patient safety and reducing medical errors, and include wellness and health promotion activities. This report also must be provided to all plan participants during the annual open enrollment period and DHHS will make the reports public available through the Internet. The Secretary of DHHS can also create and impose fines for noncompliance by employers and plans.

Coming tomorrow:  2013

Health Care Reform Legislation – 2011

Our friends at Hawkins, Ash, Baptie & Company, Tax Advisors & CPA’s have published a great chart showing the impacts of the health care reform legislation.

Today’s focus:    2011

All employers must include on the W2s the aggregate cost of employer‐sponsored health benefits. If an employee receives health insurance coverage under multiple plans, the employer must disclose the aggregate value of all such health coverage, but exclude all contributions to HSAs and Archer MSAs and salary reduction contributions to FSAs. Applies to benefits provided during taxable years after December 31, 2010.

The tax on distributions from a health savings account that are not used for qualified medical expenses increases from 10 to 20%.

OTC drugs will no longer be reimbursable under HSAs, medical FSAS, HRAs and Archer MSAs unless they are prescribed by a doctor.

Small employers (less than 100 lives) will be allowed to adopt new “simple cafeteria plans.”

All employers would be required to enroll employees in a new national public long‐term care program, unless the employee opted out.

All business owners will be subject to new expanded federal income tax requirements on payments of fixed or determinable income or compensation.

The Department of Labor will begin annual studies on self‐insured plans using data
collected from Form 5500.

Tomorrow:  Impacts in 2012

Health Care Reform Legislation – Impacts later in 2010

Our friends at Hawkins, Ash, Baptie & Company, Tax Advisors & CPA’s have published a great chart showing the impacts of the health care reform legislation.

Today’s focus:   Later in 2010

Temporary reinsurance program for employers that provide retiree health coverage for employees over age 55 begins within 90 days of enactment.

Temporary high‐risk pool program for people who cannot obtain individual coverage due to preexisting conditions begins within 90 days of enactment. Employers are prohibited from sending individuals to the high‐risk pool, with associated fines.

Group plans will be required to comply with the Internal Revenue Section 105(h) rules that prohibit discrimination in favor of highly compensated individuals (which currently apply to self‐insured plans) within six months of enactment.

Lifetime limits on the dollar value of benefits for any participant or beneficiary for all fully insured and self‐insured groups and individual plans are prohibited by current law within six months of enactment. Annual limits will be allowed only through plan years beginning prior to January 1, 2014 only on DHHS‐defined non‐essential benefits, and after than be prohibited. This requirement was extended to grandfathered plans.

All group and individual plans, including self‐insured plans, within six months of enactment, will have to cover dependents up to age 26 under current law. This requirement was extended to grandfathered plans. It also would establish that dependents could be married and would be eligible for the group health insurance income tax exclusion. However, through 2014, grandfathered group plans only have to cover dependents that do not have another source of employer‐sponsored coverage.

All group and individual health plans, including self‐insured plans, will have to cover preexisting conditions for children 19 and under for plan years beginning on or after six months after date of enactment. Grandfathered status applies for group health plans.

Health coverage rescissions, within six months of enactment, will be prohibited for all health insurance markets, including self‐insured plans, except for cases of fraud or intentional misrepresentation. This requirement was extended to grandfathered plans.

All group and individual plans, including self‐insured plans, will have to cover specific preventive care services with no cost‐sharing. They also will have to cover emergency services at the in‐network level regardless of provider, allow enrollees to designate any in‐network doctor as their primary care physician (if they require a primary care physician designation already) and have a coverage appeal process.  This requirement is extended to grandfathered plans.

Federal grant program for small employers providing wellness programs to their employees will take effect.

Health care reform legislation – Immediate Impacts

Our friends at Hawkins, Ash, Baptie & Company, Tax Advisors & CPA’s have published a great chart showing the impacts of the health care reform legislation.

Today’s focus:   Immediately

Individuals and employer group plans that wish to keep their current policy on a grandfathered basis can if the only plan changes made are to add or delete new employees and any new dependents. In addition, an exception is made for employers that have scheduled plan changes as a result of a collective bargaining agreement. The reconciliation bill would eliminated the ability of plans to grandfather in a number of areas.

Eligible small businesses (no more than 25 FTEs, pay average annual wages of less than $50,000 and provide qualified coverage) are eligible for phase one of the small business premium tax credit. Small employers will receive a maximum credit, based on number of employees, of up to 50% of premiums for up to 2 years if the employer contributes at least 50% of the total premium cost.

Employers that provide a Medicare Part D subsidy to retirees will have to account for the future loss of the deductibility of this subsidy on liability and income statements.  Current law eliminates this subsidy for the 2011 plan year, but the legislation delayed it to 2013, but there is an immediate accounting impact.

Tomorrow, the later in 2010 impacts