Senate Finance Committee Considering Excise Tax on Health Benefits.

Word is coming out of the Senate Finance Committee that consideration is being given to imposing an excise tax on health care benefits that exceed a specified threshold beginning in 2013. Although the threshold amount has not been finalized, reports suggest that the Committee may be considering $21,000 for family coverage. Reports also indicate that contributions to Health Savings Accounts (HSAs)Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs) would be included in determining whether the health benefits package exceeds the threshold. If employees receive benefits exceeding the overall threshold employers and/or insurers would pay a 35 percent excise tax on the amount in excess of the threshold.

In addition, reports indicate that the Senate Finance Committee is also considering imposing a $2,000 cap on contributions to FSAs beginning in 2013. This, coupled with a House plan to eliminate the use of HSAs and FSAs for over the counter drugs, is placing the burden of financing healthcare reform squarely on the shoulders of middle class workers.

Here are some fundamental problems with these ideas:

  • FSAs, and more recently HSAs, have become important health care tools for both employers and their employees. They help Americans afford their out-of-pocket health care costs. Even under a reformed health care system, patients will still face out-of pocket expenses and we need these tools to help us afford these expenses.
  • Placing additional caps on the contributions that may be made to these accounts will disproportionately harm patients with chronic illnesses who tend to face very high out of pocket costs.
  • Further capping contributions to FSAs and HSAs is effectively a tax on health care and a tax on middle class Americans.
  • Including FSAs and HSAs in the calculation of the excise tax threshold will cause employers to scale back or eliminate these plans (and potentially dental, vision, and other health benefits) to ensure they don’t exceed the overall cap on employee benefits and trigger the excise tax.
  • Imposing an overall cap would be extremely complex and burdensome for employers. Employers would have to calculate the excise tax for each employee and their varying benefits and coverage levels and likely have to account for benefits provided to spouses and dependents under their employer’s plan.

Below is a list of Senate Finance Committee members and their contact information. If you value your FSA or HSA, this is the time to reach out to one or more of the committee members and let them know where you stand.

MemberDC Office PhoneDistrict DirectorDistrict Phone
Lincoln(202) 224-4843Donna Kay Yeargan(501) 375-2993
Kyl(202) 224-4521Kim Wold(602) 840-1891
Carper(202) 224-2441Larry Windley(302) 573-6291
Nelson(202) 224-5274Celeste Brown or
Sherry Hupp Davich
(407) 872-7161
Grassley(202) 224-3744Bob Renaud(515) 288-1145
Crapo(202) 224-6142Layne Bangerter(208) 334-9044
Roberts(202) 224-4774Chad Tenpenny(913) 451-9343
Bunning(202) 224-4343Debbie McKinney(859) 341-2602
Kerry(202) 224-2742Drew O’Brien(617) 565-8519
Snowe(202) 224-5344Gail Kelly(207) 945-0432
Stabenow(202) 224-4822Teresa Plachetka(517) 203-1760
Baucus(202) 224-2651Barrett Kaiser(406) 657-6790
Conrad(202) 224-2043Marty Boeckel (West)
Scott Stofferahn (East)
(701) 258-4648
(701) 232-8030
Menendez(202) 224-4744Michael Soliman(973) 645-3030
Bingaman(202) 224-5521Terry Brunner(505) 346-6601
Ensign(202) 224-6244Sonia Joya(702) 388-6605
Schumer(202) 224-6542Martin Brennan(212) 486-4430
Wyden(202) 224-5244Lisa Rockower(503) 326-7525
Cornyn(202) 224-2934David James(512) 469-6034
Hatch(202) 224-5251Melanie Bowen(801) 524-4380
Cantwell(202) 224-3441Chris Endresen(206) 220-6400
Rockefeller(202) 224-6472Rochelle Goodwin(304) 347-5372
Enzi(202) 224-3424Robin Bailey(307) 682-6268

Washington D.C. Residents Most Fit.

Well, the data is out, and for the second consecutive year, Washington D.C. has been declared to be the “fittest City” in America. In the second annual American Fitness Index (AFI), a publication released by the American College of Sports Medicine, Washington, D.C., edged out Minneapolis-St. Paul, Minn., Denver, Boston and San Francisco.

The index ranks 45 metropolitan statistical areas (MSAs)–a geographical measurement defined by the U.S. Census Bureau used by federal agencies in collecting, tabulating and publishing federal statistics–that include the city and surrounding suburban area. It measures each city’s performance on 30 indicators, including acres of parkland, death rate from cardiovascular disease, the number of primary care physicians per capita and the percent of residents who bicycle or walk to work. The metrics were gathered from government and non-profit organizations. (For the complete methodology, visit www.americanfitnessindex.org.)

According to the index, Washington, D.C., residents are healthier than other Americans for a number of reasons. They have increased access to farmers’ markets, at 13 per 1 million residents, compared to a national average of 11. Fewer residents smoke and have diabetes, and nearly 90% have health insurance compared to a national average of 86%.

I have always wondered who all those people are I see riding bikes along he Potomac and jogging around the National Mall when I am visiting the nation’s capital. I always thought they were tourists. But, now I must assume that they are local residents doing what D.C. residents do best – staying fit. Way to go Washington!

IRS Announces 2010 HSA Limits

The Internal Revenue Service (IRS) has announced the 2010 inflation adjusted amounts for health savings accounts (HSAs) in Revenue Procedure 2009-29.

Annual contribution limitation. For calendar year 2010, the annual limitation on deductions under a high deductible health plan is $3,050 for an individual with self-only coverage, and $6,150 for an individual with family coverage.

High deductible health plan. For calendar year 2010, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less  than $1,200 for self-only coverage or $2,400 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $5,950 for self-only coverage or $11,900 for family coverage

This revenue procedure is effective for calendar year 2010.

PA Hospitals Blame Consumer-driven Health Plans for Financial, Health Woes.

A group of hospital officials in Pennsylvania came out this week with statements saying that consumer-driven health plans are making people sicker, not healthier, and hurting the financial health of hospitals.

According to a news story that originally appeared in The Patriot-News, Carolyn F. Scanlan, the president and CEO of the Hospital and Healthsystem Association of Pennsylvania, along with executives of PinnacleHealth System and Penn State Milton S. Hershey Medical Center, had met with the paper’s editorial board to discuss the impact of the nation’s economic crisis on hospitals.

The paper reported that a major concern of the group was the impact of consumer-driven health plans. Such plans typically have high deductibles and co-pays, making patients responsible for larger portions of bills than under traditional plans.

A goal of the plans is to motivate consumers to spend more carefully, and give them a financial incentive to take better care of themselves so they don’t need as much health care.

But, the story noted, Pinnacle and Hershey Medical Center officials said the plans are causing people to avoid health care.

They cited declines in preventive care such as mammograms, and elective surgeries such as hip and knee replacements that might not be medically necessary, but improve patients’ lives.

The hospital officials reportedly told the newspaper that patients with consumer-directed plans often don’t realize how large their shares of bills will be and that it’s common for patients to cancel procedures upon learning how much they will have to pay.

Another concern of the hospitals is rising charity care and bad debt, the paper reported. Hershey Medical Center has spent $13 million on charity care during the fiscal year that ends in June. Bill Pugh, the chief financial officer at Pinnacle, said bad debt rose 25 percent there in 2008.

There is little doubt that the recession is causing health coverage issues for many Americans, but to blame consumer-driven health plans is simply short-sighted on the part of the hospitals.

The plans that carry higher deductibles may cause people to think twice about seeking elective surgeries – that is what they are intended to do. But there should not be an impact on prevention as most consumer-driven plans pay 100% for preventative services. In fact, the Blue Cross Blue Shield Association and others with considerable statistical data to back them up say that persons with consumer-driven plans are taking better care of themselves than do those with more traditional plans.

There is also no reason to suspect that these types of plans are increasing bad debt to the degree that the hospitals are witnessing. Again, while most consumer-driven health plans carry a little higher deductible, they also include features like Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) that help members fund the deductibles with pre-tax dollars, in many cases some or all of these dollars are furnished by the employer. Furthermore, once the deductible is reached these plans usually pay for 100% of covered services as opposed to traditional plans that have long co-payment corridors where the cost of care continues to be shared by the patient long after the deductible has been satisfied.

No, the health plans are not to blame for the woes of the hospitals. Instead, I would suggest that it’s the hospital’s dependence on a system where there is no pricing transparency and where rich benefit plans provide no incentives for the hospitals to become more efficient.

Here’s a news flash: The money is running out. There will be no more first-dollar plans that completely insulate the patient from the cost of the service.

Instead, these facilities need to embrace the change and become more consumer-focused. Lasicks eye surgery is a great example of an elective procedure that is not typically covered by health insurance. Over the years the price has come down considerably and the quality has improved.

Rather than blame a health plan design for their troubles, perhaps these hospitals should spend some time with the Geisinger Health System just down the road from them. As was noted recently in this blog, Geisinger, located in the coal country of Pennsylvania, offers a 90-day warranty on elective heart surgery, promising to get it right the first time, for a flat fee.

Not only does the health system guarantee its work, but heart patients have fared measurably better, and the health system has cut its bypass surgery costs by 15 percent. Today, Geisinger has extended the program to half a dozen other procedures.

As I pointed out in my post about Geisinger, it is disappointing to learn that “best practices” like those being demonstrated at Geisinger are not being embraced by the health care industry.

New Marketing Tool Captures Brands’ “Share of Voice” on the Social Web.

When my call went out a few weeks ago to find health plans that were using social media as a means of engaging their members, one of the people who got in touch with me was Gretchen Miller of Vitrue, Inc.

Gretchen was quick to tell me that, while she was not with a health plan, she did have a tool that could tell me which health plans are doing well in this space.

Gretchen is with a firm called Vitrue, a social media marketing company for the Fortune 1,000, that provides a comprehensive social media marketing approach with a core technology platform to help brands launch campaigns, communities, Facebook applications, and just maintain an overall social presence on the web.

Gretchen told me that Vitrue had recently launched the Vitrue Social Media Index (SMI), which is designed to capture a brand’s share of voice on the social web. She told me that if I could give her a list of health plans that are using social media , she could give me measurements of their success in terms of their being present on sites like Facebook, MySpace, Twitter, YouTube and others.

Gretchen went on to explain that many of her firm’s clients struggle with social media issues such as:

  • Social media is too new and changing too fast for me to understand how to use it?
  • I know social media is important to my brand, but how to measure it?
  • There is too much data, what does it all mean?

The SMI was created to help answer some of these questions.

Gretchen said, “SMI is a simple, yet powerful tool to help marketers understand how their brand stacks up to their peers/competitors in the social space. It includes data from the most important social media sites on the web including blogs, video and photo sharing sites, social networks, and micro-blogs.”

But, SMI is more than just a snapshot in time; Gretchen said that it also provides trends, allowing brands to see how “social share of voice” fluctuates based on marketing campaigns, competitors’ activities, and external events. You can see tool at http://vitrue.com/smi/.

So how do various health plans stack up in their social networking activity? I provided Gretchen with a list of health plans. Some of them I have written about in this blog regarding their use of social media. Others were brands that I selected because they are well known names nationally or regionally. The chart below shows how they stacked up.

vitrue-smi-health-care-providers-jan-feb-2009

What the SMI tool found was that, right now, Humana has a commanding presence on the social web with this competitive set.

You can also dig in and see Humana’s SMI score as of today, by going to:

http://vitrue.com/smi/?q1=humana&q2=

Here is the breakout on where Humana has a presence on social media sites as of February 6, 2009:

  • 47.13% video sharing sites
  • 28.81% micro-blogs
  • 2.73% photo sharing sites
  • 9.87% on blogs
  • 11.48% social networks

Fun stuff and a great tool for bring some classical marketing measurements to these fast evolving new media.

If you are looking for more insight into social brands check out The Vitrue 100 – Top Social Brands of 2008 at http://vitrue.com/blog/. Any guesses as to which brand was #1?

Visa Pre-Paid Forum will Address use of Stored-Value Cards in Health Care

pjLater this afternoon I will be making my way to Phoenix for the annual Visa Prepaid Forum. This is the event hosted yearly by the people at Visa who work to bring us those stored value cards like the gift cards that look and operate pretty much like a bank debit card. The Forum will attract banks, merchants, card processors, and others involved in making pre-paid cards work.

Among this group will be a smaller subset of health care people who will break out after the General Sessions to focus on the use of stored value cards to facilitate the use of various account-based health plans including Health Reimbursement Arrangements (HRAs) and Flexible Spending Accounts (FSAs).

The big topic of discussion over the past couple of years, and the one likely to dominate the discussion this year as well, is how to make these cards compliant with IRS guidelines. As of January 1, 2008, the IRS required ‘non-healthcare’ retailers, such as supermarkets, grocery stores, discount stores, warehouse clubs, and mail-order merchants, that sell medical goods and services to maintain a point-of-sale system that effectively identifies eligible transactions when consumers use flexible spending account (FSA) and health reimbursement arrangement (HRA) debit cards.

Fort the past couple of years, the Special Interest Group for IIAS Standards (SIGIS), has worked to develop its a voluntary industry standard solution to meet IRS requirements for operating an inventory information approval system (an “IIAS”). IIAS-compliant transactions enable real-time, auto-substantiation for eligible medical items purchased with an FSA/HRA payment card. For more information see: http://www.sig-is.org/en/index.asp.

Visa Healthcare has been a driving force in the development of the IIAS Standards and will no doubt have new information to present during the forum.

Time permitting; I will be blogging from the conference, so check here for updates.