Why is this Topic Important to Wealth Managers? This blogticle provides an overview of a recently rule promulgation as part of the Affordable Care Act. Wealth managers providing health insurance should generally be aware of the current regulations as they apply to client planning.

Yesterday, the Department of Health and Human Services (HHS), working in partnership with the States, issued a final regulation which is designed to scrutinize large health insurance premium increases, and to provide consumers with access to clear information about those increases.

Under the final regulation:

• Starting September 1, 2011, insurers seeking rate increases of 10 percent or more for non-grandfathered plans in the individual and small group markets are required to publicly disclose the proposed increases and the justification for them. Such increases will be reviewed by either State or Federal experts to determine whether they are unreasonable.

• An easy-to-access, consumer-friendly disclosure form explaining the proposed increases will also be made publicly available through HHS, State and/or insurer websites.

• Starting September 1, 2012, the 10-percent threshold will be replaced with a State-specific threshold, using data that reflect insurance and health care cost trends particular to that State. The final rule clarifies that HHS will work with States in developing these thresholds.

• States with effective rate review systems will conduct the reviews, but if a State lacks the resources or authority to conduct actuarial reviews, HHS would conduct them. HHS expects that the vast majority of States will conduct these reviews, and will make this determination by July 1. HHS will continue to make resources available to States to strengthen their rate review processes.

Publication of the final rule under the Act was prompted in part since the rise in health insurance premium over the last decade. Since 1999, the cost of coverage for a family of four has climbed 131 percent. [1] Moreover the rule comes as health insurance companies have reported some of their highest profits in years.[2]

The regulation issued today finalizes proposed rules issued in December 2010. The final rule has several additions to the proposed rule, including a requirement that states provide an opportunity for public input in the evaluation of rate increases subject to review.

The Affordable Care Act brings an unprecedented level of scrutiny to health insurance rate increases. The new rate review regulation works in conjunction with earlier rules requiring insurers to spend at least 80 percent of premium dollars on direct medical care or work to improve the quality of care for patients or provide a rebate to their enrollees. The “medical loss ratio” regulation was released on November 22, 2010. The medical loss ratio regulation is designed to ensure that premiums are being spent on health care and quality-related costs, not excessive administrative costs and executive salaries.

The New York Times reports that since “Federal officials acknowledged that they did not have the authority to block rates that were found to be unjustified” the feds provided other support in the form of $250 million. The Times reports that a few states have turned downed the funding because they are generally opposed to the federal health care law.[3]. HHS has already awarded $44 million in Affordable Care Act in connection with state oversight capability funding.

Next week’s blogticle will present discussion on topics related to planning with life insurance.

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

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[1] The Kaiser Family Foundation and Health Research Educational Trust. “Employer Health Benefits 2010 Annual Survey”. http://ehbs.kff.org/pdf/2010/8085.pdf. Last Accessed 5/19/2011.

[2] See generally New York Times, “Health Insurers Making Record Profits as Many Postpone Care.” May 13, 2011.http://www.nytimes.com/2011/05/14/business/14health.html.  “The nation’s major health insurers are barreling into a third year of record profits…”

[3] Robert Pear. “Insurers Told to Justify Rate Increases Over 10 Percent.” New York Times. Published: May 19, 2011. http://www.nytimes.com/2011/05/20/us/politics/20health.html. Last Accessed May 19, 2011.

Increased medical loss ratios (MLRs) are devastating health insurance producers’ balance sheets and pushing agents out of the health insurance business. Effective this past January, the Obama Administration’s Affordable Care Act increased the MLR requirement imposed on health insurance companies, forcing many carriers to reduce agent commissions by 25 percent or more.

The intent behind imposing MLRs is to ensure that consumers receive the full value of their premium dollars by requiring insurance carriers to spend premium dollars on direct medical services, rather than on administrative costs and profits. Under the new MLR requirement, insurers must spend 80 to 85 cents of every dollar on direct medical services. Insurers who fail to meet the MLR requirement must either adjust their premiums to account for any discrepancies or refund excess premiums to consumers.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of health care reform in Advisor’s Journal, see Long-term Care Insurance Reform Act of 2010 (CC 10-46), Changes Affecting Large Employers in the 2010 Health Reform Law (CC 10-17), Changes Affecting Business in the 2010 Health Reform Law (CC 10-16), & Changes Affecting Individuals in the 2010 Health Reform Law (CC 10-15).

Repeal of the health reform law’s business-to-business 1099 reporting requirement is a step closer, with the U.S. Senate passing an amendment on February 2 that would repeal the provision.  Praising passage of the Senate amendment, Senator Stabenow said, “Today we provided a common-sense solution for business owners so they can focus on creating jobs, not filling out paperwork for the IRS…. If left unchecked, 40 million small businesses would see their IRS 1099 paperwork increase 2000 percent.”

President Obama even praised the repeal efforts in his state of the union address, receiving a resounding round of applause.  Acknowledging that his health care reform law has its share of flaws, and offering to work with the Congress to correct those flaws, he said that “We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses.”  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the Health Care Reform Act’s enhanced 1099 reporting requirement in Advisor’s Journal, see Health Care Reform Causes an Avalanche of 1099s (CC 10-84).

We’re just two weeks into the new Congress and the Republican majority is already causing controversy as it tries to live up to what it perceives as its deficit reduction, tax cut mandate. Republicans promised to cut spending by $100 billion by the end of 2011, but critics say that recent Republican maneuvers will do just the opposite by reducing revenue through new tax cuts and a repeal of the health care reform law.  

The so-called “cut as you go” rules require that every new mandatory spending measure be offset by an equivalent spending cut. Tax cut legislation is exempt from the cut-go rules.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

Determined to shuck common stereotypes about lame duck sessions of Congress, lawmakers returning to the capital after Thanksgiving break have filled their calendars with tax-related meetings and legislation—including White House visits intended to flesh out a compromise on the Bush tax cuts. Also on the docket is a repeal of the newly expanded Form 1099 reporting requirement and a sorely needed AMT patch.

The Senate is considering the FDA Food Safety Modernization Act (S. 510), which includes a provision repealing the Health Care Act provision that will expand the reach of the 1099 reporting requirement to anyone in a trade or business making a payment of over $600.  Repeal of the expanded 1099 requirement has support on both sides of the aisle.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the Bush tax cuts in Advisor’s Journal, see CBO Analysis Supports Extending Tax Cuts (CC 10-49) and What Lies Beyond the Sunsetting 2010 Tax Provisions (CC 10-88).

For previous coverage of the expanded 1099 reporting requirement in Advisor’s Journal, see Health Care Reform Causes an Avalanche of 1099s (CC 10-84).

For previous coverage of the AMT patch in Advisor’s Journal, see Finance Committee Promises AMT Patch (CC 10-100).

We invite your questions and comments by posting them in our blog AdvisorFYI or by calling the Panel of Experts.

The Health Care Act includes many provisions that are not directly related to health care but which are intended to fund the colossal government expenditure necessitated by the Act. One of the most burdensome changes imposed by the Health Care Act is the massive expansion of the payees and payment types that require a 1099. The new requirements will trigger a flood of paperwork for everyone involved, including payors, payees, and the IRS.

The new information reporting requirement will kick in on January 1, 2012. But the IRS will not be releasing guidance on the changes right away, so the time for taxpayers to implement the new requirements may run short. The comment period preceding the IRS’s release of proposed regulations passed at the end of September, so we can expect proposed regulations in the coming months. Advisor’s Journal will keep you informed as the IRS implements these new rules.   Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the Health Care Act in Advisor’s Journal, see Changes Affecting Individuals in the 2010 Health Reform Law (CC 10-15), Changes Affecting Business in the 2010 Health Reform Law (CC 10-16), and Changes Affecting Large Employers in the 2010 Health Reform Law (CC 10-17).

We invite your questions and comments by posting them below or by calling the Panel of Experts