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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
From Spencer's Benefits Reports: Some form of health care reform is imminent, according to an increasing number of observers in the health care field, as nearly all stakeholders, including consumer groups, businesses, unions, physician groups, and politicians, advocate change in financing, purchasing, evaluation, and delivery of health care. Nearly all (90%) Americans want reform, but they are equally split (45% each) among those who support major reform and minor reform, according to a UPI study.
“Creating some form of understanding and accountability with respect to health care is still considered a critical component by most,” says Mark Troutman, president of Summit Reinsurance Services, Inc., of Fort Wayne, Ind., in his opinion piece, U.S. Health Care System, Heal Thyself, in the November/December issue of Contingencies, a publication of the American Academy of Actuaries. “The why is easy, the how is not. It is still unclear whether a consumer-directed health plan is a panacea or a placebo.”
“National health care reform is inevitable,” agreed Joseph Paduda, a principal at Health Strategy Associates in Madison, Conn., in the same Contingencies issue. “The irresistible force of desperation will overwhelm the heretofore immovable object of political inertia,” he asserted in his article, Ready Or Not. “And while it’s too early to predict how it will be funded, what form it will take, and who among the stakeholders will be outraged and who delighted, it’s abundantly clear that economic and political forces are rapidly approaching critical mass.”
Mr. Paduda reviewed President George W. Bush’s health care reform proposal in light of available data regarding the uninsured and the health insurance market. Mr. Bush’s plan would make health insurance mandatory for individuals and provide a tax deduction for premiums:
“In reality, the incentive provided by the deduction is tiny compared to the actual cost of insurance coverage,” Mr. Paduda wrote. “And people covered by their employers’ plans already enjoy a tax benefit, as employer-paid premiums (and in most cases, employee-paid premiums) are paid with pretax dollars. Thus, the deduction would only provide a financial incentive for people seeking coverage via the individual market, a relatively small population.” The value of the tax deduction is much higher for high-income individuals than for those with lower incomes, and would hardly be an incentive for those low-income families, many reviewers have observed.
The Kaiser Family Foundation has found that 20.2 million uninsured individuals live in families earning between one to three times the federal poverty level of $19,037 for a family of four representing nearly half of all uninsured. Even the best off of these families would have to allocate one-fifth of their gross income to health insurance premiums under the President’s plan, Kaiser noted.
In his review, Mr. Paduda points out problems with the existing health care system. He explains that the average premium for family coverage includes a “cost-shifting surcharge” of more than $1,000 and adds that malpractice costs, including provision of extra medical services due to defensive medicine, is a minor component in costs, representing at most 5%. The health care cost burden on U.S. industry makes it less competitive with industries in other industrialized nations where the cost of health care is borne by all taxpayers. Furthermore, health care costs soon will dominate federal and state governments’ budgets. This burden is headed to dramatic growth as the sizable baby boomer generation starts to reach Medicare eligibility in 2012.
“For most of the uninsured, health insurance is just not affordable, no matter how big the tax deduction,” Mr. Paduda wrote. ”Not only does the President’s plan provide little incentive or financial assistance for the vast majority of the uninsured; it also depends on a broken market to supply the solution.”
Mr. Paduda identified the following four major problems of the individual health insurance market that must be addressed before it can be part of the solution: (1) the insurance is more costly than insurance obtained in the group market; administrative costs alone for individual health insurance represent 10% to 15% of the premium; (2) the cost is unaffordable, when a typical premium for family coverage is $11,500; (3) underinsurance results from medical underwriting that excludes coverage for any preexisting conditions; and (4) the nature of the insurance market, which is to minimize predictable risk.
To control health care costs, payers have been focusing on managing certain prevalent and costly chronic illnesses such as heart disease, diabetes, and respiratory problems. However, the pricing for catastrophic excess medical insurance and reinsurance that self-insurance plan sponsors rely on to limit their financial liability is driven by acute (occasional) medical conditions such as trauma, organ transplants, and newborns, Mr. Troutman noted. The treatment rates for cancer, premature births, and organ transplants have risen significantly, as have the survival rates and costs, he wrote.
Claims and claims costs per 1 million lives have skyrocketed from 2000 to 2006, to more than seven times and more than eight times, respectively, from the 2000 rates, Mr. Troutman found. In the year 2006, 400 claims per 1 million lives exceeded $1 million, compared with a minimal number in the years 2000 through 2004. The reinsurance market response to these catastrophic claims trends is to require higher premiums, deductibles, average daily maximums, and higher maximum benefits.
According to Mr. Troutman, a major contributing factor to increased reinsurance premiums is the “dreaded ‘outlier’ provision.” This provision alters reimbursements for certain high cost claims from a cost effective per-diem or diagnosis related group reimbursement system to the higher cost percentage of billed charges system. In general, outlier payments were designed to compensate hospitals for higher-cost cases that would not be fully reimbursed by a fixed payment arrangement.
“Self-funded employer groups must pay careful attention to any differences between their employer stop-loss policy and their own plan document to avoid differences in conditions (i.e., reimbursement provisions that do not match their underlying costs),” he advised. “In addition, employers and their third party administrators must carefully review disclosure statements and any “lasering” [setting of an additional deductible on stated person(s) with high expected claims] of individuals to fully understand what risks they retain to effect coverage for their employee benefit programs as evidenced by their ERISA plan document.”
For more information, visit http://www.contingencies.org/.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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