ObamaCare

Know Your Consumer-Driven Health Care: HSA

This is the third and final post on the primary consumer-driven health care arrangements under the current Internal Revenue Code.

As stated in the prior posts discussing the health FSA and HRA, the ideal consumer-driven health care vehicle should strive to achieve three main objectives:

1) Provide incentive for the individual to spend less on health expenses;

2) Maximize the individual’s flexibility in contributions and ownership of all assets contributed; and

3) Limit the individual’s financial exposure by including an out-of-pocket maximum.

The HSA is the only vehicle to effectively meet all three.

What is an HSA?

The health savings account (HSA) is the closest thing to the holy grail when it comes to applying free market principles and consumerism to modern health coverage.  HSAs are governed by Section 223 of the Internal Revenue Code.  And it’s one powerful Code section.  HSAs are triple tax-advantaged: contributions are made on a pre-tax basis (by payroll deduction) or tax deductible (above the line), funds held in the account grow tax-free, and distributions for qualified medical expenses are tax-free.  That’s as good as it gets.  The HSA is not perfect, but it is a solid foundation for a true consumer-driven model of health reform.

The basic premise of the HSA is to provide a tax-advantaged account to pair with a high deductible health plan (HDHP).  The HDHP is structured to leave a risk corridor that you’re responsible for paying, and the HSA is structured as a way to fund that risk corridor.  The HDHP will pay for some basic preventive services, but everything else will be subject to the high deductible before it’s covered.  If you incur expenses up to the extent of the deductible, you can (but don’t have to) use your HSA reimburse those costs.  The HDHP also has an out-of-pocket maximum to limit your financial liability.

Know Your Consumer-Driven Health Care: HRA

This is the second of three posts on the primary consumer-driven health care arrangements under the current Internal Revenue Code.

The first post on consumer-driven health care discussed the health FSA, a useful but ultimately flawed vehicle hampered primarily by the use-it-or-lose it rule and ObamaCare limits.  This post discusses the HRA, a more dynamic arrangement that can be used in many creative and powerful ways - pending a number of ObamaCare changes that will dramatically limit the HRA’s versatility.

As stated in the first post, the ideal consumer-driven health care vehicle should strive to achieve three main objectives:

  1. Provide incentive for the individual to spend less on health expenses;
  2. Maximize the individual’s flexibility in contributions and ownership of all assets contributed; and
  3. Limit the individual’s financial exposure by including an out-of-pocket maximum

What is an HRA?

A health reimbursement arrangement (HRA) is a creature of Sections 105 and 106 of the Internal Revenue Code.  It’s an entirely employer funded account used to pay for health care expenses on a tax-free basis.  Employers can structure HRAs to offer many benefits, including:

  • Direct reimbursement for medical expenses as the primary form of health coverage;
  • A way to pay for deductibles and other out-of-pocket expenses from major medical coverage;
  • As an account to pay for the premiums for major medical coverage; or
  • Any combination of those purposes

This versatility, as well as a few other key advantages over the health FSA, have made the HRA a commonly used employer-sponsored plan since 2002 when IRS guidance first blessed the HRA concept.

The Good

Obama lays out a starkly leftist tone to begin his second term

Obama takes oath of office

Yesterday, President Barack Obama delivered his inaugural address, symbolically beginning the start of his second term in office (he was actually sworn in on Sunday in a private ceremony, per constitutional requirements).

The ceremony was filled with the usual pomp and celebration that we’ve come to know with presidential inaugurations. Hundreds of thousands descended on the Mall in Washington to watch Obama take his oath and listen to his second inaugural address. Many stuck around to watch the inaugural parade, which went on into the evening.

The celebration, as Doug Mataconis explains, “places far too much of an air of monarchism around the Presidency.” Seeing the lengths we take to celebrate one branch of our government — one that is supposed to have only as much power as the legislative and judicial branches — is ridiculous; not to mention incredibly costly. But I digress.

For all of the celebrating that took place in Washington yesterday, President Obama’s inaugural address left much to be desired.

It was a well-delivered speech, but there wasn’t much there on substance. While he talked about the unifying, there was nothing in the speech that came even close to hinting that Obama is ready to work with Republicans in Congress. He couldn’t have delivered that message any clearer.

The Road to 2014: Obamacare Regulations Ramp Up

We are now only a month into the President Obama lame duck-era, yet the post-election deluge of Obamacare regulations is already well underway. Clearly, these regulations were completed prior to the election, withheld to prevent any political blowback. This should come as no surprise. Here’s a quick rundown of the latest expansive entries into the Federal Register:

Essential Health Benefits (77 FR 70644, November 26, 2012)

Obamacare lists ten broad categories of health benefits as essential health benefits (EHB), to be defined in detail by the Secretary of Health and Human Services (HHS). Secretary Kathleen Sebelius has instead put this burden on the states. States are to choose a benchmark plan to serve as the framework for EHB in that state. The states that refuse will have a default benchmark plan assigned to them. Individual health policies sold on state or federally facilitated exchanges (referred to as qualified health plans, or QHP) must actually provide these EHB. For employer sponsored group health plans, only non-grandfathered plans that are insured in the small group market must provide EHB. Any grandfathered, large market, or self-funded group health plan does not need to provide EHB, but they cannot impose any lifetime or annual limits on the dollar value of EHB. Welcome to Obamacare.

Common Sense After a Close Election

“Now let’s pull up our socks, wipe our noses and get back in this fight.”

After listening to ten days of hand wringing and doom saying from the usual suspects that Republicans must abandon our principles if we are to survive, we need a little of Mark Twain’s common sense.  I suggest we all take it to heart.

He said, “We should be careful to get out of an experience only the wisdom that is in it — and stop there; lest we be like the cat that sits down on a hot stove-lid. She will never sit down on a hot stove-lid again — and that is well; but also she will never sit down on a cold one anymore.”

So it is in that spirit that I will begin with three incontrovertible truths about this election.

First, the same election that returned Barack Obama to the White House also returned the second largest House Republican majority since World War II - bigger than anything Newt Gingrich ever had.

Second, according to polls before, during and after this election, the American people agree with us fundamentally on issues involving the economy, Obamacare, government spending, bailouts - you name it.

Third, the American people are about to get a graduate level course in Obamanomics, and at the end of that course, they are going to be a lot sadder and a lot wiser.

That is not to say that there aren’t many lessons that we need to learn and to learn well from this election, particularly here in California.  But capitulation is not one of them.

Feds May Not Have ObamaCare Operational on Time

Written by Michael F. Cannon, Director of Health Policy Studies at the Cato Institute. Posted with permission from Cato @ Liberty.

The Washington Post reports:

By the end of this week, states must decide whether they will build a health-insurance exchange or leave the task to the federal government. The question is, with as many as 17 states expected to leave it to the feds, can the Obama administration handle the workload.

“These are systems that typically take two or three years to build,” says Kevin Walsh, managing director of insurance exchange services at Xerox. “The last time I looked at the calendar, that’s not what we’re working with.”…

The Obama administration has known for awhile that there’s a decent chance it could end up doing a lot of this. Now though, they’re finding out how big their workload will actually become.

Betcha didn’t see that coming.

Part of the reason the workload is so heavy? “Buying health insurance is a lot more difficult than purchasing a plane ticket on Expedia.” You don’t say. But I thought that’s why we needed government to do it.

A note to the Liberty Movement: This is our defining moment

Obama and Romney debate

Mitt Romney had his clock cleaned on Tuesday night. There is no getting around it. People can talk about his campaign couldn’t have done any better. There isn’t much disagreement on this end. Many conservatives are understandably frustrated with how the election turned out.

Romney ran this race in the worst economy since the Great Depression. Yet, he still lost. This didn’t happen because of a lack of GOTV efforts and phone-banking. Romney lost because he failed to run on big ideas that would have made the choice before voters more clear.

Republicans didn’t win because they nominated a guy who passed a law in Massachusetts that would later serve as a blueprint for ObamaCare. When he was on the campaign trail, Romney and his surrogates played up his “experience” on the issue. There was no real distinction.

Throughout the course of the campaign Romney said that that the United States is facing long-term economic problems. However, Romney never put forward a substantive plan that would actually get spending under control.

Where did Romney go wrong?

Mitt Romney has lost.  In a purely academic fashion, I can’t help but think about what the Republican Party will get out of last night’s results.  After all, there is bound to be some kind of “after action” examination of the Romney campaign, at least by pundits.

Much of the results of those examinations will be that Romney wasn’t “conservative enough.”  They figure that the problem wasn’t that he was a horrible candidate, but that he wasn’t far enough to the right.

This ignores the fact that more and more people are supporting issues like gay marriage and ending the War on Drugs.  This isn’t indicative of an evangelical conservative stance as many Republicans tend to think most Americans really have.  Instead, it seems to indicate a more libertarian stance on social issues.  Will the conservative pundits understand that?  It’s doubtful, but we will see.

Economics are another issue that played a major role in the election.  It’s also one that some conservatives think they should modify their position on if they want to win in 2016.  Romney talked a sort-of free market game, and it looks like it cost him because free markets scare a lot of people.  Now, he wasn’t as free market as he liked to think he was, but what he put out seemed to scare enough voters in battle ground states that those people opted not to vote for him.

Personally, I can’t help but believe that foreign policy cost him. Obama’s supporters weren’t likely to change their vote on that issue apparently, but the undecided voters may have swung his way had there been more difference than “drone strikes and kill ‘em all” that we’ve seen for the last four years.

Morning in America, or Mourning in America?

Like a broken record, Obama claims to need four more years to fix the economy because he inherited from George W. Bush the worst economy since the Great Depression. He tells us when he took office he found it was worse than he thought, but that rings hollow. After all, if he thought it was the worst since the Great Depression, how much worse could it have been? Regardless, we need to revisit the claim that this is the worst economy since the Great Depression. Is it really? I think Ronald Reagan would argue differently were he with us today.

According to historical data of the Federal Reserve Bank, when Obama took office, the Fed’s prime interest rate was only 3.25%. By contrast, just one month before Reagan took office from President Jimmy Carter, the prime rate hit an all-time high of 21.5%, dropping to “only” 20.5% the day he took office. The inflation rate Obama inherited was zero, whereas Reagan inherited an inflation rate of 13.5%. The economy under Jimmy Carter was so bad that a new term, “Misery Index”, was created (an economic measure derived by adding the inflation rate to the unemployment rate). The price of gold, a bellwether reflecting economic stability, hit an all-time high in the last year of Carter’s presidency, reaching $2328/ounce in 2011-inflation adjusted dollars. We could go on and on, but the point is that Ronald Reagan would have gladly traded the economy he inherited for the one Obama inherited. Granted, the economy Obama inherited was bad, but not the worst, and he asked us for it.

Romney scores points against Obama in first debate

Obama and Romney debate

President Barack Obama and Mitt Romney squared off last night in Denver for the first of three debates before next month’s election — this debate primarily focusing on domestic policy. By most accounts I’ve read, Romney did really well, while President Obama struggled (I missed the debate because I was flying back to Atlanta from Washington, DC). The Washington Post has a good overview of the first debate, highlighting the contrast between Obama and Romney:

Romney came into the 90-minute exchange after several difficult weeks but appeared rejuvenated by the opportunity to take his case directly to Obama and the American people. He was well prepared and aggressive as he hammered the president. The contrast with Obama was striking, as the president appeared less energetic even as he rebutted some of Romney’s toughest attacks.

The debate is likely to give Romney what he needed most, which is a fresh look from voters — at least those who are undecided or open to changing their minds — and will change the conversation about the campaign, which for the past two weeks has been tilted in the president’s favor. Romney now faces the challenge of trying to build on his performance and keep the president on the defensive in the days ahead.


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