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Mega Corp Early Retirees with Health Ins -- Read HC Reform Provision
Old 03-24-2010, 03:38 AM   #1
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Mega Corp Early Retirees with Health Ins -- Read HC Reform Provision

There is an interesting provision in the Health Care reform bill that increases the chances the your Mega Corp will not dump the retirement health care benefits they gave to Early retirees:

Quote:
A temporary reinsurance program will help offset costs of coverage for companies that provide early retiree health benefits for those ages 55 to 64.
Timeline: When health care reform will affect you - CNN.com

The inflation on health costs was probably one of the largest risks that might drive companies might decide to reduce benefits, charge a lot more, or cancel altogether. This provision was done to encourage companies to continue providing benefits.


Timeline: When health care reform will affect you - CNN.com
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Old 03-24-2010, 04:38 AM   #2
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As I'm in this category, I was pleased to see this provision. I fully expected to lose paid health care in the last recession. Maybe I can make it to Medicare on MegaMotor's dime.
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Old 03-24-2010, 07:09 AM   #3
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Many or most large companies self-insure their employees. This has been going on for a least 30 years, and probably more.

Insurance companies are hired to administer the provisions plan. The actual $ are paid by megacorp.

Any information how this will work in the future?
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Old 03-24-2010, 07:13 AM   #4
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Originally Posted by winger View Post
Many or most large companies self-insure their employees. This has been going on for a least 30 years, and probably more.

Insurance companies are hired to administer the provisions plan. The actual $ are paid by megacorp.

Any information how this will work in the future?
Just to confirm your comments. In my early years, I worked for a (non-profit) Blue Cross plan. Large companies in our area, using their insurance worked on a "cost plus" basis. We would pay all approved claims (at a contract rate to the hospital) and bill the company, along with a small processing fee (around 2%, as I recall).

In our case, at the time (early 70's), there was little profit. We paid out 96-97% of every dollar collected overall, from all subscribers. Of course, since we were non-profit, we did not have investors to worry about (which is probably not the case with today's Blue's).
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Old 03-24-2010, 03:51 PM   #5
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Originally Posted by winger View Post
Many or most large companies self-insure their employees. This has been going on for a least 30 years, and probably more.

Insurance companies are hired to administer the provisions plan. The actual $ are paid by megacorp.

Any information how this will work in the future?
This shouldn't change. Mega Corp's self insured plan will need to change its provisions (lifetime maximums, no pre-existing condition waivers, cancellation only for fraud, etc) to match the federal law. I saw nothing to exempt self-insured plans from the changes passed in the bill.

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Old 03-24-2010, 04:49 PM   #6
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So is it everyone's understanding that for those in these plans, one will be eligible for the income base subsidy when they go in effect in 2014?

For example, our income, once we get cash into tax free interest instruments, will only be around $22,000 By 2014 we will be paying round $13,000 annually in premiums for the DW and I.

So it seems we should be able to get much of that cost covered by subsidy.


Just not sure how it works if you have insurance at the time law goes into effect or if there are special rules for retiree insurance plans relative to the subsidy allowance.

Am I missing something?
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Old 03-24-2010, 04:52 PM   #7
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This is another interesting wrinkle. Is tax-free muni income not considered as part of your income for the purposes of the health insurance subsidy? If it doesn't count, I'd expect the yield spreads between taxable and tax-exempt bonds to widen to account for the increased benefits of tax-exempt income.
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Old 03-24-2010, 05:14 PM   #8
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Originally Posted by chinaco View Post

The inflation on health costs was probably one of the largest risks that might drive companies might decide to reduce benefits, charge a lot more, or cancel altogether. This provision was done to encourage companies to continue providing benefits.
Time will tell. I understand the concept described above, but I'm trying to get my mind around the idea of how increasing the demand for a product (by helping companies pay more for insurance) will not further accelerate price inflation for that commodity.

Anyway, if/when early retirees are dropped by their former employers as insurance prices rise, at least these ERs will be able to get insurance through those exchanges we've heard about, and then get subsidies directly if their income is low enough. Or, if their income and assets are lower still, they can get into the newly expanded Medicaid.
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Old 03-24-2010, 05:29 PM   #9
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This is another interesting wrinkle. Is tax-free muni income not considered as part of your income for the purposes of the health insurance subsidy? ...
It sure is getting 'interesting' how all this is going to tie in to the already complex tax regs. At this point, 'what if' scenarios in the tax software are not enough, considering all the different credits, cut-offs, deductions, limits, AMT, qualified/unqualified gains/divs, RMD, the 'income to pay the mortgage Q', Roth conversion opportunities, subsidies for HC, etc, etc, etc.

It's like you need a matrix of simulations kicked out within some profile limits, and then review the results and pick a plan. You would need to enter your entire financial scenario, like "I have $X in Trad_IRA, available to convert to Roths , I have $X in dividend paying stocks/bonds which could be converted to tax-free munis (would need the cost basis and holding time to adjust for the cap gains effects....), I could pay off the mortgage to reduce income needs (again, where does the money come from, calc gains, lost div income....), should I/ would I qualify for a rebate to replace my 17 YO furnace with an 'energy eff' one, or will that hit limits if I do some of the above strategies?, on and on. Changing one variable at a time is just no longer humanly possible for the array of options most ERs have, even with a (static) tax program.

I read that the entire tax code for Hong Kong is just 19 pages. The US has gone down a strange path.


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