How the Tax Bill Affects Your Healthcare

The Tax Cuts and Jobs Act is a Presidential signature away from becoming law. What’s in it that impacts your healthcare? Here is a rundown:

  • The law repeals the Individual Mandate starting 2019, so you still need to have health insurance for 2018 or face a tax penalty of at least $2,676 per person in your household. NOTE: If you live in Massachusetts, you are still required to have insurance in 2019 and beyond, because your state already has an individual mandate that came into effect with Romneycare.
  • The law does not touch the tax advantages of having health insurance, which include using pre-tax income to pay for health insurance, and having a Health Savings Account funded with pre-tax dollars. (However, if you have an individual or family plan, you can only open or fund an HSA if you have an HSA-compatible high-deductible policy – this was an ACA provision.)
  • The new law also does not touch the “employer exemption,” which is the ability of employers to deduct 100% of the money they spend on providing health insurance to employees and their families. Three-quarters of Americans who are covered by private insurance get their coverage through employers, so this is a big relief. There was talk of capping the employer exclusion as one way to pay for the bill’s tax cuts, because it is the single biggest tax break in the tax code, saving individuals and businesses $270 billion per year in income and payroll taxes.

Much has been made of the repeal of the individual mandate and its effect on the health insurance market for individuals and families. Here are my thoughts:

  • From the start, the individual mandate has been an ineffective way to drive consumers into the health insurance market, because the penalty is too low compared to the cost of health insurance for many people. It was set at its current level because it was the most lawmakers could push through in the ACA.
  • The repeal of the individual mandate won’t be a determining factor for many people. I rarely come across clients who say that they aren’t carrying insurance because the penalty is cheaper, and who will therefore not carry insurance now because there is no penalty. People largely decide to carry insurance because it gives them peace of mind regarding their health. You may be young and/or healthy now, but one car accident or other unexpected malady and you are going to wish you had health insurance. Even the most barebones of the policies I sell includes a provision that caps your out-of-pocket maximum exposure to healthcare costs in one year (currently no more than $7,350 for in-network care in California). This was specifically included in the ACA to eliminate medical bankruptcies.
  • On the other hand, millions of people will decide not to buy health insurance once the mandate is repealed, and in most cases they will be the young and/or currently healthy. This is a problem because insurance pools count on the premiums of those who don’t use their full benefits in any given year, because it balances out the costs for those who do. In health insurance, this is an especially big problem, because unlike auto, home or casualty claims, health insurance costs routinely run into the six-and-seven figure range. Not enough young and/or currently healthy people results in what we call “adverse selection,” or a pool that is unbalanced toward those who will make claims. The only way for insurers to protect themselves from this risk is to raise premiums or to stop offering policies. To get political for a moment, this is exactly what the opponents of the ACA are hoping for, because it will cause two things: 1) unhappy consumers facing rising premiums and 2) insurers pulling out of the individual markets because they simply can’t create pools that will adequately cover the expected claims.
  • The repeal of the individual mandate will make it legal to buy non-ACA compliant health insurance policies, and I’m not sure this is a bad thing. I already sell those policies, which are currently marketed as 90-day “short-term” policies that can be renewed indefinitely. These policies essentially serve only as “pure insurance,” meaning they offer no benefits until you reach $5,000 or $10,000 in out-of-pocket costs (depending on which policy you buy), but then indemnify you up to $750,000 in medical costs per person. Currently, there is no medical underwriting for these policies, although you do have to check a box saying you haven’t had any major illnesses in the recent past. It’s unclear whether these insurers will be allowed to screen applicants using medical underwriting in the post-mandate world.
Overall, I expect the individual market to survive the repeal of the mandate, especially in California, where Covered California is doing its best to protect the market, and where we have big enough risk pools to keep insurers in the market. In other states, however, the ACA is more at risk. It took herculean efforts to make sure there was at least one ACA-compliant individual policy offered in every county this year. That may be impossible in 2019 and beyond.

Does My Doctor Take My Insurance?

It should be easy to figure out whether your doctor takes your insurance. But as everyone knows, it rarely is.

Your doctor is either in-network (meaning they take your insurance based on in-network pricing), or they don’t (meaning they will charge you full price, which counts against your out-of-network deductible, which you are unlikely to reach under most circumstances). If you have an HMO plan, it’s even simpler: either you see a doctor in your HMO and get in-network benefits, or you pay out of your own pocket. HMOs and EPOs don’t have out-of-network benefits – only PPOs do.

[NOTE: In this article, I’m using the term “doctor” as a catch-all for all medical service providers. The same guidelines apply if you need to know if a particular hospital, blood lab or testing facility takes your insurance]

Here’s a translation of some healthcare-speak: “In-network” means that your doctor is contracted with your insurance company to provide services at an agreed-upon price (sometimes they are called “participating providers”). “Out-of-network” means they are not. An HMO plan limits your access, and your coverage, only to doctors that are in the HMO’s contractual network. A PPO essentially does the same thing, with two differences: a PPO allows you to make an appointment directly with a specialist, rather than having to get a referral from your primary care doctor, and it pays out-of-network benefits after you spend a lot of money out of network. An EPO is like a PPO in that you can go directly to specialists, but like an HMO in that it offers no out-of-network coverage.

Finding out whether your preferred doctor takes your insurance is where the problem lies

Doctors’ offices should have big menu boards, like fast-food joints, saying exactly which plans they take for in-network PPO or HMO benefits. I’ve never seen one.

At best, the receptionist will know the answer (which is rare), or there will be a helpful person in the billing department who can give you a clear answer. At worst, you will walk into a doctor’s office thinking they take your insurance, no one will tell you that they don’t, and you’ll get hit with a big, surprising bill that you are obligated to pay. I have a client who got a $1,300 bill for a routine pediatric visit because their pediatrician had stopped taking their insurance and didn’t tell them.

Below you will find resources to help you find out if your doctor takes your insurance. Since I am a Northern California-based insurance broker, these links are for local providers. But if you are elsewhere, you can look for the same information in your area. I’m about to explain how.

How to figure out if your doctor takes your insurance

Almost all doctors’ offices are now part of large medical groups that handle their administrative functions, including which insurance companies they contract with. Some groups, such as Palo Alto Medical Foundation, do an excellent job of posting all the plans they take, and updating the page frequently. That’s really the gold standard, but I’ve never come across a page as thorough as that one. Stanford Health does a pretty good job with its page, but it’s not as comprehensive as it should be. Brown & Toland does a terrible job – you have to search their FAQs to find the page, and then when you click, it takes you to the wrong page!

The first thing you need to know is what kind of insurance you have. Most people have either employer-sponsored insurance (aka “group insurance”) or personal insurance for themselves or their family (aka “individual” plans or simply “Covered California”). In California, some government employees have coverage through CalPERS. Military personnel, except veterans, have coverage through TriCare.

If you are on Medicaid (known as Medi-Cal in California), you have a particular type of insurance that in California varies by county, and you must find out if your doctor takes that exact insurance plan. Those on Medicare also need to be sure that their doctors take their exact type of insurance. Stanford has a good page explaining the different types of Medicare coverage they take – but if you are not a Stanford patient, use this information only to help you to learn what questions you need to ask your provider.

In general, more doctors take group health insurance than individual health insurance. That’s simply because group health insurance pays them more than individual insurance, and some doctors don’t want to accept the lower compensation. The reason this happens has to do with how insurance pools work, but the bottom line is that insurance companies can afford to pay more out of group insurance pools than individual pools, which are separate.

This leads to a big misconception about health insurance – that if a doctor “takes Blue Shield” that they take ALL Blue Shield plans, and that may not be true. Imagine if you had to ask at the supermarket whether they took your particular version of Visa or Mastercard, and if not, you’d be forced to pay cash. That’s what we’re dealing with in health insurance.

So when you are not 100% sure your doctor takes your insurance, here’s the information you need:

  • The exact name of your plan, and whether it is an HMO, PPO or EPO network
  • Whether you have group, individual or another type of coverage
  • Your policyholder ID number, commonly called a “member ID number” or something similar. These numbers are coded to provide billing offices with information about the type of plan you have.
  • The federal tax ID number of the doctor’s office. Yes, you actually need that number. That’s the coin of the realm in health insurance. It’s how the insurance companies know whether they pay in-network claims from a particular doctor. Yes, you can ask the doctor’s office for that number and they should be able to provide it.

Next, you need to know what medical group your doctor belongs to. In the Bay Area, some of the biggest are Sutter Health, Stanford Health, Brown & Toland, Dignity Health and Palo Alto Medical Foundation. Search Google for your doctor’s name and you’ll often be able to find this information. If it’s not perfectly obvious from an Internet search, you must call your doctor’s office and ask them, and ask about which insurance plans they take. There are still some freestanding doctors offices that are not part of a larger medical group, so you have to be extra careful to ask the right questions of their front desk people before you use their services.

Once you know which medical group your doctor belongs to, you can go to that group’s website and look for their insurance page (Some doctor’s offices have such a page on their own websites, but they are often woefully incomplete). If you do not get a satisfactory answer from the web page, call the doctor’s office and/or the group’s main office. But be prepared to come away without a definitive answer.

The next place to turn is your own insurance company. Call their customer service line, give them your policyholder information and the exact name of the doctor, and get them to tell you whether they are in-network for your plan. This usually results in a satisfactory answer, but needless to say, this can be time-consuming. Some insurance companies have provider directories on their websites as well, but you usually have to be logged in as a policyholder to access them. My only personal experience is with the Blue Shield of California website, and it’s good for simple searches, but I don’t rely on it as a definitive resource, because there’s no telling how recently this information was updated.

Here are the insurance pages of major Bay Area medical groups:

I’d be very interested to hear about your experiences figuring out if your doctor takes your insurance.

Several Good Analyses of the Failure of Republican Reform Efforts

Here are several links to good stories about the failure of the Republicans to pass healthcare reform:

My write-up on LinkedIn: The ACA Will Not Fail On Its Own. It Will Take Active Efforts by the Administration and Congress.

Kaiser Health News: GOP Failure To Replace The Health Law Was Years In The Making

WashPost: ‘It’s an insane process’: How Trump and Republicans failed on their health-care bill

Politico: Medicaid Shows Its Political Clout


And finally: Former House Speaker John Boehner predicted this failure five months ago

“It’s not going to happen,” Boehner said Thursday while speaking at a health-care conference in Orlando, Florida, Politico reports. He dismissed claims by Donald Trump and G.O.P. leadership that Congress will successfully “repeal and replace” the Affordable Care Act by the end of the year, calling the prospect mere “happy talk.” 

Boehner told the crowd on Thursday that he “started laughing” when congressional Republicans, ecstatic after Trump’s unexpected election triumph, predicted that they would rapidly repeal and replace Obamacare. “Republicans never ever agree on health care,” said Boehner, who resigned in 2015 from his House leadership role amid widespread turmoil in the party.

Insurance Companies Come Out Strongly Against Loosening ACA Minimum Essential Benefits Requirements

The insurance industry was largely against the ACA’s requirement that all non-grandfathered individual and small-group health insurance policies provide minimum essential benefits such as maternity coverage, mental health and substance abuse disorders, emergency care and preventative services. They were opposed because these requirements reduced the number and types of policies that could be sold and raised the costs of new ones.

But now that they are in place, the insurance industry has done a 180. In a rare public statement about the current healthcare reform debate, large insurers have blasted the amendment offered by Ted Cruz and Mike Lee to allow insurers to offer policies that don’t meet these requirements.

Why? Because now that these plans are in place, they have insurance risk pools built around them. If the risk pools splinter, it means that some pools are vulnerable to “adverse selection,” which is insurance-speak for having more people who need their insurance benefits than there are people to pay for them. Lobbyists for the insurance companies and insurance agents are working behind the scenes to stabilize health insurance markets in the post-ACA world, and this amendment would destabilize the market in a major way.

From Politico:

In a letter sent to Cruz and Lee today, Blue Cross Blue Shield Association CEO Scott Serota warns that the proposal is “unworkable as it would undermine pre-existing condition protections, increase premiums and destabilize the market.”

America’s Health Insurance Plans additionally is circulating a memo that raises similar concerns about the individual insurance market.

“Unfortunately, this proposal would fracture and segment insurance markets into separate risk pools and create an un-level playing field that would lead to widespread adverse selection and unstable health insurance markets,” reads the AHIP memo.


Obamacare Exchanges Are Strengthening, Not in a “Death Spiral”

This is reality – the individual health insurance markets are generally in good shape, though in smaller states and counties, there is a serious problem of choice. Some markets are no longer served, and others have only one option. This is not good, but it could be solved in Washington was working on it, and not working to make the situation much worse.

If you read the article, you may see that insurer profits are up, and that the amount of claims paid are down. First of all, yes, we are a profit-making industry. Not enormous profits, mind you, but yes, profits. Nearly EVERYONE else in the healthcare industrial complex is a for-profit entity. Do you think your doctor works for free? Secondly, we are obligated to pay out an average of 80% of premiums on medical claims (85% for large groups), so quarter-by-quarter variations are meaningless.

Finally, don’t blame the health insurance industry when 2018 rates come out, because they will be going up for almost everyone. Here’s why:

“An analysis by the Oliver Wyman consulting firm estimated that up to two-thirds of insurer rate increases for 2018 “will be due to the uncertainty surrounding these two market influences” and the Congressional Budget Office estimates premiums will increase 20 percent next year if the individual mandate is not enforced.”

Reactions to the Senate’s Trumpcare Bill: Jonathan Greer Quoted as Industry Expert

The Senate revealed its draconian version of Congress’ effort to weaken the Affordable Care Act yesterday. In his role as Media Chair and Spokesperson for the Golden Gate Association of Health Underwriters, Jonathan Greer was quoted in the San Jose Mercury News and its affiliated newspapers around the Bay Area.

Here are his quotes:

Jonathan Greer, a spokesman at the Golden Gate Association of Health Underwriters, [said] fewer middle-income Californians would be eligible for health insurance subsidies since the bill lowers the maximum income level for receiving a subsidy.

“In a high-cost state like California, that’s a big problem,” Greer said. For example, he said a family of three earning $75,000 a year is currently eligible for subsidies but wouldn’t be under the new bill. In the Bay Area, an unsubsidized plan offering benefits such as low-cost prescription drugs can cost more than $1,000 per month, he said.

Greer pointed to a bit of good news for lower-income Californians in the Senate’s version: Unlike the House bill that proposed age-based subsidies, the Senate bill retains Obamacare’s income-based premium subsidies that millions rely on to make health insurance more affordable.

Here’s a good story with more details on the proposal:



Jonathan Greer Wins GGAHU’s “Out of the Box” Award for 2017

Jonathan Greer serves on the board of the Golden Gate Association of Health Underwriters GGAHU), the Bay Area’s health insurance broker trade association. Last week, his fellow board members honored him with the 2016-17 “Out of the Box” award for bringing new energy and a fresh perspective to the association’s important work representing employers, employees, consumers and our health insurance colleagues.

Health insurance brokers provide a vital – and under-appreciated – service to businesses and families. Figuring out how to buy the right health insurance policy isn’t easy, but as insurance professionals, we are committed to helping our clients sort through their options to find the most cost-effective policy to meet their needs. Insurance brokers have nothing to do with setting rates, and we are paid a relatively small commission on each sale. Our #1 priority is helping you, the health insurance consumer, whether you are the HR manager of a company or an individual.

“As you surely know, healthcare is a very big concern of everyone in this country. I’m proud to be a health insurance broker and to put my experience and professional expertise to work for my clients,” Greer said.

Saving Lots of Money With an HSA-Wrap Benefit Plan

An excellent way for employers to save on health benefits is to essentially “self-fund” the deductible and out-of-pocket costs for employees while providing a high-deductible plan that acts like pure insurance for very expensive health care. We call this an HRA-Wrap, and I’d love to explain it to you in more detail because it can save you 10-20% annually on your overall benefits costs. That’s because you don’t have to pay an insurance company to cover the first few thousands of dollars of routine care, and far less than 100% of your employees will need that kind of coverage.

Here are some more tips to save money from the Washington Post.


Teaching Hospitals Are Expensive Places to Get Healthcare Services

From the New York Times:

Perhaps not evident to many patients, there are two kinds of hospitals — teaching and nonteaching — and a raging debate about which is better. Teaching hospitals, affiliated with medical schools, are the training grounds for the next generation of physicians. They cost more. The debate is over whether their increased cost is accompanied by better patient outcomes.

Teaching hospitals cost taxpayers more in part because Medicare pays them more, to compensate them for their educational mission. They also tend to command higher prices in the commercial market because the medical-school affiliation enhances their brand. Their higher prices could even cost patients more, if they are paying out of pocket.

From the Boston Globe: Academic medical centers drive up costs in the health care marketplace


Anthem to leave Ohio’s Obamacare insurance market in 2018

From Reuters:

Anthem Inc, which has urged Republican lawmakers to commit to paying government subsidies for the Obamacare individual health insurance system, on Tuesday announced it would exit most of the Ohio market next year.

The high-profile health insurer, which sells Blue Cross Blue Shield plans in 14 states including New York and California, for months has said that uncertainty over the payments used to make insurance more affordable could cause it to exit markets next year.

This is likely the first of several such departures from ACA markets. Let’s get this straight: this is NOT the fault of the ACA or President Obama. This is solely to the fault of Congressional Republicans, who have blocked or stalled agreed-upon payments to health insurers designed to smooth out and stabilize the markets for individual health insurance.

Over-Use of Specialists Is One Of The Biggest Drivers Of High Healthcare Costs

From the NY Times:

The Affordable Care Act was misnamed; it should have been called the Access to Unaffordable Care Act. In 2015 health care spending reached $3.2 trillion — $10,000 for every man, woman and child in America. While our health care system is the most expensive in the world by far, on many measures of performance it ranked last out of 11 developed countries, according to a 2014 Commonwealth Fund Report.

But deregulation will not fix it. To the extent that we can call it a market at all, health care is not self-correcting. Instead, it is a colossal network of unaccountable profit centers, the pricing of which has been controlled by medical specialists since the mid-20th century. Neither Republicans nor Democrats have been willing to address this.

Most Americans mistakenly believe that they must see specialists for almost every medical problem. What people don’t know is that specialists essentially determine the services that are covered by insurance, and the prices that may be charged for them.

Senate Republicans Pulling Away From ACA Repeal Legislation

From Politico:

Senate Republicans remain publicly pessimistic about their prospects of repealing and replacing Obamacare this year with several raising concerns this week about the party’s central campaign promise even as one of their leaders vowed to pass such a bill this summer.

Sen. Richard Burr (R-N.C.) made the most direct prediction on Thursday, telling a news station in his home state that “I don’t see a comprehensive health care plan this year.”

Senate Republicans mull tax on employer-based health insurance

Senate Republicans set on reworking the Affordable Care Act are considering taxing employer-sponsored health insurance plans, a move that would meet stiff resistance from companies and potentially raise taxes on millions of people who get coverage on the job.

Under longstanding tax law, compensation in the form of health insurance isn’t treated as income for workers. That means employers can deduct the cost and the value isn’t subject to payroll taxes or individual income taxes. It is a system that economists say distorts the market in favor of generous insurance packages, but like other tax breaks, it has proven popular and difficult to dislodge.

California’s New Single-Payer Proposal Embraces Some Costly Old Ways

From the respected Kaiser Health Foundation:

Three of the dirtiest words in health care are “fee for service.”

For years, U.S. officials have sought to move Medicare away from paying doctors and hospitals for each task they perform, a costly approach that rewards the quantity of care over quality. State Medicaid programs and private insurers are pursuing similar changes.

Yet the $400 billion single-payer proposal that’s advancing in the California legislature would restore fee-for-service to its once-dominant perch in California.