Tag Archives: underinsured

Myths About Obamacare and Workers’ Comp

The Obama administration has said that the Patient Protection and Affordable Care Act, enacted into law in 2010 and scheduled to take effect on Jan. 1, will reduce workers’ comp claims because so many additional people will be covered under personal insurance policies. But there is reason to think otherwise.

The first issue is that so many companies are reducing the insurance they offer employees or are cutting employees’ hours so much that they fall below the law’s threshold, so employees don’t have to be covered at all. Employees who aren’t covered under corporate policies or who are underinsured are more likely to make workers’ comp claims.

Here are just a few examples from National Review Online:

SeaWorld used to let part-time employees work as many as 32 hours per week, but the company is dropping the limit to 28 hours to keep them under the 30-hour threshold at which it would be required to provide health insurance under Obamacare. More than 80 percent of the company’s thousands of employees are part-time or seasonal.

Carnegie Museum in Pennsylvania scaled back the hours of 48 of its 600 part-time employees to less than 30 hours a week to sidestep the mandate to provide health-care coverage

Virginia Gov. Bob McDonnell decided to limit the state’s part-time employees to 29 hours per week.

Brevard County, Florida told a local television station that the county’s 300-plus part-time employees will be “capped at something less than 30” hours to save the county about $10,000 per employee in health insurance.

Fatburger  announced that franchises had begun making efforts to keep employees under the 30-hour threshold, including some franchises’ engaging in “job sharing.”

As more companies shift to shorter work weeks, you can expect claims under workers’ comp to keep climbing.

Proponents of Obamare still say it will decrease workers’ compensation costs in several ways, including through the elimination of lifetime caps on medical insurance coverage. The argument is that these caps on employees’ private policies pushed them to file workers’ compensation claims. Really? Many of the leading cost drivers for work-related injuries are Musculoskeletal Disorders (MSD), better known as soft tissue injuries.  According to the Bureau of Labor Statistics (BLS), soft tissue injuries (sprains and strains) accounted for 40% of all work-related injuries that resulted in lost days of work. I do not believe that these types of injuries would affect the lifetime maximum for health insurance, which is typically $1 million.

Proponents also note that a healthcare insurer can no longer refuse to provide coverage because of preexisting conditions, conditions they claim were often not covered by private healthcare and thus encouraged employees to seek coverage under workers’ compensation. While this is a good point, the National Review’s examples show that many people are losing healthcare coverage or will see it reduced, meaning that there will be a greater likelihood of workers’ compensation claims. Yes, there are penalties for not securing healthcare coverage, but they are modest, especially in the early years of Obamacare, and there is no real mechanism for enforcement. The IRS has the responsibility for collecting penalties but has no true powers to do so.

How are people supposed to afford care if their hours have been cut?  You guessed it: workers’ compensation.

A Technology Breakthrough for Valuing Tangible Assets

What are your clients’ tangible assets worth? If you are like most advisors, you don’t have a clear answer. Without that clarity, you are leaving yourself and your clients at risk. Tangible assets – valuables ranging from fine art and wine to classic cars and jewelry – make up an ever-increasing portion of household wealth. Yet there is little visibility into this asset class.

Why? Often, individuals find the process of documenting, tracking and managing the values of tangible assets to be tedious. Instead of producing a thorough inventory, the insured may opt for a blanket umbrella policy that covers general contents as a percentage of the home’s value. The individual may list certain items, but with inadequate documentation. Many times, both the insured and the insurer fail to keep up as the market value of collections changes.

Fortunately, technology has emerged that makes collecting and managing information about tangible assets significantly easier. Appraisers can collect detailed data and provenance on property and possessions and upload them to a personal, online digital locker, where the items are regularly valued, securely managed, and are accessible anytime. Individuals will soon be able to use their smartphones to take a picture of a valuable object and upload it directly to this locker. As items are added and values change, the owner is notified – and can choose to automatically alert his advisors, including insurers and wealth managers, to ensure the items are accounted for and adequately protected.

The continuous transparency that the locker provides into values can be eye-opening to users.  Case in point: A family in the Northeast has a large, valuable art collection. Thirty years ago, the family had the pieces insured, using estate values provided by auction houses. These values, as a rule, are much lower than retail replacement values, so the family’s collection was initially insured at about half of what it should have been. The collection had not been appraised since the early 1980s, and, when a wealth manager had it re-appraised in 2012, values had changed so substantially that a piece initially valued at several hundred thousand dollars now carries a fair market value of more than $50 million.

The consequences of this type of undervaluation are significant. Had the owner passed away before the revaluation, the estate could have suffered an immense tax bill. In the event of loss, theft, fire or water damage, the owner would have been severely underinsured and faced significant loss. In addition, had the owners known the higher value of the artwork, they could have sold or leveraged it.

The bottom line is: With more information about their valuables, individuals  – and their advisors – can make more informed decisions.

This ability to capture, securely store and provide real-time valuations is a momentous step forward in tangible wealth management, and has been made possible by several technological advancements:

1. Data About Prized Possessions
There is a massive amount of data now available on luxury items. Whether a person’s passion investment is wine, diamonds, classic automobiles or fine art, there is a database that captures the real-time value changes in the category. By using technology to process that data, individuals gain a better composite view of their wealth, a greater idea of potential liquidity options, and a more accurate way to assess risk.

2. Digital Collection — Onsite and at Retail
In the not-so-distant past, a person had to take pictures or videos and store them on a hard drive, keep receipts in a safe deposit box, and use a spreadsheet to capture information on valuables. Now that all communication and record keeping has gone digital, certified appraisers can use apps to capture all of this information on-site. Merchants can email electronic receipts. Individuals can snap a picture of any acquired item, add support information like a receipt, package art, or bar or QR-code and send it to their personal digital locker in real time. All of this information is securely accessible anytime, anywhere.

3. Cloud Storage and Connectivity
Once information is collected electronically, it can be safely and securely stored in a personal digital locker in the cloud. This eliminates the need for paper records or other media that can be lost, stolen, or destroyed.  In addition to storage, the cloud provides connectivity, creating a virtual ecosystem where individuals can privately view the value of their tangible assets and manage those assets. This new capability includes easy connections to on-line auction houses, dealers, insurers, wealth manager and the like to sell, insure, donate, or take other beneficial actions powered by information about everything a person owns.

Ultimately, data is currency, and new technology is helping individuals cash in on the data about their tangible wealth. The information about possessions has inherent value. By adopting emerging technologies to collect, value and connect the information about individuals’ personal property, individuals and their advisors can finally gain transparency into tangible assets – completing the total wealth picture.

Implementing International Medical Providers Into The U.S. Workers' Compensation System, Part 3

This is Part 3 of a multi-part series on legal barriers to implementing international providers into Medical Provider Networks for workers’ compensation. Previous articles in the series can be found here: Part 1 and Part 2. Subsequent articles in the series will be forthcoming soon.

Heather T. Williams agrees with critics, that medical tourism is a trade-off for consumers, allowing them to opt-out of increased regulation in favor of fewer restrictions and greater cost savings. Factors unique to the medical tourism industry will help preserve the quality of patient care and insulate patients from the regulatory pitfalls critics fear. Williams points to the benefits of medical tourism as providing patients with substantial cost savings, due in part to lower labor costs overseas.43

The cost savings in the context of inflated health care costs in the U.S. indicates why patients are driven abroad to seek medical care. How much of a cost savings medical tourism offers patients can be seen in how much hospitals charge for major surgical procedures such as cardiac surgery, partial hip replacement, knee replacement, and rhinoplasty. A hospital in India charges $4,000 for cardiac surgery, compared to $30,000 in the U.S. Hospitals in Argentina, Singapore or Thailand charge $8,000 to $12,000 for a partial hip replacement that would otherwise cost twice that much here. Singapore and Indian hospitals charge $18,000 and $12,000 respectively for knee replacement that normally cost $30,000 in the U.S. Finally rhinoplasty that costs $4,500 in the U.S. costs only $850 in India.44

Though all patients can benefit, medical tourism’s cost savings are more likely to benefit those with inadequate health insurance coverage.45 Lower-middle-class individuals, who typically have sufficient means to pay for reduced-price care out-of pocket, will benefit most from medical tourism.46 This is a point to bear in mind with regard to workers’ compensation, as many claimants are generally lower-middle-class.47

Medical tourism disproportionately benefits uninsured or underinsured individuals,48 but they are not the only ones benefitting from cost savings from medical tourism.49 Self-insured employers and private insurance companies have begun integrating medical tourism into their policies. It is attractive to small businesses as well.50 Medical tourism is expanding as self-insured employers and insurance companies have integrated medical tourism into their policies.51 For instance, Blue Ridge Paper Products of Canton, North Carolina sought to send an employee overseas for gallbladder and shoulder surgery.52 They offered him 25% of the savings, but the United Steelworkers prevented them from doing so and union workers were removed from the pilot program.53 54

State governments, looking to save money anyway they can may accept medical tourism for their state employees. A bill introduced into the state legislature in West Virginia in 2006, (H.B. 4359), would have encouraged state employees covered by the Public Employees Insurance Agency (PEIA) to utilize Joint Commission International accredited foreign hospitals, receive travel reimbursements for themselves and a companion, and participate in the savings with a cash rebate.55 56 The bill is still pending in the House Banking and Insurance committee.57

Large HMOs and health insurance companies have established plans to allow patients to obtain low-cost services overseas.58 BlueShield and Health Net of California, United Group Programs of Boca Raton, and BlueCross and BlueShield of South Carolina have offered such plans for travel to Mexico and Thailand for treatment.59 The effect of financial incentives on American’s willingness to travel for medical care is evident in a 2007 nationwide telephone survey of a representative sample of 1,003 Americans in which 38% of uninsured and one-quarter of those with insurance would travel abroad for care if the savings exceeded $10,000. One-quarter of uninsured, but only 10% of those with insurance would travel if savings were between $1,000 and $2,400. Fewer than 10% would travel to save $500 to $1,000, and no one would do so to save $200 or less. This represented a potential market share of 20-40 percent for non-urgent major surgery.60 61

Medical tourism is fast becoming a feature of American health care. In the next few years, more and more Americans will be going overseas for medical care. It is only a matter of time before medical tourism’s mark is felt on another arena of American health care — workers’ compensation.

43 Williams, 611.

44 Herrick, 8.

45 Williams, 614.

46 Ibid, 614.

47 Juan Du and J. Paul Leigh, “Incidence of Workers Compensation Indemnity Claims Across Socio-Demographic and Job Characteristics,” American Journal of Industrial Medicine, 54 (2011): 758-770. The study suggests that low socioeconomic status was a predictor of reporting workers compensation claims, but did not include income levels; although it is possible to extrapolate from the data presented that the subjects were generally lower middle class or working class.

48 Williams, 614.

49 Ibid, 615.

50 Ibid, 615.

51 Ibid, 615.

52 Boyle, 43.

53 Ibid, 43.

54 Williams, 616.

55 Ibid, 44.

56 Nicolas P. Terry, “Under-Regulated Health Care Phenomena in a Flat World: Medical Tourism and Outsourcing,” Western New England Law Review, 29, no. 29 (2007) 427.

57 West Virginia Legislature website, (2006).

58 Williams, 616.

59 Boyle, 44.

60 Herrick, 2.

61 Arnold Milstein and Mark Smith, “Will the Surgical World Become Flat?,” Health Affairs, 26, no. 1 (2007): 138.

Life Insurance 101: America’s Most Underused Risk Management Tool

Almost four out of five U.S. households own some form of life insurance, meaning that to some degree, there is national consensus regarding the importance and usefulness of life insurance. However, the average household only owns enough coverage to replace 3.6 years of income, creating a significant gap between the amount of coverage families have versus the amount of coverage they actually need. Forty-four percent of U.S. households would agree that they do not have sufficient coverage to meet their potential needs. The question then arises of why so many Americans are underinsured.One of the primary reasons why we suspect that many Americans are not sufficiently covered is that they are not sure about what type of coverage they need or how much. They have concerns about affordability as well, especially in light of the nation’s current economic struggles. Most families are tightening their budgets in an effort to weather the storm, and unfortunately, life insurance is often one of the first expenses to go. With these issues in mind, we have come up with some basic answers to some of the most common questions that develop as families consider the purchase of life insurance.

Why do I need life insurance?
Traditionally, life insurance has been viewed as a way to cover burial costs and replace income. However, there are many additional ways that life insurance can serve as a valuable investment and risk management tool. For example, it can be used to pay estate taxes, pay off a mortgage, equalize an estate among multiple heirs, diversify investment and retirement plans, donate a substantial gift to charity, or purchase a partner’s share of a business if he or she passes away. If you do your homework, you will likely be surprised at the variety of life insurance plans that exist as well as their creative uses and how they can benefit you and your family when you pass away and while you are still alive.

What type of coverage should I purchase?
There are two main types of life insurance. Term life is temporary insurance that is offered for a specified term only; usually 10 years, 15 years, 20 years, or 30 years. Policies expire at the end of the term, much like health insurance, car insurance, or property insurance. In most cases, term policies can be converted to permanent coverage for a period specified in the life insurance contract.

Permanent life is just that — it’s permanent! Such policies can last for life if designed and monitored properly. Universal Life, Indexed Universal Life, Whole Life, and Variable Life products would all fall into the category of permanent life. They accumulate a cash value or internal cash reserve that can be used for a variety purposes. The cash value grows based on an interest rate determined by the insurance carrier. Permanent insurance can be flexible and transferable via a transaction called a 1035 Exchange, which is much like a 1031 Exchange in real estate. Typically, permanent life has a variety of uses beyond providing a tax-free death benefit, such as supplying a retirement income, serving as a cash reserve while you’re alive, offering long term care components, and giving you the opportunity to tap into the death benefit while you are alive to pay medical expenses if you become terminally ill.

Can I afford life insurance and how much do I need?
The cost of life insurance depends on your age, your health, the type of policy you’re applying for and how the policy is designed. Typically, permanent insurance, with its flexibility and multitude of uses, is much more expensive than term insurance. As you get older and/or your health diminishes, insurance carriers identify you as being a higher risk and therefore charge you higher premiums. It is best to lock in coverage while you are young and in good health.

How much coverage you need can be calculated based on your income, your projected future income, your net worth, and your age. In the case of key-person business insurance, the potential loss of profitability that would result from you passing would be a key component in the calculation. Insurance carriers consider each of these factors when determining how much coverage you can qualify for.

I’ve had some health issues. Will I even qualify for life insurance?
Underwriting is the process during which a life insurance company reviews the prospective insured’s medical records and life insurance physical exam to determine which underwriting class should be assigned to the insured. For example, ratings span from Preferred Plus, which means that the insured is as healthy as possible for someone that age, to Substandard, which means that the insured has below average health for someone in that age category. The more health issues you have, the more expensive your coverage will be. One very important fact to consider, however, is that underwriting is subjective. One carrier’s assessment of your health can be completely different from another carrier’s assessment. If you have health issues, there is value in shopping around because you never know which carrier might give you just the offer you were looking for.

What if I already have life insurance?
Active life insurance policies should be reviewed at a minimum of every two to three years. Changes in interest rates, the market, mortality tables, and product efficiency make it critical for policy owners to have their contracts evaluated periodically to ensure that their policies are still competitive. If you have a life insurance policy currently, it should be your goal to determine the following as part of your periodic reviews: Am I paying the lowest possible premium for the amount of coverage I have? How strong and stable is my insurance carrier? Is my current death benefit amount still sufficient to meet my needs? Is my policy guaranteed? Am I taking advantage of all of the living benefits my policy has to offer? Should my policy be owned by a trust? As your life changes, your policy should change to meet your evolving needs.