Don Levit

What about this scenario: Employee has a separate individual policy which maxes out at $50,000 of benefits. Employee wants to keep the employer plan, but take the savings in family premiums (about 80%) by raising his deductible to $50,000, to put into his 401(k) at his employer. Is this a taxable event? Don Levit

On page 10, it states "PPACA also reinsures insurers in both the individual and small group markets against the risk that their medical costs will be greater than 103% of expectations." It cites in the footnote section 1342. Does that mean the government is the reinsurer over 103% of expected claims, and that premiums are paid by general revenues? It seems like the government is going to subsidize insurers in the small and individual markets, but not the large group market. I wonder why? For those large employers who buy insurance, that seems to be a "bummer." And, for those who self insure, thjey have to buy stop-loss, instead of having the government be their reinsurer. Don Levit

Thanks for providing your experiences. I can cite the regulation, but you seem familiar with it. Former employees need not be retired or on COBRA. They can be disabled, laid off, or merely those who formerly had an employer-employee relationship. This provides an opportunity for creative health care planning. For example, if an employee had a limited benefits plan with his prior employer, which provided benefits up to $50,000. By continuing this plan, the former employee joins his new employer's plan, and if he has the full $50,000 of benefits, increases his deductible on the new employer's plan to $50,000. Thus, he can save about 70% off of the traditional group premium. Don Levit

I have a short answer, which may provide some insight. Employees include former employees. Thus, section 106 could apply. Don Levit

Maybe he'll post the audio on you tube. Don Levit

Yes, me too. Don Levit

Folks: With the passage of the new legislation, will ERISA lose some of its applications, particularly in regards to this posting? In addition, does anyone know if a group plan could be split between individual policies on the exchange and traditional group policies? Don Levit

Leevena: That sounds as good a reason as any. However, I wonder why other group coverage is honored as meeting the participation requirements, but similar individual coverage would not? Don Levit

Leevena: I agree with what yous aid about the participation limits. My experience has been that individual policies are not counted as coverage in force. Any theories as to why? Don Levit

Folks: In a letter from the CBO which I found on today's Benefits Link, the director, Douglas Elmendorf, responds to the questions posed of "CBO's analysis of the effects of the Patient Protection and Affordable Care Act (PPACA), as passed by the Senate on Dec. 24. In particular, the effect of the legislation on the Hospital Insurance (HI) trust fund, from which Medicare Part A benefits are paid." "Gross federal debt consists of debt held by the public and debt issued to government accounts. Debt held by the public is the most meaningful measure for assessing the relationship between federal debt and the economy because it represents the amount the government has borrowed; such borrowing competes with other participants for financial resources. In contrast, debt held by trust funds represents internal transactions of the government and thus has no effect on credit markets." "Enacting PPACA would increase debt held by government accounts more than it would decrease debt held by the public, and would thus increase gross federal debt. However, that measure of debt conveys little information about the federal government's future financial burdens and has little economic meaning. In contrast, the effects of legislation on debt held by the public offer a more useful measure of that legislation's impact on the government's financial condition." I agree with this analysis in the short run. However, in the long run, as the various trust funds are depleted, the intragovernmental debt will evolve into public debt, with similar effects on competition for financial resources. Intragovernmental debt, for today, is "good debt," but eventually, it will be treated like "bad debt." This accounting of debt goes against my grandfather's sound philosophy,"What you own, you may not own. What you owe, you owe." Don Levit

Drake: Thanks so much for this material. Don Levit

David: Can you tell me who may have originated that quote? Also, do you know the context in which it took place? For example, what democracies was he or she referring to? I plan to use this in a "sermon" i am giving at my church on Sunday. Happy new year to you and all involved with Benefits Link. Don Levit

I am also very thankful for Benefits Link. I feel like we are a team. Maybe that's because I am a little sentimental. I even feel very fond of George Burns. He is probably one of my 10 best friends. Don Levit

David: That is an apropos quote, not only from the collecfive standpoint, but also from an individual perspective. It is part of our nature to vacillate between our best and worst selves, and everything in between. We need to make bondage part of our minority and spiritual truth as part of our majority. In today's environment, spiritual truth is not much part of our collective way of thinking, speaking, and acting. If an election were held today, bondage would win hands down. Spiritual truth will set us free, but first, it will make us miserable. Instead of deferring the misery through debt and overspending, we need to work through it. All we can do is our parts, bring others along, and hope that we are on the right track. Don Levit

You two are making a lot of sense. I share many of your concerns, not only about trust funds and the pending health legislation, but also how social insurance has been utilized up to now. We know that the trust finds for Social Security and Medicare are not like trust funds in the private sector, or like the trust funds for state employees. The private sector trust fund is a separate account that is supposed to be used fpr the exclusive benefit of the participants. Not so with Social Security and Medicare. "The government does not set aside assets to pay future benefits or other expenses associated with earmarked funds (payroll taxes). The cash receipts collected from the public for an earmarked fund are deposited in the U.S. Treasury, which uses the cash for general purposes. This is from the Fiscal Year 2008 Financial Report of the U.S. govewrnment, page 96. Go to: http://www.gao.gov/financial/fy2008financialreport.html. From Accounting for Social Insurance, Revised published by the FASAB, which develops accounting principles and standards for the U.S. government Page 85 - Social insurance is not an employee benefit. The accounting methods for employee retirement benefits reflect the fact that employees voluntarily exchange lower wages during their working years to receive certain future benefits. Suich an exchange does not occur with social insurance benefits. Page 87 - A non exchange transaction arises when one party receives value without directly giving or promising value in return. In regards to social insurance benefits the federal government gives value to beneficiaries without receiving value in return. The fact that benefits paid are not based on the amount of taxes paid confirms the nonexchange nature of social insurance. Go to: www.fasab.gov. Click on Exposure Drafts and Documents for Comment. Don Levit