Dave Cain: Welcome to unsuitable on Rea Radio, the award winning financial services and business advisory podcast that challenges your old-school business practices and the traditional business suit culture. Our guests are industry professionals and experts who will challenge you to think beyond the suit and tie while offering you meaningful modern solutions to help enhance your company’s growth. I’m your host, Dave Cain.
If you ever participated in a game of blackjack, craps, roulette, or slot machines, you’re probably familiar with the adrenaline rush you get when you win and today we’re going to talk about the adrenaline rush on the Affordable Care Act as we help make tax planning great again. We’re happy to have the highly skilled ninja tax warrior and ACA expert, Joe Popp with us again on Unsuitable to talk about how business owners might be able to improve their chances of turning a profit, or at the very least lose less money by betting on upcoming tax and Affordable Care Act changes. Welcome back to unsuitable, Joe.
Joe Popp: Thank you, Dave. It’s a very kind title that you’ve given me there. I can’t say that I disagree, so thank you very much.
Dave: You know, Joe has been a frequent guest on the podcast. As we get to know you a little bit better, you’re a kayaker, you have three dogs, you like cooking, you put that cap on and you got that Zac Brown look going.
Joe: I can sing a mean Zac Brown as well. We can investigate that-
Dave: We want to go back-
Joe: Another podcast.
Dave: Also, I understand your favorite line item in the core values of The Rea Way are “be a person of influence. Be a person of influence,” and that is Joe Popp.
Joe: Well, thank you, Dave. It’s a pleasure to be here.
Dave: I think probably lour theme song today should have been something from the late 70s, maybe Kenny Rogers and playing “The Gambler.”
Joe: “Know when to hold ’em and know when to fold ’em,” and things of that nature? Yeah.
Dave: You’ve got it. For listeners, this podcast will be released sometime late March or early April, but just less than 24 hours ago, we had a … I don’t know if it’s a significant change, but a change in the direction of the Affordable Care Act, so with that, Joe, what’s going on today?
Joe: Sure. Of course, for those of you who are listening to this podcast, probably a lot has changed since we are recording this, so I’ll be mindful of that in trying to give you a couple of thoughts on how to gamble, how to plan for some upcoming things. As you know by now, the House and the Senate leadership on this issue have provided some direction in terms of actual legislation on what to do with the Affordable Care Act and kind of what’s next.
Some of these things were kind of right in the mix of things that were anticipated. There are some surprises and there’s some significant pieces of the area that has yet to really be addressed, fleshed out. There’s some differences between the policy statements of the past and the legislation that we have in front of us, and so part of the gamble may be to see where some of those policy provisions in the past were and what could we anticipate being added or modified on this current treatment.
Dave: You know, with all of these changes, you look a little nervous. Are you schweddy?
Joe: No, no, but that’s a good story. You know, Mr. Baldwin has done such a great job on Saturday Night Live throughout the years and his current interpretation of Trump, he says he’s not going to do for very much longer because it’s too accurate or biting, so it’s an interesting retrospective there on Mr. Baldwin.
It is a time to be nervous for sure in the Affordable Care Act area. We have the preexisting conditions lurking, coming back a little bit. On my previous podcast, this was something that I had mentioned is likely going to be coming back and, in fact, we have a version of it that’s coming back. The incantation of it that we have at the moment is a surcharge, and so what it’ll do is, if you haven’t had insurance for a period of time in a lookback period, you’re going to pay an additional 30% on top of your premiums to get back into health insurance.
For right now, that’s where it’s kind of been modified. The look-back period, interestingly enough, starts 1/1 of ’18, so that means that there’s a little planning point; that’s something for the gamblers out there. You may be in a situation where you’re looking at “I don’t care if there’s penalties, I just don’t want to do this.” That’s fine, but the 1/1/18 date, that’s the date you should really be looking at. “Do I have all my ducks in a row? Am I willing to gamble that this isn’t actually going to happen or should I really plan that as of January of next year, I’m going to have health insurance and so is everybody in my family?”
Dave: So, 2017 is the time to gamble.
Joe: Yep. One of the other things that’s been removed, at least in the proposed legislation, is the individual and business mandate. It’s retroactive to 2016, so that means that for the businesses that are out there that the only reason they’re providing insurance is the threat of that penalty, now may be a time to gamble and think about changing it, if you have a early renewal or something that’s coming up mid-year, maybe you don’t renew it. Maybe you go to a different option.
Dave: You know, the thing that … why this is … it just gets so much press these days. Everything you open and read in any publication or media outlet, and you’ve got millennials looking at this, you’ve got baby boomers looking at this, you’ve got the rank and file, the employees and you have ownership looking at this. Everybody has a stake in the outcome of this process.
Joe: That’s true. In the early days of this being put forth, and I will say that President Trump, to his credit, has put forward a Tweet course saying, “This is an opportunity for us to have a discussion; this is a starting point. Let’s deal. Let’s talk.” Right? And so, there are a lot of people in the early days here when we’re recording who are coming out against this policy for a variety of different reasons. You have some segments of the Republican leadership, you have AARP, other groups, and so it’ll be interesting how this all comes together.
One of the little hidden pieces that now has come out is part of the proposal includes an increase on the cap that insurance companies are able to vary between a 21 year old and someone just about to go onto Medicare. Currently that cap is three to one, meaning the company can charge, for the exact same coverage, 300% of the premium to an individual that’s kind of at the maximum age band of who would be buying private insurance.
One of the proposals is to make that word “three,” remove that and then include the word “five,” so that would allow a 500% variance. What would that look like? For someone who is, let’s say, between the ages of 55 and 62, that would allow the insurance companies to increase their premium, as of 1/1/18, by 66%. It’s a pretty big increase potentially. Again, it’s not mandating that the insurance companies do it. They’re just giving them the room that if they want to. It’s likely that that probably wouldn’t get phased in all at once, but still, this is one of the reasons that the AARPs of the world might be opposed to it at the moment.
So, if you’re a gambler, what’re you going to do? Right? So, what’s the message, maybe, for people in that age group? That is: it’s really valuable now to have an employer who provides insurance because most of the time, that amount of premium doesn’t vary based on your age. It’s just: “Here’s the company insurance. It’s this price.” Right?
For individuals who are in this age group, some of the planning that you might do is, between now and January, if this is looking progressively more and more likely to happen, you may investigate gaining employment somewhere that does offer health insurance. Maybe you’re not super interested in doing that particular work, but the value of having the health insurance is so great that it may be worth your while to think about it.
Dave: You know, I think I’m going to start a little movement here at Rea and Associates and take up a little collection to send you to Washington, DC; do a little lobbying on behalf of our clients and constituents here in Central Ohio. You have a great passion for this and if you’re going to Washington, I have a couple of requests. One is, let’s make it simple that everyone can understand, even marketing people can understand it, and that it’s affordable.
Joe: For those of you who are not in the room with the podcast, the marketing people are looking at Dave right now.
Dave: Yeah, but this thing should be called the Unaffordable Care Act.
Joe: You know, I was telling someone in the office this the other day, it’s the same game, right? The Affordable Care Act and this, it’s the same game. The insurance companies have to make money in order to do anything, right? They’re in the business of making money. That is constant. They have to make money in order for this to work, so how do we make them money? Well, someone’s got to pay for it. Who’s going to pay for it? Where’s the money going to come from? Right?
So, you know, one of the interesting points of this whole thing is, one of the reasons that the insurance companies went to the exchanges, took the leap and did that, is the Affordable Care Act had a “Here’s a pile of money and insurance carriers, we’re going to give you this pile of money for you to do this. So if you do that, you get a share of this basically free money.”
Well guess what? This plan does the exact same thing. It says, “Hey, insurance providers, here’s a pile of money that we’re going to create from something. We’re going to give it to you and the reason that we’re going to do that is so that you’re going to go to the exchanges and make them better for the American people.”
But it’s the same game. It’s about making sure the insurance companies make money, and what can we do in moving the ball around in that. When you look at this whole thing, that’s the easy part, is insurance companies are making money and we’re moving the ball around as to who pays for it and who gets what and all.
Dave: Well, it sounds like this latest round of suggestions, I guess, that’s where it is in the discussion phase, sounds more like Obamacare Lite. Not a lot of differences. Some differences, but just fishing around the edges.
Joe: It’s almost, if I had to give it a term, looking at what I’ve seen so far, it’s almost Trumpcaid. If you look at the text of the 66 some page document, 40 pages of it is Medicaid related, and then the other pieces have miscellaneous items to do with the rest of it. Really, this is about, at least at the current proposal, there’s a lot of rules relating to how we do Medicaid and doing block grants to the state and having it modified by your population in the state and all of this.
So really, if you look at this, not to get into too political a piece, but one of the things that is possible that they could have done is to say, “Line One: Repeal the Affordable Care Act. Line Two: Let’s start in on all the other stuff,” right? Interestingly enough, nowhere in any of the proposals is that “Line One” there. They don’t wholesale repeal the Affordable Care Act, so here’s one of the little gamble pieces, to get back to our topic or angle on that.
One of the things that we thought was going to happen, and that I thought was going to happen, and the policy proposals kind of informed might happen, is a real liberalization of the, “If you want to give cash to your employees instead of health insurance, you can do that.” Right? That was one of the proposals.
Dave: Right.
Joe: The piece holding that back is some of the native language of the Affordable Care Act, which basically said, “No, you can’t do that anymore.” They haven’t done anything with that particular piece. They did remove some of the limits on how much you can give, but they didn’t undo that piece of the legislation from the Affordable Care Act that said, “If you don’t also offer healthcare, you can’t do this.” They lifted the limits on what you can do, but they left in place the Affordable Care Act prohibition on, “If you don’t do this, you can’t do that” kind of thing.
If you’re an employer, you’re in this interesting place where, “Well, okay, so I don’t have to give insurance anymore because the penalty is removed, but one of the ways in which I’d like to do it which is I’d just like to give them cash and be done with it, I’m not able to do yet. At least, not based on this particular set of legislation.”
Hopefully, that’s going to change because that is one of the pieces that I think a lot of the business community have been talking about is, “I want to help my employees; I just want to help them out, but I don’t want to deal with all this other stuff.” And so, hopefully, we will see that that is one of the modifications that makes it into this in the coming weeks.
Dave: Fundamentally, I guess giving cash to the employees instead of offering benefits and health insurance seems to set a bad precedent with bad things beyond that.
Joe: I hear that comment, and if you take a little time and look at how other countries address this, one of the things that you’ll find is that somehow or other, we’ve gotten-
Dave: USA.
Joe: Yeah, yeah. We’ve gotten bound up in the employer is the one offering healthcare. That’s not true in all other places. There’s other things that have to deal with healthcare. The employer is responsible for giving you a paycheck and then you do other things with it, but with our current system, the employer and health insurance offers are synonymous. They go together. It’s almost like they have to go together. Right now, this proposal doesn’t do a whole lot to break that as a concept. It’s still in place.
Dave: Okay, I want to gamble. All chips to the middle. All right, what am I going to do? Am I going to buy coverage here in the next few months or ride it out? All chips are in the middle.
Joe: Here’s my gamble-
Dave: I’m doubling down.
Joe: On the individual side. If I am someone who is relatively old, someone that is older than 45, let us say … That’s why I say relative. I know, I know, I know. If you are in that category, you may think seriously about planning for January to be at a place that offers you healthcare. Whether you take it or not right now, whether or not it’s something you want to do or not, someplace that offers it. That is pretty important.
For the individuals who are younger than that, the game here is now you don’t have to, according to this proposal, you don’t have to have the health insurance, so if you want to drop that insurance, you want to stop paying for it and drop off, it seems like that’s a good gamble. You can probably do that and avoid really anything.
Then, for those of you who have preexisting conditions, so people with preexisting conditions in your family, very important to, again, as I said in the last podcast, really think very difficult question of, even if you can’t really afford it, even if you don’t really want to, do you go ahead and sign up for insurance as of 1/1/18, put that in the budget, have it there. Importantly, for now, the premium subsidies are still there for 2018.
One thing we haven’t talked about. Here’s another little gamble. For individuals who are close to 100% of the federal poverty line, who are getting the best benefits under the current version of this healthcare law and who are getting nice premium subsidies, one of the proposals in here is if you fall below that such that you would not be eligible, the current rule is you would pay back around $250 maximum. Under the new rule, you would pay back every dime which could be several thousand dollars.
So, it’s very, very important, if you are going to be in that category of people, to be mindful of your income, to be mindful of your employment status. If you lose your employment, you might have to immediately get off your healthcare, go to Medicaid. Very, very important. That’s a gamble that I would be very cautious about doing.
On the business side: what are we going to do? We do have that new HRA that’s available to us if we’re a small employer.
Dave: Can you explain HRA?
Joe: Sure. That’s a Health Reimbursement Account. It is for companies that are under 50 full time, full time equivalent employees. It allows you to provide up to $5,000 of reimbursement to your staff and you can do that without providing a health insurance plan. You can do that as a stand-alone. That was something that was passed back in December and we talked about in one of our previous podcasts. That right now is the best option for the smaller employers that do not want to provide healthcare.
In that previous podcast, we were theory crafting about where the expanded HSA or FSA would be; I don’t know that it’s going to happen in 2017. I don’t know that that’s a good gamble. Probably same as last year is going to be the thing, and then possibly 2018, you might earmark that for a different treatment, but for 2017, it’s looking like a real dim view of anything else becoming available.
Dave: I’m kind of listening to your commentary. Seems like there’s a couple things that are going to be protected no matter which way we go. One is the preexisting conditions; that sounds like that’s pretty safe, and possibly even for young adults right out of college will still be able to stay on a parent’s plan? You think that’s still going to happen?
Joe: Yeah. The parent’s plan, it’s a no-brainer. That one will probably happen, it’s in the current legislation. The preexisting conditions thing? You know, right now it looks like it’s a one time surcharge. It’s pretty easy to make that a permanent surcharge, and then that’s when you have a 30% surtax on top of your 66% increase.
Man, that’s really difficult. It’s just as if you’re in a high risk pool at that point, so yes, there is some protections to the preexisting conditions, but you know, we’ll see where that goes.
Dave: Our guest today is Joe Popp with Rea and Associates, great expert, and famous in healthcare options, and we encourage all our listeners to contact Joe for any questions. It’s obviously a very, very highly charged conversation and no one knows all of the answer as we speak, but I think you constantly study that; you have a great passion for this.
You know, one of the things that ran through mind as you were talking is that we spent, our government spent, a tremendous amount of money implementing the Affordable Care Act. Now we’re going to spend a tremendous amount of money overhauling the Affordable Care Act. When does it all end?
Joe: Well, I suppose-
Dave: I want to gamble, and you talk about gambling.
Joe: Like I said, as long as the game is “how do we make sure the insurance companies continue to make money,” we’re always going to be playing around with discussions like these. Where does it end? Well, if our need to make sure that the insurance companies continue to make money is no longer a game we’re playing, then perhaps it will change.
But as long as we are beholden to that, the Affordable Care Act, this particular incantation of healthcare form, we’re all playing the same game, we’re just using different pieces and we’re moving the pieces around differently. If you really want to change it, you’ve got to change the game. You can’t change the pieces, you can’t change … You have to the game, so stop playing baseball, start playing football, and there you go.
Dave: There you go. Joe, thanks again for joining us on unsuitable, and as we opened the podcast, I saw one of your hobbies is cooking. What’s your favorite meal to cook?
Joe: My favorite current meal, and this is a weird one, is carrots, boiled carrots that me and my dogs eat. It’s a pretty low piece on the cooking complexity scale, but I will tell you that the amount of enjoyment from the participants is way outweighed by the amount of complexity on that one. Probably my current favorite.
Dave: What the hell’s a wine pairing with boiled carrots?
Joe: That would be a-
Dave: Boone’s Farm?
Joe: No, no, no. That’s a nice red, because that’s what I drink, so there you go.
Dave: We’re getting great news every day about the Affordable Care Act, and I know Joe does a great job of keeping our clients posted on the constant changes, as does the rest of the Rea team. I encourage our listeners to drop in on our website at reacpa.com or follow us on social media for helpful news and updates, and I’m sure you’re going to run into Joe as he runs around the state, talking to various groups and organizations.
Stop in and say hi to Joe, and certainly ask him any questions; it’s a great resource out there for all of you, take advantage of that. And again, until next time, I’m Dave Cain, encouraging you to loosen up your tie and think outside the box.