Risky Business

The ADA Amendments Act: How Courts Are Interpreting the Amended Law

The Human Equation

The purpose of the Americans with Disabilities Act (ADA) is to generate and protect employment opportunities for individuals living with a disability. However, the manner in which courts have interpreted and applied the ADA since its enactment in 1990 has limited the law’s effectiveness. As a result, ADA lawsuits typically rank among the causes of action most likely to fail.

This fact did not go unnoticed by Congress, which noted that the U.S. Supreme Court has “narrowed the broad scope of protection intended to be afforded by the ADA, thus eliminating protection for many individuals whom Congress intended to protect.” Seeking to reinstate the original intent of the ADA, Congress passed the ADA Amendments Act (ADAAA) in 2008, which became effective on January 1, 2009.

 

There is little doubt that the ADAAA broadened the scope of protection for qualified individuals with a disability. However, as is often the case with new laws, the precise impact of the ADAAA could not be determined until enough time has passed so that the new provisions can be tested in court. Since the ADAAA has generally been interpreted as not having retroactive applicability, lawsuits involving the amended law are just now beginning to work their way through the courts.

One such case pending in the Northern District of Indiana considered whether Stage III Renal Cancer qualifies as a disability under the ADA even though the employee was in remission at the time of the alleged discrimination. The employer asked the court to summarily rule in its favor because the employee’s condition did not satisfy the ADA’s definition of disability since the cancer was in remission. As a result, the employer argued, the employee was not protected by the ADA.

 

In denying the employer’s argument, the court relied on two separate provisions of the ADAAA: one specific and one general.

The first provision relied upon by the court specifically provides that “an impairment that is episodic or in remission is a disability if it would substantially limit a major life activity when active.” In other words, under the ADAAA, because the employee had cancer in remission (and that cancer would have substantially limited a major life activity when it was active), the employee does not need to show that he was substantially limited in a major life activity at the actual time of the alleged adverse employment action. Since the employer could not reasonably dispute that Stage III Renal Cancer, when active, constitutes a disability, the court rejected the employer’s argument.

 

The second provision involves a general statement of intent found within the ADAAA. It states that “it is the intent of Congress that the primary object of attention in cases brought under the ADA should be whether entities covered under the ADA have complied with their obligations.” Consequently, the question of whether an individual’s impairment constitutes a disability under the ADA “should not demand extensive analysis.” The court relied on this provision to hold, in essence, that the rule governing impairments in remission was sufficient to deny the employer’s argument without requiring any further consideration. Accordingly, the court denied the employer’s motion and held that the case would proceed to trial.

 

From a practical standpoint, it is this second, general statement of intent which is most likely to alter the landscape of ADA litigation in the future. By limiting the extent of analysis into an individual’s status as disabled, employers may find that their ability to defend ADA lawsuits has been limited by the ADAAA. This is significant because employers have historically been very successful in arguing that a plaintiff is not disabled under the ADA and is therefore ineligible for its protection. However, since the phrase “extensive analysis” is inherently vague, it is possible that some courts may allow employers leeway in challenging an employee’s status as disabled. Nevertheless, it is possible that more ADA cases will end up going to trial rather than being resolved summarily without a trial, which is what happened in this case.

 

Unfortunately, the uncertainty currently surrounding the ADAAA has left many employers operating without a net. Since the new provisions may ultimately operate to increase the likelihood of ADA violations and decrease the likelihood of quickly resolving such cases, employers must proceed cautiously when dealing with disability-related employment matters. Otherwise, your organization may be involved in the next case that employers use as a tool to learn what the ADAAA requires.

To learn more about the Americans with Disabilities Act, including the ADAAA’s requirements, click here.

The Need for Directors & Officers Insurance for the Condominium Association Board

What is the difference between directors and officers of a small condominium association and those of a million dollar company? Oftentimes, the differences are found in levels of experience and expertise, and in the large salaries and stock options. In the eyes of the law, however, they are more alike than they are different. Yet, despite the fact that directors and officers of condominium associations often share the same legal duties and responsibilities as their highly paid and high profile counterparts, many do not realize the significance, or the ramifications, of their decision to volunteer for their condominium board.

Those deciding to serve on their condominium association board typically do so with the best intentions. They make every effort to abide by the rules, act fairly, and above all, do that which is best for their community. However, since directors and officers are charged with protecting not only their own homes, but also those of their neighbors, the stakes can be very high, and the consequences of mistakes can be severe.
 

Given that directors and officers are required to comply with numerous different legal standards, it would be unrealistic to expect them to perform their responsibilities without ever making a mistake. Common law duties, fiduciary obligations, condominium bylaws and declarations, and numerous applicable statutory requirements, all govern the manner in which directors and officers undertake their obligations.

 

Consider the following situations which may ultimately result in liability for the condominium association, as well as its directors and officers: breach of the duty of care, libel and slander, loss resulting from improper management, ignorance or misunderstanding of condominium bylaws or declaration, failure to maintain proper books and records, conflicts of interest, negligence or recklessness in conducting the association’s business, violations of applicable statutory and common law duties, breach of fiduciary duty, employment-related misconduct, and improper or discriminatory application of condominium rules. Consequently, volunteers with little or no experience or knowledge about what it means to be a director or officer are likely to make a mistake during their efforts to navigate through all of the applicable legal requirements.

 

Since the combination of strict legal requirements and inexperience generally create a favorable environment for error, prudence dictates that condominium associations insure against the resulting risk. This can be accomplished with a Directors and Officers (D&O) insurance policy.

 

D&O policies generally protect directors and officers against monetary damages resulting from lawsuits or claims resulting from actions taken in their official capacity. These policies protect against claims that directors and officers have acted improperly, or otherwise failed to act, in their individual or group capacity on behalf of the association. They can offer protection against economic damages resulting from the negligence or wrongdoing of board members. And, depending on the policy form, D&O coverage may apply to the association, as well as its directors, officers, employees, committee members, and volunteers.

 

While D&O policies do not cover all potential liabilities, such as those resulting from fraudulent or intentional acts, they do provide a much needed security blanket for those directors and officers wanting to serve their community, but who may not possess all of the necessary experience or knowledge. Such policies also reduce the likelihood that assessments will be imposed to pay amounts that would have been covered by a D&O policy.

 

Another benefit of obtaining D&O insurance is that it removes a significant obstacle in getting the best and brightest individuals to serve their condominium association. Upon discovering that they will be on their own in the event something goes wrong, many individuals decide not to volunteer for service. Additionally, the existence of a D&O insurance policy gives directors and officers the freedom to make the right decisions, even if they are not popular, without fear of liability. The alternative may be a group of directors and officers so paralyzed by fear that little is accomplished.

 

While making the decision to obtain D&O insurance is easy, choosing the appropriate policy form for a particular situation is not. Since variations among D&O policies can be significant, it is important to select a policy form which addresses any particular risks with appropriate coverage terms. When shopping for a Directors and Officers insurance policy, it is important to use the services of an insurance agent with substantial expertise in this field.

 

If you would like more information about Directors and Officers Insurance for your condominium association, please contact us.

 

 

Protecting Your Home: Expect the Unexpected

In good times and in bad, homeownership is still viewed as an integral part of the American Dream. Whether it is a starter home, a house with an extra room for the new baby, or empty-nesters’ retirement condominium, chances are good that the most expensive thing that someone owns is their home. Consequently, protecting this asset, as well as its value, should be a priority.

Unfortunately, many homeowners fail to realize some of the risks associated with homeownership. And, the failure to know of potential risks makes it unlikely that the proper steps have been taken to eliminate, or at least minimize, the risk. Given the inherent importance of the home, as well as its value, homeowners need to be aware of what can cause damage to their home, and how to prevent it.

Risks to the home come in many different forms. Regardless of whether the damage or loss resulting from these risks can be insured against, homeowners should consider the likelihood of these risks, look for any symptoms, and address the problem as soon as possible.

 

Vulnerability to Severe Weather

If your home is located in an area that experiences severe weather, such as tropical storms, hurricanes, or flooding, steps must be taken to increase the likelihood that the structure withstands any such weather events. Hurricanes can rip the roof off of a house and blow out the windows and doors. Falling trees and flying debris can cause damage that may compromise the structural integrity enough to cause a collapse or otherwise render the structure unsafe for habitation. The risks associated with severe weather are significant and the damage can be complete.

 

While it is impossible to make a home invulnerable to severe weather, steps can be taken to turn the odds in your favor. Consider the possibility of adding or strengthening structural reinforcement devices, such as storm-rated anchors or ties. Hurricane-rated windows and doors, or shutters to cover conventional windows and doors, reduce the likelihood that they are damaged by high winds and flying debris. Additionally, by protecting the integrity of windows and doors, the likelihood of flooding caused by wind-blown rain is decreased. Finally, removing or securing items surrounding the property before severe weather hits decreases the likelihood that such items will become flying projectiles that can cause structural damage.

 

Water Damage

Homes must be protected against water damage. Water can cause damage to wood, floors, flooring, walls, and furniture. It can also lead to the growth and spread of toxic mold. The damage caused by water is typically very expensive to repair, and if the water causes structural or electrical damage, the costs increase significantly. Since water can infiltrate the home in different ways, such as leaks in the roof or leaks in the plumbing, it is important to constantly be on the look-out for wet or merely damp areas. The damage caused by water tends to spread and worsen over time. Therefore, problem areas must be fixed immediately; otherwise, long-term damage will result.

 

Toxic Mold

Mold typically results from water that has been allowed to sit for a period of time. Since most people do not typically allow standing water to exist for long periods of time, the usual culprit is water accumulating as a result of an undiscovered leak. Faulty, damaged, or old plumbing are common sources of the water. Poorly sealed windows or doors may also cause water to accumulate, especially under flooring or behind objects which make it difficult to discover. Additionally, homeowners who have experienced flooding that may have been caused by rain or a plumbing incident, like a burst pipe or backed-up toilet, may have failed to adequately clean and dry the affected area. All of these situations may result in the spread of toxic mold throughout the home. Since the existence of mold can cause health problems, it must be addressed immediately, usually with the assistance of a certified professional. The costs can be significant.

 

The most effective way to prevent the growth of mold is to prevent moist conditions from existing for extended periods of time. This requires always being on the look-out for leaks or other areas where water has accumulated. Wet or moist areas must be dried thoroughly. If mold is found, clean it immediately to prevent spreading.

 

Sewage Disposal Failures

Sewer lines and septic tanks are critically important to preserving a comfortable and sanitary home. Older homes may experience problems with sewer lines because they may have been damaged by age or tree roots that have grown deep and far over time. Septic tanks may suffer from the same harms. Unpleasant odors, flooding, or frequent clogging may be symptoms of a damages sewer line or septic tank. The costs of fixing these items can be very high, and the experience may be very unpleasant. Prevention is preferable, so trees should be selected and placed with sewer lines and septic tanks in mind. Root trimming should also be performed as necessary. If there are constant back-ups or flooding, consider having the lines cleared as soon as possible before the problem grows beyond repair.

 

Given the cost of a house, protecting the investment makes good sense. By consistently performing maintenance and always keeping an eye out for potential problems, many homeowners can increase the life, and value, of not only their most valuable asset, but of their home.

The Affordable Care Act’s Early Retiree Reinsurance Program

Rising health care costs have made it difficult for employers to provide quality, affordable health insurance for workers and retirees while also remaining competitive in the global marketplace. The percentage of large firms providing workers with retiree health coverage has dropped from 66 percent in 1988 to 29 percent in 2009 (Kaiser / HRET. Employer Health Benefits: 2009 Survey.) Many Americans who retire without employer sponsored insurance and before they are eligible for Medicare see their life savings disappear because of exorbitant rates in the individual market. Health insurance premiums for older Americans are over four times more expensive than they are for young adults (Center for Policy and Research. Individual Health Insurance 2009.), and the deductible these enrollees pay is, on average, almost four times that for a typical employer sponsored insurance plan.(Kaiser Family Foundation. 2010. Survey of People Who Purchase Their Own Insurance.)

The Early Retiree Reinsurance Program provides much needed financial relief for employers, unions and state and local governments so retirees can get quality, affordable insurance. Applications for employers to sign up for this program are available now, and help is available for claims dating back to June 1 for those accepted into the program.

Purpose of the Program: Sustain Quality, Affordable Care for Early Retirees

The Affordable Care Act provides $5 billion in financial assistance to employers, unions and state and local governments to help them maintain coverage for early retirees age 55 and older who are not yet eligible for Medicare.

Employers, unions and governments can use the savings to reduce their own health care costs, provide premium relief to their workers and families, or both.

Access to Reinsurance: What Employers Need to Do

Employers with self funded and insured plans can apply, including private companies, state and local governments, nonprofits, religious organizations, unions operating employee benefit plans, and other employers.

Applications are now available online at www.errp.gov along with extensive application assistance materials and information on where to send the applications. Applicants are being accepted as of June 29.

To participate in the program, employers must have their applications approved, be able to document claims, and implement programs and procedures that have or have the potential to generate cost savings for participants with chronic and high cost conditions.

Employers participating in the program will be subject to audits of their health benefit plans to ensure fiscal integrity.

Relief for Businesses, Unions and Governments

HHS will reimburse medical claims dating back to June 1, 2010 three weeks before the statutory deadline for establishing the program. This allows more insurance claims to qualify for reinsurance payments for plans this year.

Employers that are accepted into the program will receive reinsurance reimbursement for medical claims for retirees age 55 and older who are not eligible for Medicare, and their spouses, surviving spouses, and dependents. 

Health benefits claims that qualify for relief include medical, surgical, hospital, prescription drug, and other benefits that may be specified by the Secretary of Health and Human Services, such as coverage for mental health services.

The amount of this reimbursement to the employer is up to 80 percent of medical claims costs for health benefits between $15,000 and $90,000. Claims incurred between the start of the plan year (often January 1) and June 1 are credited towards toward the $15,000 threshold for reimbursement. However, only medical expenses incurred after June 1, 2010 are eligible for reimbursement under this program.

For example: If an individual incurs costs of $30,000 between the start of the plan year and  June 1, and $40,000 after that date. The amount which may be reimbursed is $40,000 – the  costs above the $15,000 threshold that occur after June 1.

If a plan incurs $90,000 or more in expenses before June 1, it is treated as having met the  $15,000 threshold and is eligible for reimbursement for costs incurred after June 1.

These limits apply and claims are filed for individual’s costs. Employers cannot add two or more individuals together to attain the threshold.

Bridge to 2014

The Early Retiree Reinsurance Program provides temporary assistance to employers and their early retirees to make the cost of health care coverage and health care more affordable.

The program ends on January 1, 2014 when early retirees will be able to choose from the additional coverage options that will be available in the health insurance Exchanges.

Source: Early Retiree Reinsurance Program at errp.gov.

Credit History and Auto Insurance Premiums: What's the Connection?

Increasingly, consumers are asking why their credit rating affects the rates they pay for automobile insurance. Yet using an individual’s credit rating as a criterion for determining an auto insurance premium is a fairly common practice in the insurance industry. Why? Statistics compiled by the Insurance Information Institute indicate that drivers with low credit scores are more likely to file insurance claims. As a result, the lower a person’s credit score, the more likely it is that the individual will pay higher auto insurance premiums; conversely, the higher the credit score, the lower the insurance rates.

When using credit scores to set automobile insurance premiums, insurance companies consider a number of elements in an individual’s credit history. The two most important factors are an individual’s payment history and the amount of debt the individual owes. Insurers want to know whether an individual has made late payments or has missed payments, as well as whether he or she is paying down or accumulating debt. Other criteria are the length of an individual’s credit history, the number of accounts in an individual’s credit report, and the amount of new account activity in the report.

Many consumers feel that the practice of using credit history and not solely an individual’s driving record in determining auto insurance premiums is unfair. They argue that it’s wrong to charge higher rates to individuals who have not had any tickets or accidents for many years but who have lower credit scores. Yet drivers with multiple tickets or at-fault claims pay lower auto insurance premiums merely because they have excellent credit ratings. Insurance companies claim that using credit history is a proven tool that helps them measure their risk of loss and set their rates accordingly.

Given the current economic climate, with high unemployment and a record number of mortgage foreclosures, even individuals who once had good credit history may find themselves facing double trouble: mounting debt and higher auto insurance premiums. That’s why now more than ever, consumers need to work with insurance professionals committed to getting them the best automobile coverage at the best price.

For more information, contact us.

Updated Child Labor Regulations: Is Your Organization Keeping Up with the Kids?

The Human Equation

On July 19, 2010, the Department of Labor’s (DOL) Final Rule pertaining to child labor regulations became effective. The Final Rule, which is described by the DOL to include the most ambitious and far-reaching revisions to the child labor regulations in the last thirty years, is designed to protect working children from hazards in the workplace while also recognizing the value of safe work to children and their families.

The National Institute for Occupational Safety and Health estimates that 160,000 American children suffer occupational injuries every year, with approximately 55,000 of these injuries requiring emergency room treatment. As a result, the Final Rule reflects the DOL’s continued commitment to helping young workers (those under 18 years of age) find those positive and early employment experiences that can be important to their development, while adhering to the ultimate goal of keeping the children safe.

The youth employment provisions are found in the Fair Labor Standards Act (FLSA). Employers are generally subject to these provisions under the same coverage criteria established for other provisions of the FLSA. These provisions operate to establish the minimum level of protection for minors in the workplace. If a state has enacted a stricter standard, then the applicable state law controls.

Before discussing the requirements of the child labor regulations, it is helpful to establish what these federal provisions do not require. The federal regulations do not: require minors to obtain working papers/permits, restrict the number of hours or times of day that workers 16 years of age and older may be employed, apply where no FLSA employment relationship exists, or regulate or require such things as breaks, meal periods, and fringe benefits. It is, however, important to note that many states have enacted child labor laws that require precisely these things.

When it comes to applying the federal child labor provisions, the two most significant factors are age and type of work. The regulations generally classify minors as being less than 14 years old, 14-15 year olds, 16-17 year olds, and those 18 years old and older. The regulations also generally classify types of work as being farm work, nonagricultural occupations, and hazardous occupations. Once the age and the specific occupation are ascertained, determining eligibility and limitations is a matter of identifying how the regulations govern such a situation.

Although the manner in which the regulations, specifically those identifying hazardous occupations, apply in any given situation is highly fact specific, there are some general standards which should be understood by all employers who employ, or who are considering the employment of minors. These standards include:

18 or Older

• Once an individual reaches 18 years of age, he or she is no longer subject to the Federal youth employment provisions.

16 – 17 Year Olds

• Sixteen is the basic minimum age for employment.
• May be employed for unlimited hours in any occupation other than those declared hazardous by the DOL.
• The DOL has identified 17 categories of hazardous occupations, including: manufacturing/storing explosives, coal mining, power-driven woodworking machines, exposure to radioactive substances, power-driven metal-forming machines, working with bakery machines, and trenching and excavation operations. Sixteen and 17 year olds may not work in any occupation deemed hazardous by the DOL.

14 – 15 Year Olds

• May be employed outside school hours in a variety of non-manufacturing and non-hazardous jobs for limited periods of time and under specific conditions as set forth by the DOL.
• Cannot work more than 3 hours on a school day or 18 hours in a school week.
• Cannot work more than 8 hours on a non-school day or 40 hours on a non-school week.
• May not begin work before 7 a.m. or work after 7 p.m., except form June 1 through Labor Day, when they can work until 9 p.m.

Under 14

• May not be employed in non-agricultural occupations covered by the FLSA.
• Permissible employment is limited to work that is exempt from the FLSA (such as delivering newspapers and acting), and work that is not covered by the FLSA (such as completing minor chores around the house or casual babysitting.

While most of these requirements were already in existence for quite some time, the Final Rule clarified some of the provisions and modified others in an effort to modernize some of the regulations. Perhaps the most significant aspect of the Final Rule is that it serves as confirmation that the child labor provisions are a focus of the DOL, which often means an increase in policing and enforcement.

Employers may be subject to a civil money penalty of up to $11,000 per worker for each violation of the child labor provisions. Additionally, employers may be subject to a civil money penalty of $50,000 for each violation that causes the death or serious injury of any minor employee. In cases involving willful or repeated violations, the penalty may be doubled up to $100,000.

Protecting the safety and welfare of minors in the workplace should be a primary goal of every organization. Understanding the law’s requirements, including any applicable state laws which may contain greater restrictions, is necessary to minimize the risks associated with employing minors. Given the potential consequences of violating all applicable child labor laws, employers should proceed cautiously and consult a licensed professional if there are any doubts.

If you would like more information about the FLSA’s requirements, please contact us.

Affordable Care Act's Business Health Care Tax Credit

The Affordable Care Act signed into law by President Obama makes it possible for small businesses to receive a health care tax credit for both regular health insurance and add-on dental and vision coverage. The act is meant to encourage small employers to begin offering health insurance or to maintain the health insurance they already have for their employees. Generally, the health care tax credit is available to small employers paying at least half the cost of single coverage for employees in 2010. This credit is specifically targeted to business that employ individuals who receive low to moderate income. The health care tax credit is available for claiming on eligible small business income tax returns starting in 2010 and can help small businesses now reduce estimated payments. Many argue that this temporary credit may help businesses until Obama’s health care provisions are fully implemented.

Between the tax years of 2010 and 2013, the amount of the health care tax credit is up to 35% of premiums paid by small business employers who are eligible for the credit. Tax-exempt organizations can receive 25% of premiums paid. The maximum credit will go to smaller employers having 10 or less full time employees and paying annual wages of $25,000 or less. No credit is received for employers who have 25 full time workers, average wages annually of $50,000 or more, or employers who do not have a “qualifying arrangement” or a situation where the employer pays at least 50% of premium costs.

Calculating the Health Care Tax Credit

Again, the employer must pay a minimum of 50% of the premiums required to enroll each employee in health care employee. If an employer pays only a portion of premiums for the health coverage provided to employees, the credit is calculated based on the amount of premiums actually paid by the employer. Additionally, the amount of the employer paid premiums that count toward the calculation of the health care tax credit is capped by the amount of premium payments the employer would have made if the average premium for the small group market in the state were substituted for the actual premium.

For more information on determining your eligibility for this credit as a small business see IRS Notice 2010-44 or speak to a tax professional.

Contact Us if you would like more information about the new health care law and its impact.

By M.Davis/AllBusiness

Exception to the Going and Coming Rule: Workers' Compensation Liability for Commute-Related Injuries

Pursuant to Florida’s workers’ compensation laws, an employer is generally required to pay compensation or furnish benefits to an employee who is injured on the job. To be considered compensable, an employee’s injury must arise out of and in the course of his or her employment. This requirement prevents the workers’ compensation system from becoming an insurance policy of general applicability. And, it is this requirement that generally operates to prevent the recovery of workers’ compensation benefits by employees injured while commuting to and from work.

Specifically, the relevant Florida statute provides that “an injury suffered while going to or coming from work is not an injury arising out of and in the course of employment….” This provision, known as the “going or coming” rule, reflects the principle that an employee’s commute to and from work is not considered to be in the course and scope of employment.

Regardless of whether one considers such an assumption to be arbitrary, since an employee cannot get to work without actually travelling to work, a line had to be drawn somewhere along the continuum of an employee’s efforts in preparing for and getting to work . And, Florida’s “going and coming” rule operates to draw that line at an employee’s arrival at the workplace. However, there are instances in which an employee injured during his or her commute may be entitled to workers’ compensation benefits.

One such exception to the “going and coming” rule, often referred to as the dual purpose doctrine, provides that “an injury which occurs as the result of a trip, a concurrent cause of which was a business purpose, is within the course and scope of employment, even if the trip also served a personal purpose, such as going to or coming from work.” Such a situation could arise, for example, in a case where an employer asks an employee to run an errand for the employer during the employee’s commute.

The basis for this exception is found in the same statute which codified the “going and coming” rule, and it provides that the “going and coming” rule applies, “unless the employee was engaged in a special errand or mission for the employer.” If an employee is found to have been engaged in a special errand or mission for the employer, then an injury occurring during such efforts by the employee may ultimately be considered within the course and scope of employment, thereby making such injury compensable.

While the dual purpose exception to the “going and coming” rule may appear simplistic in its description, it is anything but simple in its applicability. The extent and importance of the errand or mission will face significant scrutiny before the issue of compensability is resolved. The analysis is fact intensive and generalized rules of broad applicability should be treated with caution.

While the precise applicability of the “going and coming” rule’s dual purpose exception may not necessarily be predicted accurately or consistently without the assistance of professional guidance, it is important that employers understand the possible consequences of sending employees on work-related errands or missions on their way to or from work. By understanding all of the risks involved in a specific course of action, employers are in a better position to not only make informed decisions, but to control those risks which may significantly harm an organization.

To learn more about how Florida’s workers’ compensation laws affect your business, contact us.

Health Care Reform Installment - Making Sense of the Affordable Care Act

President Barack Obama signed into law on March 23 the most sweeping reform of the United States health care system in the last 50 years. Combined, the Patient Protection and Affordable Care Act and the Reconciliation Act of 2010, now referred to collectively as the Affordable Care Act,  dedicates more than $900 billion in new federal funding over the next decade to provide as many as 32 million of the 46 million uninsured people with access to affordable health insurance. This 32 million comprises approximately 11% of our population of residents.

The Affordable Care Act made its way through Congress and to our President’s desk in order to deal with the uninsured who are:

ü  ineligible for public programs, and are unable to afford private insurance,
ü  do not qualify for private insurance
ü  or those that are eligible for public programs but have not enrolled.

By 2019, the government reports that the Affordable Care Act will result in 94 percent of Americans being covered, up from the 85% percent today.

The Whitehouse suggests  that the Affordable Care Act puts our budget and economy on a more stable path by reducing the deficit by more than $100 billion over the next ten years -- and more than $1 trillion over the second decade, through cuts to government overspending and reining in waste, fraud and abuse. The deficit decrease in no way suggests that there won’t be considerable tax increases to all citizens who can afford to pay, including small businesses, who are on tap for a significant increase in their costs of doing business.

Today, our healthcare spending is estimated at 15% of Gross National Product, with projection for the percentage to reach 19% by 2018. These numbers are often used to alarm the public, suggesting that our healthcare dollars are being squandered. When one looks at Canada’s 10.1 or England’s 8.4 or Japan’s 7.9, one must realize that our numbers include the profits derived from a largely private system and increases in administrative costs due to a complex multiple payer system. In other words, the dollars we spend on direct care, are not the as alarming as reported.  It should also be noted that the overhead associated with our healthcare distribution finds its way back into the system through spending in other sectors, thereby producing a greater GNP than our peer nations  -- a clear marker for economic health.  The US economy is typically ranked in the top 3% for economic vibrancy.

This is all not to suggest that our current system is not flawed, which might explain, fully, the success of this legislation.

There are over 2000 pages of laws and documents that address 4 key areas:

ü    coverage access, along with coverage improvements,

ü    financing of future healthcare,

ü    mechanisms to reduce costs and

ü    solutions for Long Term Care.

The expansion of healthcare to some of the 32 million people, along with the mandated coverage improvements are already in place, with the Department of Health and Human Services ready to bind coverage for high-risk individuals as early as August 1st.  The high-risk pool is available for individuals with pre-existing conditions who have not been insured by creditable coverage for the 6 month period preceding the application for coverage.  To prevent the current insurance market from ‘dumping’ high risk insureds into this new marketplace, there is a specific reference in the law for reimbursements from such insurers who take such action.

 

This high-risk pool is intended to remain in place until replaced by Insurance Exchanges in 2014, which will be an alternative marketplace for Qualified Health plans for the uninsured, self-employed, and small groups regardless of health status. These exchanges will subsidize those with incomes between 133 percent and 400 percent of poverty level. The Government has funded the high-risk pool, to subsidize premiums, with 5 billion dollars. Unfortunately, it is expected that this funding will have to increase to 15 billion by 2013.  This pre-existing insurance plan (PCIP) will charge based on age, sex and territory. Premiums in Florida can be as high as $675 a month for a 50 year male with medical conditions.

 

The Exchanges will cover a broad range of health benefits, including primary and specialty care, hospital care, and prescription drugs.  All covered benefits are available for you, even if it’s to treat a preexisting condition. In addition to monthly premiums, you will pay other costs. You will pay a $2,500 deductible for covered benefits (except for preventive services) before the plan starts to pay. After you pay the deductible, you will pay a $25 copayment for doctor visits, $4 to $30 for most prescription drugs, and 20% of the costs of any other covered benefits you get. Your out-of-pocket costs cannot be more than $5,950 per year. These costs may be higher, if you go outside the plan’s network.

Some of provisions within the Affordable Care Act apply to all plans, individual and group, while others apply exclusively to new plans, leaving so called grandfathered plans alone.

Grandfathered can be defined as plans that do not change substantially. The following plan changes will result in the “cessation of grandfather status:”

1. The elimination of all or substantially all benefits to diagnose or treat a particular condition.

2. Any increase, measured from March 23, 2010, in a percentage cost-sharing requirement (such as an individual’s coinsurance requirement).

3. Any increase in a fixed-amount cost-sharing requirement other than a copayment (for example, a deductible or out-of-pocket limit), determined as of the effective date of the increase, that exceeds medical inflation plus 15%.

4. Any increase in a fixed-amount copayment that exceeds the greater of $5 (increased by medical inflation), or medical inflation plus 15%.

5. A decrease in employer contribution rate by more than 5% or the addition of a new annual limit, when one didn’t previously exist, or a decrease in annual limits.

As of September 23rd, children under the age of 19 cannot be denied coverage for their pre-existing conditions; however, the law does not prohibit insurers from denying to insure the children, which is in the process of being remedied. It seems that the regulations were not drafted to require insurers to issue policies to these children.

As of September 23rd, insurers cannot rescind coverage on any health plan, new and grandfathered, except for fraud or intentional misrepresentation. 

As of September 23rd, insurers cannot impose lifetime dollar limits on any, new and grandfathered, plan for essential benefits, like:

ü    Ambulatory patient services,

ü    Emergency services,

ü    Hospitalization,  

ü    Maternity  and newborn Care,

ü    Mental health and substance use disorder services,

ü    Prescription drugs,

ü    Rehabilitative services and devices,

ü    Laboratory services,

ü    Preventive and wellness services and chronic disease management,

ü    And, Pediatric services, including oral and vision care.

It should be noted that regulations impose a good faith requirement with respect to the interpretation of the term, essential health benefits. Additionally all insurers, but for grandfathered individual insurers, must provide no less than specified annual limits defined by law for essential benefits as previously defined. In 2010, the maximum annual benefit is set at $750,000, increasing to a maximum of 2 million prior to 2014 when limits are removed completely.

  

As of September 23rd, all new plans, or existing plans that change substantially, not grandfathered plans, must cover, with absolutely no charge to the patient, certain preventive services such as children immunizations, tobacco counseling for pregnant women, mammograms, colonoscopies, hepatitis B screening, depression screening, HIV screening for high-risk adults and obesity screening and counseling for adults and children.  The non-grandfathered plans must also provide patient protections such as access to OB-GYNs and pediatricians without a referral by a separate primary care provider; and greater freedom for patients to obtain certain

emergency treatment without certain plan restrictions.

As of September 23rd, dependents under 26 are extended coverage on a parents plan.  This applies to all plans.

In 2014, law finally prohibits insurers from engaging in discriminatory practices that enable them to refuse to sell or renew policies or limit benefits due to health status, nor can health status be used in setting premiums.

While the Congressional Budget Office found that the law would have little impact on premiums for employer' sponsored coverage, there remains debate as to the laws possible impact on the cost of health insurance premiums.  The extension of preventive care alone, along with the elimination of annual and lifetime benefits as well as what will be pre-existing coverage for children under 19, the new taxes to health insurers and healthcare providers, additional cost-shifting due to changes in Medicare reimbursements, and the weaknesses in reform which still permit the healthy to remain uninsured, could raise premiums an average of 40% through 2013.  Without these changes, premiums were expected to increase 26% through that same period, with the greatest impact hitting individuals and small groups.

For more information about financing the Affordable Care Act, as well as cost containment measures and Long Term Care provisions, contact the author.

 

Is Your Homeowner's Insurance Comany Financially Secure?

The most frequently asked question from many of our clients purchasing Homeowner’s Insurance is whether or not the carrier is financially strong. In most of the states where there is a high risk of hurricanes, homeowners have a very limited choice for insurance coverage. There are approximately eight property and casualty insurers in each state controlling most of the market share.

In Florida, residents have more companies to choose from when shopping for homeowner’s insurance. The eight companies are only controlling 38.4% of the market share and the risk is more widespread. Unfortunately, many of the companies that have entered Florida are financially unstable and therefore before purchasing a policy through these carriers, the financial strength of the company should be verified.   

Some of what the rating companies are looking at is the operating history, the amount of reinsurance purchased, quarterly and annual financial statements along with the business model of the company. Each homeowner’s insurance carrier is then assigned a grade from A+ (superior) to F (In Liquidation). 

Many of the homeowner’s insurance carriers in Florida have not been in business for long or they do not have the financial security to meet the guidelines of the rating companies. Therefore, it is very important to research or ask your agent the financial strength of the carrier they are recommending. Question the experience they have had and how long they have been operating in the state of Florida.  Always educate yourself to make the soundest decision and do not always base the decision on the price the particular carrier is offering. We agree price is very important, but not at the risk of your home.

For more information, contact us.