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Texas Connection HEALTH CARE REFORM & DEFINED CONTRIBUTION Can your agency afford to offer health insurance to employees?
Yes … or … No?
Are Group Health Policies going to be a thing of the past? Read this edition and decide for yourself.
Regardless of the answer, one of this year’s new Texas PIA member benefits is a customized program that combines employer’s defined contribution and the employees’ new individual tax subsidies for health insurance.
HEALTH REFORM’S TAX SUBSIDIES Your Key to Better Benefits & Happier Employees
Texas PIA has a series of videos, webinars and training kit to show you how to do it.
Do you have commercial clients?
All it takes is to be a member in good standing with Texas PIA and the desire to help your clients while making a ton of money.
Regardless of whether you are licensed in Health Insurance or P&C only, Texas PIA members can help their commercial clients set up a defined contribution program that is tax deductible to the business, 100% taxfree to employees and guaranteed issue health insurance without regard for pre-existing conditions.
Texas PIA Membership has More Advantages! Contact Joe Tipton, Membership Joe@PIATX.org for more information.
Director
Texas PIA’s Texas Connection
at Page 1
November, 2013
Solutions for Very Hard-to-Place Risks An Excess and Surplus Lines Carrier 1-800-257-5590 www.primeis.com
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Health Care Reform Overview The major provisions of the Affordable Care Act (ACA) take effect January 1, 2014. Starting in 2014, the best decision for most employers and employees might be to eliminate their company- sponsored group health insurance in favor of a defined contribution health plan solution. That’s because employees no longer need employers to purchase quality health insurance. And, starting in 2014, employees earning less than 400% of the FPL (~$95,000 for a family of four per year in 2013) who purchase an individual health policy will receive a large federal subsidy on their premium if their company doesn’t offer a group health insurance plan. In order to evaluate how health care reform affects you and your company, you must understand the following major ACA provisions:
Employer Mandate – 2015 (50+ FTE Employees Only) Employer’s Common Objections to providing Health Insurance for Employees
Businesses (with 50+ FTE) will be required to offer “qualified” and “affordable” health insurance to employees starting in 2015. If they do not, they are subject to a tax penalty based on full-time employees.
1. We can’t afford health benefits. This is a new federal program. With this solution, there are no minimum employer contribution requirements.
Small Businesses (with less than 50 FTE) are not affected by the mandate or the tax penalty.
2. We do not offer health insurance. That’s great. Our program should be able to help you save money on taxes on your employee’s individual health insurance.
Individual Mandate Starting in 2014, most individuals will be required to be covered under health insurance, or else pay a tax penalty.
3. This sounds like it will take a lot of time. We hear that a lot. The solution takes less than 5 minutes per month to administer (there is zero paperwork).
Individual Health Insurance Tax Subsidies To help make health insurance policies affordable, tax subsidies will be available to the majority of employees (households with income up to 400% of the federal poverty line, FPL). The federal poverty level varies by family size. In 2013, it is $11,490 for a single adult and $23,550 for a family of 4.
4. I already pay directly for my employees’ individual health premiums. You might want to check with your CPA to verify that you have set up the required plan documents to make it taxfree. Employer’s Common Questions to providing a Defined Contribution Health Plan for Employees
With this calculator, you can enter different income levels, ages, and family sizes to get an estimate of your eligibility for subsidies and how much you could spend on health insurance. http://kff.org/interactive/subsidycalculator/
1. How does it work? Employees secure health insurance and tax subsidies through the ACA Marketplace. You can sell the policy and earn commission on the full premium if you have a Health Insurance license and have completed the online federal certification. Then we show employers how to legally and tax-free reimburse their employees via their existing payroll service.
Individual Health Insurance Marketplaces These tax subsidies will only be available through www.Healthcare.gov, the new online website where employees can purchase individual health insurance plans. The marketplaces opened for enrollment on October 1, 2013, for coverage beginning January 1, 2014. Employees are only eligible for these subsidies if they are not offered qualified, affordable group health insurance through an employer.
2. How much does it cost? That is entirely up to the employer – he / she determine the cost. There is a small monthly administration fee that is typically financed 100% by tax savings. 3. What size agency / business do we work with? All sizes. There are no minimum or maximum employee participation requirements. Texas PIA’s Texas Connection
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Health Care Reform & Defined Contribution
Defined contribution health plans are an alternative to company-sponsored group health insurance plans. When talking about defined contribution, we are referring to a “pure” defined contribution model, where there is no group health insurance plan, and where employees can choose any individual health insurance policy.
Continued from page 3 Guaranteed-Issue Policies Starting in 2014, all individual and family health insurance policies are required to be guaranteed-issue, meaning employees cannot be denied or pay more because of a pre-existing condition. No longer will sick employees need to get affordable coverage through their employer.
“Pure” defined contribution health plans by themselves are not health insurance plans and therefore do not satisfy the employer mandate of minimum essential coverage. With a “pure” defined contribution health plan:
Defined Contribution: The Ideal Solution in 2014?
Your company gives each employee a fixed dollar allowance (a "defined contribution") that employees can spend on any qualified health insurance plan.
What is a defined contribution health plan? Rather than paying the costs to provide a specific group health insurance plan (a "defined benefit"), companies fix their costs on a monthly basis by establishing a defined contribution health plan. Texas PIA’s Texas Connection
Continued on page 6 Page 4
November, 2013
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Health Care Reform & Defined Contribution
Premium amounts shown in this tool are only examples, based on a limited set of sample ages and scenarios. They may not fully reflect your individual situation. Actual plan pricing can change based on your household size, income, ages, and tobacco use.
Continued from page 4 Employees purchase their own individual policy directly from a health insurance company of their choice, through an insurance broker, or through their state health insurance marketplace.
Because the monthly premiums shown don’t account for any lower costs you qualify for based on your household size and income, the final premium you pay may be lower, perhaps much lower, than the prices shown. The only way to find out what YOU will pay for a specific plan is to fill out a Marketplace application. Many people who apply for coverage will qualify for lower costs.
Employees use their defined contribution allowance to reimburse themselves tax-free for their individual health insurance costs, up to the amount of their allowance. You can preview Marketplace health plans and prices available in your area. But to find out the actual costs for your personal situation, you need to apply.
FACTORS THAT AFFECT PRICES SHOWN Where you live. Plans are priced partly based on where you live, so be sure to pick the right state and county first.
HOW TO VIEW HEALTH PLANS AND PRICES Start by providing some basic information to find plans and sample prices available in your area. Answer a few questions and you’ll see plans and premium estimates available in your area.
5 plan categories. Plans are presented in 5 categories: Bronze, Silver, Gold, Platinum, and Catastrophic. Learn more about these categories.
Important note: The monthly premiums shown DO NOT take into account your income and household details. Texas PIA’s Texas Connection
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November, 2013
Check it out at www.SehMobile.com
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Health Care Reform & Defined Contribution
Businesses of all sizes are trying to wrap their heads around health care reform (the Affordable Care Act or ACA) and what it means for their bottom line.
Continued from page 6 Age and family situations. The tool shows monthly premiums for different family situations and, for individual applicants, age. Your final rate will depend on your specific circumstances.
Businesses must start planning now to: Understand your health benefits options Navigate your ACA compliance obligations
PREMIUMS, DEDUCTIBLES, AND OTHER COSTS Prices shown are for monthly premiums only. Deductibles, copayments, and other out-of-pocket costs are not shown.
Implement a strategy for employee health benefits by 2014
If you want more information on a particular plan, you’ll see it after you apply in the Marketplace. In the meantime, you can call the insurance company offering the plan for more information.
The Affordable Care Act includes an “employer mandate” requiring employers with 50+ employees to either offer health benefits or else pay a penalty. This is also called the “play or pay” requirement. (Note: The employer mandate has been delayed from 2014 to 2015.)
What does this mean for your business?
Please remember: The monthly premiums shown don’t account for savings you may be eligible for based on your income and household details.
This comprehensive guide provides employers, owners, CEOs, human resource departments, insurance agents, and business consultants a road map to navigate these three options, and ultimately help you calculate your health benefits savings.
The only way to get a price for a specific policy that’s accurate for you is to fill out a Marketplace application. The monthly premiums shown are what someone who doesn’t qualify for any savings would pay. Find out if you may qualify for lower costs based on your income To see whether you may qualify for lower costs based on your household details and income, you can use the Kaiser Family Foundation calculator. Texas PIA’s Texas Connection
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Concise descriptions of regulations, with links for in-depth resources How PPACA impacts employer-sponsored health insurance plans How PPACA impacts Defined Contribution Health Plans and FSAs
“How To” Booklets for Texas PIA Members
Join Texas PIA today at www.PIATX.org for only $300 per year and start enjoying all the member benefits.
Which health care reform regulations impact your business How the new health insurance marketplaces benefit employees What it means to "play," "pay," or to "play differently" How to design health benefits that save you money and help recruit and retain key employees How to calculate your health benefits savings Health care reform is changing the landscape of employee health benefits. By 2014, all businesses need to 1) understand new compliance obligations, 2) analyze cost-saving opportunities, and 3) implement changes before January 1. Are you in compliance with current PPACA provisions, and ready for 2014? This top-level guide is written for Business Owners, CEOs and HR Professionals. The checklist helps you ensure compliance with key PPACA regulations, and learn about new cost-saving options for employee health benefits. The 13 regulations you need to know now, and in 2014 Texas PIA’s Texas Connection
The editorial content in Texas Connection is valuable information but as always you should do your own due diligence and evaluation. The content is meant to be for informational purposes only and does NOT warrant an endorsement by the Texas Professional Insurance Agents in any form or fashion Page 10
November, 2013
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Advertise in the Texas Connection Attention: Insurance Companies, MGA’s, Premium Finance Companies & Insurance Industry Vendors:
Membership & General Information
Check out the rates for the most cost effective method of keeping your message in front of your customers …
Joe Tipton Membership Director
The Independent Insurance Agent.
PO Box 700877, Dallas, TX 75370 TEL: 972-862-3333
FAX: 972-307-7888
Cell: 972-965-2025
Joe@PIATX.org
PIA National
www.pianet.com
E&O Solutions Renewing your E&O every year isn’t much fun, is it? Don’t you want to make sure that you’re getting the best price for the best coverage you can get on your renewal? Why not compare with another company for your peace of mind?
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It costs you nothing and you don’t have to be a member of PIA of Texas to move your coverage. Go to the E&O Program link at www.PIATX.org and print the applicable application and e-mail or fax it to us. Do you want higher E&O limits but your carrier won’t quote what you want? That’s not a problem. Go to the E&O Program at www.PIATX.org and print the umbrella application from the link shown. Fill out the application and send it to us.
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November, 2013
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Does ACA Change Full-Time Definition Other than Health? Q&A By Robin Thomas, Managing Editor In the past, employers had wide discretion regarding which employees they define as full-time or part-time, and benefits often were assigned according to these definitions. However, thanks to the ACA, many employers must change their definition of full-time employees, at least as far as health care insurance eligibility is concerned. Q: We have 60 employees and are covered by the Affordable Care Act. In our policies, we generally have defined as full-time employees those who worked 40 or more hours a week and those employees are entitled to a range of benefits, from health insurance to paid time off. Part-time employees are defined as those who work fewer than 40 hours, and they do not receive health insurance but they do receive a pro rata share of paid vacation and sick leave. Do we have to change our definition of full-time employees?
A health plan is considered to provide adequate coverage if the plan’s actuarial value (i.e., the share of the total allowed costs that the plan is expected to cover) is at least 60%. So, if you want to continue to define your part-time employees as those who work less than 40 hours and prorate their paid vacation and sick leave, you may continue to do so. But, you will have to provide health insurance to those part-time employees who regularly work 30 or more hours a week. Of course, because of the complexities of the ACA, you are advised to seek legal counsel to determine which employees should be offered health insurance. Interested in using an article from HR Matters E-Tips on your Web site or in a newsletter? Please contact Robin Thomas, Managing Editor of Personnel Policy Service, Inc., to request permission. You can contact her by email at editor@ppspublishers.com. Please note that the information in every issue of HR Matters E-Tips is the original, copyrighted work of Personnel Policy Service, Inc., and is protected under U.S. copyright laws. As such, you may not reprint or publish in any format any article or portion of article from HR Matters E-Tips without the express permission of Personnel Policy Service, Inc.
A: Yes, but only for health insurance eligibility. Employers typically have a lot of flexibility in categorizing employees as either full-time or part-time since most federal and state laws generally do not define these terms. The 40-hour workweek has long been the benchmark for defining a full-time employee and was adopted by many employers as a result of the Fair Labor Standards Act (FLSA). The FLSA took effect in 1938 and requires employers to provide premium pay (overtime) to nonexempt employees who work more than 40 hours in a single workweek. Even with the creation of the FLSA overtime provision, no federal law specifically defined full-time employment until the Patient Protection and Affordable Care Act took effect in 2010 (commonly referred to as the Affordable Care Act or ACA). Prior to the ACA, employers often based their employee classifications on eligibility requirements for health insurance benefits, and many health care plans excluded part-time employees who worked less than 20 or 30 hours a week. However, the ACA has prompted many employers to apply a new definition of full-time employees, at least with regards to health insurance coverage. Under the ACA, employers with 50 or more employees must provide health insurance that meets minimum standards to their “full-time employees” or “full-time equivalent” employees by January 1, 2015, or face penalties, and the law defines full-time employees as those who work on average 30 or more hours a week. To avoid penalties, the health insurance coverage must be both “affordable” and “adequate” to covered employees. A health plan is affordable if the employee’s premium contribution toward the employer’s plan does not exceed 9.5% of household income. Texas PIA’s Texas Connection
Texas PIA has a new program that lets you earn more commissions. We've teamed up with goagents.com to offer you great new products. Easy to sell some of the fastest growing products: Pet Health Insurance, Auto, Motorcycle, Appliance and Home Warranties. You get a personalized link to give to your customers that tracks your commissions. All of these products are click and buy online. Absolutely no paper chasing or additional work for you. Easy to use and easy to cross-sell to existing customers. It's completely free for PIA of Texas Agents. Sign up today and start earning additional commissions at http://www.goagents.com/piatx For more information about the products and take a quick tour stop by http://www.goagents.com/agents For additional questions you can also contact GoAgents at 800-245-8726 option 6. Page 12
November, 2013
The Texas PIA is pleased to announce the endorsement of Imperial PFS. Imperial PFS is one of the largest premium finance companies in the U.S. and Puerto Rico. Built on a foundation of close working relationships with our agency partners, our national expertise and personal service make us the industry leader. We are committed to providing superior customer service and the most efficient finance process available. The Imperial PFS Advantage:
Easy loan acceptance with no impact to your client’s existing credit lines Flexible terms and fixed rate for length of loan Multiple policies financed with one loan and the convenience of one bill Low minimum amount financed and no maximum Payment options including an online ACH or credit card payment, check by mail, automatic debit and IVR phone payment Online quoting and ease with account management Online account information available for insureds to view account history and make payments. Cancellation warning email to agents and insureds
Your participation with Imperial PFS not only benefits your agency but your association as well. With local sales executives and regional branch offices, we offer a unique perspective to accommodate your needs. Please contact Lynn Wiegand at 713.419.4491 or your Imperial PFS branch office at 800.444.8815. We look forward to working with you.
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Absenteeism: What is Excessive and What is Protected? Q&A By Robin Thomas, Managing Editor Employees who miss work because of medical reasons often are protected by the FMLA and the ADA. But, not every medical absence is protected, and you can enforce your attendance policy and discipline employees for excessive absenteeism. Find out what you should consider before taking disciplinary action. Q: We provide several paid days off for use for sick leave. Most employees do not use up all of their sick days, but we have one employee who continually needs additional sick days off. These absences are very disruptive to our operations, but we are concerned that they may be protected under the FMLA or ADA. Can we discipline the employee for what we consider to be excessive absenteeism? What if she has a doctor's note for the absences? A: As a general rule, if an employee's absences are in excess of your stated policy (for example, the employee has taken more paid days off than provided by your policy), you can, and should, consider taking disciplinary action for the excessive absenteeism. But, before taking any action, you are right that you should first determine whether you have any obligations under the Family and Medical Leave Act (FMLA) or the Americans with Disabilities Act (ADA). (Download free Attendance and Punctuality model policy including HR best practices and legal background.) Most employers define excessive absenteeism as absences that exceed what you allow by policy. Thus, authorized absences that are taken according to your absence and leave policies are not considered excessive. So, if the employee's absences are covered by your paid time off policies, you should allow them. Note, though, that simply because an employee has a doctor's note verifying a medical condition to justify an absence, you may still consider the absence excessive if the employee has used all of the days allowed by your policies and the underlying medical condition is not protected by the FMLA or ADA (see below). However, you may have to disregard absences required for reasons covered by the FMLA and the ADA when determining whether an absence is excessive and discipline is warranted. Both the FMLA and the ADA limit your right to discipline or discharge employees for absenteeism caused by a protected medical condition. The FMLA requires covered employers (those with 50 or more employees and all public agencies and schools) to provide eligible employees with up to 12 weeks of unpaid, job-protected leave in any 12-month period, for the employee's own or a family member's serious health condition (and up to 26 weeks to care for a seriously ill or injured military family member injured in the line of duty). Texas PIA’s Texas Connection
In addition, you cannot discriminate against employees who take FMLA leave. As a result, you cannot take an employee's FMLA-covered leave into account under "no-fault" attendance policies or consider the absences "excessive" under your absenteeism policy. So, if the employee's absences are caused by a serious health condition protected by the FMLA, you should disregard any absences related to the condition. Of course, you can require that the employee provide medical certification as allowed by the FMLA to substantiate the need for the time off under the FMLA. Similarly, the ADA, which applies to employers with 15 or more employees, requires covered employers to provide reasonable accommodations to qualified individuals with disabilities unless doing so would impose an undue hardship. Reasonable accommodations may include part-time or modified work schedules, as well as additional unpaid leave. The ADA, in effect, requires that these absences be considered "excused" or, in the case of no-fault attendance policies, not counted for purposes of determining if discipline is appropriate. In addition, you may have to accommodate disabled employees by allowing them to take more unpaid leave than is provided by your leave policy unless this would impose an undue hardship on the operation of the organization. Thus, if your employee has a medical condition that meets the disability definition, then any absences related to it may be protected by the ADA. As with the FMLA, you can require medical certification of a disability to support the need for additional time off. But, if you determine that the absences are not protected by the FMLA or the ADA, the best way to manage this type of absenteeism is to focus on the individual problem employee and follow a progressive discipline program. For example, your supervisor should put the problem employee on notice, provide counseling about improving attendance, and document the warnings and steps taken. Then, if the absenteeism continues, you are in a strong position to take needed corrective action to discipline, or even terminate, the employee according to your normal policies. Please note that the information in every issue of HR Matters E-Tips is the original, copyrighted work of Personnel Policy Service, Inc., and is protected under U.S. copyright laws. As such, you may not reprint or publish in any format any article or portion of article from HR Matters E-Tips without the express permission of Personnel Policy Service, Inc.
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November, 2013
Back to School with Nation Safe Drivers! ARE THOSE BACK TO SCHOOL EXPENSES GETTING YOU DOWN? Let Nation Safe Drivers help you “Ace” your Sales Strategies this year and help you earn more money! We would like to offer you & your agents Free Sales Training and Tips to make you successful when selling the NSD products! Give your marketing rep, Brian Amarnick, a call at 800-338-2680, ext.276 Some of our Available Products:
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Peter Polinsky Peter Polinsky Insurance Agency of Fort Worth, TX
Deana Armstrong Armstrong Insurance Agency of San Antonio, Texas Cathie Duelley Cathie M Duelley Insurance Agency of Webster, TX
Welcome to our newest members: Aurelio Ambriz
Randy McComis
D & A Tax Service and Insurance Agency LLC of
Meyers Insurance Agency of Bridgeport, Texas
Crosby, Texas Ruth Monks Monks Insurance Agency of Houston, Texas
Gibbs Charles Charles E Gibbs Agency Inc of Beaumont, Texas Texas PIA’s Texas Connection
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November, 2013
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How to Hire Top Sales Reps by John Chapin With all the advances in every area of life, you’d think hiring the right salespeople would be an exact science at this point. It isn’t. Hiring the right people is a combination of science and philosophy and you have to utilize both effectively to hire someone who ultimately “makes it.” Here are the aspects to “employ” in order to employ the right salespeople. Keys to Hiring Top Sales Reps Hiring tip #1: Only hire employed winners. An unemployed salesperson out looking for a job is a major red flag. Unless someone’s company just blew up, or there is some other crazy extenuating circumstance, a salesperson looking for a job should, at the very least, still be employed. That said, an employed salesperson out looking for a job is a yellow flag. People do switch jobs for a variety of perfectly legitimate reasons related to family or other solid personal reasons, just make sure the reason is a good one and they can back up the stellar sales skills they claim to have. In reality, most salespeople are looking for a job because they can’t sell and they either got let go, or are about to. Don’t hire someone else’s problem without A LOT of due diligence. Hiring tip #2: Only hire within your industry if you recruited the person. If you find a stellar salesperson you want working for you instead of the competition, great, otherwise avoid your industry like the plague. Someone within the same industry looking for a job elsewhere does so because they can’t sell. Again, unless there is an extenuating circumstance with the company or product, the problem is the salesperson.
Texas PIA’s Texas Connection
Hiring tip #3: Always be on the lookout for good salespeople. Even if you are not hiring right now, build your list of candidates for when you are. That great salesperson who just sold you your car, boat, or home alarm system is a good prospect to come work for you now or at some point in the future. It’s simple, winners win. A winning salesperson in another industry can learn to sell just as effectively in your industry. Also, truly great salespeople can make the transition from products to services and from phone sales to in-person sales and vice versa. Hiring tip #4: Hire self-esteem, self-confidence, and the right attitude. Lacking any of these three is the number one reason salespeople fail. A lack of activity, blaming the economy and other outside circumstances, and ultimately not doing what needs to be done every day whether you feel like it or not, all come down to an issue with one or all of these three. Also, you want someone with a strong work ethic who is seeking a career instead of a job. Hiring tip #5: Have a hiring process. Have several people put their eyes on a potential hire. Meet all their decision makers such as spouses. Do all your testing, check all paperwork, cross all your T’s and dot all your I’s. Don’t take shortcuts, have a process and stick to it like a pilot doing preflight.
Continued on page 19
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November, 2013
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How to Hire Top Sales Reps Continued from page 18 Hiring tip #6: Shake up the testing process. Telling an applicant you are about to hire that they did not get the job, bringing them to an event with an open bar, playing golf with a candidate, or visiting them at their home, are some great ways to find out what people are really like. While you should absolutely use personality tests, in-office interviews, and other standard, accepted hiring practices as your foundation, realize that most tests can be beaten, and most people can put their best mask on temporarily. To find out what people are really like, move them out of the typical hiring environment. Hiring tip #7: Be skeptical of references, especially personal references. Anyone can find a brother-in-law, friend they went to college with, or a third cousin twice removed to say the candidate is the best thing since the wheel. If they are that good, the wheel never would have been invented.
For John Chapin’s free newsletter, or if you would like him to speak at your next event, go to: www.completeselling.com John has over 26 years of sales experience as a number one sales rep and is the author of the 2010 sales book of the year: Sales Encyclopedia. For permission to reprint, e-mail: johnchapin@completeselling.com. John Chapin Complete Selling, Inc. Helping you find and get all the business you want Cell: 508-243-7359 johnchapin@completeselling.com www.completeselling.com LINKEDIN: once logged in find me under: johnchapin1 FACEBOOK: http://www.facebook.com/johnjchapin TWITTER: http://twitter.com/johnjchapin # 1 Sales Rep in 3 industries, Author of the gold-medal winning SALES ENCYCLOPEDIA - The most comprehensive "how-to" guide on selling.
Hiring tip #8: Start not with what your company can do for them… Be wary of people who lead by asking what the base or draw is and what benefits they will get. Hiring tip #9: Candidates should be transparent and forthcoming. Yes, applicants should be willing to give you access to all their social media information, and all their other information for that matter. That said, you should be able to find enough information on applicants without having to get social media passwords. It’s just another good test to see if the applicant may have something to hide. Also, someone with a very small or no online footprint is an orange flag. Investigate further. Hiring tip #10: Have standards and stick to them as if your life depends upon it… Because the life of your business does depend upon it. In addition to hiring standards, you need performance standards and time lines that are agreed upon. Accountability is extremely important. Hiring tip #11: Hire slowly and fire quickly. Do the work and don’t cut corners. A lot of work on the front end will avoid a lot of pain once you hire the person and they don’t work out. Also, once you realize you have a duck instead of a swan, and they are not living up to the standards agreed upon under tip #10, cut the cord fast. Hiring tip #12: Provide the right environment. It doesn’t help to hire the right people if you bring them into an environment where chronic underperformers, negative people, a lack of support, and other similar cancers exist. Texas PIA’s Texas Connection
3 Easy Questions can create more Revenue! When you sell an auto policy, ask your client: 1) Do you have an extended service contract for your car or Motorcycle? 2) Do you own a Motorcycle, RV or Boat? 3) Do you want me to quote them; it will only take a second?
When you sell a Home Owner's policy, ask your client: 1) Do you own a cat or dog? 2) Do you have a Home or Appliance Warranty? 3) Do you want me to quote them; it will only take a second. Easy, fast and profitable! This is for new applications. More tips at www.GoAgents.com Page 19
November, 2013
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property’s true risk. Nationwide, about 20 percent of all NFIP policies are subsidized. To help you discuss these changes with your clients, FEMA developed a suite of resources, including the:
Biggert-Waters Flood Insurance Reform Act of 2012: Resources to communicate changes to the NFIP Flood insurance rates for some policyholders increased starting October 1 as the Federal Emergency Management Agency (FEMA) continued to implement the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12). The first phase of rate increases (Section 100205) affects many policyholders who own buildings constructed before their community adopted its first Flood Insurance Rate Map (FIRM). You can help your clients understand the changes and prepare for their new bill.
What to Know and Say Factsheet. These talking points can help guide your conversations about BW12. Quick Reference Guide. Keep this guide on hand as an outline of important dates and changes. BW-12 Brochure. Share with your clients so that they always have the necessary information on hand when they make decisions about their policies. Additionally, FEMA partnered with the Insurance Information Institute to create six videos that provide details about the legislation and give advice on how your clients can prepare. Each video was developed around a specific topic.
One of the most important things to know is that not everyone will see immediate rate increases as a result of BW12. Only one group of policyholders—those in high-risk areas paying pre-FIRM subsidized rates—might be affected by the changes taking place this year. Many of these policyholders historically have paid subsidized rates that do not reflect the
Texas PIA’s Texas Connection
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Overview What is a Subsidized Rate Moving Away From Subsidized Rates Addressing Flood Risk Elevation Rating Reducing Insurance Costs Visit FEMA.gov/BW12 for the most up-to-date information.
November, 2013
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Wayne Hooper Reports: “Do You Speak Insur-ish?” By Wayne Hooper Recently, I began volunteering as a docent in a museum in Ellijay, GA. Learning about the history in North Georgia stirred my passion for the history about how and why we came here. One of the asides of a history study is the terminology and sayings that define the "American" language.
phrases into the language we use in day to day conversation without realizing their origins. Many words we invented have no other alternative in other languages, such as "to Google" something. The insurance business has its own sub-language which evolved from terms used in Latin, Old English and the Maritime industry. Most of these terms are meaningless to your customers. In the 1970's "Easy to Read" legislation was passed requiring the policy text to be understandable to a person with a 8th grade education. It also defined how the punctuation was to be used, as a misplaced comma can add or subtract coverage based on the wording. The simplified language expanded coverage so that many more situations were covered than previously. The industry began adding back exclusions to close the holes and restricting the coverage over the years.
I think the “American" language is a distinct language because it incorporates Scot, Irish, English, Jewish, Polish, Spanish, Chinese, Internet , African words and Texas PIA’s Texas Connection
Continued on page 22
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November, 2013
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1395w–28(f)), as amended by subsections (a) and (c), is amended—
Wayne Hooper Reports: Continued from page 26 A typical P&C policy now contains more exclusion pages than the coverage, making it difficult to follow as coverage on the first page is modified or excluded on page 6. It looks like it is time to rewrite the policies again. A successful agent quickly learns how to translate "insur-ish" into every day terms so their customers can make an informed decision. The challenge for the future as we move through the "age of the internet" is to keep up with the terms and software used by our customers. I stumbled on this problem several times with young managers fresh out of graduate school, assuming the sales staff knew all of the terminology and use of Lotus, PowerPoint, Twitter, Texting, EXCEL, AVENUES and Word which they used in school. A friend recently sent me a copy of the 906 pages “AFFORDABLE CARE LAW" for my reading entertainment. Unfortunately it is written in legal terminology modifying existing laws which makes it almost impossible to follow without the prior laws laid out beside it. A small example paragraph from page 340 out of 906 pages of the AFFORDABLE HEALTH CARE LAW
(1) in paragraph (2), by adding at the end the following new subparagraph: ‘‘(C) If applicable, the plan meets the requirement described in paragraph (7).’’; (2) in paragraph (3), by adding at the end the following new subparagraph: ‘‘(E) If applicable, the plan meets the requirement described in paragraph (7).’’; (3) in paragraph (4), by adding at the end the following new subparagraph: ‘‘(C) If applicable, the plan meets the requirement described in paragraph (7).’’; and (4) by adding at the end the following new paragraph Did you follow those changes? Or do you know more than when you first started reading it? Other areas of the law are written in plain English defining what can be done and not done by the hospitals and doctors, but mostly it delegates the standards (Rules, Guidelines, Reports, Payment amounts) to the "Secretary of Health and Human Services" to develop them. In short, we are going to be learning how this plays out for the next few years.
(e) AUTHORITY TO REQUIRE SPECIAL NEEDS PLANS BE NCQA Continued on page 24
APPROVED.—Section 1859(f) of the Social Security Act (42 U.S.C. Texas PIA’s Texas Connection
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November, 2013
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Historical terms and facts (?) just for fun!
Wayne Hooper Reports: Continued from page 22 Eddie Emmett has developed classes to take some of the mystery out of it. As of today only three (3) Navigators are approved in Georgia per National Public Radio. Eddie is one of the few to pass the test and be approved but the opportunity is there for any agent to learn that extra skill with a little study. Editor’s note: It’s one thing to speak in terms understood by the client. It’s another when we fall into the trap of using our own “Insurance-Eze” slang. Since Wayne saw fit to include my name I thought I’d relay a true story about my brother-in-law and agency owner Randy James’ use of Insurance-eze. Over 20 years ago Randy was our agent in one of the Esquire Insurance Agencies. It was in the day before word processors so Randy hand-wrote a memo to one of our auto insurance customers. As it turns out, the policyholder’s Motor Vehicle Record showed his Driver’s License was suspended so the insurance company was going to cancel the policy. Here’s what Randy wrote: “Your ins co ran an MVR and found that your lic has been susp’d so your pol is getting cxl’d.” After reading the memo I turned to Randy and said “Your Lic has been Susp’d?”
Most people got married in June because they took their yearly bath in May, And they still smelled pretty good by June. However, since they were starting to smell, brides carried a bouquet of flowers to hide the body odor. Hence the custom today of carrying a bouquet when getting married. Baths consisted of a big tub filled with hot water. The man of the house had the privilege of the nice clean water, then all the other sons and men, then the women and finally the children. Last of all the babies. By then the water was so dirty you could actually lose someone in it. Hence the saying, "Don't throw the baby out with the bath water!" Houses had thatched roofs-thick straw-piled high, with no wood underneath. It was the only place for animals to get warm, so all the cats and other small animals (mice, bugs) lived in the roof. When it rained it became slippery and sometimes the animals would slip and fall off the roof. Hence the saying, "It's raining cats and dogs."
Wayne Hooper Reports …
The floor was dirt. Only the wealthy had something other than dirt.
Wayne Hooper Wayne@FYIEXPRESS.com
Here are some facts about 1500's English terms we still use.
Cell # 678-296-6345
Hence the saying, "Dirt poor."
Wayne Hooper is a retired Insurance executive and agent with 43 years’ experience in the P&C industry. A Georgia native, born in Tifton, Ga., Wayne graduated from Georgia State University with a degree in Psychology. He was commissioned into the Army on graduation and served in Germany. Wayne has been an underwriter, supervisor, manager, Product Manager, Reinsurance coordinator, agent, and Sales Manager with various carriers and MGA’s in his career. He recently retired from Kemper Specialty Insurance Co. after 13.5 years of service to join the staff of the FYI Express as a contributing editor. Wayne enjoys good humor, good food, good stories, history, sailing, antique cars, and hiking in the North Georgia Mountains. Not always in that order, depending on the weather.
Texas PIA’s Texas Connection
The wealthy had slate floors that would get slippery in the winter when wet, so they spread thresh (straw) on the floor to help keep their footing. As the winter wore on, they added more thresh until, when you opened the door, it would all start slipping outside. A piece of wood was placed in the entranceway. Hence: a thresh hold. Lead cups were used to drink ale or whisky. The combination would sometimes knock the imbibers out for a couple of days... Someone walking along the road would take them for dead and prepare them for burial. They were laid out on the kitchen table for a couple of days and the family would gather around and eat and drink and wait and see if they would wake up.
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Hence the custom; “holding a wake." November, 2013
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PIA Agents Respond to the McKinsey Report “A Flawed Premise Wrapped in a Faulty Analysis” 1. PIA: McKinsey Report a “Flawed Premise Wrapped in a Faulty Analysis”: PIA agents from around the country have shared their thoughts about a recent consulting report that says “the economics of the traditional agent model are beginning to unravel.” PIA disagrees, vehemently, terming the report “a flawed premise wrapped in a faulty analysis.” At issue is a report by McKinsey & Co.’s Financial Services Practice, a consulting firm. It contained the headline, “The End of an Era for the Local Insurance Agent.” “The McKinsey report is just somebody’s opinion. In reality, I just don’t think it’s true,” said PIA National President John G. Lee, in a press release issued by PIA. Lee was joined by several successful PIA agency principals in refuting many of the incorrect statements made. The press release also examines the real role played by these kinds of reports from consulting firms. The comments were made during a recent series of interviews conducted by PIA for forthcoming articles in both industry and PIA publications. “Every decade or so, consulting firms will predict the demise of the independent agency distribution system, for their own competitive priorities,” said PIA National Senior Vice President Patricia A. Borowski, who has seen this all before. “Often this leads to massive losses by those who buy into this narrative.” “The report by McKinsey is not a research report, as no true unbiased research seems to have been conducted for it,” said Borowski, during a break at a conference of the Society of Insurance Research (SIR) in San Antonio, where she was representing PIA. “There are charts and graph references, but they appear to be used to support a predetermined outcome. It is nothing more than an opinion article by a couple of analysts.” She said the consensus among panelists and a number of the conference participants at SIR was that the report is little more than a dressed-up op-ed article. Cutting-Edge Agents Take Issue Tim Dean, President of Marshall & Sterling Insurance in Poughkeepsie, New York, disagrees with McKinsey’s contention that the traditional agent model is “beginning to unravel.” “We’re not seeing that at all,” said Dean. “We hired three additional producers focused exclusively on personal lines in the past two years and they are doing well.” PIA National Executive Vice President & CEO Ron Von Haden can take the long view. “I’ve been around in this business for over 40 years, and I laugh every time that I hear that the independent agency is dead,” he said. “If you look back through history, that’s been said over and over and over, but agents have been able to adapt, evolve and change to keep up with customer expectations and market changes.” “Marketing methods will change, service methods will change, but independent agents – as they always have done – will rise to the demands of their clients and outperform their competitors,” Von Haden said. You can read PIA’s full press release, “A Flawed Premise Wrapped in a Faulty Analysis” here. The Marketplace Experience: Month One: While some of the state-operated health insurance exchanges have been issuing enrollment figures since they went “live” on October 1, figures from the Federally-Facilitated Marketplaces (FFMs) run by the federal government will not be released until late November. In the meantime, the non-partisan Commonwealth Fund is out with results from the first in a series of surveys it conducted designed to introduce more objective data into the conversation. Conducted from October 9 to 27, the survey focused on adults eligible to purchase coverage in the new marketplaces. Among the survey’s key findings: 60 percent of potentially eligible adults are aware of the new marketplaces as a place where they might shop for coverage; 17 percent reported visiting the marketplaces in October to shop for a health plan; about one of five visitors were ages 19 to 29; and one of five visitors enrolled in a plan. Reflecting the technical problems that have plagued the federal marketplace and some state marketplace websites, 37 percent of those who did not enroll in coverage cited those technical difficulties as a reason. A majority of survey respondents, however, appear determined to gain coverage over the next few months. Full Results>> Texas PIA’s Texas Connection
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November, 2013
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Consumers Should Consider Using Licensed Insurance Agents and Brokers for Health Coverage under the Affordable Care Act: Agents and Brokers Are More than Just Navigators WASHINGTON – As millions of consumers consider purchasing health insurance through the insurance marketplaces set up as part of the Affordable Care Act (ACA) – and as some face problems accessing the program because of failures of the government’s website – they should be aware of an option they may not know they have: Consulting their local professional, independent insurance agent or broker for help in enrolling. Consumers may already know that there are “navigators” paid by the government who are available to assist them in enrolling in policies under Obamacare. But they may not be aware that under the law, navigators cannot offer advice or recommend one policy over another. Professional insurance agents, on the other hand, are free to offer a much higher level of assistance. Consumers don’t pay for this service. In addition, in most states navigators are not required to be licensed or to comply with state-mandated continuing education requirements; they are also not required to maintain professional liability insurance coverage. Agents and brokers must be licensed and must comply with all of these requirements, along with all state laws and regulations. Many independent insurance agents and brokers have already been trained and certified to assist consumers to enroll in health plans offered as part of the Affordable Care Act. They can also make consumers aware of insurance choices not available through the exchanges. “Choosing a health insurance plan is a serious matter,” said PIA National President John G. Lee. “It is a complex process that cannot be compared to purchasing a book from a website. Insurance is not a commodity. The implications of making a poor choice due to lack of adequate knowledge include paying too much or getting inadequate coverage for yourself or your family. When it comes to health insurance, making an ill-informed decision can end up costing you your life’s savings – or your life.” “Professional agents and brokers have the training and expertise needed to advise consumers about all of their insurance choices,” Lee said. “We have always been licensed, regulated and required to carry professional liability insurance coverage. We recommend that people shopping for health insurance – or any kind of insurance – make the smart choice and not leave anything to chance. Consult a local ACA Certified Professional Insurance Agent.” Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses. PIA SM members are Local Agents Serving Main Street America . PIA's web address is www.pianet.com. This press release is online at: http://pianet.com/news/press-releases/2013/consideragentsforacacoverage102213 HHS Adds Additional Dates for ACA CMS Agent-Broker Training: Due to a high demand for information on the Marketplace training and registration process for agents and brokers, the Department of Health and Human Services (HHS) has made additional dates available for the Centers for Medicare & Medicaid Services (CMS) Agent/Broker Training and Registration webinar series. Below are the webinar dates, times, and registration codes. All registration for the webinars will be done through RegTap at www.regtap.info . Agent and Broker Participation in the Federally-facilitated Marketplaces ·
Friday, November 8, 2013, 1:00 p.m.—2:30 p.m. ET, Registration Code: ABNV2
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Friday, November 15, 2013 1:00 p.m.—2:30 p.m. ET, Registration Code: ABNV3
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Friday, November 22, 2013 1:00 p.m.—2:30 p.m. ET, Registration Code: ABNV4
Log onto https://www.regtap.info to register For agents and brokers who attended earlier presentations of this series, the presentation content is largely the same. The slides will be made available through RegTap. CMS will try to address as many questions as possible during the question and answer portion of the presentation. NAIC Working on Clarifying Roles of Navigators, Producers: Most states have not acted to protect consumers from the risks associated with working with health insurance navigators. The National Association of Insurance Commissioners (NAIC) is drafting language to help clarify the various roles of individuals and entities in the exchange. The NAIC’s health committee, led by Chairman Sandy Praeger (KS), is working on a document that will help further clarify and define the roles of navigators, assisters and producers operating in the health insurance marketplace. PIA is working with the NAIC and our industry colleagues to make it clear that navigators cannot cross the line and engage in activities only licensed agents and brokers can perform. The next NAIC meeting will be in Washington, D.C. on December 15-18. Texas PIA’s Texas Connection
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November, 2013
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Farm Bill Limps Along: Wednesday, October 30, the House-Senate Conference Committee met to discuss the Farm Bill. The prospect of Congress passing a Farm Bill this year is dim. While it appears that Congress has plenty of time, they actually have less than 15 legislative work days left in Washington this year. PIA National supports a long-term reauthorization of the Farm Bill that includes a robust crop insurance title and does not include additional cuts to the federal crop insurance program. While PIA National has fought to oppose changes to the crop insurance title, including new conservation requirements and means testing, controversy over the Farm Bill has overwhelmingly been focused on the nutrition title (food stamp funding). Agent to Agent: Book Optimization—the Million-Dollar Producer Process: Pareto was right. If you apply the 80/20 rule to your book you’ll probably discover that the top 20% of your clients generate 80% of your revenue. Now what do we do with this information? When you reach the point where growth is challenging because of service constraints, it’s time to shed smaller accounts to allow continued growth and profitability. Total up the revenue generated by the smallest 20% of clients in your book and remove them. That’s right. Take them out of your book. Give them up. Move them into a select accounts department, gift them to a young producer, sell them to a competitor or move them to a carrier service pool. Now look at the top 20% in your book. I’ll wager that the revenue generated by any single one of your best clients equals the revenue generated by all of your bottom 20% combined. In my book, I was so thrilled to discover this, that I traded down my bottom 33% (with some exceptions) and replaced the lost revenue in less than one year with 1 larger account. My book now generated more revenue with 53 fewer accounts. More importantly, I had much more time to overservice my best accounts, who responded by giving me introductions into similar accounts and I doubled my book in less than 3 years. Take a close look at your book of business and trade down the bottom 20-33% every year. You'll double your income every 3 years with many fewer clients. Read the rest of this article by David Connolly of iQ Consulting here: Book Optimization—the Million-Dollar Producer Process FloodSmart: Resources to Communicate NFIP Changes: Flood insurance rates for some policyholders increased starting October 1 as the Federal Emergency Management Agency (FEMA) continued to implement the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12). The first phase of rate increases (Section 100205) affects many policyholders who own buildings constructed before their community adopted its first Flood Insurance Rate Map (FIRM). You can help your clients understand the changes and prepare for their new bill. To help you discuss these changes with your clients, FEMA developed a suite of resources, including: What to Know and Say Factsheet: These talking points can help guide your conversations about BW-12. Quick Reference Guide: Keep this guide on hand as an outline of important dates and changes. BW-12 Brochure: Share with your clients so that they always have the necessary information on hand when they make decisions about their policies. Additionally, FEMA partnered with the Insurance Information Institute (I.I.I.) to create six videos which provide details about the legislation and give advice on how your clients can best prepare. Each video was developed around a specific topic: ·
The Biggert-Waters Flood Insurance Reform Act of 2012: An Overview
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The Biggert-Waters Flood Insurance Reform Act of 2012: Elevation Ratings
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The Biggert-Waters Flood Insurance Reform Act of 2012: Addressing Flood Risk
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The Biggert-Waters Flood Insurance Reform Act of 2012: What Is a Subsidized Rate?
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The Biggert-Waters Flood Insurance Reform Act of 2012: Moving Away from Subsidies
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The Biggert-Waters Flood Insurance Reform Act of 2012: Reducing Insurance Costs
Visit FEMA.gov/BW12 for the most up-to-date information.
Texas PIA’s Texas Connection
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November, 2013
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Extended Schedule of PIA-Hartford Flood Webinars: You asked – PIA and The Hartford Flood listened! A new extended series of webinars on changes to the National Flood Insurance Program (NFIP) resulting from reforms under the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) will be held. The “Biggert Waters October 1 Changes” webinar will be offered free every Wednesday through November 20. The registration link is provided below for your convenience. If you have any questions, please advise patbo@pianet.org. Topic: BW-12 October 2013 Changes Host: Marcia Eden Date: Every Wednesday, from Wed., October 16, 2013 to Wed., November 20, 2013 Time: 2:00 pm, Eastern Daylight Time (New York, GMT-04:00) Session number: 928 580 720 Registration password: This session does not require a registration password. ------------------------------------------------------To register for this session ------------------------------------------------------Go here to register. Once the host approves your registration, you will receive a confirmation email with instructions for joining the session. Legislation Introduced to Delay NFIP Rates: Legislation has been introduced in the House and Senate to delay most of the new rates included in the Flood Insurance Reform Act of 2012 (“Biggert-Waters” or “BW-12”). The legislation would need to pass in both the House and Senate before any action on rates is taken. There is strong bipartisan support for this legislation in both chambers and there appears to be some willingness to move it. However, a specific vehicle or route has not yet been identified. PIA National supports risk-based rates coupled with specific homeowner affordability solutions. While PIA National supports the overall intent of this legislation and many of its provisions, PIA National would caution against dismantling the much needed reforms that were included in Biggert-Waters. Hurricane-Force Storm Causes Massive Damage in Europe: Insurers will have to pay out up to €1.3 billion ($1.75 billion) in claims after the storm that swept through northern Europe in late October, reinsurance broker Willis Re estimates. Northern Europe was battered by hurricane-strength winds Oct. 27-29, with Britain, France, Belgium, the Netherlands, Denmark and Germany bearing the brunt of the damage to property. Damage was caused mainly by falling trees, consisting largely of broken roof tiles and smashed windows. A Few Words From Johnny Lee: PIA National President Johnny Lee has penned an article which runs in the November 2013 issue of Centralizer Online, the publication of the Central Insurance Companies: “As I begin my year as President of the National Association of Professional Insurance Agents (PIA), I can’t think of a better time to be an independent agent. Too often, some of us may be tempted to focus on the challenges we face…” Read More>> Buffett Says He Just Has Too Much Cash Lying Around: Billionaire investor Warren Buffett has a problem: Making so much money that he can’t invest it fast enough. It’s making him uncomfortable. Among many other things, Buffett owns GEICO – so he’s the one who writes all the checks that pay to put the green lizard in everyone’s face, constantly. Buffett has said he likes to keep $20 billion on hand should his reinsurance operations need to pay large claims. But his Berkshire Hathaway Inc. is now sitting on $40 billion cash-in-hand. The money just keeps rolling in, even in a year in which the company has struck some of its largest deals. “It’s too much any time we have more than $20 billion,” Buffett lamented. Most of Berkshire’s cash is in treasuries, which generate little interest income. “But we sleep well.” 13. One More Time: Some items you may have missed. PIA Proclaims: “We Are Much More Than Navigators!” Agent to Agent: Cross-Selling Tips for Agency Owners Don’t Let Your NFIP Referral Program Registration Expire! Bipartisan Deal Reached to Delay Most NFIP Rate Increases Four Years Two Private Insurers to Offer Flood Insurance in Florida P/C Profits Improve on Lower Losses, Higher Rates NFIP Bulletin: Clarification of Cancellation Reasons Due to Map Revision Texas PIA’s Texas Connection
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November, 2013
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Tax Provisions of the Affordable Care Act The Patient Protection and Affordable Care Act of 2010, in concert with the enactment of the Health Care and Education Tax Credits Reconciliation Act of 2010, resulted in a number of changes to the US tax code. As such there are a number of tax implications for individuals and businesses. With healthcare exchanges set to open on October 1, it's time to take a closer look at what it all means for you. Individuals Healthcare Exchanges Healthcare Exchanges, which are also referred to as Health Insurance Marketplaces, are officially open for enrollment on October 1, 2013. Some of these exchanges are run by the state in which you reside. Others are run by the federal government. Individuals (including self-employed) who do not currently have insurance or buy insurance on their own can use these marketplaces to buy insurance, which becomes effective January 1, 2014. When you get health insurance through the Marketplace, you may be able to get the new advance Premium Tax Credit that will immediately help lower your monthly premium. The Congressional Budget Office projects that seven million--primarily uninsured people--will use the exchanges to purchase private health insurance. The rest, including the 170.9 million people already covered by their employer's insurance, as well as the 101.5 million enrolled in government health programs, are not affected and need not take any action. Individual Mandate Starting January 2014, United States citizens and legal residents must obtain minimum essential health care coverage for themselves and their dependents, have an exemption from coverage, or make a payment when filing a 2014 tax return in 2015. The Individual Mandate is also known as the Individual Shared Responsibility Payment. The payment varies and is based on income level. In 2014, the basic penalty for an individual (no dependents) is $95 or 1% of your yearly income (whichever is higher), with substantial increases in subsequent years. For example, in 2015, the penalty is $325 or approximately 2% of income, whichever is higher. In 2016, it increases to $695 or 2.5% of income (again, whichever is higher), indexed for inflation thereafter. Most people already have qualifying health care coverage and will not need to do anything more than maintain that coverage throughout 2014. Self-insured ERISA policies used by larger employers, as well as Medicare, Medicaid, and CHIP (Children's Health Insurance Program), and all of the health insurance plans offered by the exchanges fall under the category of minimum essential health care coverage. Note: Certain individuals are exempt from the tax and include: (1) people with religious objections; (2) American Indians with coverage through the Indian Health Service; (3) undocumented immigrants; (4) those without coverage for less than three months; (5) those serving prison sentences; (6) those for whom the lowest-cost plan option exceeds 8% of annual income; and (7) those with incomes below the tax filing threshold who do not file a tax return($10,000 for singles and $20,000 for couples under 65 in 2013). Refundable Tax Credit Effective in 2014, certain taxpayers will be able to use a refundable tax credit to offset the cost of health insurance premiums so that their insurance premium payments do not exceed a specific percentage of their income. Qualified individuals are those with incomes between 133 percent and 400 percent of the federal poverty level. A sliding scale based on family size will be used to determine the amount of the credit. In addition, married taxpayers must file joint returns to qualify. FSA Contributions FSA (Flexible Spending Arrangements) contributions are limited to $2,500 per year starting in 2013 and indexed for inflation after that. Texas PIA’s Texas Connection
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November, 2013
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New Rules for HSAs and Archer MSAs Tax on non-qualified distributions from HSAs and Archer MSAs that are used to cover the cost of over the counter medicine without a script increased to 20 percent starting in 2011. Medical devices, eyeglasses, contact lenses, copays, and deductibles are not affected, nor is Insulin even if it is non-prescription. Medicare Part D Medicare Part D, the tax deduction for employer provided retirement prescription drug coverage, was eliminated in 2013. Increase in AGI Limit for Deductible Medical Expenses In 2013 the limit for deductible medical expenses increased to 10 percent of AGI (7.5% in prior years); however, the 7.5 percent threshold continues through 2016 for taxpayers aged 65 and older, including those turning 65 by December 31, 2016. Health Coverage of Older Children The cost of employer provided health care coverage for children (through age 26) on tax returns is excluded from gross income. Medicare Tax Increases for High Income Earners Starting in 2013, there is an additional 0.9 percent Medicare tax on wages above $200,000 for individuals ($250,000 married filing jointly). Also starting in 2013, there is a new Medicare tax of 3.8 percent on investment (unearned) income for single taxpayers with modified adjusted gross income (MAGI) over $200,000 ($250,000 joint filers). Investment income includes dividends, interest, rents, royalties, gains from the disposition of property, and certain passive activity income. Estates, trusts and self-employed individuals are all liable for the new tax. Exemptions are available for business owners and income from certain retirement accounts, such as pensions, IRAs, 401(a), 403(b), and 457(b) plans, is exempt. Businesses Self-Employed If you run an income-generating business with no employees, then you're considered self-employed (not an employer) and can get coverage through the Marketplace and use it to find coverage that fits your needs. Note: You are not considered an employer even if you hire independent contractors to do some work. If you currently have individual insurance, that is a plan you bought yourself and not the kind you get through an employer, you may be able to change to a Marketplace plan. Note: You can't be denied coverage or charged more because you have a pre-existing health condition. Small Businesses (50 or Fewer Employees) If you have 50 or fewer full-time equivalent (FTE) employees (generally, workers whose income you report on a W-2 at the end of the year) you are considered a small business under the health care law. As a small business, you may get insurance for yourself and your employees through the SHOP (Small Business Health Options Programs) Marketplace. This applies to non-profit organizations as well. And, if you have fewer than 25 employees, you may qualify for the Small Business Tax Credit (see next section). Nonprofit organizations can get a smaller tax credit. Note: Beginning in 2016, the SHOP Marketplace will be open to employers with 100 or fewer FTEs. As an employer, you must provide notification to your employees of coverage options available through the Marketplace and are required to provide this notice to all current employees and to each new employee beginning October 1st, 2013, regardless of plan enrollment status or full or part-time employment. The Department of Labor has sample notices that employers can use to comply with this regulation. One notice is for employers who do not offer a health care plan and the second for employers who offer a health care plan.
Texas PIA’s Texas Connection
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November, 2013
More “News, Satire & Opinions for Independent Agents from Independent Agents” at www.PIATX.org
Small Business Health Care Tax Credit Small businesses and tax-exempt organization that employ 25 or fewer, full-time equivalent workers with average incomes of $50,000 or less, and that pay at least half (50%) of the premiums for employee health insurance coverage are eligible for the Small Business Health Care Tax Credit. For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities. Starting in 2014, the tax credit is worth up to 50% of your contribution toward employees' premium costs (up to 35% for tax-exempt employers). The tax credit is highest for companies with fewer than 10 employees who are paid an average of $25,000 or less. The smaller the business, the bigger the credit is. Note: The credit is available only if you get coverage through the SHOP Marketplace. Additional Tax on Businesses Not Offering Minimum Essential Coverage Effective January 1, 2015 an additional tax will be levied on businesses with 50 or more full-time equivalent (FTE) employees that do not offer minimum essential coverage. This penalty is sometimes referred to as the Employer Shared Responsibility Payment or "Play or Pay" penalty. You may have to pay this additional tax if you have 50 or more full-time equivalent employees and at least 1 of your full-time employees gets lower costs on their monthly premiums through the Marketplace. Note: Employers with fewer than 50 FTE employees are considered small businesses and are exempt from the additional tax. The amount of the annual Employer Shared Responsibility Payment is based partly on whether you offer insurance. If you don't offer insurance, the annual payment is $2000 per full-time employee (excluding the first 30 employees) If you do offer insurance, but the insurance doesn't meet the minimum requirements, the annual payment is $3000 per full-time employee who qualifies for premium savings in the Marketplace Note: Unlike employer contributions to employee premiums, the Employer Shared Responsibility Payment is not tax deductible. A health plan meets minimum value if it covers at least 60% of the total allowed costs of benefits provided under the plan. To determine whether other coverage meets minimum value, please contact us for assistance. Note: All plans in the Marketplace meet minimum value, so any coverage offered through the SHOP Marketplace should qualify. Excise Tax on High Cost Employer-Sponsored Insurance Effective in 2018, a 40 percent excise tax indexed for inflation will be imposed on employers with insurance plans where the annual premium exceeds $10,200 (individual) or $27,500 (family). For retirees age 55 and older, the premium levels are higher, $11,850 for individuals and $30,950 for families. Excise Tax on Medical Devices Effective January 1, 2014, a 2.3 percent tax will be levied on manufacturers and importers on the sale of certain medical devices. Indoor Tanning Services A 10 percent excise tax on indoor tanning services went into effect on July 1, 2010. The tax doesn't apply to phototherapy services performed by a licensed medical professional on his or her premises. There's also an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee. Quote of the Week: “This report [McKinsey] attempts to create the impression that the independent agency distribution system is unraveling. That is just not true. The independent agency system is expanding. For example, in the past few years we have noticed that more former captive agents are becoming independent agents and are joining PIA. Membership in PIA nationally is up significantly in the last year, reversing a decline, and the trend line is up.” --PIA National Executive Vice President & CEO Ron Von Haden
Texas PIA’s Texas Connection
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November, 2013