What In The World Is A “MINI-MED”?

The Obama administration on Monday loosened rules for bare bones health insurance plans known as “Mini-Meds”. Essentially, a mini-med is an insurance policy that pays for small, routine health care expenses but does not provide for catastrophic events. For example, a mini-med might pay $90 of a $100 doctor visit. If the doctor put you in the hospital, it probably would not pay more than a flat daily amount. Actuarially, the mini-med uses a different model than standard health insurers.

The mini-med concept has great appeal to the foot loose and fancy free younger generation that is seldom sick. This group typically only goes to the doctor once or twice a year. For employers with significant workers that fall in this class, this product is very valuable.

So when the Obamacare program came out, it required health insurance companies to spend between 80 and 85% of its premium dollars on actual medical care (a topic for another day). Mini-meds were included in the initial legislation.

The problem, as previously stated, is that the mini-med model requires a lower payout to premium percentage than the standard policy. The only way to make the mini-med work was to significantly raise the premium. Enter now the employer of America’s youth, McDonalds. McDonalds said “not so fast my little friend.” Mickey D’s has approximately 30,000 hourly workers on the mini-med program. To change to a standard program would require a significant cost. Or, put another way, old Number 2 and a Dr. Pepper would have to go up in price.

Monday, the President and his posse loosened the rules giving the mini-med an extension. That is good news for companies with a number of young hourly workers. Mini-meds are a good program for that category of individuals. The product offers a low cost employee benefit for employers.

If you need more information on mini-meds, give our office a call 210-495-4424.

WHY THE INCREASE IN AUDIT COSTS?

Time. It all comes down to the amount of time a firm and its employees must spend gathering support and documentation. An increase in audit hours leads to an increase in overall audit costs due to the per hour rate that most firms institute. Why the increased support and documentation? Two words: new standards.

These new accounting and auditing standards are often difficult to interpret and can be even harder to apply. Some of the more wide-known changes include:

• Greater responsibility related to the detection of material fraud
• Gaining a better understanding of the design and operation of a client’s internal controls
• Obtaining specialized knowledge regarding fair value measurements
• Determining the best answer when presented with conflicting guidance in professional literature
What can firms (who require audits) do to assist the auditors and decrease audit costs? The following list provides a few basic rules to follow to make an audit as smooth as butter (butter? Maybe crunchy peanut butter):

• Ask your auditors for a list outlining what documents they will need. Some likely suspects:
o Articles of incorporation
o Debt agreements
o Significant leases
o Minutes of the Board of Directors
o IRS filings
• Designate sufficient personnel to the audit. For example:
o CFO
o Controller
o Accounts receivable manager
o Accounts payable manager
o Internal auditor
• Hold a meeting to introduce the audit firm to any personnel they may need to have contact with.
• Develop a joint audit plan that identifies deadlines and the materials needed at those deadlines.

Instituting these simple steps can greatly reduce confusion, excessive communications, and thus audit hours. For further questions regarding the audit process and how to simplify it, contact your local Certified Public Accounting firm.

UNIVERSAL HEALTH COVERAGE MANDATES

I just finished a continuing education class on the new universal health coverage mandates. I also visited with people in the health care insurance business. After last Tuesday referendum on the current administrations policies, there may be changes. As of today, however, this is where we stand.

First, the coverage requirement does not include individuals whose employer sponsored coverage exceeds 8% of their household income. So if your household income is $50,000 then you do not have to take the coverage if the annual employer sponsored coverage exceeds $4,000 (8% of $50,000). Since insurance premiums tend to increase with age, older individuals that have higher premiums , will be more likely to exceed the 8% rule. Hence, the people most likely to need insurance will be less likely to be covered.

In addition, coverage rules to do apply to exempted religious individuals, Indian tribes and incarcerated individuals.

Penalty for Non-paying Qualified Individuals
If an individual that qualifies for coverage, does not maintain coverage, they will be penalized. The penalty is the lesser of (1) a flat dollar amount or (2) a percentage of income. Now it gets confusing.

The flat dollar amount is actually the lower of two separate calculations based on a government mandated applicable dollar amount. For 2014 this amount is $95.00. After you have determined the
appropriate flat dollar amount, you calculate the percentage amount and chose the highest number as your flat dollar amount.

The percentage method takes a percentage of household income adjusted by the filing threshold amount (part of you annual 1040). The kicker is that household income is the sum of the taxpayer and all individual accounted for in the family unit. Therefore, if the kids work, you must include their income!

Now choose the appropriate amount and you have your penalty. These penalties will be a part of your annual tax return (form 1040).

If you are confused, you are not alone.

Insurance premiums will be increasing 30 to 50% at your renewal date.
Your insurance premiums will be increasing because you will also be paying for those that can not afford regular insurance premiums. Here is how this provision works:

Should you not be covered by an employer, the government is creating a new program similar to CHIPS called QHP. The QHP insurance will be provided by all insurance companies at discounted rates. All insurance companies must participate.

There is more in this legislation including the tax credits for those that can not afford any of the above. The long and short of this legislation is that those of us that pay insurance premiums will pay more to subsidize the QHP. Those of us that pay federal income taxes will pay more to offset the tax credit program.