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February 26, 2009 at 07:00 PM
The $787 billion stimulus package recently enacted by Congress and signed into law by President Barack Obama contains provisions of substantial significance to the life-health insurance industry, both for carriers and agents, according to industry officials.
Especially significant in terms of cash outlays were provisions in the package improving the short-term health insurance safety net for people laid off from their jobs.
The final bill provides $24.7 billion to provide subsidies for 9 months to laid off employees under the Consolidated Omnibus Budget Reconciliation Act or COBRA. It will be available March 1.
Robelynn Abadie, president of the Association of Health Insurance Advisers, notes that the COBRA provision “is the most immediate concern to AHIA members.”
Abadie says, “What I realize now is how bogged down agents/advisors are in getting the correct information out to employer groups on how to implement the program.”
There are “numerous challenges” for human resource/risk managers/COBRA administrators, as well as small employers and agents to implement the subsidy, she says. This is particularly so, she explains, for those small employers who utilize the State Continuation programs and usually have little experience or assistance other than what their agent provides.
“The role of the agent is critical as employers are scrambling to comply but AHIA members are prepared to meet the challenge,” Abadie says.
It points up the important role agents play in the health insurance area, she says. “A critical point is that agents do so much more than just sell policies. We assist our clients and guide them through plan changes, mandates, economic and personal challenges, as well as provide a level of assistance that no one else offers,” she explains.
Group health carriers will also benefit from a provision that establishes a temporary increase in the federal medical assistance percentage (FMAP) with respect to Medicaid payments for FY2009-FY2011 for eligible states. The estimated cost of this is $86.6 billion.
The bill also provides $19.4 billion for first-time incentives for hospitals, doctors and other healthcare providers to keep health records electronically while also providing $1.1 billion to fund wellness programs and $1 billion to study the comparative effectiveness of medical treatments.
The legislation’s tax provisions include both business and individual tax relief that will benefit small insurance agencies, say officials at the National Association of Insurance and Financial Advisors.
On the business side, the bill includes an additional year of authority for small businesses to expense (rather than capitalize) up to $250,000 in capital acquisitions, and a 50% bonus depreciation provision.
In another provision targeted for small businesses, the bill provides a 5-year net operating loss (NOL) carry-back provision. This provision, scaled back in the final bill, is now available only for losses that were incurred in 2008 by businesses with gross receipts of up to $15 million, NAIFA officials say.
At the same time, the industry is now waiting for the other shoe to drop.
For example, insurance agents who work in the executive compensation market need to be watchful of the limitations placed on the executives of companies participating in the Trouble Asset Relief Program (TARP), NAIFA is cautioning its members.
“There is concern that Congress may look to expand executive compensation limits to any company receiving federal assistance, which could include companies that are receiving special tax breaks,” NAIFA says in a bulletin to its members.
The industry is also anticipating that the budget deficit reduction program President Obama was scheduled to release after press time last week may propose cutbacks in executive compensation programs sold by the industry.
Specifically, NAIFA tells its members, “more tax legislation is certain later this year.”
