The Palmetto Insider

The blog of the South Carolina Policy Council

Posts Tagged ‘Freedom

Health Care Law Already Hitting Home for HSA Consumers

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Even as foes of Obamacare celebrate their recent victories at the polls, more and more of the regulations mandated by the federal health care takeover (otherwise known as the Patient Protection and Affordable Care Act) are hitting their start date, and the reality is setting in quickly – we are all going to be affected by this law, and most of us for the worse.

Take HSAs, for example, which we have previously extolled as a tool to bring down health care costs. HSAs provide greater cost-saving incentives to consumers, who may roll over unused health care dollars from year-to-year and even use remaining dollars for retirement. But Health Savings Accounts are being marginalized by the new healthcare law.

The way HSAs work is like this. Imagine if you had insurance with which to buy a new car – much like we have health insurance to cover health-related expenditures. Well, if the new car is covered by insurance – and you pay a hefty premium to have this insurance – you will likely want to maximize the “benefits” you receive. So does everyone else in the insurance program.  Eventually, your choice and the collective choice under this plan will eventually jack up the cost and the price of your “car purchase insurance”. So when the next insurance bill comes in, everyone is complaining that their “car purchase insurance” is ridiculously expensive.

In short, you’ll buy the most expensive new car your plan allows and it is not secret that there is a price hike. But if instead you have a “car HSA” plan, you might think to yourself: “Should I spend all of my allotted car dollars on this one purchase? Or should I save some of that money in case I want to buy a second car later – or if this first car breaks and I need a new one?”

Based on these incentives, consumers with HSAs tend to only use the health care they need. Instead of over-consuming health care (which sometimes happens with regular insurance plans), HSA consumers weigh the costs and benefits of their health care decisions.

Unfortunately, the utility of HSAs is quickly deteriorating. As of January 1, 2011, over-the-counter purchases will no longer be HSA eligible. Consumers who don’t want to pay out-of-pocket for these items (about 15,000 in total, according to Fox News) will need a doctor’s note.

As Max Borders writes in the Washington Examiner, we have lobbyists to thank for this stomach punch to consumers:

First, Big Pharma (drugs) and the AMA (doctors) were both mixed up with writing Obamacare. This was clear from the start, but the progressives looked the other way. So, an army of lobbyists made sure that if a bunch of people were going to be forced by the feds to buy health insurance, they’d want to get some goodies out of all these newly minted HSA holders. How could all those lobbyists find a way to divert all those new customers into more expensive drugs and make them to go to the doctor more? Take them out of the driver’s seat. It has nothing to do with primary care paternalism. This is good old fashioned rent-seeking at its finest.

Additionally, this is another one of the ways the government has proposed paying for Obamacare. Which in essence, makes it a tax increase.

Other mandates are also making HSAs less affordable.

  • Covering children: Several major health insurers have dropped child-only policies because of the intense mandates that have gone into effect.
  • HSAs must cover 60 percent of actuarial benefit: According to the Heritage Foundation, only the Health and Human Services Department Secretary Kathleen Sebelius can know whether HSAs are viable under this plan. Will contributions count? If not, then HSAs will “no longer be viable.” Why is that? Because the HSAs revenue/expense system functions in exactly the opposite manner of traditional health insurance products. In traditional health insurance plans, premiums are the major revenue stream and deductible and co/pay are supplementary to cover the medical expense. In HSAs, contribution from members (function similar as deductible) is the major revenue stream while premium serves as a supplementary to cover the cost.
  • Medical loss ratio (MLR): Obamacare has mandated the health insurance companies spend at least 80 percent (85 for bigger companies) on “your health care.” What this does is limit choice in the market, by forcing some companies out of business who don’t meet this 80 percent level. It will also discourage spending on fraud prevention, because that will not be counted in the 80 percent. So every dollar spent on fraud prevention hurts an insurance company’s ability to hit the 80 percent level. Fewer choices in the market means fewer HSA plans. Fewer HSA plans means more expensive HSA plans. Either way, it’s bad for consumers.

HSAs are still a viable option for state-based reform. The South Carolina General Assembly could create a better tax environment for consumers who choose these health plans.

One example of a bill that was already introduced is S 998 from last session, which never made it out of committee. This bill – sponsored by Sen. Mike Rose and Sen. Shane Martin — would have allowed a 100 percent tax deduction or HSA premiums and created a fast-track approval process for new HSA plans that have already been approved by other states. Both of these items would add up to more choices for consumers.

Another way the state could counteract federal burdens on HSAs would be to create state-level exemptions. For example, the federal government removed tax-exemption from over-the-counter purchases. But there’s nothing stopping the state legislature from enacting a state-level exemption for South Carolinians.

South Carolina has at times been at the forefront of HSA legislation. The damage done to HSA plans by Obamacare opens the door for more state-based reform.


Written by SCPC

November 24, 2010 at 12:47 pm

Federal Health Care Legislation: We Really Don’t Know What’s In It

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Everyone already knows the Patient Protection and Affordable Care Act, also known as Obamacare, is more than 2,000 pages long. (2,562 pages and 511,520 words when

both the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act are combined, notes Michael Tanner.)

But what isn’t publicized much is that through July 31, 2010, there were already 3,833 new pages of regulations added to the Federal Register directly relating to the new law’s implementation.

That means that a bill that was signed into law on March 30, 2010, generated almost 4,000 pages of new regulations in four months. 1,000 pages a month – and counting.

Here are some examples:

1)      Medicare: Updated rules regarding Medicare payments to hospitals. This 95-page section pertains to the policies and price levels for hospitals seeking reimbursement for Medicare patients. So instead of focusing on providing high quality of care to patients, hospitals must devote significant resources to reading and understanding these new rules.

2)      Hospice care: This rule, among other things, updates payment rates and capitalization requirements for hospice and home health agencies. The rule is 106 pages long.

3)      Electronic medical records (EMR): Most doctors will likely tell you that EMR improves patient care. It cuts down on paperwork, and reduces the likelihood of errors (ever heard of a doctor with good handwriting?). But this rule adopts standards, specifications, and certification criteria for health care facilities to implement EMR in their facilities. In other words, 153 pages of new regulations and rules to facilitate a process that is supposed to reduce compliance costs and paperwork. Huh? On top of that, the rule adds new regulations and requirements for offices that already have EMR. These early adapters now need to obtain government certification in order to receive reimbursements for Medicare/Medicaid. But what if the EMR system they have is already working fine? Why force them to switch? This rule could also stifle market innovation in this area by locking in all health care facilities to the module that the government requires.

No doubt, this is just the start of literally entire libraries of rules that are going to dictate everything from how much health care providers charge to how many x-ray machines are found in each hospital.

And we wonder why lawyers love Obamacare.

Written by Geoff Pallay

November 19, 2010 at 7:47 am

Florida Case Proceeding

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Great blog from Heritage on the Florida decision to allow the legal challenge to Obamacare to proceed. Check out this quote:

“Congress should not be permitted to secure and cast politically difficult votes on controversial legislation by deliberately calling something one thing, after which the defenders of that legislation take an “Alice-in-Wonderland” tack and argue in court that Congress really meant something else entirely, thereby circumventing the safeguard that exists to keep their broad power in check.”

South Carolina is one of 20 states suing the federal government because Obamacare arguably violates the Constitution, going far beyond the Commerce Clause’s intended meaning.

Written by Jameson Taylor

October 15, 2010 at 8:43 am

Posted in Healthcare

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1099: The Trojan Horse within Obamacare

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The new federally mandated healthcare experiment continues to be the gift that keeps on giving – only we wish it would just stop rearing its ugly head in our daily lives.

Last week we reported on the regulatory problems facing Medicaid reimbursement – and the coming $1 billion increase in costs for South Carolina.

Now, comes the 1099 fiasco. Earlier this month, the Senate failed to repeal a provision of Obamacare that adds a major compliance burden to small businesses and independent business owners.

Buried within the federal health care mandate is an unnoticed provision that requires all businesses to report to the Internal Revenue Service any purchase from a vendor for goods and services amounting to $600 or more per year.

What does that mean? Well, if you work from home and purchase a computer for more than $600, prepare to send a 1099 tax form to Apple. Did you buy more than $600 worth of office products this year? Better prepare that 1099 for Staples.

This little gimmick is aimed at raising $2 billion in revenue to help pay for the new health care mandate.

But according to the National Small Business Association, the average business will have to file 85 1099s as a result of this new policy – nearly 9 times the current average of around 10 forms.

There were two amendments proposed in the Senate that would’ve changed the 1099 provision. One was an attempt to raise the threshold from $600 to $5,000 and exempt all businesses with less than 25 employees. That amendment failed, as did a separate amendment to repeal the provision entirely.

Sadly, these amendments seemed to fail because the Senators are trying to make up the $2 billion in revenue needed for the health care bill. So in each amendment, they tried to find the money from elsewhere – and those lobbyists were powerful enough to swing the vote in their favor.

Even President Obama has come out in favor of repealing this 1099 provision. This begs the question – did he even read the bill before he signed it? How come he didn’t know about this 1099 provision before he made it law in such ceremonial fashion back in March?

Remember, as Speaker Nancy Pelosi said, “But we have to pass the bill so that you can find out what is in it.”

Perhaps she was right. After all, you have to open your Christmas present before you can find out what it is. Too bad Obamacare continues to be one giant lump of coal after another.

Written by Geoff Pallay

September 21, 2010 at 8:26 am

Judicial Independence Threatened by Legislative Activism

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In South Carolina, the Senate and the House of Representatives are charged with electing justices to the Supreme Court, the Court of Appeals, the Circuit Court, and the Family Court. The only judicial appointments made by the governor are Masters-in-Equity and Magistrates, and those appointments require the advice and consent of the General Assembly. South Carolina is the only state in the nation that grants this much control over the judicial branch to its Legislature.

All candidates for the bench must be found qualified by the Judicial Merit Selection Commission, which is also controlled by legislators. The Commission may also determine that a judge is no longer qualified to serve when his or her term expires.

The Judicial Merit Selection Commission has 10 members. The Speaker of the House appoints five: three must be members of the General Assembly; two must be members of the general public. (Currently, House Speaker Bobby Harrell’s brother serves on the Commission.)

The chairman of the Senate Judiciary Committee appoints three members; and the President Pro Tempore of the Senate appoints two. Of these appointments, three must be serving members of the General Assembly, and two must be selected from the general public. Senate President Pro Tempore Glenn McConnell actually nominated himself to serve on the Commission.

Judicial Merit Selection Commission Members

  • Senator Glenn F. McConnell 
  • Senator John M. “Jake” Knotts, Jr.    
  • Senator Floyd Nicholson       
  • Representative F.G. Delleney, Jr.
  • Representative Alan D. Clemmons
  • Representative David J. Mack, III
  • Professor Emeritus John P. Freeman
  • Amy Johnson McLester
  • H. Donald Sellers, Esq.
  • John Davis Harrell, Esq.

The American Judicature Society, an organization dedicated to maintaining public trust and confidence in the court system through an independent judiciary, provides a detailed description of the court system in South Carolina. A number of states have adopted a merit review process to select judges, but the American Judicature Society does not include South Carolina’s Judicial Merit Selection Commission among them because it is controlled by legislators.

College of Charleston School of Law professor John L. S. Simpkins likewise expressed concerns about the Legislature’s influence over the judicial branch in his examination of the constitutionality of roll call voting legislation:

“The General Assembly enjoys a broad scope of authority in exercising its constitutional powers. This grant of authority has been characterized by an extreme degree of judicial deference to the legislative branch in the pursuit of legislative prerogatives.”

Much of that influence is concentrated within the Judicial Merit Selection Commission itself. A 2009 report in The State about a decision by the Commission to remove a family court judge raised questions about the Commission’s ability to influence controversial cases:

“If somebody doesn’t stop it, it’s going to repeat itself in the next year and the next year and the next year,” (Clary and Greenwood lawyer C. Rauch) Wise said. “And it’s going to get worse to the point where a judge on any semi-controversial case will think, ‘What will the Legislature think if I rule this way?’”

In March, the state Supreme Court upheld the Commission’s decision to remove the judge from the bench, a decision described by the American Bar Association Journal as “a tragic day for the independence of the judiciary.”

It is precisely for these reasons that those who interpret the laws—the judicial branch—should not be influenced by those who write the laws—the Legislature. An essential part of reforming government in South Carolina must be to end the General Assembly’s control over our courts.

To learn more about how legislative reform in South Carolina, see our new report.

Written by Robert Appel

September 9, 2010 at 3:00 am

Fire Sprinkler Requirement Represents More Unnecessary Government Intervention

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There has been a growing trend nationwide to require fire sprinkler systems be installed in any new home.

The regulation comes from an International Code Council (ICC) vote in 2008 that would take effect in 2011.  The ICC publishes the International Residential Code – a document used by 46 states to regulate new home construction.

Many state legislatures have been taking up the issue. California passed a mandate echoing the ICC last week.

Given all the controversy surrounding airplanes, golf tournaments, and cigarettes during this year’s South Carolina legislative session, you might not expect something like sprinkler systems to raise much of a fuss.

Yesterday, the Senate sent H 4663 – which would prohibit the enforcement of building codes like the one in California – back to the House with amendments. The Senate version restricts the enforcement of fire sprinkler mandates until at least 2014. By contrast, the House bill would have set no end date.

Part of the Senate amendments include the creation of a study committee tasked with increasing participation in a tax credit program to offset the costs of fire sprinkler system installations. This study committee would include 6 members – 4 of whom are representatives from:

  • The South Carolina Fire Sprinkler Association
  • The South Carolina Home Builders Association
  • The South Carolina Association of Counties
  • The Municipal Association of South Carolina

This committee appears to be the legislature’s attempt at mediating the battle between home builders (who oppose the mandate) and fire sprinkler manufacturers (who support it). The Cato Institute recently pointed out that the fire sprinkler industry has been a driving force behind this legislation – more sprinkler systems means more business for them.  

For the ordinary citizen, the debate is simple: Should the government mandate new homes be built with fire sprinkler systems (at a cost of thousands to home owners)? Or should givernment continue to allow individuals to decide for themselves to have such systems installed?

A recent story in the Sun News quoted a state employee insinuating that the increase in costs to home production shouldn’t matter because there are “other ways to reduce the cost.” Is the official suggesting people should forgo installing other amenities – e.g., hardwood floors or tiles or a deck – so that they can install a sprinkler system? But since when does the government have the right to tell people what amenities they should have in their homes? And make no mistake about it – a sprinkler system is an amenity – and a very expensive one at that.

This is just another example of the state trying to protect people from themselves. If a homeowner does not want to install sprinklers – which, admittedly, carries some risk – then they should have the right to do so.

But to mandate that all homes have a sprinkler system is like requiring everyone to buy a car with anti-lock brakes. Sure, it may be safer, but it should be up to the individual to decide what risks they take in their own lives.

Individual responsibility is a key part of a capitalism. The more government acts like an all-knowing, omniscient parent, and the more people give up ownership over their lives, the worse for freedom, creativity and prosperity.

Written by Geoff Pallay

May 19, 2010 at 12:59 pm

Can We Trust These Guys With Our Money?

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You’ve got to wonder just what’s going on at the state capital. Yesterday the Senate gave final approval to a 50 cent cigarette tax increase, generating an estimated $136 million—but costing thousands jobs according to warnings from economists.

At the same time, the Economic Development Competitiveness Act, quietly giving the General Assembly a free ride to …

  1. Pass out more taxpayer money to buy political power.
  2. Line the pockets of special interests.
  3. Perpetuate a failed policy of state-driven economic development.
  4. All of the above.

… passed the Senate Finance Committee.

Then we learned that our state government, due to an accounting error, is nearly $60 million further in the hole than they thought. That means more budget cuts in the last quarter of this fiscal year and in next year’s budget as well. More motivation to enact all manner of tax increases and new fees and fines.

At least we can look back as how our lawmakers voted … just kidding.  Only 14 percent of House and Senate votes have been recorded this session. So forget trying to find out how your elected representatives stand on these issues.

To recap:

  • More taxes
  • More Lost Jobs
  • More Government Control Over the Economy
  • More Fuzzy Accounting
  • Less Transparency

A banner day for the Big Government powerbrokers running our state.

Written by Robert Appel

April 15, 2010 at 11:35 am