Ending Health Subsidies: ‘People Will Die’

Six Embarrassing Headlines on Subsidies from October

By Marc Derendinger, Sr.

  • President Trump Ends Healthcare Insurance Subsidy Program – Fortune [October 12, 2017]
  • Ending Health Subsidies: ‘People Will Die’ New York Times-Oct 13, 2017
  • Trump to halt subsidies to health insurers – ABC News [October 13, 2017]
  • Trump’s strike on health insurance subsidies jolts markets, Washington [October 14, 2017] 
  • Trump will end ObamaCare subsidy payments | New York Post [October 12, 2017] 
  • White House to halt health insurance subsidies The Boston Globe-Oct 12, 2017 

This small sample of headlines from October 12th to 14th emblematize a disappointing age in the history of American Journalism, where indifferent editors compete for reader “clicks,” for the purpose of increasing advertising revenue.

“Yellow Journalism” is based upon sensationalism and crude exaggeration (dictionary.com).

After answering several individual inquiries to explain Trump’s decision on subsidies, I feel compelled to put this explanation in public view (if for no other reason, than to catch my breath). The following paragraphs attempt to more accurately explain what Trump did to Subsidies, as it concerns Californians.

Background: The California individual health insurance market is segmented into two halves:

  1. Covered California plans e.g. Kaiser, Blue Shield, HealthNet, Anthem etc., which are potentially eligible for Subsidies
  2. Off-exchange (same plans as above, but purchased directly from the insurers)- Not Eligible for Subsidies

Further, there are two types of subsidies addressed in this article:

  1. The APTC (advance premium tax credit)- Most Covered CA policies enjoy this subsidy (about 5 billion dollars worth*), whether Minimum Coverage, Bronze, Silver, Gold or Platinum (*Source: Covered California Active Member Profile of March 2017, reported June 1, 2017:  estimated using 828,973 policies, $499 average APTC)
  2. Cost-sharing Reductions (CSR)- only Silver Plan policies receive this subsidy

In contrast to recent headlines, Trump’s orders do not impact the APTC subsidy, which are funded specifically from a California health and dental insurance premium tax (of approx. 3.8%) on California insurance companies. (Truly, one could argue greater damage to the market place was done by Anthem, with its plans to pull out of all California counties except three).

“Trump’s recent order does not impact the APTC subsidy”

The APTC funding mechanism was enabled by the original PPACA legislation. However, Congress blew it when they neglected to include funding for the second subsidy, “CSRs,” leading to the current situation.

What are the CSRs? This misnomer is a buzzword for “coverage enhancements” made to a Silver Plan for applicants with household income from 133% to 250% of the Federal Poverty Level. It lowers copayments and deductibles (essentially making a Silver Plan into a Gold or Platinum+ Plan, at no additional premium). The cost for the coverage upgrade has been coming from the feds (until Trump’s orders).

“Enhanced Silver plans include more robust coverage for the price of the same Silver premium. These plans include lower copays, coinsurance and deductibles compared to normal Silver plans.” [Covered California, July 21, 2017]

Of the Silver plan policies issued in Covered California, about three-quarters qualify for CSRs.  It is noteworthy that whether your Silver plan enjoys CSR status or not, the monthly insurance


premium and the APTC subsidy remain the same.

Interestingly, Trump’s order only impacts adults, because children of these households are taken out of Covered California automatically, and sent to a Medi-Cal case worker for possible coverage (all children in households with less than 250% FPL). So what happens to the remaining adults? Assuming Congress does not provide funding, they would likely receive a supplemental premium notice for the extra coverage, with the option to downgrade to the regular Silver 70 plan for no difference in premium. Yet this may be a worst-case scenario, and here the story gets interesting.

A Small Subsidies Surprise

The deeper we dig, the greater the surprise.  The grand surprise follows this paragraph, but first, in a paper commissioned by the public healthcare exchange, Covered California** and published January 26, 2017, researchers estimated if CSR funding were cut-off (presumably by President Trump), overall Silver policy premiums would increase 16.6% for 2018, AND, rather than causing a multitude to lose insurance coverage, this Covered California-sponsored paper estimates Covered California would actually gain a net 20,000 new members!  (**source:  Evaluating the Potential Consequences of Terminating Direct Federal Cost-Sharing Reduction (CSR) Funding, By Wesley Yin, Ph.D., and Richard Domurat, Ph.D. candidate).

A Big Subsidies Surprise

Closer inspection of a Covered California report issued July 21, 2017 suggests a contingency plan was conceived last June, in the event CSR funding was ceased.  Taken verbatim from this report:

What happens if the cost-sharing reduction payments are stopped?

“In June, Covered California’s board took steps to protect most consumers from any rate increases caused by the uncertainty surrounding cost-sharing reduction payments. The board acted to place any rate increases caused by the uncertainty only into Silver plans. If the federal government does not act to provide certainty that CSRs will be funded, Silver-level consumers would see an increase in the gross cost of their premiums, they will also see an increase in the amount of  financial assistance they receive, leaving their net payment virtually the same.” [Source: “How Cost Sharing Reductions Work:” Covered California, July 21, 2017]

Recent Headlines

Reflecting on recent headlines, readers beware:  Yellow Journalism is prejudiced, jaundiced, and lurks everywhere…even from the world’s most respected news organizations:

Ending Health Subsidies: ‘People Will Die’  New York Times-Oct 13, 2017


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Zenefits Transfers 7000 Insurance Accounts

What will happen to Zenefits’ 7000 employers now that the San Francisco firm has announced it will exit the insurance “broker of record” business?

“By partnering with OneDigital, Zenefits is essentially getting out of the broker business, a move that will allow the company to focus solely on making software.” [San Francisco Chronicle, September 21, 2017]

Zenefits: From San Francisco to Atlanta, Georgia

As reported in this recent San Francisco Chronicle story, Zenefits has arranged with Atlanta-based firm, One Digital, to take-over servicing the 7000 insurance accounts.  Atlanta, Georgia? This may be the perfect time to say “no” to Atlanta and transfer your account to a Local Broker.

“With less than two months from open enrollment season, the Zenefits decision provides California Employers a timely opportunity to transfer to a local, California Broker: We are already receiving phone calls.”  [Marc Derendinger, Insurance Broker #0644617]

How To Keep Your Insurance In California

If you have Kaiser Permanente, check with KaiserPlanet.org for a Local Broker.  For employers who offer dual choice benefits or plans from Anthem, United HealthCare or Blue Shield, contact this 50-year California-based benefits brokerage, the San Francisco bay area.

Zenefits exits Broker Business

 Telephone (408) 252-7300 to discuss your options with a local broker, license 0644617

Blue Shield PPO replaces Anthem Blue Cross

Blue Shield PPO replaces Anthem Blue Cross on January 1, 2018, as the only major medical PPO plan in Santa Cruz, San Benito and Monterey counties, according to statements released by Anthem and Covered California.

Which Counties will Anthem keep?

(Anthem will not offer individual policies in Santa Cruz County. Refer to related story…)

Even Kaiser Permanente is jumping on the chance to add new subscribers in selected zip codes of Santa Cruz county [see related Kaiser Story].

Blue Shield replaces Anthem Blue Cross- Kaiser is an option

Blue Shield PPO replaces Anthem Blue Cross?

“Our readers would ask why is the Blue Shield PPO the best option to replace Anthem?”

According to Covered California’s August 2017 published report, “Covered California’s Health Insurance Companies and Plan Rates for 2018,” Anthem held 39% of its 29,050 individual health policies in Region 9 (Santa Cruz, San Benito and Monterey counties):

Blue Shield PPO replaces Anthem Blue Cross

  • 39% Anthem
  • 34% Blue Shield PPO
  • 8% Blue Shield HMO
  • 2% HealthNet EPO
  • 17% Kaiser Permanente HMO

Effective January 1, 2018, Blue Shield appears to be the only individual PPO plan available through Covered California.  In fairness to HealthNet, they offer an EPO plan.  Request a FREE Free Rate quote between Blue Shield and HealthNet.


Is Blue Shield PPO Really Your Best Option

The 2018 rates are not released yet, but Blue Shield has filed two sets of rates for the upcoming open enrollment, depending on whether or not CSR funding is approved in Washington.

Sample 30 year-old 2018 Premium for Blue Shield’s Silver 70 PPO:
Without CSR Subsidy Funding                    Including CSR Subsidy Funding

$609.49 monthly (2018)                            $562.63 monthly (2018)

To compare the current (2017) year premiums in your county, use this free quote engine.




Anthem Individual Health Insurance Changes Again

More Disruption Ahead For Anthem Individual Health Insurance Policyholders, As Anthem drops Covered California In Most Counties

Why is Anthem withdrawing from the exchanges in California?

Which Counties will Anthem keep?

(In Anthem’s own words…)

“While Anthem is reducing its 2018 Individual plan offerings in California, it is not withdrawing from the exchanges. We are pleased to be participating in three key areas”

“On-exchange and off-exchange EPO plans at all metal levels will be offered in three regions of Northern California…”

We give credit to DerendingerIns.com for covering this story:  Read the full article

Healthy California Makes Strange Bedfellows

What’s inside the Healthy California act? “It is the intent of the Legislature to enact legislation that would establish a comprehensive universal single-payer health care coverage program and a health care cost control system for the benefit of all residents of the state” (Californians For A Healthy California Act SB 562).

Ironically, California state politicians hope for the failure of Obamacare from opposite ends of the political spectrum: Liberal proponents argue Obamacare is proof that the private market cannot solve California’s health care problems. Conservatives argue Obamacare is proof that government regulation only makes California’s health care problems worse. It’s a “cluster.”

The Trumpcare-Obamacare fiasco in Washington captures this irony perfectly.  However, while national media makes money selling advertising on Washington politics, a committed group of Californians hope to steal the cake by convincing disgruntled Californians they are better off with a government-run plan for Californians.

The Healthy California Act:

SB 562 will move health care coverage to one publicly-run plan that covers everyone who lives in the state. Every California resident will have one plan.” [California Senator Ricardo Lara’s Legislative Fact Sheet].

  • Private Insurance through your employer would be replaced by a government-run plan
  • Nearly 40 million residents of California would be covered by a single plan
  • Traditional insurance premiums would be replaced with contributions based on your payroll and income

Although proponents are borrowing words from a federally-funded program when they use the phrase “Medicare for All,” in actuality, SB 562 contains no details at all.  Yet, a February 17th San Jose Mercury News story hints that the timing is right, while acknowledging this has been tried before, and failed.

And from the Los Angeles Times: “…seems like wishful fantasy, even in deep blue California.”

It remains to be seen if enough Californians would really give up their employer-sponsored coverage to take a chance on SB 562. Ironically, would enough millionaires be willing to give up their $15,000 annual Obamacare subsidies to vote for SB-562? Yes, it’s true: millionaires are receiving large Obamacare subsidies, because of the expansion of Medicaid via the Patient Protection and Affordable Care Act i.e. Obamacare. Political opponents make strange bedfellows.

Read related story:  The TrumpCare Legislative Process Begins

What Can Go Wrong With Key Person Insurance?

Key Person Insurance

Key Person Insurance (Key Woman, Key Man etc.) helps mitigate a bad situation by sponsoring some transition (adjustment) time. The ultimate goal is to increase the probability of business (or family) financial survival.

True Stories: What Can Go Wrong With Key Man or Key Person Insurance

So you already have a Key Person insurance program, and you are certain it’s bullet-proof… afterall, what could go wrong?  Based on my 33 years of professional practice, hKey Person Insurance for Silicon Valleyere are some examples of what did go wrong…and all of these outcomes could have been prevented:

  • Bay Area start-up grows to 30 employees, including $1,000,000 of Key Person Insurance purchased on all 3 founders. 12 months later, the healthiest of the 3 had died from Cancer (at the young age of 40). Within 2 years, the business failed. Why? Their ability to focus on business was overcome by the grief and distraction of watching a close friend suffer away.

“In retrospect, $3,000,000 to $5,000,000 of increased Key Person protection would have at least allowed them to walk away with something for their investment.”

  • Owner of Northern California financial services firm dies in auto accident with no Key Person Insurance (because he had postponed his Key Man Insurance application until he lost a little weight).  Without the chief revenue-earner, employees start to resign and soon the customers were phoning the widow at home, asking for assistance.  without any financial resources, she was forced to hire an attorney and data forensics firm to extract the accounting data needed to file corporate tax returns and to close down her late husband’s corporation, while dealing with her grief, his business creditors, personal creditors, all of which necessitated the sale of her residence.

“In retrospect, it would have been better to purchase the higher priced Key Man Insurance, then re-apply later after losing some weight.”

  • Individual retires after 25 years and starts own business.  Within 2 years, is diagnosed with brain Cancer and has to stop working as the disease progresses rapidly.  Spouse decides they receive better care at home, than in a nursing facility, but is overcome by the cost $40,000.

“In retrospect, a properly-constructed Key Person Insurance program would have allowed the advancement of cash benefits for such expenses, prior to death.  Using an experienced Key Person specialist would have made a real difference to this family.”

If you know a Key Person in your organization or family, make the call today.  Get affordable coverage for your business or loved ones.

FREE QUOTE:  1 (408) 252-7300

…or complete the information request form below.

Mandatory Doctor Assignment Has Arrived In California

Obamacare’s Covered California says they know what’s best for you, and mandatory doctor assignment is the best medicine, according to the experts in Sacramento. How did a quasi-government agency get the authority to practice paternalism in the golden state?  Using their authority to negotiate insurance carrier contracts, Covered California modified the contracts with Mandatory Doctor Assignmentparticipating insurance companies, such as Anthem Blue Cross, requiring participating insurance companies to begin mandatory doctor assignment on individual plans in 2017. While really not applicable to HMO plans, the mandate targets PPO and EPO plans, in particular.

Frequently Asked Questions

Yet, Anthem Blue Cross made a recent decision to go beyond the Covered California mandate, and apply Mandatory Doctor Assignment to off-exchange (all California individual and family plans), as well.

The Impact of Mandatory Doctor Assignment

We expect the impact on Anthem policyholders to be minimal, of course, because aside from a few grandfathered policies, Anthem Blue Cross does not have many PPO plans left in California, as reported in a recent article, Anthem PPO Plans Discontinued.

Looking to leave Anthem and find good PPO insurance in California?  Whether it’s medical, Guardian dental or vision from VSP, get 24/7 online insurance quotations from this Northern California independent agent.  Hurry! Except for dental and vision, open enrollment closes January 31st.

Patient Protection Affordable Health Care

The Patient Protection & Affordable Care Act

Sutter Health Blue Shield Breaking News

Many hearts sank when Sutter Health Blue Shield negotiations failed to produce an agreement on New Years Day. However Sutter Health announced good news this evening (see excerpt below):

 “I am pleased to announce that Sutter Health has come to an agreement with Blue Shield of California on a three-year renewal of our provider contract. We now have all of our health plan agreements in place for 2017.”

 In the rush to publish the good news, they missed a date typo (Jan 4, 2016). Late shoppers appreciate the news anyway.

“For information about products and the networks in which Sutter providers currently participate, please check: http://www.sutterhealth.org/openenrollment/accepted-health-plans.html ”


Stanford Children’s Health Drops Individual Health Plans

Stanford Children’s Health (SCH) has stopped accepting most individual health plans, according to letters shipped to patients in early December.

Stanford Children's Health Drops Individual Health Plans

Stanford Children’s Health Ships Patient Letters

“If you are receiving this letter we have identified that…you or your child have an upcoming appointment and SCH is NOT an in-network provider with your insurance.” (view entire letter)

What health plans will take SCH?  Unless you are covered on a group plan, individuals and families should consider HealthNet plans [Quote and Apply Here].




HealthNet PPO  may be purchased via Health Net or through a licensed insurance agent [Read more from the Stanford Medicine FAQ here]

Stanford Medicine has published an FAQ on the Stanford Children’s Health news story, which can be found at the link below:


Updates will be posted to  http://www.healthinsurance.stanfordchildrens.org as they occur


As you will read from the resources listed above, HealthNet is one of the few insurance options for individuals and families.




[Quote and Apply Here].