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Enrollment in health savings accounts linked to high-deductible health insurance plans more than tripled in 10 months, according to an America's Health Insurance Plans survey. As of Jan. 1, 2006, about 3.2 million people were covered by HSAs, with at least part of the surge in enrollment due to large employers offering HSAs for the first time.
The maximum annual amount of money that could be contributed to HSAs would nearly double under a Bush administration proposal. Under the plan, the maximum HSA contribution would have been equal to the maximum out-of-pocket health expense an employee could incur. In 2006, the maximum out-of-pocket employee expense was $5,250 for a worker with single coverage; the maximum deductible was $2,700. Congress, though, does not act on the proposal.
President Bush signs legislation boosting the base annual premium employers with pension plans must pay to the Pension Benefit Guaranty Corp. to $30 per participant from $19. The legislation, intended to ease the PBGC's nearly $23 billion deficit, also imposes a new annual fee of $1,250 per participant for three years on employers that terminate underfunded pension plans as part of a bankruptcy filing.
Chrysler Group announces it will base salaried employees' health insurance premium contributions on their rank and salary level. For example, midlevel managers will pay an additional $450 in premiums while top executives will pay an extra $1,500. On average in 2006, salaried employees paid $950 a year in health insurance premiums. The change came as Chrysler struggled to bring health care costs, which had doubled in five years, under control.
Massachusetts Gov. Mitt Romney signs landmark legislation to enable the state to achieve near-universal health care coverage within a few years. Under the law, all state residents are required to obtain health insurance. To achieve that goal, the state will heavily subsidize premiums for low-income individuals. The expansion of coverage is financed in part by a new surcharge on all but very small employers that do not offer or pay for at least part of employees' health insurance premiums.
Vermont lawmakers approve legislation intended to boost the percentage of state residents with health care coverage to 96% from 90%. The measure, like the one passed in Massachusetts, subsidizes premiums for low-income individuals with the amount of the subsidy linked to the individual's income.
Health care plans can seek reimbursement of medical expenses from beneficiaries who receive third-party settlements, the U.S. Supreme Court rules in a unanimous decision. Chief Justice John Roberts writes that the Employee Retirement Income Security Act considers such reimbursement equitable relief. The case before the court involved a health insurer seeking reimbursement for about $75,000 in medical expenses from a California couple injured in an automobile accident and who sued several parties and ultimately received a tort settlement of $750,000.
Tennessee becomes the third state in as many months to pass comprehensive legislation to reduce the number of people without health insurance. Tennessee's approach, though, is markedly different than Massachusetts and Vermont, which requires employers not offering health insurance to pay an assessment to the state. Under the Tennessee law, the state will pay one-third of the health insurance premium for low-income employees working at small companies. Insurers are to be selected by the state through a bidding process.
Delta Air Lines Inc. says it will terminate its massively underfunded pilots' pension plan because it can no longer afford it. The plan, which covered about 13,000 current and retired pilots, had promised participants $4.7 billion in benefits, but had just $1.7 billion in assets. The Pension Benefit Guaranty Corp., which would take over the plan, says it would guarantee about $913 million in benefits.
A Maryland law requiring very large employers to spend at least 8% of payroll on health care for employees or pay the difference to a state fund that provides coverage to low-income uninsured residents is illegal, a federal judge says. U.S. District Court Judge J. Frederick Motz says the statute violates an ERISA provision that pre-empts state rules and laws that relate to employee benefit plans. The way the statute was written, it would have applied only to Wal-Mart Stores Inc.
President Bush signs comprehensive pension reform legislation. The Pension Protection Act requires employers to fund pension obligations within seven years, creates a new methodology to value plan liabilities and prevents employers with underfunded plans from boosting benefits. The bill also makes clear that new cash balance plans do not violate age discrimination law. A rash of huge pension plan failures raised congressional concerns that the federal pension insurance program could go broke unless funding rules were tightened to avert yet more plan collapses.
Cash balance plans are not age discriminatory, a federal appeals court says. In the first ruling on the issue at the federal appeals court level, the 7th U.S. Circuit Court of Appeals reverses a judge's 2003 decision that all cash balance plans in general, and IBM Corp.'s plan in particular, are age discriminatory because younger employees have more time to earn interest on their benefits than older employees. But the appeals court rejects the argument, saying the difference in value of the accrued benefitexpressed as a retirement age annuitybetween older and younger employees reflects the time value of money, which is not age discrimination.
Two top elected officials veto bills mandating that large employers spend a certain amount of money on health care benefits. California Gov. Arnold Schwarzenegger vetoes a bill, which would have applied only to retailer Wal-Mart, to require employers with at least 10,000 employees in the state to spend an amount equal to 8% of payroll on health care benefits or pay the difference to a state fund. Gov. Schwarzenegger says the law would do nothing to guarantee coverage or lower costs.
In Chicago, Mayor Richard M. Daley vetoes a bill that would have mandated so-called "big box" retailers to pay workers at least $10 an hour in wages plus $3 in benefits. Mayor Daley says the plan would drive jobs from neighborhoods most in need of economic recovery.
Wal-Mart cuts prices on nearly 300 generic prescription drugs to $4 for a 30-day supply. The price cut triggers competitors, such as Target Corp., also to discount generic drugs. The moves are expected to boost generic drug use and reduce employers' drug costs.
Dr. William McGuire, who helped grow UnitedHealth Group Inc. from a small health maintenance organization to the nation's second-largest health insurer with more than $70 billion in revenues, says he will step down as chief executive officer following an outside review that found numerous stock option grants were "likely backdated." Dr. McGuire and UnitedHealth reach agreement to reprice his stock options to the highest point each year between 1994 and 2002, reducing their value by about $200 million.
Drug giant CVS Corp. and pharmacy benefit manager Caremark Rx Inc. say they have agreed to merge. Experts say the $21 billion deal should result in lower prescription drug prices because the combined entity should have greater leverage in price negotiations with drug manufacturers. Caremark buys directly from manufacturers and distributes drugs through 60,000 pharmacies and mail-order. CVS operates nearly 5,400 retail stores with pharmacies. In December, however, Express Scripts Inc. submits a "superior" $26 billion offer for Caremark, saying a union would create an "industry-leading PBM." Caremark says it is bound by its agreement with CVS.
Paper packaging and office products giant MeadWestvaco Corp. says it is converting its traditional final-average pay pension plan to a cash balance plan, the first company to do so since Congress passed legislation protecting cash balance plans from age discrimination suits. MeadWestvaco says cash balance plans are appealing because the benefit formula is visible, easy to understand and shields employees from investment risk.
Health care cost increases, while still outpacing overall inflation, are holding steady, according to a survey of nearly 3,000 employers by Mercer Health & Benefits L.L.C. Group health care plan costs increased by an average of 6.1% in 2006, the same increase as in 2005. After torrid increases just a few years earlier, Mercer says the easing of health care inflation reflects greater corporate emphasis on consumerism and case management.
Congress gives final approval to legislation that will allow many employees to boost contributions to HSAs. Among other things, employees could make the maximum contribution to their HSAs regardless of when they were hired in a plan year. Current rules require contributions to be prorated to reflect when an employee was hired. Other changes would make it easier to transfer balances from health reimbursement arrangements to HSAs and no longer link the maximum HSA contribution to the deductible in the health plan connected to the HSA.