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Wellness Cafeteria Plans and Self-funding High Deductible Programs
May Emerge as the Salvation of Chiropractic
Editor's Note: Kelly Jarvis, DC, of Heber City, Utah (NCC 1977) is
past president of the Utah Chiropractic Association, and currently
serves on several advisory boards for chiropractic. Dr. Jarvis and
colleagues Drs. Reed Phillips (LACC president), and Elliot Morris
authored, "Cost per case comparison of back injury claims of
chiropractic versus medical management for conditions with identical
diagnostic codes," one of the scientific articles which were
accepted by the AHCPR to draw its conclusions in the Clinical
Practice Guidelines on Acute Low Back Problems in Adults. Their
article was originally published in the Journal of Occupational
Medicine in August 1991.
If it is true that Republicans are more free market oriented,
chiropractic may experience its heyday under the new conservative
Congress. The probable death of the Clinton-style health reform
which promised to lock in all the ivory towers of medicine, drugs,
and surgery to permanent levels of inclusion, will result in the
re-emergence of all the credible forms of alternative medicine.
Once squelched by big insurance companies that are run by monopoly
minded administrators, cafeteria plans are just what the patient
ordered, not the doctor!
Instead of buying insurance which dictates every move the employee
and his family make (choice of doctor, pharmacy, hospital, etc., as
a theoretical ploy to cost-containment, under the cafeteria system),
the employer buys a high deductible policy and provides an
individual medical account which the employees can draw upon at
their discretion.
The medical account is called the "cafeteria plan" because it
allows employees full freedom of choice in the provider, hospital,
and pharmacy they elect to use. The wise shopping by employee
usually promotes the used of less expensive alternatives
(chiropractic, homeopathy, etc.), because any monies left over in
the medical account can be used as a "rainy day" fund for future
medical bills. If employees can achieve a level of savings in the
account equal or greater to than the deductible, then they basically
have a first dollar coverage with complete freedom of choice,
including homeopathic medicine.
Even self-employed people can cash in on the benefits of cafeteria
plans by contracting with employee-leasing companies or plan benefit
administrators. A staff-leasing company this author consulted has a
"customized" cafeteria plan that pays reimbursement checks weekly.
Cafeteria plans benefit the self-employed, the employer, as the
employee in four primary ways:
- Both the employers and the employee receive the benefit of FICA
tax savings.
- The owner or self-employed can participate, as well as employees.
- This is a true benefit for the self-employed and employees that
they have individual control over.
- The cafeteria plan can be designed to provide a personal
medical budget.
The Working Couple Raising Children
Without Flexible With Flexible
Compensation Compensation
Gross Monthly Pay
----------------
Salary Reductions $2,200.00 $2,200.00
Health Insurance 0.00 125.00
Unreimb. Health Expenses 0.00 100.00
Dependent Care 0.00 175.00
Adjusted Gross Pay $2,200.00 $1,800.00
-----------------
Taxes
FICA 157.30 128.70
Federal Income Tax 201.75 141.75
State Income Tax 88.00 88.00
After-Tax Pay $1,752.95 $1,441.55
-------------
After-Tax Expenses
Health Insurance 125.00 0.00
Unreimb. Health Expenses 100.00 0.00
Dependent Care 175.00 0.00
Net Pay
------- $1,352.95 $1,441.55
Annual Savings
-------------- 0.00 $1,063.20
If you're wondering if insurance companies relish the conversion of
their below deductible plans to catastrophic plans, the answer could
be self-evident. Insurance companies profit most by taking your
large premiums and preventing you from spending them. Catastrophic
plans only allow them to collect small premiums. However, some
reluctant carriers are now offering catastrophic plans because they
see the handwriting on the wall.
The self-employed or the employer could actually "self-fund" only
to the difference in premium from the "high" deductible to the "no"
deductible insurance with the same results as a cafeteria plan.
Example per participant:
No Deductible High Deductible
Premium Premium
------- -------
$400.00/mo. $100.00/mo. = $300.00 Self-Funded Amount
$200.00 Cafeteria Participation
$500.00 Tax Free Dollars
X 12 months
------------------------------
$6,000.00 Annual Tax Free
The IRS Regulation Code, more specifically defined as, "Use It or
Lose It," is virtually eliminated in both cases if these two plans
are administered properly.
It will soon be apparent that HMOs and cafeteria style plans will be
the two party system in insurance. The HMO will cater to those who
do not want to take the risk for allocating their below deductible
health care costs themselves and instead would rather lose freedom
of choice of provider than to have one pill or exam not fully
pre-paid.
On the other hand, the cafeteria plan will appeal to the vast
majority of the self-employed who already accept risk and need to
improve cash flows and selection. For more information contact
B.J. Christensen at 1-800-748-5102 or myself at (801) 654-3032.
Kelly Jarvis, DC, FACO
Heber City, Utah
DC
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