Monday, March 9, 2009

Economic Stimulus Package

I'm now referring at least one portion of Obama's massive plan as the Economic Stimulus Paradox. I'm sure as more details emerge I'll be able to place additional items under this heading.

Obviously no one thinks that economic salvation will come without a cost. The government is not sitting on almost a trillion dollars just wondering what to do with it. Someone has to pay for this. The terms 'children' and 'grandchildren' come up often as the likely ones to pick up the tab.

The stimulus package calls for those who are involuntarily laid off to receive help to pay for their health insurance premiums. Ok, sounds good. Let's make sure that the millions who have been laid off during this mess don't lose their health coverage and further compound their financial problems.

If you worked for a large employer and lost your job due to downsizing, restructuring, etc. then you are able to continue your health coverage through a provision known as COBRA. The coverage remains the same and you now pay the premium yourself without any subsidy from your company. It allows you to remain insured while you look for another job. Once a new position is found you drop the COBRA coverage and enroll with your new company's plan.

For smaller companies, at least in Texas, you're not subject to the COBRA rules but you do have to offer a similar option according to state continuation rules.

Without getting too bogged down in the details here's it all in a nutshell - lose your job but keep your insurance. Again, I'm all for it.

Until the stimulus package came along. It calls for the terminated employee to only be liable for 35% of the premium. In soundbite form this sounds great and I'm sure contributed to someone's job approval ratings. But you discover the paradox in the details.

Case in point. We have a client who owns a small business (less than 25 employees). They offer a health plan and pay 50% of the employee's premium. As with many small businesses they have seen things slow significantly. As a cost cutting measure they let some employees go. One of them was enrolled in the health plan and desires to continue coverage according to the state continuation rules.

Two months ago this was easy. Employee leaves, employee signs paperwork indicating the desire to continue coverage, employee sends the full premium payment to the employer each month.

Now thanks to the government's plan to save the economy it gets complicated and confusing. Employee leaves, employee signs paperwork indicating the desire to continue coverage, employee only has to send in 35% of the monthly premium.

That leaves 65% to be paid. So who pays it?

Well this is where it gets complicated and confusing. The employer has to pay the additional 65% initially. Remember that these companies are usually in cost-cutting mode. We've just offset the amount saved in salary by the amount being paid in premiums. But for argument's sake let's assume this amount is not material.

They actually will get this money back - it will just take a couple of months. Whatever they pay out in health insurance 'subsidies' can be counted as a credit against their payroll tax filings.

That's the paradox.

We've just paid for health insurance premiums using social security and medicare taxes.

So apparantly the solution is to use programs that are already grossly underfunded to help pay for the stimulus. Yes, kids and grandkids need to watch out.

And remember in this case, while working the employee was paying 50% of their premiums. Now they only pay 35%.

It would actually be funny if it wasn't SO absurd.

Economic stimulus? Hopefully somewhere but not in this case. In this instance the phrase "Robbing Peter to pay Paul" comes to mind.

Back in the saddle

I've used the catastrophes from January as an excuse for far too long now. So thanks to a nudge from Allan yesterday during lunch I'm going to get back in the habit of posting something here on more of a regular basis.

First, things are back to normal at the Byrnes house (insert your own comment about our version of normal here). Everyone is back in their designated sleeping area. New carpet and floor has been installed. And thanks to our very good friend Gary Roberts we also managed to get a very nice makeover of our master bathroom. Thanks Gary - we couldn't have done it without you.

We've also added a new addition. Shanna brought home a Bichon/Poodle mix the day before Valentine's as a gift for the kids. He's mostly white with black ears and some black markings on his head. Dakota immediately commented that he looked like an Oreo and it stuck. Oreo.

Ironically he weighs about the same as a package of Oreos. Typically about twice a day we have to go looking under beds and the back of closets to find him. Quite an adjustment for someone who grew up never having a dog that you had to bend over to pet.

Due to all of the unfortunate events of January we have officially decided to cut the entire month from the 2009 calendar. We have deemed February 1 as New Year's Day. So I guess I'm still 36. Now that's a silver lining.