Health Insurance for the Self Employed .

June 27, 2013 by Frank West

Health Insurance for the Self Employed

Medicine Bottles Being self-employed is a liberating feeling for those who make it a part of their lifestyle. These people have the autonomy to set their own schedule, and enhance their careers as much as possible without having to deal with mundane office politics. A self-employed person can manage their own career, without having to wait to be promoted. There is one thing however, that is tough to manage, which is health insurance.

When first starting out in a new career, it can be especially difficult to carry health insurance. Although many people would love to become self-employed, and plan carefully for such an event, most do not realize the actual monthly expense of health insurance. Before you make this decision, it is crucial to figure out exactly how much you will be paying for health insurance. Collect as much information as possible, for example the rates you need to pay to cover yourself and possible dependents, and how that fits into your budget.

Being self-employed does not allow you to take advantage of bulk rates that are normally set aside for employers paying to cover their employee’s health insurance costs. This is one of the reasons why the insurance rates are so high. Through careful research, you may find you have access to low bulk insurance rates through a non-corporate affiliation. Possible solutions include programs related to educational institutions you may be associated with, or perhaps your religious background will allow you to get a discount from certain organizations.

Consider joining a group that can help get you an affordable insurance rate. The Freelancer’s Union was formed partly to help the self-employed get health insurance at discounted rates by bringing freelancers together. Take into account nationwide organizations like the Freelancer’s Union as well as local community organizations that will give you options for insurance rates. It’s just a matter of being resourceful and creative to find health insurance as a self-employed person.

The Tax Penalty Won’t Push People to Buy Health Insurance.

June 27, 2013 by Frank West

The Tax Penalty Won’t Push People to Buy Health Insurance

Two-thirds of people surveyed by HealthPocket say a $95 IRS penalty for being uninsured won’t motivate them to buy insurance. Nearly 30% are not sure whether the penalty will motivate them to buy insurance, and only 8% say it would.

Beginning in 2014, the Affordable Care Act requires consumers to buy health insurance or face a tax penalty, with some exceptions for people with financial hardships or religious beliefs that preclude them from purchasing health insurance, among others.

The tax penalty starts at $95 per individual or 1% of household income, whichever is greater. By 2016, the penalty rises to 2.5% of annual household income or a minimum of $695 per person, whichever is greater. Bruce Telkamp, CEO of HealthPocket said, “The law will be most effective if consumers see real value in obtaining the insurance coverage. Only insurers that offer high quality and affordable health plans should expect to see significant new enrollments this fall.”

The tax penalty is not the only strategy that Obamacare will use to promote enrollment. Some premium and out-of-pocket assistance is available for individuals making less than 400% of the federal poverty level or $45,960. However, 63% of consumers who fall in this income band say a tax penalty will not motivate them, indicating that that they need more outreach. For more information, visitwww.HealthPocket.com

Filed Under: Affordable Care Act, Health Care Reform, Health Insurance, Health Savings Account Tagged With: Affordable Care Act, Health Care Reform, Health Insurance Exchange, individual mandate

Will Small Firms Self-Insure After Jan. 1, 2014?

June 27, 2013 by Frank West

Starting Jan. 1, 2014, the Affordable Care Act (ACA) will bring about significant changes in the regulatory landscape for small firms offering health insurance to their employees.

Regulations affecting small firms include “guaranteed issue” and “guaranteed renewal” which require health insurers to offer and renew plans to all enrollees, regardless of health status. Additionally, three-to-one age rate banding will require that the premium paid by the oldest adult enrollee in a health plan will not exceed the premium paid by the youngest adult enrollee by more than a factor of three for the same set of benefits. Such regulations could have the effect of raising premiums for firms with young and healthy workers.

The ACA’s small group regulations will apply to firms with 100 or fewer workers. The impact of ACA’s regulations could be particularly strong for firms with 51 to 100 workers, because health plans available to firms with 50 or fewer workers are already subject to significant regulation, including guaranteed issue requirements, under federal and state law.

Because of the ACA’s regulations, some smaller employers with young and healthy workers are considering avoiding the purchase of health care coverage in the regulated market, opting instead to self-insure their employees. Firms that self-insure pay directly for employees’ health care expenses, and assume the financial risk associated with unpredictable health costs incurred by employees and their family members.

Historically, concerns about these financial risks have dissuaded most small firms from self-insuring. According to the most recent Kaiser Family Foundation Survey, only 15 percent of insured workers at firms with fewer than 200 employees are enrolled in self-insured plans, compared to 81 percent of insured workers at larger firms. However, if their premiums increase due to regulations, small employers may find self-insurance more attractive. This will have broader consequences. If small firms with young and healthy workers self-insure, premiums could increase for firms remaining on the regulated market.

RAND has developed the COMPARE computer micro-simulation model, which uses what is known about the health care system to estimate what will happen as a result of changes such as those prescribed under the ACA. Recent RAND work provides estimates of the proportion of small firms that will self-insure after implementation of the ACA. These simulations suggest that a critical factor affecting self-insurance decisions will be the pricing and availability of stop-loss coverage, a type of reinsurance for self-insured firms.

One common type of stop-loss policy reimburses the self-insured firm if an enrollee’s health care claims exceed a specific dollar value, called the attachment point. An attachment point of $10,000 per enrollee is considered generous. COMPARE predicts that a large proportion of small firms will self-insure only if generous stop-loss coverage becomes widely available, at an affordable price.

Moreover, COMPARE predicts that such increases in self-insurance would occur even if the ACA were not implemented, as long as affordable and comprehensive stop-loss coverage is available. Therefore, we estimate that any increase in self-insurance would be due to the availability of generous stop-loss coverage, not to a strong interest in avoiding ACA regulations.

Will small firms self-insure? The answer will largely depend on actions taken by stakeholders other than small employers, namely, companies selling stop-loss coverage, and the government. There are already many signs that insurers are trying to lure small firms into self-insuring by advertising low stop-loss attachment points. This inducement to self-insurance could be counterbalanced by government action, in order to maintain a balance of healthy and less healthy employees across the marketplace (including the exchanges, the regulated market outside the exchanges, and the self-insured market).

Currently only a handful of states impose limits on how low attachment points can be set. What should the government do to maintain balance among the different segments of the small business health insurance market? One option is to mandate limits on stop-loss attachment points so as to discourage small firms from self-insuring. However, this option could have the drawback that consumers in self-insured plans would have less financial protection in the event that their firms self-insure.

This commentary appeared on The RAND Blog on June 17, 2013.

Filed Under: Affordable Care Act, Group Health Benefits, Group Health Insurance, Health Insurance Tagged With: Affordable Care Act, Group Health, Group Medical Insurance, Health Care Reform, Obamacare

15 PPACA provisions that will take effect in 2014.

June 27, 2013 by Frank West

The effective date of the Patient Protection and Affordable Care Act (PPACA) was March 23, 2010, although various provisions have their own effective dates from January 1, 2010, (the small business income tax credit) through 2018. The start of 2013 saw the launch of a number of key provisions, among them Medicare tax increases, limits on Health FSA deferrals and the requirement that W-2 reporting note employer and employee payments for certain health care items in 2012.

But 2014 is the year when most core pieces of PPACA will be put into effect, notably the mandates that employers with 50+ employees provide health insurance and that individuals obtain minimum essential health coverage for themselves and their dependents, whether or not they have access to coverage through their employer.

Equally momentous, beginning Jan. 1, 2014, states are required to have opened a state-run health insurance exchange, or to have partnered with the federal government to open an exchange. In theory, within these exchanges, insurance companies will compete for business on a transparent, level playing field, which should reduce costs and give individuals and small businesses the purchasing power enjoyed by big businesses. However, health reform does many things to increase costs by covering those who are now uninsurable and by increasing mandated benefits. Many predict these factors will far outweigh any efficiencies created by the exchanges and that health insurance prices will increase. If exchanges succeed, they will create the first viable alternative to the group markets for the younger than age sixty-five population.

Filed Under: Affordable Care Act, Health Care Reform, Health Insurance, Health Insurance Exchange Tagged With: Affordable Care Act, Health Care Reform, Health Insurance Exchange

Why a Health Insurance Penalty May Look Tempting.

June 22, 2013 by Frank West

Why a Health Insurance Penalty May Look Tempting .

Often, when the government wants you to do something, it makes you pay if you don’t. That would seem to be the case with Obamacare, which penalizes companies for not providing health care. But in that penalty, there could be a paradoxical result: dropping health coverage could save companies a lot of money.

$11,429

Employer portion of family health benefit, average current cost

$2,000

Employer penalty for not providing benefits under Obamacare

Once new health insurance exchanges are up and running in October, companies with 50 or more full-time employees will face a choice: Provide affordable care to all full-time employees, or pay a penalty. But that penalty is only $2,000 a person, excluding the first 30 employees. With an employer’s contribution to family health coverage now averaging $11,429 a year, taking that penalty would seem to yield big savings.

Yet there may be costs in employee satisfaction, especially if companies don’t raise pay enough to keep workers whole when they buy insurance on the exchanges.

“No one wants to drop health insurance and have unhappy employees,” says Rick Wald, who heads Deloitte’s employer health care consulting practice.

Few experts see immediate, big changes to existing employer-sponsored coverage. But that may change in time. A generation ago, defined-benefit pensions were prevalent. Not so today.

So why did the government set the penalty at $2,000?

Policy experts don’t agree on the rationale, and the White House didn’t respond to requests for comment. Perhaps the intent was to start a gradual shift from employer-sponsored coverage to the new exchanges. Or maybe the low amount was a compromise needed to pass the law.

Whatever the reason, the government is about to conduct a huge experiment in corporate decision-making.

By ANNA BERNASEK Published: June 22, 2013 New York Times Business Daily

Sources: 2012 Employer Health Benefits survey from the Kaiser Family Foundation and Health Research and Educational Trust; the Affordable Care Act

Filed Under: Group Health Benefits, Health Insurance Exchange Tagged With: Group Health, Group Medical Insurance, Health Insurance Exchange

What to Expect of the Small-Business Insurance Exchanges.

June 21, 2013 by Frank West

Looking to buy a small group plan from your state’s new health-insurance exchange? There’s a risk it won’t be ready to open on time in October.

A report released Wednesday from U.S. Government Accountability Office said that officials still have big tasks to complete, including reviewing plans that will be sold in the exchanges and training and certifying consumer aides who can help small businesses and individuals find plans. (See related article, “Health-Insurance Exchanges Are Falling Behind Schedule.”)

Eleven percent of 783 firms with less than $20 million in annual revenue said that their biggest concern regarding the health-care law is how the insurance exchanges will operate, according to an April survey by The Wall Street Journal and Vistage International Inc., a San Diego-based executive-mentoring group. That compares with 33% who said the cost of health care is their top concern.

If you own a small business and are looking to purchase a small-group plan from your state’s exchange, here’s what you need to know:

Is my small business eligible to buy insurance from an exchange?

The exchanges are limited to only businesses with 100 or fewer full-time-equivalent employees. Full-time equivalent is the number of employees on full-time schedules plus the number of employees on part-time schedules, converted to a full-time basis.

How would an exchange benefit my business?

The small-business exchanges are expected to make it easier for small employers to manage their health-benefits programs. An employer could make a single payment to an exchange, which would disburse the money to the various insurance providers covering its staff, among other benefits.

Also, small group plans purchased through an exchange could be less expensive than what’s available in the private marketplace. This is because the exchanges are expected to attract a large pool of participants, which theoretically would create more competition among insurers, thus resulting in lower insurance premiums.

Husband-and-wife business owners Chris and Maria Guertin of Minneapolis are among those hoping to find a small-group insurance plan within their budget through their state’s exchange. They say they currently can’t afford one to cover themselves, their one full-time employee and any recruits they hire in the future for Sport Resource Group Inc., a retail and wholesale company they started in 2006. But they would like to be able to offer health insurance as an employee benefit to attract and retain top talent in order to grow the business. “A group plan right now is too much,” says Mr. Guertin.

Who’s running the exchanges?

Seventeen states are running their own small business exchanges, with the federal Centers for Medicare and Medicaid Services carrying out the task on behalf of the remaining 33 states. For more information on the exchange in your state, visit www.healthcare.gov/marketplace.

What kind of plans will the exchanges offer?

The exchanges will offer insurance plans from private insurance companies. For 2014, employers in states where the federal government is running the exchange will be able to select just one plan to offer to workers. Which carriers will be participating and how many will vary by state. In some states, such as New Hampshire, only one insurance carrier has expressed interest in the small-business exchange.

When will I be able to start using my state’s exchange?

Though enrollment is slated to begin in October of this year, with plans to take effect in January 2014, the GAO report suggests they may not open in time. The 17 states running their own exchanges were late on an average of 44% of key activities that were originally scheduled to be completed by the end of March, it said.

There have been other setbacks as well. The federal government said in April that contrary to initial plans, it wouldn’t allow workers in the first year to choose between a range of insurance options offered through employers. For the first year, companies will select one plan to offer to workers.

Also, in some states only one insurance carrier has expressed interest in the small-business exchange. For example, regulators in New Hampshire have said they received applications from only one carrier, Anthem Blue Cross and Blue Shield, a unit of WellPoint Inc., WLP +2.48%to sell small group plans or individual policies next year. And in Washington state, officials have had to postpone the exchange altogether because they couldn’t find a carrier willing to offer small-business plans for all parts of the state.

Can I get a tax credit?

If you have fewer than 25 full-time equivalent employees, you may qualify for a tax credit of up to 35% of your premium costs this year and up to 50% in 2014.

Do I even need to buy a small-group plan?

Once your firm reaches 50 full-time equivalent employees, a penalty will kick in if you fail to provide coverage for employees who average 30 or more hours a week in a given month, starting in January. The penalty is $2,000 for each full-time employee in excess of 30 full-time employees. There are no penalties if part-time employees are not offered coverage. The government will rely on data about the composition of employers’ workforces this year in order to determine whether a firm will be liable.

Also, if an employer with 50 or more full-time equivalent employees does offer coverage, but the insurance doesn’t meet the law’s minimum requirements, there is a penalty of $3,000 for each worker who gets a federal subsidy through state insurance exchanges.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

Filed Under: Group Health Benefits, Group Health Insurance, Health Insurance Exchange Tagged With: Group Health, Group Medical Insurance, Health Insurance Exchange

Tackling the New Health-Care Rules.

June 21, 2013 by Frank West

Ready or not, here it comes!

The launch of new marketplaces for buying your own health insurance—a key piece of the “Obamacare” plan—is just four months away.

The launch of new marketplaces for buying your own health insurance—a key piece of the “Obamacare” plan—is just four months away, and the so-called insurance exchanges are starting to take shape.

In late May, the state of California said 13 health-care plans will participate in its exchange, offering insurance in the state’s 19 regions, and insurers in several other states are proposing rates and plans. The federal government will run exchanges in states that don’t provide their own.

If you get your health insurance through your job or through Medicare or Medicaid, you probably won’t be affected by the exchanges. But if you don’t have health insurance through work or you have been buying your own as a sole proprietor, the exchanges will provide central sites for comparing plans and buying individual and family insurance.

For many people who currently buy individual insurance, premiums could go up, reflecting new fees, taxes and a requirement that 10 essential areas be covered. Among those are maternity care, substance abuse and mental-health services and prescription-drug coverage, which aren’t standard in individual policies today, says Sarah Lueck, a senior policy analyst at the Center on Budget and Policy Priorities, a nonprofit group in Washington.

In addition, plans can’t exclude pre-existing conditions. While a typical 60-year-old today might pay five to seven times more for health insurance than a 20-year-old, the new law limits that ratio to three times what a typical young person might pay, says Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the industry’s trade group.

Those who buy through the exchanges and have incomes below certain limits also will get tax credits to reduce their costs.

Beginning next year, those who choose to forgo health insurance could pay a tax penalty of 1% of their family income, or at least $95. Those penalties are set to increase in 2015 and 2016.

Here’s an overview of the new twists and turns coming this fall.

Know your metals. When you go to an exchange, such as Covered California you will see four different levels of plans.

“Bronze” plans are priced so that approximately 60% of the average person’s health-care costs are covered by insurance. “Silver” should cover about 70% of the average person’s costs, “gold” 80% and “platinum” 90%. (In addition, those under 30 can buy a limited “catastrophic plan” intended to provide insurance only when costs reach a certain point.)

Generally, bronze plans should have the lowest premiums and platinum the highest, but prices can vary widely. Proposed premiums for a 40-year-old single person in Portland, Ore., for instance, range from $169 to $401 a month for a bronze plan and $276 to $591 a month for a gold plan.

Bronze plans might look cheap, but that will hold true only if you don’t need much medical care. If you suffer a serious illness or are hurt in an accident, you might have to meet a deductible of up to $5,000 for an individual or $10,000 for a family or pay half the hospital bill.

Under the law, annual out-of-pocket expenses are capped at $6,350 for a single person and $12,700 for a family.

• Check the details. Some states, including California and New York, are standardizing at least some of their plans. For instance, some silver plans will have the same copayments for specialists or emergency-room visits, so buyers can compare apples to apples.

But in most states, plans under a category like silver might have very different deductibles and copays, which you will need to take into account in calculating your actual cost.

“You don’t shop for this the way you do for peaches,” says Karen Pollitz, a senior fellow at the Kaiser Family Foundation, a nonprofit that focuses on health-care issues.

• Network, network. The best copays and rates will apply only to in-network providers, so you will want to be sure that you are comfortable with your choices of doctors and hospitals. While a broad network might be appealing, a smaller one could save you money.

Paul Wingle, head of exchange strategy and implementation at insurer Aetna, AET +1.59%notes that a silver plan with a small network might be cheaper than a bronze plan because the insurer has negotiated better deals with a smaller group of providers.

• What’s your real cost? The majority of people who need to buy insurance are expected to receive some help from the government, depending on their income.

Through tax credits, the government will help fund some of the premiums for those whose household income is up to 400% of the federal poverty level. That’s $45,960 for an individual or $94,200 for a family of four, based on 2013 numbers.

Experts expect those subsidies to reduce some of the cost sting, especially for young people. Those with incomes below 250% of the federal poverty level should also pay smaller deductibles and copays.

• Be prepared. Open enrollment for coverage starting Jan. 1, 2014, will begin Oct. 1 and run through March 31. After that, open enrollment for 2015 will run only from Oct. 15 to Dec. 7, 2014.

To get a head start, you might want to evaluate your medical needs and calculate what will most affect your budget: overall deductibles or copays for specialists or prescription medicine. If you don’t already have a good rainy-day fund, you also should set aside money so that a large deductible or out-of-pocket expense doesn’t put you into debt.

Finally, if you smoke, this is a good time to kick the habit. Under the law, tobacco users could pay as much as 50% more in premiums than nonsmokers.

Write to Karen Blumenthal at karen.blumenthal@wsj.com

A version of this article appeared June 1, 2013, on page B8 in the U.S. edition of The Wall Street Journal, with the headline: Tackling the New Health-Care Rules.

Filed Under: Health Care Reform, Health Insurance Exchange Tagged With: Health Care Reform, Health Insurance Exchange

CRITICAL ILLNESS & DISABILITY.

May 27, 2013 by Frank West

CRITICAL ILLNESS & DISABILITY

Consumers Are Not Prepared for a Critical Illness

Ninety percent of middle-income Americans say they are not financially prepared for a critical illness diagnosis, according to a study by the Washington National Institute for Wellness Solutions. The study surveyed 1,001 Americans ages 30 to 66 with annual household incomes of $35,000 to $99,999. The following statistics reveal that many have little, if any, savings to fall back on in the event of a critical illness: • 75% have less than $20,000. • 50% have less than $2,000. • 25% have no savings.

To pay for out-of-pocket critical illness costs, middle-income Americans say they would need to use credit cards (28%) or loans from family/friends (23%) or financial institutions (19%). Another 23% don’t know what resources they could use to pay their expenses. Millennials and Gen Xers anticipate greater reliance on credit cards and loans to pay for critical illness expenses. Thirty-eight percent say they might never recover financially from a battle with cancer and 45% believe they would never recover financially from an Alzheimer’s/dementia diagnosis.

Eighty-eight percent of middle-income Americans have had no conversations with loved ones or advisers about potential care-giving options and 60% have not discussed financial planning for critical illness. Only 12% have explored care-giving options.

Filed Under: Critical Ilness Tagged With: Critical Illness Coverage.

Why a Health Insurance Penalty May Look Tempting .

By ANNA BERNASEK Published: June 22, 2013 New York Times Business Daily

Individual Rates to Soar In California

Consumers Are Not Prepared for a Critical Illness

Quick Links