Health Insurance

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

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

HSAs Gain Strength As Crucial Retirement Planning Tool.

May 27, 2013 by Frank West

Most retirees will spend an average $250,000 in out-of-pocket health costs during their retirement years, seriously cutting into their nest egg. The flexibility of HSAs and the tax advantages they offer may afford many workers the ability to contribute to their future health needs over their working careers and amass enough wealth to help chip away at their out-of-pocket expenditures. This may be particularly important when workers begin paying Medicare premiums, which are likely to rise when retirees are required to take minimum distributions from tax-advantaged retirement accounts, according to Investment News. Required minimum distributions from tax-qualified retirement plans, pensions and Social Security can trigger an increase in income that results in permanent Medicare premium hikes. As HSAs are tax-free income sources when distributions are used to cover qualified medical expenses, the use of them may help workers cover their costs and premium payments according to a recent report at www.algeus.com.

Filed Under: Health Insurance, Health Savings Account, HSA Tagged With: Health Savings Account, HSA, HSA Retirement Planning

Individual Health Care Mandate Q&A

May 15, 2013 by Frank West

Beginning in 2014, the Affordable Care Act includes a mandate for most individuals to have health insurance or potentially pay a penalty for noncompliance. Individuals will be required to maintain minimum essential coverage for themselves and their dependents. Some individuals will be exempt from the mandate or the penalty, while others may be given financial assistance to help them pay for the cost of health insurance.

What type of coverage satisfies the individual mandate?

“Minimum essential coverage”

What is minimum essential coverage?

Minimum essential coverage is defined as:

Coverage under certain government-sponsored plans
Employer-sponsored plans, with respect to any employee
Plans in the individual market,
Grandfathered health plans; and
Any other health benefits coverage, such as a state health benefits risk pool, as recognized by the HHS Secretary.

Minimum essential coverage does not include health insurance coverage consisting of excepted benefits, such as dental-only coverage.

How does “Minimum Essential Coverage” differ from “Essential Health Benefits”?

Essential health benefits are required to be offered by certain plans starting in 2014 as a component of the essential health benefit package. They are also the benefits that are subject to the annual and lifetime dollar limit requirements.

This is different than minimum essential coverage, which refers to the coverage needed to avoid the individual mandate penalty. Coverage does not have to include essential benefits to be minimum essential coverage.

What is the penalty for noncompliance?

The penalty is the greater of:

For 2014, $95 per uninsured person or 1 percent of household income over the filing threshold,
For 2015, $325 per uninsured person or 2 percent of household income over the filing threshold, and
For 2016 and beyond, $695 per uninsured person or 2.5 percent of household income over the filing threshold.

There is a family cap on the flat dollar amount (but not the percentage of income test) of 300 percent, and the overall penalty is capped at the national average premium of a bronze level plan purchases through an exchange. For individuals under 18 years old, the applicable per person penalty is one-half of the amounts listed above.

Beginning in 2017, the penalties will be increased by the cost-of-living adjustment.

Who will be exempt from the mandate?

Individuals who have a religious exemption, those not lawfully present in the United States, and incarcerated individuals are exempt from the minimum essential coverage requirement.

Are there other exceptions to when the penalty may apply?

Yes. A penalty will not be assessed on individuals who:

cannot afford coverage based on formulas contained in the law,
have income below the federal income tax filing threshold,
are members of Indian tribes,
were uninsured for short coverage gaps of less than three months;
have received a hardship waiver from the Secretary, or are residing outside of the United States, or are bona fide residents of any possession of the United States.

Filed Under: Affordable Care Act, Health Care Reform Tagged With: Health Care Reform, individual mandate

Health Care Reform: What is a health insurance exchange?

May 15, 2013 by Frank West

In case you haven’t heard, big changes are coming in October 2013. Big changes for a lot of people. The Affordable Care Act is expected to help increase access to health care. Health insurance exchanges will be an important part of that.

Most people get health insurance through their employers. But people without this option will now be able to shop for health insurance on exchanges, as an alternative to buying coverage directly from individual health insurers. Exchanges are new and easy to use. And they’ll be open for business in October 2013, allowing consumers to shop for health plans that will begin on January 1st.

Experts predict that by 2016, more than 25 million people will use exchanges to buy health insurance.

So what are exchanges? How do they work? How will things change? And why is this important?

Let’s talk about it!

Think of an exchange as an online marketplace. It’s a website where shoppers can research all their options and then buy health insurance.

There are different types of exchanges… first let’s talk about a public exchange.

The Affordable Care Act requires every state to offer an exchange to its residents. States have a few options:

A state can choose to create and run its own exchange.
If a state decides not to run its own exchange, residents of that state can shop on an exchange that will be run by the federal government.
Or a state can partner with the federal government. In a partnership model, the state and federal government share responsibility for operating that state’s exchange.

No matter what each state decides to do, an Exchange will be available to residents in every state.

Public exchanges will exist for both individuals, who are buying insurance for themselves, and for small group employers, who can buy insurance to offer to their employees. The small group exchange is called SHOP – short for Small Business Health Options Program.

Why are exchanges expected to be so popular? There are a few reasons:

The Affordable Care Act no longer allows insurers to deny coverage or charge people more based on their health status or pre-existing conditions. So, many people who were unable to buy coverage in the past will now start shopping for a health plan.
Starting in 2014, individuals are required to buy health insurance or face penalties. This is called the “individual mandate.” Although the penalty for not buying coverage is initially low, it will grow over time. As the penalty goes up, so will participation on exchanges.
The Affordable Care Act will provide tax credits and subsidies for individuals who qualify, to help make insurance more affordable, when they shop on a public exchange.

Many individuals who shop on exchanges will be new to health insurance. To help make shopping easier, health plans on a public exchange will be labeled platinum, gold, silver or bronze. The metallic level helps shoppers understand the level of coverage a plan offers – how much they will need to pay and what the plan pays.

Platinum plans will have the lowest out of pocket cost for members but the monthly premiums will generally be higher. Bronze plans, on the other hand, will have the highest out of pocket costs for members, but will typically feature lower monthly premiums.

All plans on an exchange have to offer some core benefits – called “essential health benefits” – like preventive and wellness services, prescription drugs, and coverage for hospital stays.

Public exchanges are designed to help shoppers choose a plan that fits their needs and their budget.

So that’s the public exchange – offered by the government – either state or federal, or both.

There are also private exchanges. Private exchanges are not part of the Affordable Care Act. They are created by private sector companies – for example, by a health insurance company or a brokerage or consulting firm. A few private exchanges exist today, but they are becoming increasingly popular.

Like public exchanges, private exchanges can sell to both individuals and employer groups.

Unlike public exchanges, private exchanges are already open for business.

For employers who are trying to keep the cost of offering health benefits manageable, private exchanges offer an interesting solution. Employers can give their employees a set amount of money and then direct them to a private exchange. There, they can shop for a health plan and other benefits, like dental, based on what the employer has selected as options.

Public and private exchanges are likely to appeal to different audiences. Individuals who do not have access to affordable health insurance today are more likely to shop on a public exchange because of the subsidies, which are not available through private exchanges. Employers are more likely to send their employees to a private exchange. And both individuals and small employers will still be able to shop for coverage as they do today, directly from health insurers.

So to highlight a few key messages about exchanges:

Exchanges give people additional access and more opportunity to buy insurance.
A public exchange may be run by the state or federal government, or by the state and federal government working together.
Every state will have a public exchange available to its residents.
Subsidies and tax credits will help make insurance affordable for many individuals who shop on the public exchanges.
Small group employers can buy and offer insurance through an exchange, as well.
Private exchanges are not run by the government but by a private sector company, like a health plan or a consulting firm.
These exist today, but they will become more popular as employers look for new ways to offer affordable benefits to their employees.

One thing is certain: Exchanges are going to change the way millions of Americans view their health insurance – whether it’s how they shop for a plan, what plan they decide to buy or how they use their benefits.

Here at Aetna, we’re ready to do our part to help make health care easy to shop for, easy to understand and easy to use.

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

HHS Resurrects ‘ACORN’ Through ObamaCare.

May 11, 2013 by Frank West

ObamaCare provides millions of dollars in grants to hire community activists and others as “navigators” to assist individuals enroll in health insurance provided by state or federal exchanges and, according to recent reports, register people to vote. In a new rule proposed Wednesday, HHS lays out numerous guidelines for these “navigators”, including paying them up to $48/hour for their work. The rule, guidelines and voter registration effort are a potential vehicle to resurrect ACORN or an ACORN-like entity.

One organization expected to take a lead role in distributing the funds and overseeing hiring is Enroll America, a new non-profit headed by Anne Filipic, a former Obama White House official under Valerie Jarrett. Filipic was also a senior staff member at OFA director and a former Obama campaign director. The organization was founded, in part, by Families USA, a far-left advocacy organization that lobbied aggressively for ObamaCare, a source at HHS told Breitbart News. Filipic has said she expects. Enroll America to spend $100 million on the enrollment effort. A large percentage of this is likely to come from federal funds.

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

Individual Rates to Soar In California

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