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Health Insurance Exchanges:
Whose train wreck is it anyway? Opinion By Kathryn Mayer May 1, 2013 •
By now, I’m sure you’ve heard about top Democratic senator Max Baucus predicting a “train wreck” coming for PPACA. In a budget hearing nearly two weeks ago, Baucus expressed his concern that the exchanges for consumers and small businesses wouldn’t open on time in every state. He also said the “administration’s public information campaign on the benefits of the Affordable Care Act deserves a failing grade.”
People worried about Obamacare’s implementation? Not a big surprise. But a key author of the health legislation screaming about it in a budget meeting? Not great for morale.
Recently, both HHS Secretary Kathleen Sebelius and President Obama admitted some flaws in the whole thing — Sebelius admitted the law would cause higher premiums for some, while Obama just this week said there will be “glitches and bumps” in the rollout of his health care law.
This isn’t news, but just how much higher premiums will be and just how bumpy this ride will end up — those are the questions.
One thing’s for sure: the law is losing steam. Public opinion is no longer on Obama’s side: The latest Kaiser Family Foundation poll found that a majority of Americans have a negative perception of the law. In the latest tracking poll, 40 percent said they have an unfavorable view of the law, compared with 35 percent who have a favorable view.
Oh, but here’s the worst (I mean scariest) part about all of it: Consumers still don’t get it. Like, they really, really don’t get it.
A staggering number of Americans — 42 percent — apparently didn’t realize that the Supreme Court held a huge case on the constitutionality of the law — and voted to keep it. Four in 10 Americans are unaware that the PPACA is still law and is being implemented. Among them, 12 percent believe the law has been repealed by Congress, 7 percent believe it’s been overturned by the Supreme Court and 23 percent say they don’t know enough to say what the status of the law is.
There’s not much else to say besides that’s not OK.
It makes me ask: whose train wreck is this, really? Is it the fault of the administration who passed and praised and pressed this law, but haven’t been able to successfully control its implementation? Is it Republicans who are too prideful for this to work, doing everything they can to prevent the success of the law?
Or is the trainwreck due to the ignorance of Americans, who apparently really need to pick up a newspaper or put on C-SPAN for a few minutes?
It’s a little bit of everyone. But without being embraced by each of these groups, the PPACA won’t just be off to an imperfect beginning; it will be a hot failure.
The Basics Of Health Insurance Exchanges.
As part of the Affordable Care Act (ACA or health care reform law), starting in 2014
all Americans must have a minimum amount of health insurance or be taxed by the
government. The law also requires each state to have a health insurance exchange
where people can buy health insurance coverage. People who don’t get health
insurance at work, or can’t afford it, may be able to get it through an exchange. The
exchanges do not replace buying health insurance privately. They are simply a new
place to shop and buy.
Exchange plans will be offered in a tiered format. The tiers are named
after metals: bronze, silver, gold, & platinum. Each tier will have
several plans to choose from and will include essential health benefits.
Bronze plans will have the lowest monthly premium, but cost shares will
be more when health care services are provided. Platinum plans will
have the highest monthly premium, but cost shares will be less.
All plans must include “essential health benefits” as defined by the
health care reform law. Specifically, the plans must include items and
services from at least these 10 categories of care:*
1. Ambulatory patient services
2. Emergency services
3. Hospitalization
4. Maternity and newborn care
5. Mental health and substance use disorder services, including behavioral
health treatment
6. Prescription drugs
7. Rehabilitative and habilitative services and devices
8. Laboratory services
9. Preventive and wellness services and chronic disease management
10. Pediatric services, including oral and vision care
Subsidies & Credits For Individuals:
Those who don’t have access to affordable, minimum essential health
coverage can buy a health plan from the exchange and get a credit or
subsidy if they meet income requirements. Credits and subsidies help
with the cost of premiums and out-of-pocket health care expenses.
Income requirements:
133% to 400% of federal poverty level
For an individual that equals $15,282 to $45,960 per year (in 2013).
For a family of four that equals $31,322 to $94,200 per year (in 2013).
President Barack Obama’s new health care law will offer subsidies to help people buy private health insurance on state-based exchanges, if they don’t already get coverage through their employers. The subsidies are based on income. The lower your income, the bigger the subsidy.
That could result in smaller tax refunds or surprise tax bills for millions of middle-income families.
“That’s scary,” says Joan Baird of Springfield, Va. “I had no idea, and I work in health care.”
Baird, a health care information management worker, is far from alone. Health care providers, advocates and tax experts say the vast majority of Americans know very little about the new health care law, let alone the kind of detailed information many will need to navigate its system of subsidies and penalties.
“They know it’s out there,” said Mark Cummings, who manages the H&R Block office where Baird was getting her own taxes done. “But in general, they don’t know anything about it.”
A draft of the application for insurance asks people to project their 2014 income if their current income is not steady or if they expect it to change. The application runs 15 pages for a three-person family, but nowhere does it warn people that they may have to repay part of the subsidy if their income increases.
“I think this will be the hardest thing for members of the public to understand because it is a novel aspect of this tax credit,” said Catherine Livingston, who recently served as health care counsel for the Internal Revenue Service. “I can’t think of what else they do in the tax system currently that works that way.” Livingston is now a partner in the Washington office of the law firm Jones Day.
There’s another wrinkle: The vast majority of taxpayers won’t actually receive the subsidies. Instead, the money will be paid directly to insurance companies and consumers will get the benefit in reduced premiums.
Health care providers and advocates for people who don’t have insurance are planning public awareness campaigns to teach people about the health care law and its benefits.
Enroll America, a coalition of health care providers and advocates, is planning a multimillion-dollar campaign using social media, paid advertising and grass-roots organizing to encourage people who don’t have insurance to sign up for it, said Anne Filipic, a former Obama White House official who is now president of the organization.
Starting in October 2013, there’s one more way to get health coverage. It’s called the health insurance marketplace (also known as exchanges). It gives you another way to compare and buy health insurance.
All plans in the marketplace are run by health insurance companies and offer a core set of benefits called “essential health benefits.” These benefits include ER care, hospital stays, maternity and newborn care, prescription drugs and preventive care. You can choose from four levels of coverage: bronze, silver, gold and platinum.
Each level may have a few plans to choose from, with bronze having the lowest monthly premium but you pay more for your care. Platinum plans have the highest monthly premium, but you pay less when you get care.
The Affordable Care Act aims to expand Medicaid to provide coverage for more Americans. States decide whether to expand their Medicaid program. If they do, the expansion means more funds for services that prevent diseases and obesity. People who qualify for Medicaid can get annual exams and vaccines for free. If you’re a woman, mammograms and other wellness checkups are covered at 100%.
The goal is to make it easier for people with Medicaid to take care of their health. Getting the right preventive care is tough when you have limited funds. But this care can prevent serious diseases and the need for costly care later on. The extra funds from the federal government can help Medicaid members get regular checkups and screenings at no charge.
More people can qualify for Medicaid as funding from the federal government goes up. That means more people with lower income can get free preventive care.
If you have Medicaid coverage, the law makes it a little easier to take care of your health. Extra federal funds can help your state cover preventive care. So annual exams, vaccines and certain screenings are free.
Yes. Each state has its own rules on Medicaid, but health care reform requires all plans to cover preventive care. Extra funds from the federal government help the states pay for it. States that choose to expand Medicaid coverage to 133% of the federal poverty can get full federal funding. With the expansion, a person under 65 who earns less than $14,500 a year can qualify for Medicaid. Or a family of up four earning less than $29,700 a year.
Medicaid expansion means offering health care coverage to more people with low incomes. Giving states extra funds for preventive care is part of the Medicaid expansion in health care reform.
Yes. Products and services to help quit smoking will be covered starting in 2014. States can choose to cover family planning services and supplies. Coverage for prescriptions will increase.
In 2014, if you meet the criteria, you might be able to get a subsidy to help you pay for your health plan. You can use it for any plan offered in the health insurance marketplace (also known as exchanges).
How to qualify: You have to make less than a certain amount (as reported on your last federal tax return). You must be a U.S. citizen or legal U.S. alien.
Who qualifies for a subsidy?
Keep in mind, this financial help isn’t offered to people who have other low-cost choices, like Medicaid or Medicare. You also don’t qualify if health plan at work is affordable. This means your share of the premium is less than 9.5% of your earnings.
Open enrollment starts October 1, 2013. Plan coverage can start as early as January 1, 2014.
If you can get a subsidy, you’ll pay a lower monthly premium when you buy a plan in the health insurance marketplace.
No. You can get it when you pay for your health insurance. It will be taken from your premium. The IRS will send the amount of your tax credit to the insurance company.
You can still do that. Tax credits can only be used when you buy a plan in the marketplace.
These things also influence how large of a tax credit you get back.
*The federal poverty level may vary by state.
Choose the Best Health Insurance Plan for You!
Selecting a health care plan can be an overwhelming task, because the options and coverages can be seemingly endless. Which insurance company should you choose? How much of a deductible should you opt for? Is your current doctor “in network?”
Which is better, a PPO (Preferred Provider Organization) or HMO (Health Maintenance Organization)? Consumer Reports has a guide to help you understand the different “managed care” options available, and to choose the best one for you. The features and differences are many. For example, if you don’t want to have to worry about referrals and finding providers “in network,” you may want to choose a PPO. With an HMO you might have to pay the full cost to see a provider out-of-network.
Consider a plan’s deductible, the minimum amount you’ll be responsible for paying before the insurance coverage kicks in. Because the lower the deductible, the higher your premium will be, if you’re in good health and have few regular medical expenses, you may want to opt for an insurance plan with a higher deductible.
Next, think about co-pays, the costs you share with the insurance company. You may be responsible for a set amount, say $15, for an office visit, and $100 for a trip to the emergency room. Insurance plans also often have co-insurance, where you’ll share an 80/20 or 90/10 or similar agreement with the insurance company. They’ll pay 80 percent of the bill, and you’ll be responsible for the balance, up to your out-of-pocket maximum, after which insurance should pick up 100 percent of the bill. The higher your out-of-pocket maximum is, the lower your premiums will be. You should weigh this aspect of each plan carefully.
Beware cheap health insurance. Of course, you want to snag the best deal possible, and pay the least amount in monthly premiums. Fully understand the plan and all of its benefits and limits before you agree to a plan. Ask questions and take notes to compare, if you have to. Check Standard & Poors insurance ratings, and try to choose a plan with a company which has an “A” or higher rating. Watch out for things like “no major medical,” “guaranteed acceptance,” and discounts up to a certain amount. These can be red flags for “junk” insurance plans.
Buy what you need. Don’t get roped in to paying more for extended plans or extra benefits that won’t actually benefit you that much. Conversely, don’t get caught without the coverage you will need. Does the plan you’re considering cover hospital stays and prescription drugs? The plan you choose should cover both, as well as outpatient treatments, emergency services, lab work and imaging, preventive care, mental health, substance abuse, rehabilitation services and maternity care (if you’re a female of childbearing age).
Know the difference between a discount plan and insurance plan. For a discount plan, you’ll pay a monthly fee for a card that may entitle you to discounts from certain providers. These are no intended to be a substitute for a full health insurance plan, and many are scams that won’t actually offer you much for your investment. Consumer Reports recommends familiarizing yourself with the Federal Trade Commission’s Consumer Information article about the difference between discount plans and health insurance.
Insurance plans, other than Medicare, must now provide a standard Summary of Benefits and Coverage form, detailing deductibles, co-insurance, co-pays, benefits and limitations. Use this form to help you compare different plans.
Individual Health Premiums to Shoot Up Under Affordable Care Act Source: WSJ – Merrill Matthews , January 2013
Health insurance premiums have been rising-and consumers will experience another series of price shocks later this year when some see their premiums skyrocket thanks to the Affordable Care Act, aka ObamaCare. The reason: The congressional Democrats who crafted the legislation ignored virtually every actuarial principle governing rational insurance pricing. Premiums will soon reflect that disregard-indeed, premiums are already reflecting it. Central to ObamaCare are requirements that health insurers (1) accept everyone who applies (guaranteed issue), (2) cannot charge more based on serious medical conditions (modified community rating), and (3) include numerous coverage mandates that force insurance to pay for many often uncovered medical conditions. Guaranteed issue incentivizes people to forgo buying a policy until they get sick and need coverage (and then drop the policy after they get well).
While ObamaCare imposes a financial penalty-or is it a tax?-to discourage people from gaming the system, it is too low to be a real disincentive. The result will be insurance pools that are smaller and sicker, and therefore more expensive. How do we know these requirements will have such a negative impact on premiums? Eight states-New Jersey, New York, Maine, New Hampshire, Washington, Kentucky, Vermont and Massachusetts-enacted guaranteed issue and community rating in the mid-1990s and wrecked their individual (i.e., non-group) health-insurance markets. Premiums increased so much that Kentucky largely repealed its law in 2000 and some of the other states eventually modified their community-rating provisions.
States won’t experience equal increases in their premiums under ObamaCare. Ironically, citizens in states that have acted responsibly over the years by adhering to standard actuarial principles and limiting the (often politically motivated) mandates will see the biggest increases, because their premiums have typically been the lowest. Many actuaries, such as those in the international consulting firm Oliver Wyman, are now predicting an average increase of roughly 50% in premiums for some in the individual market for the same coverage. But that is an average. Large employer groups will be less affected, at least initially, because the law grandfathers in employers that self-insure. Small employers will likely see a significant increase, though not as large as the individual market, which will be the hardest hit. We compared the average premiums in states that already have ObamaCare-like provisions in their laws and found that consumers in New Jersey, New York and Vermont already pay well over twice what citizens in many other states pay. Consumers in Maine and Massachusetts aren’t far behind. Those states will likely see a small increase. By contrast, Arizona, Arkansas, Georgia, Idaho, Iowa, Kentucky, Missouri, Ohio, Oklahoma, Tennessee, Utah, Wyoming and Virginia will likely see the largest increases-somewhere between 65% and 100%. Another 18 states, including Texas and Michigan, could see their rates rise between 35% and 65%.
While ObamaCare won’t take full effect until 2014, health-insurance premiums in the individual market are already rising, and not just because of routine increases in medical costs. Insurers are adjusting premiums now in anticipation of the guaranteed-issue and community-rating mandates starting next year. There are newly imposed mandates, such as the coverage for children up to age 26, and what qualifies as coverage is much more comprehensive and expensive. Consolidation in the hospital system has been accelerated by ObamaCare and its push for Accountable Care Organizations. This means insurers must negotiate in a less competitive hospital market. Although President Obama repeatedly claimed that health-insurance premiums for a family would be $2,500 lower by the end of his first term, they are actually about $3,000 higher-a spread of about $5,500 per family.
Health insurers have been understandably reluctant to discuss the coming price hikes that are driven by the Affordable Care Act. Mark Bertolini, CEO of Aetna, the country’s third-largest health insurer, broke the silence on Dec. 12. “We’re going to see some markets go up by as much as 100%,” he told the company’s annual investor conference in New York City. Insurers know that the Obama administration will denounce the premium increases as the result of greedy health insurers, greedy doctors, greedy somebody. The Department of Health and Human Services will likely begin to threaten, arm-twist or investigate health insurers in an effort to force them into keeping their premiums more in line with Democratic promises-just as HHS bureaucrats have already started doing when insurers want premium increases larger than 10%. And that may work for a while. It certainly has in Massachusetts, where politicians, including then-Gov. Mitt Romney, made all the same cost-lowering promises about the state’s 2006 prequel to ObamaCare that have yet to come true. But unlike the federal government, health insurers can’t run perpetual deficits. Something will have to give, which will likely open the door to making health insurance a public utility completely regulated by the government, or the left’s real goal: a single-payer system.
Starting in 2014, Barack Obama’s health care law will expand coverage to some 30 million uninsured people. At the same time, insurers no longer will be allowed to turn away those in poor health, and virtually every American will be required to have health insurance — or pay a fine. Insurance will be available through an employer or a government program or by buying it on their own.
Here’s a look at some of the major taxes and fees, estimated to total nearly $700 billion over 10 years.
– Upper-income households. Starting Jan. 1, individuals making more than $200,000 per year, and couples making more than $250,000 will face a 0.9 percent Medicare tax increase on wages above those threshold amounts. They’ll also face an additional 3.8 percent tax on investment income. Together these are the biggest tax increase in the health care law.
– Employer penalties. Starting in 2014, companies with 50 or more employees that do not offer coverage will face penalties if at least one of their employees receives government-subsidized coverage. The penalty is $2,000 per employee, but a company’s first 30 workers don’t count toward the total.
– Health care industries. Insurers, drug companies and medical device manufacturers face new fees and taxes. Companies that make medical equipment sold chiefly through doctors and hospitals, such as pacemakers, artificial hips and coronary stents, will pay a 2.3 percent excise tax on their sales, expected to total $1.7 billion in its first year, 2013. They’re trying to get it repealed.
The insurance industry faces an annual fee that starts at $8 billion in its first year, 2014.
Pharmaceutical companies that make or import brand-name drugs are already paying fees; they totaled $2.5 billion in 2011, their first year.
– People who don’t get health insurance. Nearly 6 million people who don’t get health insurance will face tax penalties starting in 2014. The fines are estimated to raise $6.9 billion in 2016. Average penalty in that year: about $1,200.
– Indoor tanning devotees. The 10 percent sales tax on indoor tanning sessions took effect in 2010. It’s expected to raise $1.5 billion over 10 years.
The 28 million people who visit tanning booths and beds each year — most of them are women under 30, according to the Journal of the American Academy of Dermatology — are already paying.
2013 Taxes Take Effect to Fund Healthcare Law
We keep hearing our politicians talking about the “fiscal cliff” and not raising taxes on the middle class, and whether or not to raise taxes on the top 2% of earners in the United States. What we are not hearing as that the middle class and the top earners are being hit on January one with several new taxes to fund the healthcare law that will be fully implemented a year from now.
Some of the taxes that go into place on January 1, 2013 are an increase in payroll tax on wages, and investment income, including, dividends, interest and capital gains.
Since affluent people tend to be more likely to have health insurance than lower income people, in a sense they will be helping to pay for health insurance for lower income families.
Employers and employees will also not be paying a Medicare tax this will be in the amount of 1.45 % of all wages earned. It will also require an additional.09% for all earners over $200,000.
Here are a list of all of the upcoming taxes that go into effect in 2013
1) Employer reporting of insurance on W-2 (PPACA page 1957)
2) Surtax on investment income (Reconciliation Act pages 87-93, this creates a new 3.8% tax on investment income including the sale of your home.
3) Hike in Medicare payroll tax (PPACA pages 2000-2003, Reconciliation Act pages 87-93)
4) Tax on Medical Device Manufacturers (PPACA pages 1980-1986) this creates a tax on medical equipment retailing over $100.
5) High Medical Bills Tax (PPACA pages 1994-1995) Currently if you have medical bills over 7.5% of your AGI you can get a deduction, now it will be 10%
6) Flex Spending Cap (FSA) (PPACA pages 2388-2389) imposes a cap of $2500
7) Elimination of Tax Deduction for employer provided RX drug coverage in co-ordination of Medicare part D (PPACA page 1994)
8) $500,000 Annual Executive Compensation limit for health insurance executives (PPACA pages 1995-2000). This limits what executives of health insurance companies can make. I find this one interesting because it is OK for the President of the American Red Cross to have a salary of $651,957 and the President of the United Nations Children’s Fund (UNICEF) to have a Salary of $1,200,000 per year.
With the “Bush Tax Cuts” expected to expire compounded with these new taxes, be prepared to pay significantly more in 2013 than you did in 2012.
The only states to be affected are those that refuse to set up their own exchanges because of opposition to the Patient Protection and Affordable Care Act. They are almost certain to be those under Republican control. In those states, HHS will set up the exchanges GOP governors are taking a hard line against implementing any part of the healthcare law, which will mean insurers in their states will need to pay the monthly fee, The Hill reports.
Arizona Gov. Jan Brewer announced this week that her state will not set up an exchange, calling the proposal “too expensive and too risky.” Her decision brings the total of states refusing to comply with the act’s provisions up to 17. The exchanges were supposed to be up and running in all states by 2014. HHS plans to charge insurers 3.5 percent of the premiums for each plan they sell through the federal exchange.
There are still some states that haven’t yet decided whether to set up their own exchanges or use the federal exchange option, so it’s not yet known how much money the HHS will collect from insurance companies. In addition, HHS said it might change the user fees later on as more people enroll through the exchanges. But exchanges that don’t attract enough insurers may make the companies carry larger percentages of unhealthy and thus expensive, patients, making them appeal even less to customers. “It is important to keep in mind that any new fees to pay for the administration of exchanges will add to the cost of coverage, and that is why the focus needs to be on reducing administrative costs, streamlining operations, and avoiding regulatory duplication that will add complexity and increase costs,” America’s Health Insurance Plans (AHIP) said in a statement on the new rules.
The regulations also show how the government plans to redistribute money to help insurers with expensive clients stay afloat, as Obamacare provides fees to help companies offset the costs of taking on numerous unhealthy patients. The Obama administration says the process is designed to make sure one insurance company doesn’t get stuck with an unhealthy risk pool.
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