Healthcare Reform School, Lesson #12: What does the Delay in the Employer Mandate Really Mean?

Welcome back to class.  Another scorching day here in Chicago, which I love.  This morning on my walk with my dog, I was thinking about the ramifications of the delay in the "Employer Mandate" in the Healthcare Law and what that means to people. I have been thinking and reading about this a lot in the past week.  Therefore the topic of this morning's blog was determined.  First I will explain exactly what the delay means in terms of the law, and then some general ramifications to people in general.

A big part of the Patient Protection and Affordable Care Act (PPACA) is that employers with more than 50 full time employees will be REQUIRED to provide QUALIFIED health insurance to employees at a reasonable cost.  If they do not provide good health insurance at a reasonable cost to employees, then they will be fined by the federal government approximately $2,000 per employee.  This is the part of the law that has been delayed by one year.  No other part of the law has been delayed.

Mark Mazur, Assistant Secretary for Tax Policy, wrote in a July 2nd, 2013 blog post.“We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,”  “We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so.”

This was part of the announcement and the stated reason for the delay.  Businesses are complaining that the law is so ornerous in its reporting and it will be too difficult to get that part up and running by January of 2014.  No matter that this has been on the books since March 13, 2010.  In fairness to businesses, politicians have created doubt from the beginning about the efficacy of the law, and the details for the requirements have been long in coming.  Due to this lack of certainty, businesses took a wait and see attitude toward preparation.  After all, why should they spend money on something that might not happen, that takes away from profits.

So we know what this means to businesses.  They get a break for a year.  Most large corporations already provide qualified group plans, so no biggy for them and their employees.  It affects the smaller businesses and their employees and those few corporations that do not provide qualified health benefits.  A prime example is the McDonald's Franchise owner or similar type of operator.  Many of them do not provide health insurance to all employees. They are in the gray area of the law because they use many part time employees also, which makes requirements a bit more blurry.

All of this affects businesses in terms of what they are required to provide to employees, and in practice this affects those people that work for those businesses.  Now the catch here is that individuals are still mandated to get health insurance or face a penalty.  In the first year this penalty is minimal, $95 per year per person.  So many people will go without health insurance anyway and the penalty is not too bad, it is much less than actually buying the health insurance.

So for most people who do not get insurance through work now, that will not change in 2014.  Therefore the only option for compliance is to purchase their health insurance from a public Marketplace (online exchange) or a private Marketplace (similar to current methods of purchasing private insurance).  If they are eligible for a subsidy based on their income, then they will want to go to a public Marketplace.  If they do not qualify for a subsidy then a private Marketplace will be much easier and provide better doctors networks.

Courtesy of Simon Howden at freedigitalphotos.net

Note: The Federal Poverty Level (FPL) in 2013  is $11,490 for an individual and $23,550 for a family of four.  So if you make less than four times these totals as your Adjusted Gross Income, then you will qualify for some level of subsidy.  To figure out how much, use this subsidy calcultor.

The bottom line for the law is still this:  Everyone will be required to have health insurance and the insurance companies are required to insure everyone that applies, and the subsidies are designed to make it affordable to some. 

What changes for a year is that many people who were counting on employers to provide insurance will not get that option and many businesses will have one additional year to figure out how to deal with this extra government requirement and cost to their business.

If you would like my opinion on this, then write a comment.  I am trying to keep this blog objective and educational.  Opinions can skew the objectivity.  If you would like to check out the rest of my blog, check them out below

Lesson #1 - Introduction
Lesson #2 - Basic Reason for creating the Patient Protection and Affordable Care Act
Lesson #3 - Public exchanges for Purchasing Insurance
Lesson #4 - Essential Health Benefits that will be added to all Health Insurance policies in 2014
Lesson #5 - Tax Credits to Help Pay for Health Insurance
Lesson #6 - Enforcement and Penalties in the Affordable Care Act
Lesson #7 - Preparing for the Affordable Care Act
Lesson #8 -  Options for Small Businesses
Lesson # 9 - Will my Insurance Premiums change in 2014?
Lesson #10 - What Will Happen to Small Groups in 2014?
Lesson # 11 - Why Should I Buy Insurance Before the Deadline?

Healthcare Reform School - Lesson #11 - "Why should I buy insurance before the Deadline?"

Welcome back to class.  It is a beautiful day in my hometown of Chicago. I just finished walking my dog Kodie and enjoyed the 75 degree weather and clear skies.  If only we had 364  additional days like this one here.

As I was walking and thinking about blogging this morning, I went over in my head a recent email received from someone who was trying to figure out how to proceed with health insurance.  They emailed me since I am health insurance agent/broker and this is what I do for a living.  It was.a very simple question, "Why should I buy health insurance before the deadline?"  This is  a simple question with a few answers.  The very quick and simple answer is

1. A person should not be without health insurance for any amount of time.  Insurance does these important things: a) provides access to the medical system with deep discounts; b) protects you in case of a medical emergency;  c) protects your assets if something happens and you need major medical treatment. 

The more complex answer of course deals with the Affordable Care Act and how it will affect insurance.  This is the part of the answer they are trying to figure out.  And is perfect content for a complete Healthcare Reform School lesson.  Five reasons follow and then I will explain them in the following paragraphs.

Courtesy of: jscreationzs on Freedigitalphotos.net

1. Premiums will be higher for most people after the deadline, January 1, 2014.  Estimates range anywhere from 30% to over 115% higher, depending on your age and geographic location.  The youngest will be affected most, while the older generation should have the least amount of premium increase.  To figure out what your premium might be in 2014, you can use this rate calculator from the independent non-partisan Kaiser Family Foundation.  Which is an excellent place to learn everything you ever wanted to know about health insurance and the Affordable Care Act.  There is major point to make about premiums in 2014.  Many people will qualify for government subsidies based on income levels.  The rate calculator will help to determine if you will qualify for subsidies.
2. If you are a smoker, definitely buy now!  After the deadline, insurers will not be able to rate up people for pre-existing conditions, but they will be able to rate up smokers.....A LOT. So lock in a rate now and save money during that first year and try to kick the habit before 2015.
3. There are policies available now that will be stable all the way through the end of December 2014.  So if you buy ahead of the deadline, you will have a stable policy and price for the first year.  Put yourself in a good position now to ride out the bumpy first year of the individual mandate to have insurance.  My feeling is that during this first year a lot of bugs will be worked out and the law should be easier to deal with in 2015, there will be better options for insurance at that point.  To make my point about working out the bugs during the first year, I can simply refer to the recent delay in the employer mandate until 2015.  This means that they are already trying to work out the bugs during 2014, and should have a more coherent policy in 2015.  Again, ride out that bumpy first year with by going into the year with a stable policy!
4. There are choices now that will not be available after the mandate.  There are only four choices for insurance after the mandate.  All policies are required to follow government guidelines for what type of insurance they can offer. So not only is the government telling people they need to buy health insurance, the government is also dictating what type of insurance to buy.  What this means, basically, is that all policies have a limit on how high the deductible can be plus all policies must cover all of the Essential Health Benefits  (including maternity, mental health, drug rehabilitation, etc).  These two factors alone increase the premiums substantially.
5. The public exchanges will have long and detailed applications that require financial information.  Essentially, on the public exchanges people will be submitting an application to the IRS for a subsidy for health insurance.  People will also be able to purchase insurance on private exchanges, which my agency will be.  So, for those who do not qualify for a subsidy base on their income, I can help get a policy without the government application.  These polices will follow the same coverage guidelines, but will have more robust doctors networks because they will not be subsidized.

These are the main reasons to buy health insurance before the deadline.  I have explained many of these point in more details in my previous 10 blogs.  If you would like to learn a bit more about one or all of these topics, review the lessons below and go to that specific blog.  Have a happy day, I hope the day ends up as nice as it started.

Lesson #1 - Introduction
Lesson #2 - Basic Reason for creating the Patient Protection and Affordable Care Act
Lesson #3 - Public exchanges for Purchasing Insurance
Lesson #4 - Essential Health Benefits that will be added to all Health Insurance policies in 2014
Lesson #5 - Tax Credits to Help Pay for Health Insurance
Lesson #6 - Enforcement and Penalties in the Affordable Care Act
Lesson #7 - Preparing for the Affordable Care Act
Lesson #8 -  Options for Small Businesses
Lesson # 9 - Will my Insurance Premiums change in 2014?
Lesson #10 - What Will Happen to Small Groups in 2014?
 

Healthcare Reform School - Lesson #10, What will happen to small groups in 2014

Welcome back to school.  Today I will explain what will happen to most of the small group health insurance plans in 2014.  Small group plans will be a thing of the past, like dinosaurs.  There is no reason to start a new small group plan in 2014 or to keep a small group plan in force.  How can this be?  To understand how I can say this, lets take a look at why many small group plans exist.

1. Employers want to provide a benefit, and a small group has always been a popular option.  health benefits are expected by employees and are a good tool for recruiting and retention.
2. Some employees usually have pre-existing conditions that will exclude them from coverage on the private market, but within a group that person cannot be rejected by an insurance

   

   renjith krishnan/FreeDigitalPhotos.net

   company.

The problem with group plans is that they get very expensive over time.  The reason they get expensive is that the sick people start using medical services and filing claims.  Then the insurance have to raise premiums on that particular small group to reclaim their expenses.  This can lead to huge increases and very expensive premiums. That never go down.  Some people will leave the group and this will increase the premiums even more because the group is even smaller so insurance companies increase premiums even more to reclaim their costs.  This is a vicious cycle known as the DEATH SPIRAL.  This is a real term and a part of the insurance world.

Fast forward to 2014.

1. Insurance companies can no longer refuse coverage to anyone, so that reason for small group plans goes away. 
2. If an employee is eligible for a qualifying group plan, then they are not eligible for federal subsidies on the health insurance exchanges.  So a group plan can actually take money out of peoples pockets.
3. The employer can still offer benefits to employees through an alternative health benefit plan called a Health Reimbursement Arrangement (HRA).  This will fix the cost for the employer and more importantly allow the employee to use the benefits to buy insurance on the exchanges or private market.  They will still be eligible for subsidies.

Therefore the small group plans, for companies with less than 50 employees, will become dinosaurs.  They may become a disincentive for hiring and retention.

HRA's are the wave of the future.  I have partnered with Zane Benefits, who administer the HRA's and is the premier on-line benefit company in the nation.  They have it figured out and are geared up for 2014.  This is the wave of the future, for small employers.

This is lesson number 10 so we are in the double digits!Review the single digits lessons below.
Lesson #1 - Introduction
Lesson #2 - Basic Reason for creating the Patient Protection and Affordable Care Act
Lesson #3 - Public exchanges for Purchasing Insurance
Lesson #4 - Essential Health Benefits that will be added to all Health Insurance policies in 2014
Lesson #5 - Tax Credits to Help Pay for Health Insurance
Lesson #6 - Enforcement and Penalties in the Affordable Care Act
Lesson #7 - Preparing for the Affordable Care Act
Lesson #8 -  Options for Small Businesses
Lesson # 9 - Will my Insurance Premiums change in 2014?

Healthcare Reform School - Lesson #9 - Will my insurance premiums change in 2014?

Welcome back students.  I hope you are all learning something from these lessons.  Based on my conversations every day with many people in the market for health insurance, you are ahead of the curve on education just by reading the 8 lessons I have posted so far.  If you have not read them all then there is a review at the end of this blog for you.  Please share this blog with any of your acquaintances that care about big topics like Healthcare Reform and the Affordable Care Act (ACA).

So today I will give some insight to the question "will my health insurance premiums change in 2014" undder Obamacare.  The short answer is YES.  In the long answer I will break it down based on your age bracket, income bracket and where the insurance marketplace of which you are a member.

First I will break it down by age and in the private market place.  I will not cover people in large employer sponsored group plans.  That will be the next blog, so keep an eye out for that if you are a member of that marketplace.

• A great tool for anyone to use to determine what their rates might be in 2014 is the rate calculator.  It will ask for ages of individuals to be insured, income level and zip code.  Then it will give expected rate for 2014.  This tool will also give any subsidy amount that to expect in 2014.  What an awesome tool this is to help prepare for the affordable care act.

  

  Image courtesy of Piyachok Thawornmat http://www.freedigitalphotos.net
  

• People in the youngest age group, under 26, are allowed to stay on their parents plan, and assuming the parent are paying for it, then this is the only free insurance out their and it will not increase
• However the youngest people buying their own insurance, under the age of 30, will be impacted the most by premium increases.  There have been some articles I have read that premiums will increase as much as 116% for this age bracket in major metropolitan areas.
• If you are a smoker, now is a good time to quit, (duh) because smoking is the only rate up that will be legal under the ACA.  What I mean by this is that a client can have cancer and be in treatment, but can not be charged a higher premium than their healthy neighbor of the same age.  In contrast, if the neighbor smokes, that person can be charged up to 50% more for their health insurance premiums.
• The middle age groups will be affected by premium increases also.  However since the older groups pay higher premiums already, they will be affected less each decade of increase.  For example, a 51 year old will experience a less dramatic increase then a 41 year old.
• After the age of 60 the premiums will stay the same or possibly be reduced, depending on the type of insurance currently owned by the individual.  If a 61 year old currently has a high deductible plan designed to keep premiums lower, unless they prepare now and lock in a low premium policy, than their premiums will increase significantly also.
• There will be subsidies available for many Americans.  This will be based on income and will be a topic for another blog.  But use this Rate Calculator to determine eligibility for subsidies.

Many people wander why the premiums will increase.  There are many reasons why.  I will list just a few of the more impactful reasons:

• Many sick people that are currently uninsurable are expected to enter the purchase insurance and start filing claims immediately, driving up the cost to insurance companies, who then must raise premiums to pay for these claims.
• The insurance companies will are required to change their rating calculator for older clients -vs- younger clients.  What this means is that currently an insurer can charge up to 5 time more for a client in their 60's than for a client in their 20's.  Under the ACA, insurers are restricted 3x factor on premiums based on age.  Which means they will only be able to charge 3 times more for that same person.  The practical effect this provision of the law will have is to keep the premiums on the older group relatively stable while increasing the premiums on the younger group.
• Minimal Out of Pocket expenses, lower deductible, and essential health benefits are other main factors in increasing premiums.  Currently to keep premiums low people have options such as choosing a higher deductible, and pulling out coverages such as maternity and mental health.  Under the new law, these options will no longer be available, the government is not only telling citizens they need to purchase insurance, but they are putting requirements and what type of insurance to purchase.  The requirement is to have low deductible insurance and all of the essential health benefits will be added to policies regardless of need.  This increase premiums significantly.
• The multiplier that insurers can use to figure premiums differences between young clients and older clients is being changed.  A provision in the ACA restricts this age multiplier.  Currently a insured person in their 60's can be charged up to 5 x more than a client in their 20'.  This multiplier will change to  a factor of 3X in 2014. The practical effect of this provision is the keep the premiums on the older group relatively stable while raising the premiums on the younger group.

 So there it is, yes your premiums will be affected.  My advice is to prepare for the future by planning now.  If you would like some help, contact me at 773-972-5343 or respond to this blog.  The only dumb question is the one that is not asked.

As promised below are the links to my previous blog posts for your continuing education.
 Lesson #1 - Introduction
Lesson #2 - Basic Reason for creating the Patient Protection and Affordable Care Act
Lesson #3 - Public exchanges for Purchasing Insurance
Lesson #4 - Essential Health Benefits that will be added to all Health Insurance policies in 2014
Lesson #5 - Tax Credits to Help Pay for Health Insurance
Lesson #6 - Enforcement and Penalties in the Affordable Care Act
Lesson #7 - Preparing for the Affordable Care Act
Lesson #8 -  Options for Small Businesses