The Countdown Begins! An Affordable Care Act Summary
It's Almost Here!
As of now (January 2013), several aspects of the ACA (Affordable Care Act or Patient Protection Act or "Obamacare") have been implemented. First, children under the age of 19 with any pre-existing condition can now be insured and an insurance company cannot decline them. Second, all plans now must now cover 100% of a policy holder's preventative care expenses without co-pay or deductible. Finally, insurance companies have also been forced to adhere to the 80% MLR rule where they must pay at least 80% of all premiums received to patient medical claims.
Many more changes will happen in the next few months, and unfortunately, we don't know how all of them will be rolled out and what plans will even look like right now. HHS (Health & Human Services) is still writing the rules and we are less than a year away from the roll out. Here is a quick bullet point list of the things we know will happen;
Creation Of The Exchange - One of the ACA's main components was the creation of health insurance exchanges where clients could obtain health insurance. Under the law, each state was required to set up an exchange for their residents or if the state opted out, the federal government would create a federal exchange for them. The idea is that the exchange would become a large market place for all the purchasers of health insurance to obtain coverage. In our case, Texas has opted out of the cost of establishing an exchange, so in 2014 we will have a federally run exchange. Since the exchange will be federally run, there is a possibility that government chooses one or two insurance companies to represent the government plan in the state.
The End Of Pricing Differences - The ACA requires that insurance companies become "blind" and "ignorant" to basic math and actuarially sound principles. In 2014, policy holders with pre-existing conditions like cancer, stroke, or heart attack, cannot be declined and must be accepted by all carriers (the exchange as well) AND the premium charged must be the same as the rate paid by healthy people. The same type of pricing will apply to gender. Finally, instead of significant premium difference existing between the cost of an 18 year old and that of a 64 year old, the law requires that pricing differences only consist of 3 "age-bands" (in general there are currently 8 age bands now).
Pre-Existing Conditions Don't Matter - As of January 2014, all insurance companies and the exchange will now be required to accept any applicant. This new change will apply to applicants 19 and older.
Child Only Policies – In the new year, all carriers will be required to offer child-only health policies. Currently, only one firm in Texas offers a child-only major medical health policy and it is only offered twice a year. The carrier does not pay any commission on this product (yuck!).
Maximum Deductibles – One of the most significant changes to the health insurance world will be the requirement that the MAXIMUM deductible that an individual can have is now going to be $2,000. As you all know, individuals and businesses have fought ever-increasing insurance premiums by walking up the deductible ladder to $3000 or $4000, or even $5000 deductible plans. In January, the highest a person may obtain is a $2000 deductible. Clearly, the deductible is the biggest driver in plan cost, so this change will result in huge increases in premiums paid for all of us, whether we have an individual plan or a plan provided by our company.
Essential Health Benefits - Several key health benefits will now be provided as part of every policy. Most of these are pretty straight-forward, but the major improvement that we can now anticipate is that it requires all insurers to pay for maternity coverage. Individual carriers in Texas have not covered maternity. If there is one solid improvement that comes from the implementation of this law, this is it!
The rollout of the ACA will fundamentally change everything we know about health insurance. The most significant change that is coming is the impending price increases. On average, every man, woman, and child should expect an increase in premiums ranging from 50% to 85%!!
Exchange And Non-Exchange Plans – In 2014, there will be an exchange health plan and also non-exchange plans to choose from. The government wants to avoid a situation where all subsidized participants fall into the exchange plan, so at some point there will be a push to require all insurance carriers to allow tax-payer subsidized applicants onto non-exchange plans
Confusion – The creation of the health exchange and new non-exchange health plans will create confusion. Every new plan (exchange or not) will transition to a new open-enrollment format where they can sign up for new coverage in October of each year. This also means that if a client chooses an insurer, they will be stuck with them for the next calendar year, there will be no intra-year switching.
Subsidies – Citizens that don't make much income could actually receive subsidies that will help them pay for their health insurance premiums and co-pays and deductibles. Many of these people may have coverage already if they are responsible, but that should not keep us from evaluating their options and seeing if they can receive assistance. No matter what, these clients may need to adjust their current health plans to come under compliance with the mandate to have a $2000 deductible. Just because a policy owner may receive a subsidy does not require them to go on the exchange, individual carriers will still offer them coverage and they will still obtain the subsidy.
Non-Receipient Of Subsidies – If you make more than $90,000 a year for a family of four, you will not receive a government healthcare subsidy for your health coverage. You must obtain health coverage to avoid tax penalties and may purchase the coverage through the exchange or through private insurance carriers. Over the years I have met many business owners that have felt like they didn't want to spend money on health insurance due to the cost or frankly, they just didn't want to deal with the search. At this time, these same people must obtain coverage as there is a mandatory requirement to do so by December 2013!
Complexity Increases – Any government action usually makes the situation more complicated and confusing. That would of course apply to this situation as well! Texas Health Design is here to help simplify your life and reduce confusion in your health insurance search!
Open Enrollment (Yikes!) – In October of 2013 the government will begin a formal OPEN ENROLLMENT period that should last through the first week of December. During this time, the entire US population that is covered by an individual plan AND those not covered by insurance will be looking for coverage and signing up for a plan either on the exchange or off the exchange. This crazy time will be incredibly confusing and busy. Remember, this won't be just for the federal exchange, it will apply to all individual insurance plan applicants as well. The plan you purchase in October that goes into effect in January will be the plan you have for the remainder of the calendar year.
Commissions - About the most uncertain thing in this whole rollout involves commission payments to health insurance brokers. If the government determines that commissions paid to health brokers will be terminated, reduced significantly, or changed to a small fee per application, many brokers will simply be unable to continue serving their clients and the public. Currently agents build businesses based on the promise of long-term residual growth, any commission scheme that alters or destroys the residual component of the business will certainly be a negative as the true experts in the industry work to slowly build great businesses over time.
Who Will Need Help In The Coming Year?
Poor Uninsureds - Clearly the biggest beneficiary of the legislation will be the poor and the uninsured. Taking out any discussion of cost or how to pay for the huge group of newly "insureds", the bottom line is that these people will not enter the insurance system en mass.
Small Business Employees – If coverage can be obtained more cheaply through the exchange or through an individual plan, employees of small businesses may be interested in pricing their options. Small employers with less than 50 employees may drop their group plan entirely since no one can be declined now (and many key decision makers bought group insurance because they have pre-existing conditions). It may be worthwhile for small groups to quote their employees!
Wealthy Procrastinators And Risk Takers – Let's face it, we all know entrepreneurs and clients that just haven't bought health insurance. They can't put it off any longer, they will be required to sign them up.
People With Pre-Existing Health Conditions – As described above, Americans that have had previous strokes, cancer, diabetes, or other serious condition cannot be declined. In October, they will be able to obtain coverage for the coming year.
I think that is a pretty good review of the changes and challenges that will manifest in the coming year. Please contact me anytime with questions or concerns and please continue to pray that the decision is made to pay residuals on health insurance policies on the exchanges. I look forward to serving you, your family, and friends in these incredibly complex times!
Finally, I will leave you with one tidbit and tease you to keep looking for a future article I need to write. Everyone is "excited" about this new insurance, but I am very concerned that when those uninsureds get that coverage they will be sadly disappointed as they learn that the cost of the premiums will be extraordinarily high and that the deductible and co-insurance (sharing) portions of the coverage require significant out of pocket contributions. There already is a disconnect with what we've been promised (that rates would go down) and reality. Just wait until middle class and wealthy citizens process the truth that their premiums doubled, their access to providers was reduced, and their coverage didn't improve.
Please bookmark www.texashealthdesign.com/thdblog to keep up to date with any new health insurance information.
Jason W Bohmann
Texas Health Design