With Medicare and Medicaid spending projected to grow from less than 5 percent to near 10 percent of GDP (Gross Domestic Product) over the next 10 years, it’s realistic to expect some eventual changes to these programs. However, that debate lies in the future, and in 2014, Medicare, Medicare Supplements, Advantage Plans and Part D Rx plans will essentially work as they have in previous years.
For people under 65 who do not receive their health insurance through their employer, look for big changes.
The Federal enrollment Web site opens Oct. 1, 2013 for health plans with an effective date of Jan. 1, 2014. The first year of the law’s enactment will have an extended enrollment period to March 31, 2014. The new law requires your guaranteed acceptance by insurance companies, regardless of your health conditions.
Those choosing to go without insurance will be subject to a tax penalty. In 2014, the penalty will be $95 per adult in the family, plus $47 for each child, or 1 percent of your income, whichever is greater. By 2016, these penalties rise to $695 per adult, plus $347 per child, or 2.5 percent of income, whichever is greater.
One professional compared understanding the new health care law to trying to drink from a gushing fire hydrant. The bill’s 2,700 pages have grown to more than 20,000 pages of regulations. Even health care, insurance and legal professionals have difficulty getting their arms around it.
Let’s use examples to make it a little easier to grasp:
Example A) Steve and Mary do not have employer-based coverage. As a family of four, Steve and Mary earn $65,000 a year. They apply and the enrollment Web site “pings” the IRS and other agencies to confirm income. The Web site instantly informs them they qualify for a subsidy. Starting January 1, the government will pay a sizeable percentage of their premium to the insurance company and the insurance company will bill them each month for the difference.
The Affordable Care Act’s subsidies apply to an individual earning up to $43,000 per year, and a family of four earning up to $94,200 (up to 400 percent of the Federal Poverty Level). The lower your income, the higher the subsidy. To receive a subsidy, one must apply through the Federal Web site.
Those individuals and families earning less than 138 percent of the Federal Poverty Level will not use the online enrollment Web site. They qualify for MediCAID (not to be confused with Medicare), since the State of Arizona recently approved the new law’s expansion of Medicaid.
Example B) John and Susan are in their fifties, and together earn $130,000 a year. John opens his policy and checks the issue date, discovering he has a “Grandfathered Plan.” Grandfathered Plans must have an effective date prior to March 23, 2010, when the law was passed by Congress. John calls his health insurer to confirm that yes, he has a Grandfathered Plan. He decides to do nothing, and keep his present coverage. His insurance company will send him a certificate every year, which John can include with his tax return proving that he has a Grandfathered Plan, and will not be subject to a tax penalty.
Example C) Ruth does not have health insurance. She has pre-existing conditions, and was declined for coverage in past years. She applies during the upcoming Annual Enrollment Period, gets notification that she qualifies for a subsidy, and is GUARANTEED coverage with an effective date of January 1.
Example D) Eric and Lois purchased a health plan in 2011, so it is not “grandfathered.” They also make too much to qualify for a subsidy. However, they want to compare plans to see if they can save money. Eric and Lois look at the plans listed on the Federal online exchange. They also check the Web sites of various private insurance companies, and talk to their health insurance broker. Though not all individual/family plans will be listed on the Federal exchange, all insurance companies must follow the standard templates (Bronze, Silver, Gold, Platinum) and offer guaranteed acceptance during the annual enrollment period. This uniformity (comparing apples to apples) makes it easier for consumers to compare.
Example E) Ann owns a health plan she acquired in 2012, so it is not “grandfathered.” However, her health plan was designed by her insurance company to be compliant with the 2014 Federal requirements, and will automatically roll into the new system with no action on her part. She now carefully reads all the mail coming from her insurance company, and they let her know exactly what she needs to do, if anything.
For many years as a health insurance professional, I have often faced a tragic situation when people desperately need health insurance, but cannot get it because of pre-existing conditions. The new law addresses this, and that’s a good thing. But the cost?
Rates will likely increase. Ohio, for example, posted January 1 individual/family health plan rates showing an average 88 percent increase. Concern abounds that younger people, after seeing the high rates, will opt out of coverage and take the tax penalty. The Affordable Care Act needs a solid start to be successful, and if too many healthy people opt out it leaves a higher percentage of people with medical conditions, causing the rates to spiral higher.
There’s also concern about employers cutting their employees back to less than 30 hours a week, avoiding the mandate to offer health insurance. Also, some smaller companies may face pressure to drop their group plans, since keeping lower-wage employees on an employer group plan disqualifies them from receiving subsidies through the online Federal exchange. For larger companies with more than 50 employees, the new law has a penalty for not offering coverage, and those who work for larger companies may see few if any changes to their current health insurance benefits.
Though the Affordable Care Act may struggle as it gets up and going, there’s hope we will eventually work through all the kinks, much like the Medicare Part D Rx program got off to a slow start, but has turned out to be successful. Time will tell.
About the author
Tom Russell is an independent health insurance broker for Medicare Plans, Under 65 Plans, and Small Employer Group Plans. He has served the Rim Country since 1994. His office is on East Highway 260 behind Fargo’s. Call (928) 474-1233 or go to www.TomRUSSELLinsurance.com.