If you're like most people, you're probably clear about the fact that healthcare laws are changing. Unfortunately, that might be all you're clear about. Don't worry – most people are in the same boat because the Affordable Care Act (ACA) and its implications are complicated and multifaceted. Read on to get answers to some of your questions from Atlanta experts about how healthcare reforms may affect you, your family and your business.
What's happened so far?
The ACA was signed into law in March of 2010. Since then, parts of the law have rolled out in stages every few months. Tina Weiss, the senior director of Individual and Family Plans for Kaiser Permanente of Georgia, breaks down the most important changes that the law has required all insurers to implement. She says, "Number one, preventive care coverage became available on every plan for no cost. So you can go in and get your preventive screenings for free now." As of September 2010, the new law also prevents insurers from charging a copay if you go to your doctor for a well visit. She continues, "The second significant change also came in 2010 when we started allowing children on plans whether or not they had pre-existing conditions. And another important change was that we now allow children to stay on their parents' plan up until age 26, and that kept a lot of people covered." These pieces of the ACA are already in effect.
What's coming up next?
The next significant date to be aware of is October 1, 2013. Lisa Owen of Core Benefits Solutions explains that on this date, open enrollment begins and continues through December. On January 1, 2014, "Every U.S. citizen is required to have health insurance, period. If you don't, you will pay a penalty tax when you file your taxes." The penalty is minimal the first year, just $95 or 1 percent of your income (which ever is higher), but it will increase for the next two years. According to Owens, the penalty cap is a maximum of $2,085 per family. Owen also points out that beginning in 2015, businesses with 50 or more employees will also have to pay a penalty if they do not offer "affordable" coverage, which is defined by the government as coverage that costs less than 9.5 percent of annual household income.
According to Michael Parker, CFP and senior consultant at Thrive Advisory Group, LLC, "The law has two possible penalties attributed to 'large' businesses. First, if no health plan is offered there is a $2,000 penalty for every employee minus the first 30 employees if just one employee goes to the exchange and gets a subsidy. Second, if an employer offers a plan, but it does not meet the 60 percent actuarial value or does not meet the 9.5 percent affordability then an employer will pay a $3,000 penalty for each employee that goes to the exchange and gets a subsidy."
Eric Haglund, president of Georgia Benefits, emphasizes another upcoming change. Insurance is now "guaranteed issue," meaning coverage cannot be denied based on pre-existing conditions. He explains, "So if you're uninsured and have a heart condition, on October 1, you'll be able to apply for insurance. They'll have to cover you, and they'll have to cover your heart." The coverage, however, will not start until January 1, 2014. To enable everyone to educate themselves and select an appropriate plan, the Health Insurance Marketplace opens on October 1 as well. Sometimes referred to as the healthcare "exchange," the Marketplace is a federal website where individuals can go to shop for health insurance. Some states have their own state websites to go through, but Georgia does not, so Georgia residents can use the federal site.
What can the Marketplace offer my family and me?
The main thing the Marketplace offers is government subsidies for lower-income individuals and families. "Lower-income" is defined as an annual income of less than 400 percent of the poverty level – for an individual, Owen says, that works out to about $45,000. Weiss points out that the number of dependents will raise this threshold. For example, 400 percent of the poverty level for a family of four is about $95,000. If you or your family fall within this 400 percent category and do not have access to affordable healthcare through an employer, you should be eligible for a government subsidy through the Marketplace to help with the cost of your premium. Weiss explains that the subsidies are "financial assistance, basically. And so those that have not been able to afford it before, now have opportunities to afford it."
What about my business?
If you run a small business (fewer than 50 employees) and are below a certain threshold, your business too may be eligible for a subsidy through the online Small Business Health Options Program, known as SHOP. The smallest businesses, Owen says, with fewer than 25 employees who make less than $50,000 annually, may also be eligible for a small tax credit through the SHOP. Owen posits that the price offerings for businesses through the SHOP may not be very different from those found elsewhere, so she says the Marketplace and its subsidy offerings will likely be most utilized by individuals. "All businesses, including small businesses, need to be aware of the compliance/administrative impact. I refer to this as the "soft cost" associated with the law. The man-hours, systems, reporting, etc. that it will take to maintain compliance will be an added burden to all businesses (i.e. the mandatory DOL notice all businesses have to distribute to all employees no later than October 1, 2013)."
Let's talk money. Will I pay more?
Maybe. Part of the ACA is something called "community rating," according to Owen, Haglund, and Weiss. Weiss explains that the "community" this phrase refers to is a geographic community. "For instance, Metro Atlanta is 'Rating Area #3,'" she says. Insurance companies now look at your geographical area and your age to determine your rate. "Tobacco status is also taken into account," Parker says. This is different than in the past, when your personal medical experience determined your rate. "So that could mean an increase in cost for some people and a decrease in cost for other people," says Weiss.
Something else to consider is a new three-to-one ratio in place for insurance companies: The price of their lowest-cost person cannot be more than three times the cost of their highest-cost person. Now, an example in plain English: If a 20-year-old is paying $100, a 60-year-old can only be charged three times that amount, or $300. Before the reform, that disparity was as high as a ratio of six to one. Basically, this means that in the past, young healthy people started out with low premiums that could – and would – climb throughout their lives. With the new ratio in place, you can expect less fluctuation across your lifetime. Weiss illustrates it plainly, saying, "Imagine that as a big slope. As you bring the slope more toward even, you're going to see some rates increase for younger folks and some rates decrease for older folks."
Haglund explains, "If community rating for individuals and groups under 50 means that rates are basically averaged, then in theory 50 percent of Americans should pay more and 50 percent will pay less. However, because of required changes in coverage and new taxes, if I had to guess, then more likely 75 percent will pay a higher premium and 25 percent will pay less. Groups with more than 50 employees also have new taxes in January so rates should increase on those group plans." This is all an educated guess as specific rates have not been released. Parker also notes, "With such a restrictive three to one band you may see a shift in the whole price continuum towards a more expensive cost. I would be very surprised if 25 percent or more saw a price decrease."
But before you younger readers worry too much about your rates possibly increasing, remember that the subsidy kicks in if you make anything up to about $45,000 per year. If you make more than that but still don't feel you can afford your healthcare premiums, Weiss says the government has created a catastrophic plan, which is a lower-cost plan geared toward people under 30. Haglund expresses some concerns that this younger age bracket still might struggle to afford their premiums when the community rating kicks in, but Weiss says, "I think there are enough options, and quite honestly, so many people fall under the subsidy amount."
So, how does the law's implementation vary from state to state and what does that mean to Georgia residents? "Each state is making a number of decisions about implementation that will change the experience for consumers in small ways. For instance, in some states (i.e. CA and OR), they are mandating health plan designs," says Weiss. This means that all carriers will offer the same plan and the difference will be in the choice of doctors, quality and price. Some are mandating rules about how brokers can sell on the Marketplace (MD, CO). There are many more differences as well. What this means is that consumers may have a slightly different shopping experience in other states, but in general all states have essential health benefits, access to premium subsidies through the Marketplace and standard pricing rules across carriers. Georgians may not see a Marketplace or plans that are tailored directly for the unique aspects of Georgia, but they will still receive all the same benefits that other states will have.
What if I don't want or need to use the Marketplace?
Good news: You don't have to! The Marketplace is merely a tool for customers who want to take advantage of the federal subsidies. Weiss points out, "You can still do any of your normal shopping methods that you use today: going directly to carrier sites, using the broker, etc." If you don't need to shop around because you're insured through work and satisfied with your coverage, then as long as your company keeps the same plan, it's unlikely that much will change. Even your doctor will probably stay the same, since most employers are not changing their networks of care providers. The only real difference, Weiss says, is "people are getting more coverage than before, and that means your costs are more. But it's that tradeoff," she says – higher costs, but better care. She points out that the "lean plans" of years past with high deductibles and little coverage would certainly be cheaper, but thanks to the law's requirements about "essential health benefits," insurers are required to provide more coverage than before. "It varies how much that is going to increase costs for folks," says Weiss. "We have a lot of people that will actually see their prices drop."
So, while the exact changes in rates remains to be seen, the bottom line is that there are lots of options out there and you, the consumer, are more empowered than ever to find the coverage you need. Whether you utilize subsidies through the Marketplace for yourself, through SHOP for your business, or whether you stick with an employer's plan, know that it's up to you to seek out the right plan. Above all, make sure you use your available tools and resources to find coverage that works for you and is effective by January 1, 2014.
If you have further questions, post them on our Facebook page (www.facebook.com/bestselfatlanta). We'll ask our experts to answer them in "The 'New' Healthcare: Part II," coming in October, which will delve deeper into this complicated topic.
Editor's Note: While every effort was made to ensure the information provided in this article was accurate up until press day, due to implementation changes that are continuing to be made, we cannot guarantee the information has not changed in some way.
Eric Haglund, Georgia Benefits – www.georgiabenefits.com
Michael Parker, Thrive Advisory Group, LLC – (404) 216-1108
Lisa Owen, Core Benefit Solutions – www.corebenefitsga.com
Tina Weiss, Kaiser Permanente of Georgia – www.kaiserpermanente.org