Health Care Reform, ObamaCare, Patient Protection and Affordable Care Act – it all adds up to the Affordable Care Act, which became official in 2010.
So why do we know so little about it and why are we not prepared? Why are the airwaves full of misinformation that scares employers and employees alike? Are there really fines and penalties of thousands of dollars?
Part of the information breakdown problem is that the law is very complex. Not many people have actually read it, few want to read it, and even if they did read it, would they really understand it?
IXG Consulting Group has deconstructed the Affordable Care Act for Tire Review to help you understand the main points of this legislation and how they will impact you. Whether you own a small or large company or you are an individual in college, there are a few things you need to know:
1. Grandfathered Plans: If your medical insurance coverage was in effect prior to March 23, 2010, you can keep your plan and be in compliance with the law. Not all of the new requirements apply to grandfathered plans.
2. If you are insured with a state or federal Pre-Existing Condition Insurance Plan (PCIP), that coverage will end on Dec. 31. Why? PCIP was a “gap” plan to help those that could not obtain affordable insurance between Sept. 23, 2010, and Jan. 1, 2014. Individuals that are currently insured under PCIP will have to obtain other coverage.
3. Coverage for All: Effective Jan. 1, 2014, no individual or small employer group can be declined coverage. Rate increases, waiting periods, nor exclusions can be imposed on any insurance policy for pre-existing medical conditions.
4. Open Enrollment will begin this October and run through February 2014. During this period, individuals will be able to obtain insurance coverage under the new law. Penalties will be applied for each month to those who go uninsured after February 2014.
5. Making Insurance Affordable: The general consensus is that rates are certainly going to go up, so exactly how does that measure up to the “affordable” portion found in the title? Well, discounts, tax credits and premium credits also known collectively as “subsidies” will be available to individuals that are within certain income levels. Those with annual income equal to or less than 400% of the Federal Poverty Level, or $45,960 (2013) for an individual, will be eligible for a subsidy. If income falls below 133%, the individual will be eligible for Medicaid. Medicaid is a federal and state funded insurance program that is free for those who qualify. Medicaid will be extended to individuals, pregnant women, children, elderly and the disabled.
6. Tax Credits for Businesses: Employers with 25 or fewer full-time equivalent employees that earn less than $50,000 annually are eligible for tax credits. If your company fits the bill and is already offering benefits, you can receive 35% to 50% in 2014 tax credits for premiums paid. File form 8941 with your tax return to claim.
7. Avenues for Insurance and Subsidies: There will be many ways to obtain coverage and comply with the law, but there are a few things employers and employees have to know.
• Exchanges: Health Benefit Plan Exchanges – now more widely recognized as Marketplaces – will be operated by federal or state authorities depending on what an individual state decides. To obtain coverage and receive the subsidies, employers and employees must enroll through the Marketplace. Individuals and companies with fewer than 50 employees are able to utilize the Marketplace or continue to be serviced by their agent/broker, who will have access to the exchange platform.
• Small Business Health Option Program (SHOP) – this will be a privately operated exchange or Marketplace for small businesses with up to 100 employees.
• Medicaid has been extended to individuals with the only qualifying factor being limited annual income.
• Medicare gives coverage for individuals 65 years of age or older who have worked at least 40 quarters and those under the age of 65 who qualify due to health status or disability.
• Employer group insurance, continued coverage under a grandfathered plan, and co-ops are consid- ered valid plans to avoid penalties.
8. Penalties: fines will be processed when your taxes are filed and most individuals and large employers (50+ employees) will be subject to the “Play or Pay” rule. Individual fines will inch up over a three-year period and will be the larger of:
• 2014: $95 or 1% of income
• 2015: $325 or 2% of income
• 2016: $695 or 2.5% of income
Large employers with 50 or more full-time equivalent employees will pay penalties for the following:
• Offering no coverage = $2,000 per employee minus the first 20.
• Offering unaffordable or no coverage to employees, forcing them to seek subsidies through the exchange = $3,000 per employee minus the first 20.
9. Qualified Health Plans: Insurance coverage must meet certification by the Department of Health and Human Services as a qualified health plan in order to be offered through the exchange or be offered as coverage that complies with the law. Beginning in January, all plans will extend coverage for: maternity and newborn care, rehabilitative and habilitative services, pediatric service, including oral and vision care, just to highlight a few.
10. Rebates: Insurance companies are required to use your premium dollars for health-related services and research. If they don’t, you receive a check. The first rebate checks were sent on August 1, 2012, totaling over $1.1 billion.
Many concerns remain, so here are a few common questions and answers:
• Free Insurance: Some believe insurance will be free. Not so fast. As mentioned, Medicaid will be offered to those that are living in poverty, but for the majority of us, insurance coverage will be far from free.
• Tax on Employee Benefits: Employers are required to report the dollar amount spent on benefits in your W-2 as of 2013. However, this will not be taxable income to the employee.
• Employers Have to Offer Benefits: There is not a requirement, but rather an encouragement to offer coverage to employees. Remember: employers with less than 50 full-time equivalent employees will receive tax credits for offering qualified medical insurance benefits.
Companies with more than 50 full-time equivalent employees will be penalized for not offering such benefits.
Insurance costs will continue to rise; this is no surprise. But consider this – rates in the small group benefits sector will not see much more than a 4% increase due to health care reform, according to the Congressional Budget Office, industry analysis and government regulations.
Individual plans will take the largest hit due to the need to get the plan benefits up to par. Those individual plan rate increases will range from 12%-30%.
I know you are asking: “Why, if we have a law starting with the word “Affordable” would already astronomic insurance premiums go up?”
Premium increases will occur primarily due to the fees being imposed by the federal government onto the insurance companies. These increases are then passed down to you and me – the policyholders. The increases will cover a range of so-called “patient-centered” services, such as “Research Institute Fee,” “Transitional Reinsurance Fee,” “Insurer Fee,” and “Risk Adjustment Fees.”
One thing is for sure: the law is full of changes to what we understand of health care insurance and can be very confusing. The practice of medicine and service of insurance programs will change dramatically as we approach the end of 2013.
The best advice is to arm yourself with real facts, not what you might hear on TV or from friends and family. Seek out knowledgeable, professional assistance if necessary to make sure you and your business are on the right side of the new regulations.
Most of all, take a deep breath and relax. The world is not coming to an end, government is not taking over and your business is not likely to fail as a result of the Affordable Care Act. Like any new government regulation (such as the TREAD Act, for example) there will be a period of confusion, concern and adjustment.
As both business and government proceed forward under real-world conditions, these regulations may well require tweaking. That means you will need to remain vigilant to stay ahead of the curve.
Alicia Gibson is the managing partner of IXG Consulting Group, a Mooresville, N.C., business consultant specializing in risk management, human resources, training and inter-corporate communications.