Major medical plans
that were in effect on or before the law was signed on March 23, 2010 and had no significant changes made to them since then
are now grandfathered. Grandfathered plans are now considered GOLDEN and they are to
be treasured and kept in force if at all possible. Even though they may also experience some rate increases, grandfathered
plan rate changes will be nothing like those of non-grandfathered plans under HCR. NOTE: If your plan is grandfathered,
you need to understand how valuable it is. It would be unwise to terminate a grandfathered plan. Plans can lose grandfathered status if the deductible
or co-insurance is changed by more than 15% (in total over time) or if the co-pays have been changed
by more than $5.00 (in total over a period of time) since March 23, 2010 or in the future. Whenever a plan loses grandfathered status it will have to meet all of the new
HCR requirements, which will translate into much higher premiums. So, not only do you not want to terminate a grandfathered
plan, you also do not want to change the deductible, co-insurance or the co-pays if at all possible. Of course, some people may want all of the new mandated benefits of HCR that may
not be included in their grandfathered plan and may actually be willing to pay the cost to get them, but that will be at a
very high cost.
Qualified Health Plans and Essential Benefits
On January 1, 2014 all existing and newly-issued major medical plans had to become
QUALIFIED HEALTH PLANS or “Metalasized” plans. In other words, they must become like the new “Metal”
plans under HCR. Metal or Metalic plans are the Bronze, Silver, Gold or Platinum plans required
by HCR. They must include all of the health reform benefits in order to be a Qualified Health Plan. A Qualified Health Plan must include the “Essential
Benefits,” as they are known. These Essential Benefits are expensive. Not only were non-grandfathered
plans guarantee-issue and had no pre-existing conditions excluded, many benefits were required to be included that were not
covered by older plans.
The10 Essential Benefits
are as follows:
Ambulatory patient services (unlimited
Emergency services & hospitalization
(unlimited maximum benefits)
· Maternity and Newborn care (as any other illness and unlimited maximum benefits)
Mental health and substance abuse
services (as any other illness and unlimited maximum benefits)
· Prescription drugs (unlimited maximum benefits)
Preventative and wellness services
(100%, no deductible, no co-pay, no co-insurance and unlimited maximum benefits)
· Chronic disease management (unlimited maximum benefits)
· Pediatric services including basic oral/dental and vision services
Laboratory services (unlimited
Rehabilitative and habilitative
services and devices (unlimited maximum benefits)
One additional benefit was later added:
Contraceptives and sterilization
services and counseling for women (100%, no deductible, no co-pay, no co-insurance and unlimited maximum benefits)
The Case for Short Term Major Medical Plans
There is also a consensus by some that short-term major medical plans are an alternative
way to go. Remember that on Jan 1, 2014, all major medical plans were required to be guarantee-issue with no waiting
period on pre-existing conditions. Short-term major medical plans are a lot less expensive than the metal plans because they
do not have to comply with HCR. Even though they do not cover pre-existing conditions, if you develop a serious health
condition after your purchase of a short term plan, you can always change to the metal plans on a guarantee-issue basis every
January 1, but you will have to wait until the new HCR “Annual Open Enrollment Period” in order
to do that. HCR guarantee-issue is not available, year-round. It is only available during the Annual Open Enrollment
Period. If you are healthy now, you do not need
to worry about pre-existing conditions not being covered on a short term plan. If your health changes later, you can
always get a guarantee issue metal plan to be effective on Jan 1, during the Annual Enrollment Period.
Health Insurance Company Taxes
Insurance companies will receive
tax notices that they have never had to pay before in order to help pay for Health Care Reform (HCR). These increases
are not in the millions, but will be in the billions over time. In addition, insurance companies have to rent space on
the exchanges in order to do business on them. Insurance companies are going to have to change the way they price their products
- until HCR, health insurance companies used a 6:1 ratio for rating older persons compared to younger persons. Under
HCR, that ratio was cut down to 3:1. That means that older people’s rates came down a bit, but younger, healthier
people’s rates skyrocketed in order to make up the difference in ratio. As a result, many of these younger and healthier
people rejected the exchange entirely and elected to pay the mandated fine for not having health insurance. When
you calculate the cost of guarantee issue, no waiting period on pre-existing conditions, the “Essential Benefits”
requirement, the new community rating ratio system requirement, new taxes and the cost of doing business on the exchanges,
it is easy to see why rates are much higher than anyone could have ever predicted when HCR was originally conceived.
As you can see, much of the rate shock is caused by HCR’s mandates, the new taxes, and charges imposed on the insurance
The Individual Mandate
Care Reform (HCR), there was a federal mandate that forced everyone to have health insurance or pay a fine (except for all those waivers and exemptions that were issued for special
for individuals who do not have health insurance in:
2014 was 1% of income
or $95.00 per person
· 2015 was 2% of income or $325.00 per person
2016 was 2.5% of
income or $695.00 per person
Of course, keep in mind that in order to better motivate people
to buy, the Feds may increase these fines in the future.
The following groups are either exempt from the HCR mandates or they are not eligible:
· Those that can demonstrate a financial hardship - the process for that is controlled by the exchanges
· Those who object because they do not believe in health insurance for religious reasons
· People who are between coverage (without coverage for less than three months)
· Undocumented immigrants
· People who are incarcerated
for whom the lowest cost plan option exceeds 8% of an individual's income
who have incomes that are so low, that they are not required to file taxes
Note: There is a new federal proposal intended to eliminate
the fine for not having a qualified health plan.
· HCR was supposed to expand
Medicaid to a larger number of people that were currently on Medicaid in order to cover many of the uninsured. However, since
the Supreme Court ruling that disallowed that states be mandated to expand Medicaid, many states have elected not to participate
in an expansion of Medicaid. This complicated what HCR’s final cost would be even further because HCR anticipated that
many new people would actually be placed on Medicaid and covered by the states and not have to use the exchange. As
a result of the Supreme Court ruling, only 20 states and the District of Columbia have agreed to expand Medicaid in their
states. Thirty states have decided not to expand Medicaid in their states. This has had a major impact on how many people
who were placed on Medicaid and ended up on the exchanges with a federal subsidy.
· HCR created a sliding
scale tax credit (the subsidy) for non-Medicaid-eligible individuals who have incomes up
to 400% above the federal poverty level. The current poverty level is around $24,300 per year for a family
of four. Four hundred percent of the poverty level is about $97,200 a year for a family of four (12.5% of the people in the
US are currently at or below the poverty level or about 1 in every 10 people) - January, 2018.
· The subsidy is only available through an exchange.
· Although individual and employer small group major medical can be sold on or off the exchange, subsidies
will not be available outside an exchange.
· Small employer groups will have their own exchange called the “SHOP”
exchange. It is different than the individual exchange - very few employers are participating on the Shop Exchange. Many
small group employees began looking for health insurance coverage outside an exchange unless they can qualify for a subsidy.
· Subsidies are not available to people in the above income bracket that are eligible for employer-sponsored
· Again, some
employers, particularly smaller employers, due to the higher costs under HCR, may decide not to offer employer sponsored coverage
anymore since they are not required to do so. Instead, they may send employees over to the exchange and/or offer them
money to buy their own coverage on or off the exchange.
Remember, the only reason for anyone to buy on an exchange is if
they are eligible for a subsidy. Otherwise, they will not need an exchange to purchase medical insurance.
Many insurance companies have left the individual health insurance market. Most insurance
companies will operate off the exchange as well as on it. Most companies on the exchange are not be on all exchanges.
If an insurance company operates
on a state’s exchange and they also offer plans off the exchange in that state, their plans must mimic the benefits
and premiums on the exchange. If they do not operate on a state’s exchange, but they do offer plans off the exchange
in that state, their plans can differ from the “Qualified Health Plans” (QHP’s) on the exchanges. Remember,
plans offered on the exchange must be a QHP and a QHP plan must include all the “Essential Benefits” discussed