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Heath Care Reform - Are You Ready For It? - Article #1 

On March 23, 2010, the president signed into law the most sweeping overhaul of our health care delivery system and the health insurance industry in history.  The new law is known as the Patient Protection and Affordable Care Act (PPACA).  It is also known as The Affordable Care Act or ACA, but you probably know it as Health Care Reform (HCR) or “ObamaCare.” For the purpose of this article, we will refer to it simply as “HCR.”

Not only will HCR affect insurance companies, it will impact physicians, hospitals, employers, the self-employed as well as individuals, families and even those on Medicare.  No one will be beyond its reach.

Many of the mandated changes have already occurred.  Some took effect as early as September 23, 2010 and others took effect on January 1, 2011, ‘12 and ‘13.  However, the most significant changes for everyone will occur on Jan 1, 2014.

The Child Continuation of Coverage Provision

You may already know about the new requirement that children can stay on their parents employer group or individual major medical insurance plan until they are 26 years-old. But did you know that those under age 26 can do so even if they are married and have their own homes away from their parents?

The Guarantee Issue of Coverage for Children Provision

Children under the age of 19 are now guarantee-issue for individual major medical insurance, meaning they cannot be turned down or have exclusions for specific health conditions placed on their policies.  Unfortunately, this has caused a mega change in the individual health insurance marketplace.  Insurance companies will no longer cover children alone, without parents being covered on major medical insurance policies.  You can no longer buy a child-only major medical policy.

 The 100% Preventive Care Provision

Preventive care on major medical policies is now paid at 100% with no deductible, co-insurance, co-pays or amount limits. 

 The Elimination of Annual and Lifetime Maximum Limits Provision

Annual and lifetime maximums limits have also been eliminated from major medical policies.

 

 The Guarantee Issue on Everyone Provision

On Jan 1, 2014, everyone (no matter their age) will be able to buy health insurance on a guarantee-issue basis and no one will be declined for coverage or have specific health conditions excluded from their policies.

Health Insurance Exchanges

On October 1, 2013, the new Health Insurance Marketplaces will open.  These are better known as “Health Insurance Exchanges.”  People earning less than 400% of the poverty level will be able to buy health insurance through one of the exchanges and receive a federal subsidy to help pay their premiums.  People enrolling through an exchange in October 2013 will have coverage effective on Jan 1, 2014. Some states will offer a State Exchange, others will offer a Federal and State Partnership Exchange and still others will default to a Federal Exchange.  Most states have opted to default to the Federal Exchange.  More to come in the next article.

Health Care Reform Rate Shock is Coming - Article #2 

Major medical policy owners are in for a reality check come January 1, 2014 and then later when they receive their renewal notice. Those people waiting on their “free” Obama Care are going to be in for a shock as well.   Not only will major medical health insurance not be free, it is going to be extremely expensive, even for those who may qualify for a subsidy on an exchange.  All new individual and existing major medical plans, except for those grandfathered, will have to include the new Health Care Reform (HCR) “Essential Benefits” after Jan 1, 2014. When those new benefits are added, rates will skyrocket.  Major medical plans that were issued after March 23, 2010 are not grandfathered and will be required to comply with all of the new HCR mandates. 

Grandfathered Plans 

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 going to be 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 at this point.  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 will have to become QUALIFIED HEALTH PLANS or “Metalasized” plans. In other words, they must become like the new “Metal” plans under HCR.  Metal or “Metalized” plans are the new Bronze, Silver, Gold or Platinum plans required by HCR.  They will include all of the new health reform benefits in order to be a Qualified Health Plan.   A Qualified Health Plan must include the new “Essential Benefits” as they are known.  These Essential Benefits will be very expensive.  Not only will non-grandfathered plans be guarantee-issue and have no pre-existing conditions excluded, many new benefits will also be required to be included that are not covered by plans today. 

There are 10 Essential Benefits that must be included as follows:

·        Ambulatory patient services (unlimited maximum benefits)

·        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 maximum benefits)

·        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) 

Carrier Actions 

Remember, all non-grandfathered plans will have to adhere to HCR and include the “Essential Benefits,” or as I said earlier, they will become “Metalasized”. Different insurance companies are taking different approaches, but here are a few examples: 

1.      Some carriers are going to terminate all existing non-grandfathered major medical plans as of Jan 1, 2014. 

2.      Some carriers are going to terminate all existing non-grandfathered major medical plans as of their anniversary date on or after Jan 1, 2014.

3.      Some carriers are going to terminate all existing non-grandfathered major medical plans on the same date on or after Jan 1, 2014.

4.      All carriers will offer a change-over to a metal plan that compares as close as possible to their current plan.

In order to protect yourselves from the looming rate shock from the “Metalasized” plan rate increases, most insurance companies are taking a proactive approach as a way to postpone the shock as long as possible. 

Many carriers are suggesting that insureds replace existing non-grandfathered major medical plans before a certain date (that they have chosen) so that they can move to a new non-grandfathered plan that has a renewal date as far into the future as possible. For example, if a non-grandfathered major medical plan is replaced late in the 4th quarter of 2013 with an effective date of December 1, 2013, that insured will not see the “Metalisized” rates until December 1, 2014 or Jan 1, 2015 instead of Jan 1, 2014, saving thousands of dollars. Of course these plans will have to be re-underwritten and you will have to re-qualify, medically. 

Changing Plans Due to Rate Shock 

Before changing plans due to a notice from your insurance company that your rates are going up dramatically due to HCR mandates, you may want to speak with your current agent about how they can help you. Going from one company to another due to an HCR mandated rate increase will not help. All insurance companies will be having similar dramatic rate increases when the new mandated Essential Benefits are added to a policy or a policy is changed to a new “Qualified Health Plan” that includes the Essential Benefits in order to make it HCR compliant.  

The Case for Short Term Major Medical Plans 

There is also a consensus by some that short-term major medical plans may be an alternative way to go.  Remember that on Jan 1, 2014, all major medical plans will be guarantee-issue with no waiting period on pre-existing conditions. Short-term major medical plans will be a lot less expensive than the metal plans because they do not have to comply with HCR - for now they are exempt. 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 after January 1, 2014, but you will have to wait until the new HCR “Annual Open Enrollment Period” in order to do that.  HCR guarantee-issue will not be available year-round.  It will be available during the Annual Open Enrollment Period. There are now 12-month, short-term major medical plans available that can be written to terminate at a time to correspond with the open enrollment date on HCR metal plans. Of course, congress can also change the rules later on and this may not be an option further down the road. However, 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 on or after Jan 1, 2014 during the Annual Enrollment Period. 

Qualified Health Plan Notice 

Insurance companies will begin to send out letters to their major medical insurance policy owners sometime in the 4th quarter of 2013 regarding what options you will have regarding your existing, non-grandfathered plans. More information to follow in another article….

Health Care Reform Article #3 

Health Insurance Company Taxes 

Insurance companies are about to start receiving 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 are also going to have to rent space on the exchanges in order to do business on them.  They are also 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 has been cut down to 3:1. That means that older people’s rates could actually come down a bit, but younger, healthy people’s rates will skyrocket in order to make up the difference in ratio. As a result, many of these younger and healthier people will likely reject the exchange entirely and elect 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 mentioned in article two, 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 will be much higher than anyone could have ever predicted when HCR was originally conceived.  As you can see, much of the rate shock will actually be caused by HCR’s mandates, the new taxes, and charges imposed on the insurance companies. 

The Individual Mandate 

Under Health Care Reform (HCR) there is now a federal mandate that forces everyone to have health insurance or pay a fine - excuse me you will have to pay a tax (except for all those waivers and exemptions that were issued for special circumstances). 

The penalty for individuals who do not have health insurance in: 

·        2014 is 1% of income or $95.00 per person

·        2015 is 2% of income or $325.00 per person

·        2016 is 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 will be controlled by the exchanges 

·        Those who object because they do not believe in health insurance for religious reasons 

·        American Indians  

·        People who are between coverage (without coverage for less than three months) 

·        Undocumented immigrants 

·        People who are incarcerated 

·        Those for whom the lowest cost plan option exceeds 8% of an individual's income 

·         Those who have incomes that are so low, that they are not required to file taxes 

The Subsidy     

·        HCR was supposed to expand Medicaid to a larger number of people than is 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 has complicated what HCR’s final cost will actually 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 will have a major impact on how many people that could have been placed on Medicaid will now end 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 $21,000 per year for a family of four. Four hundred percent of the poverty level is about $90,000 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). 

·        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 - we do not believe many small group employers will want to participate in the SHOP exchange, due to cost. Many of those small group employees will be 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 coverage.   

·        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 people will not be eligible for a subsidy on an exchange.  And even if they are eligible and want to buy on the exchange, they will have to complete a 23-page application that not only asks them their age, name, address, birthday and social security number, but the majority of that application is about their background and finances in order to determine if they are eligible for a subsidy, Medicaid or nothing. 

As I noted in bullet point 7 under exemptions above, if the lowest cost plan on the exchange is more than 8% of your income, you are exempt from the mandate. If a family of 4 earns $90,000 per year and their exchange health insurance premium will exceed $7,200 (8% of their income), they will not be required to buy health insurance. The average cost of health insurance on the exchange for a family of four will be around $12,000 per year. That is far in excess of $7,200 or 8% of their income. As a result, we believe that there will be many people looking for health insurance off the exchange since they will be either ineligible or exempt and the exchange premiums are just too high.   

Most insurance companies will operate off the exchange as well as on it.  As a matter of fact, some companies have already made the decision not to participate in any exchanges in any state. IHC Health Solutions or IHC Group is one of those companies (their major medical insurance companies are Standard Security Life Ins. Co. of New York and Madison National Life Ins. Co.). Some large carriers that have several insurance companies under their brand will use one company on the exchange in order to have a presence and others will only be available off the exchange. United Healthcare’s Golden Rule Ins. Co. is one of those companies that will not be on an exchange. Some carriers will only operate on exchanges in a few select states that they feel will work for them. Most companies that will be on the exchange will most likely not be on all exchanges, with the exception of the BlueCross BlueShields, who will more than likely be on all exchanges in all states. We may also see more insurance companies leave the market come Jan 1, 2014. 

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” I talked about the last article. All of this boils down to a very mixed bag of what is going to be available on the exchange and what is going to be available off the exchange. Most insurance companies are being very coy about their intentions because of competition.  As a result, it is still very difficult to get a handle on exactly what will be available where.  What we do know is that there will be a very robust on and off exchange major medical market. Most insurance companies will also operate their own “private exchange.”