Consumer Alert: New Health Care Markets on the Way
Buying your own health insurance will never be the same.
With the next phase of the Affordable Care Act kicking in this fall (October 1, 2013), new state-run insurance markets called exchanges will open in each state, marking the long-awaited and much debated debut of President Barack Obama’s health care overhaul the Affordable Care Act (aka Obama Care). Debate rages over whether health care reform will do anything to rectify such pricing disparities or help lower costs.
Employers are required to provide Current Employees and New Hires a written Notice to Employees of Coverage Options by October 1, 2013. Employees hired after October 1, 2013, must be given the notice within two weeks from their Hire Date.
Obamacare is meant to address the availability and cost of health insurance coverage, not necessarily the cost of specific services. Still, supporters believe that because Obamacare paves the way for Universal Health Care Coverage, the resulting larger pool of insured patients should lower health care coverage costs in the long run. Supporters also believe, the high-deductible tiered health plans the health exchanges and a growing number of employers are offering, will make consumers more cost-conscious and put downward pressure on health care prices.
The goal is quality coverage for millions of uninsured people in the United States. Exchanges will offer individuals and their families, a choice of tiered private health plans resembling what workers at major companies already get.
Most people will go online to pick a plan when open enrollment starts October 1, 2013. When you pick a plan, you’ll no longer have to worry about getting turned down or charged more because of a medical problem. If you’re a woman, you can’t be charged a higher premium because of gender. Middle-aged people and those nearing retirement will get a price break: they can’t be charged more than three times what younger customers pay, compared with six times or seven times today’s current rate.
If this sounds too good to be true, remember that nothing in life is free and change isn’t easy.
Starting in Jan. 1 2014, when coverage takes effect in the exchanges, virtually everyone in the country will be required by law to have health insurance or face a penalty. The mandate is meant to get everybody paying into the insurance pool.
* Employers are highly encouraged to issue the written Notice to Employees of Coverage Options to ALL Full-Time and part-time Non-Enrolled/Enrolled participants of the Employer-Sponsored Health Plan!
TIP: Please be sure to review your 2014 Health Insurance Premium Statements Carefully. Premium are expected to increase in 2014 and some insurance carriers may asses a reinsurance fee at $5.25/covered person.
Different Measures of Affordability
Several key reforms under the Affordable Care Act measure the affordability of employer-sponsored health coverage. Effective for 2014, the affordability of an employer’s health plan may be assessed in the following three contexts:
- The Shared Responsibility Penalty for Large Employers
- The Premium Tax Credit for low-income individuals to purchase health coverage through an ACA Exchange and;
- The tax penalty imposed on individuals who fail to obtain health insurance coverage, or the Individual Mandate.
Although these mandates involve an affordability determination, the test for affordability varies for each provision.
Employers Shared Responsibility
Under the ACA’s “pay or play” requirements, large employers that do not offer health coverage* to their Full-Time employees (and dependents), or offer coverage that is either unaffordable or does not provide minimum value, may be subject to a penalty.
- Large Employer: under the ACA’s shared responsibility penalty, is an organization with 50 or more Full-Time employees, or an equivalent combination of Full-Time and Part-Time Employees.
- Full-Time Employee: An individual employed on average at least 30 hours or more per week.
* For Health Care Coverage ELIGIBILITY REQUIREMENTS, Hawaii Employers must still follow the coverage requirements as stated under the Hawaii Prepaid Health Care Act; Employers must provide health care coverage to employees who work at least twenty (20) hours per week after four (4) consecutive weeks of employment.The employees’ share cannot exceed the lesser of 50% of the premium cost or 1.5% of the employees’ monthly gross earnings. Cost sharing for dependents is determined by plan type.
The affordability of health coverage offered by a large employer is a key point in determining whether the employer will be subject to a shared responsibility penalty.
Coverage is considered affordable if:
- The employee’s portion of the Self-Only (Single) Premium for the employers lowest cost coverage that provides minimum value does not exceed 9.5% of the employee’s household income for the current calendar tax year.
The determination applies regardless of whether the employee is eligible for another level of health plan coverage, for example “Family” (3 Party) coverage. The cost of 2 party and Family coverage is not taken into account to determine whether an employer’s health plan is affordable for purposes of the shared responsibility penalty.
Because employer may largely unaware of the income level of their employee’s family member, they could find it difficult to asses whether the coverage they offer would be considered affordable. To address this issue, a proposed rule on the ACA’s shared responsibility penalty includes three affordability safe harbors that allows an employer to determine the affordability of its health coverage without known an employee’s household income:
- Form W-2 Safe Harbor: an employer compares the cost of “Single” coverage to an employee’s wages that are required to be reported in Box 1 “Gross Wages” of the employee’s Form W-2 to determine whether the cost exceeds 9.5 percent of income.
- Rate of Pay Safe Harbor: affordability is determined by comparing the cost of “Single” coverage to employee’s rate of pay.
- Salary Employees: Employers would use the monthly salary to determine affordability
- Hour Employees: Employers would multiply the employees hour rate of pay by 130 hours per month and determine affordability based on the resulting monthly wage amount.
- Federal Poverty Line (FPL) safe harbor: Affordability is based on the FPL of a single individual.
Premium tax Credit
A premium tax credit was created to help eligible individuals and families purchase health insurance through an ACA Exchange. The credit is designed to make coverage through an exchange more affordable and reduce a taxpayers out-of-pocket premium costs.
Eligibility for Tax Credit
To be eligible for the premium tax credit, a tax payer:
- Must have household income for the current tax calendar year between 100 percent and 400 percent of the FPL for the taxpayer’s family size.
- May not be claimed as a tax dependent of another tax payer
- Must file a joint return, if married.
In addition, to receive the premium assistance, a taxpayer must enroll in one or more qualified health plans through an exchange. The taxpayer cannot be eligible for minimum essential coverage )such as coverage under a government sponsored program or an eligible employer-sponsored plan).
Tip: An employee who may enroll in an employer sponsored plan, and individuals who may enroll in the plan because of a relationship with an employee, are generally considered eligible for minimum essential coverage if the plan is affordable and provides minimum value.
Employees (and their family members) who are eligible for coverage under an employer-sponsored plan that is affordable and provides minimum value are not eligible for the ACA premium tax credit.
To determine an employee’s eligibility for a tax credit, the ACA provides that employer-sponsored coverage is considered affordable if the employee’s cost for “Single” coverage does not exceed 9.5 percent of the employee’s household income for the tax year.
Tip: Under the Hawaii Prepaid Health Care Act; Employers must provide health care coverage to employees who work at least twenty (20) hours per week after four (4) consecutive weeks of employment.The employees’ share cannot exceed the lesser of 50% of the premium cost or 1.5% of the employees’ monthly gross earnings. Cost sharing for dependents is determined by plan type.
Beginning in 2014, the ACA requires most individuals to obtain health coverage for themselves and their family members or pay a penalty.
Minimum Essential Coverage
Beginning in 2014 (unless an exemption applies), a penalty will be assessed against an individual for any month during which he/she does not maintain minimum essential coverage. The requirement to maintain minimum essential coverage applies to individuals of ALL ages, including children.
Minimum Essential Coverage includes coverage under:
- Government Sponsored Programs: Medicare or Medicaid Programs, Med-Quest, CHIP , TRICARE and certain types of veterans health coverage;
- Eligible Employer-Sponsored plan (Including Cobra and Retiree Coverage)
- Health Plan purchased in the individual market
- Grand-fathered health plan.
Minimum essential coverage does not include specialized coverage, such as coverage only for:
- Vision Care
- Dental Care
- Workers Compensation
- Disability Policies
- or Coverage only for a specific disease or condition.
Under the ACA minimum essential coverage also includes any addition types of coverage that are designated by the Department of Health and Human Services (HHS) or when the sponsor of the coverage follows a process to be recognized as minimum essential coverage.