A few months ago, we joined with Aflac Inc. (NYSE:AFL) to organize a webinar on the possible effects of the Patient Protection and Affordable Care Act (PPACA) on our readers.
Webinar attendees submitted 44 questions about topics more substantive than “How do I find a recording of the webinar?” (The answer to that question. Please click here.)
We’ve published four batches of answers to the questions; this is the fifth and last batch, including answers to questions about matters such as how PPACA will affect the small-group market in Hawaii and what producer commissions might look like.
Of course: We’re doing this mainly to spark conversation, not to create a substitute for careful discussions with skilled, experienced advisors.
Please mull these questions and answers over with your own advisors and tell us in the comment sections if you’ve come up with better answers. The audience is listening.
1. How will Obama care affect states that already have been requiring employers to provide health care for their employees, like Hawaii?
Even in states with existing employer coverage mandates and incentives, PPACA will lead to changes.
The Hawaii Health Connector, Hawaii’s PPACA exchange, notes in a guide for employers that the employer coverage mandate that has been effect in Hawaii since 1974 is much stricter than the PPACA mandate.
PPACA will simply impose penalties on employers with more than 50 full-time, year-round workers that fail to provide a minimum level of health benefits.
Hawaii already requires any employer with at least one employee to provide health benefits.
The state employer mandate will continue to apply after PPACA takes effect, officials say.
But any part-time workers who are not eligible for their employers’ group benefits will be able to get individual coverage through the individual health insurance exchange, officials say.
The maximum PPACA tax credit for qualifying small Hawaii employers that provide health benefits will increase to 50 percent in 2014, from 35 percent this year.
2. What happens to groups under 50 that are grandfathered? How does this reform affect them?
PPACA already has eliminated lifetime limits on essential health benefits for small groups, eliminated pre-existing condition coverage limitations for children under age 19, and started applying the minimum medical loss ratio (MLR) rules to small-group plans.
Starting in 2014, grandfathered small-group plans will have to phase out annual coverage limits on essential health benefits; eliminate all pre-existing coverage limitations; and limit any benefit waiting periods to no more than 90 days.
Grandfathered small-group plans will not have to get rid of deductibles and co-payments for preventive care, and they will not have to meet the same emergency services coverage, claim review, benefits package and cost-sharing rules that non-grandfathered small-group plans will have to meet.
3. Why doesn’t the calculator just use the employee-only income to determine penalties? Isn’t that the new safe harbor rule?!
Many government agencies, nonprofit groups, law firms, accounting firms and consulting firms have developed PPACA-related calculators, and we’re not sure which calculator you’re referring to here.
Employers have to worry only about the Form W-2 wages they pay an employee when deciding whether the coverage they have offered an employee is affordable for PPACA penalty purposes.
But, in other situations, such as when the employees themselves are determining whether they must pay the tax to be imposed on individuals who fail to meet PPACA coverage ownership standards, employees will use a figure based on overall household income to determine whether or not they could afford to buy coverage.
4. When an employer fails to provide enough health coverage to meet PPACA requirements, it’s supposed to pay a penalty of $2,000 per uninsured employee. To come up with a head count for penalty calculations, the employer can subtract 30 from the number of employees. Can the employer also exclude certain classes of employees? How would those exclusions mesh with the 30-employee exemption?
When an employer is determining whether it’s a big employer for PPACA penalty purposes, it can exclude seasonal workers, and it can reduce the effects of part-time workers by counting each 120-hour of work done by part-time workers during a month as a full-time equivalent employee, rather than by counting each part-time worker as an employee.
When an employer is actually calculating the “shared responsibility” penalty, it can, as you say, exclude 30 employees from the total. It also can exclude seasonal and part-time workers from the count, and it can exclude any employees who work outside the United States.
If the employer does provide a minimum level of affordable coverage for 95 percent of its employees, but some employees end up getting subsidized coverage through the PPACA exchanges anyway, then the employer can just pay a penalty of $3,000 per employees who gets coverage through the exchanges.
5. What would you expect group and individual health commissions to be — a flat amount or a percentage?
In the individual market, where the PPACA exchanges could cause a great deal of upheaval and some states already are moving toward flat-rate compensation arrangements, flat-rate pay could be the wave of the future.
In the small group market, in which the PPACA exchanges could face significant competition from single-employer self-insurance arrangements and single-state association plan self-insurance arrangements, the typical form of compensation could still be a percentage commission.
6. Some states prohibit agents from accepting a fee in connection with the sale of health insurance business. Will that change?
7. Will a producer need a special license to have a fee-based practice, just as a securities broker who wants to have a fee-based practice needs a special license?
It looks as if producers and regulators have been so busy debating whether producer compensation should be kept out of the PPACA minimum MLR formula that they have not been giving regulation of other health insurance producer commission and fee concerns much attention.
Maybe the Professional Health Insurance Advisors Task Force – the body that the National Association of Insurance Commissioners formed to come up with ways to address producers’ minimum MLR concerns – could come up with model producer compensation rules that would give more flexibility to cope with PPACA-related changes in the health insurance market.
8. What could the commissions look like?
Most exchange managers seem to be converging on the idea of letting brokers negotiate compensation directly with insurers, or, in a few cases, basing compensation arrangements on what insurers are paying producers outside the exchange system.
It seems possible that producer compensation in many states could start to look like producer compensation in Massachusetts, a state that already has an exchange system in place.
Analysts at the Henry J. Kaiser Family Foundation found that 2010 producer compensation in Massachusetts averaged about $6 per member per month in the individual market and about $10 per member per month in the small group market.