Let’s be honest. In the history of American health care, the year 2013 won’t exactly go down as a time that went as smoothly as one of President Barack Obama’s campaign speeches.
At mid-year, most observers could see some of the downsides: rising premiums and dropped policies. Deadlines had to be pushed back, and some parts of the law demanded rewrite.
And by October — when the exchanges rolled out — there were (are) glitches with state websites and HealthCare.gov, which prompted calls for Silicon Valley to rescue the $600 million mess. Tea Party Republicans partially closed the government in an attempt at political blackmail, while Democrats quickly distanced themselves from the program’s failures. It was difficult for any good news about the Patient Protection and Affordable Care Act (PPACA) — such as reduced premiums for some consumers and the ability for people with pre-existing conditions to buy coverage again — to cut through the media morass.
But even though PPACA implementation has been bumpy, it will continue — and 2014 will prove to be a pivotal year. Much of the law’s major provisions take effect next year, and yes, there are likely to be more delays or problems. Brokers can count on clients, employees and HR managers turning to them for advice on coming into compliance with the law and helping make decisions in the uncertain business environment ahead.
“In some respects, someone who’s new to insurance and is learning the new scheme — they’ll have an advantage because the stuff we used to know doesn’t apply anymore. It’s all new,” says Pamela Mitroff, director of state affairs for the National Association of Health Underwriters. “I answer the bulk of compliance questions from our members. I get 20–30 a day, and they’re not just one simple question. Many of them will have a page of questions.”
Here’s a look at what’s ahead in 2014 for the.
The individual mandate
Beginning Jan. 1, 2014, Americans must buy health insurance from a private insurance provider or through a public program. While the glitch-marred exchange website debuted in October 2013, individuals must have insurance by Jan. 1 in order to comply with the new regulation. The penalty for failing to do so is either $95 or 1 percent of a person’s income — whichever is higher.
PPACA includes a bevy of market reforms — the most notable being that carriers will have to cover people with pre-existing conditions. Others include prohibiting lifetime limits, defining small employer groups as between 1–100 employees (some states can define as 50 employees until 2016), and limiting annual deductibles to $2,000. Brokers and agents point to PPACA’s edict on modified community ratings as a major factor in potential increases in the cost of plans. PPACA mandates a 3:1 community rating, while some states are as high as 8:1. Carriers also will not be able to charge more for women.
“You’ll see younger people with plans that go up in price, and the older folks, in all likelihood, stay where they were,” says Zach Zinser of Zinser Benefit Service in Louisville, Ky. “They’re going to raise the bottom up.”
Tax credits begin
Because of the individual mandate, PPACA also includes tax subsidies for individuals to help them afford the cost of health insurance. However, the tax credits are dependent on annual income and access to private plans. Brokers have answered a lot of questions from employees about whether they qualify for a tax credit and will continue to do so.
“The No. 1 question I get is, ‘Am I eligible for a subsidy?’” says Trish Freeman of Trish Freeman Insurance Service in Gonzalez, La.
“When people hear Affordable Care Act or they hear comments from [The Department of] Health and Human Services or the president, they’re expecting something affordable,” says Darlene Tucker, owner of Darlene Tucker Insurance and Financial Planning in Scotts Hill, Tenn. “And they may or may not find it affordable. We’re going to see a lot of people where the premium is not affordable. And I think we’ll still see people who can’t afford the premium who aren’t eligible for the subsidy.”
New tax No. 1
To help pay for it, architects of the law built in several new taxes and fees on carriers. Perhaps the most expansive is called the Health Insurance Tax, which is expected to generate $8 billion in 2014 and more than $100 billion over 10 years, according to America’s Health Insurance Plans. Several groups — and unions that have negotiated top-shelf plans for their members — have started lobbying to repeal the tax.
New tax No. 2
Another tax comes in the form of the “transitional reinsurance fee.” A fee of $63 for each life covered on a health insurance plan will be collected yearly from carriers. The fee will be first be collected in 2014, and it will continue being collected through 2016. The fee is supposed to offset the extra cost of covering people with pre-existing conditions.
Brokers and agents credit these two new taxes and others as contributors to premium increases across the country.
“Those are all taxes that will be built into the price now,” Zinser says.
Medicaid — the state-federal program that provides health coverage for the poor — will expand to cover individuals whose incomes are 133 percent of the federal poverty level. Some states have opted not to take part in the Medicaid expansion.
Health care co-ops
Co-ops will be allowed to compete for consumers on the exchanges. An Oct. 22 story in the Washington Post, however, reported some co-ops are in trouble and might not have enough funding to adequately begin operations. In some states, though, co-ops have launched.
“Unfortunately, when everyone in Michigan had to submit their rates, it was a guessing game, and [the co-op’s] rates are higher,” says Denise Van Putten, an account executive with the Grand Rapids, Mich.-based Lighthouse Group. “I think a co-op is a good idea if we can get the rates to be competitive.”
Freeman pointed out the relative youth of the co-ops — many of which were created during the time since PPACA’s passage — could affect consumers’ perception about their quality and affordability.
“In Baton Rouge, there are two companies on the exchange — we have Blue Cross and the Louisiana co-op,” Freeman says. “People are a little leery about companies they don’t know anything about.”
All health insurance policies must adhere to standards set forth under PPACA. People who’ve lost policies in 2013 and those who will continue to lose coverage in 2014 will do so because their existing plans don’t meet 10 minimum standards mandated under PPACA.
Those standards include:
- Ambulatory patient services;
- Emergency services;
- Maternity and newborn care;
- Mental health and substance use disorder services, including behavioral health treatment;
- Prescription drugs;
- Rehabilitative and habilitative services and devices;
- Laboratory services;
- Preventive and wellness services and chronic disease management;
- Pediatric services, including oral and vision care.
Waiting periods defined
Also starting Jan. 1, the waiting period for people to sign up for health insurance will be set by PPACA. Waiting periods of more than 90 days will be prohibited for all health plans. Brokers and agents say this provision mainly affects businesses and industries that experience high turnover.
Wellness worth more
PPACA also allows employer-sponsored wellness programs to increase the value of incentives. After Jan. 1, employers can increase the value of incentives to 30 percent of premiums. For reducing tobacco use, employers can increase the maximum reward up to 50 percent.
Factor in the new regulations with parts of the law that are already in effect, and brokers and agents agree that there has been a profound impact on the individual and small-group markets. Some warn that the market could disappear, while others say the market can withstand PPACA’s regulations.
“For brokers that work in the small-group arena, the vast majority of groups with under 50 employees are going to look at dropping their coverage,” Tucker says. “That’s been my opinion since the law passed, and nothing has happened to change my mind.”
Van Putten says that among the more than 500 small groups he manages, less than 10 percent will drop their coverage.
“The rates out there for individuals are high,” she says, “so they’re completely different from the group plans.”
So as 2014 looms, brokers around the country are continuing to advise clients. But they’re also looking around for new opportunities and developing strategies to keep their own businesses afloat. Some have advised a wait-and-see approach, while others have been more aggressive.
Freeman says at the end of the day, it’s about helping clients.
“I can’t bail on them,” she says. “I can’t leave them with a navigator — someone who’s had 20 hours of training when I’ve had 20 years of training. I will get my clients through this, and as long as I don’t lose money in the future, I’ll be here.”