HHS releases final rule on insurance exchanges.
The Centers for Medicare and Medicaid Services (CMS) is proposing standards for insurance exchanges under the Affordable Care Act. In a proposed final regulation released on Friday, June 14th 2013 the feds outlined these new programs. Understanding how they work is important because they will be the place where individuals small companies can purchase health insurance once fully implemented. They must also become a part of your vocabulary as a small business owner because they are the mechanism that could trigger penalties for businesses over 50 not offering acceptable coverage according the ACA.
What is a health insurance exchange aka marketplace? Click this video for an explanation in less than one minute and listen to this segment of America’s Healthcare Challenge for a comprehensive breakdown.
These new marketplaces are a critical component of President Obama’s healthcare reform law, and are set to start running in October. Individuals, based on income, can go there to purchase coverage. The exchanges are currently being tested for quality assurance and may be rocky the first year or two according to experts. Again, if an employee who works full-time, takes a premium tax credit this could trigger an excise tax on their employer if they do not offer coverage and employ more than 50 full-time workers. Exchanges have to be solvent by 2015 according to the law. A marked up version of the regulations are available. Contact us today and subscribe to our exclusive newsletter for the latest.
What’s Happening at the State Level
One of the challenges of such a large program is the fact states vary in spending drastically. According to the Dartmouth Atlas, there is a huge variation in healthcare spending in the United States. A person on Medicare costs twice as much in Miami, FL as they do in Minneapolis, MN. This is no surprise that there are such variations in choice for health insurance options in 2014. The Medicaid expansion will also be an important issue to pay attention because it is one of the other methods to provide coverage to the uninsured. This chart outlines where many of the states stand.
This New York Times article outlines this issue well, important for you to pay attention to as more rates come to the forefront. Several states have released their rates and more will be doing so in the next few weeks. The law states they have to be online by July 1st so we are getting closer to having concrete numbers which will give us a better idea of new costs for employers looking at offering coverage.
As Premiums Increase Employees Place High Value on Employer Sponsored Insurance
Offering health insurance will remain a critical tool for employee attraction and retention. It is also a safe way to reduce any penalty exposure through the law. Starting in 2014, everyone will need to decide if they will enroll in a health plan or pay the new tax penalty. For many people who do not have access to health insurance through their employer, they will have to buy an individual plan on their own or pay a tax. Some employers have given employees money to find insurance individually and others buy insurance on their own through the individual market strictly for economic purposes because in the past, if you were healthy and young, these individual plans could often be purchased for less than the cost of certain employer sponsored group plans.
Previously, individual plans were not required by law to cover the same things as group plans and this helped keep the premium costs down. Individual plans could discriminate based upon a condition by deny you coverage or putting riders on specific health conditions while group plans were not allowed to do this. In some instances there may have been a situation where one or two people covered under an employer’s group plan were very sick and this caused the premiums within the group plan to rise and thus be higher for everyone. This described above is the main difference between individual and employer sponsored group plans. These will be different due to the insurance market reforms in the new health law which will not allow individual health plans to discriminate for a condition or deny renewal in the individual market.
Beginning January 1, 2014 there will be no premium difference between comparable health plans bought on the “individual” market vs. the “group” market. Those who are young and healthy will no longer be able to reduce their premium costs by signing up for an individual health plan. Many people currently covered by an “individual” policy are expected to experience what the industry refers to as “Rate Shock” as their premiums in many cases are expected to rise dramatically. Two states that have already released the new rates for their individual policies available through the State Exchange are a good indication of things to come. California has indicated their rates are set to increase between 64%-146%. Ohio has stated the rates there for individual policies are set to increase by 88%. The amount of increase will be effected by a person’s age and gender with young males expected to be hit the hardest.
In conclusion, there are many things to consider when making decisions about employer sponsored health insurance and we are here to help you navigate this every step of the way. New advertisements sponsored by the government will soon be coming out in the media which will make this new program sound attractive but remember that millions will be in for a surprise when they find out they make too much to qualify for “free” healthcare and they have to pay a portion.
To review, the premium assistance through the exchanges is based on income and not everyone will qualify for subsidies for coverage. Rates in the individual market will drastically increase thus putting a higher value on health insurance offered through an employer. Blue Cross Blue Shield discussed this further in depth on the latest episode of America’s Healthcare Challenge as well as how the law will affect the small group market. Listen in for what their experts are recommending consumers need to do to prepare for the new normal beginning next year. Check out this podcast of America’s Healthcare Challenge for the latest in Washington.