TAKE 5 Q&A: Affordable Care Act and its implications
Tom Snell, JD, is a Principal of the Raleigh office of Digital Benefit Advisors (DBA), with offices in Raleigh, Durham and Sanford. DBA is a national benefits consulting firm and a part of Digital Insurance, the nation's leading employee benefits agency. Tom has worked for third party administrators, insurance companies and in private practice, and has over 30 years experience in insurance and employee benefits. A graduate of Wake Forest University (BS & MA) and NCCU School of Law (JD), he has earned his CLU, ChFC, RHU and REBC professional designations, is an LUTCF Fellow, and focuses on the creative solutions to finance and HR challenges in the benefits arena. Tom is a frequent speaker for continuing education courses,
As an insurance professional, you’ve surely followed the Affordable Care Act (ACA) from infancy to law to implementation. There’s a lot to discuss there, but when people ask for your thoughts about the law’s provisions and mandates (and not the politicizing of the passage or the rollout), how do you respond? What do you say? As a consultant with Digital Benefit Advisors, our stance is that IT IS THE LAW, and we want to help people understand it and best take advantage of it. Members of our firm have asked to speak about this law to about every civic group, employer, chamber and individuals who have questions about it. Many employers, large and small, have employees that may be helped by the subsidized premiums. Others just want to make sure they are providing the correct legal notices to employees (and there are several). It is a big law and there is a lot to understand.
What are the most common misconceptions about Obamacare? The three most common misconceptions are that it is “free” health insurance, if you are low income you can get a subsidy and employers will keep providing health insurance the way they do now. First, health care is not free, and the insurance that finances it will not be free either. Someone pays for it. Many today get Medicaid and this law expands that number. Many millions of other Americans will get subsidize premiums. If someone gets subsidized premiums, another’s cost will go up to pay for it. Most of those who get subsidies still have to pay some premium, and will still have deductibles, co-insurance and copays to pay. Secondly, not all lower income people with get a subsidy or even the same subsidy. There is a three-part test to qualify for a subsidy, which I will discuss more about later. But the fact is, income is only one of the tests to qualify. Thirdly, employers on the whole are pretty smart people. They were smart enough to figure out how to make their own living, and are usually in business to make a profit. They will figure out the rules for the ACA and how to best take advantage of it. A non-profit will do the same to stretch the money they are entrusted with. Obviously, under the SHOP Marketplace for small employers, there are tax credits to help offset up to 50% (35% for non-profits) of the employer contribution, if their plan meets certain criteria of the law. But beyond that, employers are working with their consultants to figure out how to shift cost to the Marketplace. Employers generally dislike this law and those that offer health plans now face higher cost from the mandates and new taxes directly applied to the new plans. We work hard to help them figure out how to keep that health plan cost in line with their budget and when cost go up, changes get made. Employers are in business “to make widgets” (or whatever their product or service is), not to provide health insurance. They want to focus on their core business, not get further distracted by one of their largest expenses, behind wages. If an employer can raise pay and eliminate health insurance without hurting their employees, some are doing it. What we don’t know today is how many employers will.
From a health care standpoint, who in the population does the ACA work for? Who does it benefit, and who does it hurt? The ACA includes a lot of new mandates about your health care coverage. These make the coverage better but the cost higher. There will be winners and losers. For some, their cost will go up much higher. For others, they will be able to now afford health insurance. Hospitals should benefit because they provide a lot of unreimbursed medical care for all those who do not now have health insurance. Individuals who have serious medical conditions will be able to get insurance regardless of their pre-existing conditions. The NC Inclusive Health high risk pool ends Dec. 31. Those covered under it now have a place to buy health insurance. Many employers do not offer health insurance but still care about their employees and we have held group meetings to explain the law.
When it comes to the health insurance marketplace, it’s projected that fewer than 10 percent of the population will access those … so what’s important to know about how the marketplaces function? There is a three-part test to determine if you are eligible to get subsidized health care on the Marketplace. First, do you or your spouse have access to group insurance? If yes, the second test is whether the group coverage is affordable. “Affordable” means that the cost of Employee Only Coverage is less than 9.5% of the employee’s wage. If you have access to “affordable” coverage, you cannot get a subsidy through the Marketplace. If you do not, then the third test is about how much subsidy. You need to provide your annual family income (AGI) and number of tax dependents you claim. This determines your subsidy. Then you select your health plan with either BCBSNC or Coventry and your rate is reduced by your subsidy amount. The subsidy is really an advanced tax credit, so the IRS will settle up with you at year end on your tax return. If you made more money, you are entitled to less subsidy, so will get a smaller tax refund. If you made less money, you will get to take credit for the higher subsidy. You’ll need to know the answers to this three-test questions when you sit down with an agent or navigator to figure your subsidy.
The primary argument of people who seem not to favor the ACA is that it’s socialized medicine. Is it? No, Medicaid is socialized medicine. We pay taxes, and some of those dollars are used to care for our most unfortunate. Participants in the Marketplace are buying health insurance from insurance companies at standard rates, and some will get their premiums subsidized. Because the law allows subsidies for families making up to $126,360 (family of six), there will be a lot of people would might be able to participate. I think the real concern for those who say it is socialized medicine is that it will quickly become so. It is hard to take a benefit away from people once government has given it. They argue this law will make more people dependent on government and those voters will then vote for people who will give them more, hopefully free healthcare. Now, I have heard 7-10% will access the Marketplace. As I mentioned in the earlier question about misconceptions, that assumes employers keep doing what they are doing now. One employer who currently pays 100% of the employee cost today is planning to cancel his health plan and give his employees a raise. We determined that because most of his employees are at the low end of the pay scale, by eliminating the group health plan, most will be able to go to the Marketplace and get subsidies, not just for themselves, but for their entire families. A lot of large national employers have already said dependent spouses are no longer eligible to be on their plan. This is not meant to be mean, but rather that allows the spouse to go to the Marketplace if they cannot get affordable group insurance. How many employers will do this is still to be decided.
We keep hearing and reading about scores of people whose insurance premiums have skyrocketed — but not so much about people who are suddenly finding “affordable” health care. Are we just pointing our ears in the wrong direction? Maybe. Mad people scream louder that happy people, that is true. But from my viewpoint, almost everyone I deal with has seen significant increases. The new taxes on one group were $25 per employee per month, plus they had to modify their plan to meet the new mandates which made their rates go up 6% on top of their regular rate increase. That is one unhappy employer and 150 unhappy employees. I have not met many happy people in this process.
The health law includes subsidies for low- or middle-income people to purchase health insurance. This will likely decrease premiums, as it provides financial help for those buying their own coverage. Any drawbacks, that you know of, about these subsidies? No, any time you can help people that is good. There are no drawbacks except the complexity with which the subsidies are calculated. We all want to make more money. Some employees will find out, too late, that the subsidy has been significantly reduced because they made just a little more income, or one of their children (tax dependents) moved out.
From a practical standpoint, what advice are you giving people who are looking for the best health care? What considerations should they know about? Work with someone knowledgeable about the law and insurance. You can get a lot of different answers about what your subsidy will be and a lot of wrong information about the health plans themselves. Don’t wait on the web portal. The problems with the website will be fixed. Get your application for coverage in as soon as possible. Get started if you think you may qualify for a subsidy. If you are an employer, be open to new ways to look at this problem. Work with someone who can bring you ideas.
If you were in Kathleen Sebelius’ shoes, what would you do first thing tomorrow morning? Get a shower, pray and go do my job.