Preparing For Health Care Reform

As the 2014 health care reform implementation date is rapidly approaching, the predominant sentiment seems to be fear.  Fear of increasing costs, fear of losing employer sponsored insurance and fear of being forced to purchase unaffordable health insurance.  Fortunately, most of these fears are not based on fact.  While the Affordable Care Act will result in increased costs for many, the picture is not as bleak as often perceived. 

• Individuals will not be forced to purchase insurance.  While the law requires everyone to obtain health insurance, the penalty in 2014 for non-compliance is only one percent of income, with a minimum penalty of $95.  For example, an individual making $30,000 a year who opts to pass on health insurance would face a penalty of only $300 for the entire year.  This does not mean that it is advisable to remain uninsured, but choosing to continue to remain financially at risk won’t break the bank until you find yourself in need of health care.  Preparation Tip:  Did you know that a healthy individual in their twenties can get quality insurance for less than $150 per month?

• The health insurance mandate comes with some financial assistance.  In 2014, individuals and families making less than 400 percent above federal poverty level will be eligible for health insurance tax credits.  Presently, this works out to about $46,000 per year for individuals and $94,000 per year for families.  Preparation Tip: Income based health insurance tax credits will only be available for insurance purchased on the Federal health exchange.

• Small businesses with less than 50 employees will not be required to provide health insurance.  However, many will qualify for tax credits that will cover up to 50% of the cost of premiums, potentially enabling many small businesses to provide health insurance for the first time.  Preparation Tip:  Consult with an agent to see if your business is eligible to receive the health insurance tax credit.  It’s 35% this year and increasing to 50% next year.

• Employers with more than 50 employees are not expected to drop coverage.  In fact, businesses with more than 50 employees will be required to provide insurance or face hefty fines.  In addition, the law requires that employers with 50 or more employees ensure that the employee portion of their monthly premium does not exceed 9.5% of their income.  In many cases, this will result in a decrease in individual cost sharing as employers begin to pay a larger share of the premium.  Preparation Tip:  Consider an early renewal.  Many plans are offering the option to lock-in to your present rates through 2014, with some restrictions.

• All health plan options must include 10 required key benefits in 2014. As a result, individuals will no longer realize after it is too late that their health plan does not include coverage for things like maternity care or mental health services.  Likewise, deductibles on group health plans will be capped at $4,000 per family, eliminating the sticker shock when medical needs arise.   

• Pre-existing conditions will no longer prevent uninsured individuals from obtaining affordable health insurance.  This is perhaps the most significant segment of health care reform.  While this change will make health insurance attainable for those who were previously denied coverage all together or offered premiums that exceeded $1000 per individual, it will also result in a premium increase for the vast majority.   Health insurance plans are expected to spread the risk of offering coverage to high risk individuals across their entire pool of enrollees. Health care reform imposes limits on health insurance profit margins, which will help to soften the blow.  Regardless, premiums will undoubtedly increase.  Preparation Tip:  Consult an agent about early renewal options and start saving.

• Premiums are not going to double.  Industry experts predict an average increase of 13 to 25%.  This is a hefty hike but it's far from doubling.  In addition, some businesses will even experience a decrease in rates.  Currently, health insurance companies increase group premiums based on the group’s industry and collective health condition.  Beginning in 2014, insurers will only be able to impose premium rate-ups on small businesses and individuals based upon geography, age and tobacco use.  For small businesses with a relatively young group of non-smoking staffers, they may actually see a rate decrease as their rates will no longer be influenced by pre-existing conditions.  For example, a group that includes staff members with diabetes and high blood pressure in a high-risk industry will now pay the same as a low-risk group, assuming the age and region of the groups are similar.  Preparation Tip:  Consult an agent to perform an analysis of your rates to determine how the new rules might impact your premium.

In summary, the bad news is that most current enrollees will have to get familiar with a new health plan and adjust to an increased premium in 2014.  The good news is that health care reform will improve the quality of the health plans, and overall coverage, in the process.

Want to be proactive in assessing how health care reform will impact your business or family?  Contact me and we’ll discuss your options.

Meshell Hicks is a licensed health insurance agent and the agency owner of Agleam Benefits, which provides health, dental and vision insurance to Virginia businesses and individuals.  Services are provided free of charge.  Agents are reimbursed on a commission basis by the health plans selected by our clients.