Get Ready for Healthcare Reform

The Affordable Care Act, passed into law in March 2010, is the biggest change to health insurance since it was invented in the 1940s and ‘50s. Although many people thought the law would have been overturned by now, the majority is still standing.

Some of the provisions have already gone into effect, but the biggest change will take place in October. That’s when the health care marketplaces, websites where individuals and small employers can buy insurance, are up and running.

Because the law effectively is an overhaul of the entire system, everyone’s health insurance will be affected. Here are some of the major changes that will impact you:

Individuals

All U.S. citizens and legal residents must have some form of health coverage. If your employer does not provide coverage and you do not purchase it for yourself, you must pay a penalty of $95 or 1 percent of income (there is a cap) in 2014.

Benefits will change for most individuals, but plans must cover 10 categories of essential health benefits, such as hospitalization, mental health and pediatric dental and vision. You will be able to purchase coverage on the individual marketplace, a website that used to be known as an exchange. In Tennessee, the marketplace is run by the federal government.

The marketplaces offer four benefit levels. The minimum level, bronze, covers 60 percent of expected claims. Silver covers 70 percent, gold 80 percent, and platinum 90 percent. The marketplace will also offer a catastrophic plan for those under age 30 or in financial need.                                                       

The open enrollment period is Oct. 1, 2013 through March 31, 2014. If you miss this timeframe, you’ll have to wait until Oct. 1, 2014 or a qualifying event to purchase coverage. You may be eligible for a premium credit if you buy your insurance through the marketplace. Credits are available if your 2013 income is under $45,960 for individuals or $94,200 for a family of four.

Small Employers

Businesses with fewer than 50 employees (meaning you issue fewer than 50 W-2’s a year) are not required to offer a group health plan. If you decide to offer coverage, the benefits will change on the anniversary date of your policy. Some of the biggest changes include:

• The plan must include the 10 required coverage categories. A “metal” (bronze, silver, gold, platinum) level of coverage is required.
• The deductible maximum for a single employee is $2,000 or $4,000 for a family. Now all co-pays will be counted toward the deductible.
• There are no annual or lifetime coverage limits.
• The new-hire waiting period can’t exceed 90 days.

The largest single change is that rating factors are no longer based on gender, health status, number of employees or type of business. Instead, they are based on age, tobacco use, geographic area and family size.

New taxes and fees will apply. Some small businesses may qualify for a tax credit if they have fewer than 25 employees with average annual wages of less than $50,000. Few businesses can take advantage of this credit because it phases out as employees and wages increase.

Small businesses can purchase group plans from a small business marketplace, but they can also get the same plans through an insurance agent. We recommend that these employers talk with their agent about the possibility of renewing their existing plan for another year so they have more time to adjust to the law’s requirements.

Large employers

If you issue more than 50 W-2’s a year, you’re considered a large employer under this law. You will be subject to community underwriting and the $2,000 out-of-pocket deductible maximum. Some benefits may change, and new taxes and fees apply (for about a 3-4 percent increase).

You’ll continue to work with your insurance agent on your group plan, as large employers can’t use the marketplace in 2014.

Beginning in 2015, reporting requirements and penalties for not offering coverage will apply. A different definition of “large employer” applies when it comes to penalties. Basically, if you have more than 50 full-time equivalency employees but do not offer a health plan, you’ll be subject to some sort of penalty. You can view this chart to see who would have to pay what.

We’ve seen a trend of large employers moving to a self-funded plan to keep rates down.

Timeline

We expect phones to be ringing off the hook on Oct. 1, 2013—that’s the day that health plans for individuals and small businesses will get final approval and be posted to the marketplaces.

Many details of how the law will be implemented are still unclear and could change between now and Oct. 1. If you have any questions about your particular situation, contact your insurance advisor and develop a plan for your business. Some resources that may help are healthcare.gov, which will act as the marketplace when rates are finalized, and IRS.gov for tax implications. The Kaiser Family Foundation also has a wealth of information about the Affordable Care Act and its implications.

Chase Sinquefield can be reached at 615-904-3454 or by email at chase.sinquefield@pnfp.com.