Obamacare: What you need to know

This was a feature story ing the October/November 2013 issue of Commonwealth. I was unhappy with the explanations of the Affordable Care Act being circulated by the National Association of Realtors — I didn’t think they did a very good job explaining it to members. So, using Virginia examples, I wrote one for us.

Commonwealth coverThe major provisions of the Patient Protection and Affordable Care Act — the PPACA, but we’ll call it Obamacare like everyone else — take effect on January 1, 2014.

Because most Realtors are independent contractors, and 28% are uninsured (according to NAR), the law has some significant effects for the profession.

Depending on your situation — whether you have or how you get health insurance — you may need to make some changes. If you own a small business, you might also have some decisions to make.

So here’s what you need to know to be ready for 2014.

Obamacare does several things:

  1. It requires that [almost] everyone carry health coverage — that’s so A) those with insurance (or taxpayers in general) don’t foot the bill for an uninsured person who needs but can’t afford treatment, and B) to prevent individuals from waiting until they get sick to enroll.
  2. It makes sure that the coverage available is comprehensive and affordable: Costs are capped, you can’t be denied coverage, your rates can’t be affected by your medical history, insurer profits are limited, there are no caps on coverage, and so on.
  3. It defines minimum acceptable coverage: Any qualifying plan must cover “essential health benefits”: emergency services, hospitalization, prescription drugs, maternity and newborn care, mental health services, rehab, laboratory services, and more. Plans must also cover at least 60 percent of the average person’s medical costs. (Those are “bronze” plans. “Silver” plans cover 70 percent, “gold” plans cover 80 percent, and “platinum” plans cover 90 percent. The only difference between those plans is the dollar amount they cover — not the quality of care.)

For individuals

If you have coverage

If you have health insurance — through a spouse,  employer, veterans or retiree benefits, or Medicare, for example — nothing changes; you don’t have to do anything. Go and read another article.

If you don’t have coverage

If you aren’t covered, you have several options:

  • If you’re 26 or younger, go on your parents plan (no, you don’t have to live with them).
  • Shop for health insurance the way you would shop for any other coverage — online, through an agent, or however you like. But it’s probably easier to…
  • Shop on the federally-administered health-insurance exchange for Virginia at healthcare.gov and choose your insurer and plan from the usual suspects: Aetna, Anthem, Blue Cross/Blue Shield, Kaiser, etc.*
    If you’re under 30 and don’t want a full-featured healthcare plan, you can opt for a lower-cost “catastrophic” plan. These typically have a deductible of several thousand dollars, and are designed to protect you from being bankrupted by a major illness or injury.
  • Pay the tax penalty for not having insurance; for 2014 that’s $95 per adult and $47.50 per child without insurance or 1.0% of your household taxable income, whichever is more. (E.g., it’s $360 for an individual earning $36,000 per year.) It doubles for 2015, then doubles again in 2016.) Also, don’t get sick or injured.

Limits to the cost of the plans (premiums)

If your income is less than 400 percent of the federal poverty level — that’s about $44,000 ($90,000 for a family of four) — your premium cost will be capped at between 2.o and 9.5 percent of that income. The government will make up the rest through tax credits.

And whichever company you choose to buy your insurance from, there are only a few things that can affect the cost of your policy:

  • The type of policy, e.g., individual, couple, family, parent/child
  • Where you live
  • Your age
  • Whether you use tobacco
  • What kinds of “cost-sharing” features you choose (e.g., higher or lower deductible; bronze, silver, gold, or platinum plan

Limits to the cost of medical care

No matter what plan you choose, the absolute maximum you will have to pay in medical expenses is approximately $6,350 per year for an individual or $12,700 for families. That includes deductibles, coinsurance/copays, and prescription drugs; down the road it will increase with inflation.

Those limits will be even lower for people who earn less than 400% of the poverty level — that’s about $44,000 ($90,000 for a family) today.

  • Governor McDonnell has opted not to have Virginia create its own marketplace, so Virginians need to use the Federally administered exchange for the state.

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For small businesses

Depending on the size of your business, you may have to or be able to offer your employees health coverage.

First of all, what’s an employee? In terms of Obamacare, “employee” does not refer to independent contractors. So, brokers, the receptionist who’s on salary counts, but your agents don’t (unless they’re on a salary). Further, the number of employees you have, for purposes of the law, is based on “full-time equivalents” — so two half-time employees count as one full-timer.

If you have 25 or fewer employees

You do not have to offer coverage for employees. If you do, however, you could be eligible for some tax savings, and you could use health coverage as a way to lure the best talent.

Businesses with 25 or fewer employees that do offer coverage (i.e., pay at least half of the cost) and purchase their coverage through their state or federally-administered small business exchange may be eligible for a 2014 tax credit of up to 50 percent of the premiums depending on the sizes of the firms and the wages they pay. That tax credit can be claimed for a total of 2 years.

So in 2014 if you want to offer insurance to your employees as an incentive, you would sign up on the federally administered Small Business Health Options Program (SHOP) exchange for Virginia (healthcare.gov) as a business, then choose a plan to cover your workers. You pay the premiums to the exchange, which handles paying each insurer.

Beginning in 2015, a small employer purchasing coverage via SHOP will be able to allow each employee to choose his or her own plan and carrier — Aetna, Blue Cross, Kaiser, etc. Again, the business pays the premiums to the SHOP exchange, which handles paying each insurer.

Insurers in these cases will be required to follow the same rules that apply to individuals, e.g., they won’t be allowed to base pricing on the health or past claims of the workers being covered.

If you have 26 to 49 employees

  • You are eligible to purchase coverage for employees through the federally-administered SHOP exchange. There are no tax incentives for offering this coverage (other than the traditional ability to deduct the expense), nor are there penalties for not offering it.

If you have 50 or more employees

Let’s be straight here: If you fall into this category you should consult your tax advisor about your options and their implications.

That said, businesses of this size will be required to provide affordable health coverage to full-time employees, or pay a penalty of $2,000 a year per worker — but not counting the first 30.

  • What’s “full-time”? It’s defined as someone who works 30 or more hours per week.
  • What’s “affordable”? You must pay at least 60 percent of the premium, and the cost to an employee can’t exceed 9.5 percent of his or her family income.

If you offer coverage but it’s not affordable, that $2,000 penalty jumps to $3,000 for each employee who turns to the individual insurance exchange and receives a premium tax credit. (If you offer affordable coverage and your employees decide not to take it, no harm, no foul; you aren’t penalized.)

You also may have heard that this part of the law has been postponed for a year. That’s true… sort of. The law is still on the books, but it won’t be enforced until 2015. (Strange but true.) So technically firms with 50 or more employees are required to provide coverage for full-time workers starting on January 1, 2014. You might be thinking that having a law without a penalty is like not having a law at all, but it raises questions about civil suits — and thus it’s something you should talk to your tax advisor or attorney about.

* * *

Real numbers for Virginia

At press time, nine insurers had submitted plans to cover Virginians. More will likely be available by the time you read this.

To give a ballpark figure for what health insurance will cost (for those who don’t already have it), the Kaiser Family Foundation calculated the premiums for those plans.

These are actual prices, but because they’re for specific ages in a specific location (Kaiser used Richmond), consider them ballpark figures. But solid ballpark figures.

Unsubsidized monthly cost for two of the lowest-priced silver plans

                                                                     Age 25   Age 40         Age 60

Anthem Healthkeepers                            $199      $253            $537

Coventry Health Care (Bon Secours)     $181       $230            $488

 

When tax credits are taken into account, the price drops:

  • A single 25 year old earning $25,000 would pay $144 per month for the Anthem silver plan (thanks to a $55/month tax credit).
  • A 40-year-old couple earning $60,000 with two children would pay $409 per month for the Anthem silver plan (thanks to a $348/month tax credit).
  • A single 25 year old earning $25,000 would pay $79 per month for the current lowest-cost bronze plan offered in Virginia (after $55 tax credit).

These are premiums only. However, maximum out-of-pocket medical expenses (premiums, deductibles, copays, etc.) are capped at approximately $6,350/year for an individual or $12,700 for families. See the main story.


The pharmacists are in

Looking for more information? Both CVS and Walgreens will be launching programs to help consumers navigate the requirements of Obamacare — everything from brochures to websites to in-store “navigators.” They’ll explain how the insurance exchanges work and help people use them to choose coverage.

The National Alliance of Community Pharmacists, which represents independent drug stores, is starting down a similar path by creating informational cards its members can give customers.


Where to learn more

The mother ship for Obamacare information is the government’s own site: healthcare.gov.

And for businesses the government has business.usa.gov/healthcare.

One of the best places for individuals to get information about plans and costs under Obamacare is the Kaiser Family Foundation: kff.org/health-reform.

For a lot of good, clear articles, plus various calculators and state-specific information, check out Healthinsurance.org.