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.

* * *

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.