Obamacare Followup

After years of anticipation and speculation, the Affordable Care Act (Obamacare) is now officially in effect. The health insurance marketplace has experienced a dramatic metamorphosis and will continuously evolve as the effects of Obamacare are sorted out. There are many components of the new laws that are still murky to most people, and I will do my best to shed light on some of those issues and concerns.

At the end of 2013, most people were faced with three options:

1) Continue your plan until its renewal date, at which point your plan would terminate and be replaced with a new ACA plan.

2) Re-enroll in your health plan for 12 more months until the end of 2014, or

3) Enroll in a new ACA plan for January 2014

“If You Like your Plan, You Can Keep your Plan”

Many Marylanders (and people throughout the nation) received a letter from their insurers stating that their healthcare plan was going to be canceled as of January 1, because it was “non-compliant” with the Affordable Care Act. There was a national outrage about the cancellation of plans, since there had always been a promise that “If you like your plan, you can keep your plan.” The fury over this misunderstanding prompted the President to appear on national television and announce that his administration will allow for a one-year extension to non-compliant plans. The unspoken caveat was that each state had the authority to make its own decision on this issue, and then each insurer had the authority to either agree to the President’s terms or not. Luckily, Maryland got onboard with the President’s extension, and the insurers followed suit.

The Maryland Health Exchange

The Maryland Health Exchange launched on October 1, 2013. Almost instantly, the site was disabled due to technical difficulties. The site was restored online shortly thereafter but was virtually inoperable for the first few weeks. Most people who attempted to enroll in a plan through the Exchange were met with technical glitches and extreme frustration. The media coverage of these glitches frightened many consumers and slowed down the enrollment attempts dramatically. Around mid-November, with the enrollment deadline looming, and reports that the major technical issues with the Exchange had been repaired, the enrollments started to increase. Some people were able to navigate their way through the Exchange and receive subsidies, while many others were still mired in technical malfunctions that prevented them from completing the process.

The month of December was the most active time on the Exchange. Many people who had either procrastinated or waited until the media reports about the enrollment experience improved, attempted to enroll very close to the deadline. With the influx of new subscribers, coupled with a website that was still experiencing major issues, the state extended the deadline for enrollment and payment.

We are now at the end of January, and there are still many people who have not been able to complete their enrollment on the Exchange. The State of Maryland was faced with a problem: There are people who have significant medical needs who are now uninsured due to the technical glitches in the Exchange. As I write this article, the State legislature is considering offering a “gap” coverage for those people who have attempted to enroll for a health plan on the Exchange but have not been able to complete the process.

There are issues arising for people who have successfully enrolled as well. Some people have been quoted rates on the Exchange that were incorrect. When the bills finally came in, some of the invoices were as much as 300 percent more than what was quoted on the Exchange. Others with large families have had issues validating the identities of their younger children and were being prevented from securing coverage on the entire family. Still others were granted a subsidy, but the system inadvertently purged their information, and they are now left to pay the entire bill. The State is aware of all of these issues and is working to resolve them.

The many reports in the local media about horror stories due to the rollout of the Maryland Health Exchange is causing the State to consider abandoning its own Exchange (which has already cost in excess of $200 million, over $170 million of which came from the federal coffers) and joining the federal Exchange (healthcare.gov) While the federal Exchange has had its own share of issues and negative media publicity, it is still performing slightly better than the Maryland-run Exchange. The insurance carriers vociferously argued against a switch, claiming that the effort it would take to move over to the federal Exchange, which itself is not perfect, would be too costly and risky at this stage of the game. We are awaiting further guidance from the Insurance Commission as to the future of the Maryland Exchange.

The Silver Lining

While the Exchange has been a source of frustration for many people, we can’t overlook the silver lining. Many individuals and families are receiving subsidies for their health insurance who previously could not afford coverage. Medicaid enrollment has skyrocketed, giving the lower-income segment of the State more access to health care than they had previously.

Preexisting conditions: The main improvement we are seeing in the new marketplace is the ease of qualifying for a health plan. Prior to 2014, people with preexisting conditions were either uninsured, stuck in their health plan indefinitely, or relegated to an MHIP plan. Today people with preexisting condition can have the same shopping experience as those without preexisting conditions. Moreover, everyone is now able to select a new plan once a year, without any medical qualifications. The result of this change is that people can now buy a plan for their immediate needs with the knowledge that they can reevaluate in 12 months’ time. For example, a relatively healthy person who would normally be comfortable with a high-deductible plan but knows they have one-time surgery slated could buy a platinum plan this year but change to a high-deductible plan next year without that surgery affecting their eligibility. The peace of mind in knowing that you can alter your plan every year based on your medical needs and financial ability has been a very welcomed change.

The family rate: Prior to 2104, many insurers issued a family rate based on the age of the oldest person in the family. The rate for the family was the same, whether there was one child on the plan or 12 children. Today the rates are factored based on each person in the family. Each spouse is factored into the rate, as well as the ages of the first three children. In this system, a family with one child would pay less than a family with three children. After the first three children, the remaining children carry no additional cost.

Child-only policies: Under the ACA, children can now have their own individual policies. They no longer have to be grouped into the family to get coverage. This allows for children who have greater medical needs to be on a more robust policy, while the rest of the family can be on a higher-deductible plan.

Enrollment Numbers

The enrollment numbers are finally in. Through the middle of January, about three million people have enrolled under federal and state healthcare insurance exchanges. There are another 3.9 million people who have enrolled in Medicaid. It is unclear how many of the 3.9 million are new to the Medicaid program and how many of the subscribers were simply renewing their Medicaid, but by all accounts, the number of Medicaid subscribers is increasing.

The Maryland numbers break down as follows: As of January 4, an estimated 20,300 people had enrolled in private health insurance plans through the Maryland Exchange, and about 26,500 Marylanders enrolled in Medicaid.

The Key to Obamacare Success

The Obamacare system is built on one simple concept: Everyone must have insurance. The theory is that, if the older and sicker population pays for insurance and the young and healthy population pays as well, the price point should meet somewhere in the middle. The system is designed to have everyone paying into the system. The key to this is undoubtedly the young population. The quintessential consumer from the insurance company’s perspective is the 26 to 30-year-old single male who goes to the doctor once a year (if you’re lucky).

Since the new law requires insurers to accept everyone regardless of preexisting conditions, the system desperately needs the young and healthy population to buy insurance to help offset the claims that the insurance industry has to blindly assume from the less healthy people. Without the premium dollars of the young and healthy people, this will result in what the industry calls an “adverse risk pool.” When the only people who are buying the coverage are those with high claims, the system becomes unsustainable, since you have more dollars being spent on care than you have being paid in premiums. The effect of an adverse risk pool is almost always to increase premiums and/or lower reimbursement to the medical providers.

The government and the health care analysts who drafted the bill were hoping for 40 percent of the enrollees to be from the younger population. The initial date that was released by U.S. Department of Health and Human Services was that 24 percent – or 489,460 – of the 2.2 million people who signed up for ACA were in the coveted 18 to 34 age range. That means the government has hit 18 percent of its goal of enrolling 2.7 million adults in the 18 to 34 age range. While that number falls below the target, the government has maintained an optimistic outlook, saying that the initial numbers are a good start and that the expectation is for that number to grow over the first year.

Open Enrollment

With our new system people can no longer purchase coverage at their whim. We now have very strict open-enrollment periods. The period for enrolling in a new health plan will extend through March. After that point you will not be able to purchase a health insurance plan. There are a few exceptions to that rule. If you currently have an “old” plan, you will be able to switch to a new plan at your renewal date. Your renewal date falls on the month that you purchased your policy (if you bought your plan on July 1, 2011, your renewal date this year is July 1, 2014). Anytime a plan is up for renewal, you can make a new selection.

The other exception to the open-enrollment law is a “qualifying event” or “life event.” These include marriage, death of a spouse, divorce or legal separation, a dependent aging out of the family plan, change in employment status, and birth or adoption of a child. You will have 60 days from the date of the qualifying event to secure coverage.

If none of the above applies to you, then you are limited to the open enrollment periods set by the government, which are as follows

Under the new law, failure to procure coverage in 2014 may result in a penalty of $95 per adult and half of that per child, or up to one percent of the household income. Open enrollment for January 1, 2015 coverage will begin on November 15, 2014.

As the Affordable Care Act begins to settle in, there will certainly be tweaks and alterations to the law. As I write this article, the IRS is actively compiling new regulations and guidelines for various components of the penalties. The end of 2014 will also be an interesting time, as all of the policy holders who filed for extension merge into the new system. I strongly encourage anybody who is seeking new coverage to contact a local health insurance professional. Even though the details surrounding the new plans are complex, a licensed and trained agent can explain all of the nuances of the ACA plans and guide you to the right program.

Ari Gross is president of The Columbia Group, located in Pikesville, MD. If you have any questions, feel free to call him or his team at 410-483-8888 to discuss your personal situation and find the best option for you and your family.