Top 8 Things You Need To Know About The New Health Insurance Marketplaces
September 12, 2013
Financial Planning
- This is part of the Patient Protection and Affordable Care Act that President Obama signed into law on March 23, 2010, also dubbed ‘Obamacare’. The fact that these health insurance marketplaces are government-sponsored does not mean the government will itself be issuing insurance as some have mistakenly suggested. Rather, these state-based marketplaces will create an online exchange for consumers to obtain health insurance with the new minimum policy standards (see #4 below) from the same private companies that are operating now. If you have employer-sponsored medical coverage or a private health insurance plan already, you won’t be required to use the marketplace. The new health insurance marketplaces are aimed at those who lack coverage or are seeking better coverage than they now have.
- Enrollment starts on Oct. 1, 2013 to take effect on Jan. 1, 2014 when the marketplaces officially open. The enrollment period ends on Mar. 31, 2014.
- The public marketplaces will either be state-run or they will participate in a federally-facilitated multi-state exchange by the Health and Human Services Department. This will be determined by the state. There can be up to three in a state (some may choose to combine the first two):
1) Individuals – Known as the Health Insurance Marketplace
2) Small Businesses – Known as the Small business Health Options Program. (SHOP). Small businesses (50 or fewer full-time equivalent employees) will no longer need to purchase group coverage, instead employees can purchase policies that best covers their needs and goals. A limited version of SHOP will be available in 2014 (employers can offer one plan to employees), with the full flexibility of the program to open in 2015.
3) Private – Mainly for larger employers as these insurance policies are ineligible for federal subsidies.
Participation in the marketplaces is not mandatory (some large employers will likely still purchase their employee coverage directly through insurers). - The goal is to create a minimum standard level of health coverage in a central location so that individuals don’t sign up for a policy only to realize later that a fundamental benefit was excluded or limited in some way in the small print of the insurance policy. This will be accomplished through:
-Establishing a list of “Essential Health Benefits” (the exact standards of each of the following broad categories will be determined by each state):
–Ambulatory patient services (i.e. doctor visits and outpatient services)
–Emergency services (without any preauthorization or additional burdens for getting out-of-network emergency services)
–Hospitalization
–Maternity and newborn care
–Mental health and substance abuse disorder services, including behavioral health treatment
–Prescription drugs
–Rehabilitative and habilitative services and devices
–Laboratory services
–Preventive and wellness services and chronic disease management
–Pediatric services, including oral and vision care
-Insurers cannot impose maximum annual or lifetime dollar limits for the above benefits (non-monetary limits can still be imposed such as amount of doctor visits within a certain timeframe).
-The Act seeks to encourage the use of preventive services by making them free for the consumer (insurer will cover 100% of the cost).
-Policies that do not provide the above can still be sold in 2014, but that may subject employers to the Employer Shared Responsibility Tax and households to the Individual Shared Responsibility Tax. (Some policies may be grandfathered in.) - There will be five main plan types:
1) Bronze – Required to cover at least 60% of the cost of essential health benefits.
2) Silver – Required to cover at least 70% of the cost of essential health benefits.
3) Gold – Required to cover at least 80% of the cost of essential health benefits.
4) Platinum – Required to cover at least 90% of the cost of essential health benefits.
5) Catastrophic – For those under 30 or who have a “hardship exemption”, this plan will still have all the essential health benefits, but will have a larger deductible and therefore lower premiums. - Premiums will be based on:
-Age (maximum 3:1 ratio of cost between the oldest and youngest applicants)
-Family size (the more people covered, the higher the premium)
-Area of residence (cost of living levels will impact the cost of insurance)
-Smoking habits (states can decide if pricing will be based on tobacco use)
For the first time, pre-existing conditions will NOT be a factor when applying or getting pricing for insurance via the marketplace. Insurers cannot decline or cancel coverage due to changes in health. - Lower income households will be able to obtain more comprehensive insurance coverage for a similar cost to unsubsidized plans for higher income households through various federal credits and subsidies:
-Premium Assistance Tax Credit – Intended to help make healthcare more affordable by providing a tax credit for households that earn less than 400% of the Federal Poverty Level.
-Small Business Tax Credit – Intended to mitigate the cost of insurance by offering a credit to small businesses (25 employees or less) with low-wage employees. The credit excludes certain business owners/partners and is only available for the first two years that a plan is offered.
Cost-sharing subsidies – This is related to lower income households that enroll in the Silver plan. - For more information, visit HealthCare.Gov, the official government site for health insurance and to access every state exchange.