By Cammie Nowell
Vice President of Employee Benefits
Gus Bates Insurance & Investments
Americans are now feeling the effects of the Affordable Care Act (ACA), particularly with individuals that simply want quality, affordable health insurance. The federal government’s Open Enrollment is upon us beginning Nov. 1, with many changes ahead for 2017 and beyond.
Under ACA, most individuals are required to have health insurance or pay a penalty. For 2016, the penalty is $695 per adult, $347.50 per child under 18, or 2.5 percent of one's total household adjusted gross income. At the same time, the employer mandate rules require that employers with 50 or more employees provide health insurance for their employees or pay a steep penalty. This undoubtedly pits the employer against the employee at times, one of many unintended consequences of the ACA.
What happens to those employees who work for small businesses that aren’t required to offer group health insurance? What do individual entrepreneurs do when starting a business?
The federal government’s Health Insurance Marketplace still exists where an individual might receive a subsidy if his or her income is less than 400 percent of the Federal Poverty Level; if he or she is under age 65 and not eligible for Medicare or Medicaid; or if he or she is an individual who files a joint tax return if married and cannot obtain coverage from the spouse’s group plan. Without a subsidy, individuals are finding out that their choices are becoming more limited and often aren’t affordable.
In Texas, we have already experienced a tumultuous individual enrollment period in 2015 when Blue Cross Blue Shield announced it would no longer offer PPO (Preferred Provider Organization) plans in the individual market beginning Jan. 1, 2016. Blue Cross had 70 percent market share in the state. Although it continued to offer plans in the Blue Cross HMO (Health Maintenance Organization) network, individuals discovered their doctors and hospitals weren’t part of this network and therefore were not accepting the coverage. Blue Cross stated it had paid out millions more in claims than premiums collected. With losses that substantial, it was no longer sustainable. In recent months, other major carriers are taking it a step further. Aetna, Cigna, Baylor Scott & White and Humana have all recently announced they will discontinue certain individual plans in select states including Texas. All are exiting the federal exchange, including the nation’s largest private insurer, United Healthcare.
How does an individual plan for the future? On the Healthcare.gov website, 2017 plans and prices became available for preview Nov. 1. The Kaiser Family Foundation published an analysis in July concerning premium changes and participation in the federal marketplace. They are predicting higher increases in premiums than in recent years. Participation will be lower than in 2016, especially with United Healthcare exiting the marketplace.
Small businesses are also finding plans difficult because of limited choices and increasing rates. Even before there was a mandate, companies chose to offer health benefits to their employees for very good reasons. Benefits tend to increase employee retention and are a recruiting tool. Most would agree that health insurance is necessary, especially with today’s high costs of health care and prescriptions. The lower the deductible, the higher the premium has been the norm. It appears that companies are having to increase deductibles to keep financial obligations sound. Even with a cap on the deductible at some point, it will become unsustainable.
This challenges the carriers to be more creative and offer more affordable choices. In recent years, most carriers have introduced a level funded plan option (self-funded) to small businesses. These small businesses would normally not be eligible due to their size. Self-funding allows a company to have more control over how its dollars are spent and a better understanding of the expenses incurred. There is a benefit if health care costs go down as well as stop-loss insurance protection for unexpected large claims. Level funding has the financial predictability of fixed monthly payments like a fully insured plan. If the actual claims are lower than expected at the end of the year, a business can receive a credit to put toward future health plan costs. Exclusive Provider Organization plans (EPO) have also been a cost-saving option in which a member can use the doctors and hospitals within the EPO network but cannot go outside the network for care. There are no out-of-network benefits. Depending on your geographic area, this is a good viable option.
Regarding individual insurance, the next two years will be challenging in Texas. A great deal will depend on who is elected president and if the powers in control dismantle or maintain Obamacare. In the meantime, the remaining A-rated carriers offering individual coverage will be limited. The primary reason to enroll via the federal marketplace is if you are eligible for a subsidy. A certified broker can assist and explain your options both on and off the marketplace. There are also several affordable benefits that can enhance a medical policy with a limited network.
A qualified insurance consultant can help clients select the most appropriate plan(s) for their specific needs, educate on their health care coverages, and serve as an advocate when problems arise. Brokers and consultants are needed more than ever to help navigate the ever-changing and complex health care system in this era of health care reform. Excellent brokers offer assistance with their coverage long after the point of sale. And as NAHU (National Association of Health Underwriters) has always emphasized, the implementation of ACA can only be successful if American consumers are able to receive adequate guidance. Education regarding new programs and compliance issues through licensed agents, brokers and consultants is key to success.
Cammie Nowell has been with Gus Bates Insurance & Investments since 2007. Prior to joining Gus Bates, she owned and operated multiple retail stores.