Navigating the new
The Affordable Care Act will not change everyone’s health insurance coverage, but it will likely alter how some businesses offer insurance to their employees, and how individuals shop for insurance.
Industry experts say there are some misconceptions about the ACA, familiarly known as Obamacare. Still, small business owners, workers with families, and independent contractors are all faced with challenges due to the new law, but many are determined to figure out the new changes.
The 2010 law was reportedly intended to help uninsured individuals buy insurance, but some adults say they already have insurance, and the new law is not going to help them. Michael R. Davis is an attorney in private practice. He started his firm, MRDLaw, in 2012 after working for the federal government, including the U.S. Department of Health and Human Services. He currently has a health savings account and a high deductible plan.
“What the health savings account does is force people to be smarter consumers of health care,” he says. “When I had a Cadillac plan with a $10 copay, I didn’t care about prices. Now I have to pay a $5,000 deductible, so before I go to the dentist and he wants to do a procedure, I ask how much will this cost.”
Davis pays $199 a month for his plan, which his insurer confirmed will not be available for renewal in 2015. He knows he will have to pay more for insurance and worries that with Obamacare his premiums will increase to subsidize heavy users of the health-care system.
“I don’t want to pay $600 a month for people who make bad decisions,” he says, adding he also has no interest in surfing the healthcare.gov website, which, famously, had troubles during its launch last year. “I am not going to shop on the exchange. I am not going die waiting in line. I would rather pay the fine.”
David Kikumoto, CEO of management consulting and insurance brokerage firm Denver Management Advisors Inc., says Davis is indeed a discerning consumer. “He has the right mix of risk protection and health savings,” Kikumoto says. “He will easily be able to navigate this uncertainty.”
Part of the uncertainty lies in the exchanges, or online marketplaces the federal and state governments set up to enable people to shop for health insurance. The exchanges were supposed to mimic travel websites where consumers could compare features and prices. However, health-care consumers have experienced confusion while attempting to navigate the sites. Kikumoto notes that people do not have to use the government exchanges. Private companies have set up their own exchanges, and insurance brokers are also available to help consumers sort through the information. “People should be able find competitive products online,” he says. “Don’t panic.”
For others, the real confusion lies in why their insurance companies are canceling their current plans. Some insurers are canceling their plans because they do not meet specific ACA requirements. For example, some plans do not offer emergency services, maternity coverage, prescription plans or preventive care. The ACA exempts certain plans from some provisions, if the plan is “grandfathered,” or covered the worker before March 23, 2010, the day the ACA became law. Other insurance companies are quietly and without explanation canceling plans that do not fit their business models.
Marc Crawford, president of the technology company Educational Measures, says his company offers its 23 employees three options for medical insurance and one for dental. Two of the medical are high deductible plans and one is a PPO plan. The company contributes the majority of premium payments for all plans. That will change.
“The ACA will eliminate all our medical plans in 2014 and ultimately we will be having to pass more premium costs onto our employees in order to maintain the level of insurance,” Crawford says. “When we renew we may also be required to switch carriers, which will be cumbersome for everyone.”
Others say the ACA will not change much about the way they offer insurance to employees. The only change might be the way an employee’s spouse buys insurance, or the worker buys insurance for their children under age 26.
“We have offered a pretty rich set of health benefits,” says Alek Orloff, chief financial officer for the waste collection company Alpine Waste & Recycling. He adds that Alpine’s plan meets the ACA threshold not only for minimal level of plan coverage but also for affordability.
The company has 200 employees, and not all buy insurance through their employer. “The only interesting wrinkle here is we don’t make our employees buy health insurance but the government is making them buy it,” Orloff says. That means young and healthy employees are likely debating whether to buy insurance or pay the annual fine, which starts at $95 for adults and $47.50 per child.
Also, spouses of employees have to think about whether to switch plans. “People do have to do some math to see if that makes sense,” Orloff says. “I think what people are finding is it is cheaper for them to stay on our plan than to go off the plan, because our benefits are richer and the costs subsidized.”
Some companies that provide insurance coverage for employees are finding they will likely not have to change their offerings. “I am getting companies asking me, ‘Should we send employees to the exchange?’” says Joe Long, senior vice president at the Denver office of Hays Cos., an insurance brokerage and consulting service. “You do not want employees to go to the exchange, because the employer pays a $2,000 penalty per employee if they go on the exchange.”
Instead, Long says, determine with a broker consultant if the plan meets affordability standards under ACA. Affordability refers to the percentage of the worker’s income that the worker must pay for their share of coverage. If the amount is more than 9.5 percent, the plan is not affordable.
“Everyone needs to do a proper evaluation,” Long says.