A new streamlined application for insurance was unveiled yesterday by the Centers for Medicare and Medicaid Services. Essentially, the initial 21 page application (many more if the appendices are included) was converted into three separate applications – two for individuals and one for families. Interestingly, the Kaiser Family Foundation released a new survey yesterday as well. This survey shows a significant lack of understanding among Americans of the status of the Patient Protection and Affordable Care Act, citing that 42% of Americans are unaware that PPACA is, in fact, the law. The survey goes on to conclude that 12% of Americans believe PPACA was repealed by Congress, and 7% believe PPACA was overturned by the United States Supreme Court.
This lack of understanding regarding the status of the law highlights another important issue – a potential lack of understanding of how PPACA will impact individuals and families in 2014. Since the passage of the law, it has been widely publicized that PPACA would eliminate exclusions for pre-existing conditions, restrict waiting periods to 90 days, cover preventative care at 100% with no cost sharing, and prohibit annual and lifetime limits on essential health benefits. What has been less publicized, and less understood, is how the tax penalties work for individuals and families who do not maintain health insurance, and how individuals and families can avoid paying these tax penalties.
Generally, individuals and families must either participate in an employer’s group health plan, purchase insurance through the public Marketplace, or participate in Medicare, Medicaid, or another federal healthcare program. With limited exception, individuals and families who do not maintain health insurance will be subject to tax penalty of $95 for the first year or 1% of household income, whichever is greater. Tax penalties increase in later years – $695 or 2.5% of household income by 2016. For many individuals, the decision may come down to the cost of the tax vs. the cost of insurance on an annual basis, at least initially. Marketplace reports on the likelihood that Americans will purchase insurance, which is likely to cost significantly more than the tax penalty, instead of paying the penalty and going uninsured.
This is fueled by the uncertainty surrounding the variety of plans that will be available through the Marketplace, and more importantly, their costs. With carriers requesting double digit increases to compensate for the elimination of pre-existing condition exclusions, taxes assessed on insurers by PPACA, and a population of individuals with unknown risk, coverage purchased through a Marketplace may not be inexpensive, even with the aid of premium tax credits or cost-sharing subsidies. Individuals making more than $45,960, and families of four with household incomes greater than $94,200 will not be eligible for premium tax credits for coverage purchased through a Marketplace.
How does this impact employers? Employers should bear in mind the impact on employees and their families when exploring benefit strategies. However, many employers also have a golden opportunity to communicate to employees how PPACA will impact them individually, and the role the employer’s group health plan (or lack thereof) will factor in to employee’s individual decisions. For employers with non-calendar year plans scheduled to hold open enrollment in the upcoming months, the next open enrollment may be the last opportunity for employees to enroll in the group health plan or change elections prior to January 1, 2014. Proposed regulations provide that employers may, but are not required to allow a one-time opportunity for employees to enroll in or terminate their participation in the group health plan when January 1, 2014 arrives. Communicating effectively to employees during this time is crucial in promoting employee understanding of the employer group health plan and healthcare reform. How employers communicate in the upcoming months can either generate many questions and create frustration on the part of both HR professionals and employees, or it can pave the way for a smooth transition to 2014.
