Professor Lisa Sewell DeMoss is one of the nation’s preeminent experts in insurance law. She is director of Cooley Law School’s LL.M. Program in Insurance Law. Before joining Cooley’s faculty, she was general counsel of Blue Cross & Blue Shield of Michigan. For more on Prof. DeMoss, scroll to the end of this post.
Haven’t been able to get past the log-on screen on healthcare.gov? Don’t worry. It’s a common experience during this inaugural phase of on-line shopping for new individual and small group health insurance on the government exchanges. But, traffic is slowing, the glitches are under repair, and the shopping experience is already running more smoothly. So, buckle up, be patient, and stay focused on the destination: better coverage, no coverage exclusions or higher premiums because you or a family member is sick or needs expensive medical care, and financial help in paying premiums and out-of-pocket costs such as deductibles and copayments.
The Federal Exchange
Thirty-six states, including Florida, have decided to have the federal government operate their new state insurance exchanges required under the Affordable Care Act (ACA). The Federal Exchange, found at healthcare.gov, is a web portal that allows consumers to register and enroll in selected PPO, HMO and Cooperative health plans, while calculating and applying available premium and cost sharing assistance based on the shopper’s estimated 2014 household income. All health plans that have been approved for sale on the Exchange must include all ten categories of “Essential Health Benefits” specified under the ACA and cover them in a consistent manner. The products are grouped into four main categories labeled Platinum, Gold, Silver, and Bronze. A fifth level of catastrophic coverage is available only to individuals under the age of 30.
The product groupings reflect different levels of consumer cost sharing, while all products offer the same basic categories of benefits. Premiums are higher for products in the Platinum category because services are covered and paid at 90% of amounts billed by health care providers. At the Bronze level, a policyholder will have higher out of pocket costs, but a lower premium. If compliant with rules that measure equivalency, Exchange products are permitted to offer different levels of benefits such as 20 physical therapy visits versus 40. And each Exchange product will be connected to a network of contracted health care providers. Within each health plan’s delivery network, there may be significant variation in the number, types, and location of health care providers available to the purchasers of those products. So, there are a lot of things to consider when comparing health plans on the Exchange, not the least of which is the total cost after premium subsidies and cost sharing assistance. This is definitely one purchase that requires a little shopping to make the best decision for you and your family.
Who Should Shop? And When?
So, who needs to start shopping and how long do you have to apply for coverage to avoid the penalties that begin in 2014 for those who are uninsured? The ACA is based upon an individual shared responsibility that requires individuals of all ages, including children, to have minimum essential health coverage in place, every month beginning January 1, 2014. This is known as the individual mandate. This coverage mandate applies to everyone unless they qualify for an exemption or elect to pay the penalty when filing their federal income tax returns. There are nine categories of exemption.
Who Is Exempt?
Congress included affordability exemptions for individuals for whom even the subsidized Exchange products are too expensive. These include individuals who are not required to file federal income tax returns because their incomes fall below the filing threshold (around $10,000 for an individual), as well as those who cannot find affordable coverage that costs less than 8% of household income. Although not exempted from the requirement that they obtain minimum essential coverage, individuals with household incomes between 100 and 133% of the federal poverty level, who live in states (like Florida) that did not expand state Medicaid eligibility under the ACA, are categorically excused from the tax penalty if unable to locate affordable coverage.
Most people already meet the minimum essential coverage requirement. They are enrolled in qualified employer sponsored health insurance plans; COBRA or retiree coverage linked to previous employment; individual coverage; Medicare Part A; Medicare Advantage; Medicaid; CHIP; some veteran’s plans; or TRICARE. Unless your current coverage is a limited benefit plan such as a mini-med plan, dental or vision coverage, or a Medicaid plan that offers specified benefits like pre-natal care or family planning, it likely meets the test of a minimum essential coverage plan. Generally, individuals are not eligible for premium tax credits or subsidies if already enrolled in minimum essential coverage. Your employer is required to provide you with a notice of whether your workplace health plan meets this requirement. If you are uncertain, you can verify your compliance with the coverage mandate on healthcare.gov or by contacting one of the many assistants who have been trained and certified by the Federal government to help you understand and meet the new requirement.
The Exchange Is a Form of E-Commerce, So Use Care the Same Care as With Any On-line Transaction
Because the Exchange is a form of e-commerce, it requires the same consumer care and attention as any other internet shopping experience in which personal and financial information is shared. Do not respond to direct telephone, Internet, or door-to-door solicitations for your health insurance business. The process is designed to protect consumers by requiring the consumer herself to initiate the shopping and enrollment process. The Federal Exchange has been designed to safeguard the privacy and security of the information necessary to the application process, such as social security numbers, names, birth dates, address, and projected household income. If you are working with someone who has offered to help you, make sure that person is a certified assistant (sometimes called Navigators) who may be located at community health centers, certain health care provider locations like pharmacies or hospitals, and insurance agencies where licensed agents have been specially trained and certified to assist shoppers on the Exchange. Individual and small group health products will continue to be available for sale off of the government exchanges. However, only Exchange products are eligible for premium subsidies and cost sharing assistance, so consumers should begin their shopping on the Exchange to first determine whether they qualify for financial assistance.
For those who do not have coverage or whose coverage is ending December 31, 2013, or for those who want to explore whether a better product at a more affordable price is available through the Exchange, the 2014 enrollment period runs from October 1, 2013 through March 31, 2014. If you apply for coverage by December 15, 2013, you are assured of having your new coverage in place on January 1, 2014. After that, you may apply for coverage anytime up through March 31 in order to avoid the penalty which is triggered by going for more than three consecutive months without coverage in any calendar year. The 2014 penalty, which will be assessed and collected upon filing your 2014 federal income tax return in 2015, is $95 per individual or 1% of income, whichever is greater. Penalties increase every year, and taxpayers are responsible for penalties assessed for their non-covered dependents.
You have plenty of time to explore and consider which options fit your budget and best meet the health care needs of you and your family before you actually enroll in a new individual or small group health plan. Just make sure that you complete an application by December 15 if you need insurance on January 1.
In addition to her responsibilities in the LL.M. program at Cooley, Professor DeMoss serves on the Board of Visitors of the Oakland University School of Nursing and the Detroit Metropolitan Bar Foundation where she is currently its Secretary-Treasurer. She also is a member of the Advisory Committee for the Risk Management and Insurance Advisory Center at Olivet College and the Michigan Insurance Hall of Fame Board. In 2012, Professor DeMoss was appointed to a three-year term on the Board of Ethics for the City of Rochester and elected its Presiding Officer.