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Covered California Q&A

Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.

February 2011 Archives

HRA Plans and the Young Invincibles

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Question: I have been offered a job that only offers HRA insurance and I don't understand it fully, so I am hesitant to accept the job. What should I do?

Answer:: One of my group clients is in the game business. Most of the employees there are young people - under 30 for the most part. The company was providing a defined contribution per month for each employee to pay for group health insurance coverage but found that many of the employees did not value the benefit. We quickly found that the "young invincibles" were healthy and they felt the insurance was too expensive. They believed that they'd never meet the deductibles required before they could get medical expenses paid for. Moreover it wasn't even medical services that they needed. Rather it was treatment for that nagging toothache that the health plan didn't even cover.

So the employer initiated an HRA plan that reimburses medical, dental and vision expenses as well as health insurance premiums. The employees love it and the employer is actually spending less than before.

Question If the individual mandate fails in the courts, are there other options that would get similar results in terms of near universal coverage?

Answer: Nothing proposed so far would work as well as the mandate. Preliminary findings from the Congressional Budget Office show that eliminating the mandate would reduce the number of newly insured individuals from 32 million to 16 million. However, Jonathan Gruber -- an economics professor at the Massachusetts Institute of Technology who helped develop the reform law -- said removing the measure would have a larger effect, reducing that figure to eight million.

Two alternatives to the individual health insurance mandate would cover fewer individuals and would not lower costs substantially.

First Alternative

For CAP's analysis, Gruber examined an alternative to the mandate that would automatically enroll people in a health insurance plan and permit them to opt out. He found that the strategy would result in about 24 million newly insured U.S. residents. According to MedPage Today, the auto-enrollment option would cover fewer individuals than the individual mandate because fewer employers would offer health plans to workers if there was no coverage requirement. Gruber estimated that the cost of the strategy would be roughly the same as the cost of the individual mandate, because an estimated 80% of newly insured individuals would be automatically enrolled in Medicaid. In addition, he estimated that many young and healthy individuals would opt out of coverage, which would increase premiums by 11% in the non-group market.

Second Alternative

The second option for replacing the individual mandate is modeled after Medicare and would permit individuals to choose whether they purchase insurance, but force them to pay a penalty if they enroll after a certain date. Gruber estimated that around 12 million U.S. residents would gain coverage under this alternative. He estimated that premiums would increase by about 20% more than under the individual mandate because fewer healthy individuals would purchase insurance. However, he estimated that cost would be around 25% less than the mandate.


Gruber said, "The bottom line is there is no alternative to the individual mandate that gives us close to comparable results." He added, "They're not nearly as effective. They cost almost as much and they cover many fewer people while leading to much higher premiums for those who are insured".

Question: I read in the newspaper that the Preexisting Conditions Health Insurance Plan was a bust. What happened?

Answer: It's not a failure by any means, however enrollment is less than expected so far.

Several months ago, the special insurance pools became one of the earliest facets of the new health-care law to take effect. They are intended as a temporary coping mechanism for people with preexisting medical conditions that traditional insurance companies do not want to cover. The program is temporary, because, starting in 2014, the law will forbid insurers to reject customers based on whether they are healthy or sick.

One must be a resident of California, have a pre-existing condition as shown by a
Rejection letter from a health insurance company in the last 12 months, or coverage offered with premiums higher than those of the state risk pool, be a U.S. Citizen, U.S. National or lawfully present foreign national, and have been uninsured for 6 month prior to application for the plan.

A fundamental problem is that insurance for people with existing medical problems remains too expensive for many. Monthly premiums range from $350 to $600 for a middle-aged individual in California.

Another hurdle is the requirement that an applicant must have been uninsured for 6 months prior to applying for the special risk pools. The thinking behind this requirement is to prevent a wholesale migration of insureds from existing state major risk pools to the new pools where rates and coverage are better. HHS needs to take a look at removing that requirement.

Question: Obama claims health reform will lower health insurance rates. The Republicans say they'll go up. Who's right?

Question: It seems to me there's a pretty good chance the law that every American must have health insurance or pay a penalty will be declared unconstitutional by the Supreme Court. Will that kill the rest of the health reform law?

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