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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.

March 2012 Archives

HHS Final SHOP Rules

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Question: Was there anything for brokers to hang their hats on in the HHS Rules pertaining to the small group market?

Answer: Nothing really earth shaking, mostly housekeeping details. Have a look:

  • Requires SHOP to use the same special enrollment periods as the individual Exchange - October 1, 2013 to March 31, 2014 - and offer newly qualified employees coverage outside of open enrollment periods.

  • Adds a definition of minimum participation requirements (percent of employees that must participate) and permits the SHOP to impose such rules. SHOP QHP health plans cannot impose minimum participation rules.

  • Affirms that Exchanges have the latitude to determine the extent to which employers may limit choice for their employees.

  • Adds requirement that SHOP develop and offer a premium calculator.

  • Adds a requirement that SHOP must report employer contribution and employee enrollment to the IRS.

  • Removes requirement that SHOP continue coverage if an employer fails to take action during an election period.

Question: I am a 57 yr old underweight female with a history of controlled asthma and allergies who is mostly healthy. Because of these risk factors, I want to know if underwriting success is higher for a high deductible/low premium plan vs a low deductible/high premium plan. I want to apply for plans with the lowest risk of being declined.

Answer: Generally, the probability of being accepted for coverage is improved by choosing a higher deductible plan. There are some variations to the risk assessment with every carrier. The frequency and number of prescriptions, along with any other risk factors will affect the final underwriting decision regardless of the chosen deductible. I suggest, you call our individual underwriting specialist, Erin, at 800-557-5693 and go over your medical history with her. She can determine where you will be treated the most favorably.

Question: What do the HHS interim final rules mean to California brokers? Is there anything new there?

Answer: Yes. There is very definitely some new and potentially positive clarification of the brokers’ relationship with the individual Exchange. The “Interin Final Rules” (typical government term - how can something be both final and temporary?) released by the HHS last week, mention agents and brokers in section 155.220 as follows:

  • Exchanges may allow agents and brokers to enroll individuals in Exchange coverage under specified conditions, and
  • Gives the Exchange the ability to allow private insurance websites to enroll individual exchange coverage but the websites must have all of the information about Qualified Health Plans that are on the Exchange website.

Also good news in what was omitted from the rules - the feds did nothing to limit broker compensation. It was thought they might. Instead, broker compensation was passed on to the states. This follows the trend established with the essential benefits ruling, giving a great deal of flexibility to the states.

Brokers have a lot of work to do with the state exchanges to make them appreciate the vital role we play.

Question: Are catastrophic health plans optional under the Affordable Care Act?

Answer: The ACA requires that qualified plans offer essential health benefits that among other requirements limit cost-sharing (out-of-pocket maximum and maximum deductible). In 2014, out-of-pocket expenses cannot exceed the HSA compatible high deductible health plans. based on that, todays limits would be $6,250 for family (2 or more) and $3,150 for an individual. Deductibles will be limited to $4,000 for families and $2,000 for individuals. Depending on your current coverage you may consider this catastrophic coverage, but these limits are much lower that current high deductible health plans.

Question: How will healthcare providers be reimbursed by the CA Exchange?

Answer: California healthcare providers will continue to be reimbursed directly form the insurance carriers as they are now. However, you can look for some improvements once the Exchange is operational. The behavior of insurance companies that offer qualified health plans through the exchange will be more transparent and they can be held accountable for short-comings such a delays or denials of provider reimbursements as a condition of their continued participation in the Exchange. The exchange can also make available information to providers as well as consumers about how different health insurance plans perform on measures such as prompt payment of claims, customer service, breadth and quality of plan provider networks, and outcomes of grievance and appeals processes.

Question: I’m approaching at 65 and my employer is strongly encouraging me to cancel my group coverage and elect Medicare coverage only. Can they do that?

Answer: Yes, your employer can “strongly encourage” you to take Medicare coverage when you become eligible. It’s important that you understand that your employer has been paying at least $500 a month to provide health insurance for you. Medicare will cost $100 per month. Perhaps you could negotiate a reimbursement for the Medicare Part B premium of $100 and an additional $130 - $150 per month for a Medicare Supplement - total cost to your employer is $250 per month and you get virtually 100% coverage. This advice applies only to group health plans with less than 20 employees where Medicare is the primary payor and the group health plan is secondary.

In larger groups, Medicare is the primary payor and there are rules that forbid employers from targeting Medicare-eligible employees by providing incentives (financial or otherwise) for them to drop employer coverage in favor of Medicare. As one of our readers, Chris Anderson of Sylmar, CA, pointed out: “The Centers for Medicare and Medicaid Services (CMS), formerly known as the Health Care Financing Administration (HCFA), has confirmed this prohibition many times, and employers should note that CMS may assess a penalty of up to $5,000 for each violation. An employer cannot offer, subsidize, or be involved in the arrangement of a Medicare supplement policy where the law makes Medicare the secondary payer. Even if the employer does not contribute to the premium, but merely collects it and forwards it to the appropriate individual’s insurance company, the GHP policy is the primary payer to Medicare.”

Question: In 2014, if I only offer a defined contribution plan will i be penalized?

Answer: The answer is no. There is no penalty for a small business (less than 50 employees) that does not provide a health benefit plan for its employees - either now or in 2014 and beyond. If you offer a “defined contribution” that your employees can use to purchase individual health insurance either through the Exchange or the outside market, you are going beyond what the law requires. We expect this to be a common practice, especially among employers with lower-income workers since these workers will qualify for premium subsidies within the exchange. Tax issues will have to be considered, the defined contribution is not tax deductible to the employer and is taxable income to the employee.

What Brokers Want to Know

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Question: What questions do brokers have about exchanges?

Answer: While it is generally impossible to know who is asking the questions that come into our Q&A website, the majority of questions about Navigators seem to come from brokers. In general, brokers and agents are looking out for their survival. Brokers are trying to figure what role, if any, they will have in the exchange. What the market outside the Exchange will be like for individual health insurance in particular. How will they interface with the exchange? Will the exchange pay a commission? Will it be competitive with the outside market? All questions for which we have few answers at this point.

Question: Can an employer set up an hra with no group health insurance?

Answer: Yes. Companies that want to offer health benefits, but cannot offer group health insurance due to high cost or participation requirements can offer a defined contribution health plan in which they make available monthly contributions that employees can choose how to spend. Employees can use their monthly contribution amount to reimburse their individual health insurance costs and eligible medical expenses. This is just one of many HRA design options.

Question: i am adding a person with a pre-existing medical condition on my group policy…will they be accepted?

Answer: Yes. In 1996, Congress passed the Health Insurance Portability and Accountability Act (HIPAA). This law mandated nationwide, across-the-board guaranteed issue in the small group market - among other things. A small group is defined as an employer group with 2-50 employees. However, insurance companies may charge higher premiums for groups that contain high risks or that have had a history of high claims. In some states, the premium for high-risk groups can be much higher.

Subsidies and Tax Credits

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Question: Are subsidies available in the SHOP Exchange?

Answer: Subsidies for individuals will only be available through the individual exchange. The SHOP Exchange will offer small business tax credits . In 2014, the maximum small business health care tax credit that will be available for eligible small employers will be 50 percent of nonelective contributions. However, the contribution arrangement requirements will also change. Beginning in 2014 the tax credit will only be available to small business employers who purchase their health plans through the SHOP Exchange.

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