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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.

December 2012 Archives

Opt out of coverage

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Question: I have an employee in Pennsylvania that is recently divorced and was covered under his spouse’s policy. He is currently uninsured and wants to choose the “opt out incentive” and remain uninsured. Are there any legal consequences to this or does he have to accept the coverage since he is uninsured? Answer: If you have elected to pay 100% of the cost-sharing for existing employees he cannot opt out. Otherwise, he can.

Covered California HSAs

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Question: Will HSA plans be included in aca and in the exchanges in ca?

Answer: Yes. Covered California will offer 2 HSA plan designs: one at the silver level with a $1500 deductible, 80/20 coinsurance, and a maximum out-of-pocket of $6400 and a bronze level plan with a $3500 deductible, 70/30 coinsurance, and a max out-of-pocket of $6400. Family deductibles and out-of-pocket maximums equal to 2 times the individual amounts.

Covered California Open Enrollment

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Question: Will we recieve advance notice of the carriers products and price on the exchange prior to open enrollment so we can take our time?

Answer: Yes. The Covered California open enrollment period will begin October 1, 2013 but coverage for the new plans will not begin until January 1, 2014 at the earliest.

Covered California Rates?

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Question: When will we see rates for Covered California Plans?

Answer: The deadline for the health insurance companies to have their rates ready for approval is May 15, 2013. Then there is a 45-day public comment period. Finally, on July 1, 2013 the rates are loaded into the Covered California system.

What can I expect to pay?

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Question: In 2014 I can retire at $33K per year for my wife and I. Me 57yrs and her 55yrs. Do you have an approximate monthly premium cost chart for a family of 2? I saw one for a family of 4 but even the Kaiser calculator does not have one for a family of 2.

Answer: An annual taxable income of $33,000 for a 2-person family is equivalent to about 200% of the Federal Poverty Level (FPL) in 2014. Assume that your monthly unsubsidized premium is estimated at $700 for a Silver Level Coinsurance Plan ($1000 deductible, 70% coinsurance, and $5,500 maximum out of pocket). Applying the same subsidized percentage as the 4-person family, your subsidy will cover 80% of your premium, leaving you with a net monthly cost of $140. (I’m estimating but I’m not too far off.)

In addition to the premium subsidy, you will qualify for cost-sharing reductions. What that means to you is lower out-of-pocket maximums - $2750 rather than $5500 - giving your plan an actuarial value of 79% rather that 71%.

Question: What happens when the federal grant money runs out? Will the California taxpayers have to foot the bill?

Answer: Covered California is supposed to eventually be self-sufficient without state or federal money. Executive Director, Peter Lee, said “The feds are basically saying, ‘We will help you start up, we will prime the pump. But the federal money runs out at some point. ” Covered California’s plan includes an assessment fee of about 3% of premiums in the early years. Eventually, Lee said, the exchange hopes to operate on a 2% premium assessment fee. But if enrollment numbers do not meet expectations, the assessment fee in the second year (2015) would bump up to 5%, then down to 4% in both 2016 and 2017. The premium assessment is to be paid by insurers, which they will recover from consumers in the form of higher premiums.

Question: I run a small business with 30 employees who live in 5 different states. Most of them will probably qualify for premium subsidies, but I’m concerned about those that live in states that will have federally run exchanges like Texas for instance. Will they be eligible for subsidies? I’ve heard no.

Answer: Yes. Just last week, the Congressional Budget Office (CBO) released a letter to the House Oversight Government Reform Committee Chair Darrell Issa saying that it never considered that the subsidies might only be available in states operating their own exchanges. CBO Director Doug Elmendorf said in the letter, “the issue [had not been] raised during considering of earlier versions of the legislation in 2009 and 2010, when CBO had anticipated, in its analysis, that the credits would be available in every state.

Question: I read where health insurance companies will have to pay fees to the Exchange. What are those fees for?

Answer: To fund several of the changes mandated by the ACA, new fees will apply to health insurance issuers and self-funded plan sponsors. The fees fund patient-centered outcomes research, the Transitional Reinsurance Program, and premium tax subsidies for individuals in Covered California.

The cumulative affect of the health reform fees in 2014, based on the government rule and industry analysis, shows an increase in the premium by about 3.8 percent. The insurers will collect the funds through premium rates and pay the insurer fees.

Question: My employer just distributed a new copy of the “Summary Plan Description” that says our Cafeteria Plan contributions are limited to $2,500 per year. It used to be higher. They say it’s Obamacare. True?

Answer: Under the ACA, employee contributions to health care flexible spending accounts or Cafeteria Plans will be reduced to $2,500 per year for any plan year starting in 2013. The Plan Year is the 12-month period specified in your Summary Plan Description (SPD) that determines the beginning and ending dates of plan contributions. The plan year should not be confused with the “Claim Period” which is the period specified in the SPD of at least 12 months that determines the beginning and ending dates of expenses eligible for reimbursement. In other words, it is the period of time that claims can be incurred and reimbursed from current plan contributions. The beginning date always coincides with the beginning of the plan year, but the end date may not.

Question: What good is a catastrophic plan for young adults under 30? With a $6350 deductible, we’ll seldom get any benefit from having health insurance.

Answer: Even catastrophic plans available right now have some benefits for which the deductible does not count. One of the earliest consumer benefits of Obamacare (September 23, 2011) is that recommended preventive care services for are free. “Many California residents with high-deductible health insurance plans incorrectly believe the deductible applies to all physician visits, according to a Kaiser Permanente report published in the Journal Health Affairs. For the report, researchers surveyed 456 California residents who are enrolled in health savings accounts, a type of high-deductible plan. Researchers found that fewer than one in five respondents understood that preventive care was available at no cost or for a small copayment as part of their plan. According to the report, one-fifth of respondents said they had avoided preventive examination or treatment because of cost concerns. Insurers and agents must educate members about the details of high-deductible plans and persuade them from avoiding preventive care because of cost concerns.

Payroll Tax Increase

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Question: Is the 2% payroll tax increase for 2013 part of Obamacare?

Answer: No. It has nothing to do with Obamacare. Actually, FICA payroll taxes were cut 2% in 2011 and 2012. That cut will expire, effective Jan. 1, 2013. Although the increase is on employee contributions, the increase also affects an employer’s withholding obligations.

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