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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.

January 2013 Archives

What is a Stand-Alone HRA Plans

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Question: Just read your article, No Standalone HRAs Allowed in 2014, and I’m concerned. They have an HRA at my work and I love it. It practically eliminates any out-of-pocket expenses. It’s with Anthem. Is that a standalone HRA? Will it be outlawed?

Answer: No. The HRA plan you have is not a stand-alone plan, It is integrated with a group health insurance plan (Anthem) and those will still be good going forward. A stand-alone HRA either has no health insurance component at all or is integrated with individual health insurance coverage. Only this type of HRA will be eliminated next year.

Subsidies in the SHOP Exchange?

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Question: Are empoyees covered by a group plan on the exchange eligible for subsidies?

Answer: No. Premium subsidies will only be available in the Covered California individual marketplace. This is an interesting question because it presents a dilemma for many small-business owners and their employees. Almost all small businesses will have some employees who will qualify for premium-subsidies. The way the ACA law reads, those employees cannot enroll in the Covered California individual marketplace and use their subsidies if their employer offers a group plan. This appears to force the employer into an all or nothing choice - offer a group plan to all eligible employees or don’t offer one at all.

Question: What is the individual mandate health care reform amount of tax?

Answer: The Affordable Care Act (ACA) specifies that the “applicable dollar amount” of the tax is $695 per adult to be phased in and adjusted as follows:

  • In 2014, the penalty is $95 per adult and $47.50 per child (up to $285 per family) or 1% of family income, whichever is greater.
  • In 2015, the penalty is $325 per adult and $162.50 per child (up to $975 per family) or 2% of family income, whichever is greater.
  • In 2016, the penalty is $695 per adult and $347.50 per child (up to $2,085 per family) or 2.5% of family income, whichever is greater.

Question: Do I have to report employer-paid health benefits on my employees W-2s? If so is it for the tax year 2012 or 2013?

Answer: Yes. Actually, this requirement became effective as of January 1, 2012, but was deferred by making the requirement optional for employee’s Tax Year 2011 W-2 forms. The requirement is now effective for employee Tax Year 2012 W-2 forms that will be issued in 2013. However, the IRS has provided an additional year of relief to employers who issue fewer than 250 W-2 forms for the 2012 tax year. Last week, the Center for Consumer Information and Insurance Oversight (CCIIO) issued a notice extending the deadline for employers to notify their employees about the availability of health insurance offered through the exchanges. Employers now have until later this year to notify employees, versus the original notification deadline of March 1— the intent is to have notifications coincide with open enrollment in October 2013. This decision was made by the U.S. Department of Labor citing the need to allow employers additional time to comply.

These benefits are not taxed. The IRS says their purpose is to inform employees of the true value of their employer-sponsored health benefits. (Download the full IRS FAQ on this topic below.)

Employer-Provided Health Coverage Informational Reporting Requirements- Questions and Answers.pdf

Question: I am a 60 year old retired widower. I have health insurance through my wife’s former employer due to a spousal continuation provision. I pay 100% of the premium. My income is approx 40K and my premiums are $1200/mo. I can’t afford this much longer. I continued with this coverage because I have a pre-existing condition and would not be able to find other coverage - at least anything remotely affordabe. Will I be able to buy insurance through the exchange?

Answer: Absolutely! Any legal resident of California under the age of 65 can purchase health care coverage in the Covered California health insurance marketplace. You mentioned your preexisting condition and the fact tat you are “locked-in” your current coverage which is unaffordable. This will no longer be the case as of January 2014. Preexisting medical conditions will no longer affect either the availability or cost of coverage either within the Covered California marketplace or in the market outside the exchange. Additionally, your income qualifies you for a premium subsidy which can only be had in the Covered California marketplace. It should make your coverage considerably more affordable.

Participation Fees

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Question: What happens if the federal grants to launch Covered California is not enough? Will California taxpayers have to foot the bill?

Answer: The Covered California health insurance marketplace is required to be self-sufficient without federal or state money by 2015. In fact, the state law establishing the Covered California expressly prohibits using state funds. Covered California’s continuing funding will come from participation fees for all qualified health plan (QHP) issuers of 3% of premiums in the individual exchange and 4% of premiums in the SHOP exchange. QHP issuers will recover their participation fee costs from policyholders in the form of premium increases.

Question: I have seen this on many ACA timelines, but have not seen any guidelines on how employers are supposed to notify their employees, or what specific information must be included. Have those guidelines been set? Where can I get more information on how employers notify their employees of Exchanges?

Answer: The ACA places three requirements on employers to disclose information to employees either at the time of hire or by March 1, 2013 for current employees:

  1. Employers must provide written notice informing employees about the state’s Exchange, including a description of how the employee may contact the Exchange for assistance.
  2. The employer must notify employees if the plan offered by the employer is inadequate, meaning it does not meet the actuarial value of 60 percent. The employer must let employees know that they may be eligible for a premium tax credit and a cost-sharing reduction if they purchase a health plan through the Exchange.
  3. Employers must notify employees that if they purchase a health plan through the Exchange, the employee may lose the employer’s contribution to health benefits offered by the employer.

Sticker Shock

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Question: In January, 2014, I will be 60, my husband 63. Neither has insurance thru an employer and we currently pay for a private health insurance policy. According to the Kaiser Family insurance calculator, since our joint family adjusted gross income is around $63,000, we would not be eligible for any subsidy. As we live in the Los Angeles area, I’m assuming we are in the higher health cost area. If we each have to pay the full $12,206 premium, that will come to almost 40% of our income. It will more than double our current payments and will be impossble to maintain. Am I calculating this correctly? This is really frightening.

Answer: You are correct that your income will make you ineligible for a premium subsidy. But I can calm your fears a bit. Your premium next year will be somewhat higher but closer to what it is now than the “unsubsidized premium” used in the subsidy modeling charts and the subsidy calculators. The main reasons are (1) these are projections done years ago and they are overestimated and (2) these estimates are national averages. California premiums are well below the national average because of our long term commitment to managed care leading to lower medical utilization rates.

Question: Can I get a premium subsidy through the Exchange if my spouse has affordable coverage from her employer?

Answer: Covered California will have the capability for individual family members to apply for different Health Insurance Affordability Programs. Your family scenario could include your spouse on employer-sponsored coverage, you on a Covered California qualified-plan with a premium subsidy and your child on Medi-Cal. Each family member will have a unique Client Identification Number (CIN). Continuity of coverage for each family member can be maintained because the system can accommodate moving between public and private coverage options according to changes in status or qualifying events (pregnancy, recently unemployed, turned 65, etc.).

Question: I currently have a high-deductible healthcare policy (HDHP) from Blue Cross, but it is not a “qualified plan” under the ACA. Will I have to pay the penalty in 2014 and onwards if I keep my existing insurance policy?

Answer: If your current health care coverage continues to be available after January 2014 as a grandfathered plan, you may choose to keep it. There will be no tax penalty as long as you are insured.

Group Size in SHOP

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Question: Will employers with over 50 employees be allowed to use insurance exchanges?

Answer: The ACA left it up to the states to decide where to draw the line for participation in SHOP exchanges - employers with 50 or less employees or employers with 100 or fewer employees. The Covered California SHOP will limit participation to groups of 50 or less initially with the option to include larger groups later.

Question: What is cost sharing reduction for?

Answer: The reason for the cost-sharing reductions is to make the overall cost of health care coverage more affordable for low and moderate income individuals and families. In addition to premiums, private health insurance has other costs referred to as “out-of-pocket expenses”. These expenses include deductibles, copays, and coinsurance for covered medical expenses. Policies include an annual limit on these costs called the annual out-of-pocket maximum or sometimes it’s called the annual copay maximum. Covered California will require health plan issuers to reduce out-of-pocket cost-sharing for individuals in families with incomes between 100% and 250% of FPL who purchase silver level coverage through the Exchange. The cost-sharing reductions will lower the maximum out-of-pocket limits and then reduce other cost-sharing components, such as deductibles, copays, and coinsurance. Reductions in cost-sharing also increase the actuarial value of the silver plan coverage for those affected. The federal government will pay for the value of the cost sharing reductions to the health plan issuing the coverage to the individual whose cost sharing was reduced.

Question: What is the penalty for not having health insurance after January 1, 2014.

Answer: The individual mandate taxes will be pretty weak as they are phased in over two years — only $95 per adult in 2014 and growing to $395 in 2015, much less than it costs to buy insurance. There is a practical reason for the mandate, which starts next year, it was supposed to pull in enough healthy customers to help pay for all the sick people who will get coverage as everyone with pre-existing conditions will have to be accepted for coverage right away. That’s why insurance companies are saying the mandate won’t be enough for the first two years. They want more incentives — such as a late enrollment fee — to get healthy people to sign up quickly. Without getting the healthy folks in, the fear is that everyone’s health insurance premiums could shoot through the roof when all those sick people get their coverage.

Vision Benefits in the Exchange

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Question: Will Covered California include vision care in 2014?

Answer: Yes. Pediatric vision benefits will be imbedded in the medical plans offered in the Covered California exchange. Benefits include an eye examination at no cost and a $100 maximum eyeglass benefit, Additionally, vision plans for adults will be offered on a voluntary stand-alone basis. In August, The exchange board first voted to allow stand-alone vision plans to be sold to small businesses. However, it decided not to allow the plans to be sold to individual customers. Exchange staffers said that the agency decided that the task of splitting subsidies was too difficult to manage in the first year of operating the exchange. After the board’s decision, Vision Service Plan (VSP) and Superior Vision Services, protested against the exchange board’s original decision. In late October, the Exchange board decided to approve policy changes that will allow the sale of stand-alone vision plans to individual customers as well as small businesses.

Pediatric Dental Benefits

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Question: Does Obamacare cover dental until 26 years old?

Answer: Pediatric oral care must be included in all medical insurance offered through the exchanges and small group and individual markets - as mandated by the Essential Health Benefits rule of the ACA. The pediatric dental benefits are imbedded in the qualified health plans. Benefits will include annual check-uo, preventive and diagnostic examination at no cost. Basic dental cost sharing is yet to be determined. Orthodontic care will cover medically necessary services only. There is no clear guidance from HHS yet on how to define pediatrics - such as what age? Stand alone dental plans for adults will continue to be offered on a voluntary basis both within the Exchange and in the outside market to individuals and small groups.

Premium Subsidy Eligible Income

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Question: I made some ROTH IRA conversion which shows up as taxable income. It is clear for anyone to see that it is not a real income in the normal sense. It most certainly is not a repeatable income. So, it makes no sense to include that as income when projecting for a future year. Could you please clarify, and let me know if there is any way around this situation? Coming up with full premium amounts for the entire year would stretch my finances even if they would be refunded later on.

Answer: Yes. Any IRA distributions would be included in your adjusted gross income (AGI) for that tax year. Your eligibility for a subsidy will depend on your modified adjusted gross income (MAGI). How is it modified? The online application process will automatically use the AGI from your most recent 1040 as a starting point. Then you’ll be asked to estimate your annual income in the year in which you are to be insured, 2014 initially.

Changing Coverage in 2014

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Question: What will happen with members who are already enrolled in a policy, and the policy is offered in the Exchange? Example: Anthem will provide 4 medal type policies, and I currently am enrolled in a policy that is similar, but at a different rate. Will I automatically be enrolled into Covered California’s policy or will I have to apply with Covered California first and coordinate my termination of current policy, etc.?

Answer: The details are yet to be worked out, but here’s what you can likely expect. Covered California will work with the health plans to make it relatively seamless to switch from a pre-reform plan to a similar Exchange qualified plan through your existing carrier - (Anthem in your case) whether or not you qualify for a premium-subsidy. If you are open to a change of insurance carrier (other than Anthem), you can use your agent or a Covered California customer service rep to help you make a selection and submit your application through the Exchange.

Who is Pays First?

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Question: Who is primary when there is adult dependent on both parents policy and parents are divorced?

Answer: Coordination of Benefit Rules were codified by the National Association of Insurance Commissioner in 1986 and each state uses this model with some modifications. The rules cover how the primary payer is determined when an insured employee or dependent has double coverage. To determine who pays first on dependent children’s claims, the plan covering the parent whose birthday is earlier in the calendar year is primary.

Question: I am 59 years old, have Anthem Blue Cross as an individual and not thru an employer. I earn about $27,000 a year. I can hardly afford my premiums. Will I be able to switch to a subsidized California Exchange program by just applying? How will I switch to the Exchange without a lapse in insurance? How will the Exchange rates be for me as an individual with my earnings?

Answer: If you apply for Covered California coverage during the open enrollment period starting October 1, 2013, your coverage will begin on January 1, 2014. You may cancel your current individual health insurance at that time and not have a lapse in coverage. Your agent will help you with this or Anthem Blue Cross will probably provide an easy way to do all this through them. Assuming your adjusted gross income (AGI) is $27,000, your premium subsidy should cover about two-thirds of the monthly premium. (Please understand that this is a rough estimate based on what we know at this point in time. Things will change, but this should be in the ballpark.)

Maintaining Subsidy Eligibility

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Question: Will there be a requirement to submit new tax return information each year to re-calculate the premium subsidy for which an individual may be eligible?

Answer: The Exchange will use your most recent tax return information for premium subsidy eligibility. However, you will not have to submit a return to the Exchange. The Exchange will be connected seamlessly to the required IRS data.

Question: As an insurance agent, how can I sign up to sell health policies through the exchange? Is there a form of contract? Can I participate in both the individual and SHOP exchanges? Thanks

Answer: Yes. Covered California contracted agents will be able to participate in both the individual exchange and the SHOP exchange. The agent contracting terms are in the early stages of stakeholder discussions. The preliminary steps to getting contracted will include training and certification, including completing an online training course and agreeing to Exchange rules and requirements yet to be determined.

Multi-State Health Plans

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Question: Do you think that offering nationwide health plans is a good idea for Covered California?

Answer: First a little background for our users: at least two multi-state health plans chosen by the federal government will compete with private health plans in state Exchanges. These health plans are similar to those available to members of Congress and other federal employees and will be offered by private insurance companies under contract with the United States Office of Personnel Management (OPM).

The Covered California board has expressed concerns because these federal plans do not appear to be under the same requirements and restrictions as California health plan issuers participating in the Covered California health insurance marketplace. Some of the reservations expressed by the board are:

  • Participation Fees: If the participation fee imposed by OPM is lower than the Covered California health insurance marketplace, California’s QHPs will be at a competitive disadvantage.
  • Essential Health Benefits: Will the multi-state plans be allowed substitutions to essential health benefits. California law prohibits this, but the rules for multi-state plans are unclear.
  • Cost-Sharing and Standardization: The federal proposal does not require the multi-state plans to adopt the same cost-sharing and standardized plan designs that other health plans must meet by state law.
  • Recertification and Decertification of QHP: The proposed rules exempt the multi-state plans from decertification and decertification by Covered California.
  • Regulatory Oversight: California’s role in ongoing oversight of the multi-state plans is unclear.

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