Question: The Small Business Fact Sheet on the coveredca.com website states that the SHOP exchange is for businesses with 50 or fewer full-time equivalent employees. On the CoveredCA agent webinar #2, Michael Lujan says that the FTE calculation is only used to determine whether or not a group is subject to the pay or play mandate and that the SHOP is open to any business with 50 or fewer full time employees, not FTE employees. Which is correct? I’ve sent two emails to folks at CoveredCA but have yet to receive a response.

Answer: The FTE method of calculating employees should be used in both cases that you mentioned according to the ACA: (1) to determine group size in the exchange and (2) to calculate the play or pay penalty if any. I don’t doubt that Mr. Lujan may have mistakenly said otherwise with all he had going on. But the exchange itself is inconsistent in their published information on this issue.

Question: With CoveredCalifornia, how do health insurance agents receive compensation if the individual has to go through the exchange?

Answer: Agents placing individual health insurance business in Covered California will be paid by the carrier who gets the enrollment, just as they do now. The commission amount has not yet been made public, but it will vary somewhat from carrier to carrier. In those cases where the commission is calculated as a percentage, it will be based on the entire premium amount - including federal premium assistance. Agents will have to be certified by the exchange and appointed with the carrier in order to get paid.

Question: I have 25 employees and currently pay 65% of health insurance premiums. The (small business) tax rebate is non-existant for my company, so we are considering ending our coverage but paying the employees more, using some kind of bonuses/special compensation.

• Can the employer demand proof that the insurance was bought?
• Is it feasible to ask for this every month, or is the employee locked into an insurance contract when they first sign up?
• Can the employer only give the “bonus” money to insured employees or are all employees entitled to it?
• Under what circumstances can an employer give pre-taxed money in their paychecks?
• Can the amount vary by employee?

Answer: Thank you for sending in your question, because these issues will be faced by most small-business owners over the coming year. I must start with a disclaimer: I am a licensed insurance agent, not a tax accountant or HR professional. Have said that, I believe I can answer most of the issues you raise.

• Yes, you can ask for proof of individual insurance coverage as often as you like. The individual is insured on a month-to-month basis. They can cancel their coverage or lapse it by not paying their premium.
• Doesn’t bonus compensation usually has strings attached - performance goals for example? I see no problem with requiring employees to maintain uninterrupted coverage as a condition of qualifying for the bonus.
• There is no 100% safe way to withhold pre-tax money from an employee’s pay to reimburse individual health insurance premiums. Some claim that a Health Reimbursement Arrangement (HRA) can be used for this purpose, but I believe this will have to be tested with the IRS, before we can safely do it.

Question: I have a client who is earning a relatively small income and has a disabled spouse who is collecting disability income. When looking at this situation, is the income he receives from his disability payments considered part of their annual income?

Answer: To the extent that the disability income is taxed, that portion is added to the spouses income for total household income. The 2-person household income dictates the subsidy amount for the able-bodied spouse even though the disabled spouse is not enrolling in Covered California.

Question: My mum recently immigrated her, she is 79, and we currently have coverage until end of year through travel. She is a legal California Resident and I wish to apply for covered CA for her. She lives with me, but her income individually is low, at a pension of around $1000 per month. What are the steps to take. Thanks.

Answer: Your mother does not qualify for public health insurance, either Medicare or Medi-Cal. Since she is a legal resident, she does qualify for Covered California coverage regardless of her age. She may be eligible for premium assistance as well. She can apply during open enrollment starting October 1 for coverage effective January 1, 2014.

Question: As a broker who has 5 licensed support staff members, will they have to be Certified to help our current clients or prospective new clients with enrollment in to the Exchange or SHOP?

Answer: Yes, if licensed staff actually enroll people in Covered California they must be certified. No, if they only provide assistance and the Certified Agent does the “enrolling”.

Question: Our family income for 2013 is likely to be very low, since we started a new business earlier this year — probably between 100 and 250% of FPL. I expect however that our income in 2014 will be higher, likely exceeding 400% of FPL, the level at which the subsidies phase out. A couple of questions: 1. If our 2013 income is low enough to qualify us for Medi-Cal (instead of subsidies) for 2014, can we still purchase health insurance on the exchange? Is there any good reason to do so? For example, I’ve heard that many providers don’t accept Medi-Cal and that the quality of care available may be subpar. 2. I know that if we get subsidies for 2014 based on our 2013 income, they will have to be paid back during tax time if our 2014 income makes us ineligible. But what about the reverse? Suppose we subscribe to a plan in the exchange and pay for it in full, but it turns out that we were in fact eligible for a subsidy based on our actual income. Can we then claim this subsidy amount as a credit when we file our 2014 taxes? Many thanks for your help.

Answer: (1) If your income qualifies you for Medi-Cal, you can choose not to apply for Medi-Cal and enroll in Covered California without premium assistance. And no, there is no good reason to do this, since you would be passing up virtually free coverage for unaffordable coverage - end of story. (2) If you enroll in a Covered California qualified health plan and your premium assistance is underpaid, you can recover what you were due at tax time.

Question: My husband and I are retired and enrolled in Medicare Part A and B. We also have Kaiser Senior Advantage. We pay a total of $395 for Medicare /Supplementary insurance per month. Our only income is Social Security totaling $27000/year. According to calculator it would be cheaper to join Covered CA. Am I missing something?

Answer: People who are eligible for public health insurance, such as Medicare or Medi-Cal, are not eligible for premium assistance in Covered California.

Question: I am working in Europe and plan to return to the US in May 2014. I assume I can enroll with a Covered CA plan when I return? Will I face a tax penalty for the months I was out of the country for not having health insurance?

Answer: Being out of the country exempts you from the individual mandate so there will be no penalty. You will also be eligible for a special enrollment when you return in May 2014.

Question: What can agents advertise regarding our role the exchanges?

Answer: You cannot call yourself “certified” until you are. You may only use the approved logo link on your website or e-mail marketing messages. Otherwise you can advertise and prepare clients for enrollment without restriction.

Answer: According to Michael Lujan by e-mail today, “Covered California will offer HSA-compliant high-deductible plans in both individual and SHOP product portfolios”. It was less than 2 weeks ago that another Covered California spokesperson was quoted as saying there would no HSA qualified plan in the individual exchange, so I hope this is for real.

Question: Phil, don’t get me wrong, I think your website is great and you really know your stuff, but I sent in a couple of questions and you didn’t answer. What’s up with that? A fan

Answer: Here are some reasons not all questions get published answers in this Q&A blog: (1) your question is very specific to you and other readers won’t get anything out of it. I will send you a private answer if you include your e-mail address in the body of the question. (2) I just answered that question or one very much like it recently. The Q&A blog has a search function that you can use to find an answer. Try that first. and (3) I won’t publish political opinions, left or right.

Question: I was reviewing the standard plans on the Covered California site and couldn’t figure out which, if any, of the plans are compatible with health savings accounts. Do you know?

Answer: Correction 7-24-13: “Covered California will offer HSA-compliant high-deductible plans in both individual and SHOP product portfolios”. according to Covered California spokesperson Michael Lujan.

Question: It looks like the media has bit into the “subsidy fraud” issue and is chewing on it like a dog with a T-bone. Do you think it’s really going to be a big problem for Covered California?

Answer: They’re barking up the wrong tree by focusing on fraud by applicants who claim lower incomes than actual. At best, they will be getting a loan for 12 months because any excess tax credits will be recovered by the tax collector. The real danger is that people who don’t guess their income correctly will have a painful surprise when they get stuck with a big tax bill on April 15.

Question: I see that prices for subsidies vary substantially between pricing regions. Will I be able to see doctors outside of my pricing region with the plans offered in the exchange?

Answer: Yes. You will be ale to see doctors outside of the pricing region. Provider networks are completely independent of pricing regions. Just to clarify, subsidies DO NOT vary between pricing regions. Your subsidy (premium assistance) amount is a fixed amount based on a percentage of your income. It does not vary by pricing region. The premium rate does vary and thus the net out of pocket payment for those receiving premium assistance varies by pricing region.

Question: Employer sponsored insurance is considered affordable if what the employee pays toward the employee-only premium does not exceed 9.5% of his income. But individuals are exempt from the individual mandate if the cost of insurance would exceed 8% of their income. Wouldn’t that mean that people who contribute more than 8% of their income to the employee-only premium of their group plan are exempt from the individual mandate?

Answer: Yes. Individuals are exempt from tax penalty if the premiums for a bronze policy cost more than 8 percent of their income or their income is below the tax filing limit. Your academic point, while accurate, would be applicable to a statistically negligible number of employed individuals who could decline employer-based coverage, remain uninsured and avoid paying a tax penalty. You must be an attorney :)

Question: Given your recent Q&A regarding no web based interface for Covered CA for the initial open enrollment, what impact will this have on agent online quoting and enrollment services like Quotit, Norvax or HealthConnect? Agents need to know what restrictions this places on those services beginning in October. The service I use refuses to discuss or provide any information as to whether or not they can even provide quoting much less online public access and app/enrollment options.

Answer: They’ll still be in business. Covered California will provide their rates to online quoting services such as those you mentioned, so the those vendors will be able to provide online quoting services to brokers for both exchange and off-exchange plans. However, Covered California will not supply an interface, so their services will lack the functionality to connect to Covered California’s online application or subsidy eligibility process. The way I see it at this point, the consumer who arrives at your website can be interactively engaged with online quoting, but then they will have to be guided or linked to the Exchange website to be logged in with your certified agent ID (perhaps automatically) and complete the tax credit eligibility process there. It is my understanding, that plan selection and enrollment can either take place at the exchange site or a carrier’s site, but we’ll have to see how that works. Stay tuned. For those consumers who obviously not subsidy eligible, you should be able to quote and link to carrier online apps just as you do now.

Question: What’s the latest on agent certification?

Answer: If you missed the Covered California Agent webinar yesterday, here’s the latest on Certified Insurance Agent Training & Certification. - Registration for Training begins on August 19. We will provide a link to the registration form as soon as it’s available. - In-Person Training (8 hours min) begins in September (no date yet). The in-person sessions are expected to be 8 hours in length followed by a 4 hour online course and exam. There will be multiple locations training throughout the state. Training sessions will continue throughout the year. - Entire certification training online training course won’t start until November. - Expect to pay about $60 for the training and you’ll get CE credits. - You’ll need to get 80% or better on the post-training exam to get certification.

Question: I currently purchase my own plus spouse individual health insurance (both retired less than 65). Premiums are terribly high. Will we be eligible to purchase individual insurance from the Health Care exchange plans through Covered California?

Answer: Yes, of course you can. I don’t know why you would think not. Unless there is another question implied. Will you be eligible for premium assistance? Some younger retirees with substantial assets will qualify for premium assistance based on their taxable income alone. Assets are not considered. If you do not qualify for premium assistance, your premiums will be at least as high as they are now but the coverage will be somewhat better.

Question: If I buy on the Exchange for my family, am I required to purchase a standalone pediatric dental plan from the Exchange if I have kids? I have heard it’s one of the essential benefits but it will not be “bundled” with the health benefits.

Answer: So far, no. Standalone pediatric dental coverage is optional. However, there could be more changes coming. As you say, pediatric dental is one of the essential benefits but Covered California chose not have it bundled with the health benefits. Many consumer advocates and others have pushed back saying this is not the intent of the law. Covered California may feel compelled to make an adjustment, but it appears to be too late to have the carriers imbed the dental benefits and submit new rates. We’ll see how the exchange board handles it at the next board meeting in August.

Question: The carriers know exactly what the commissions are for 2014. Why haven’t they released them?

Answer: The carriers submitted their proposed commission plans for approval by the state governing bodies - DOI and DMHC - about 2 months ago. They probably thought that they would be rubber stamped in short order and that’s why they told us that we would see commission schedules in June. But approval was delayed, and at least one of the primary California carriers was told by the DMHC that their commission plan was unacceptable. That took place just 2 weeks ago. So for at least one Covered California insurer the agent commission is yet to be determined. I expect all carriers will release their commission rates together to prevent unfair competition while changes can still be made.

Question: What will be the commissions paid to agents selling individual plans in the exchange and out of the exchange in 2014?

Answer: Agent commissions have not been announced yet.

Question: I read today CoveredCa will not partner with for profit web base brokers. Dose this mean they will not certify them or allow them to place business through the exchange?

Answer: No, any licensed agent who completes the required training and passes the certification test can be certified to place business through Covered California. Only individual agents can be certified - not business entities or agencies. The fact that an agent operates a web-based business does not affect his or her eligibility for certification. Covered California has decided to delay, for at least the initial open enrollment period, the electronic interface that would allow web-based agents to connect to the exchange with full functionality. Such functionality would allow an applicant to complete the entire application and enrollment process without leaving the web-based agent’s web site. Federally facilitated exchanges (33 states) plan to provide this interface this year.

Question: How do consumers choose between agents and assisters? It looks like they do the same thing.

Answer: Some things are the same, they will both educate and inform people about options available to them. But you choose an agent because you want to ask the agent bottom-line questions like, ‘What do you think I should do?’ If an unlicensed assister is asked that question they’re going to have to say, “I can’t tell you what to do.” Also, agents do much more than sell insurance. Agents explain critical differences in plan designs and provider networks. This usually involve substantial fact-finding about the client’s needs. Back to your question, these differences will not be obvious to consumers. It’s out job to tell them.

Question: Any chance the Covered California and other individual state sponsored health plans will be pushed back to 2015 too?

Answer: No. Covered California will begin enrolling individuals for health coverage on October 1, 2013 for coverage effective January 1, 2014. If other state-run exchanges are not ready to launch, they will default to federally-run exchanges.

Question: What’s to stop anyone from lying about their income to claim a subsidy?

Answer: The system has two safeguards: (1) During the application process, the applicant’s income will be compared to tax filings, social security data, and income reports; (2) the IRS already has mechanisms in place to recollect subsidies that were overpaid.

Question: I just read that the exchange will accept the applicant’s “word” regarding their household income. Is that true?

Answer: The Feds released a new rule Friday that grants state and federal facilitated exchanges the “discretion” to accept an applicant’s attestation of projected annual household income “without further verification” during the first year of operation - 2014. The rules also allow only random, rather than comprehensive, checks on income eligibility in 2014. Covered California may continue with its plans for comprehensive income verification regardless. We will probably learn more about this at the August board meeting.

Question: If my employer is not required to report which employees are covered under our grou plan, how will the Exchange know if I apply for a subsidy?

Answer: Until now, Exchanges had to verify whether new applicants receive employer-sponsored insurance benefits through random checks. But in final regulations released on Friday by the HHS Department, 16 states, including California, which are setting up their own exchanges, until 2015 to begin random sampling of enrollees’ employer-insurance status. However, California may choose to follow through with random sampling.

Question: If the Silver Plan is the only level available for the subsidy, what would be the purpose of applying for any other level of coverage inside of the exchange?

Answer: While the dollar amount of the premium assistance is computed based on the Silver Level, you can apply that amount to any level plan. Those who know they are going to have major medical expenses might opt for the Platinum and those with no health issues might apply their subsidy to a Bronze plan for a lower net premium.

Question: From my understanding, the carriers that are participating in the exchange have to offer the same plans outside of the exchange which are IN the exchange and nothing more. Is this correct?

Answer: Off-exchange, carriers have to offer the standard plans offered inside Covered California without modification. But they are free to offer other benefit designs off-exchange as long as they conform to ACA guidelines such as essential health benefits and actuarial values. This should allow for a little innovation. Also all HSA-qualified plans will be off-exchange.

Question: Cigna (CA) tells me that I can keep my current plan through 2014. Doesn’t everyone have to change to Obamacare on January 1, 2014?

Answer: There is currently a loophole in the ACA that enables health insurers to extend existing policies for nearly all of 2014, thereby avoiding changes under the healthcare law. In california, some carriers, like Cigna, who are not included in the Exchange, are providing individual and small group clients an option to change their policy date to December, 2013. If you accept this option, you will keep your current level of coverage (at a new December 2013 rate) through November 30, 2014. The potential benefits are to lock in a new December 2013 premium through November 30, 2014, a premium that could be less than a 2014 ACA-compliant plan. When coverage comes up for renewal in November 2014, the plan will be closed. The loophole could close because carriers participating in Covered California, such as Blue Shield, Kaiser and Anthem Blue Cross, are lobbying state lawmakers to require individual policies to comply with the federal law by Jan. 1, 2014.