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Covered California News & Commentary

Topics of interest to both consumers and agents related to Covered California and the ACA biased in favor of the successful implementation of the Exchange and deliberately apolitical.

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ACA Losers

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The numbers for the ACA in California are cold: 900,000 Californians will lose their individual health care plans Dec. 31. About 300,000 will be eligible subsidized coverage in the exchange and most will get better coverage at lower cost. The losers are professionals, entrepreneurs, and mom and pop business owners who did the right thing by buying private health insurance. They number about 600,000. The are losing their coverage and facing higher rates to buy replacement coverage that is ACA-compliant.

Individual policyholders represent only 7 percent of the health insurance market, but they are an attractive demographic and the wrong people to anger. They are proactive enough to have bought their own coverage, successful enough to afford it and vocal when they realize that their premiums are likely to rise - even double for some.

Obama played the hero for some allowing insurance companies to keep their customers on existing plans through 2014. But the Covered California board ruled against that extension. In the end, some 600,000 Californians who don’t qualify for subsidies should expect to pay more a lot more an many case.

People who did everything right know now that they cannot keep the plans they had - and they’re the first in line to be handed the real bill for the Affordable Care Act.

Guest Author, A.Marshall, is a retired attorney whose blog, An Ad Hoc Guide to the Affordable Care Act, seeks to make sense of buying health care under Obamacare. A. Marshall has been a frequent commenter on our Q&A Advice blog under the name, Freelancer.


We Are Confused

Many individuals and families with complicated income situations are confused about how to calculate their MAGI (modified adjusted gross income) for purposes of determining eligibility for premium support under the Affordable Care Act (ACA). Official web sites such as the Healthcare.gov site or IRS.gov tend to focus only on earned income and do not provide much guidance as to how to handle other forms of income or various tax deductions. Much of the information posted on other internet sites is mistaken or misleading. Part of the confusion stems from the fact that the tax code uses the phrase “modified adjusted gross income” to mean different things for different purposes. Some web sites or blogs have posted worksheets based on IRS forms developed for very different purposes. In fact, MAGI is defined in different ways in well over a dozen different sections of the tax code. Although this statutory framework is confusing, it does leave one thing clear: the definition of “modified adjusted gross income” varies depending on the purpose of the income calculation, and it is always clearly stated within the particular statute which defines a particular income-related tax or benefit. The term is defined for purposes of the Affordable Care Act in 26 USC 36B.

Adjusted Gross Income Plus

The term “modified adjusted gross income” means adjusted gross income increased by—

  1. any amount excluded from gross income under section 911,
  2. any amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax, and
  3. an amount equal to the portion of the taxpayer’s social security benefits (as defined in section 86(d)) which is not included in gross income under section 86 for the taxable year.

This means that MAGI is the combined total of:

  1. the adjusted gross income of the taxpayers within a household, plus
  2. any amounts excluded from taxation by section 911 (the exclusion from gross income for citizens or residents living abroad),
  3. any tax-exempt interest received or accrued during the tax year, and
  4. any portion of the taxpayer’s social security benefits that are excluded from gross income.

Tax Deductions Not Included

Other than the items specified by the statute, there are no other add-backs to the calculation. That means that the various types of tax deductions listed in the Adjusted Gross Income sections of the IRS 1040 or 1040A forms are also income reductions for purposes of the ACA. This means that in determining subsidy eligibility, taxpayers can continue to benefit from a variety of tax deductions, including the following:

  • Deductions related to college expenses (student loan interest and college tuition deductions
  • Deduction for contributions to a traditional IRA
  • Health Savings Account (HSA) deduction
  • Self-employment deductions, including:
  • One-half of the amount of self-employment tax
  • 100% of the amount of self-employed health insurance premiums
  • Contributions to a qualified retirement account, such as a Simplified Employee Pension (SEP) plan.

Keep in mind that these rules are subject to change - in fact, the definition of MAGI in the Affordable Care Act has already been changed by Congress twice since the law was first written. Taxpayers with complex profiles should seek the advice of a tax preparation professional

Covered California Tests TV Ads

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Beginning Labor Day, television ads will hit the airwaves in three test markets: San Diego, Sacramento and Chico/Redding. By October, other television markets will be added. The phased approach will allow Covered California to test the ads and fine-tune its customer service process.

“With a six-month open-enrollment period from October through March 2014, Covered California’s media team recommended we build our campaign to promote enrollment with an eye toward the beginning coverage date of Jan. 1, 2014,” Peter Lee said. “We’ve done the background research to make sure we reach people in ways that are specific to their hopes, fears and concerns and that reflect the rich diversity of California’s population.”

From October on, these and other broadcast advertisements will run statewide along with print and radio ads connecting with specific ethnic communities, as well as languages beyond English and Spanish. The ads will expand awareness of the health benefit exchange, of how the process for shopping and signing up for insurance coverage works, and of how people can find out whether they qualify for financial assistance.

Covered California has budgeted $45 million for the initial push of paid media through March 2014 and plans to spend another $35 million from April to December 2014. The funds come from a one-time federal grant.

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Covered California previously said they would implement a new quality rating system for health insurers this fall, two years earlier than required by the ACA. Now it looks like that may slip by a year. According to Peter Lee, currently available insurer data are out of date and only cover plans that differ significantly from those that will be offered through the Exchange. Covered California instead is determining strategies for quickly collecting performance data during the first year of the exchange and creating its own ratings.

The Exchange may have underestimated the demand for a rating system. You only have to look at how Generations “X” and “Y” use ubiquitous online rating applications like Yelp to help make decisions about where to eat and what to buy. While definitely not part of Gen-x or Gen-y, I generally look for some objective comparative data to make purchasing decisions.

Beth Capell of Health Access made a good point “it’s important for consumers to have information on quality in year one, even if it’s not everything we want…If for five bucks more a month I can get a 4-star plan instead of a 2-star plan, I should have that information.”

Better-performing insurance companies under currently available quality data are all HMOs. Kaiser Permanente, Sharp Health Plan and Western Health Advantage jointly wrote that the exchange should prominently display quality ratings. They argued that officials should label plans as “not yet rated” if data are not useful for certain insurers, rather than withholding ratings for all insurers. That would certainly be to their advantage, so insurers who sell PPOs should be looking for ways to help Covered California quickly gather performance data so that they can compete on a level playing field in the ratings game.

SHOP GAs Announced

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Calrement.jpeg Covered California has announced the selection of General Agents (GA) for the SHOP. They are Claremont Insurance Services, Dickerson Employee Benefits, LISI, and Warner Pacific. The most notable omission is Word & Brown, one of California’s premier GAs. Dickerson.jpeg

Choice Administrators’ CaliforniaChoice brand is a private small group exchange owned by Word & Brown. CaliforniaChoice is Covered California’s chief competitor so that could the reason lisi-logo.jpg that Word & Brown was not selected or chose not to participate as a SHOP GA. The public SHOP and private CaliforniaChoice exchanges will feature the following carriers in common: Health Net, Kaiser, Sharp and Western Health. However, CaliforniaChoice will include both Aetna and Anthem Blue Cross exclusively; while SHOP will include Chinese Community Health Plan and Blue Shield of California exclusively.
Warner Pacific.jpeg

Covered California opted to exclude all GAs from the individual exchange, a market that has not been penetrated to any great degree by GAs in California. In light of the changes brought on by the ACA, Word and Brown has expanded its Individual Department as well, offering various services to support agents.

SHOP Carriers Announced

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Peter Lee.jpeg

Covered California announced participants for the new Small Group Health Options Program (SHOP) marketplace. Six health insurance plans will be made available. The participants will include:

  • Blue Shield of California
  • Chinese Community Health Plan
  • Health Net
  • Kaiser Permanente
  • Sharp Health Plan
  • Western Health Advantage

The plans, a mix of HMOs and PPOs, will be sold through licensed agents who are trained and certified by Covered California.

Michael Luhan Resigns

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Michael Lujan.jpg

Michael Lujan, Director of Sales and Marketing for Covered California’s SHOP, resigned today. A spokesman for Covered California said Lujan will leave his position Aug. 9th. Lujan is expected to release a statement later today and we will continue to provide updates as they become available. Michael was the de facto voice of the exchange for agents. He will be greatly missed.

Anthem Won't SHOP

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Anthem withdrew its application to be on the Small Business Health Options Program (SHOP) last week. It was a surprise move that leaves the SHOP as wobbly as a three-legged chair. Without Anthem Blue Cross, the SHOP will be decidedly less attractive to employers and agents. Anthem is the major insurer in the California small group market with about one-third of the market and even if it wasn’t, you’d still want as broad a range of carriers as possible for the SHOP to have a successful launch year.

California Choice Benefits

The Anthem announcement included the not so subtle reminder that they are a participant in California Choice, a privately owned small group exchange that has operated successfully in state for a decade or more. Indeed, California Choice, the SHOP’s only competitor, seems to be the winner here.

Originally, Covered California required insurers to participate in SHOP as a condition of being on the individual exchange, but they had to remove that requirement to attract new insurers. Relatively small plans like Alameda Alliance for Health, Chinese Community Health Plan, Contra Costa Health Services, and L.A. Care Health Plan lack the resources to field small group plans in the SHOP, but their participation in the individual exchange is desirable.

DOI Attacks

Anthem had been under fire from DOI Commissioner Dave Jones for a series of recent small group rate increases that he considers excessive. Without the legal power to stop the rate increases, jones has been scorching Anthem in the media and lobbying the Exchange Board to exclude Anthem from the SHOP. Whether the board would have done that remains a moot point since Anthem has taken that chip off the table.


David Lazarus, an LA Times columnist, frequently writes about what’s wrong with our healthcare system. But he got an appreciation for what’s good about it recently when his wife had a seizure. The following is reproduced from his article.

“My wife had a seizure a couple of weeks ago after the sodium level in her blood dropped dangerously low. She’s now home after spending eight nights in the intensive care unit at UCLA Medical Center….”

“First, it’s hard to imagine any other healthcare system in the world that can marshal as many resources as ours. From highly skilled doctors and nurses to every possible medical device and drug, our system is second to none in its capabilities. No wonder that when foreign leaders fall sick, they often seek treatment here and not at home.”

“Moreover, once you’ve gained access to the higher levels of the system — admittedly, no small feat — there’s seemingly no limit to efforts that will be made to heal you. Every possible test will be run. Every expert opinion will be sought.” Click here for entire article. U.S. health system has flaws, but not in quality of care.

Covered California announced its selection of pediatric dental health plans. The six selected companies: Anthem, Blue Shield, Delta Dental, Health Net, LIBERTY Dental, and Premier Access Dental. Nine stand-alone plans are offered, but all can be bundled with health insurance for a single premium. Health Net Dental is available only when bundled with a health plan.

Three different product types are available, depending on where the child lives: dental health maintenance organizations (DHMOs), dental preferred provider organizations (DPPOs) and dental exclusive provider organizations (DEPOs). Stand-alone plan premiums range from less than $10 a month for an HMO plan in some areas to about $30 a month for a DPPO.

Unlike Covered California’s health insurance plans, dental plans are not designated by metal levels, but come in two actuarial value options: 85 percent, which features higher premiums but lower average out-of-pocket costs; and a 70-percent value plan, with lower premiums and higher average out-of-pocket costs.

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Covered California has persuaded California Department of Insurance regulators to change essential health benefit (EHB) regulations, to eliminate a provision requiring the “qualified health plans” (QHPs) sold through the exchanges to offer pediatric dental benefits. In the revised version, regulators let QHPs leave out pediatric dental benefits as long as insurers are selling stand-alone dental plans through the exchange.

Peter Lee told insurance regulators that actually requiring a QHP to provide pediatric dental benefits would conflict with ACA requirements to exclude dental from premium assistance. “Our federal colleagues have confirmed that Covered California must permit offering QHPs without pediatric dental in multiple conversations,” Lee said. “They were reluctant to provide written guidance on this point because they believed the text of the statute and regulations are so clear.”

Because the Covered California QHP solicitation process did not require QHPs to include pediatric dental benefits, none of the QHPs selected for the individual exchange program did so, and implementing the requirement in the original version of the emergency regulations “would cause a delay of Covered California’s health plan solicitation process, possibly by several months,” Lee said.

Dave Jones.jpg California Insurance Commissioner Dave Jones will recommend that the Covered California SHOP exchange exclude Anthem Blue Cross from selling small business coverage. Jones cited a pattern of “unreasonable rate increases” for small groups by Anthem, amounting to more than 17% in the past year, according to Jones.

Frustrated by his lack of authority to reject premium increases, Jones is using his power under the ACA to recommend that the state exchange, exclude insurers with a pattern of excessive premium increases. In November 2014, voters will decide whether to give him that rate control authority in a ballot initiative.

Anthem says that small business rates are going up 11.5% on average this year and warned that excluding Blue Cross of California from the SHOP would sharply reduce competition.

“The idea you would exclude one of the most widely chosen health plans in the state is ridiculous,” said Micah Weinberg, a senior policy advisor at the Bay Area Council, an employer-backed San Francisco group. “All this would do is make health reform for the small business market less attractive.”

The Great Rate Debate

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It didn’t take long for those opposed to the successful implementation of the ACA to attack Covered California’s claim that their health care rates would be lower than predicted.

Avik Roy of Forbes headed his article, “Rate Shock: In California, Obamacare to Increase Individual Health Insurance Premiums by 64-146%”. He charged that Covered California “was making a misleading comparison. They compared apples - the plans that Californians buy today for themselves in the individual market - and oranges - the highly regulated plans that small employers purchase for their workers as a group.” He went on to compare today’s individual plans by getting an online quote for individual plans available today where the median cost of the five cheapest plans was $121 for a 40 year old and $92 for 25 year olds. That’s how he arrived at an Obamacare increase of 100% for 25 year olds and 116% for 40-year-olds.

In response, Ezra Klein of the Washington Post and a frequent contributor to MSNBC wrote what I though was an amusing and spot-on analogy. “Imagine you went to Best Buy and found a great deal on a plasma television set. I want to be clear here: You didn’t find a great television set. This television set is actually a bit crummy. The picture is fuzzy. Consumer Reports says it breaks down a lot and it’s expensive to fix. But it’s really cheap. The price tag reads $109. When you take it to the counter, the saleswoman tells you that the set will actually cost you $199. And count yourself lucky, she confides in a conspiratorial whisper. There are customers whom Best Buy won’t sell it to at any price. You ask her which customers those are. The ones who need the TV most, she replies. So here’s the question: Does that television really cost $109?

According to HealthCare.gov, 14 percent of people who try to buy an individual health insurance plan are turned away outright. Another 12 percent are told they’ll have to pay more than the quoted rate, So a quarter of the people who try to buy this insurance product for $109 a month are told they can’t. Those are the people who need insurance most — they are sick, or were sick, or are likely to get sick. So, again, is $109 really the price of this plan?

Comparing the pre-underwriting price of this plan to a guaranteed-issue plan in Covered California is ridiculous. The plans in the exchange have to include those people. They can’t turn anyone away or jack up rates because you once suffered a migraine headache, or experienced a summer of hay fever, or had acne as a teenager

Yes, some people will find the new rules make insurance more expensive. That’s in part because their previous health insurance was made cheaper by turning away sick people. The new rules also won’t allow for as much discrimination based on age or gender. The flip side of that, of course, is that many will suddenly find their health insurance is much cheaper, or they will find that, for the first time, they’re not turned away when they try to buy health insurance. For example, the Commonwealth Fund estimates that 94% of the the 19-29 age group will receive free public insurance or subsidized private insurance under Obamacare.

That’s why the law is expected to insure almost 25 million people in the first decade: It makes health insurance affordable and accessible to millions who couldn’t get it before. To judge it from a baseline that asks only what the wealthy and healthy will pay and ignores the benefits to the poor, the sick, or the old is a bit disingenuous.

CC Rate Sample 2.png

Congratulations Covered California you pulled it off - affordable health insurance with better coverage.

Click image to enlarge

Proving the dire predictions of rate shock wrong, Covered California announced 2014 rates for standard plans in the exchange. Sample rates are all we have right now, but they sure look good. How do the rates Covered California is announcing compare to costs today in California? To get close to an apples to apples comparison, 2014 rates are compared to current rates available in the small employer market. Both are competitive market with guaranteed issue. CC rates ranged from two percent above the 2013 average premium to 29 percent below the rates in California’s most populous markets. This is impressive since the 2014 products include doctor visits, prescriptions, hospital stays and more essential benefits. Additionally, there is financial protection like a maximum out-of-pocket cost of $6,350 which will dramatically reduce the chances of someone filing bankruptcy because of medical bills.

How Did They Do it?

The major factors that resulted in rates being lower than many predicted are:

  • Better health status of likely enrollees — health plans assumed that Covered California’s marketing, outreach and enrollment plans were likely to result in a more balanced health mix than some commentators.
  • Effective partnerships with providers — Many of the health plans worked for many months to arrange contracts with doctors, medical groups and hospitals that were equally committed to being part of Covered California. These high performance networks were built around quality and cost criteria. Some plans included their integrated delivery system that promote efficiencies and quality. In addition the plans had an emphasis on care coordination, early intervention and management of high-risk enrollees.
  • Trust in the Affordable Care Act’s risk protections — The Affordable Care Act has a number of provisions that are designed to reduce risk for health plans, including a risk adjustment process, risk corridors and reinsurance. These mechanisms were closely reviewed by and trusted by health plans.
  • Reduced administrative costs — While health plans will need to pay a fee to participate in Covered California, that fee will be spread across their entire individual business. At the same time, plans will no longer have any costs for medical underwriting, will have reduced marketing expenses and many committed to limiting profits to only two percent to three percent of Covered California business.


Some agents were developing a marketing strategy that capitalized on the difference in commissions between agents and assisters. With assister enrollment payments fixed at $58 and the agent commission expected to be somewhat higher, the deal involved agents paying assister entities more than $58 for the referral. Similar arrangements between agents and grantees would be more lucrative for both sides of the deal because grantees have received a lump sum an are not paid by enrollment.

Because of the concern that financial arrangements between agents and grantees, Assisters or community-based organizations would increase the overall cost of marketing and enrollment assistance, which are directly reflected in health plans’ costs, Covered California is making a policy clarification, with the following recommendations:

Covered California encourages non-monetary partnerships among all groups offering enrollment assistance. With regard to financial arrangements that could increase overall marketing and enrollment costs, staff recommend adoption of the following recommendations:

  1. Prohibit grantees and Assisters from accepting payment or other valuable consideration from agents for referrals and/or enrollment services; and
  2. Prohibit agents trained and certified by Covered California from providing payment or other valuable consideration to grantees, Assisters and other community-based groups for referrals and/or enrollment services as a condition of program participation.

Shorter Paper Application

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While some of us think applying for health insurance online is pretty cool, others can’t or won’t do it. That why the health insurance exchanges needs a good old-fashioned paper application. Unfortunately, the first attempt at a paper application for individuals and families was 21 pages long. Hardly consumer friendly. There were hoots and hollers. The length of the application was criticized openly by many in the industry, including the NAHU members at their annual DC conference in February.

Low and behold, within 3 months, the CMS has come up with a three-page application for individuals, while the application for families has been reduced by two thirds. CMS says “the consumer friendly forms are much short than industry standards for health insurance applications today.” Click the following link to view and/or download a advance copy of the new application. Ind Paper App.pdf

Consumers continue to lack awareness of how the Affordable Care Act will affect them. Up to two-thirds of the uninsured still say they don’t know what the ACA will mean for them. CMS has repeatedly said in recent weeks that brokers will play a crucial role in consumer assistance and education about the public exchanges for the uninsured and what ACA might mean for all Americans. CMS has said that broker training information will be available by August.


Peter Lee, Executive Director of Covered California said, “Come January 2014, Covered California will be open for business providing subsidies for millions of Californians”, but he didn’t promise it would be smooth. The truth is that the rollout is likely to be messy. This is a massive change, on a par with the launch of Medicare, that will take time to get right.

Keep in mind that I am a stong supporter of the ACA and Covered California in particular so I not some critic taking a potshot. But here are plenty of Obamacare critics out there and they will have a field day with the inevitable problems sure to accompany the launch. It will be difficult enough for consumers, agents, and insurers to maneuver through the launch period’s screw-ups, but all this will be happening amid a tough election year political fight, in which Republican opponents of health reform will renew their call to repeal the ACA, or at least roll it back.

We hope that some journalists will take the long view, but this is probably too much for which to hope. When the shit hits the fan next January, as it surely will, there won’t be many newspaper headlines taking the long view.

Funds Running Low

The Center for Medicare and Medicaid Services (CMS) to ordered California to suspend enrollment in the Pre-Existing Condition Insurance Plan (PCIP). This enrollment suspension applies to applications received by the state of California after March 2, 2013. The demand for the PCIP program has outstripped expectations. CMS has announced this nationwide suspension of enrollment to assure that there are sufficient funds available throughout 2013 to continuously cover people currently enrolled in PCIP through the period when the program is already scheduled to end in December.

There are only two exceptions to this suspension:

  1. California will still enroll people after March 2 if the individual is currently enrolled in a PCIP program in another state and they move to California
  2. California will continue to screen applications submitted after March 2 to see if the individual qualifies for the state’s own high risk pool, the Major Risk Medical Insurance Program, MRMIP

The current PCIP enrollees will remain covered and will receive services through December 31, 2013.

PCIP was established as a temporary program for people who were unable to secure coverage in the insurance marketplace. Starting January 1, 2014, there will no longer be a need for PCIP because the Affordable Care Act does not allow insurers to deny individuals with pre-existing conditions or charge them higher rates than those without such conditions. Also, the California Exchange, “Covered California” will be open for business in January for both individuals and small businesses to buy affordable health benefits plans.

This Affordable Care Act represents sweeping changes for how the middle class will get insurance. Whether or not you qualify for premium subsidies, also called “Advanced Tax Credits”, becomes a primary concern for consumers looking for a way to afford mandatory health insurance.

Your 2012 tax return is key to determining if you’re eligible for any financial assistance. Using the information from his 2012 return, a tax advisor at H&R Block advised his client that she would qualify for a significant tax credit and would have to pay pay only about $65 a month in for health insurance after the subsidy. If she skips coverage, H&R Block warned her, she faces a $95 tax penalty next year and $356 the following year.

For customers who want help with getting health insurance, H&R Block refers them to insurers affiliated with the Blue Cross and Blue Shield Assn., an industry group that represents both Anthem Blue Cross and Blue Shield of California in the state. That partnership stands to give those insurers valuable leads on potential customers.

Although the Blue Cross and Blue Shield logos are present, there is no mention inside H&R Block’s offices of Covered California, the new California health insurance marketplace.

This could be the first evidence of the competition that is likely to develop between health insurance carriers and the exchange. On the one hand carriers are motivated to “partner with the exchanges in a marriage of necessity and on the other hand do what they can to retain or gain market share.

Covered California, is planning to spend about $250 million on marketing statewide to establish its brand name and make it a prime destination for consumer information. Peter Lee, executive director of Covered California, said he welcomes the information H&R Block is providing before the state’s marketing ramps up this summer closer to when enrollment begins. “We will be exploring relationships with tax preparers because they offer a great way to provide one-on-one assistance,” Lee said. “But we don’t want to be too far ahead of when people can enroll.”

The ACA says that someone with access to affordable employer-sponsored coverage cannot get a premium subsidy from state exchanges in 2014, unless the cost of the employer-based health care coverage for that employee exceeds 9.5 percent of the worker’s household income. The IRS ruled last week that the calculation of affordability will be based on the cost of employee-only coverage, not family coverage.

Many Families Priced Out

This is highly disappointing ruling. Estimates made in 2011 by respected research organizations suggested that some 2 million to 3.9 million non-working spouses and dependents would be harmed by the strict ruling. It could leave millions of Americans with modest incomes unable to afford family coverage under their employers’ health insurance but ineligible for subsidies to buy coverage in the Exchange. A Kaiser Family Foundation survey found that in 2012, employees’ annual share of insurance premiums averaged $951 for individual coverage and $4,316 for family coverage. Under the I.R.S. rule, such costs would be considered affordable for an employee with a household income of $35,000 a year — making the employee’s spouse and children ineligible for a premium subsidy on a health exchange, even though that family would have to spend 12 percent of its income for the employer’s family plan.

Exempt form Penalties

The IRS said in a proposed rule also issued today that most families in such a situation won’t have to pay a penalty if they choose not to buy insurance coverage. This helps some, but it still leaves families that can’t afford health coverage either through an employer or on their own without the subsidy they need. There will be a substantial number of families who are priced out of needed health care,

Enrollment in Covered California will not begin until October 1, 2013, but here are some things you can do to get ready.

  1. Find out if your employer will offer health insurance in 2014? This is especially important if you work for a company with fewer than 50 employees.
  2. Use this time to understand how health insurance works, including copays, deductibles, out-of-pocket maximums. You’ll need to understand these details to be an informed shopper.
  3. Make a list of questions to have ready when it’s time to choose your health plan. For example,”Will this plan cover my prescription drugs? or “Can I stay with my current doctor?”.
  4. Know your household income. (You’ll find it on your form 1040 listed as “Adjusted Gross Income”). Most people will qualify for a premium subsidy that will provide a substantial discount on health insurance costs. You’ll need your income information to find out for how much you’re eligible.
  5. Set your budget. You’ll have to make some trade-offs between what you’d like and what you can spend. Breaking down the choices by cost will help narrow your choices.
  6. Explore what’s available now. Perhaps you can get help with insurance now. Some changes are already in effect from the new health care law, for example dependent coverage to age 26, guaranteed issue for children, or the Preexisting Conditions Insurance Plan.

Agent Contract Terms Coming Soon

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Covered California is in the process of developing agent contract terms that will govern agent duties and obligations. The Exchange hopes to release a rough draft of the contract in late January or early February 2013, with public comments to follow.

Heads Up Agents

This is a BIG deal for agents. The specific contract terms to be offered to agents will provide a true test of the Exchange board’s commitment to agent participation. Covered California did not have to include agents in the individual Exchange. It’s decision to do so surprised many and, it is fair to assume, disappointed some among the very vocal special interest groups who see agents as unnecessary middlemen at best. They can be expected to lobby for heavy-handed anti-agent rules.

We will publish the rough draft of the agent contract terms as soon as it is available.

HHS released 5 new ACA regulations last week. Most are for the new state exchange - Covered California. These are tweaks to existing regulations. If you’ve been on top of things up to now, you won’t see much change here.

  1. Guaranteed issue and renewal: you no longer can be denied getting insurance due to a pre-existing condition. Insurance companies can no longer jack up rates or drop you completely when it’s time to renew. They may only raise rates annually (on your birthday!) and only by a set amount.
  2. Fair premiums: premiums can only differ based on age, family size, tobacco use and where you live. Adults will be within a 3:1 ratio. In other words, a premium for a 63-year-old can be a maximum of three times the rate of a 21-year-old. Everyone over age 63 is in the same rate band. Women can no longer be charged more than men.
  3. Young adults special option: Younger people tend to be healthier than older people. But, as noted above, older adults are capped at paying a max of three times the premium of a 21-year-old. There was concern that this would mean high premiums for 20-somethings. The new rules allow for catastrophic health insurance plans — plans with lower premiums and higher deductibles for those generally health younger adults.
  4. What’s covered: The feds have already detailed that each state must offer coverage within ten categories. States have some latitude in exactly what they’ll put in their plans. But one question had been around prescription drugs. The federal government had initially indicated that plans need only cover one prescription drug per category in a policy’s “formulary” — which could be problematic for the millions of people with chronic illnesses who take more than one drug. There were concerns that only one drug would be covered in a huge category, such as diabetes for example. The new rules today say that insurance sold in the exchange must match the benefits of the most popular small group health plan in the state (the “benchmark plan”). In other words, in all likelihood, more than one prescription drug will be covered in each category.
  5. Wellness programs: A new rule encourages employers to offer a new kind of wellness program. If employers participate, people who receive insurance through their employer will be able to participate in enhanced wellness programs. Specifically, they can win a reward (real money here, folks: discount on premium or co-pay, for example) if they meet a specific health target: reduce or quit smoking; lower cholesterol; weight loss, etc..

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