By Guy Boulton
Milwaukee Journal Sentinel (9/28/13)
On Tuesday, roughly 31/2 years after becoming law, the Affordable Care Act reaches an important milestone in its goal of reducing the number of Americans without health insurance.
The marketplaces, or exchanges, being set up in every state are scheduled to open. People who are not offered affordable health benefits by an employer may qualify for federal tax credits to subsidize the cost of the plans sold on the marketplaces.
The subsidies are one of two ways the law will expand health coverage. The other is expanding Medicaid programs for people with very low incomes.
Roughly 490,000 people under 65 — about one in 10 — are uninsured in Wisconsin. In Milwaukee County, nearly one in seven people under 65 don’t have health insurance.
Here are some common questions about the changes:
Q. What are these new marketplaces?
A. The health law set up the marketplaces, known as exchanges, with the hope of increasing competition in the insurance market for individuals and small businesses, in part by making it easier for consumers to compare health plans.
Two marketplaces — one for individuals, the other for small employers — will be set up in each state by the federal government or by states. The federal government is setting up the marketplaces in Wisconsin.
For now, the marketplace for people who buy health insurance on their own is what matters. Marketplaces for small businesses are scheduled to be fully open for enrollment in November, a month later than planned.
Q. Will I have to buy health insurance on the marketplace?
A. No. Most people get health insurance through an employer or through government programs such as Medicare and Medicaid. Nationally, 156 million people were covered through an employer in 2012. The exchanges are designed for the 19.4 million people who buy insurance on their own.
In Wisconsin, with a population of 5.7 million, roughly 180,000 people get coverage through health plans bought on their own.
Q. Who should shop for a health insurance plan on the marketplace?
A. People who do not get affordable health benefits through an employer — those who don’t have to pay more than 9.5% of their wage for their share of the cost for single coverage — and who might qualify for federal tax credits to help offset the cost.
The federal tax credits apply only to health plans sold on the marketplace.
Anyone can buy a health plan on the marketplace. But far more health plans will be available outside the marketplace. Most insurers, including UnitedHealthcare and Humana, are not selling plans on the marketplace in Wisconsin this year.
Q. When can I sign up for a health plan on the exchange?
A. The enrollment period this year runs from Tuesday through March 31. However, to get covered by Jan. 1, you must buy a plan by Dec. 15.
Q. I’m on Medicare. Does this affect me?
A. The law contains numerous changes to Medicare, such as better prescription drug benefits and certain preventive screenings. But people on Medicare won’t need to shop in the marketplaces.
Q. Do I need to buy a health plan if am covered by BadgerCare Plus?
A. Possibly. In Wisconsin, adults now covered by BadgerCare Plus who have household incomes above 100% of the federal poverty threshold — $23,500 for a family of four — will need to buy a health plan on the marketplace.
Children in households with incomes of up to 200% of the threshold and pregnant women with incomes of up to 300% of the threshold, or $34,470 a year, remain eligible for BadgerCare Plus.
Q. What if I get coverage through a Medicaid program other than BadgerCare Plus?
A. People who are disabled or elderly are not affected by any of the pending changes.
Q. Who is eligible for the tax credits?
A. People with household incomes below 400% of the federal poverty threshold — and, again, who are not offered affordable benefits from an employer.
The tax credits end for an individual with an income of more than $45,960 a year and for a family of four with an income of $94,200 a year.
That sounds like a lot — but remember that family coverage can cost more than $10,000 a year, plus deductibles and other out-of-pocket expenses. Further, the tax credits are relatively small for people with incomes close to four times the poverty threshold.
Q. How do the tax credits work? Do I have to wait until I file my taxes to get the credit?
A. The tax credits are applied to the cost of health insurance in advance. They are available even if an individual or family doesn’t owe any federal taxes.
Q. How large are the subsidies?
A. The tax credits will vary with income, and they will limit the amount that an individual or family has to pay for insurance to a set percentage of their household income — ranging from 2% to 9.5% of that income.
Q. What if my income is below 100% of the federal poverty threshold?
A. Adults with incomes below 100% — $11,490 a year for an individual and $15,510 for two people — will be eligible for coverage through Medicaid in Wisconsin, even if they do not have children under 19.
Q. What about deductibles and other out-of-pocket expenses?
A. The premium is just one part of the cost of health insurance. The health plans also will have deductibles and out-of-pocket expenses. The limits on out-of-pocket expenses are pegged to income but still will strike some people as high.
For instance, a health plan in the silver tier — the second-lowest-cost set of plans sold in the marketplaces — limits out-of-pocket expense to $5,950 a year for an individual and $11,900 for a family — the current limit on contributions to health savings accounts. That, again, is in addition to the premium.
In other words, an individual or family with a serious injury or illness still will have relatively high medical expenses.
Q. How do the different tiers work?
A. The marketplaces in many states will have four tiers — bronze, silver, gold and platinum — that basically are a gauge of deductibles and other out-of-pocket expenses. The bronze will have the lowest premium and the highest out-of-pocket costs. The platinum will have the highest premium and the lowest out-of-pocket costs.
Plans in the silver tier will cover 70% of their customers’ total medical claims.
Q. Does this mean a silver tier plan will pay only 70% of my medical bills?
A.No, and this is a source of some confusion. The plans will pay 70% of the total medical claims for everyone in the health plan — not 70% of any one person’s medical bills. For instance, if someone with a serious illness has $100,000 in medical bills, the health plan would pay for all of his or her care above the limits on deductibles and out-of-pocket expenses.
Q. What is catastrophic coverage?
A. People under 30 have the option of buying catastrophic coverage — a health plan with much higher deductibles that fulfills the mandate that everyone buy health insurance.
Q. What if my employer doesn’t offer family coverage or I can’t afford the cost of family coverage?
A. This is one of the quirks of the law — and a significant problem for some families.
Employers who do not offer affordable health insurance must pay a $2,000 penalty for each employee, and $3,000 for each employee who receives tax credits to buy a health plan on a marketplace. (Employers with fewer than 50 workers are exempt from the penalty.) But employers only have to offer coverage for the employee — not his or her family — to avoid the penalty.
Family coverage can cost two to three times more than single coverage.
Here’s the quirk: If your employer offers affordable single coverage, your family isn’t eligible for tax credits on the marketplaces.
“It leaves the family in a lurch,” said Karen Pollitz, a senior fellow at the Kaiser Family Foundation, a health care policy organization.
Depending on the family’s income, their children might be eligible for BadgerCare Plus. But, Pollitz said, “It’s going to be a problem for families. And they really aren’t going to understand it, because it doesn’t make any sense.”
Q. Is everyone required to have health insurance?
A. Yes, with very few exceptions. If you don’t, you will have to pay a penalty of 1% of your taxable income or $95, whichever is greater, next year. The penalty increases to a maximum of $2,085 for a family, or 2.5% of household income, whichever is greater, in 2016.
Q. What happens if I am now covered by HIRSP?
A. The Wisconsin Health Insurance Risk-Sharing Plan — one of the largest and most affordable high-risk pools in the country — will no longer be needed.
It was created to provide health insurance to people who were locked out of the market because of pre-existing medical problems.
The Affordable Care Act bars health insurers from denying coverage to someone because of health problems. It is a key part of the law — and one of the most popular provisions.
What this means is the roughly 24,000 people who get coverage through HIRSP can buy any health plan they want — and they will need to do that soon. HIRSP will stop offering coverage on Jan. 1.
Q. Will the law really make health insurance affordable?
A. What’s affordable is relative. Health insurance is expensive and it will remain expensive, even if provisions in the law succeed in helping to slow the rise in the cost.
Even with the tax credits, the cost will seem high to many people, and the cost of the plan doesn’t include out-of-pocket expenses such as deductibles.
Advocates have contended the tax credits are too low, while others have contended that the law will be too costly. Congress had to try to strike a balance between putting health insurance within reach and limiting the projected cost.
Q. Will my employer drop coverage?
A. For now, probably not. That didn’t happen in Massachusetts, which implemented a plan in 2006 that was a model for the Affordable Care Act.
For certain, some employers, particularly small employers with low-wage workers who would be eligible for subsidized coverage on the marketplaces, are likely to stop offering health benefits. But the decline in employers’ offering health benefits is a longstanding trend.
Remember, employers have always had the option of dropping their health benefits — and they could do so without paying a penalty.
Employers offer health benefits to attract and retain employees. They also would have to stop offering health benefits for every employee, from the CEO on down. And the cost of health benefits — the share paid by employers and employees — is not taxed. That gives employers a strong incentive to continue providing health benefits, and the $2,000 penalty increases that incentive.
That said, the law does give an additional incentive to employers to hire more part-time workers and to limit them to less than 30 hours a week. Under the new law, employers with at least 50 employees must pay a penalty unless they offer coverage to those who average 30 or more hours a week.