In late March, we saw the greatest changes in more than half a century to our country’s private health care system. President Obama’s first reform effort includes a commitment of $1 trillion in federal funding to bring access to health care and coverage to roughly 32 million currently uninsured Americans. The new law includes changes that the health insurance industry has been proposing for several years, such as guaranteed coverage, discontinued use of ratings based on health status or gender, and an individual mandate to maintain coverage.
The good news is that America’s health care system remains in place. But federal regulation of health care is greatly expanded and will continue to expand. The most important changes will not go into effect until 2014, but some changes in both individual and group coverage will phase in beforehand.
Health care basics
Universal health coverage for everyone regardless of health status. This will phase out disqualification for preexisting conditions by 2013.
Large employers must provide health insurance to employees or pay a significant penalty beginning in 2014.
Small employers who qualify—less than 25 full-time employees with average salaries of $50,000 or less—will receive federal income tax credits up to 35 percent of employer-paid health insurance premiums for employees, through the end of 2013, retroactive as of January 1, 2010.
Tax-exempt and nonprofit organizations may receive a refund of up to 25 percent of employee health insurance premiums paid by the employer. If the organization has no taxable income, the tax credit becomes a refundable credit, up to the total amount of federal payroll taxes—both the employer and employee share of Medicare taxes plus income tax withheld from wages annually.
Individuals must obtain health insurance or pay a penalty for not acquiring coverage beginning in 2014.
Insurance “exchanges” must be established by individual states where individuals and small businesses can purchase insurance if their employer doesn’t provide it. A minimum set of benefits is required, including provisions for preventive care and mental health services. Subsidies are provided to help low- and moderate-income individuals—as well as small businesses—buy health insurance.
MediCal eligibility expands to a broader range of income levels in 2014 to include 16 million individuals nationwide.
Medicare Advantage plan payments for 2011 are frozen at 2010 levels.
Commercial premium rate reviews by the federal government begin immediately.
New taxes will be levied on investment income, high-cost health plans, medical device companies, pharmaceutical companies and health plans, plus others too complex and too many to summarize here.
What to expect
People uninsured for more than six months/preexisting medical condition. Subsidized coverage is available until 2014 through a high-risk insurance pool. Premiums will be set for a standardized population. Annual out-of-pocket medical costs will be capped at $5,950 for individuals; twice that amount for families.
Current health insurance. You can keep your plan through your employer or through individual insurance. Some restrictions may be changed, but new coverage standards won’t apply until 2014.
Higher premiums in 2014. Most people will qualify for subsidies, lower-income individuals and families might pay less.
Higher taxes in 2013. Maybe, due to significant changes in deductible costs, increases in Medicare payroll taxes, lower tax deductions on medical costs and lower caps on deductible expenses.
Federal income tax credits. Between January 1, 2010, and the end of 2013, small businesses will receive tax credits up to 35 percent to offer coverage to employees.
Preventive services and screenings. Medicare annual checkups covered; copays/deductibles eliminated.
Medicare prescription “donut hole” gets you a $250 rebate this year if you hit the gap in coverage for prescription drugs and a 50 percent discount on brand name drugs in 2011.
Medicare premiums higher in 2011 if you earn more than $85,000 per year.
Children with preexisting conditions may be insurable, beginning in September 2010.
The small print
The actual rules and regulations for implementation aren’t yet complete. Industry groups and labor unions will influence the insurance coverage, employer regulations and new health insurance changes that will be set up in every state.
In the meantime, American businesses only have rumors and snippets of information on which to base plans for future business and the American workforce. This year’s furious lobbying activities, which set records for spending, haven’t slowed down. The power of special interests and the money that’s the lifeblood of Washington, D.C., won’t slow down either. As the gigantic—and still growing—Department of Health and Human Services works out the details that involve real money, things will get worse. Then there are the ongoing regulatory details, rules, guidelines, incentives, penalties and legal authorities from the Labor Department, the Internal Revenue Service, the Surgeon General, Immigration and the Attorney General’s legal minions. Not to mention the overcrowded undergrowth in Washington, D.C., of unions, lobbyists, insurance companies and special interest groups.
Jim Johnson has been in the employee benefit business for the past 20 years. He is president of Jim Johnson & Associates, a locally owned and operated agency located in downtown Santa Rosa. You may contact him for more details at (707) 571-0226 or Jim@JimJohnsonAssociates.com.
