When shopping and/or purchasing an Individual or family health insurance policy through the federal and/or state exchange marketplace there are several terms you must know to best understand your options and insure you get the best policy for the best cost to cover you and/or your family. The State and Federal Exchange Marketplaces have been up and available to consumers since October 1, 2013. Healthcare.gov, the primary starting point for Americans seeking affordable health care, opened with a bang, receiving many more hits than expected. Healthcare.gov saw 8 million unique visitors during the first four days it was open (October 1-4, Tuesday-Friday).(http://www.motherjones.com/mojo/2013/10/it-doesnt-matter-if-no-one-signs-obamacare-week ) This does not include those who went directly to the state run exchanges, for example, California and New York. Most of those visitors did not purchase insurance when they first visited the website. There are a variety of reasons for this including but not limited to being a new program, failing to anticipate the number of people who would explore the site immediately after launching it. Most of the people went on the exchanges to explore, to actually search for the insurance options and some logged on were curious about the exchanges.
Initially upon opening, the website was slow and experienced some glitches, as is often the case on new popular websites upon launch. I do not think that the designers anticipated the large volume of people that would visit the exchanges all at one time. As a result, the pent up demand by the long time uninsured, searching for insurance, finally, brought the web site to its knees. This caused frustration by those excited to price out and find out more about their insurance options which will be effective for them as of January 1, 2014. While many people were frustrated with their inability to access the site, enrollees have until December 15th to sign up for insurance for 2014 beginning on 1/1/2014. The open enrollment period for 2014 is actually extended for three additional months, from January, 2014 until 3/15/2014. This will give potential enrollees a little extra time to decide about purchasing health insurance from the exchange. Enrollment in subsequent years will last just under three months, from October 1st of the year before the effective date of the insurance year until December 15th before the effective of the insurance year. So, for the insurance year beginning on of January 1, 2015, we will have an enrollment period of just less than 3 months from 10/1/2014 through 12/15/2014. ‘If someone decides to not enroll in the exchange for 2014, elects to pay the tax penalty, and they get sick or have an accident in the year, they cannot get insurance back dated to the date of the event. This is a common myth that people, who are trying to turn the public against ACA tell people that they don’t need to sign up for insurance, because if something catastrophic happens they can sign up then. In 2014, if a person happens to have a catastrophic event between January 1st and March 15th, the person will have the opportunity to enroll in ACA with the effective date being about two weeks from the date of their application since the open enrollment period is extended. However, after March 15, 2013 and in subsequent years, if a person declines to enroll and then gets sick or has an accident, they will not be able to acquire insurance until the next enrollment period, from October-December and their coverage will not start until the following January 1st. This could put a large financial burden on the uninsured person and could lead to potential personal bankruptcies. It is important to remember that more than 60% of households who declare bankruptcy say medical bills were one of the leading causes of their bankruptcy. (http://www.sbkass.com/new-york-bankruptcy-news/over-60-of-bankruptcies-caused-by-medical-bills/ ) 20% of the US population between the ages 19 and 64 are expected to suffer some kind of financial hardship due to healthcare costs.(http://madamenoire.com/284014/medical-bills-are-the-number-one-cause-of-bankruptcy-in-america) This is something to keep in mind when trying to decide whether to purchase your individual insurance or not. The old adage “better safe than sorry” is a good lesson for all to remember in terms of buying health insurance.
Another reason people did not enroll is because they were just browsing, considering buying health insurance through the exchange while others just wanted to check out the pricing so they can budget for next year or just see what all the controversy is about. Millions of people in the United States have been unable to purchase insurance because of high prices or because they have had pre-existing conditions which excluded them from underwriting. HHS issued a report on 1/8/2011 that stated “129 million Americans with pre-existing conditions could be denied without new health reform law. Without Affordable Care Act protections, in 2014, 1 in 2 non-elderly Americans could be denied coverage or charged more due to a pre-existing condition”(http://www.hhs.gov/news/press/2011pres/01/20110118a.html) These people, who number more than 10 million uninsured, when you consider the people using the federal exchange and the state exchanges, were excited and relieved at the prospect of being able to purchase affordable insurance for both themselves and/or their families. Many of these people immediately went on the exchanges to get the information they have been waiting for in the past two years. They had been anticipating the ability to obtain insurance since the ACA bill was signed into law in 2010. People with pre-existing conditions wanted to see if they qualified for coverage and those who prior to this time could not afford insurance wanted to see if the Affordable Care Act made insurance truly “affordable.”
According to Mother Jones, “Experience shows that getting lots of uninsured people into private health plans and new Medicaid plans is maddeningly difficult and time-consuming.”(http://www.motherjones.com/mojo/2013/10/it-doesnt-matter-if-no-one-signs-obamacare-week ) This is based on the history from implementation of “RomneyCare” in Massachusetts. The implementation in MA basically followed the same pattern as what we are seeing with the implementation of ACA nationally. The Massachusetts exchanges opened in October of 2006 and by the time everyone had to be enrolled into an insurance plan, July 1, 2007, the kinks eventually were worked out and everyone got enrolled by the end of the enrollment period ended on 7/1/07. It is our expectation that the same thing will happen with ACA. We have a shorter window and many more states to get fully operational since Massachusetts only had to concentrate on their own needs. Now, Healthcare.gov needs to address the specifics of 49 additional states, some on their own state exchanges and some on the federal exchange. As a matter of fact, HHS (Health and Human Services) took the website down on the weekend of October 11 and 12th for upgrading and maintenance so it would be able to handle the additional traffic. (http://healthcaregov.net/healthcaregov-news/category/healthcaregov/page/3/) Although we are experiencing better access after the upgrades this past weekend, the website still needs some work. HHS is busily working on addressing all the volume demands.
There has been an incredible amount of false information fed to the American people about ACA and many folks seem to have forgotten the primary goal of the Affordable Care Act was to insure that all Americans had access to affordable health care and that pre-existing illnesses would not longer be a reason people were denied insurance. The Democrats initially wanted a system that would serve all people, however this was an issue that upon negotiation and compromise resulted in the Affordable Care Act. This compromise meant that people who have insurance through their employer or Medicare, are not eligible to purchase insurance through the exchange marketplaces. This also means, these folks are not eligible for subsidies or cost sharing, which has been frustrating for people who work in low paying jobs, with barely adequate insurance. Only those who do not have any insurance and small businesses can purchase their insurance in the exchanges. The small business exchange will not be ready for exploring and sign-up until November.
Although small businesses under 50 employees will not be penalized if they do not provide insurance for full time employees (30 or more hours a week), these small businesses, with under 50 employees, can offer insurance to their employees through the SHOP Marketplace designed specifically for small businesses with less than 50 employees (https://www.healthcare.gov/what-is-the-shop-marketplace/). There are small business tax credits worth up to 50% of the premiums paid available to these small businesses when they do offer insurance to their employees. Some employers have stated that the tax incentives have made it possible for them to hire more employees.
When you go to Healthcare.gov to shop for and purchase your individual/family insurance, you will see a lot of different terms that sometimes get confusing. Below, are the definitions of many terms that will make understanding the policies that you are considering purchasing easier and guarantee you ultimately get the coverage and the premium you feel most comfortable paying.
- Tax Credit: Tax Credits are a subsidy provided by the government for lower income individuals and families that offset the cost of the monthly premium. Even though this is a “credit” on your income taxes, it can be taken up front and directly applied to your monthly premiums. You select that you want to apply the Tax Credit to your premiums and the government will pay that portion to your insurance company towards your premium and you will owe the balance. This subsidy can be applied to any level policy (Bronze-Platinum) It is important to remember that if you under estimate your 2014 income, you will be liable for any over payment on your 2015 tax return.
- Cost Sharing: Cost sharing is also a subsidy, but this subsidy is only available on SILVER POLICIES. Lower income people applying for Silver Plans will see their Deductibles and Co-Pays reduced by a Cost Sharing subsidy. So, although the policies have a standard deductible and co-pay, this subsidy reduces the out of pocket costs for the individuals. For example, instead of the standard $2000 deductible and $45 co-pay found in a Silver policy, based on the purchaser’s income and where they live, their deductible might be lowered to $500 and the co-pay to $25. It is important to remember that if you under estimate your 2014 income, you will be liable for any over payment on your 2015 tax return.
- Co-Pay: There are multiple Co-Pays in the policies, depending on the type of service. Each one is a different flat, pre-defined amount that the patient pays for that service. The services and Co-Pays without cost sharing subsidies in the Silver policy are exhibited below:
- Preventative Service $ 0
- Primary Care Doctor’s Office Visit $45
- Specialist Doctor’s Office Visit $65
- Generic Prescription $19
- Brand Prescription $50 after $500 Rx deductible
- Lab Testing $45
- X-Ray $65
- Maternity $30% after deductible
- Out-patient surgery $30% after deductible
- Hospital Stay $30% after deductible (up to 5 days)
- ER Visit $250 after deductible
- Urgent Care $90
It should be noted that prior to completing the application for health insurance through the exchange, you can review the available plans. These plans will not show any cost sharing subsidies for which you may be eligible. Do not panic or assume you will not be eligible for cost sharing. You must go through the entire process of signing up and verifying your income and identity to be shown what cost sharing subsidies for which you may be eligible. You will also have to sign an attestation statement indicating you have stated your potential income correctly and understand that you will have to pay back any subsidy over-payment.
- Deductible: Some services, such as Maternity, out-patient surgery, in-patient hospital stay and ER visits require a Deductible be met by the patient before the insurance starts paying anything. Note above, that this is not the case for Doctor’s visits, prescriptions, lab tests or radiology services. All of the co-pays for those services are applied to the deductible. The Silver plan has a $2000 deductible with no cost sharing applied. Note that Brand name prescriptions have their own separate deductible in the plan.
- Coinsurance: Unlike the flat Co-pay which is a single flat amount per service, a Coinsurance is a percentage of the approved fee, usually assessed after the deductible has been met. As you can see above, the Deductible and the Coinsurance are tied together. So, Maternity, Out-patient surgery, and inpatient hospital stays are all paid at 70% of the negotiated fee schedule once the patient meets the deductible on the silver plan. This means that the patient pays the amount of the deductible (in the case of a Silver policy, before any Cost sharing, this is $2000). Then the patient pays a 30% coinsurance of the fee schedule for these services.
- Out of Pocket Max: Out of pocket maximums are often confused by those purchasing insurance as a deductible and assume this is an added burden or cost. But this is actually an added benefit of the plan. Once the patient has spent the out of pocket max in Co-Pays, Coinsurance and Deductibles, the insurance starts covering everything at 100%. So, for example, the Silver plan has an Out of Pocket Max of $6,350 for an individual and $12,700 for a family without the application of cost sharing. This means that once the patient has expended $6,300 out of their own pocket in Co-Pays, Coinsurance and Deductibles, the insurance will start to pay for every service in full (at 100%). Once a family has paid $12,800 over all the members in the family out of their pocket in Co-Pays, Coinsurance and Deductibles, the insurance will start paying in full, at 100% for all the members in the family.
Hopefully, this has given you a better understanding of the unfamiliar terms in your health insurance policy. It is important to understand each of these terms and how they affect you. Remember, all of the figures included in this blog are before any subsidies are determined, because the subsidies are personally customized just for you.
Make sure you follow our blog as the next one published will be a description of the four plans, plus an overview of the step by step process on the exchange to shop for, select and purchase your health insurance policy at: http://wp.me/p3QGSP-1r
Check out our other new blog: Concessions Demanded by Republicans for ACA: Do They Pass The Truth Test? at http://wp.me/p3QGSP-ap
and Best Use of Tax Dollars: Paying for Government Shutdown or Paying Healthcare Subsidies at http://wp.me/s3QGSP-385
About the Authors: By: Barbara J. Cobuzzi, MBA, CPC, CPC-H, CPC-P, CPC-I, CENTC, CPCO and Lynne Smith, MSSW. Barbara is an industrial engineer with an MBA. She worked in the pharmaceutical industry for many years before moving into the healthcare industry where she had a company where she provided top quality coding, compliance and revenue cycle management services for physicians. She has since moved into full time consulting for physicians. Barbara is a nationally known expert known for her education, consulting and expert witness services. Lynne has dedicated her career to helping others. She has experience as a social worker in a rural county, an administrator in a large hospital network and as a College Professor. She uses the skills she developed over the years as an advocate in a variety of areas including her most recent venture serving as a Healthcare Advocate. Together, Lynne and Barbara own the ACA Healthcare Advocates consulting firm and are available to individuals, families and businesses to help them meet the requirements of the Affordable Care Act in order to meet the specific needs of the client while optimizing the fiscal considerations. Please direct your questions and/or inquiries to askcobuzzi@gmail.com.
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