ACA’s Top 10 Misconceptions (Nos. 6 – 10)
Last week’s post revealed the first 5 of my “Top 10 List of ACA Misconceptions”. This week I finish out the Top 10 list with nos. 6 – 10. There’s a tremendous amount of information pertaining to the Affordable Care Act (ACA) that must be read, understood, translated, and communicated. I will continue informing and communicating as much as possible on this site; and I encourage readers to reach out to me with questions, comments, and suggestions.
Here are nos. 6 – 10 of my “Top 10 List of ACA Misconceptions”…
6. Insurance companies are cancelling certain health insurance policies that are not “ACA compliant”, leaving customers uninsured.
TRUE & FALSE!
The vast majority of non-grandfathered small group (fully insured) and individual policies in place prior to 2014 do not meet several ACA requirements (e.g., community rating, 10 essential health benefits, out of pocket maximum, etc.). In order to be compliant with the law, insurance companies sent “cancel and replace” notices to affected customers, and replaced those policies with ACA compliant coverage. Customers were offered a plan that is closest to what was in place, along with some alternative plan designs. In many cases, because the ACA requirements increase the cost of coverage, the replacement/alternative plans include higher out of pocket limits and/or higher premiums. So yes, policies are being cancelled, but customers are being offered replacement coverage in order to prevent them from being uninsured. Note: A “Special Edition” blog post addressed the President’s recent announcement giving States the option of maintaining otherwise non-compliant plans through 2014 (click – http://sstevenshealthcare.blogspot.com/2013/11/special-edition-individual-plans-may.html
). At this point, it is uncertain whether there is sufficient time or practical ability for insurers to “roll back” their renewal offers to existing clients, and modify their plans/rates set to be offered for 2014 effective dates. In addition, each state must decide whether to pursue the President’s offer/allowance.
IMPORTANT: Blue Cross Blue Shield of Nebraska announced that they will allow customers receiving “cancel and replace” notices the option of keeping their 2013, non-ACA compliant plans through 2014.
7. An individual that meets the ACA federal poverty level income requirement is automatically eligible for a subsidy for health insurance coverage purchased off a public marketplace/exchange.
An individual that works 30 hours or week or more, for an employer of any size that offers health insurance that meets the ACA’s affordability and minimum coverage requirements is NOT eligible for a subsidy, regardless of their income. This does not mean that affected employees are forced to accept their employer’s health insurance coverage offering. Such individuals can still purchase alternative coverage (e.g., spouse’s plan; individual health insurance coverage purchases on or off the marketplace/exchange, Medicare, Tricare, etc.). They simply are not eligible for a subsidy. In most cases, if an employee opts to decline their employer’s health insurance offering, they forfeit the employer’s premium contribution.
8. The employer mandate (aka “employer shared responsibility”) compels employers with 50 or more full time (30 hours/week) to offer health insurance coverage to an employee and all of their dependents, or face penalty exposure.
This provision of the ACA addresses the offering of health insurance to an eligible employee, and “their dependents under the age of 26”. Employers are not required to offer coverage to the spouse’s of their employees. As a result, some employers are considering limiting the offer of health insurance benefits to only their employees and eligible dependents. UPS recently announced that they are no longer extending the offering of coverage to their employee’s spouses. In addition, some employers are requiring employees that choose to include their spouse on their plan to pay significantly more premium, IF their spouse is eligible for coverage through their employer.
9. The ACA will be funded exclusively by a combination of fines/penalties placed on individuals and employers, and additional taxes assessed on health insurance companies.
TRUE and FALSE!
While it is true that the ACA relies on revenue generated from fines imposed on both individuals and employers, along with a number of new taxes assessed on insurance companies and self funded employers, there are several other new fees and taxes associated with ACA funding. The U.S. Chamber of Commerce has published a list of 18 specific ACA fees, penalties, and loss of tax deductions (see – http://www.uschamber.com/sites/default/files/issues/health/LABR_HealthCareTaxChart_FIN.pdf
), which, combined with other sources of funding, are projected to provide the necessary funding of the ACA. These include separate taxes for things like artificial tanning and medical devices. The cost of the ACA is projected by the non-partisan, Congressional Budget Office (CBO) to be $1.7 trillion dollars, over a 10 year period. And there is much disagreement over the potential effects of the ACA on the federal budget deficit. Suffice it to say, the ACA will draw from a number of funding sources in order to fulfill its intended purpose and objective.
NOTE: It is estimated that the one year delay in the imposition of the employer mandate will result in a loss of up to $11 billion in lost employer fine revenue.
10. The ACA’s “minimum loss ratio” or MLR provision, requires insurance companies to issue refunds to each affected policyholder, if the claims paid out on their specific policy were less than 80% of the premiums collected (or 85% for large group customers).
While the ACA does include the referenced MLR provision, which requires insurance companies to issue refunds to customers if the claims paid amount is less than the applicable premium collected percentage (80% or 85%), the refunds ARE NOT POLICY SPECIFIC. Insurance companies are allowed to pool their insured customers together into approved “blocks” of business, and based on the performance of these blocks of business, the insurers are required to calculate claims to premium ratios, and if applicable, issue refunds. So while a particular insured individual or employer group may actually have a claims to premium loss ratio that is less than 80% (or 85%), if the block of business they are a part of meets or exceeds the 80% (or 85%) figure, there is no refund payable.
Keep checking in for more updates, information, and guidance!