Explanation of the Open Enrollment Period Under the Obamacare Law

If you have health insurance through an employer, you’ve surely heard the phrase “open enrollment season” before. That’s the time when you pick your health plan for the coming benefit year. For most of us with employer coverage, open enrollment happens between October and December.

But now there’s a new open enrollment period coming to town, and it’s going to be a doozy.

According to rules issued by the Department of Health and Human Services, the Affordable Care Act is going to create an open enrollment period for people who don’t have employer coverage. This is a big deal. Most of these consumers – many of whom are uninsured today – will be required to purchase coverage in 2014.

The first individual market open enrollment period will begin in October of 2013 – that’s when the new health insurance exchanges are due to open – and will run through March of 2014.

When open enrollment comes, people without employer-based coverage who earn less than 400% of the federal poverty level may be eligible for government subsidies to help them buy coverage for 2014. During open enrollment, they’ll be able to purchase plans and obtain subsidies through government health insurance exchanges, or through licensed web-based entities (where available) working in cooperation with state exchanges.

People earning more than 400% of the federal poverty level who have no employer-based coverage will still be required to purchase coverage on their own, though they won’t be eligible to receive subsidies. These consumers will be able to purchase health insurance through licensed agents of their choice, direct from the insurer, or through their state exchange website.

Next year the federally-defined open enrollment period will be cut in half, running from October 2014 through December 2014. However, states will have the option to create additional open enrollment periods within their own borders.

Outside of an open enrollment period in 2014, you’ll only be able to enroll in an individual health insurance plan when a qualifying event occurs. These could include the birth of a child, marriage, or the loss of employer-based health insurance coverage, among other things.

Stay tuned in the months to come and we’ll keep you informed about open enrollment for 2014 and everything else you need to know about our health reform future.

The Patient Protection and Affordable Care Act

It is important to know that the Patient Protection and Affordable Care Act and the Heath Care and Education Reconciliation Act, known as the Health Care Reform Acts, introduced sweeping changes regarding the delivery of health care for employers all over the United States. These acts, signed into law in March 2010, are intended to expand health coverage, control costs and improve access to and delivery of health care within the framework of the existing employer-based system. To make sure their employees are getting the coverage mandated by law and avoid facing sanctions for failure to comply, employers need to be familiar with the provisions of these acts.

Contrary to popular belief, the Health Care Reform Acts do not require individuals to get health insurance per se. But, the laws do impose a penalty on individuals who do not have employer-sponsored or individual health plans that provide “minimum essential coverage.” These penalties will start to take effect in 2014 and will reach their full effect in 2017. Starting January 1, 2014, individuals will be required to forfeit one percent of their taxable income or $95, whichever is greater. In 2015, those penalties will increase to two percent or $325, and in 2016, individuals will have to pay the greater of 2.5 percent of their income or $695. In 2017 and beyond, these penalties will be indexed and adjusted for cost of living. For each dependent under 18 who lacks coverage, individuals will have to pay an additional fee equal to half the adult fee.

These acts do include provisions for some exemptions to these penalties. Individuals who go without coverage for less than three months may be eligible for an exemption; likewise, individuals who cannot obtain affordable coverage may not be assessed a penalty. Low-income individuals who do receive qualified health coverage may receive premium assistance and tax credits through a Health Benefit Exchange.
 

Also, the Health Care Reform Acts do not explicitly require employers to offer health insurance. Instead, through the “Pay or Play” provision, employers with more than 50 full-time employees are required to pay a fee if they do not offer minimum essential coverage. Any employer that does not offer health insurance, or that offers insurance that the government deems to be too expensive, despite having at least 50 full-time employees will be subject to penalties if and only if any employee receives a government subsidy for health coverage. For the purposes of these penalties, a full-time employee is anyone who works an average of at least 30 hours a week.

When penalties are assessed against an employer, the amount is equal to $2,000 per full-time employee beyond the first 30. For instance, an employer with 70 full-time employees that does not offer minimum essential coverage will be assessed a penalty of $80,000. In cases where some employees collect federal subsidies even though the employer offers health coverage, penalties may still be assessed; that penalty is equal to the lesser of the above calculation and $3,000 times the number of subsidized employees.

Small businesses with less than 25 full-time employees are not assessed penalties if they do not provide health benefits; but, they become eligible for a tax credit if they do offer minimum essential coverage. As long as the employer’s contribution is at least half the employee-only premium cost, these businesses are eligible for a tax credit on 35 percent of their premium costs; this credit will increase to 50 percent in 2014. For the purposes of these tax credits, part-time employees are counted in proportion to their hours; for instance, a company with 48 half-time employees effectively has 24 full-time employees and is thus eligible.

Employers will be required to take some additional actions to fully comply with these acts. By March 1, 2013, employers will be required to notify their employees in writing about the existence of their state’s Health Care Exchange, the benefits provided them, the possibility of a tax credit for purchasing insurance through the Exchange, the consequences of doing so and contact details to reach out to the Exchange for more information. Starting in 2014, employers with more than 200 employees will have to automatically enroll new employees in their health insurance program and give them the opportunity to opt out. Thanks to a provision of the Fair Labor Standards Act (FLSA), employers must give nursing mothers reasonable break time and private locations in which to express breast milk, unless they can demonstrate a significant hardship. Finally, starting in 2018, providers of high-cost health plans will be assessed a non-deductible excise tax, known as the “Cadillac Tax.”

The Health Care Reform Acts also require certain reporting requirements, the first of which went into effect with the 2012 tax year. Employers are now required to report the total value of medical, dental, vision and supplemental coverage on the Form W-2. Starting in 2014, employers with at least 50 full-time employees will be required to file information returns including their names and identification numbers, attestation regarding whether they offer minimum essential coverage to their employees, their monthly total number of full-time employees and the name, address, tax identification number and benefits received by each full-time employee. In addition, the law requires employers to send each employee written reports regarding these returns.

Lastly, the Health Care Reform Acts made several major changes to health care coverage. Group insurance plans are now required to offer dependent coverage to adult children up to age 26, and dependents need not remain unmarried or maintain full-time student status to stay eligible for this coverage. Health plans are no longer permitted to impose a lifetime dollar limit on minimum essential coverage and cannot deny coverage for pre-existing conditions. No group or individual health plan may rescind coverage once an individual has become a covered participant, and the waiting period for any such plan may not exceed 90 days. In addition, salary reduction contributions to flexible spending plans are now limited to $2,500 annually, and health savings, flexible spending or reimbursement accounts may not be used to pay for over-the-counter medications.

Federal Healthcare Reform Key Provisions Taking Effect in 2011

While many components of the law will not occur until 2014, some key provisions do go into effect in 2011:

Beginning in January, 2011:

·        Seniors who reach the coverage gap will receive a 50% discount when buying Medicare Part D covered brand-name prescription drugs. Over the next 10 years, seniors will enjoy additional savings on brand-name and generic drugs until the coverage gap is closed in 2020.

·        The new law provides for certain free preventative services, not subject to coinsurance or deductible, such as wellness exams, colonoscopy, and mammography.

·        To insure that premium dollars are primarily spent on healthcare and claims, the new law requires that at least 85% of all premium dollars collected from large employer plans be spent on health care services and health care quality improvement. For individual and small group plans, at least 80% of the premium must be spent on benefits and quality improvement. If insurance companies do not meet these requirements because their administrative costs and profits are too high, they must rebate a portion of the premium back to the consumer.

·        The Medicare Advantage program funding for seniors is being significantly cut back. Somewhere in the vicinity of $500,000,000 is being cut from this popular program. This program used to pay the insurance company as much as $1000 more per person than the per person amount spent in original Medicare. This popular program funding is being eliminated and all that will ultimately be left will be some bonus payments to Medicare Advantage plans that “provide high quality care”.  This part of Obamacare came right out of the pockets of many of our seniors on Medicare.

·        The “Community Care Transitions Program” will help high-risk Medicare beneficiaries, who are hospitalized, avoid unnecessary readmission, by coordinating care and connecting patients to services in their communities.

·        Distributions from Health Flexible Spending Accounts and Health Reimbursement Arrangements will only be allowed to reimburse the cost of over the counter medications, if they are purchased with a prescription. This new rule does not apply to reimbursement for the cost of insulin, which will continue to be permitted to be purchased and reimbursed, even if without a prescription.

First Quarter of 2011 News:

·        At least 637,000 young adults are getting coverage under their parents’ health plans as provided for under this federal law. The Act requires health insurance plans to allow young adults up to age 26, to be covered under their parents’ plan, even if  the young adult is a full-time student, not living with or a dependent of the parent, or even if they are married.

Beginning October 1, 2011:

·        The “Independent Payment Advisory Board” will begin operations to develop and submit proposals to Congress and the President, aimed at extending the life of the Medicare Trust Fund. The board is expected to focus on ways to target waste in the system and recommend ways to reduce costs, improve health outcomes for patients, and expand access to high-quality care.

·        The new “Community First Choice Option” will allow states to offer home and community-based services to disabled individuals through Medicaid, rather than through institutional care in nursing homes.

For more information on these or other health insurance issues, call Andy Hesch of Health Choice One at 303-241-8155 or email me at andyih@msn.com. Please also visit my website at www.heschinsurance.info/  and get a free insurance quote or learn more about Colorado health insurance agent Andy Hesch.

Health Reform Tax Credit Offers Relief to Small Employers

Section 45R was just added to the Internal Revenue Code by the Patient Protection and Affordable Care Act. It is effective for taxable years beginning in 2010 and applies to both taxable, as well as tax exempt small employers. To be considered a small employer, the employer must have fewer than 25 full-time equivalent employees (FTE) for the tax year. The average annual wages for the employees must be less than $50,000 per FTE. Finally, the employer must maintain a “qualifying arrangement” under which the employer pays a certain percentage of the premiums (approximately 50% or more) for each employee enrolled in the company plan.

The credit is worth up to 35% of a small business’s premium cost in 2010 (25% for tax-exempt employers). This will then increase to 50% for tax years on or after 2014 (35% for tax exempt employers). Unfortunately, the credit phases out gradually for companies with between $25,000 and $50,000 of average wages, and also for firms with the equivalent of between 10 and 25 full-time workers. And, beginning in 2014, the credit will only be available for a two year period and only apply to coverage which has been purchased through one of the new health insurance exchanges.

IRS rules regarding this new tax credit can be found in Notice 2010-44, and also in follow up Notice 2010-82. For example, Notice 2010-82  clarifies how an employer that offers more than one plan determines whether its contribution amount meets the necessary threshold for a qualifying arrangement.  The IRS has even released several additional informational materials, including: Three Simple Steps Fact Sheet, Frequently Asked Questions, and a YouTube Video. Check with your CPA on the details to see if you qualify and for how much.

As always, for the latest information on Colorado Health Insurance and the most competitive quotes for both businesses, large and small, as well as for individuals and families, contact Andy Hesch at 303-241-8155 or email andyih@msn.com. You can also visit me on the web at www.heschinsurance.info/. Get a free Colorado health insurance quote or learn more about Colorado health insurance agent Andy Hesch.

January 1, 2011 is a Big Date for Health Insurance in Colorado

January 1, 2011 portends huge changes in Colorado Health Insurance Law.  Colorado House Bill 10-1021 mandates that all individual health insurance policies that go into effect on or after January 1, 2011 must include coverage for routine maternity. Maternity must be treated in the same manner as any other sickness or injury. The days of the separate maternity deductible and separately purchased add on maternity coverage are over.  While in the past, complications of pregnancy were covered, under the new Colorado law, routine prenatal and delivery costs will now be required to be covered, as well.

For those planning on having a baby right away, it means that you  can buy an individual policy and get pregnant the following month and have all maternity expenses covered with the same medical deductible as other medical costs! However, if you are already pregnant, you will not be able to add on the maternity coverage with a new individual policy, until the pregnancy is over. In such circumstances, your best bet is to get on a group plan, if you are able, where maternity is immediately covered.

Unfortunately, for those men and women who are not planning a pregnancy, it also means higher premiums for them as well. Men and women have historically used health care quite differently. Typically in the past, women would utilize more medical care and pay more for health insurance, until around age 55. After age 55, men typically use more and have paid more for health insurance at that point, than women. Starting in 2011, Colorado House Bill 10-1008 will require “gender neutrality” in the pricing of health insurance premiums. Male and female rates must be the same for each age group.

The most dramatic price shifting will impact those in their twenties and thirties. Men in this age group will see a substantial increase in their premiums, while the ladies will only see a modest increase, or even a slight decrease in prices. One of the key effects of these changes is to make new individual policies more closely resemble the group plans in Colorado. Group plans have always had maternity coverage included and gender neutral rates. The biggest winners in all of this, as just pointed out, are the younger women, who will be able to obtain maternity coverage as part of their major medical policy, whereas before it was unavailable or too expensive to purchase. 

For more information on maternity, gender neutrality, or other health insurance issues, call Andy Hesch of Health Choice One at 303-241-8155 or email me at andyih@msn.com. Please also visit my website at www.heschinsurance.info/ and get a free colorado health insurance quote and learn more about Colorado health insurance agent Andy Hesch.