December 30, 2013
Beginning in January 1, 2014, the ACA imposes a new sales tax on health insurance that will increase the cost of health care coverage. The amount of the tax will be $8 billion in 2014, increasing to $14.3 billion in 2018, and increased based on premium trend thereafter. The Joint Committee on Taxation estimates that the health insurance tax will exceed $100 billion over the next ten years. The list of features of the Affordable Care Act coming to the nation in 2014 does not end there.
1/1/2014 – The law will prohibit health plans from imposing annual limits on the amount of coverage an individual may receive.
1/1/2014 – The law will extend the prohibition on excessive waiting periods to existing health plans.
1/1/2014 – The law will provide “tax credits” available through the health insurance exchange system for people with incomes • above Medicaid eligibility but below 400% of the federal poverty level (FPL) who are not eligible for or offered other acceptable coverage.
1/1/2014 – The law will require persons to obtain “acceptable” health insurance coverage ( the individual mandate) or pay an annual penalty. • Families will pay half the amount for children, up to a cap of $2,250 per family. After 2016, dollar amounts of the penalty for disobedience are indexed.
1/1/2014 – The law will impose an employer mandate; businesses must either offer an acceptable level of health insurance coverage or pay a • penalty. The law increases the fee to $2,000 for each full-time employee for businesses with more than 50 employees that do not offer coverage. Up to 30 employees are exempt when calculating the fine. It provides for a fine of $3,000 for each low-income employee receiving federal taxpayer subsidies for insurance in those instances where employers already offer coverage.
1/1/2014 – The law provides a phase in for the individual mandate and its penalties: $95 penalty or 1.0% of individuals’ income. It rises to $325 • or 2.0% of income in 2015, and $695 or 2.5% of income in 2016.
1/1/2014 – The clock starts on the “individual mandate.” Nearly all U.S. citizens and legal residents are required to have “minimum essential coverage” for most of 2014, or pay a penalty. Most people already are insured through their jobs, Medicare, Medicaid, or military coverage and so don’t need to do anything.
1/1/2014 – The law will create state-based American Health Exchanges and Small Business Options Program (SHOP); SHOP is, in effect, a • form of a health insurance exchange for individuals and small businesses with up to 100 employees, though these government exchanges are now delayed until after November, 2014 due to issues with the government exchange websites. The government exchanges do not have the range of benefits, carriers or plans available to businesses that private association marketplaces have.
**It turns out that in an obscure report buried in a June 2010 edition of the Federal Register, the Obama Administration predicted the current and yet to arrive but coming massive disruption of the private insurance market.
Section 1251 of the Affordable Care Act contains a “grandfather” provision that, in theory, allows people to keep their existing plans if they like them. But subsequent regulations from the Obama administration interpreted that provision so narrowly as to prevent most plans from gaining this protection. We’ve seen the initial stages of that turnover already. But, here is what has yet to arrive…
“The Departments’ mid-range estimate is that 66 percent of small employer plans and 45 percent of large employer plans will relinquish their grandfather status by the end of 2013,” wrote the administration on page 34,552 of the Register. All in all, more than half of employer-sponsored plans will lose their “grandfather status” and become illegal. According to the Congressional Budget Office, 156 million Americans—more than half the population—was covered by employer-sponsored insurance in 2013.
All together, about 93 million Americans will receive cancellation notices. So, the 5 million individuals who have received them thus far is the tip of the iceberg. If you’ve heard the calamity arising out of 5 million cancellations, imagine what another 87 million cancellations will do?
Another 25 million people, according to the CBO, have “nongroup and other” forms of insurance; that is to say, they participate in the market for individually-purchased insurance. In this market, the administration projected that “40 to 67 percent” of individually-purchased plans would lose their Obamacare-sanctioned “grandfather status” and become illegal, solely due to the fact that there is a high turnover of participants and insurance arrangements in this market. (Plans purchased after March 23, 2010 do not benefit from the “grandfather” clause.) The real turnover rate would be higher, because plans can lose their grandfather status for a number of other reasons.
Private association marketplace clients will have prepared their members for this tsunami so that they will have the safe, reliable place to go to make their orderly, ACA compliant choices to build and plan for benefit programs. Letting them know what’s coming establishes associations as being on top of this and in front of the wave so they can avoid the hit.
1/1/2014 – Employers are required to furnish information on health benefits to employees and government.
For the growing number of associations opening their own private health insurance and employee benefit marketplaces, information about and compliance with these provisions is a part of the service provided to association members who use the marketplace.
Each time the federal government alters a feature of the Affordable Care Act, or when a new milestone is coming up, we make sure our association clients are informed and can help their members and frequently their own brokers as well.
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