Health Care Reform Questions and Answers

Health care reform can be very confusing, so we’ve asked our experts at Arkansas Blue Cross and Blue Shield to help answer your questions. The following are some of the top questions we’ve received in the past few months from Blue & You readers through our email address designated for health care reform questions, If you have a question that hasn’t been asked here, feel free to send us an email. We will forward it to one of our experts and get an answer back to you, usually in a day or two. We love to hear from you!

Will there be penalties for switching insurance?
No. However, people who purchased coverage prior to March 2010 should be very careful about switching coverage. New rules on what health plans must cover and how premiums must be calculated become effective January 1, 2014. For many of our customers, coverage purchased before March 2010 (called “grandfathered” plans) will be the most affordable option. And after you have switched from these plans, you cannot get them back! Beginning in 2014, there is a penalty for not having insurance which meets certain government requirements. If someone does not have this type of “qualified coverage,” the individual penalty will apply and will be withheld by the IRS from any tax refund due the individual.

Under the new health care reform laws, will premium rates still be structured based on age?
Under the new laws, premium rates can vary by a factor of no more than 3:1 based on age. That means that the oldest can be charged no more than three times the rate of the youngest. The result likely will be that younger insureds will pay more than they currently do for their insurance, and older age groups will pay less than they currently do. In other words, young people will subsidize the cost of the older age group.

If I currently have COBRA under a grandfathered plan, can I keep my grandfathered status?
Unfortunately, no. Your COBRA policy will expire under the terms of the COBRA coverage. At that time, you will need to secure coverage through either another employer plan (which may or may not be grandfathered) or purchase coverage in the individual market (which will be non-grandfathered because it will be purchased after March 2010). You might choose to shop for coverage through the newly created online health insurance marketplace beginning October 1, if you believe you will be entitled to an advance premium tax credit (subsidy). If you do so, your coverage would begin on January 1, 2014. Depending on when your COBRA coverage expires, you may need to purchase a short-term policy to cover you until the new policy takes effect on January 1, 2014.

How will health care reform affect my Medi-Pak plan?
There were some provisions in the legislation that discussed Medicare Supplement plans, but those will not be effective until 2015. We are hopeful that any changes to the supplement plans will be for policies sold after 2015 and will not impact our current members. The guidance related to these provisions has not been finalized yet. We will be sure to keep all of our Medi-Pak members informed of any changes that might impact them as we get closer to the implementation date.

If an individual buys his or her health insurance through the health insurance marketplace, will he or she be kept from switching to an employer’s plan in the future?
No. People cannot be penalized for dropping off the marketplace and purchasing qualified coverage outside the marketplace, either as an individual or through an employer plan.

What do I do if I am on the Arkansas CHIP Program?
While we do not know for sure, it is likely the Arkansas CHIP program will end and CHIP enrollees will be able to enroll in products on or off the marketplace. Beginning January 1, 2014, medical conditions can no longer be used in rate determinations and older enrollees can be charged no more than three times the rate of younger enrollees. You should be prepared to shop beginning in October for new coverage that will begin on January 1, 2014.

Will those who have insurance through their employer that is considered self funded still be eligible for advance premium tax credits, and will the advance premium tax credit be the same as those available through the marketplace?
Individuals who meet the income requirements will be eligible for advance premium tax credits on the marketplace unless they have the option to purchase affordable coverage through an employer. “Affordable coverage” is defined by the law as the employee’s contribution to the employee only premium, which must be no more than 9.5 percent of his income listed on his W-2. In other words, if your employer offers coverage (whether fully insured or self-funded) that is either grandfathered or meets certain coverage requirements, and your contribution to self-only coverage does not exceed 9.5 percent of your income, you (and your dependents) are not eligible for an advance premium tax credit even if you fall within the income eligibility rules.

For employers with fewer than 50 employees, what will be the penalty for not offering health insurance to employees?
A business with fewer than 50 full-time equivalent employees is not required to offer coverage to employees. If the firm has 50 or more full-time equivalent employees and 30 actual full-time employees and does not offer coverage, there is a penalty of $2,000 per employee (excluding the first 30 employees) if an employee purchases subsidized coverage on the new marketplaces.

Are there tax credits or breaks for employers with fewer than 50 employees who offer health insurance?
There will be tax credits available for some small businesses that provide benefits during the first two years of the marketplace operations if the employer meets size requirements and certain wage levels for employees. The program is similar to the one that was put in place for small businesses in 2011. To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You also must have fewer than 25 full-time equivalent employees. Those employees must have average wages of less than $50,000 a year. You can find out more information about the small-business tax credits on the IRS website.

Can I choose to drop my health insurance with my employer if I can get a better deal elsewhere?
Yes, you can drop your coverage and purchase a product either on the marketplace or off the marketplace. You may not qualify for an advance premium tax credit on the marketplace if your employer offers coverage deemed affordable. Under the new rules, there can be no underwriting of health insurance products, no pre-existing conditions, and rates for older people will be no more than three times what they are for younger people (right now they average five times higher nationally).