HIQS Group

Health Reform Act - first major effects - Fall 2010

Joseph Knudsen — Wed, 16 Jun 2010 18:16:39 +0000

The Health Reform Act as interpreted by Health and Human Services has required that starting September 23, 2010 children cannot be denied for insurance for any medical “pre existing condition”. In addition these conditions must be covered immediately. My concern is that this issue will only become “newsworthy” the weekend before September 23. This will have a profound affect on rates and perhaps availability of insurance plans. In CT this affects about 15% of all policyholders. Typically a much larger percentage of policyholders are clustered into 3 categories: self employed; retired (under 65) or young adults. For them there often is no other way to insure themselves.
What I am trying to do in this article is not make a political point (I have my own opinion about health reform). My intent is to offer a practical analysis of the impact of the changes that the Health Reform will have starting September 23rd .
Currently, if individual insurance is needed for a child 18 or younger or for a family which includes a child 18 or younger an application can be made to any of 8 individual insurance carriers . Prices vary widely, but insurance companies can reject applicants with serious or expensive medical issues. Healthy applicants can get preferred pricing. Some applicants will be accepted, but with higher premiums or riders excluding some conditions.
On September 23 (6 months after the passage March 23 of the health reform bill) this system ends for children. Let’s logically see what effect this will have. I believe virtually no one is really aware of what is coming. Since to my knowledge the final Health and Human Services regulations about this have not been released, I am basing these conclusions on what I assume they will contain.
If the insurance companies have to accept all children the premium must go up for the healthy children and families with healthy children. In Connecticut we have 2 parallel health insurance marketplaces: Individual and group. Group is about 40% more expensive than individual because they must accept everyone. On September 23, 2010 group prices will not be affected. For individual plans, prices for children will rise. A child who has a very severe medical problem, pending surgery, etc. will automatically be accepted. I believe the insurance companies will be allowed to charge up to 3 times the standard rate for high risk children. That will not be a high enough premium to cover the most severe medical cases.
Theoretically, a baby who is in Neonatal care might be able to get individual coverage. We have a very unusual situation in that a group of insurance companies, which are private commercial ventures, are being required to sell their products even when they will lose money on them. An equivalent situation might be a law that required insurance companies to sell flood insurance to cover a flood after it happened. We don’t know how many children will need coverage or how much it will cost the insurance companies, but we can say with certainty that prices will rise. There is nothing in the health reform act which helps fund this new expense for the insurance companies or the consumers.
We might see companies pull out completely of the individual market. The largest individual carrier, United Health One (Golden Rule) has already stopped selling any policies to any children unless they are on a plan with at least one parent. If other companies pull out also, carriers remaining in the marketplace may realize that they will get too many bad risks and pull out as well. We may see no providers willing to stay in this uncharted and uncertain marketplace.
In New York, individual insurance plans are already guaranteed issue and rates for children are about triple the rates in CT. New York follows existing HIPPAA laws stipulating that if someone has not had insurance for 90 days prior to the start date, then pre-existing conditions are not covered for one year. This acts as market mechanism to motivate consumers to stay insured. However, with the Health Reform Act a child can be uninsured, have a pending medical expense and then buy the insurance to cover the expense. Even New York will experience price increases, but not as dramatic. In 2014 all insurance will be guaranteed issue for all policies, but there will be penalties for not carrying insurance. In September there will be no penalty for children who are uninsured. My prediction is that premiums will be so high many consumers will have no choice but to remain un-insured and only purchase a policy when they have a known expense pending. The fewer healthy children that buy policies, the more expensive the premiums will be.
There appear to be three categories of policies in the Reform Act:
1. Policies that existed on the day the reform was passed, March 23, 2010 (“Grandfathered” plans)
2. Policies started after March 23, but before September 23
3. Policies written after September 23
I believe children added to “grandfathered” plans will not be guaranteed issue. This includes newborns and adopted children. If this is true, these policyholders could be protected from the rate increases that will affect newer plans. If not, even these premiums will go up.
At this point, I can only speculate about how the health reform bill will affect plans with start dates between March 24, 2010 and September 22, 2010. I don’t know if these plans will be required to add children to existing policies on a guaranteed issue basis after September 23. If not, and the plans remain protected, anyone who may be purchasing individual insurance and has healthy children should do so before September 23 to lock in rates.
After September 23, I assume all carriers will have new high priced plans so that they are starting with a completely new “pool” of policyholders. One carrier, Aetna, has already announced this.
I don’t have a good way to end this article. Because Health and Human Services has not issued final regulations, everyone is in a holding pattern. If I was the director of Health and Human Services and I had to issue regulations about this law, I don’t know how I would do it fairly. How this law is interpreted will affect people now and in the future. Once children are added to plans on a guaranteed issue basis how can you undo that?
Those who passed this law heard stories of children who could not get the medical help they needed under the current system. They passed the law to help them. Instead of creating some sort of high risk pool for children, they chose instead to force the insurance companies to add them to the “low risk” pool; forcing higher prices for all. I am concerned that the public will blame insurers for using this law as an excuse to increase their profit by imposing “unfair” price increases. That is not where the responsibility lies. It will be interesting political theater to see what develops, but I am afraid it cuts a little too close to our wallets as these changes occur.
The author, Joseph Knudsen, is an independent agent and the owner of Health Insurance Quote Service in Bethel, CT an agency that specializes in health insurance. (www.HIQSGroup.com)

Case Study Small Business Tax Credit

Kevin Murray — Fri, 07 May 2010 17:24:08 +0000

Small Business Health Care Tax Credit

The Patient Protection and Affordable Care Act

Vanilla LLC. - Case Study 2010

As part of the bill signed into law by President Obama on March 23^rd of 2010, small businesses may be eligible for a maximum 35% tax credit for companies that provide health insurance to their employees.

To qualify for the full 35% tax credit businesses must:

Pay for at least 50% of the insurance premium.
Have 10 or fewer full time employees (FTE’s).
Pay out annual salaries of up to $25,000 per employee.
Premiums must not exceed the average premium for small group market in each State set by HHS. (Connecticut average per employee premium small group market = $5419 Employee 13,484 Family annually or $452 and $1123 monthly.)

The 35% tax credit is a sliding scale as average salaries are above $25,000 to a maximum of $50,000, and number of full time employees exceeding 10 to a maximum of 25.

The following case study for Vanilla LLC will represent all of the above stipulations:

Vanilla LLC has 8 full time employees and has an average annual per employee payroll of $24,500.
3 EE’s and 4 Families
Total health insurance premium for Vanilla LLC is $70,200. $5850 per monthly

The company pays half of the health insurance premium totaling $35,100 - $2925 monthly

Vanilla Inc. will receive a tax credit for 2010 of $12,284.00. Vanilla LLC earns $100,000 annually putting the owner in the 28% tax bracket that also pays about 15% in social security taxes.

This tax credit of $12,284 is equivalent to a pre-tax savings of $21,551. $21,551 of earnings after taxes would come out to $12,284. The $35,100 of premium the owner has already paid out now costs him only $13, 550 or $1129 monthly. This represents a 61% savings in health insurance premiums.

Actual case study for Clean-All in Brookfield:

Clean-All has 7 full time employees with an average annual salary of $31,000.
Clean-All’s share of the premium equals $12,414 or $1034 monthly

After accounting for salaries exceeding $25,000, and adjusting for the maximum premium allowed, the total amount of tax credit for Clean-all in 2010 = $2156.

This tax credit of $2156 is equivalent to a pre-tax savings of $3782. $3782 of earnings after taxes would come out to $2156. The $12,414 of premium the owner has already paid out, now costs him only $8640 or $720 monthly. This represents a 30% savings in health insurance premiums.

Protecting your vacation with travel insurance

Lynn Leavey — Fri, 10 Jul 2009 17:41:08 +0000

We are often asked:

“Does my health insurance cover me out of the county and while traveling?”

The answer may be yes or no or somewhere in-between depending on your insurance. The best advice is to check with your insurance agent before you book a trip. Medicare, for instance, does not cover you outside of the U.S.

There are some supplements that do offer some coverage, but not all plans do. In my past life as a tour planner for mostly senior groups, we advised everyone to take trip cancellation insurance with some emergency medical coverage. We had good experiences and bad - the bad only from those that did not take it and ended up ill in a foreign country.

Even travelling within the U.S. a trip cancellation policy can save the day when you or a family member becomes too ill to travel at the last minute or needs to interrupt a trip due to illness.

Cancellation penalties can be steep, so in addition to missing the trip of a lifetime, you lose hard earned cash. A trip cancellation policy can pay not only for cancellation penalties, portions of your travel you do not use in the case of illness, but travel delay if flights are delayed and you miss your flight, baggage among other things.

Obama’s health plan - will it work?

Joseph Knudsen — Thu, 04 Jun 2009 15:52:21 +0000

Where to start? On June 3rd 2009 Obama announced that he had sent letters to key congressional leaders outlining the key provisions of his health care plan. He wants legislation completed before the end of August. Here is a link to a New York Times article about this:

Obama Open to a Mandate on Health Insurance

I have hopes ….and concerns about this approach.

Hopes:

We need a healthy private sector insurance choice. This seems to offer it……….If people are required to buy the insurance then everyone is covered (just like car insurance - you drive you must be insured; otherwise it affects everyone else if you cause an accident - hey maybe we should have no fault health insurance. If you hit me and I go to the hospital I still have to pay for it!)……..This forces everyone to be responsible…..If agents can still be given commission for signing people up Obama has an army of willing helpers to make sure everyone has coverage……public option can be valid alternative if priced right.

Fears:

lots of em….in Mass. the only state to implement this type of plan, there is an escape valve for those who say that they can’t afford it. 76,000 people have been granted the right not to have insurance. That’s way too many. There has to be a system to include everyone. … In Mass the goverment mandated the plan design and did not allow high deductible plans….That choice has to be allowed for people willing to take the risk…..The government, which means us - the taxpayers, needs to price (or fund) the public coverage appropriately so that they don’t come to the congress in a few years saying that they totally underestimated the cost of the plan and need lots more money. We all will have been tricked into a costly national health plan. If this is what we want lets all decide that we will pay the price — I don’t think we will.

that’s all I have time for now

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Gwendolynn Eissman — Tue, 17 Feb 2009 15:15:14 +0000

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