Should I continue with my employer plan or go to Access Health CT for a discount?

This is a common question these days so I want to share a short article from WebMD with some things to think about.

To provide some information about Connecticut lets look at what a Single person might pay as their share of the medical insurance plan's monthly premium. A plan through Access Health CT for a person who earns 30k will cost them $237.50 a month. Some one at 40k will pay $316.66 each month. Couple points about this new way to obtain health insurance:

● The amounts above are more than the contribution many employees pay each month under their current Single coverage.

● Individuals with these incomes will qualify for premium support and this amount, which is called an Advance Premium Tax Credit (APTC), will be sent each month to the health insurance company they selected.
Note: A person's APTC is based only on income. Whether they are 32 or 62 if their income is the same their APTC will be the same.

● These individuals will get a bill each month from their plan and pay their share with after tax dollars.

● Individuals enrolled in a group medical benefit plan through their employer normally pay their share of the monthly premium with before tax dollars.

BTW - a Single person with incomes like above who currently has an Individual medical insurance plan will benefit from the new premium support program.

Question? Call (860) 451-9793 or send a note to JohnParkerAgency@gmail.com

Why can’t everyone have lower cost medical insurance?

Someone recently raised this question so I am sharing some comments.

The direct answer – federal health reform legislation does not provide a reason why the income based levels for help were selected.

BTW - if you have questions about any part of what federal health reform means to us here in Conn. Post your question.

The premium support program: Section 1401 of the law, which is entitled – Refundable Tax Credit Providing Premium Assistance For Coverage Under A Qualified Health Plan, includes details on the program. Various comments have been made about this since the law was signed in March 2010 and provide some insights. A couple points:

● It’s purpose is to lower the number of uninsured individuals.

● Another focus was to help individuals whose income is above the level for MedicAID eligibility and thus are a big part of the uninsured. The contribution or share of the premium for those with a lower income is smaller than for a person with a higher income.

Note: Perhaps the answer to the question is in the speculation of some - if additional individuals had been included, the cost to the federal government would have been too high to get the law passed. Eligibility was thus limited to people whose income is at 400% of Federal Poverty Level (FPL) and lower. Anyway 400% equals about $46,000 for a single person and $94,200 for a family of four.

The new “help to pay for coverage” program starts January 1st and has two parts:

First - federal funds will be sent each month to the person’s health insurance company. Technically this payment is an Advance Premium Tax Credit, the IRS will record it in the person’s record, and they will include it in their annual 1040 filing.

Second - the amount a person, who qualifies for help, has to pay their health insurance company each month is based on a percentage of their annual income. Their payment amount is subtracted from their plan’s age based premium to determine the amount of their premium support.

The level of help changes with income: The amount individuals who qualify will pay, based on different ranges of household income, is shown in the list below. The FPL percent amount is found in Section 1401 of the law in a chart which shows income ranges “expressed as a percent of poverty”. I converted the percent of annual income amount into the monthly contribution for people with this income. The first amount is what a Single person at that income level will pay each month, next is the payment for a Couple, than for a Family of 3, and the fourth amount is for a Family of 4.

● When at 133% of FPL a person pays 3% or $37 - $50 - $63 - $77

● When at 150% of FPL a person pays 4% or $56 - $76 - $95 - $115

● When at 200% of FPL a person pays 6.3% or $117 - $159 - $200 - $242

● When at 250% of FPL a person pays 8.05% or $187 - $254 - $320 - $387

● When at 300% of FPL a person pays 9.5% or $265 - $359 - $453 - $547

● When at 400% of FPL a person also pays 9.5% or $354 - $479 - $605 - $730

One other point about federal health reform. Regretfully very little in the law addresses the real problem we face today. What is that? Health insurance is expense because the rapidly growing cost of medical treatments is very expensive.

It is also important to understand another big reason medical insurance is so expensive - lifestyle choices. For example, people who smoke have higher treatment costs and big costs result from the obesity problem we face today since many adults and children do not follow an effective diet. Costs from lifestyle choices use up 70% or more of each premium dollar.

What's this about lower cost medical insurance for eligible individuals

Individuals in Conn will be able to submit an application when Open Enrollment begins this October to determine eligibility for lower cost medical insurance. They can apply for coverage to begin January 1, 2014 through Connecticut’s Health Insurance Marketplace, which is an on line enrollment site operating with the name Access Health CT.

I am pleased to share some points on eligibility and what the regulations to implement federal health reform say about how this new program will work:
● Eligibility is based on the person’s modified adjusted income (MAGI) and what it's percent of the Federal Poverty Level (FPL) is. Single individuals whose MAGI is at 400% of FPL (about $46,000) and below will be eligible.
● Individuals with dependents can also receive help based on their families combined MAGI. The maximum MAGI for a family of four would be $94,200. This is the 400% of FPL for a family.
● The share of the plan's premium for a single person making $40,000 is equal to 9.5% of their annual MAGI or $316.66 a month. The monthly share for a family of four whose MAGI is $94,200 would be $745.75. The monthly share for a person 22 and one who is 62 will be the same if each has the same income.
● The amount a person will be eligible for, which I call premium support, is calculated by subtracting, for example, the above Single individual’s $316 share from the premium for their age. If the premium was $600 it would be $284. Technically the amount a person qualifies for is an Advance Premium Tax Credit (APTC) and as a tax credit it will be reported to the IRS. Thus, a person will be responsible to reconcile this credit as part of their annual 1040 income tax report.
● The premium support or APTC amount is not based on the plan a person selects but only on the monthly premium of their second lowest cost Silver plan.
● The federal level Health and Human Services will send the individual's premium support to the medical insurance company they selected each month. This amount will vary based on a person’s age and the number of individuals they cover.
● The health insurance company will invoice them at home each month and they will pay their share on an after tax basis.

Initial plans for the application process was for a person to go to Access Health CT, enter personal and financial information, and while this was being done the system would:
● Interact with federal agencies, such as Homeland Security (citizenship), Social Security, and the IRS through a federal level data hub.
● Come back to them in real time and indicate, while still on line, if eligible for help and the amount they would have to pay each month. e.g. the above $316.
● Move them to the next step to review medical insurance plans from the three companies participating in the Individual plan part of Access Health CT. Eligible individuals will be able to select a plan, other than the second lowest cost Silver plan, which has more coverage by paying the additional premium.
● Then move them to the medical insurance company they selected to complete their enrollment.

As of today we do not know how much of the fully automated enrollment process will be available initially.

Want to take a look at whether you would be eligible for a premium discount and what your share might be? Go to AccessHealthCT.com. There is a link to a savings calculator on the home page.

Will the new plans coming in January cover everything?

There are two parts to this question. The first is are all medical treatments covered – the answer is just about! The state of Connecticut has more mandates on the kinds of treatments, which have to be covered, than most states. If I recall we are the 5th highest in the US. This means whether a person enrolls in a plan in the Individual or Small Group market the kinds of medical treatment coverage will be extensive.

The second part of the question on coverage is – will people who enroll have to pay co-pays and cost sharing? The answer is Yes. For many reasons much of the cost of medical insurance in Conn is connected to the cost of medical treatment. Small group medical insurance plans for example are some of the most expensive in the US. Thus, the only way to control the cost of premiums is to include individual cost sharing in the plan design.

Federal health reform requires Individual and Small Group market plans, whether available in the current market, which I am calling “outside” or plans in the "inside" market have to meet certain coverage requirements. Plans in the inside market will be available through Connecticut's Health Insurance Marketplace, which is marketing under the name Access Health CT.
● The first – plans must include what the law calls Essential Health Benefits (EHB) and there are 10. Two of them, which are not currently in plans in Conn, are pediatric dental coverage (for age 19 and under) and what is called habilitative services. Plans today cover the rehabilitative services an individual needs to recuperate for example following hip surgery but coverage stops when the person is no longer improving. Habilitative coverage is for those who are no longer improving but their condition can fall back if the services were to stop.

● Health reform also introduced a complex calculation to review the plan’s design and determine how much the health insurance company has to pay and how much an individual will pay. This calculation determines what reform calls the plans Actuarial Value. As part of this plans are divided into four levels of coverage. They are Platinum, Gold, Silver, and Bronze.

● Some additional information about the four “metal” level plans.
+ Platinum has to cover 90% of the required EHBs. Gold is 80%, Silver is 70%, and Bronze is 60%.

+ When looking, for example, at a Silver plan a person might think – oh my if I have $100,000 in medical expenses I will have to pay $30,000. The answer is NO. The percent of coverage a person pays only applies to initial treatment. In a major treatment situation their expenses are limited by the plans maximum out of pocket (MOP) provision. This limit is adjusted each year to follow the maximum expense provisions of health savings account plans. During 2013 the MOP for Single coverage is $6,250.

Lets look at the Silver plan through Access Health CT. Regulations say premium support will be based on the premium of the Silver plan from the company with the second lowest premium. A person enrolled for Single coverage will have:
+ A $3,000 deductible on medical treatment
+ A $400 deductible on prescription coverage
+ A $30 co-pay for a primary care doctor visit and $45 to see a specialist
+ A $150 co-pay for an emergency room visit
+ A $500 per day for hospitalization, after the medical deductible has been met
+ A maximum out of pocket (MOP) of $6,250 for Single coverage.

When a Single person’s income is at 400% of the federal poverty level (FPL) or lower the MOP is reduced. It drops in three steps for lower income. When income is at 250% of FPL the plans co-pays and cost sharing are also reduced.

Will rates for older individuals be going down?

Some background. Today when a person buys a plan in the Individual and Small Group medical insurance market it is not unusual for a 62 year old's premium to be five times higher than for someone age 22. One change in Federal health reform is to restrict the maximum difference for a 62 vs a 22 to no more than three times.

So to answer the question. If today’s plan coverage were to continue and these new age based rules where applied the rates for someone say close to 60 would come down and the rate for individuals in their 20s and 30s would go up quite a bit. However, today's coverage will be changing. Health reform requires all Individual and Small Group market plans to cover 10 essential health benefits plus meet limits on how much the plan pays and how much an individual will have to pay.

Let’s look at how premiums will be developed beginning January 1, 2014. For illustration I will use a family where the Father is 52 and the Mother is 48. They have several children:

Child One is age 23 and in College. Child Two is also in College and 21. Child Three is 19 and in high school. Child Four is 17 and Child Five is 15 and both are in high school. Child Six who is a late arrival to the family is 7!

Starting January 1, 2014:
● In a situation where just Mother and Dad were covered for example on Plan abc the premium will no longer be based on Dad’s age as now, whether covered on a small group plan or under an individual plan. There will also no longer be male and female premium amounts and each age will have a separate rate. Thus, in this situation the two amounts are added to get Mom and Dad’s monthly premium for Plan abc.

● In a situation where Mom and Dad are going to cover themselves and just Child One and Child Two each will be charged the Plan abc rate for their age. BTW, the premium for someone age 21, 22, 23, & 24 will be the same. Thus, these two amounts will be added to Mom and Dad’s premium.

● In a situation where the couple wants to cover themselves and just Child Three, Four, Five, and Six, shown above, there are special rules for children age 20 and under. The Plan abc premium will be .635 of the age 21 amount for Child Three, Four, and Five. These three amounts will be added to Mom and Dad’s premium.

● What about Child Six above? When a family has Child Four or more, age 20 or under, there is no additional cost.

Each medical insurance plan has to use the new year by year rates, which start at age 21. This is the base rate and considered to be a Factor of one. Starting at 25 the factor will increase a certain amount for each age until age 64, which will be a Factor of 3. Thus, the amount for the person 64 will be three times higher than someone age 21.

Specific premiums have not been finalized here in Connecticut but initial insights indicate we will see:
● Individual plans continuing to be less expensive than small group plans.

● Not a lot of difference (generally) in the premium charged by different health insurance companies for the same plan.

● A variation in premium based on location, as it now does, with Fairfield County tending to be the most expensive. Premiums here in New London County may also be higher for certain companies than in some other counties.

Federal health reform also brings us a new online place for Individuals and small employers to review plans from different companies, select one, and enroll for coverage. It is called a Health Insurance Marketplace and here in Connecticut it will operate under the name Access Health CT. The details on how much of the application and enrollment process will initially be fully automated are still in the to be determined pile.

The Access Health CT online marketplace is the only place where a person can apply and perhaps, based on their income, receive a premium discount. You can learn more about it here.

The companies currently selling medical insurance plans in Connecticut’s individual and small group “outside” market will continue to offer plans. Individuals may have options in the “outside market” in addition to what is offered “inside” Access Health CT.

John C Parker, RHU, LTCP