Anthem Lowers California Rate Increase

The Los Angeles Times  (2/15, Terhune) reports, "In response to pressure from California regulators, Anthem Blue Cross agreed to a slightly lower rate increase for about 630,000 individual policyholders that will save consumers an estimated $54 million." The average rate increase will now be around 14%, with some customers seeing their premiums increase by as much as 25%. Despite the increase in rates, Anthem "expects to lose money on its individual health insurance business in California this year, primarily because of rising medical costs."

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Health Care Reform and Insurance Rate Increases

Why Are Rate Increases Happening Now?

From:  Real Health Care Reform


The past few years, we have seen low price increases on medical care, with costs growing less than 4 percent a year over the past three years.   Though various political groups may want to take credit, the main reason that medical inflation has slowed is the sluggish economy.  People are getting laid off, cutting costs, and putting off medical care.  As demand drops, so do prices.

So… why are health insurance rates increasing?

Health insurance rates have been increasing substantially, all across the country.  Ten- to 20-percent rate increases are not uncommon right now.  Some people are attributing this to “greedy” insurance companies, but the situation is actually not so murky.

As families look for ways to cut their costs in a slowing economy, one item that may end up on the chopping block is health insurance.  People who are in good health and not using their coverage much may decide to take a chance, but people with chronic health conditions are more likely to keep their coverage.

As healthy people drop their coverage and unhealthy people retain insurance, the average health of the pool (all those covered) goes down, and the people still insured use more services.  Thus, the rates increase.

What This Has to Do with The Potential Collapse of Obamacare

The next implementation of the Affordable Care Act in January of 2014 will eliminate most underwriting by insurance companies.  Anyone will be able to sign up for a plan, regardless of pre-existing conditions.  An increase in unhealthy people in the insured pool will put further upward pressure on premiums.

In an effort to counter this math, Obamacare is requiring all healthy people to purchase coverage.  It is also requiring the youngest (and generally healthiest) applicants to pay higher premiums in order to subsidize the premiums of older policyholders.  I will not be surprised to see premiums double or even triple for young men.

This system may work out (well, except for the young healthy people facing the biggest rate increases) – but only if everyone plays the game.  If enough people drop out and decide not to carry coverage, then rates further increase for everyone else.


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Are Higher Insurance Premiums In Your Future?

Study: One Third Of Health Insurance Policies Could See Higher Premiums Next Year.

The Kaiser Health News   report, "Consumers who buy their own health insurance will see the total amount they could pay out of pocket for medical care capped starting next year, but some will likely pay higher premiums as a result" of the Affordable Care Act. According to a study by HealthPocket, "currently, when deductibles are included, 36 percent of policies offered to individuals on the private market exceed that limit." For the study, the researchers "looked only at policies sold on the private market to individuals, who buy their own coverage because they don't get it through their jobs."

Should You Keep Your Grandfathered Health Insurance Plan?

From: Real Health Care Reform

Grandfathered plans may be the most misunderstood part of health care reform. If you bought a policy before health care reform was enacted, it’s not subject to all the new mandates. That’s all the term “grandfathered” means in this case. Whether you keep one of these policies or upgrade to a new policy can make a world of difference in your health care. Here are the main questions you need to consider.

Would You Benefit from More Fully Covered Health Care?

Grandfathered plans do not have to cover recommended preventive health care. These services are recommended specifically because research shows they help prevent major medical problems, and major expenses, in the long run.  But keep in mind that you are paying for this extra coverage, and many people may be better off with a less expensive plan, and paying for their own preventive care.

How Do My Current Premiums Compare to New Plans?

A grandfathered plan could offer lower premiums because it doesn’t have to include all health care reform required benefits.  The numerous mandates and requirements on new plans are expected to result in large premium increases in 2014.

I recommend being cautious about dropping a grandfathered plan because you won’t be able to get it back once you cancel it or stop paying the premiums.  I think new plans will be more expensive than many grandfathered plans because applications from people who are sick cannot be declined in 2014.  The huge influx of people who need health care is going to put massive upward pressure on premiums.  But the only way to make a smart decision is to compare your current rates with what a new plan would cost.

There’s a similar issue, though not as immediate, with grandfathered plans.  Because these policies are no longer being sold to new applicants, the premium rates for grandfathered policies will probably ultimately rise.  No healthy, young people will be buying those plans, but aging policyholders will need more health care. So ultimately, you may end up eventually changing to a new plan anyway.

Will My Present Plan Qualify for Minimum Coverage in 2014?

Essential benefits to be offered by all newly issued plans next year are still being debated. States have already begun to make different decisions about what basic coverage will be required from plans in their territory.  Some changes taking place in 2014 may be limiting. Your current policy may offer you greater options with provider choices, prescription benefits and more.

If you have a grandfathered plan, then you can keep it even though it will not meet minimum coverage requirements in 2014.  If your coverage started after March of 2010, then you will be forced to get a new plan.

Immigration Reform Proposal Does Not Include Healthcare.

CQ (1/29, Bunis, Subscription Publication) reports, "The estimated 11 million illegal immigrants living in the United States probably would still not qualify for federal health care benefits under an immigration policy overhaul proposed by a group of senators Monday." After outlining the bipartisan proposal, the article notes that "one of the bullet points in the proposal says: 'Current restrictions preventing non-immigrants from accessing federal public benefits will also apply to lawful probationary immigrants.'" This means "that anyone under the probationary status would not be eligible for Medicare, Medicaid or the Children's Health Insurance Program."

A Bit of News About "Covered California"

California has moved ahead in creating an exchange and named it "Covered California". It has received nearly $1.5 billion in Federal and Private Grant funding to have it operational by October 1, 2013 for a January 1, 2014 effective date. It will primarily focus on individuals but will also offer plans for small employer groups. One of the key elements of the exchange will be to administer a Federal Health Insurance Premium Subsidy for individuals and a Federal Health Insurance Tax Credit for small businesses.

Five Answers To Your Health Care Reform Questions

From: Real Health Care Reform

When talking about health care reform, there are still areas about the law that are filled with uncertainties.  Below are the five commonly asked questions about the Affordable Care Act: 

1.    What is the individual mandate?

The individual mandate by the health care reform law requires every American to have a health insurance plan in place by 2014 or pay a penalty.  The annual penalty is $695 or up to 2.5 percent of your income (for 2016 and beyond).

2.    Could I have a waiting period before employer coverage is available?

Companies subject to the employer mandate of the health care reform law (those with 50 or more full-time employees) will have a grace period of 90 days before offering new hires minimum essential coverage without incurring any penalties starting January 2014. On day 91 onwards, failure to offer affordable and adequate employer-sponsored healthcare coverage would mean paying a per person penalty.

3.    What if employers offer coverage that’s unaffordable? 

Employers with 50 or more full-time employees offering unaffordable health care coverage to their workers with at least one full-time employee getting health insurance via the exchange would still have to pay a penalty.  Employers will be fined an annual penalty of $3,000 per full-time employee (the first 30 workers will be excluded).

4.    How does household income determine if a plan is affordable?

Coverage is said to be unaffordable if the employee have to contribute more than 9.5 percent of their family income to employer coverage.  According to the IRS, an employee’s household income will be verified using your tax filings.  For individuals with income levels below 400 percent of the federal poverty guidelines, you’re qualified to get federal premium subsidies in the form of tax credits or free choice voucher.  Under the law, the health insurance exchange will be ready by January 1, 2014.

5.    What is a free choice voucher?

If your employer offers adequate coverage but is not affordable, you can request a free choice voucher from your employer to get health insurance coverage through the state-based health insurance exchange. The amount of the voucher is equal to the amount contributed by your employer for an individual or family plan. The voucher would still be tax deductible for employers.  Take note that you can choose either the premium tax credit available via the exchange or get the free choice voucher from your employer.  You cannot get both at the same time.

The Employer and the Affordable Care Act

What are the Employer Shared Responsibility provisions?


Starting in 2014, employers employing at least a certain number of employees (generally 50 full-time employees and full-time equivalents, explained more fully below) will be subject to the Employer Shared Responsibility provisions under section 4980H of the Internal Revenue Code (added to the Code by the Affordable Care Act). Under these provisions, if these employers do not offer affordable health coverage that provides a minimum level of coverage to their full-time employees, they may be subject to an Employer Shared Responsibility payment if at least one of their full-time employees receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges. 

To be subject to these Employer Shared Responsibility provisions, an employer must have at least 50 full-time employees or a combination of full-time and part-time employees that is equivalent to at least 50 full-time employees (for example, 100 half-time employees equals 50 full-time employees). As defined by the statute, a full-time employee is an individual employed on average at least 30 hours per week (so half-time would be 15 hours per week).

Too Bad That My Prediction is Coming True.

Health Insurance Premiums Rise Nationwide. NBC Nightly News (1/8, story 7, 2:20, Williams) reported, "Now to an unwelcome surprise for millions of Americans this new year, health insurance premiums that are causing sticker shock, double-digit increases in some places, suddenly a whole lot of families are watching this happen in the era of the so-called Affordable Care Act, better known as Obamacare." NBC (Myers) added, "Some insurance companies in California including Anthem Blue Cross, Aetna and Blue Shield of California are proposing rate increases of 20% or more for some individual customers. ... And it's not just California. In Florida and Ohio, insurers have instituted double-digit rate increases. New York, which unlike California has power to roll back rates, has generally held increases below 10%. Overall, medical costs are projected to rise only 7.5% this year, so some experts are puzzled by the double-digit premium increases, and question whether it has something to do with the Obamacare law, which will bring big changes next year."

Your Business and Health Care Reform

Does Your Business Face Health Care Reform Penalties?
From: Real Health Care Reform

1. How do you know if your business is subject to the employer mandate?

The threshold for compliance can be determined with this formula, which you calculate on a monthly basis:

Take the number of employees working full-time (those who average more than 30 hours a week for the month) and add that to the number of hours part-time employees worked during the month plus 120 hours. That’s how to figure the full-time equivalence or FTE for employees who don’t work at least 30 hours a week.

2. How much will it cost to meet the new coverage requirements?

That can differ depending on your operation, as well as how minimum coverage is defined through the regulatory process.

3. What is the premium tax credit?

There is a federal subsidy to be used by those earning an amount up to 400% of the federal poverty level to help them afford coverage. The tax credit is available through the state health insurance exchanges, which play a vital role in certifying whether people are eligible for the premium tax credit.

4. Do all small businesses have to provide coverage?

No, only some do.  Employers who have less than 50 full-time-equivalent employees cannot be subjected to the employer tax penalties.

5. Does the new law require part-time workers to be covered?

No, not necessarily. Part-time employees (those working an average of less than 30 hours per week) are counted only to determine whether a small business owner meets the 50 full-time equivalent threshold that’s required under the law. The employer responsibility section of the law does not require employers to provide health care coverage to part-time employees, or to pay health care penalties.

6. Who will have to pay a penalty for not providing health care coverage?

That will fall on employers whose business meets that 50 full-time equivalent standard. Those employers may opt not to provide health care coverage to full-time employees, but it could result in a penalty. If at least one employee uses a premium tax credit to get coverage at a state exchange, the employer will be subject to pay a penalty of $2,000 per full-time employee per year (or $167 per month).

Small business owners may exclude the first 30 full-time employees when calculating this penalty. For example, let’s say an employer has 60 full-time employees and does not offer health insurance coverage, but one or more employees use a premium tax credit on the state exchange.  That employer could face a yearly penalty of $60,000, assuming a constant workforce.  That would be figured as 60 total full-time employees minus the 30 full-time employees excluded from the calculation.  The result would be 30 employee times the $2,000 penalty giving a $60,000 penalty.  And, it should be noted that the penalty is computed and assessed on a monthly basis.

7. What type of health coverage would need to be offered to full-time employees?

Business owners who employ more than the 50 full-time equivalent of employees need to provide affordable “minimum essential coverage” with at least a 60-percent actuarial value in order to meet what the law requires. “Minimum essential coverage,” however, is still being defined through the regulatory process.



Health Care Reform and Your Business

How Will Health Care Reform Affect My Business in 2013?

From:  Real Health Care Reform


2013 is here!  How will the mandates of health care reform affect your business, and what do you need to change about the way you provide health care benefits? Here are answers to some of the most commonly asked questions to help you decide.

1. What’s my deadline for complying with health care reform?

For businesses with 50 or more full-time employees, you have until 2014 to provide “adequate” and “affordable” health care coverage or face penalties. If your business employees less than 50 full-time workers, you are exempt from penalties, but you are still required to carry personal health insurance.

2. Will I be required to provide health care benefits to all employees?

You are required to provide affordable “minimum essential coverage” to workers if you have 50 or more employees working full time beginning in 2014. Failure to do so would mean paying a $2,000 “per person” penalty (although the first 30 workers are not included in that).

For part-time employees, you are not required to provide health care coverage, but remember there is a full-time equivalent of part-time workers.

3. How do I figure the full-time equivalent?

To get the FTE, determine the number of employees who work 40 or more hours weekly.  Then, add up wages paid to part-time employees, and divide the total by 2,080. The FTE is equal to the number of full-time employees and full-time equivalent part-time employees, and the total is rounded to the lowest whole.

4. Is my business eligible for small business tax credits, and when do those start?

Certain small businesses with up to 25 full-time-equivalent (FTE) workers that contribute to employees’ health insurance are eligible to get tax credits.  That began January 1, 2010. To learn more, you can visit the IRS website

5. Are health benefit costs reported on W-2 forms taxable?

Health benefit costs reported on the W-2 are not taxable.

6. Are my two companies each considered as separate employers?

Not necessarily. Check with your tax advisor if you are defined as a single employer under the “Common Control” clause found in the tax code [IRC Sections 414 (b), (c), (m), (o)]. If you’re considered as a single employer, all your full-time employees in both companies will be combined together. If the number totals 50 or more, you will have to provide affordable coverage with minimum essential benefits.