AHCA AND YOU #2

I had devoted the first segment to this series relating to the impact of AHCA upon employers and indirectly their employees. Today’s focus dwells on the individual aka consumer. Future blogs will reflect my take not only on the economic, and social factors affected by this law. But also the availability and usage of resources.

Obama care (AHCA) mandates that by 2014, all citizens and legal residents in the United States will be required to have at least basic health insurance coverage, and those without coverage will be subject to a phased-in tax penalty that goes up every year a person isn't covered. The penalty won't go into effect until 2014, and a person would be penalized only after going more than three months without insurance. The penalty won't exceed the cost of a basic health plan.

This obligation can be met by (1) participating in a plan offered by your employer ;( 2) Enrollment in a government program such as Medicare, Medicaid, or CHIP; (3) Buying insurance direct from a state approved insurer; or (4) purchasing through a “State Exchange”.

These State Exchanges are a new entity required by the law and will need further comment.  All states have until Nov. 16 to establish their exchange or default to a Federal run exchange for the State. As of the end of May only 19 states have established a State-based exchange although some have only one carrier participating. 

There are 7 more states that are in the planning stage. However 25 including NJ have defaulted to the Federal exchange.

The New Jersey health insurance exchange will be operated through a federally-run health insurance exchange, called the Health Insurance Marketplace.  Horizon Blue Cross Blue Shield of New Jersey and AmeriHealth NJ said last week they would participate, and this week Aetna said it also will take part. A new cooperative health insurance company fostered by the Affordable Care Act, the Freelancers Co-Op of New Jersey, has applied for a state insurance license to sell policies on the exchange. Cigna and UnitedHealth Care will not participate but will continue to sell “competitive” low cost insurance on the open market.

The law, which critics have long labeled “Obamacare,” requires that health plans offered to individuals and small employers provide coverage in 10 categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.

Another perk under the AHCA law is the provision that adult children up to the age of 26 can be included in a family policy. They do not have to be students. 

The downside to these inclusions is that the cost of a policy will have to go up. Policy cost is predicated by actuarial determinations based on the probability of using services rendered; insurance population demographics which can determine risks; operational expenses; and of course profit.  Profit is limited by law to a certain percentage of the premium charge; and just recently several insurers including Horizon were fines for violating that provision and policy holders are to receive rebates.

The penalties which are to be assessed as part of their income tax returns. In 2014, the penalty is $95 or 1 percent of the individual’s income, whichever is greater. By 2016, it increases to $695 or 2.5 percent of income.

There will be an inclination for the young (20-early 30s) who have been estimated to spend on an average about $854.00 yearly on health care to pay the fines rather than spend about $6,000.00 yearly on insurance. This will be true of the healthy ones; those that have pre-existing and/or concurrent problems will of course take advantage that they must be granted insurance. 

Studies have also shown that those in the upper 50% income bracket are likely to have some form of health insurance while those in the lower 20/30% brackets are reluctant to purchase insurance; undoubtedly because of the greater impact on their income.

There are some fiscal safeguards in the law. For example there are tax credits based on income levels in the form of advance payments – to help eligible families and small businesses purchase health coverage through new insurance exchanges that will operate in each state, beginning in October.

Families and individuals whose income is on the lower end of the scale -- up to four times the federal poverty level, or just over $88,000 for a family of four -- will be entitled to credits and subsidies to help with some or all of the costs for coverage..

To learn about these credits; visit this IRS & government site (website).