CBS This Morning: The Future of Obamacare

The Affordable Care Act may be going back to the Supreme Court after a federal judge ruled the entire law unconstitutional. I joined CBS This Morning to discuss.

Have a money question? Email me here.

Obamacare 2017 Update

Open enrollment has started for individual health care coverage under the Affordable Care Act, aka “Obamacare,” making now a good time to check in on the program. As a reminder, most Americans are insured through their employers (150 million), Medicare (57 million), Medicaid/CHIP (nearly 73 million) or through Veterans Affairs (6.7 million). However, if you are one of the 11 million people who are covered by ACA or plan to purchase coverage, here are some important dates:

• Nov 1, 2016: The first day you can enroll, re-enroll, or change health plans for 2017.
• Dec 15, 2016: Deadline for coverage starting Jan 1, 2017.
• Jan 31, 2017: Last day to enroll in or change a 2017 health plan. After, you can enroll or change plans only if you qualify for a Special Enrollment Period.

By now you have probably heard that the average premium for a mid-level Obamacare plan is set to spike by an eye-popping 22 percent in 2017. The increase should not significantly affect the more than 80 percent of enrollees who qualify for premium tax credits to make coverage more affordable. (To qualify, income must be between 100 percent ($24,300 for a family of four) and 400 percent ($97,200 for a family of four) of the Federal Poverty Level. These are the 2016 amounts-2017 will not be available until January).

Even if you did not qualify for a premium credit last year, you should check again this year. According to HHS, “of the nearly 1.3 million HealthCare.gov consumers who did not receive tax credits in 2016, 22 percent have benchmark premiums and incomes in the range that may make them eligible for tax credits in 2017. In addition, an estimated 2.5 million consumers currently paying full price for individual market coverage off-Marketplace have incomes indicating they could be eligible for tax credits.”

Why are premiums rising by so much?

(1) Not enough young, healthy people have enrolled. When conceiving the plan, the government aimed to enroll a large portion of 18-to-35 year olds to help keep premiums lower. The goal was to have over a third of participants in the ACA plans in this cohort, but currently, they represent just over a quarter of the marketplace. Part of the issue may be that the penalty for not carrying insurance (the “individual mandate”) is too low. Yes, you read that correctly – too low! For 2016, the annual fee for not having insurance is $695 per adult, up from $295 in 2015 and $95 in 2014. For many young people, paying the fee may still be cheaper than the cost of health care insurance and deductibles.

(2) Those who did enroll, regardless of age, needed more care than anticipated. This is known as “adverse selection”, which occurs when buyers have better information (i.e. “I know that I am unhealthy and need lots of medical services”) than sellers, which results in the highest cost consumers purchasing more insurance.

(3) Insurers likely underpriced the plans initially. That may have been an actuarial error based on expectations of who would enroll (see 1 and 2), but regardless, it has led to some insurers exiting the program all together, especially in low-population areas.

The combination of the three issues has led to a smaller overall plan with rising costs. In these early years of Obamacare, what is clear is that more Americans have health coverage – the uninsured rate has fallen to the lowest rate on record. What remains unanswered is whether the government can rejigger incentives (increase the mandate, keep more insurers in the plan) to keep a lid on costs.

ACA Open Enrollment, Part Deux

On November 15 (and through February 15, 2015), the second open-enrollment period will begin for individual health care coverage under the Affordable Care Act. Despite a dreadful rollout, during the first Open Enrollment period, 8 million individuals signed up for non-group coverage through federal and state Marketplaces. If you didn’t sign up for coverage in the first go-round, you will be able to enroll for 2015 at HealthCare.Gov, which has been revamped for the new season. Note: If you want coverage starting January 1, you must enroll by December 15. If you signed up last year, use this time to renew or change policies and to ensure your current plan is still the best choice for you, especially if you are one of the approximately 85 percent of Marketplace enrollees who is receiving premium tax credits to make coverage more affordable. (Remember that you claim the credit by filing a federal income tax return.)

While it may seem easy to renew coverage without updating, unless you update your income data, you won't have accurate information about how much you are eligible for in tax credits and what your out-of-pocket premium contribution for a plan actually is. Additionally, if your income has increased, you may no longer be entitled to the credit, a fact that you don’t want to discover when you file taxes and have the nasty surprise of owning the government money!

Even if your personal circumstances have not changed, the cost of your plan may rise next year. PriceWaterhouseCooper’s Healthcare Institute found that on average, premiums for individual insurance plans are expected to increase by 6 percent in 2015, though actual changes and premium prices vary significantly across states.

Your cost of healthcare is not just measured in premiums, but in out of pocket expenses like deductibles, co-pays and coinsurance. All Marketplace plans are required to set a cap on total out of pocket spending for in-network services in a year. The maximum out of pocket cap for 2015 will increase to $6,600 for an individual ($13,200 for a family policy), compared to $6,350/$12,700 in 2014.

Another change for 2015 is the penalty for not having health care coverage. The fee is the higher of: two percent of your income or $325 per adult/$162.50 per child, with a maximum penalty per family of $975. You’ll pay the fee on the federal income tax return you file for the year you don’t have coverage. If you don't pay the fee, the IRS will hold back the amount of the fee from any future tax refunds, but there are no liens, levies, or criminal penalties for failing to pay it.

According to the Kaiser Family Foundation, you may be exempt from the requirement to maintain qualified healthcare coverage if you:

• Can not afford coverage (defined as those who would pay more than 8 percent of their household income for the lowest cost bronze plan available through the Marketplace)
• Are not a U.S. citizen, a U.S. national, or a resident alien lawfully present in the U.S.
• Had a gap in coverage for less than 3 consecutive months during the year
• Will not file a tax return because your income is below the tax filing threshold (In 2014 the tax filing thresholds are $10,150 for individuals and $20,300 for married filing jointly)
• Are unable to qualify for Medicaid because your state has chosen not to expand
• Participate in a health care sharing ministry or are a member of a recognized religious sect with objections to health insurance
• Are a member of a federally recognized Indian tribe
• Are incarcerated

Kaiser also notes some exemptions must be obtained by applying directly to the Marketplace and those who may be eligible for exemptions and who have not yet applied for one can still do so before the end of the year. Some exemptions can be claimed on the income tax return with IRS Form 8965, though the exemption for people who don’t earn enough to file taxes is automatic.

Finally, if you need help, you can call the health insurance marketplace for assistance, at 1-800-318-2596, where one of 14,000 customer service representatives (an increase of 1,000 from last year), can answer questions.

Health Care Reform: What You Need to Know

After years of political fighting, a Supreme Court decision and lots of confusion, the 2010 Affordable Care Act (ACA) began implementation on October 1. For those who have health insurance coverage through their employers or through Medicare or Medicaid, you can pretty much drown out the noise. If you are an uninsured U.S. citizen or legal resident, you must be enrolled in qualifying health coverage in 2014 or face a penalty. This is known as the “individual mandate” and it is the cornerstone of the ACA. The government has established a web site called Healthcare.gov to manage all aspects of the ACA.

Here’s a refresher on what you need to know:

What is qualifying health coverage? Employer-provided insurance; government programs like Medicare, Medicaid, CHIP; COBRA; privately purchased insurance; or coverage you purchase on a state or federal marketplace.

What are “Exchanges” or “Marketplaces”? Starting on October 1, there will be Marketplaces (also known as “exchanges”) for those who do not have insurance and for small businesses with up to 50 employees. The state and federal governments are not providing the coverage; rather they are aggregating the information for consumers through one platform—the Marketplace. It’s like using Travelocity to understand the cost of various airlines flying to your desired destination, rather than visiting each airline’s website to find the same information.

ACA envisioned that most states would establish and run their own online health insurance Marketplaces, with federally run Marketplaces as a backstop. However, only 16 states and the District of Columbia have done so; seven more are partnering with the federal government to operate their Marketplaces. In the other 27 states, people without insurance will use federally managed Marketplaces to shop for coverage.

Individuals can choose among 4 plans: bronze, silver, gold and platinum, which are intended to cover 60 to 90 percent of health costs that a health plan would pay for an average person. Insurers don't have to offer all four plans, but within the health insurance marketplaces, all insurers must offer at least one silver and one gold plan. Costs of each type of plan vary by state.

What are the penalties for NOT having coverage? The greater of:

• 2014: $95 per uninsured adult in the household, capped at $285 per household OR 1 percent of the household income
• 2015: $325 per uninsured adult in the household, capped at $975 per household OR 2 percent of the household income
• 2016: $695 per uninsured adult in the household, capped at $2,085 per household OR 2.5 percent of the household income

Are there exemptions from penalties? Yes, for economic hardship (income below 100 percent of poverty level, those who are unable to pay for coverage that is more than 8 percent of household income), religious objections, American Indians, those without coverage for less than 3 months, undocumented immigrants and incarcerated individuals.

Will Uncle Sam help financially? Tax credits for individuals and families making between 100 and 400 percent of the federal poverty level to purchase insurance through the Marketplaces and are ineligible for coverage through an employer or a government plan, like Medicare and Medicaid. Current household income limits for 100 to 400 percent of the poverty line are:

• $11,490 (100%) up to $45,960 (400%) for one individual
• $15,510 (100%) up to $62,040 (400%) for a family of two
• $23,550 (100%) up to $94,200 (400%) for a family of four

If you are eligible for the credit, you can choose to have all or some of the credit paid in advance directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014; or you wait to get all of the credit when you file your 2014 tax return in 2015.

Tax credits to buy health coverage will be available to small employers with up to 25 workers and who have average wages of $40,000 or less.

The government will also help low income people with out-of-pocket (unreimbursed) expenses. If income is between 100 percent and 250 percent of the federal poverty line ($23,550 to $58,875 for a family of four), you can qualify, BUT only if you enroll in a silver plan.

How will ACA change health benefits and coverage?

• Eventual elimination of lifetime limits on coverage and annual limits on coverage
• Elimination of pre-existing condition exclusions by 2014
• Requirement to extend dependent coverage to age 26
• Insurers will not be allowed to charge women or persons with medical problems higher rates.
• Premiums of older people can't be more than 3X as expensive as those of younger
• Coverage will be portable, even if you leave a job
• Limit any waiting periods for coverage to 90 days
• Require health plans to report the proportion of premium dollars spent on clinical services, quality, and other costs and provide rebates to consumers. Insurance companies pay out 74 cents on every dollar-new rules will increase to 80-85 cents
• Develop standards for insurers to use in providing information on benefits and coverage and to promote administrative simplification
• Limit deductibles in the small group market to $2K for individuals ($4K for families)
• Create a new federal body that could block insurers from raising rates

Will there be changes to Medicare? Higher-income Medicare beneficiaries (those who earn more than $85,000 per person or $170,000 per couple) will pay slightly more for their prescription drug coverage, or Medicare Part D. This is expected to affect about 5 percent of beneficiaries.

Most Medicare recipients will see their drug costs go down as the ACA begins to close the "donut hole," which is a coverage gap that forces Medicare beneficiaries to pay 100 percent of their prescription drug costs up to a certain amount. This gap is expected to be fully closed by 2020, but those who fall into the gap this year will get a 47.5 percent discount on certain brand-name drugs and a 21 percent discount on generic drugs until they reach the out-of-pocket limit.

Will there be changes to Medicaid? ACA will mean an expansion of Medicaid to anyone under 65, with income eligibility levels of 133 percent of poverty level.

When do employers have to do something? On July 2, 2013, the Obama Administration announced that it would delay implementation of the “Employer Mandate” until 2015. As of 2015, employers of 50 or more full-time workers that do not offer coverage will pay a fee of $2,000 per worker for each full time employee over the first 30 employees. Small businesses with fewer than 50 employees can start shopping for coverage on October 1st through the Small Business Health Options program, or SHOP Marketplace.

How much ACA cost? The net cost is now estimated to be $1.375 trillion over the 10-year period from 2014 to 2023, according to a July 30 CBO estimate.

Who is paying for ACA?

• As of Jan 2013, the IRS levied an additional 0.9 percent increase in Medicare payroll taxes on individuals earning more than $200,000 and couples with income of more than $250,000 a year
• As of Jan 2013, unearned income (interest and capital gains) subject to additional 3.8% tax
• As of Jan 2013, a 10 percent tax on indoor tanning salons
• Starting in 2014, the government will impose fees medical device manufacturers
• A tax on individuals without qualifying coverage (see above)
• Starting in 2018, there will be a new excise tax on high-premium ("Cadillac") insurance plans. Tax = 40% of premiums paid on plans costing more than $27,500 annually for a family

When will there be a reduction in health care costs overall? President Obama recently proclaimed, that in “the three years since ‘Obamacare’ passed, we’ve seen the slowest growth in health care costs on record.”

According to the Kaiser Family Foundation and CMS data, national health spending grew by 3.9 percent from 2009 through 2011, and near 4 percent in 2012; it’s projected to grow at a similar rate through 2013. Those are the lowest rates since the government started keeping track in 1960. BUT, independent experts believe the slowdown is largely due to the economy and a contraction of spending during the recession. Most agree that any cost savings provisions included in ACA have not yet been realized.