A real look at the Patient Protection and Affordable Care Act!

Reform certainly is important because we know 85% of each medical insurance dollar goes to medical treatment expenses and over 70% of that amount is connected to lifestyle choices. However, instead of dealing with access and adding way to much complexity these two laws should have focused on cost, which is what employers and individuals tell me they want.

Thus, an important question is what do the new laws do about the big problem in health care - ever increasing medical treatment costs? A quick answer - far far to little! Instead numerous provisions will result in higher costs for employers and individuals. Here are some:

+ The premium for young individuals will be higher. Why? A medical insurance company will only be able to charge a person 60, with an individual or group plan, no more than 3 times someone 25. This requirement is contrary to the actuarially proven fact that costs are higher as we get older, which is why many plans in Connecticut now charge 5 times more for age 60 vs 25. Rates for older people won’t come down – younger will go up! To offset some of this higher cost people under 30 will, at the same time, be able to buy a catastrophic plan.

+ Firms with 50 to 100 employees with a fully insured plan may have higher rates! Why? The laws require employees in firms under 100 to be charged the same as employees in other firms of their age and the same level of coverage. Thus, firms with 50 to 100 who new have lower medical treatment expenses will no longer be able to achieve lower rates.

+ Medical insurance premiums will increase when insurance companies are required beginning in 2014 to cover everyone. Why? People who are healthy won’t buy until they have a medical condition. Thus, medical insurance companies will have more people with medical conditions thus higher costs. Those who are healthy will just pay the low penalty for not buying, e.g. $325 in 2015 and $695 in 2016 and then buy on the way to the hospital. Starting this fall children 19 or under won’t be turned down when their family applies for an individual medical insurance plan. Family coverage will then have higher rates.

+ Various taxes are imposed, which will just be passed along as higher premiums for employers and individuals.

+ When a firm has 50 or more full-time employees and one or more decide to receive the income based premium assistance tax credit, which starts in 2014, the employer will then be required to pay the lesser of $3,000 for each employee who does or $750 for each full-time employee. Tax credits will only be available through the Connecticut based exchange.

+ Beginning in 2014 when an employer of 50 or more does not provide medical insurance they must pay a fine of $2,000 per year for each. The first 30 will however be exempted.

There are other provisions, which won’t lower medical treatment cost and don’t allow people to do what they want. Here are some:

+ Many people looking for medical insurance will have to buy more coverage than they may want! Why? The Secretary of Health and Human Services has been authorized to decide the “essential benefits” you are required to have. There will be four benefit packages: Bronze, which must cover 60% of the essential (mandatory) benefits, silver 70%, gold 80% and platinum 90%.

+ Employers can no longer have a waiting period for new employees to enroll in their medical benefits greater than 90 days.

+ People who now have certain consumer choice plans and are paying for over the counter medications with before tax dollars will no longer be able to!

+ Employers and individuals that wish to keep the policy they had on March 23rd can if they do not ever change the plan design in any way. However, various new requirements will be added to these grandfathered plans, which will increase the cost.

One other point. The new laws include a small business tax credit to encourage firms to retain their employee medical benefit plan or to implement one. The full income tax credit of 35% of the part of the premium the employer pays can be taken by firms with 10 or fewer employees whose average salary is $25,000 or less. The owners salary is not included. This credit is factored down for firms with up to 25 employees and average salary of up to $50,000.

What is usually not mentioned in the media coverage – firms who now offer a medical insurance plan currently deduct this cost as a business expense. They can not also have the tax credit!

John C Parker
Niantic CT