By Eric Tiedtke, CFP; TDA Financial Services Insurance Program

There are a lot of changes coming in the last few months of this year related to health care and health insurance. Some will impact you and your coverage and some will not. However, it’s critical that after November 1, you review your options so you can plan for your coverage that goes in effect on January 1, 2016.

The next and third open enrollment period for health plans under the Affordable Care Act begins November 1, 2015 (for plans with the effective date of January 1, 2016). Since ACA was passed and implemented, the law had multiple changes, waivers, and deferments. Add the House’s multiple votes to repeal the law, lawsuits at state and federal levels, and high-profile Supreme Court decisions, and you’ll understand why there’s still so much confusion and uncertainty about the law. What’s changed? What might change? And probably most importantly, what types of rate increases and plan changes can we expect? Below is a summary of the significant changes and developments affecting ACA going forward.

The Supreme Court Decision

In June, the Supreme Court made its ruling regarding whether people who purchased an On-Exchange plan via the Federal Exchange (like we utilize in Texas) were eligible for a subsidy. The Supreme Court ruled the law’s intent could not have been to exclude people who purchase a plan on the Federal Exchange from a subsidy, so the lawsuit was dismissed. The opposite ruling would have eliminated the subsidy from approximately 80% of the plans, and made the insurance unaffordable with a widespread dropping of plans no longer subsidized. The entire ACA marketplace potentially would have imploded; unless Congress passed a new law, or executive or legal action kept that from happening in the short term.

The Supreme Court decision upheld the law’s language, and removed the last major lawsuit that could have eliminated the law’s very foundation. There are a few other changes that could be accomplished legislatively, such as eliminating the tax on medical devices or additional taxes on higher incomes; however, the soonest anything substantial could be done to the law would be after the 2016 presidential election. Any other legislative efforts would be vetoed by the president. The bottom line is: the ACA is the law and will not change until 2017, at the earliest.

Do You Know the 3 R’s?

The ACA required all plans to be guaranteed issue, have no exclusions for pre-existing conditions, and provide certain mandated coverage. Consequently, the health-insurance industry lobbied hard for protection in return for its support. The ACA 3 R’s program was the result. ACA’s risk adjustment, reinsurance, and risk corridors programs are designed to work together to offset potential effects of adverse selection and risk selection to carriers. Many health insurance companies are reporting huge losses on their 2014 block of individual business (one Texas company is reporting a $400 million dollar loss), but are having some of the losses offset by these programs. However, these programs—the risk corridors in particular—are scheduled to be eliminated by the end of 2016. Unless there are significantly fewer claims and if there are no legislative changes, 2017 rates will increase significantly.

The 3 Amigos

The ACA was supposed to provide more options, competition, and lower prices for consumers; and of course if you liked your plan, you were supposed to be able to keep it. But the opposite happened, as many TDA members whose association or individual plans were cancelled know. Unless you’re self-insured or have a “grandfathered,” church, or ERISA plan, you have an ACA plan (assuming you’re not just self-insuring and paying the tax). Unfortunately, the health insurance market has gone from having 15-20 companies in 2010 to a handful since 2014; and the market continues to shrink. Another has exited the market in the past few months, and of the remaining 5 largest companies, 2 are being purchased by competitors. This could shrink the Texas health insurance market to only three national companies (The 3 Amigos) with a handful of hospital-system based plans in limited parts of the state. This consolidation is all about size and scale, and trying to create efficiencies by having more insureds.

The market for new insureds is projected to be limited, because of the increases in Medicaid enrollment and the millions that simply won’t sign up. This means the only way companies can now grow is by buying another company or companies and its insureds. The plans all must offer the same mandated benefits, so the only significant way to reduce plan costs are through their managed-care networks. Get ready for more HMOs, EPOs, limited PPO networks and provider and hospital conflicts.

Most insurance companies are already very efficient from a staffing and technology standpoint, so they’ll try and get additional savings when negotiating with hospitals and providers. This will continue the growth of Accountable Care Organizations (ACO), where hospital networks buy provider groups, and physicians become employees rather than work solo or in a group practice.

Certain insurance companies will have arrangements with certain hospital groups. This will probably accelerate the trend of independent physician and physician group practices being bought or joining an ACO. It will simply become unprofitable to be a small or independent provider in the medical field. Large state PPO networks might become more regional with certain insurance companies becoming the dominate carrier in, say, Houston, but not in Dallas or San Antonio.

The networks will change. Expect some very high-profile and contentious public negotiations between insurance companies and hospital groups. The provider networks will be the decisive factor in the premium, and become the most essential area to review. When using your insurance, it will be critical that you know the provider is in the specific network (for instance, don’t simply ask if the provider takes Aetna or Blue Cross). You’ll also need to double check that nothing’s changed from one visit to the next.

Potential Penalty Alert

A provision in the ACA prohibits employers from paying for employee health insurance that’s not group insurance. Under this rule, the IRS may fine non-complying employers $100 a day per employee, up to a maximum of $500,000. The fine appears to apply even to businesses with less than 50 employees—the same businesses that are exempt from ACA’s health care mandates. This is something that you need to be aware of, however a bipartisan group of lawmakers in Congress announced plans to undo the rule via legislation. The proposed bill would remove the fine for businesses with fewer than 50 employees. The Obama administration has so far signaled openness to the proposed change.

What Does this Mean for My Premium?

The 2016 filed rate increases for all companies selling policies in Texas range from 10-99%! These rates still have to be reviewed and approved, but don’t expect them to be significantly less. Additionally, the plan rates are based on your actual age; so your premium can be higher just because you’re a year older—even if there was no rate increase.

What are Some Options?

Higher-Deductible Plan or HSA

First, think about how you actually use your healthcare. Here are some situations where having a lower deductible, office copay and RX copay plan would likely be worth the extra cost:

  • You and your family see your physicians more than 3 times a year.
  • You have a child or spouse that’s accident prone.
  • You need high-cost meds on a monthly basis.

However, if you and your family don’t visit the physician often, you probably don’t need the lower deductible, office copay and RX copay plan. A higher deductible plan or HSA will help on your premium.

If you have a family member or members that frequently use health care, but you don’t, you might want to get a lower-deductible plan for them, and a higher-deductible plan for yourself. (See more on HSAs below.)

Consider the Out-of-Pocket Maximum

The ACA plans are comprehensive because of the mandates, and all have the same benefits and coverage. The most important thing you need to look at when determining what plan you’ll select is: what your total out-of-pocket maximum is—both in and out of network. This number is the total of your deductible, coinsurance and copayments on a calendar-year basis before the insurance will pay covered charges at 100%. I.e. this is your risk exposure—what you’re responsible for before insurance covers the rest.

For 2016, the maximum out-of-pocket for an individual is $6,550 and $13,100 for a family. This is for in-network expenses; double that or more for out-of-network expenses. Also depending on your plan, your out-of-pocket expense could be less.

When comparing individual plans between companies, certainly look at the premium, but make sure you also look at your out-of-pocket cost—not just the deductible. For example, the out-of-pocket maximum for the following are the same. But plan “A” may cost 15% less.

A) $3,000-deductible plan with 100% coinsurance
B) $1,000-deductible plan with 80% coinsurance of the next $10,000

When comparing networks make sure you’re looking at PPO to PPO—not PPO to EPO or HMO. Make sure you understand what your out-of-network coverage is and how it works.

Health Savings Account (HSA) Plans

If you haven’t looked at HSA plans or didn’t think they made sense previously, you should revisit them. They offer the lowest premium; and with the tax deductibility of the contribution (as much as $7650 for a family), they can be a great way to build up a self-funding account for future medical expenses. The earnings and interest accumulate tax free, you own and control the funds, and they’re not a use-it-or-lose-it vehicle.

Small Group Coverage

Small-group coverage might be less expensive than the individual market in 2016, especially if paid by the practice. Providing small-employer health insurance can be a good way to retain and attract high-quality employees while offering a lot of flexibility on plan designs. For instance, you can offer more than one plan with your group and pay for a base plan that’s less expensive for employees (perhaps an HMO); and have a different plan for you and your family. Additionally, the plan can include life insurance and short-term disability coverage.

The changes and other developments are not particularly promising, and not a lot can be done until we know what the new rates and plans will be. The best course of action to take is to stay informed, be ready to review and compare your coverage and options, and remember we’re all in the same boat; hopefully it’s not the Titanic!

Disclaimer: This article was submitted in July, so a few changes will have happened by the time it’s published.

If you’d like more information or to discuss insurance options, please contact TDA Financial Services Insurance Program at 800-677-8644 or visit http://www.tdamemberinsure.com