President Obama's re-election has been widely viewed as a mandate to make good on his Healthcare Reform package. Many reforms are already in place, including insurance coverage for young adults on their parent's plans until the age of 26, lower prescription drug costs for people on Medicare and temporary help for people with pre-existing conditions. But many small employers and self-employed individuals will have to wait until 2014 before the full impact of reform kicks in.
Insurance for the Self-employed
Today, a self-employed individual with a pre-existing medical condition probably can't qualify for private health insurance - or if he can, he may face crushing premiums.
California's Pre-Existing Condition Insurance Plan (PECIP) provides little relief from unaffordable rates. A 50-year-old subscriber living in San Francisco would pay a monthly premium of $428 - almost half of net income for a single individual earning $15,000 gross wages per year. Even at a more middle class wage of $50,000 gross, the annual $5,316 premium would consume about 14 percent of net income.
Starting in 2014, individuals who elect to op-out of the system will face a tax penalty ranging from $150 for an individual with a gross income of $15,000 per year to $500 for someone earning $50,000. In 2016, those penalties will increase to $695 and $1,250 respectively - still $4,066 less costly than the PECIP premium.
For those who still quality for private, individual insurance coverage, rates are going up again in 2013. In a letter sent to some policyholders by Anthem Blue Cross, the carrier is threatening an increase of 24.1 percent. The letter explained the rate change was due to "increased consumer demand for services, rising medical and prescription drug costs, advances in medical technology, changes in benefits and/or taxes required by state and federal law."
The letter went on to explain what Anthem Blue Cross is doing to keep costs down, including "pursuing the best rates for health care products and services on your behalf, giving tools that can help you better manage your health and out-of-pocket costs, and working with network providers to get higher quality care."
Among the "tools" provided by the company in a subsequent mailing were $1 off grocery coupons for two cans of Campbell's Healthy Request soups and Healthy Ones brand luncheon meat. The cover letter was headlined "here are some money-saving coupons to help you lead a healthy lifestyle."
The Affordable Care Act was supposed to require insurance companies to justify rate increases beginning in 2011 and requires them to spend at least 80 percent on health care instead of overhead, salaries or administration. If they don't they're required to provide a rebate to subscribers. Insurance companies to unreasonably raise rates may be denied access to insurance exchanges that begin in 2014.
Last year Anthem Blue Cross backed down from a proposed maximum increase of 30 percent to 20 percent after public outcry.
Anthem, a unit of insurance giant WellPoint Inc., isn't alone in looking to boost rates at double-digits. According to California'sDepartment of Managed Health Care, Health Net is planning average rate increases of 18 percent, Cigna HealthCare is looking for a 15 percent increase and Kaiser Foundation wants to raise premiums an average of 9 percent.
Switching to a lower-cost plan may not be an option. When applying for individual insurance, applicants typically face an interrogation about their medical history for the past two years. If you've avoided seeing a doctor to protect yourself from a carrier claiming a "pre-existing condition" in order to deny coverage, you're likely to encounter a required physical examination before a new policy will be written. If you're paying out-of-pocket, a doctor's exam plus lab work could cost well over $1,000.
Small Businesses Offered More Coverage in 2012
More small businesses offered health benefits to their employees in 2012, according to a survey by benefits consultant Mercer. But the study also showed more employers are making high-deductible plans their primary offering. This could put more Americans at risk for medical bankruptcy. A 2007 study published in the American Journal of Medicine concluded over 62 percent of all bankruptcies have a medical cause. Most medical debtors were middle class and 75 percent of those had health insurance.
Taking on high deductibles is a fact of life for many Americans. "That's the only way to save money on premiums. The old 250/500 deductible is a dinosaur," said Mike Allen, special agent with Weingarten & Hough in Palm Springs. He said health insurance is the most complicated of all lines of insurance the firm offers.
Today, when he's advising small business owners and independent contractors he says, "we want to put a plan together they can afford. You can save a lot of money by going from a $10 copay to $40."
Allen offers another secret for small group employers to save on health insurance costs: use supplemental insurance. "Colonial (Insurance) has accident riders, they have cancer policies and such that you can buy very inexpensively on a group." This strategy allows for taking on regular healthcare plans with a higher deductible while giving specific coverage for things employees really want. "The other nice thing about these kinds of products is they are portable, which means if they leave the company they can take it with them. It's a win-win situation for employers and employees. You're giving employees more benefits but (employers) don't have to pay for it," he said.
Allen says small employers will have more choices starting in 2014 but worries about rates rising for all employers to cover more people. It was recently revealed that Obamacare will levy a $63 per person fee to cushion the cost of covering people with pre-existing conditions. The charge, buried in a recent regulation, works out to tens of millions of dollars for the largest companies, employers say. Most of that is likely to be passed on to workers. The Obama administration says it is a temporary assessment levied for three years starting in 2014, designed to raise $25 billion. It starts at $63 and then declines.