Why Everybody Should Have Health Insurance

Last week I wrote about the Affordable Care Act and its impact on filing your federal income taxes.  Was this the most efficient way to implement affordable health care?  Probably not, but in the end it doesn't matter.  The fact that we have a law that is helping so many people get health care is in my mind a good thing.  And in my less-than-expert opinion, here’s why:  Everybody loses when people are uninsured. 

When a patient doesn't have health insurance, the patient loses.  Preventative care frequently catches disease in an early enough stage for treatment to be both faster and cheaper.  By the time an emergency room visit is warranted, the cost, time to cure, and potential prognosis are all far worse.

Emergency rooms can’t turn anyone away for lack of ability to pay.  But all hospitals, for-profit and non-profit alike, will make every attempt to collect for the services.  This means the patients will be billed, and when they do not pay, they will be called and repeatedly asked for payment.  When the hospital finally turns the account over to collections, a new set of calls will begin, with increasing pressure or threat levels.  All the while their credit reports will reflect outstanding bills, collections, and a much lower credit score.  They will be unable to get loans, be subject to higher interest rates, and in many cases will not qualify to rent an apartment.  The patient loses again.

The hospitals and doctors lose revenue for patient care.  After turning these delinquent accounts over to collection, they write off the loss as charity care and deduct it from their expenses, reducing their taxable income.  Federal, state, and local governments lose.

Hospitals and doctors then increase their prices to make up for lost revenue.  Insurance companies have to pay higher costs.  Insurance companies lose.  Insurance companies raise their rates to make up for increased expenses.  The consumer loses.

How do we turn all this losing into winning?  We pay it forward by providing health insurance – and health care – for everyone.  Let’s take the leap of faith and pay up front.  Let’s fix what’s broken in the Affordable Care Act and make health care available to everyone.

The Affordable Care Act and Income Taxes

 This year the Affordable Care Act (commonly called “Obamacare”) requires everyone to have health insurance or to pay a Shared Responsibility Payment (commonly called a penalty).  This transaction, along with the receipt and reconciliation of federal subsidies to help make health insurance more affordable, all takes place within the user-friendly environment of filing your federal income taxes.

OK – not so user-friendly.  In the spirit of tax forms everywhere, the new forms for filing are equal in complexity to the law that they were invented to enforce.  The good news – once we tax preparers figured them out, they’re really not so bad.

Here’s what the Affordable Care Act means as you file your 2014 tax returns.

1.  If you have health insurance from any source other than the Marketplace (healthcare.gov), all you have to do is check a box.  Done.

2.  If you have health insurance through the Marketplace, the Marketplace sends you a form 1095-A.

This lists the subsidies (if any) that were paid directly to the insurance carrier to supplement your monthly payment.  Did you receive too much in subsidies?  Too little?  You’ll reconcile this on form 8962 of your tax return.  If you were paid too much, the overpayment will be subtracted from your refund (or added to the amount owed.)   If you were paid too little, the amount underpaid will be refunded to you (or subtracted from the amount owed.) 

3.  If you did not have health insurance, your Shared Responsibility Payment (SRP) will be calculated on a worksheet that accompanies form 8965 of your tax return.  The SRP is calculated on a monthly basis for each month you or any of your dependents did not have health insurance.

But wait!  There are a number of exemptions to the requirement for health insurance.  If you or any of your dependents qualify for an exemption, it is recorded on form 8965.  If your income is below the level for filing income taxes, or if your income is below 138% of the federal poverty level in a state that didn’t expand Medicaid, you qualify.  You also qualify if your coverage gap is fewer than three months, or if your coverage gap is a result of the less-than-stellar initial rollout of healthcare.gov.  The full list of exemptions and their codes can be found at http://www.irs.gov/pub/irs-pdf/i8965.pdf.  Note that this list of exemptions applies only to your 2014 return; the exemptions and the process for qualifying for exemptions are expected to change for the 2015 tax season.  The SRP is expected to go up for the 2015 tax season.

This year’s tax season has been eye-opening to me as a preparer as well as to our clients.  Some, who knew last year that they were too poor to qualify for subsidies on the marketplace, were relieved that they would be granted an exemption while our state legislature makes decisions on dealing with the coverage gap from not expanding Medicaid.  Some clients found out during our tax preparation session that they would be assessed the Shared Responsibility Payment this year and next year, and that they were too late to enroll for 2015 coverage, as open enrollment closed on February 15.

Will Utah implement a program to cover the uninsured that are too poor for healthcare.gov but too wealthy for Medicaid as it currently exists.  Will the federal government extend the open enrollment period for healthcare.gov to make it align with tax season?  The adventure continues…

Health Care Reform: Is It Working?

Last Tuesday I had the opportunity to attend the Utah Health Policy Project’s Conference, titled, “Is It Working? – Taking the Pulse on Health Reform in Utah.”  It was a great conference with way too many key messages to cover in a short blog post, so I’ll cover the ones that spoke to me.

The morning keynote speaker, Mr. Rick McKeown, began with the message is that we solve common problems when the common pain is sufficient.  He addressed the many forces that are driving health care reform in our nation.  His list of eight pressures follows:

1.  Economics – recovery from the recession, job stagnation

2.  Demographics – aging boomers, obesity and chronic illness

3.  Consumers – we’re demanding transparency in our health care costs

4.  The Affordable Care Act
                A.  Access to health care
                B.  Regulating the insurance industry
                C.  Defining benefits
                D.  Medicare and Medicaid improvements
                E.  Uncertainty and unintended consequences
                F.  Politics

5.  Judicial – the debate between state and federal exchanges causing more uncertainty

6.  Employers – transitioning from a defined benefit to a defined contribution

7.  States – looking for autonomy and the ability to craft solutions that fit their populations

8.  Reconfiguration of risk – outcomes vs. services

Is this enough common pain?  Are we there yet?

Disclaimer:  I consider myself fairly liberal and am glad of the health care reforms brought about by the Affordable Care Act.  I live in a fairly – OK, I live in a very conservative state where most of the leadership is less than impressed with the Affordable Care Act.  That said, liberals and conservatives came together at this conference, leaving their egos at the door, to discuss real solutions for real people.  A panel of those real people spoke to us, giving us hope that the solutions in place are working for some. 

Lynn Quincy, Associate Director of Health Reform Policy for Consumers Union, gave us tips for getting the value from our health insurance, confirming the idea that we need to become intelligent consumers of health care services.  She noted that this has been difficult because of the current model of health care delivery.  I've experienced this myself – when nobody could tell me the price of an x-ray.

The liberal in me was exposed to a new perspective when the “Healthy Utah” plan to address the coverage gap was presented.  People who fall below 133% of the federal poverty level currently fall into the coverage gap in the states that opted not to expand Medicaid.  Because they should have been covered by the Medicaid expansion, they are not eligible for subsidies to assist with buying private insurance on the marketplace (healthcare.gov).  Utah’s solution, as I understand it, is to use federal dollars that would have been given to the state for the Medicaid expansion to provide subsidies for Utahns that fall into the coverage gap.  The upside of this plan – one I had not considered – is that it removes the stigma of being on Medicaid as well as opening up better choices for health care.  A privately-issued insurance card opens more doors to services than a Medicaid card.  The plan was well received by the conference attendees.  Now – on to the Legislature for approval.

Is the health care reform law working?  Not perfectly, but it’s a start.  And I am hopeful that in the State of Utah, well known for its innovative approaches to quality health care, it will continue to improve.

A Retiree Looks at the Affordable Care Act

I received my retiree health benefits enrollment package from my former employer in the mail day before yesterday.  After hearing all the doom and gloom about rising costs I was pretty nervous opening the envelope.  Turns out the cost of our total coverage – pre-retirement medical for me, Medicare supplement for my husband, and dental insurance for both of us – will go up 2%.  I can live with this.

But is there a better deal out there?   My premium for a high-deductible plan with a Health Savings Account (HSA) will be $713 a month.  This is the full premium for employer-based coverage for retirees – which by definition are a high-risk pool.  I am the (relatively) young, healthy person paying into this pool.  What would I pay for the same plan on the new health care exchange?

My current plan is not available on the exchange in the state of Utah.  So while I would have liked an apples-to-apples comparison, the best I can do is look at similar plans. 

As a reminder, the healthcare exchange offers four plan Tiers. 

                Bronze – plan pays 60%
                Silver – plan pays 70%
                Gold – plan pays 80%
                Platinum – plan pays 90%

With the high-deductible/HSA plans, the plan starts paying after the deductible is met.  These plans are only offered on the bronze and silver tiers.  The lowest premium of the bronze plans is $329 per month; the highest premium for the silver plans is $502 per month.  The higher the premium – the lower the deductible.  The silver plans come closest to what I have now. 

Just for fun, I also researched what my current insurance dollars would buy on the exchange.  The highest priced platinum plan is $622.75 per month.  So the answer is yes, I could get a policy with a lower premium on the healthcare exchange.

But I won’t.  Premiums are not the only thing you should consider when evaluating a health plan.  You also need to do the math.   Look for the plan that will give you lowest total health care costs, including premiums, co-payments and co-insurance, and out of pocket maximums.

This became very clear when I researched Medicare Supplement Plans for my husband. Here in Utah there are eight available plans that cover both health and prescription drugs.  Of the eight, two have no monthly premium; the others have a much lower premium than what we pay for the Medicare Supplement offered by my former employer.  But wait!  How much will the copay on his prescription be?  About $450 a month, as opposed to the $28 per month we’re paying now.  And – what is the annual out of pocket maximum?  They range from $6700 for the no premium policies down to $2500 for the highest premium policy.  Our current plan has an out of pocket maximum of $500

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I can’t cover my husband through my former employer unless I am also enrolled.  So I will choose to pay more for my health care in exchange for my husband paying less for his.