The Wait: Whether the Affordable Care Act Will Make Health Insurance Less Expensive is Unfolding

May 1, 2013

Enrollment projections for Illinois Health Insurance Marketplace
Credit WUIS/Illinois Issues
Heidi Massey hasn’t been to the doctor in several years. At 52 and unable to afford health coverage, the Chicago resident hopes her situation changes when a key feature of the federal health care reform law begins in 2014.

But whether Illinois’ health-insurance exchange, similar to those being set up in other states, reaches its goal of eventually providing 1 million or more people and small businesses a cheaper way of getting good coverage remains to be seen.

“I hope the exchanges make a difference,” says Massey, a self-employed consultant for nonprofit organizations and a divorced mother of three young adults. She wants to find good coverage that costs less than the $500-a-month plans she has checked out in the past but found too expensive.

“I need to see these exchanges in action,” she says.

Among the questions outstanding are whether federal subsidies that an estimated 70 percent of exchange enrollees will receive will actually make the coverage affordable for most of them. It’s unknown whether people too well off to qualify for subsidies will experience the level of “rate shock” predicted by insurers.

“‘Affordable’ is in the eye of the beholder,” says Laura Minzer, executive director of the Illinois Chamber of Commerce’s Healthcare Council. 

Also uncertain is the quality of customer service to be provided by something so new and different. Employers are concerned about how the Affordable Care Act’s many requirements and potential penalties will affect them and their employees.

“It’s going to be hugely confusing for the employer,” Minzer says. “It’s going to be 10,000-times more confusing for the employees.”

Jeffrey Ingrum, president and chief executive officer of Urbana-based Health Alliance Medical Plans, says: “There’s just a lot to do and not a lot of time to do it right. There’s going to be a lot of chaos in the first year.”

Jim Duffett, executive director of the Champaign-based Campaign for Better Health Care, strongly supports the 2010 law despite the uncertainty. He expects critics to pounce on any problems encountered during the remaining implementation and “say this is another failure in government. I don’t want to downplay those problems at all. No legislation … is going to be perfect. The positives override all of the negatives.”

In President Barack Obama’s home state, his fellow Democrats in the General Assembly, who control both the state House and Senate, were too distracted by Illinois’ budget crisis, a pension crisis and ambivalent public opinion on the Affordable Care Act, casually labeled “Obamacare,” to approve legislation to establish a state-operated exchange for 2014.

Debate about legislation that would accomplish the feat in 2015 continues in Springfield, and discussion remains intense on whether the exchange board would have broad authority to decide which private insurance policies could be sold through the exchange.

For now, the administration of Gov. Pat Quinn is working on what will be a state-federal partnership for an exchange for 2014, now called the Illinois Health Insurance Marketplace, so it can begin enrollment October 1 and coverage can start January 1.

“We do think it’s going to start on time,” Deputy Gov. Cristal Thomas says, adding that a comprehensive public-awareness campaign will inform the residents about the exchange and another major program funded by the Affordable Care Act — an expansion of Medicaid eligibility for childless adults with incomes up to 138 percent of the federal poverty level.

The federal government, which so far has given Illinois almost $155 million to set up the exchange, will fund the marketplace’s online portal. The portal can be used to comparison shop in the four tiers of coverage that will be available. The feds also will staff call centers and fund a network of trained “assisters” to help sign people up.

Illinois has almost 1.7 million uninsured citizens, according to the U.S. Census Bureau, and the Quinn administration estimates that 200,000 to 300,000 of them will get insurance through the exchange over the next few years. 

An additional 510,000 or more of the uninsured would be covered by the Medicaid expansion by 2017 if the legislature approves the move this spring, according to the Illinois Department of Healthcare and Family Services. That total includes 342,000 newly eligible individuals with incomes up to $15,282 for one person and $31,322 for a family of four.

The total also includes 171,000 currently eligible who are expected to join the Medicaid rolls because of the Affordable Care Act’s publicity campaign and its mandate that almost all people get health insurance in 2014 and beyond or face a tax penalty.

The state’s estimated 400,000 undocumented immigrants, many of them uninsured, aren’t eligible for coverage through the Affordable Care Act.

If the Medicaid expansion takes place, all people between 138 percent and 400 percent of the federal poverty line, or up to $45,960 for an individual and $94,200 for a family of four, would receive federal assistance to limit their out-of-pocket cost for premiums and other charges.

The subsidies are intended to limit the premium cost to 9.5 percent of household income for families at the upper end of the scale, but the assistance overall is most generous for people between 138 percent and 250 percent of the federal poverty line, Ingrum says. The price of premiums for those groups is limited to between 2 percent and 8.05 percent of household income.

Whether competition in the Illinois marketplace will make insurance more affordable for those not receiving subsidies is uncertain, says John Michael Davis, a benefits specialist at Davis Financial Group in Springfield. Overall, costs may be comparable with today’s prices, he says.

Insurers selling coverage inside and outside exchanges will be prohibited by the Affordable Care Act from denying coverage or increasing rates based on “pre-existing conditions,” though there will be an annual enrollment period and other controls to prevent people from waiting until they get sick before seeking insurance. Insurers won’t be able to boost rates based on gender, and premium variations based on age will be more limited. 

The additional healthy people enrolled in insurance will help spread the risk of covering sicker, uninsured people. But insurers must offer more comprehensive coverage, as well as certain preventive services at no out-of-pocket cost. Insurers will face increased taxes, and the Illinois exchange’s fee in 2014 be 3.5 percent of the premium cost, which could be passed on to customers.

“Affordability will be an insurer’s biggest challenge,” says Elena Butkus, Chicago-based regional vice president of governmental affairs for Aetna.

Estimates are that premiums for people buying individual and family coverage — not coverage through their employer — could rise by between 15 percent and 30 percent, while small-group coverage for businesses could rise 5 to 10 percent, Minzer says. 

The increases would be at least partially offset by subsidies for people who qualify, she says.

Whether rate shock will be real won’t be known until summer or fall, when details of coverage through the marketplace are finalized, according to Thomas, the deputy governor.

“There is uncertainty there,” she says. “We’ve never done this before. Overall, it’s most important that people have coverage to lead healthier lives.”

Some young, healthy uninsured people may do the math and opt to pay a penalty of $95 per adult, and up to $285 per family in 2014, rather than shell out an average of $4,500 for individual coverage or $12,500 for a family, Davis says. 

The penalties for remaining uninsured ramp up, however, to $695 for an individual and up to $2,085 for a family in 2016 and beyond.

The exchange could be a blessing for the 14 drivers who work as independent contractors for Anthony Walker, owner of Walker’s Limousine and Shuttle Services in Decatur. They would qualify for subsidies, he says. So would the three dispatchers Walker employs but can’t afford to offer health insurance.

“I think it would be a great opportunity,” Walker says.

The exchange could serve the many uninsured employees of Mark Burris, who owns seven Subway restaurants in the Springfield area but can’t afford to offer insurance to those who aren’t managers.

He suspects that many of his uninsured employees delay treatment out of concern about costs or use an emergency room as a doctor’s office. He doubts many of his employees even are aware of their insurance options under the Affordable Care Act, however.

“I can’t imagine that the regular employees will think that they can afford it,” he says. 

Burris, 61, member of a small-business consortium affiliated with the Campaign for Better Health Care, supports legislation that the state Chamber of Commerce opposes for a state-operated exchange, but he shares the chamber’s concern about the headaches the Affordable Care Act could create for employers.

“I think every person in the United States deserves health insurance,” he says. “The question is how to pay for it.”

The chamber opposes the Affordable Care Act’s requirement that employers of more than 50 full-time equivalent employees provide “minimum essential coverage” to employees and dependents or face penalties if any of those employees end up receiving subsidized coverage through exchanges, Minzer says.

The penalties are based on complex formulas that treat employees as full time if they work an average of 30 or more hours a week. The fines are $2,000 a year per employee for employers who don’t offer coverage and $3,000 per employee for employers whose coverage isn’t deemed affordable.

The Affordable Care Act will help entrepreneurs and small employers who previously saw their premiums jacked up or coverage denied because of chronic health conditions, Minzer says.

But the federal rules regarding affordability of employer-sponsored coverage as a percentage of an employee’s income don’t apply to dependent or family coverage. That glitch in the law, Minzer says, could result in coverage for spouses and children becoming even more costly for employees as employers focus on keeping employee coverage affordable amid rising health-care costs.

Employees would have to drop family coverage through their employer, but retain individual coverage, before their spouses and dependents could have a chance of qualifying for subsidies through the exchange, Minzer says. That’s an inefficient and more costly option for everyone involved, she says.

The coverage mandate could prompt some employers, particularly those with lower-wage workforces such as in the retail industry, to drop their insurance, pay the penalties and send their employees to the exchange, she says.

Verne Evans, a resident of downstate Chatham who owns 15 Subway restaurants in the Springfield area, already has begun to reduce hours for employees to make sure his business avoids a penalty for not offering them health insurance.

“We don’t like doing that,” he says, adding that some of the employees have been upset.

Evans says he favors less-drastic solutions to assist the uninsured.

“There is this publicly generated perception that companies have gobs of money,” he says.

Zachary Hoffman, president of Wiley Office Furniture in Springfield, says his business is too small to come under the coverage mandate, but he doesn’t plan to drop coverage. He says he will check out whether Illinois’ marketplace offers more affordable coverage through its exchange in future years, but he has doubts about whether Illinois will be ready for enrollment this year.

“I wasn’t a supporter of this law, but I don’t want it to be a big, flaming failure,” he says.

It’s undeniable that insurance companies will serve more people because of the Affordable Care Act. Health Alliance, which currently covers 285,000 people through various plans, could end up serving 15,000 to 20,000 more, Ingrum says.

Duffett says insurers “are going to be making out like bandits.” Ingrum disagrees, saying new taxes on insurers, new mandates on the percentage of insurance revenues that must be devoted to medical care and other changes in the industry that include an end to pre-existing conditions, all will act as a counter-balance to the argument that profits will increase.

The insurance exchange won’t directly affect employers already providing insurance for their workers, though having more people in society covered could help moderate future price increases, Ingrum says. Less of the unpaid cost of care for the uninsured will be shifted to the rates paid by the insured, he says.

The bigger problem, Minzer says, is that the Affordable Care Act doesn’t do enough to address rising health-care costs.

Advocates say preventive care and pay-for-performance initiatives such as accountable-care organizations will help hold down costs, but Minzer says more aggressive measures, such as malpractice reforms that reduce the wasteful practice of “defensive medicine” are needed. 

Janet Eisenberg, 58, a self-employed pension actuary in Skokie, says she is glad she would be able to get coverage, even expensive coverage, regardless of her chronic health conditions, through Illinois’ exchange.

Her husband, a purchasing agent, was laid off in January 2012. COBRA health insurance benefits the couple are paying for through his job run out this year. Eisenberg’s husband may not be able to get another job with benefits in time, she says, so the exchange is a good backup.

“I’m hoping the Affordable Care Act will be affordable,” she says. “If it’s not, at least it will be accessible. I worked very hard to establish myself and save for retirement. You can get wiped out in a minute by medical costs.”

Massey, the consultant from Chicago, is more cost-conscious. Depending on her fluctuating income, she doesn’t know whether she would qualify for a subsidy in the exchange. “If it still takes $500 a month to get coverage, what have we gained?” she asks.

Dean Olsen covers the health beat for The State Journal-Register in Springfield. He can be reached at olsen60@gmail.com. Follow him at twitter.com/DeanOlsenSJR.

 

 

 

Affordable Care Act - The Benefits Already in Place

  • 125,000 young adults in Illinois have kept or gained health insurance coverage by being able to be on their parents’ coverage until age 26.
  • The act has begun to close the gap in prescription-drug coverage for Medicare recipients known as the “doughnut hole.” In Illinois, Medicare recipients have saved more than $235.3 million on prescription drugs since the 2010 law’s enactment. And in 2012, 133,889 Illinoisans saved $95.9 million, or an average of $716 per beneficiary.
  • The Affordable Care Act already requires many insurance plans to provide coverage without cost sharing for a variety of preventive services, such as screening for colon cancer, Pap smears and mammograms for women, well-child visits and flu shots.
  • The law already bans insurance companies from imposing lifetime dollar limits on health benefits. The law restricts the use of annual limits and bans them completely in 2014.

Source: U.S. Department of Health and Human Services

 

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Illinois Issues, May 2013