Texas Well and Healthy

For the last week or so, there’s been lots of news coverage of people enrolled in the individual insurance market getting discontinuation notices from their health insurance companies.  Up until recently, the news coverage has told only part of the story.  More and more, we are hearing that after the initial frustration of getting a cancellation notice, some people are finding that they qualify for a better plan at a lower cost through the Marketplace.

Here’s a summary of what is actually happening and why.

What is going on?

Most people get insurance through a job.  But about 5 percent of Americans purchase insurance directly from an insurance company, in what is known as the “individual market.”  Coverage in the individual market is generally the skimpiest coverage available, often with high out-of-pocket costs, no coverage of maternity care, and limited coverage of mental health, substance abuse, and prescription drugs.  The Affordable Care Act sets new minimum standards for the benefits in health insurance sold to individuals and small employers (the two markets where access to adequate coverage was lacking).  For example, plans must cover ER visits, hospitalization, prescription drugs, maternity and newborn care, and mental health care.

Grandfathered plans – those in existence when the ACA was enacted in March 2010 that haven’t changed substantially – do not have to comply with new standards.  But policies established since then must meet new standards.  In many cases, insurance companies have chosen to discontinue their non-grandfathered, individual market policies and offer enrollees new policies for 2014.

For more on what is going on, see the linked posts by the Georgetown Center on Health Insurance Reforms and the New York Times.

Some context

Routine plan changes and cancellations have always been part of the individual market.  For example, in 2009 (pre-ACA), Unicare withdrew from the Texas market and discontinued policies for 180,000 people.  Unlike policy cancellations of the past, anyone losing an individual market policy right now has access to coverage in the Marketplace that they cannot be turned down for due to pre-existing conditions and subsidies are available to help low- and middle-income families afford coverage.

Keep in mind that the plans being cancelled are ones sold after the ACA was enacted.  Plan cancellation notices are coming from insurance companies that marketed and sold products since 2010 that they knew didn’t meet the ACA standards and would eventually have to be modified to come into compliance.

It is certainly inconvenient to have to shop for a new health plan.  And it is frustrating to do that when the Marketplace website isn’t fully functional.  But consider the frustrations (or worse) inherent in possible tradeoffs, such as fighting with your insurance company to get them to cover basic care or finding out only after the diagnosis of a serious illness that you have a substandard policy that leaves you with piles of medical bills, or worse, threatens you with bankruptcy.

It is true that some people will pay more for their new plan (but others won’t; keep reading). But generally speaking, these people will be getting something for their money – coverage for benefits that weren’t available before, protection against getting dropped if they get sick, and more protection from medical bankruptcy.

Now we know the rest of the story

Some intrepid journalists have  dug a bit deeper to figure out the real coverage options for people who’ve understandably been upset by cancellation notices, and they are finding that initial claims are only part of the story.  For example, Dianne Barrett, who went from “Obamacare victim to Obamacare beneficiary” in the space of a week as journalists discovered that the $54/month plan she was losing didn’t cover hospitalization at all, leaving her at risk of bankruptcy in the case of serious illness or injury. What’s more, she is eligible for subsides that would significantly reduce her premiums to a fraction of the $591/month alternate policy quoted in the cancellation notice from her insurance company.

Also, Deborah Cavallaro, who pays $293 a month for catastrophic coverage and thought her only alternative was a  replacement plan that costs $478/month.  It turns out that in the Marketplace, which she had not explored, she has several options that would help her come out ahead compared to the coverage and premiums she has today.

Who is watching out for consumers?

One thing that seems to be an issue in some of the “debunked” stories is the misleading notices enrollees are getting from insurers that list a price for a default alternate policy and either downplay or completely fail to mention that enrollees can shop on the Marketplace instead and may qualify for subsidies to make coverage more affordable.  At the Center, we’ve seen discontinuation notices that went out to Texas enrollees that do not mention the Marketplace at all, and at least in one case, push the enrollee to renew coverage at a higher price than they’d find in the Marketplace.

Departments of Insurance in Texas and other states should ensure that any discontinuation notices sent to enrollees are clear, not misleading, and help consumers understand their range of options including potential subsidies in the Marketplace.  Some states (not Texas) have required insurers to share their cancellation letter with the Department of Insurance to better protect consumers.  If Texas consumers believe they have received a misleading or inaccurate letter, they should file a complaint with the Texas Department of Insurance online or by calling 1-800-252-3439.

Written by: Stacey Pogue, Center for Public Policy Priorities. Cross-posted from Better Texas Blog.

Below we show you examples of actual Marketplace premiums across the state and how they vary by region, age, and subsidy level and provide a behind-the-scenes look at how insurers set premiums in the marketplace and how the subsidies are calculated.
On Wednesday, the U.S. Department of Health and Human Services unveiled preliminary rates for the Texas Health Insurance Marketplace, scheduled to launch October 1, 2013.
What do these preliminary rates mean for you and your health insurance options?
We’ll walk through a few examples illustrating how actual Marketplace premiums in Texas will vary by region, age, and subsidy level. In a subsequent post, we’ll provide an overview of how rates are set and subsidies are calculated in the Marketplace.

Texas Marketplace Rate Examples

Every individual will have a unique story and characteristics (income, age, region, etc.) that will affect their premiums and subsidy amount.  To get us started, however, let’s walk through a couple examples of what a Texas resident might expect to see in the Health Insurance Marketplace on October 1.

Single 27-Year-Old Houston Resident, Making $28,700 Annually

For this individual, the monthly pre-subsidy rate for the 2nd lowest cost silver plan will be about $201.  At this income level (250% FPL), this individual can qualify for premium tax credits to help reduce their premium.  This resident can expect to receive a monthly tax credit of approximately $8, reducing their monthly premium for this silver plan to roughly $193.  If, however, the individual wants to apply this tax credit to a lower-cost bronze plan, they can!  The after-subsidy cost of the lowest-cost bronze plan would be about $129.

Single 27-Year-Old Houston Resident, Making $15,300 Annually

What if our hypothetical 27-year-old Houston resident has a significantly lower income, closer to 133% FPL?  Larger subsidies become available to those with lower incomes (who are above 100% FPL).  This resident can expect to receive a monthly tax credit of approximately $163 to apply to the pre-subsidy $201 rate, reducing their monthly premium to about $38.  As in the previous example, this person can still apply their tax credit to a lower-cost bronze plan, which would give them a monthly premium of zero dollars.

Single 40-Year-Old Austin Resident, Making $28,700 Annually

For this individual, the monthly pre-subsidy rate for the 2nd lowest cost silver plan will be about $250.  This resident can expect to receive a monthly tax credit of approximately $57, reducing their monthly premium for this silver plan to roughly $193.  If the individual chooses to apply this subsidy to the lowest cost bronze plan, the cost would be about $119 a month.

Single 40-Year-Old Austin Resident, Making $15,300 Annually

This lower-income resident can expect to receive a larger monthly tax credit of approximately $211 to apply to the pre-subsidy $250 rate, reducing their monthly premium to about $38.  As in the previous example, this person can still apply their tax credit to a lower-cost bronze plan, which would give them a monthly premium of zero dollars.

But What Will I Pay?

For additional data and examples, reference our Texas Marketplace Premiums chart (which includes pre- and post-subsidy premiums for individuals at 250% FPL) and our Texas Rates by Income Levels  (which examines premium rates for individuals of varying income levels in Houston).  But first, find out what geographic rating area you are in by referencing this Texas Rating Areas.

You can also use the Kaiser Family Foundation subsidy calculator to get a sneak preview of some of the rates you can expect to see in the Marketplace on October 1.

And don’t forget to go to www.HealthCare.gov on October 1 to find out more about the full range of new coverage options!

How Does Rating Work in the Texas Health Insurance Marketplace?

Health insurance issuers in the Marketplace can rate consumers based on their age, geographic region, tobacco use, and family size.  The U.S. Center for Consumer Information & Insurance Oversight has sorted all of Texas’ 254 counties into 26 different “geographic rating areas,” across which insurance premiums may vary.  Issuers cannot charge a person more based on their health status or gender, and can charge older consumers no more than three times the rate for younger consumers due to their age.  Consumers who smoke may be charged up to 50 percent more than the base rate, and consumers who purchase family plans may be charged more based on the size of their family.

Aside from these individual rating factors, premiums will vary depending on the plan selected.  Plans in the Marketplace will be offered in four metal tiers: bronze, silver, gold, and platinum.  Plans in each tier will offer comparable benefits, but at varying levels of cost-sharing.  A plan, for example, in the bronze category covers, on average, only 60 percent of overall enrollee medical costs (with the remaining 40 percent paid for out-of-pocket through deductibles, copays, and coinsurance), while a silver plan contributes 70 percent and a gold plan 80 percent, for example.  Plans in higher metal tiers can be expected to have a higher monthly premium since consumers are paying to have a lower deductibles and copays.  The size of your premium tax credit will be calculated using the rate for the 2nd lowest-cost silver plan in the Marketplace, discussed below.

What about Subsidies?

In Texas, individuals and families with household income between 100% and 400% of the Federal Poverty Level (FPL) will be eligible to receive premium tax credits to help make monthly premiums more affordable.  Persons at varying levels of poverty will be required to pay no more than a certain percentage of their income towards health insurance, using the 2nd lowest cost silver plan as a base rate for calculating the subsidy amount.  For example, the cost of the 2nd lowest-cost silver plan can be no more than 8.05% of income for an individual at 250% FPL.  But for an individual at 133% FPL, the cost of the 2nd lowest-cost silver plan is capped at 3% of income.   The subsidy can subsequently be applied to plans in other metal coverage tiers, such as bronze or gold.

How can I learn more?

The Center on Budget and Policy Priorities has great resources online at Health Reform Beyond the Basics, including FAQs on premium tax credits.

Written by Megan Randall, Center for Public Policy Priorities. Cross-posted from Better Texas Blog.

Dear Cheasty,

I am the owner of a small business that employs 75 people.  Our company provides access to health, dental, vision, life, LTD, ADD, and optional insurance. The company pays the first $300 of the full premium, which represents up to an 80% contribution rate on the employer side.

During a recent talk I heard you give, you said that insurance companies are barred from increasing rates more than 9.9%.   Yet this year,our particular group rates increased 20%.   In order to keep the premiums low, we opted for “poorer” plans that have higher deductibles, higher co-pays, higher out of pocket minimums, but our employees still have to pay more in premiums. Under the plans that we chose, the lowest cost plan for a family with a $6000 deductible, 70% co-insurance, $10,000 maximum out of pocket, and $45 doctor visit co-pay, is $955 per month.   That is about 35% of our average non-management take-home salary.  That is too much!  As a result, many of our employees do not cover their children or spouses.  So, although they have access to health insurance, it is prohibitively expensive.  “A dream deferred is a dream denied.”

If the maximum rate increase is 9.9%, how can they charge us so much more than that?  Should I contact the Texas Department of Insurance, or the Office of Public Insurance Counsel?

I really support a “government takeover” of healthcare – I wish that making these hard decisions were out of the hands of employers.  I think it would give us a level playing field as we compete for qualified employees with larger businesses. (I lost a computer programmer last month in a bidding war with BP — I can’t offer the deep discounts on health insurance benefits that they have the luxury of).

Sincerely,

Frustrated Business Owner

 

Dear Frustrated,

I am so sorry to hear that you are having so much trouble finding accessible and affordable health insurance for your employees. Sadly, yours is a story I hear far too frequently. You’ve asked some really good questions, and the answers break down into two categories: good news and bad news. I’m going to give you the bad news first, and then end on a couple of high notes.

OK, first for the 9.9% cap on yearly insurance rate hikes. Insurers are not, as you thought I said, banned from raising them more than 9.9% (I’m sorry if I was unclear). What the Affordable Care Act does is guarantee that if the rate hike is 10% or higher, then it triggers an automatic review process. That is, the Texas Department of Insurance (TDI) must conduct a review to figure out whether that rate hike was fair and justified or not. (For Texas, the sad news here is that, unlike in some other states, TDI can’t tell a company not to raise the rate that high, they can only recommend that it not be raised that high. We’ll be fighting to give the TDI enforcement power this coming legislative session, so stay tuned!)

One more important thing to understand is that the 9.9% cap is not a cap on the policy offered to one person or business. Rather, it is a limit on the company’s average increase across a group. So if your policies went up 20%, they have to balance out their average by not raising somebody else’s rates.

What are the reasons an insurance company may “justifiably” raise rates? There are six categories: health, gender, age, geography, type of work, and size of group. Therefore, if somebody on your plan recently battled cancer, the “health” category would raise a red flag for your insurer. If you lost seven male employees and hired seven female employees in their place, your “gender” category would light up, because insurance companies charge more to cover women than men. If a few of your employees aged into a higher age category, your rates would go up because they charge higher rates for older folks. As you can see, there are lots of reasons why RIGHT NOW, insurance companies can raise rates like they just did to you.

So that was the depressing reality. Now for some good news.  When the ACA goes into full effect on January 1, 2014, insurance companies will lose some of those six categories that they use to “adjust” rates for their clients. They won’t be able to charge women more than men. They won’t be able to charge a company more based on the type of work that they do. And most importantly, they won’t be able to raise rates or deny coverage based on health history or condition. So no more rate hikes based on an employee getting sick. Depending on the reasons for which your insurer raised your rates, these provisions may stop your group policy from rising so quickly or so high.

But best of all, Frustrated, if you still can’t afford the health plans for your employees, you can simply stop providing insurance without being a “bad employer.”  Here’s how it could work. As a “large business” owner (i.e. larger than 50 employees) you will have to pay a fee of approximately $2000 a year for every employee that you don’t insure (there are caveats, of course, too much detail for a blog post, but you can click here to read all about the ACA provisions for large businesses). You’ll get the first 30 employees free, so if you have 75 employees, you’ll have to pay the fee for 45 employees. That’s a total of $90,000 a year in fees [$2,000 x 45 = $90,000]. Right now, if my math is correct, you pay $270,000 a year for insurance [12 months x $300/month x 75 employees = $270,000].

In short, Frustrated, you could cancel your insurance, pay the fees and pay your employees several hundred a month toward buying their own insurance, which they’ll be able to do – with government subsidies! – on the Health Insurance Exchange, which will begin operating in 2014.

I know there are so many questions still left unanswered, Frustrated, and I hope this answer goes a long way toward helping you understand what is going on with your insurance rates. If you still have questions for me, feel free to email me at anderson@cppp.org and I’ll be happy to answer in more depth!

To a well and healthy Texas,

Cheasty Anderson

Health Insurance lingo has always been somewhat complicated and confusing, but with the passage of the Affordable Care Act it is increasingly important for the average Joe six-pack American (borrowing from a famous Alaskan governor) to understand this terminology. As the Affordable Care Act continues to be implemented, these terms will be used to define certain components of the bill.  Here’s a break-down of some of the most commonly used terms:

Premium: The monthly cost of your health insurance plan.

Co-payment: The set amount you pay each time you visit the doctor, pick up a prescription or visit the emergency room.

Deductible: The amount you have to pay before your insurance “kicks in”. Let’s say you have a $1,000 deductible. That means you must pay $1,000 before your insurance will begin to pick up any of the tab. If you have a higher deductible, your monthly premium will typically be lower.

Co-insurance: The percentage of the bill your insurer will pay after your deductible has been met. A typical co-insurance is 80-20. The insurer will pay 80% and you will be responsible for the remaining 20%.

Maximum Out of Pocket: The maximum amount you will personally pay for rendered health services during a year. This amount figures in your deductible and your portion of the bill.

Lifetime Benefit: The total amount of coverage you are eligible to receive over the course of your lifetime.

*Prior to the Affordable Care Act, insurers could place a lifetime limit on your coverage. Luckily that is no longer the case.  An estimated 105 million Americans have benefited from this new provision according to the U.S. Department of Health and Human Services.

Stay tuned for an upcoming segment on tackling the concepts behind various health insurance plans.

Contributed by Stephen Duckett, Health Policy Intern, Children’s Defense Fund and graduate student at the University of Texas Health Science Center at Houston, School of Public Health.

 

Dear Cheasty,

Hello. I work for a small company and one of my co-workers just told me that this year our insurance premiums are being reduced. I asked some more questions and he told me that our entire office might even get a refund check in the mail from the insurance company this year. I was delighted to hear that of course! I was wondering, though, what’s going on? Is this true? And if it is true, is this change because of health reform?

Thank you,
Laura from Houston

Dear LFH,

I know where you’re coming from. Reduced premiums? Getting a refund check from your insurance company? That’s NOT how the world as we know it works – surely we simply failed to notice the rabbit hole we must have fallen into! Well hang on to your shorts, LFH, because have I got some great news for you.

First of all, yes.

Health reform – also known as “Obamacare,” “the Affordable Care Act,” and “the ACA,” is responsible for some reductions in premiums and refund checks from insurance companies coming this year. While I wish I could guarantee you that your personal premium would indeed be reduced, I can’t speak to your individual case. I can say, however, that some small businesses in Texas have indeed seen reductions in their premiums in the last few months.  This is great news, but not a guarantee that premiums will drop for everybody. In fact, rather than reducing premiums across the board, it is more accurate to say that Obamacare is slowing the ludicrous speed at which premiums rise over time.  It is doing this in two ways – through “rate review” and the “80-20 rule”.

Let’s discuss them one at a time to fully explain.

Believe it or not, prior to this law, insurance companies could raise premiums as much as they wanted to, and with no explanation for why they were going up.  I received a letter from a guy who’d seen a 700% increase in his policy over 6 years even though he had never gotten sick during that whole time. Outrageous!

Now, because of a provision called “rate review” insurance companies can still raise premiums, but they must justify rate increases over 10%.  Those justifications are posted publicly – so you can see why rates are going up – and the justifications are reviewed by the Texas Department of Insurance to determine if the increase is based on reasonable assumptions and solid evidence.  For insurance companies, this will be an unprecedented level of scrutiny and transparency, and will do two things: (1) it will help keep you the consumer informed, and (2) it will help hold down premium increases over time.  Nice.

Now for the fun stuff: REFUND CHECKS!!

This is pretty exciting, and it’s all thanks to a provision in Obamacare called “the 80-20 rule”. You may have heard of this.  Until recently some people were (and some still are) calling it “medical loss ratio” or “MLR” for short, but that name doesn’t make a lot of sense. What it really means is this:

Insurance companies now have to spend at least 80% of all the money they collect in premium payments on actual medical care, and they can spend no more than 20% of that money on administration and profits. 

For some insurance companies, this isn’t a problem – they already hit that mark – but others that offer less value to their customers are going to have to make some big changes to how they do business. And here’s the kicker!  Those companies that don’t hit the 80-20 mark will have to issue refunds to their customers, starting August 1st of this year. In fact, some companies are reducing premiums now to avoid sending refunds out later.

This is probably what happened with your company’s insurance, LFH. That’s great news for Texans, especially in these tough economic times!

So, Laura from Houston, I hope these short paragraphs have helped explain exactly what might be going on with your insurance premiums this year. I wish I could promise that all of my readers would get reductions in premiums and a big check in the mail, but at least we know that many Texans will. And most importantly, I hope you feel better knowing that Obamacare is taking some really important steps toward improving the way health care works in this country. We’ve already seen some really great benefits so far, and more are coming in 2014.

So, keep your eyes peeled for a great health care future!

To a well and healthy Texas,
Cheasty