Think Health Insurance is Hard to Understand? Wait Till You See This

I've never heard someone argue that health insurance is too simple. In fact, it could be one of the most complex purchases you ever make. Here’s the kicker: IF you get your plan figured out after 11 hard-fought months with the same coverage, your employer changes the deductibles...and premiums...and co-pays...and prescription coverage. Or if you buy your own plan, premiums climb so high that a hunt for new coverage begins right away.

If you thought health insurance could confuse you as it stands now, have you heard some of the new terms being thrown around? Tax credit for health insurance? Silver plan? Actuarial value? FPL?

Don’t worry, it’s all new information. Right now it’s impossible to calculate what premiums will cost starting in 2014. At least with the chart above, you could determine your max premium cost for the Silver plan if you’re income is low enough.

I've participated in two conference calls with executives at major health insurance carriers here in Georgia in 2013, and both offered no guidance on possible premium costs. In fact, as of the call, they couldn't even begin designing plans because they were will waiting on guidance and rulings from the U.S. Department of Health & Human Services.

Here Are a Few Things We Know

Metal Plans
Plans will need to fit one of these metal plan tiers every year. Plan tiers are categorized by “actuarial value.” Example: a Platinum Plan has an actuarial value of 90 percent. For the standard population, this means:
• the plan will pay 90 percent of their healthcare expenses.
• the enrollees themselves will pay 10 percent through a combination of deductibles, co-pays, and co-insurance.

The Gold plan has an actuarial value of 80 percent, and so on.

The Catastrophic Plan is a lower-cost health plan with limited benefits available to people under age 30 and to people with financial hardships.

Open Enrollment
Open Enrollment will begin October 1, 2013.  Until then, here are the basics to give you a simple outline of the changes ahead based on if you're an individual, small business or large business (or work for one).

The Big Picture for Individuals
Americans not covered under a government plan will have three options for health insurance in 2014:

1. Get coverage through their employer if available
2. Buy an individual market plan through either:
• The individual market exchange – Purchaser may be eligible for subsidy
• The off-exchange market
3. Go uninsured (will pay penalty unless they qualify for an individual exemption)

The Big Picture for Small Groups
Employers who have 49 or fewer employees will have at least three health insurance options in 2014:

1. Offer a fully insured plan through either:
•A SHOP exchange – Employer may be eligible for a temporary two-year tax credit to offset part of the employer premium contribution
•The off-exchange market
2. Offer a self-insured (employer pays claims) plan, if allowed by state law, where essential health benefits and metal level requirements don’t exist
3. Stop offering coverage and let employees buy through the Individual market

The Big Picture for Large Groups
Employers who have 50 or more employees will have at least three health insurance options in 2014:

1. Offer health insurance – either fully insured or self-insured (employer pays claims)– that meets the minimum coverage definition (no essential health benefit or metal level requirements) and is affordable
2. Offer some level of coverage that does not meet minimum requirements and pay the employer penalty
3. Stop offering coverage, let employees buy through the Individual market and pay the employer penalty

- Note: The employer mandate does NOT:
•Require employers to contribute to the premium (though not doing so would likely make the plan not affordable, putting the employer at risk for penalties)
•Require employers to offer dependent coverage

With a background helping individuals and small business owners implement a health insurance plan fitting their specific situation since 2008, I've been asked a number of different questions relating to the changes coming at the beginning of next year. The "Affordable Care Act" has been rolling along since being just a talking point in 2008 with virtually no hindrance to its implementation. There remains an incredible void to be filled by "clarification" and "guidance" from the U.S. Department of Health & Human Services as to how parts of the law will be executed. Whether we're in favor of the new legislation or not, at this point, it's happening. The best thing you can do now is identify the best options for your family or business.

Final Tips

- Don't freak out. Theoretically, the tax credits are designed to make premiums affordable. So even though you'll face a penalty for not having coverage, if you feel like your income won't allow coverage, the tax credits should bring premiums into an affordable range. For example, if you make less than an $88,200 household income as a family of four, there will be potential tax credits to help pay your premiums.

- At this point, don’t guess how much your premium will go up. Most won’t even find out until after they apply on the exchange market starting October 1, 2013. Your best efforts and energy between now and then should be readying the rest of your financial house. Eliminate debt, build your emergency fund, and maximize the efficiency of your other insurance decisions.

What's the biggest health insurance question still remaining for you?

Editor's Note: Caleb Huftalin, CFP® serves clients by specializing in thorough and objective comprehensive financial advice at Catalyst Wealth Management.