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Obamacare is mandatory health insurance and where no one will be denied insurance due to a pre-existing disease. However, mandatory healthcare on a nationwide basis is an enormous and daunting task as we have already seen with enrollment software problems. But this is the least of our concerns.
The question is "How has or will this affect individuals and small businesses?" We all know that healthcare cost is rising and at the same time health insurance premiums are rising at an uncontrollable rate.
Obamacare is following Massachusetts healthcare reform but it seems that Obamacare is also hindering what Massachusetts has tried to do to keep health insurance premiums down, which is already unaffordable for the individual or small businesses that have less than 50 employees. Health insurance premium rates are the same whether it is one person or 49 employees.
For individuals:
When government or state officials and insurance providers talk about affordable health insurance, they are only looking at lower premiums but not lower overall healthcare cost to the individual. With lower premiums, come higher deductibles ($1,000 - $2,500 for medical and sometimes separate deductible for prescriptions $250 or $500), higher co-pays ($30/$45 - PCP, specialists for medical visits, and prescriptions of $15, 50% coinsurance, 50% coinsurance a month (for generic, name brand approved and name brand unapproved), co-pays after annual deductibles for ER visits, outpatient surgery and hospitalization and where more tests and/or procedures are not covered and are paid towards one's deductible. Basically it means more out of pocket expenses before insurance kicks in.
I can't speak to the government exchange or other states, but I can speak to what is going on in Massachusetts. The key to all of this is how insurance premiums are calculated, a mysterious black box and determination of co-pays pending whether it's an individual or company. I've tried to investigate through the Department of Insurance (DOT) and my insurance provider but the DOT could not explain it in great details nor would my insurance provider want to explain it.
The DOT approves the rate increase of all health insurers' plans. You've been reading about 2-4% increases that the DOT have approved. However, what the DOT is approving is the base rate which means the rate that the premiums start at and then the insurance company can add percentages based on age, geographic location, occupation etc. Except there are no charts stating what the rate factors are or the calculated percentages. I've experienced 8 - 9 % increases/year for total premiums when all variables of age, geographic location, occupation have remained the same. This may not seem a lot to some, but when it is 8 - 9% annual increases on $500/month for an individual plan, it is unaffordable.
Each premium is also calculated based upon each plan which takes into account the total number of people in the plan minus healthcare cost paid out plus other calculations such as administration cost. If you happen to be in a plan with a small amount of people (which you don't know) or your plan gets discontinued but you are grandfathered in and there are a number of people with health issues, your premiums will be higher than other plans that may have more people but less people with health issues. While we all like to have a lot of choices in health plans, in order for premiums to remain low, we need a lot of people in a few plans not spread out over many plans. Most insurers have at least 20 plans.
Other Factors
In August of 2012, Governor Patrick signed into law a bill that controls health care cost. "The bill caps the rate of growth for healthcare costs at the rate of growth of the state's economy from 2013 to 2017, and then to 0.5 percent less than economic growth after that. In other words, if the state's economy grows 3% next year, healthcare costs can't grow faster than that. If we grow 3% in 2018, healthcare costs can't grow more than 2.5%." While I commend Gov. Patrick in trying to control health care cost, are we talking about overall healthcare premiums or just base rate or overall healthcare cost in general?
The Boston Globe reported in February 2013 that for policies that renewed in the April-to-June 2013 period, the largest renewal period for the small group market, health insurers asked for average premium base rate increases of 2.7 percent for Massachusetts small businesses and individuals based on last year's data. Again, this is only the base rate and not the final premium increase.
The Globe also reported in February 2013 that Massachusetts health spending was heading up for that year. "Representatives from the state's nonprofit health plans as well as national for-profit insurers doing business in Massachusetts estimated the "medical cost trend," a key industry measure, will climb between 6 and 12 percent this year - higher than last year's cost bump and more than double the 3.6 percent increase set as a target in a state law passed last year."
"If trends are going up, premiums are going up," said Eric Swain, vice president of sales and account management for United Healthcare of New England.
The rise in healthcare cost according to nonprofit healthcare insurers is due to a number of reasons including (but not exclusively) a bad flu season in Massachusetts and more demand for medical services from people who delayed visiting doctors or getting elective procedures during the recession. Premiums would not necessarily rise as fast as the medical cost trend, but the two are closely related.
The establishment of Accountable Care Organizations (ACOs) and global payment (value based system) vs. fee-for-services are already taking place or planned with many institutions and insurers to curb the rising healthcare cost.
There are two major issues that will affect Massachusetts small companies with the new healthcare reform.
1. Insurance - buying cooperatives:
In 2010 Gov. Deval Patrick also signed a law stating that small businesses could band together to buy health insurance known as insurance-buying cooperatives and in January of 2012, the Division of Insurance certified two organizations as the first group purchasing cooperatives. The certification, allowed the Retailers Association of Massachusetts and the Massachusetts Chamber of Commerce Executives to begin talks with the state's commercial health plans about offering new lower-cost insurance products to the tens of thousands of members they hope to attract to their cooperatives.
The cooperatives also allowed small business to qualify for discounts by offering employees wellness incentives. But rules released in November under the federal laws superseded the Massachusetts rating factors by which the co-ops had hoped to gain purchasing power with larger self-insured organizations.
Jon Hurst and Peter Forman, chairman of the Massachusetts Association of Chamber of Commerce Executives, met with federal officials in Washington, D.C., in February to gain a waiver from the federal law but was denied soon after their request.
2) Calculations of Premiums:
a) Rating Factors:
Twenty-five business groups, including several in Western Massachusetts, have asked the state's congressional delegation for a waiver from a provision of the Affordable Care Act that affects how health insurers calculate premiums.
Massachusetts uses 11 rating factors to calculate premiums, while the national health care reform law requires insurers to use just four factors when determining the cost of a plan: age, geography, tobacco use, and family composition. The more rating factors involved in the calculations can decrease or minimize premium increases if it's in one's favor.
The state also asked that the premium rates be calculated quarterly vs. annually as mandated in the national healthcare reform laws. They believe that insurers tend to be more conservative if rates are calculated on a quarterly basis rather than an annual basis where there is more projection rather than actual cost.
"Without this waiver, many small employers in this state will see their health insurance premiums increase by as much as 57 percent," the groups wrote in a letter released by the Associated Industries of Massachusetts. "These steep increases are simply unaffordable for small employers and risk our impressive 97 percent coverage rate in the event that employers discontinue providing health insurance to their employees."
b) List Billing for companies:
Previously, Health New England would base insurance rates on the average age of a company's employees or "list billing" according to Jim Kessler, general counsel at Health New England in Springfield. It would estimate that every family had two and a fraction child.
Now, the Affordable Care Act requires insurers to calculate every individual's premium based on actual age and family size and base a company's premiums on that.
So, for example, a small company with lots of large families will see higher premiums.
The Associated Industries of Massachusetts (AIM), a business trade group, did a survey of its members for January 2014 renews to analyze the impact of the Affordable Care Act on actual insurance premiums being offered to businesses, and revealed that the Affordable Care Act has caused significant variability in premiums.
While some businesses (27%) will actually see a small decrease in premiums, a greater number (30%) of businesses are seeing their premiums rise by 10 to 29 percent, and a few (2%) are seeing even greater spikes.
"These numbers are pretty much in line with what we've been expecting and certainly with what the health insurance companies developed in their modeling," said Christopher Geehern, a spokesman for AIM. The group will conduct an additional survey in March, since many small businesses renew their premiums in April.
Enrollment
As for computer glitches, Massachusetts has its own problems and a deadline of January 1st 2014 that the state needs to meet. There are five key factors that the state faces according to the Boston Globe:
1. Confusion reigns.
2. A key part of the Connector site architecture is not working.
3. Some consumers using the Connector site can't really shop, never mind sign up.
4. Very short turnaround time for Jan. 1 plans.
5. Consumers may defect to insurer websites.
Now factor in the thousands of people, mostly self-employed, who received cancellation letters for January 1st, 2014 plans that did not conform to the Obamacare's "minimum essential coverage" and Massachusetts "decided not to implement the one-year extension on the "cancelled" plans for individuals in the unsubsidized market."
About 150,000 who previously got health insurance through the Commonwealth Connector (part of the subsidized market), the state got an extension from the federal government for that population until March 31.
But 35,000 former members of Commonwealth Choice, the unsubsidized Health Connector program that served many freelancers, contractors and self-employed individuals need to sign up and some of their plans are set to expire Jan. 1 (along with thousands of other individual plans purchased outside the Health Connector).
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