Navigating the Health Insurance Marketplace

by E. Jones, ACA Implementation Specialist

Introduction

The “individual mandate” provision of the Patient Protection and Affordable Care Act (a.k.a. health care reform or “ACA”) began in January 2014, meaning that most U.S. citizens and legal residents need to have health insurance coverage or face a penalty by the end of each tax season. This is just one of many provisions and programs that kicked off in the new year, but will have a significant impact on individuals who do not currently have health coverage. Many people are still confused as to what they will need to do to find coverage, what type of coverage is available, and whether they qualify for federal financial assistance which can help make purchasing insurance more affordable.

Even if you don’t provide coverage as a business owner, you may find yourself in the position of needing to assist your employees with navigating the new health insurance marketplace. If you employ 50 or fewer full time employees, you now have an option to purchase coverage through the new health insurance marketplace, known as “Covered California,” in addition to being able to purchase from health insurance plans directly. Knowing the basics can help you and your employees be prepared and confident in navigating the new health insurance marketplace and selecting the right health plan specific to your needs and budget.

Open for enrollment – Covered California

You may have already heard about the opening of Covered California, a state-run agency enacted as a result of health care reform that serves both individuals and small businesses. The purpose of the marketplace is to provide consumers with competitively priced health plans in a transparent and user-friendly fashion, with plenty of support available online, over the phone, and in person. Health plans selected to participate in Covered California compete with one another for customers based on price and quality, since consumers have a variety of choices with upfront pricing to choose from. Covered California makes it easy for individuals to shop for health insurance coverage and simultaneously determine whether they qualify for government programs, such as Medi-Cal based upon their level of income, or qualify for any tax credits to reduce the price of their premiums. Exploring the Covered California Marketplace

During the 2014 open enrollment period for individuals, which ended March 31*, Covered California featured at least 13 participating insurance plans for consumers to select from and offered two types of programs for Californian consumers – one specifically for individuals and families looking for personal coverage (known as the individual market) and one for small businesses looking to find coverage for their employees (known as the Small Business Health Options Program or “SHOP”). Open enrollment continues for the SHOP.

Beginning in 2015, businesses with 50 or more full time equivalent employees will need to offer health coverage for full-time employees or they may face a penalty. While small businesses with less than 50 full-time equivalent workers will not incur penalties for choosing to not provide employer-sponsored health insurance, they are required to inform their workers about alternative health care options available through Covered California. Alternatively, small businesses may find that offering an employer-sponsored plan boosts employee morale, retains employees, and reduces absenteeism. Covered California is a one-stop shop for individuals to look for coverage and compare plans, as well as an avenue for small businesses that want to make coverage available for their employees.

Essential Health Benefits

Starting with plan years beginning on or after Jan. 1, 2014, the ACA requires non-grandfathered individual and small group commercial plans (with some exceptions, such as retiree and dental-only plans) to cover essential health benefits (EHBs) as defined by the ACA and its regulations. Although the premiums and cost-sharing differ, the coverage of the health care services offered is the same. For example, an individual purchasing the highest level of coverage through Covered California would be covered for the same health care services as someone who chooses to purchase the lowest level of coverage. The only difference in coverage between the two individuals would be their out-of-pocket costs when they receive health care services. Services that were not often covered by insurance plans in the past, such as maternity and newborn care, are now guaranteed in the individual and small group markets through the essential benefits requirement.

The definition of what is considered to be an EHB will differ, to some extent, from state-to-state, at least through plan years 2014 and 2015 as the program rolls out. Each state may define EHBs by choosing a base benchmark plan from among popular plans offered in that state. California, for instance, has chosen to use the Kaiser Foundation Health Plan Small Group HMO 30 as its benchmark plan. Individual and small group plans sold in the state, including through each state’s health insurance exchange, must provide benefits that are substantially equal to the modified EHB benchmark plan adopted within the state, as well as meet other requirements included in the regulations.

Qualified Health Plans — the new metal tiers for 2014

The new insurance Marketplaces offer qualified health plans that include the EHBs identified in the state. The plans offered by Covered California fall into four metal tiers — Bronze, Silver, Gold and Platinum. Each metal tier corresponds to an actuarial value, which is a measure of how much of the cost for covered services would be paid by the plan. Each metal designation depends on the amount of cost-sharing that the consumer must pay out of pocket for care under each plan. Bronze plans will offer 60 percent coverage by the health plan with 40 percent consumer copay; Silver plans will offer 70 percent coverage with 30 percent consumer copay; Gold plans will offer 80 percent coverage by the health plan with 20 percent consumer copay; and Platinum plans will offer 90 percent coverage by the health plan with only 10 percent consumer copay. Covered California has established standardized plans at each of these metal tiers that are available for purchase.

Selecting a metal tier plan depends upon consumer preference. For example, the Bronze plan has the lowest premiums, but has higher out of pocket costs. So while this plan might make sense for individuals who are relatively healthy and rarely visit a doctor’s office, it might not be a good option for individuals needing a high level of care.

Federal financial assistance on the individual marketplace vs. tax credits through the Small Business Health Options Program (SHOP)

Federal financial assistance based on the household income of the consumer is available for plans purchased by individuals through Covered California to assist with the costs of insurance for Californians who don’t have government or employer-sponsored coverage. Federal financial assistance is applied to the cost of premiums and out of pocket costs individuals might incur for treatment.

While businesses are not eligible for federal financial assistance, they may be able to take advantage of a small business tax credit. In 2014 the tax credit is only applicable to plans purchased through Covered California’s SHOP. Employees who are offered a health plan consistent with the ACA requirements through their employer, but who choose to look for individual coverage through Covered California instead, will not be eligible for federal financial assistance, nor will they be eligible for an employer contribution towards premiums.

Individual and family federal financial assistance

In California, federal financial assistance is available to both individuals and families whose modified adjusted gross income falls between 133 and 400 percent of the federal poverty level (FPL), which is the government’s standard way of measuring and comparing income levels. The amount of federal financial assistance through the exchange will vary depending upon the level of income earned by the consumer (or their family), as well as other factors.

Employer Notification Requirements

For those businesses that are subject to the Fair Labor Standards Act (FLSA), all employees, including part-timers, should receive information about their ability to purchase insurance through Covered California. The FLSA generally applies to businesses that make over $500,000 annually and to certain categories of businesses such as schools and nursing care facilities. New hires that come onboard will need to receive notice about their insurance options within 14 days of their initial start date. FLSA-subject businesses will need to provide notification to employees regardless of whether they choose to offer an employer-sponsored health plan. However, even if your small business does not qualify as an employer subject to FLSA, assisting your employees with finding health coverage through Covered California if they don’t already have coverage can be a small step towards reduced absenteeism and long-term productivity.

Sending out the Details

For the California businesses that are required to provide notification about the marketplace, the notice to employees needs to contain the following:
• Information about Covered California, including a description of the services it provides and how to contact someone for assistance;
• Information about whether your business already offers a health plan that covers at least 60 percent of the costs of care. If your business doesn’t offer this, employees need to be notified that they may be eligible for federal financial assistance through Covered California that goes towards the cost of plans purchased on the marketplace; and
• Notice that if the employee chooses to purchase a plan through Covered California, they may lose employer contributions (if any) towards employer-sponsored insurance and that all or a portion of such contribution may be excludable from income for Federal income tax purposes.

Since Covered California open enrollment for individuals purchasing a plan to go into effect in 2014 ended on March 31*, it may be a good idea to send out the required marketplace details in the summer or early fall (September) so that the information is timely when the individual marketplace open enrollment period begins again in November 2014. Even if you are not required to send out the details because you are not an FLSA business, you still might want to inform your employees about the new options. The Department of Labor has provided model notices that can easily be printed and mailed out to your staff, making the notification process fairly straight-forward. Employers are also allowed to customize the notice as long as the basic information requirements are met, so feel free to add in a logo for your business or personalize it for your workplace.

Gearing Up for Open Enrollment in Fall of 2014

Even as the first-ever open enrollment period for the Covered California individual marketplace recently drew to a close, Covered California began preparations for its next open enrollment period to begin in November 2014. Covered California has done the leg-work to make it easy for consumers to navigate the system, find answers to their questions both online and via telephone, and calculate some initial costs to get an idea of price ranges prior to open enrollment. Covered California designed their resources to be user-friendly and straight-forward, allowing both individuals and small businesses the ability to explore options before selecting a final plan using a “no wrong door” approach. This means that while a comprehensive website is available to allow consumers the ability to purchase plans through the web, purchasers can also explore plans by calling or visiting dedicated storefronts for in-person assistance. The state hired over 20,000 staff members to walk consumers through the health insurance process and answer specific questions consumers might have along the way. Individuals will have from November 2014 to Feb. 15, 2015 to enroll in a plan for 2015. For small businesses open enrollment started Oct. 1, 2013 and is ongoing.

As a small business owner, this is a great opportunity to help employees identify some of their alternatives for health coverage should you choose not to offer a health plan of your own in 2015, or to explore whether the plans available to employees through SHOP or directly through health insurance plans might be a better fit for them. All of these resources should help to empower both your small business, as well as your employees, with finding the right plan that fits both budget and personal needs. Be sure to check out the California website for the latest news at CoveredCA.com.

* From May 15 to July 15, 2014, people who have health coverage through COBRA (the Consolidated Omnibus Budget Reconciliation Act) will be eligible to shop for and buy coverage through Covered California during a special enrollment period.