Goal of lower costs remains big uncertainty

Where can Americans find help with health insurance coverage?

And P.S. – what’s it going to cost?

For three big segments of American society – the elderly, the poor and veterans of the U.S. military – health care comes primarily from the government. It reaches these groups via Medicare, Medicaid and the Department of Veterans Affairs. For everybody else, if health coverage is available, it usually is a fringe benefit of employment. But employment ranges from self-employment to a small business with six employees to a multinational corporation.

In 2010, when Congress passed a law to make health insurance more available and affordable, the remedies were tailored to those widely varying kinds of employment. And therefore they were complicated: Carrots and sticks. Tax penalties. Tax credits. Grants. Regulations. Small employers mainly face incentives. Larger employers face penalties if their workers have no coverage. Individuals face both penalties and incentives.

On Jan. 1, most of the new federal law will take effect. While partisan debate still sputters on, businesses are racing to comply with the law.

Where can credible information be found for those who wonder what the law will mean to them?

As a starting point, three information sources deserve to be high on anyone’s list, regardless of political persuasion:

• The federal government. At www.healthcare.gov, the U.S. Department of Health and Human Services operates a website designed to provide clear, official descriptions of the federal law’s provisions. Those who dig deeper into the site will find links to the law itself and the regulations that will govern details of its implementation.

• The Henry J. Kaiser Family Foundation. At www.kff.org, this nonprofit, nonpartisan organization operates a website packed with summaries and details of the new federal law, the progress of work by states to implement it, and other information regarding worldwide health issues.

• In every state, residents who lack affordable insurance soon will go to a website where they can purchase federally subsidized group health insurance coverage – provided they don’t already have large-group coverage through their employer. These websites are to become operational Oct. 1. Until the sites are running, it’s not possible to visit them. In Washington state, the agency developing this site offers introductory information at www.wahbexchange.org.

These websites will be crucial to the self-employed and to small businesses. Why? Because they’ll change the way small-business health insurance is sold and priced. Many of these changes will be embodied in what the 2010 federal law refers to as Small Business Health Options Programs.

If a business wishes to provide small-group insurance to its employees, it can:

• Set up an account on the website.

• Choose what level of coverage it wishes to provide. Options include the amount of employer subsidy for employees and dependents and how generous the coverage of medical costs will be, from 60 percent up to 90 percent.

• Choose an insurance carrier based on qualitative ratings of the carrier’s product.

• Upload a list of the employees it wishes to cover.

• Send the employees a link where they can log on to the site and sign up for the coverage. When they sign up, if their income qualifies them for a federal subsidy, they’ll get it on the site and the subsidy will reduce the amount of their premium.

Federal subsidies will not be available outside these state insurance-buying websites.

New federal insurance regulations play a key role in what these websites have to offer to small businesses and the self-employed. Today, according to the Department of Health and Human Services, the insurance industry’s underwriting practices have made individual and small-business policies so costly that many Americans don’t have coverage. For example, when people get seriously ill their rates can go up or their coverage can be canceled. The new federal regulations prohibit those practices. Equally important, the federal rules require that each insurance carrier put all of its customers into a single statewide group to spread risk more broadly and lower costs per customer.

Penalties and incentives

Meanwhile, what about those carrots and sticks, the complex incentives for uninsured individuals and businesses to get on board with health care coverage? Here’s a summary, condensed from documents prepared by the Kaiser Family Foundation:

• Individuals who lack health insurance coverage will face a penalty on their income taxes: $95 in 2014, $325 in 2015 and $695 in 2016.

• Employers with 50 or more employees must pay a federal penalty of $2,000 per full-time employee if they fail to provide health insurance coverage.

• Small employers with up to 25 employees can get federal tax credits if they provide health insurance for their workers via the new insurance-buying websites. The credits vary in size depending on the employees’ wages, company size and the amount the employer contributes toward its employees’ insurance premiums.

Fate of association plans not settled

Like everything else about the federal health reform law, the small-business insurance-buying provisions have critics.

Mike Kreidler, Washington state’s insurance commissioner, contends the penalties for not buying or providing insurance are not large enough, considering the cost of the insurance itself.

Another criticism: The new websites and their subsidies threaten to supersede the methods some small businesses have used to provide health insurance in the past.

In Washington state, influential groups such as chambers of commerce and the statewide Association of Washington Business have provided some small businesses with a way to purchase insurance for their employees. The AWB says nearly 500,000 people are covered through association plans such as the one it runs.

According to Kreidler’s office, there’s no problem with association plans if they’re limited to one profession, such as farmers or plumbers.

But under federal law there might be an issue for association plans such as AWB’s, which cover a variety of vocations. To preserve these plans, AWB is lobbying the Washington Legislature to approve Senate Bill 5605, which aims to keep the association plans going at least temporarily. This week the bill passed the Republican-led Senate, 38-11. Democrats, who control the House, contend federal law conflicts with the bill and will doom its chances of enactment.

Biggest uncertainty is still cost

For small businesses and consumers, the biggest uncertainty is what health insurance will cost on Washington’s Health Plan Finder, the new website.

Critics of the federal reform law predict sticker shock.

In recent years as medical costs have soared, insurance benefits have shrunk – leaving many small-business or individual plans with high rates, high deductibles and coverage as low as 35 percent to 40 percent of patients’ medical expenses, according to Kreidler.

Federal regulations will raise the lowest level of coverage to 60 percent, for plans sold on the websites.

The new rules will expand insurance companies’ risk pools to statewide groups, instead of small groups consisting of one employer’s workers. Theoretically, this should lower costs.

But until the carriers unveil their rates, state regulators pass judgment on the rates, and the websites debut, no one can say what carriers will charge.

A few things do seem clear: On those websites, insurance companies will have to compete for purchasers’ business. Federal safeguards will protect carriers against extraordinary losses. In Washington, some insurers are sitting on large surpluses, which they might use to reduce their rates – or protect their earnings. And the actual premiums many purchasers will pay will be reduced by the federal subsidies.

What does it all add up to? Change. Coming to a website near you in less than seven months.