By Steve Schulte of
Health Advocate Solutions
(213) 999-1227
Job-based insurance has been on of the most resilient struts of the American healthcare system since the post-World War II years.
This major accomplishment of the postwar activist labor movement in the United States supported the rising prosperity of countless American families. Employer-paid insurance was a major wage concession to workers through the 50s, 60s and 70s along with rising national prosperity. At its height about 60% of workers under 65 received their coverage through their employers.
This began to change during the 1980s and the Reagan presidency.
Several important factors have led to this shift: a rise in corporate mobility and transitoriness, increasing globalization of markets, rising home-based entrepreneurship along with more convenient and accessible technology. All contributed greatly to this significant shift.
So, during the recent healthcare debates, a key point of contention was whether insurance should still be employer-based (owned by employers....) or shifted to individuals through a mandate. The opposing, multiple sides to this debate are fascinating in themselves.
Take two examples. Remember that when Mitt Romney was governor of Massachusetts the healthcare legislation he signed contained an individual mandate along with employer sanctions to provide coverage. This was seen as a concession to conservative pragmatism: people should provide for themselves.
Hillary Clinton adopted this plank during her campaign for president. Her supporters (including economists) saw it as a cold-eyed look at a changing workplace (more working and single women, for example) as well as a sound way to make a larger insurance market function well. Candidate Obama was opposed.
The idea of an individual mandate became caught in a fierce battle between House and Senate members: the House members siding more traditionally with union and liberal sentiments who favored employer-based insurnace. The Senate committee chaired by Senator Max Baucus promoted the mandate at the expense of employer mandates. A strong compromise carried the day which highlighted the individual mandate as a key part of reform.
Second, while there was Congressional agreement that expensive "Cadillac" plans would be taxed, the compromise struck primarily with union and business representatives was to delay this tax until 2018. So, while more expensive plans will be taxed to help those who require subsidies, the impact of this shift will wait.
Even though cost-savings was a key objective of healthcare advocates in Congress, this important savings plank of taxing expensive plans was allowed to be put off for several years.
So, now that healthcare reform has been passed---and we have added coverage mandates and taxed benefit packages, what else can individuals and small businesses expect to see? Here's a quick overview:
1) By July 1 each state had to set up a high risk pool to cover those who were otherwise ineligible for coverage (30 states already had such pools). If states could not or would not do this the Department of Health and Human Services established a national exchange to cover these individuals.
2) The individual mandate will extend to both individuals and to businesses. People with incomes under 400% of the federal poverty level (FPL), those whose lack of coverage is temporary, those in prisoners, Native Americans and some religious groups will not be subject to the mandate. There will be no criminal penalties for not getting insurance.
3) Younger people will have to have insurance, but will most likely be able to purchase a "basic plan". This will be a high deductible, lower benefit plan that is estimated to cost between $136 and $198 per month.
4) Each state will have at least one "exchange" by 2014. This will allow individuals to compare prices and buy coverage; at first businesses with fewer than 50 employees will be able to utilize exchanges. Even employees whose choices are severely limited by their employers who offer coverage will be able to use the exchanges to find better choices. By 2017 businesses with more than 100 employees will be able to utilize the exchanges.
5) Exchange choices will be graded based on amount of financial coverage offered by a plan. This will work so plans will be labelled "bronze", "silver", "gold" and "platinum" to signify that the plan pays for, at a minimum, 60% of the cost of benefits, at most, 90%.
6) Individuals will pay a tax penalty of 1% of income or $95 if they have not gotten insurance coverage by 2014. By 2015 this penalty will increase to 2% and will reach its maximum of 2.5% or $695 (whichever is greater) by 2016.
7) Subsidies will be available (on a sliding scale) for those who make less than 400% of the federal poverty level---or $88,000 for a family of four. Vouchers will be available to those who make less than 400% of the FPL or who must spend more than 9.5% of their incomes on coverage. They will be eligible for the equivalent amount of coverage their employer would have offered to them.
8) Employers will get a tax credit---starting in 2013---for 35% of the premiums paid for employee insurance. To qualify these employers must pay at least 50% of insurance premiums of their workers. The aid will grow to 50% of the premiums paid by 2014 (35% in the case of tax-exempt groups).
9) For employers of 50 or more who do not offer coverage---or whose employees seek coverage in the exchange as an alternative to what's offered---the penalty will be $2,000 times the number of full-time employees beyond the first 30. This will also apply to any employer who does not offer at least a "bronze" equivalent plan (60% of benefits paid for) or whose employee spends more than 9.5% of their income on their coverage. The penalties are triggered when the employee goes to the exchange to seek coverage other than that offered by the employer.
10) Finally, employers will be encouraged to retain on their plans employees who are between 55 and 65.
One more note, while this is somewhat complicated and will take over four years to roll out, the changes promise to enroll millions of new people. In addition, the exchanges may, over time, substantially alter how insurance is offered and purchased. It undoubtedly will take five years or so to see the full impact.
Sources: The Washington Post, Kaiser Family Foundation website, The New York Times.
Next time: Politics versus Implementation. And.....Socialism.
Coming Soon: Seminars on the Impacts of Healthcare Reform and Long-Term Care Insurance
To respond to this blog, email steve6schul@yahoo.com
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