Health Care Reform Explained
Your questions answered
By Susan Jaffe, AARP Bulletin Today, Updated April 26
Q. I am 67 and have two daughters, one is 18 and the other is 20. Can they be covered by my health plan? If so, when does this take effect?
A. Starting Sept. 23, 2010, the health care reform law gives college students a graduation present. They won’t lose their health coverage just because they are no longer in school or they’ve reached the current age limit under their families’ health plan. They can stay on their families’ insurance until their 26th birthday.
But it’s not that simple.
Although the requirement takes effect Sept. 23, it applies only at the beginning of a new or renewed plan, not during the plan’s coverage year. So after every May or June graduation, graduates will not be covered under their parents’ family plan until it is renewed, or restarted, usually in January. Insurance companies have the option of eliminating the coverage gap and keeping the adult child on the family plan, if they wish.
Health and Human Services Secretary Kathleen Sebelius is encouraging insurers to do just that and to follow the requirement now, instead of waiting until September.
By eliminating the gap, young adults won’t have the “unnecessary inconvenience and disruption” of disenrolling in the spring and then rejoining when the new coverage year begins on or after Sept. 23, she wrote in a recent appeal to insurance companies. “Taking this step is good business and will offer relief to grateful families across the country,” she said.
UnitedHealthcare, Kaiser Permanente, Humana, WellPoint/Anthem and the Blue Cross Blue Shield plans have announced they will voluntarily allow young adults to keep their family plan coverage after graduation. HHS officials expect other companies to do so as well, so check with your insurer to see whether it is among them.
There’s another rule to watch out for: If the graduates are lucky enough to land a job that offers health insurance, their parents’ insurers are not required to cover them until age 26 even if the family plan is better or cheaper coverage. However, after 2014, they can remain on their family plan regardless of whether their employer offers coverage.
Readers also asked other questions about the new provision:
Can new graduates stay on their families’ plan? Or will they have to buy a rider, individual policy or COBRA policy?
Health and Human Services spokeswoman Jessica Santillo said that the provision applies to health plans that cover children and extends that coverage under the same family plan, until they turn 26. The adult child does not need a separate policy.
Can insurers charge more for the family plan—raise premiums, deductibles, copayments, etc.—because it will be extended to adult children?
No one knows yet. But as one skeptical New York parent says, “It’s an additional cost, so someone will be paying for it.” Santillo said this will be one of the many details spelled out in the federal regulations that will be issued by Sept. 23. The regulations serve as directions on how to follow what Congress has written in the law.
Will I be able to add my 22-year-old son to my Medicare coverage as if I had private health insurance?
No, the requirement doesn’t apply to Medicare coverage.
Does the adult child have to live with the parents in order to be covered by their insurance?
Santillo said no. But whether they can live in a different state or country will be addressed in the forthcoming regulations.
Does the law extend family health plan coverage to young adults who are married?
Santillo said yes.
Does the law extend family health plan coverage to grandchildren under 26 years old?
No, it does not.
If you find this change in the law is still not crystal clear, you’re not alone.
“While the new law will allow for expanded coverage of adult children, there are still many regulatory details that are yet to be coordinated,” said Oklahoma Insurance Commissioner Kim Holland, who is also the secretary-treasurer of the National Association of Insurance Commissioners. “We, like many, are hoping for clarification and direction on a variety of questions.”
Q. I heard that the IRS is hiring 16,500 agents just to make sure we buy insurance?
A. The Internal Revenue Service has not yet determined how many employees it will need to carry out its new responsibilities under the health reform law, an IRS spokeswoman said. But most of their work will be helping people, not hunting them down.
The agency has to make sure everyone eligible gets tax credits to help them purchase health insurance. “A substantial portion of IRS’ administrative expenses” will go toward this work, she said, which includes educating individuals and businesses about available tax incentives and how to claim them, answering taxpayers’ questions, and improving the agency’s technology and infrastructure capacity to handle the job.
One thing the IRS will not do: contact individuals about their health insurance.
IRS Commissioner Douglas Shulman told a congressional committee in March that “we expect to get a simple form, that we won’t look behind, that says this person has acceptable health coverage.” The form—sent by an insurance company—will verify that the taxpayer has health coverage. It will be similar to the 1099 interest form a bank completes.
Q. I’ve heard that the payments from the government to Medicare Advantage will decrease or be stopped altogether. Is this true? This is a great program. Why take it away from us?
A. The new law changes the way the government reimburses insurance companies that offer Medicare Advantage plans to seniors. But it doesn’t abolish the program. The nation’s top health official, Secretary of Health and Human Services Kathleen Sebelius, blames “misinformation” for the impression that “we were getting rid of Medicare Advantage.”
Instead, what’s being gradually reduced are excess payments to Medicare Advantage plans, the sweeteners they were originally paid to come into the Medicare market.
Now, Sebelius tells the AARP Bulletin, “the market is stable. There are plenty of companies and over 1,600 plan choices.”
About one in four people in Medicare—some 10 million out of 45 million—are enrolled in these plans. On average, the subsidies mean care for people in Medicare Advantage plans costs 13 percent more than it costs for people in traditional Medicare. But that figure is much higher for some plans—up to 20 percent higher in some areas. This translated into $14 billion added to the cost of the Medicare program last year alone.
So it’s not surprising that these payments have enabled Medicare Advantage plans to offer extra benefits like dental coverage, eyeglasses and gym memberships. As the subsidies are scaled back, some of those may be cut.
But basic guaranteed Medicare benefits cannot and will not be cut, Sebelius says. And seniors have another protection: The new law requires plans to spend at least 85 cents of every dollar they receive from Medicare on benefits.
Last year, the subsidies to these plans averaged $1,138 more for each Medicare Advantage member, according to a study by health policy analyst Brian Biles at George Washington University.
Under the new law, next year’s payments will be frozen at 2010 levels. Then, cuts averaging 12 percent a year will be gradually phased in over six years, bringing payments closer to what traditional Medicare spends to provide medical care. Biles says that works out to about $200 less per Medicare Advantage member per year.
The cuts are not the same for all plans. In fact, plans with excellent track records that earn four or five stars from Medicare’s rating system will get up to a 5 percent bonus.
Overall, Medicare Advantage insurers will be paid $136 billion less by 2019 than they would have received before health care reform, according to estimates by the independent Congressional Budget Office.
Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, a leading insurance trade association, contends that “the last time Congress cut the program, seniors saw benefit reductions, higher premiums, and in some parts of the country they lost their coverage altogether.”
Plans are going to try to minimize the impact on members, he says. But he adds that given the size of the cut, that will be difficult. “It will impact different plans differently,” Zirkelbach says, and it’s still too early to know how.
Whatever the companies do, the changes won’t be dramatic, says Marsha Gold, who has studied trends in private insurance and Medicare as a senior fellow at Mathematica Policy Research, a research firm based in Washington. “Everything will come slowly,” she says, because the payments are reduced over several years.
Medicare Advantage is a big business, and the growing number of seniors in Medicare is an important market, Gold adds. Total Medicare Advantage enrollment grew this year even though there were fewer plans. “Beneficiaries still have a lot of choices.”
“My guess is that plans will still be competing for business,” says Sebelius. “They will add or subtract benefits based on where they see a marketplace advantage.”
Q. I’m a Marine Corps veteran with health coverage through TriCare and the VA. Would there be any change in my coverage? Am I or my family required to buy other health insurance?
A. The new law requires adults to buy health insurance starting in 2014 and provides subsidies for those who can’t afford it. Those who don’t have it will pay a penalty. Kathleen Sebelius, secretary of health and human services, says you, your spouse and your children do not have to buy new health insurance because you already have it. TriCare and coverage through the Department of Veterans Affairs “is now and into the future considered coverage,” she says.
Q. President Obama says health care reform will save us money, but others say we’ll have to pay more in taxes. Who’s right?
A. The answer depends on whether your income is on the high side, whether you have “Cadillac” employer-sponsored health care coverage and how often you go to tanning salons (more about that one later), among other things.
First, here’s the bad news: Expanding coverage to 32 million people, providing subsidies to buy insurance, closing the Medicare drug coverage gap and other health care reforms aren’t free. But most of the taxes fall on wealthier Americans.
Under the new law, they will pay an extra 0.9 percent (for a total of 2.3 percent) in their Medicare payroll tax on the portion of their earned income above $200,000 or above $250,000 for married couples. That starts in 2013. They will also a pay a new tax on unearned income, including money from investments, dividends, annuities, royalties and rent. Social security, pensions or IRA income are excluded.
Starting in 2013, you can deduct from your taxes only medical expenses that exceed 10 percent of your income—up from 7.5 percent now. This change is postponed until 2017 for taxpayers age 65 and older.
Perhaps one of most controversial new taxes, which begins eight years from now, is a 40 percent tax on expensive “Cadillac” employer-sponsored health plans that cost more than $10,200 for individuals or $27,500 for a family. But the tax is imposed on the insurers.
Some readers have asked about the new tax on medical devices slated for 2013. It doesn’t apply to hearing aids or other medical items consumers usually buy in retail stores.
Beginning in July there will be a 10 percent sales tax on indoor tanning services. For those who don’t know what tanning services are, the law provides a precise definition: “… a service employing any electronic product designed to incorporate one or more ultraviolet lamps and intended for the irradiation of an individual by ultraviolet radiation, with wavelengths in air between 200 and 400 nanometers, to induce skin tanning.”
And, finally, people without health insurance who are required to have it will have to pay a penalty, starting at $95 or 1 percent of taxable income in 2014, $325 or 2 percent of taxable income in 2015, and $695 or 2.5 percent in 2016. After 2016, the penalty increases with a cost-of-living adjustment.
Some good news comes next.
Q. My husband and I are in our late 50s and have a health insurance policy with a very high deductible that only covers catastrophic care. We pay high premiums and have no preventive-care coverage. Will the new law help us afford better health insurance? We are living on the edge—any more bills and we fall off.
A. The new law will lower the monthly cost of insurance in 2014 by providing tax credits or refunds to reduce the cost of your premiums. The credits are available to people whose income is in a certain range and who are eligible to buy coverage through the new state-run health insurance exchanges. You can buy basic comprehensive coverage through an exchange if you don’t have insurance or if your insurance is unaffordable. (How the exchanges work will be explained in an upcoming answer.)
Because it’s too early to know what the insurance premiums will be in 2014, we don’t know how much the credits are worth in dollars. We do know that the credits will be a percentage of your income, from 2 to 9.5 percent, if your income is under a certain level—the current range would include individuals with incomes of $14,403 to $43,320 and families of four with incomes of $29,326 to $88,200.
In addition, new consumer protections will take effect in September that can also help make coverage more affordable. For people who buy new group and individual policies, insurers cannot set lifetime limits on how much they will pay, cannot cancel policies after you get sick, and cannot exclude children with preexisting medical problems. And certain preventive screenings and vaccinations will be provided at a price that can’t be beat: free.
Q. I’m over 50 and have been turned away by health insurers who either won’t sell me coverage or charge so much I can’t afford to buy it, all because of my health problems. How long do I have to wait before I can get covered?
A. If you have preexisting medical conditions and have been unable to get health insurance for at least six months, you should be eligible to buy coverage through a temporary federally funded program called a “high-risk pool.” Under the new law, this option—expected to be available by July—will cover about 2 million men and women in your situation. Older members cannot be charged more than four times what younger members pay for this coverage, and out-of-pocket expenses are limited to $5,950 for an individual or $11,900 for a family this year.
This isn’t a new idea: Many states already offer high-risk pools for their residents, but some are closed to new enrollees because of high costs. That will change and every state will be participating, thanks to an influx of $5 billion in federal aid.
How much premiums will cost to join the high-risk pool, in which hospitals and doctors will participate, and exactly what will be covered are among the key details yet to be worked out. So it’s no surprise that at this point, there isn’t a telephone number the public can call for more information.
This program ends in 2014, when insurance companies will be required to sell policies to anyone, regardless of their preexisting medical conditions.
Q. I’m having trouble now finding a primary care doctor. Will it be harder for me to get one when millions more people get health insurance because of this new law?
A. While 32 million people will eventually be added to the rolls of the insured, that won’t happen overnight or in one fell swoop. It will take time, and about half will be insured through state health insurance exchanges, which won’t open until 2014. But you are right—it can be hard to find a primary care doctor who will accept a new patient, especially as the nation’s population grows older and demand increases. During the health reform debate, Republican critics such as Florida Sen. George LeMieux warned that a physician shortage could undermine the entire reform effort: “It’s not health care reform if the doctor is not in,” he said.
The new law addresses the shortage of primary care doctors in three basic ways.
• First, primary care doctors who treat Medicare patients will receive an extra 10 percent bonus from 2011 to 2016, and earn another small bonus if they file health care quality reports with Medicare. In addition, the law adjusts Medicare payments to reflect the variations in medical costs by geographical area, which the American Medical Association says will benefit doctors in 42 states.
The measure also raises payments for family physicians who treat patients in Medicaid, the government’s health care program for low-income people. And it reduces paperwork for doctors who treat Medicare and Medicaid patients—another sweetener to entice physicians into the programs.
• The second way the law tackles the shortage is by providing incentives for doctors to go into the primary care field. For example, it expands loan forgiveness programs to defray the cost of medical school and provides money for primary care training programs at teaching hospitals.
It also provides grants to medical schools to recruit and train students who will practice medicine in rural communities. There are similar incentives for training nurses and other medical providers, which should help ease the demand for primary care doctors.
• Finally, the law encourages changes in how patients are treated by creating “accountable care organizations”—physician and other medical groups—which will be paid according to how well the patient fares, rather than the number of services provided, explained Jean Silver-Isenstadt, M.D., executive director of the National Physicians Alliance. “This means that issues that can be handled over the phone, will be, and patients won’t be required to come in for an office visit just to ensure the physician gets paid,” she said. “This will free up valuable time for doctors to see more patients.”
No one knows for sure whether bonuses and other changes will build up the supply of primary care doctors fast enough to keep pace with demand.