The Affordable Care Act (ACA) – What Would a Replacement Program Look Like – And Is One Needed?

Georgia Congressman Tom Price, a fierce critic of the ACA and a leading advocate of repealing and replacing the controversial 2010 health care law, recently was chosen by President-elect Donald Trump to lead the Department of Health and Human Services (HHS).  On track to be behind the wheel at HHS, Price may be the one who authors final rules implementing whatever legislation ultimately replaces the ACA (known informally as “ObamaCare”).

Congressman Price, a former orthopedic surgeon, personally introduced legislation to repeal and replace ObamaCare in the current Congress and previous sessions.  His 2015 proposal is called the Empowering Patients First Act and served as the basis for a subsequent health care proposal unveiled in June of this year by House Speaker Paul Ryan.

A key feature of ObamaCare is that it spreads out the costs of health insurance across generations, with subsidization of older sicker people who use more health care by healthier young people.  Prior to the ACA’s implementation, most states permitted an age band rating with a 5:1 ratio; meaning that insurers could charge insureds at the highest issue ages up to five times what the youngest insureds pay in premium.  The ACA compressed the permitted age band rating to a 3:1 ratio, forcing companies to subsidize older people with higher premium levels for younger people.  Price’s proposal would eliminate that, which might be viewed favorably even by ObamaCare's proponents who now recognize they are fighting an uphill battle trying to convince young adults to buy coverage at an exorbitant premium cost.

Price has spoken out against the ACA’s approach to insert the government in the middle of the doctor-patient relationship.  In June of this year Price stated, “They believe the government ought to be in control of health care” and continued with "we believe that patients and doctors should be in control of health care.  People have coverage, but they don't have care."  More recently, he declared “ObamaCare is failing” in a November 1st op-ed on the Townhall website.

Some of the key points from Prices' health care proposal are as follows:

• Fixed tax credits for people to use to buy insurance on the private market, with credits starting at $900 a year below age 18 and rising with age.  People on Medicaid, Medicare, Tricare or the Veterans Affairs (VA) program could opt for tax credits to buy private insurance.

• Expansion of health savings accounts, which allow people to save money for health care costs on a pre-tax basis.  People covered by existing government programs including Medicare and the VA could contribute to their health savings accounts to pay for premiums and copayments.

• No denying coverage to people with pre-existing medical conditions provided they had maintained continuous insurance for 18 months prior to selecting a new policy.  Otherwise, for people who had not maintained such continuous insurance, coverage of a pre-existing condition could be excluded for up to 18 months after enrolling in a new health plan.

• Companies can take a tax deduction of up to $20,000 for a family health plan and $8,000 for an individual.  The limit is intended to discourage overly generous employer health insurance plans.

• States would receive federal funds to create “high-risk pools”, which are government-run health plans for people with pre-existing medical conditions who cannot find affordable health insurance on the private market. 

Effective implementation of Price’s plan seemingly would require an initial open enrollment period that achieves broad success in covering Americans not already insured under employer-sponsored programs or government health care plans such as Medicare and Tricare.  Following the initial program enrollment, Price’s plan would make it difficult for people to try to game the new system by purchasing insurance only upon discovery of an illness.

Price concluded his op-ed with the following:

“We solve the insurance challenges of portability and pre-existing conditions by applying the same coverage rules that already exist in the employer-sponsored market – real, sustainable protections that mean no one can be priced out of the health insurance market if they have a bad diagnosis or injury.  And, for those on a government health care program, we offer reforms that will empower states with the flexibility to best serve their Medicaid populations while offering Medicare beneficiaries more choices that will help save, strengthen, and secure this vital program in the years to come.”

Let us hope that Price’s words do not prove to ring hollow, like President Obama’s statement from March 2010 in his Weekly Address: Health Reform Will Benefit American Families and Businesses This Year:  “What won’t change when this bill is signed this:  if you like the insurance plan you have now, you can keep it.  If you like your doctor, you can keep your doctor.  Because nothing should get in the way of the relationship between a family and their doctor.”

For the record, as a licensed sales agent I have assisted dozens of Americans in obtaining insurance through the ACA’s Health Insurance Marketplace.  I have been authorized to conduct Marketplace business since the fall of 2013 when agents initially were certified.  Since that time, my existing individual policy was canceled, and the premium for the lowest cost (non-subsidized) ACA compliant plan for sale in my area is more than double what I had paid prior to 2014.  Further, my 2017 plan (I chose the lowest cost) does not include coverage for the orthopedic surgeon who successfully repaired a torn labrum for me more than a decade ago; nor does my plan include coverage for any physician I have visited in nearly 20 years living in Florida.  To add insult to injury, today I often work harder for an individual or family to assist with a health insurance plan enrollment; yet my compensation is less than a third of what I received for similar work performed prior to ObamaCare.  I do not believe that insurance company executives are making less money now, and I definitely do not recall hearing President Obama admit that his proclamation noted above turned out to be totally false.  It is disappointing to me that accountability only applies to regular people, and not to those at the highest positions in our country.

After having conducted a thorough examination of the issues, I would say that a program to replace ObamaCare indeed is needed.

Until next time,

Andrew Herman

HSAs: Costs Are on the Rise

What is an HSA? What is it used for? Who is qualified to have one?

An HSA is a Health Savings Account; it is a supplement to a high-deductible healthcare plan (HDHP). As a lot of companies, especially with the current economic conditions, are cutting back on health insurance, more and more people are finding themselves having healthcare plans with high deductibles. The HSA does not get rid of the high deductible; but it does serve as a non-taxable security fund in case of medical emergency. As the 401k is established to help squirrel away money for retirement, untouched for other purposes, the HSA is used to set money aside only for medical use. These non-taxable caches are meant to lighten the burden in case the deductible has to be filled in one fell swoop; or simply to pay for routine medical care on a tax-favored basis. The best part, though: whatever money is left over in the HSA at the end of a year will be rolled over into the next year.

So What Is New with HSAs?

The tax-deductible contribution limits have increased slightly: the contribution limit for individual plans has increased from $3,050 in 2011 to $3,100 in 2012; and for family plans from $6,150 in 2011 to $6,250 in 2012. Furthermore, the 10% penalty for using HSA funds for non-approved expenses is being raised to 20%. Finally, under the Patient Protection and Affordable Care Act (PPACA), HSA approved expenses on drugs include only doctor-prescribed medications, with the sole exception of insulin. Before PPACA, there was no requirement for OTC medications to be prescribed by a doctor in order to count as an approved expense.

How About Partial Year Eligibility for People Newly Insured by an HDHP?

A 2006 change in the HSA law allows individuals whose HDHP coverage begins part of the way into the year to make the full annual contribution amount for their first year of HSA eligibility. This change in the law was intended to help people fully fund their HSA accounts, especially since many insurance plans apply the full year deductible amount even though coverage might be in effect less than 12 full months. To take advantage of this rule, the individual’s HDHP coverage must take effect any time after January 1 but no later than December 1. Normally, less than full-year HDHP coverage would require the individual to pro-rate their HSA contribution for the year based on the number of months they had HDHP coverage. However, to avoid having to pay back any of the “extra” contribution amount, the individual must remain covered by an HDHP through December 31 of the following calendar year. If the individual does not remain covered by HDHP during this “testing period,” the extra amount must be included in the individual’s income and will be subject to additional taxation. If you are unsure or know that you’re not going to keep your HDHP coverage through December 31of the following year, you may be better off prorating your contributions for your first year of HSA eligibility.

Are HSA Contributions Tied to the HDHP Deductible?

HSA contributions are not limited by the amount of the HDHP deductible. This means that even if you are covered by an HDHP with the minimum deductible (i.e., $1,200 for individual coverage or $2,400 for family coverage), you may still contribute up to the full amount to your HSA. On the other hand, if you purchase an HDHP with a deductible higher than the annual HSA contribution limit, your 2012 HSA contribution will still be limited to $3,100 for individuals with self-only coverage or $6,250 for individuals with family coverage.

Contribution Deadlines

HSA contributions for a given year must be made on or before the due date (without extensions) for filing tax returns for that year. That means for most years contributions must be made on or before April 15 of the following calendar year.

What Else Should I Know About HSAs?

In addition to the tax favored treatment of qualified medical expenses, HSA account funds can be drawn down without penalty or taxes to pay for the following types of premium:

1)      Qualified Long Term Care Insurance;

2)      Health Insurance while receiving federal or state unemployment compensation;

3)      Continuation of Coverage plans, such as COBRA, required by federal law; and

4)      Medicare premiums.

Qualified medical expenses are defined to include unreimbursed medical expenses of the accountholder, his or her spouse, or dependents. Therefore, the HSA account can be used to pay for medical expenses incurred by family members even if they aren’t covered by the HDHP.

Until next time,

Andrew Herman

Health Savings Account (HSA) 2011 Contribution Limits

The IRS has announed the maximum annual HSA contributions for 2011 - and they are the same as in 2010:

• Individuals covered under an eligible high-deductible health plan (HDHP) may contribute up to $3,050 in 2011.
• Those with family HDHP coverage may contribute up to $6,150.
• People age 55 and older who are not entitled to Medicare can make additional catch-up contributions of $1,000 to their HSAs in 2011.

Health Savings Accounts (HSAs) are savings plans with tax advantages provided that account funds are used to pay qualified medical expenses such as prescriptions, doctor's office visits and hospital stays.  Generally, medical insurance premiums cannot be paid from HSA account funds; but there are some exceptions including health coverage while receiving unemployment benefits, COBRA continuation coverage, Qualified Long Term Care Insurance premium, and Medicare premiums and out-of-pocket expenses.

Unfortunately, starting in 2011 over-the-counter medicines such as aspirin are no longer considered qualified medical expenses.

You must first be insured under an HDHP in order to open an HSA.  Click here for more information on qualified high deductible health plans.