The Breeders’ Cup Forum: Understanding the Affordable Care Act
With the Affordable Care Act now U.S. law, there is a great deal of confusion among employers and individuals working in the horse business about what they must do to adhere to the health care program that is commonly referred to as Obamacare. We went to the experts for some answers to frequently asked questions: Jeff Truitt, the senior vice president of Benefit Insurance Marketing, and Deanna J. Johnson, the director of compliance for the Lexington-based company that works with the Kentucky Thoroughbred Association in providing health care benefits to thousands of individuals employed in the horse business.
What are some of the key dates and upcoming requirements of the Affordable Care Act?
Since the law was originally passed March 23, 2010, there's been three years of baby-stepping certain compliance pieces to employers' health plans: covering dependents to the age of 26; certain preventive services and certain women's health care issues have been expanded. It's been relatively benign to most employers and individuals.
The major impact date is Jan. 1, 2014. Oct. 1 got much attention because it was the promotion date of the federal exchanges for the 36 states in the federal program. Kentucky is one of a handful of states to have its own health care exchange. There is a lot of emphasis and confusion and concern within the marketplace around this date because of misinformation that is scaring people in regards to whether or not their doctor is going to be in the coverage network, whether their rates are going to change. Each employer currently providing health benefits has its own renewal date. That is an insurance contract, so things cannot change in the middle of that contract just because of the Oct. 1 date.
Will employers with 50 or more employees be required to provide health coverage beginning Jan. 1, 2014?
No. That is one of the provisions that's been delayed a year.
Are individuals not currently covered by an employer required to get health insurance by Jan. 1, even if they are not a U.S. citizen?
Yes, they are. If you are an American citizen, or if you are working here and filing federal taxes, and you're not incarcerated or here illegally, you are required to have coverage Jan. 1, 2014, or on the first date that your current health plan renews in 2014.
If individuals in the U.S. on a work visa have health insurance coverage in their native country, does that satisfy the individual mandate?
Some of the Visa programs, especially those coming from Europe, require health insurance to be bought separately. I don't believe out of country insurance will satisfy the mandate.
What is the penalty to individuals if they don't buy health insurance?
The penalty in the first year is $95 or one percent of their gross income, whichever ￼is higher. The penalty will not be enforced until an individual files his or her tax return for the 2014 calendar year, which obviously would not be until early 2015.
Will it be more difficult for farm workers to get health insurance because of the potential for injury working around horses?
No. Insurance companies can no longer ask medical questions on the individual market or small group market. There are only four criteria that can determine a modified community rate: age, tobacco use, geographic location, and who you are covering. Those are the only criteria an insurance company can use to determine rates.
Will individuals qualify for subsidies to help pay for the insurance?
With the Affordable Care Act, the state of Kentucky has increased the federal poverty level from 100 percent to 138 percent, so more individuals may be eligible for Medicaid. It's also expanded the definition of eligibility to include anyone over the age of 65 making under 138 percent of the federal poverty level. For a single person, that expanded number is roughly $16,500 in gross earnings.
As of now, on Jan. 1, 2015, employers with 50 or more full-time employees will be required to offer health care. How is that going to work in an industry where there are so many seasonal workers?
We're waiting for guidelines on that. The initial determination of how to count and track employees was extremely difficult to communicate and to understand. We think that's one of the reasons the employer mandate was delayed until 2015, because the counting of employees was so difficult, with the criteria of constantly trying to track the number of employees and hours worked. The majority of farms are tracking hours, just like any employer with an hourly workforce, but the seasonality makes it that much more difficult.
The law counts employees that work at least 30 hours a week as full time. That has given employers some concerns. Do they hire more people and have them work fewer hours? For an unskilled labor force you might be able to do that, but for a skilled labor force that's going to be a challenge.
Will employers have to pay a certain percentage of the employee's health care?
The employer has to pay at least 50%. So if the monthly premium is $300, the employer has to pay at least $150. The $150 paid by the employee cannot exceed 9.5 percent of his or her gross income for that month to be considered “affordable.”
An employer's plan has three criteria. It has to cover essential benefits, which the majority of plans in Kentucky do. It has to meet an actuarial value of 60%, which means the plan has to pick up 60% of the cost of care, which the majority of plans do. The third piece is the affordability. If the employee's payroll deduction is less than 9.5 percent of the gross wages – for the employee only cost – the plan is deemed affordable. They are not eligible for any type of subsidy on the marketplace.
There are some unintended consequences. If a plan is deemed affordable (as above), the dependents of that employee are not eligible for a subsidy on their health care. If a family premium is $1,000, the law is only looking at the single coverage, in this case $300, half of which must be paid by the employer. Employers are not required to pay dependent coverage, so that employee would be responsible for the $700 dependent care and they would not qualify for a subsidy. That's why some companies are dropping dependent coverage, so those dependents can qualify for a health care subsidy on the exchange.
What are some concerns you're hearing about the new law?
There are a lot of questions about whether someone's doctor will be in the network, whether rates are going up dramatically, or plans or coverage will be cancelled. There's a lot of fear of what's out there in the new marketplace, the official name for the exchange. One of the things we do know is that the federal government really pushed the insurance carriers to come up with lower, affordable rates. They've been able to accomplish that, but they've done it by reducing the level of benefits, with higher deductible, higher maximum out-of-pocket costs, and also reducing their networks. Some carriers are going to what is called a “skinny” network, where not all the hospitals and doctors are included. Therefore, when you take away co-pays from a plan and put more things into deductible and co-insurance, and also reduce the network, you're going to be able to be achieve a lower rate.
People may look at the exchange and say “Oh, that's really great,” but when they start looking at the benefits they need to realize it's not a low deductible and low co-pay, it's high deductible and no co-pays.
A lot depends on how much you need care. If you're sick or been denied benefits before, the exchange will be a good deal. The exchange is trying to hit something that's affordable, but everyone's definition of affordable is different. When you go and use the plan, that's when I think people will really be surprised – not with private insurance but with the marketplace insurance. They need to be careful when they are looking at the marketplace. They need to know exactly what the plan looks like and what the network involves.