While health care is still a hot issue in the election, in the coming months consumers will be facing a health insurance decision of their own: open enrollment. That’s the period, usually in the last quarter of the year, when workers with insurance can change coverage options without having to prove their health status.
While the majority of provisions in the Obama administration’s Affordable Care Act (ACA) don’t take hold until 2014, a handful have already been rolled out and more will be implemented in 2013. For employees, their companies, and insurers, the law means new choices and responsibilities in the upcoming open enrollment period.
WOMEN’S HEALTH PROVISIONS
One controversial ACA provision this year for most plans mandates that companies and insurers offer free preventive care coverage for women in eight new categories, like well-woman visits, screening for gestational diabetes and domestic violence, breastfeeding support, counseling, and all FDA-approved prescription contraceptive methods (the pill, Depo-Provera, the ring, contraceptive implants, diaphragms, cervical caps, and permanent contraceptive methods like tubal ligation).
The debate over the requirement to cover contraception continues—church organizations are exempt, but church-affiliated nonprofits are not. In January, the Obama administration gave those organizations an additional year to comply. Bruce Davis of the human resources consulting firm Findley Davies, which works with several Catholic clients, says they’re waiting out the results of the fall election and lawsuits that are making their way through the courts: “Right now, they’re not modifying their plans, but that clock is ticking.”
For covered female workers, the benefit is good news. Anthony Lopez of online insurance broker eHealthInsurance says the law’s guarantee of these and other no-cost preventive services means that people who are healthy should consider raising their deductibles and saving on their premiums—they’ll still be able to get those services for free at the higher deductible.
FLEXIBLE SPENDING ACCOUNTS
A change to flexible spending accounts, which allows employees to set aside pre-tax funds to use for health care expenses, also kicks in this year. The amount of money employees can put into their accounts will be limited to $2,500 starting next January 1. Currently there is no limit, though most companies set their own. Davis says the change means that employees expecting a big medical expense next year who want to use pre-tax money to pay for it should consider switching to a health savings account, which has a higher pre-tax cap of $3,250.
Last year, the ACA expanded Medicare’s annual enrollment period to better accommodate participants—it now runs from October 15 to December 7 (previously it was November 15 to December 31).
The ACA will slowly eliminate the “donut hole” for Medicare prescription drugs (the point at which Medicare participants cover the full cost of their drugs out of pocket)—by 2020, the law is designed to close it completely, says Mary Dale Walters of Allsup, a Medicare plan selection service. The donut hole will shift upward slightly in 2013 compared with 2012—from $2,930 to $2,970 on the lower end and $4,700 to $4,750 on the upper end. And next year, participants buying brand-name drugs who hit the donut hole will get a more than 50 percent discount; those wanting generic drugs will see a 21 percent discount.
Some experts also expect to see price increases for Medicare Part D next year. According to Avalere Health, a health care research company, 7 of the 10 plans will have double-digit percentage increases in premiums next year—plans that affect 80 percent of Part D beneficiaries. One plan, Humana WalMart Preferred Rx, credits the increased coverage of the donut hole gap under the ACA as one factor in the price hike, according to Reuters. At the same time, new plans have recently come onto the market for 2013, like UnitedHealth’s Medicare Rx Saver Plus, that offer low introductory rates.
Another aspect of Medicare changes that experts are worried about is the reimbursement rate cuts to hospitals, nursing homes, and doctors. In last week's debate, Romney said Obama “cut” $716 billion from the program. While this isn’t entirely true—the cuts aren’t to the current program, and the $716 billion is a slowing in spending between 2013 and 2022—the coming reductions are causing some highly paid specialists, and primary care doctors whose reimbursement rates are low, to withdraw from the program or stop accepting new patients. Others, however, are exiting individual practices for full-time employment with larger organizations that can survive as Accountable Care Organizations under the ACA (where Medicare patients will be able to find care).
Seniors with a Medicare Advantage plan (an alternative to fee-for-service care and provided by a private company that contracts with Medicare), have the option of switching at any time of year (not just during open enrollment) into one of the dozen or so Medicare Advantage plans that received a 5-star rating from the government. Many plans include drug coverage, and experts anticipate only modest increases in premium costs next year. You can use the government’s Medicare Plan Finder to identify plans with 5-star ratings.
Open enrollment doesn’t affect Medicaid participants because those who qualify can enroll at any time if they meet their state’s income limits. In line with the Supreme Court’s June decision, starting in 2014 the ACA allows states to expand Medicaid coverage to people earning up to 133 percent of the federal poverty level. A number of states have said they don’t plan to grow their Medicaid programs as allowed by the law, while others still are making that decision. One troublesome issue for Medicaid expansion: already last year, almost a third of doctors were unwilling to accept new Medicaid patients, according to a recent Health Affairs study. That compares with only 17 percent who said they wouldn’t accept new Medicare patients and 18 percent who wouldn’t accept those enrolled in private plans.
FEES AND TAXES
Employers and insurers will face a small excise tax for the first time this year that is to be used to support research on the effectiveness of different treatment options at a new Congressionally- authorized Patient-Centered Outcomes Research Institute. To help fund the institute, employers and insurers offering plans whose policy expires between October 1 2012 and October 1 2013 will be charged $1 per person covered, rising to $2 per person in the following year.
Consumers also will face a tax change starting in 2013 as a result of ACA, notes Allsup’s Walters. Currently, unreimbursed medical expenses must total more than 7.5 percent of adjusted gross income to be deductible. Starting with the 2012 tax year, for taxpayers under age 65 the ACA raises that threshold to 10 percent; for those older than 65, the 10-percent threshold will start in 2017. Allsup’s Walters says that should affect the decision-making of people who have high medical expenses or are choosing a high-deductible health plan and assuming that some of their expenses will be deductible—it’s now harder to hit the threshold for deductibility.
This year for the first time, insurers or businesses must give employees a Summary of Benefits and Coverage that explains their insurance options in plain language and in a standardized format—it’s designed to let people more easily compare their choices. For employees, the SBC will be a powerful tool for comparing plans, says Craig Rosenberg of benefits consulting firm Aon Hewitt. They should use it to assess their plan in comparison with that of a working spouse—one may offer the family a better deal.
For employers, large insurers shouldn’t have a problem generating the documents, but for some small businesses, producing such a detailed comparison of plans is proving to be an administrative challenge, according to Davis. So employees in smaller firms should be on the lookout for any anomalies in their SBCs.
Starting this January, most employers must also show the full cost of employees’ health insurance coverage on their W-2 tax forms, a provision that’s designed to inform them about the value of their benefits. Robyn Piper of benefits advisory firm Piper Jordan says that requirement seems simple, but for employers, figuring out how to calculate the cost can be anything but: “If you have an employee who’s single from January to July, they get married, they change their election to employee plus spouse, your systems have to be really tight to [determine the cost]…the small- to mid-market size employers have been challenged by this.”
A LOOK AT 2014
For all of the focus this year on health reform, it’s in 2014 that the new law’s full impact will be felt. That’s when the ACA, among other provisions, starts requiring that most people buy health insurance or face a penalty and that businesses with more than 50 full-time employees provide insurance.
The choices that companies and employees make in response to those mandates will affect the health care market for years to come. Kevin Sliwa, a partner at insurance broker MJ Insurance, says that for nearly all of the companies he works with, the employer mandate will have a minimal impact since most already insure their staff. But Bruce Davis says many of his clients are still sorting out their options, one of which is to pay the penalty and drop insurance coverage—that would mean workers would need to buy their insurance on state health insurance exchanges that are being set up now. And Piper says that in part because of the ACA, employees will increasingly find that their firms are moving to high-deductible plans to limit the employer’s costs and encourage employees to take more responsibility for their health and health care decisions.
Taking charge of their health insurance costs is something that Rosenberg thinks all employees should be doing during open enrollment. He suggests people use the new SBC to look “holistically” at their health and retirement benefits: “If you have a pot of money to spend, are you allocating it in the right way?”