On the Affordable Care Act (ACA) front, recent news has shed light on several changes employers and their employees should expect (and will ultimately experience) moving forward. While legislative efforts to modify the ACA haven’t produced many changes, the executive branch’s efforts to impact this mix of federal programs has driven significant changes to health insurance. Here’s a recap of ACA changes being reported on:
- The main item is the withholding of payments to insurers of certain ACA items, specifically Cost Sharing Reduction (CSR) reimbursements for those making under 250 percent of the federal poverty level (FPL). The ruling now in place relies on a partially successful court case from last year to withhold around $8 billion in payments from insurance companies and redirect the budgeted cash to other initiatives.
- CSR payments to insurance companies are due to the requirement in the ACA that mandates cost sharing reductions for individuals or families who make under 250 percent of the federal poverty level. The payments are funded by ACA revenue-raising provisions, collected by the federal government and paid to insurance companies who participate in exchanges and incur financial costs to provide improved coverage to individuals and families. The restoration of CSR payments is at the heart of current bipartisan negotiations to stabilize the markets.
- Premium subsidies individual taxpayers receive are still in place.
- Potential changes include an expansion of an employer’s ability to have a stand-alone Health Reimbursement Account (HRA) – meaning they offer pre-tax cash without an offer of coverage.
- There is future potential for businesses to band together to offer short-term coverage at a low price point, primarily because the coverage won’t likely be comprehensive.
What does this mean for Ohio individuals and businesses?
- Insurance companies anticipated withholding of CSR payments months ago, which means they’ve already adjusted their premiums in anticipation.
- Medical Mutual of Ohio requested a 29 percent average increase in premiums. CareSource, in May, requested an 18 percent average increase in premiums, and in August it grew to 36.5 percent with a full 12 percent directly from the withholding of CSR payments.
o For some areas in the state, this is a smaller increase or even a small reduction in premiums; and some small private group plans have much smaller increases. For example, an Ohio Farm Bureau plan increase was 4 percent based on Ohio Department of Insurance filings.
o For other state locations in Ohio the increase is as high as 67 percent.
- Final, approved prices are available, as of the last week of October 2017.
Current ACA Takeaways
- 1095 filings and penalties are still in place. (Rea offers custom solutions for these filings. Give me a call to learn more.)
- Individual exchange rates are significantly increasing for 2018. It’s unlikely the exchanges will entice more insurance companies to participate in 2019. Any changes made to the ACA by the administration at this time would be in effect 2019.
- CSR reductions will remain in place for 2018 because associated costs and potential nonpayment of CSR reimbursements from the federal government were already priced into premiums this year. It is unclear what will take place in 2019.
- Individual premium subsidies will pay for increases in premiums, if taxpayers are eligible for the subsidies. This is because subsidies set an amount the individual or family can pay, and then it takes care of the rest. For those not eligible for premium subsidies, they will experience an increase in out-of-pocket costs.
- ACA open enrollment is November through mid-December, so now is a good time to discuss your 2018 expected income and whether you should take subsidies with your financial advisor. For example, if you’re not eligible for subsidies in the year ahead, your 2018 tax bill may significantly increase. This is especially important for those in Ohio’s south eastern region, as we’ve noticed that most issues concerning disqualification are arising in this area.
- For businesses, the financial burden on your employees (where the employer does not provide coverage) will be significant. This could increase hiring and retention pressure in favor of employers who offer a better health care package.
- Business owners should keep their eye on expanded rules to offer pre-tax cash to employees for health care. There is a limited rule in place now for small employers. I’m happy to discuss this option with you in more detail.
Email Rea & Associates or reach out to me directly to learn more about these changes and what options are out there for you and your business.
By Joe Popp, JD, LLM (Dublin office)