If I don’t have health insurance, why should I and how can I get it?

August 3rd, 2015 by mbcadmin

The Pros and Cons of enrolling in health care coverage + become an ObamaCare expert!

People often ask us to explain how the new law affects them so we decided to give you a lot of information in one place which will be hard to find anywhere else. We have no financial interest in the companies mentioned below and encourage you to shop around and talk to friends. Also, we are based in Maryland; hence, there are some references to local organizations.

If you are not eligible for employer-sponsored healthcare, you need to shop for individual insurance and sign up by March 31st, 2014 or you are subject to a fine on your 2015 income tax return. And yes, the fine is less than what you will pay for insurance premiums (the monthly); however, health insurance is just that – insurance protecting you from a catastrophic incident that will cause you great financial hardship or bankruptcy. It’s the same reason we buy car insurance, which is mandated in most states.

What about the IRS?

The IRS and Obama administration are going to be relaxed and quiet about it this year, mostly because of Senate mid-term elections; but if a tax service files your taxes, you may have to prove you have health insurance when you bring in your W-2s. However, it’s not a stretch for the IRS and health plans to collaborate in the future to determine your enrollment; after all, Accenture is taking over the Healthcare.Gov website. It only takes 1990s technology to search/match on social security number, and you can believe that Accenture has those skills and more. That said, I’ve never heard of the IRS auditing whether you actually were enrolled in a high deductible health plan that is compliant with and required to contribute to a tax-deductible Health Savings Account (HSA). A comprehensive IRS audit is a different story!

Why should you enroll in a health plan?

When you are weighing the tax versus insurance, you have to consider that the following:

  1. The main reason to get health coverage is because your health plan has volume pricing with providers in your area – you pay list price without a health plan. Think about it, if you have to go to a physical therapist for 10 weeks, being in the health plan’s network you might save enough money to cover premiums for a year. Or one trip to the emergency room for a broken arm would probably make it worth it.
  2. You receive a yearly physical at no charge.
  3. Some high deductible plans available can be combined with a health savings account (HSA) which means all out of pocket spending can be tax deductible (unfortunately, not premiums for individuals).
  4. Some health plans provide concierge service, tools, and possibly an incentive if you fill out a health risk assessment.
  5. What if you had a catastrophic illness or accident?

I know – it’s still expensive…

OK, you decide to sign up – Are you ready…You may not have to suffer!!!

If you made more than $46,000, as an individual, you do not need to suffer through a painful experience on your State’s or HHS’ website. Go directly to the website of your health plan of choice. You will get the best deal on their insurance from them because they are not paying broker fees. Alternatively, visit a commercial exchange such as www.ehealthinsurance.com or www.healthmarkets.com where you can compare different health plan offerings. They will usually have a better user experience and HealthMarkets can help you with subsidies if you qualify. There may be other commercial exchanges in your region, especially if you live in a highly populated state like California.

Ehealthinsurance.com has a calculator that tells you the tax you might pay or the approximate subsidy and you can view prices without providing any contact information. Also, find out about payment options. I like to pay for everything on my credit card. My insurance company just started taking credit cards for payments a couple of years ago! Health plans are still learning how to become good consumer companies.

Check into other types of plans in your State

Note that these commercial exchanges may not have all offerings in the State – they are the same as brokers so some health plans do not work with them. For example, in Maryland, there is a new “Co Op” health plan for residents in the Baltimore area. There are more than a dozen around the country. You can buy a plan directly from their website, www.evergreenmd.org. On paper, this plan offers a better deal because it’s a new organization and wants to attract membership. Although the premiums are about the same, they tend to have lower deductibles (the amount you pay until the insurance kicks in).

Sign Up for an HSA!

You will notice that the most affordable plans have very high deductibles. With that, you should consider a plan that is compatible with a Health Savings Account (HSA). That means if you filter money through the HSA (make contributions and payments from it), a contribution up to $3,300 for individuals and $6,550 for families is deductible on your taxes! Also, you can save the money for future healthcare costs if you don’t spend it all. The HSA doesn’t have to be connected with insurance; in fact, I would recommend www.HSABank.com for about $3/month. It’s very easy to move money into the account from another bank and you receive a Visa card for convenience when spending the money. There are rules to an HSA that you should be familiar with, http://tinyurl.com/HSAfaq, but it makes the whole experience a little more palatable knowing you will have tax deductions for contributions next year!

Subsidies

As an individual, if you made < $46,000 or have a 2-person household and made < $62,000 last year (check www.healthcare.gov for more scenarios), you may be eligible for a subsidy. State-based exchanges and Healthcare.gov enable you to apply for the subsidies. In the future, you will most likely be able to do this through commercial exchanges.

Become an Obamacare Expert

To explain why all this is happening, the following is a simple explanation of healthcare reform as it affects consumers directly. If you get this – you got Obamacare! This is the policy – the implementation will change over time. Think of it as a four-legged stool.

“Let’s cover everyone and make it affordable!”

  1. Guaranteed Issue
  2. Community Rating
  3. Subsidies for lower income individuals and Medicaid expansion
  4. The Individual Mandate

 

Healthcare Reform or PPACA guarantees that you cannot be denied coverage (a.k.a. guaranteed issue) or pay more for pre-existing conditions (a.k.a. community rating); everyone pays the same in the pool for the same plan for the plan year, similar to employer-sponsored insurance.

Good News: If you were denied or charged exorbitant rates before, you won’t be now!

Bad News: You are not given discounts for leading a healthy lifestyle or substantive incentives to adopt healthy behaviors and now your rates are higher.

 

Health plans use underwriting, based on claims data and your application, to understand the risk of you and the population that they manage. Before 2014, they used individual underwriting to price your policy (and deny coverage); now they underwrite the entire pool (e.g. all the individuals in Maryland that live in the metropolitan Baltimore area) as a group, with age-rated pricing. The business model in every insurance industry is pretty simple: take in premiums, pay out less than you take in and make a profit. Since insurance companies are profit-driven organizations, they have raised rates to make sure that they do not lose money, making assumptions about the pool, but they still must be competitive in the market place. Therefore, the rates for similar plans across the industry in your state or region are going to be about the same – which is probably high!

Until health plans start paying claims and collect a history on new individuals in their plans, rates are going to be high. They could drop, but only if more people sign up. Most likely they will rise because health care costs continue to rise. There’s inherent friction between health plans and provider systems. Health plans actually try to keep care delivery cost down through volume purchasing agreements that are reflected in their network pricing. Providers want to provide the best care possible and continue to apply new treatments for obvious reasons. It’s actually a good check and balance in the system. Depending on which side you talk to, the other is winning.

The insurance industry agreed to the above mandates in exchange for the government “getting everyone in the pool”. The government expanded requirements for Medicaid and provides income subsidies for those barely above the poverty line; however, the government has almost no control over pricing as this was left to the free market. This was the big unknown and now we know. That notwithstanding, the federal government mandated that individuals must buy health insurance. This mandate was challenged and upheld by the Supreme Court. It’s not going away easily, if ever. Theoretically, if it was repealed, people should be turned away at emergency rooms if they do not have insurance. But we can’t do that as a society. And that’s the basically the debate.

Good News: It’s like living in a State where car insurance is mandatory and everyone who drives must sign up, rates are cheaper! Right?

Bad News: We are in a catch-22 – in most markets, prices came out of the sausage factory too high for the market to bear and not enough people have signed up. Making it worse, many of the exchanges weren’t functioning.

 

We will get passed the technology implementation, but this still leaves us with a system where many healthy people can hardly afford an extra $1000-2000/year for minimum health insurance coverage and have little incentive to enroll. The good news is that it will get better; however, we are all going to continue to be paying more out of pocket as employers get out of the health insurance business and offer subsidies for coverage in private exchanges. That’s the next blog post.

Universal acceptance of a voluntary rigorous health score, based on behaviors, used to qualify for premium discounts, can attract more people into the pools and provide an incentive for the entire population to be healthy, leading to less chronic illness and utilization of the healthcare system. If you care about your credit score and your driving record, your health score should matter too.

If you are leading a healthy lifestyle and would like to use your health as a currency to buy down your insurance in the future, signup to estimate your health score at www.mybodycount.com to show your support.

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