Whenever the final book on the Patient Protection and Affordable Care Act is written, the year 2016 may not garner the most lengthy of chapters in terms of implementation. Most of Obamacare’s policy and rules changes have been enacted (or in some rare cases, tweaked.) Heck, it might not garner much more than a footnote. But benefits professionals across the nation know better—2016 is a shaping up to be a pivotal year in the PPACA story.
Start with the numbers. Now that the nation is a few years into PPACA, there’s no consensus on whether the law is making health insurance more affordable or insuring more people. Reports on health insurance rates have been widely reported, but those figures are based on parts of the law that are already in effect and carriers that have submitted rates to state insurance commissioners for 2016.
In summary: Some premiums are up. Some are way up. Some are down. And some are staying the same. Every so often, the Department of Health and Human Services announces another huge number of people who’ve signed up for health insurance under Obamacare. Just as fast, opponents begin picking apart the statistic.
But while the numbers are all over the place, the law and the politics in 2016 are known quantities. A few small parts of the law will be implemented, barring delays, including the last phase of the employer mandate and an increase in the penalty for not signing up for coverage. While the reporting requirements will occupy lots of time for brokers and agents, many are taking 2016 to talk to clients about parts of the law that are years down the road, mainly the Cadillac tax. And as a backdrop, it’s a presidential election year, which means candidates are either trashing or lauding PPACA—it depends on the crowd. And the poll numbers.
“We don’t really sell health insurance anymore,” says Denise VanPutten, an account executive at Lighthouse Group of Grand Rapids, Michigan. “We’re consultants, strategists and partners.”
Ever since Obamacare’s passage, Republicans in Congress have taken every opportunity to try to replace or repeal the law. Recently departed House Speaker John Boehner announced the effort to repeal PPACA almost as soon as the ink from President Obama’s pen dried after signing the bill into law. Since then, several attempts at replacement were made, but they were fought off by PPACA’s supporters.
While Obamacare faced scrutiny in 2012, the 2016 election cycle is a different political landscape. For starters, Obamacare faces a stiff challenge from the right—and the left—on the campaign trail. With a herd of Republicans running for the party’s nomination, PPACA has been dissected by everyone who’s in the race. So far, though, only Jeb Bush has offered a credible plan to replace Obamacare. But as Tea Party, conservative and moderate contenders jockey for position in the Republican fold, more alternatives could come.
The controversial Cadillac tax is also under scrutiny on both sides of the aisle, with Democratic presidential frontrunners Hillary Clinton and Bernie Sanders coming out against the PPACA provision.
But, one of the most counter-intuitive political challenges to PPACA comes from the left, where Vermont Sen. Bernie Sanders says Obamacare doesn’t go far enough. The insurgent candidate would like to take health care reform several steps further and replace PPACA with a nationwide single-payer system.
However, parts of PPACA aren’t up for political discussion in 2016. President Obama signed the PACE Act into law in early October, which effectively changes how PPACA defines a small employer. As PPACA was originally written, the definition of a small employer would have expanded to employers with 100 employees or fewer. The PACE Act keeps the definition at 50 or less. It was one of the few times Obama has agreed to tweak his signature domestic policy.
“To have them added into the small group market was going to cause a big increase in premiums,” says Marcy Buckner, vice president of government relations for the National Association of Healthcare Underwriters. “We were part of a coalition with groups like ourselves and carriers. Oftentimes, the carriers and agents aren’t on the same page, but we worked well on this. It was a great success.”
Under the PACE Act, though, individual states are still able to determine what constitutes a small- or large-group employer. Some states, such as New York, are holding the line at 100 employees. Compounding the confusion over the the law’s requirements is the fact that some employers have already shifted their offerings to comply with PPACA’s original language.
“I commend the government for passing the PACE Act—it really did eliminate a lot of issues the mid-market groups would have faced,” VanPutten says. “But some groups renewed early, so they would have complied with the law. And just recently, the insurance companies created all new systems, so some of the groups that renewed early are having to shuffle back and forth. It’s a lot more work for employers, the broker-agents and the carrier-partners.”
Also in 2016, the minimum penalty for not buying health insurance will increase to whichever is higher: $695 or 2.5 percent of an employee’s income over $10,000.
Benefits professionals are also bracing for the onslaught of compliance regulations that will be required in 2016.
“I think very few employers understand what’s coming by the end of February,” says David Contorno, owner of Lake Norman Benefits in Mooresville, North Carolina. “It’s going to hit employers’ radar, and they’re going to turn to their brokers and ask how to get prepared for this, and a lot of brokers are going to be unprepared for the conversation.”
A self-described technology geek, Contorno has been collecting all the data electronically for a few years now. But many benefits professionals are going to be overwhelmed by the amount of information the government is requiring through the IRS.
“I read something the other day on the IRS website about how long they are estimating it would take an employer to file the forms and I laughed out loud,” Van Putten says. “If our groups choose to go to an outside vendor, the cost for an 80 person group could be $6,000–8,000 to implement and administer the forms, not to mention the amount of additional work it takes the employers to file the form.”
Another symptom of the reporting in 2016 is a phenomenon known as the “family glitch.” Back when it became mandatory to buy health insurance, PPACA required husbands and wives who had access to a plan that meets the minimum requirements and was deemed affordable to purchase the health insurance through the spouse.
Many people, however, purchased a plan through an exchange and took a subsidy. In 2016, the nation could be seeing the first people who will have to pay back the subsidy—whether it was an inadvertent or nefarious act on their part.
“The spouses of employees went to the exchanges and were able to get a subsidy because the government didn’t have the information,” Contorno says. “Now, some people have been getting subsidies for two years, but the government is getting the information to be able to say to the spouse, ‘You were not supposed to be able to get a subsidy.’”
Many brokers and agents are talking to their clients about the Cadillac tax, which levies an annual 40 percent excise tax on plans with premiums of $10,200 or more for individuals or $27,500 for families.
Included in the tabulation are any dollars contributed to flexible spending accounts, health reimbursement accounts and health savings accounts. (Dental, vision, accident, disability, or long-term care insurance coverage won’t count, though.)
So far, the tax has the power to affect employers that offer more robust health insurance options for their employees. That includes unions who have bargained for better health plans.
“The latest numbers say it will impact 40 percent to 50 percent of the overall benefits plans out there—that’s a big number,” says Doug Field, CEO and founder of the Institute for Healthcare Consumerism in Alpharetta, Georgia.
The tax will start being collected in 2018, but Field and others are lining up support to jettison the tax.
“Most of us in this business believe there’s lots of bipartisan support for the repeal of the Cadillac tax,” Field says. “But we also think it’s realistic that we may be able to get contributions to HSAs removed from counting toward that tax threshold. If we do that, the majority of companies will be OK. None of us in the business like the Cadillac tax—the most successful HSAs are fueled by employers making contributions. If you remove that, you’re taking the air out of the tires.”
Field also pointed out that the Cadillac tax’s threshold will only adjust for inflation, so plans that come in under the threshold may quickly surpass the threshold as costs grow faster than the inflation rate.
And as Field and other industry insiders point out, the tax will essentially be passed on to the consumer in the form of higher premiums.
Also new in 2016, brokers and agents will be able to contact a call center staffed with individuals who can help sort through specific PPACA issues. Also, Buckner says, brokers and agents will be able to participate in bi-weekly stakeholder calls that will run throughout 2016. And, healthcare.gov has made it easier to find local brokers and agents who can help consumers with questions.
No one has a crystal ball, but industry veterans can see some likely outcomes from 2016′s Obamacare implementation—and the rest of the law, too.
“I think we’re going to see the continuation of a shift to more and more groups that are moderately healthy go into a self-funded scenario,” Contorno says. “And what I predict is going to happen in 2016 is the fully insured pools with carriers are going to get less healthy as more healthy pools go to self-insured. I foresee upward pressure on fully insured rates.”