Tag Archives: deductibles

Penalties Under the Affordable Care Will Hit Lower Income Workers Hard

tax-penalties-carousel-rappler-20140416New Orleans    The good news in the narrative of Obamacare is that everyone gets covered, there are basic guarantees, and in 60% of the states more people, particularly lower income children, are covered by expanded Medicaid. Those are just the highlights, and they are lifesaving. The controversy continues for conservatives and businesses around the mandates, the fact that all businesses of a certain size are required to provide coverage. In truth, this is largely a fiction. The quieter, more painful, side of the mandates is the fact that everyone is required with some exceptions to embrace the coverage offered and available, and if not are also required to pay a penalty. The penalties were relatively trivial, but are becoming more expensive.

The fictional burden for companies has proven to be Swiss cheese, a drum I’ve admittedly been beating for several years now. Payments for monthly premiums could not be higher than a certain percentage of a worker’s gross payroll, but unlike the Massachusetts model, there were no limits on deductibles and little to none on co-pays. Nursing home chains, janitorial contractors, mental health and home care providers and untold other employers demanded and eagerly received from the insurers bare bones, narrow network plans with deductibles ranging from $4000 to $6500 along with significant increases in co-pays and of course required payment of monthly premiums.

The real cost to employers? Almost nothing in practice, because lower waged workers, making less than $15 or $20 per hour are priced out of such policies both by dollars and common sense. If a nursing home worker is making $10 per hour – and many aren’t! — and works an industry standard 35-hour week while being paid for annual labor about $18,000 in gross wages, and might be facing a $5000 deductible and to be conservative another $1000, she would be losing one-third of her income before she was able to access any benefits from the plan other than the statutory minimums. Why would she enroll in the employer’s plan if she were looking after her own economic self-interest? No reason, and in fact as Local 100  looks at the participation numbers from workers we represent, almost no one is signing except those who anticipate critical or catastrophic care situations like imminent surgery.

The math for the worker in this situation when required to pay penalties, as they are in Arkansas for example, at the 2.5% assessment would be $450. Cheaper to pay the piper than the policy. In Louisiana, Texas, and the other 18 states that did not expand Medicaid, if these workers would have been eligible, and with this income and likely family size, most of them would have been, they are exempted from paying the fine. There are other exemptions, but most are catastrophic in nature as well: homelessness, medical debt, unemployment, and worse.

Everyone is talking about inequality. Politicians, economists, and columnists on all sides of the spectrum make the point about jobs increasing but wages remaining stagnant, so the paradoxical impact of this healthcare conundrum is that the pain will worsen for lower income workers with largely frozen wages. In a ton of states not only will these workers not get raises, but they will pay in this example a fee out of their tax returns collected by the IRS.

For the nursing home worker we have used as an example, a $450 penalty under the Affordable Care Act is equal to twenty-five cents per hour in lost wages. In states throughout the South with strapped budgets and reduced reimbursements for such workers, they would need to win a 2.5% wage increase just to stay even, and without a union that’s not going to happen, and in all likelihood even with a union that’s going to be rare. Such a worker, and there will be millions of them, will wake up in 2016, 2017, and find themselves in a situation where they are in a double bind with a smaller paycheck and still no healthcare coverage thanks to the miserly offering of their employer and the loopholes that allow farcical coverage to mask as real insurance.

This is a huge problem, and it is not going to end well.



More Dilution of Affordable Care Act for Lower Income Workers

Health Insurance Policy and CashLondon    We may think that Congress does nothing but try to repeal the Affordable Care Act, and although they do a whole lot of that, like it or not both parties do come together every blue moon to amend the Affordable Care Act, but when they do so, it’s not necessarily a win for the lower income workers and families that need the coverage the most.   Once again I’m harping on the theme of allowable deductibles under Obamacare.

My old friend and colleague, Mike Gallagher of SEIU Local 615 fame in Boston, was scratching his head in disbelief recently when reading my reports of bargaining with large health care employers on supposedly qualified plans with virtually no limits on allowable deductibles.  He brought to my attention the predecessor work in Massachusetts and the critical feature there that had allowed them to bargain decent health plans.  A Massachusetts fact sheet made it clear setting:

A cap on annual deductibles of $2,000 for an individual and $4,000 for a family

Why didn’t we have that nationally with Obamacare?

Well, we almost do, and then we didn’t it seems, and it all happened within the last few months when Congress got together across the aisles and on April 1, 2014 passed the Protecting Access to Medicare Act, which sadly eliminates the Affordable Care Act restrictions on separate deductible limits.  The Bureau of National Affairs (BNA) reported the following:

The Affordable Care Act requires annual cost-sharing limits on coverage as part of the essential health benefits package required for plan years beginning in or after 2014. As enacted, it provided for annual limits on total cost-sharing and for annual limits on deductibles for insured employer-sponsored plans offered in the small group market. Section 213 of the Protecting Access to Medicare Act of 2014 (Pub. L. No. 113-93) eliminated the $2,000/$4,000 limitation on deductibles for affected group health plans retroactive to the March 23, 2010, enactment of the Affordable Care Act.

Unfortunately what that bit of doublespeak means is that for large employer and self-funded plans there are no deductible limits, which is why Local 100 United Labor Unions and many others are confronting the problems of substandard group plans being proposed by larger employers which are totally inferior and worthless compared to what might be available to the same lower wage workers under the Affordable Care marketplaces.  For small employer and individual plans, the limits on deductibles under the Act are the same as my friend showed me in Massachusetts at $2000 for individuals and $4000 for family.

An employer newsletter gloating about the Congressional change signed by the President was also crystal clear:

Though getting little attention in the aftermath of the new law, there is a second consequence of the new law. The separate limit on deductibles posed something of a challenge in designing Bronze-level and Silver-level plans, i.e., plans with, respectively, 60 and 70 percent actuarial value. The Department of Health and Human Services recognized as much in final regulations implementing the Affordable Care Act’s rules governing essential health benefits. According to 45 C.F.R. § 156.130(b)(3): “A health plan’s annual deductible may exceed the annual deductible limit if that plan may not reasonably reach the actuarial value of a given level of coverage. . . without exceeding the annual deductible limit.”  In other words, the separate cap on deductibles could be exceeded where necessary in order to get to a particular level of actuarial value.

Since the Bronze and Silver plans are also the ones most often chosen by lower income workers because of the lower monthly premium costs, what the employer advisory was really saying, is “no sweat, buddies, HHS had already allowed you to break the deductible ceiling limit if you needed to, but now Congress has repealed the limits anyway, so go low or go home.”

This was not the fix that millions of lower waged workers desperately needed in order to finally make fake employer coverage and compliance under the Affordable Care Act real.  In fact quite the opposite.  I guess those workers for smaller outfits should feel lucky, because with this alternation, the bigger the outfit, the worse the pain, and the more worthless the health care policy for many under Obamacare.