An 'independent' idea

Work to begin Monday on creation of new state-based insurance exchange

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The debate is over. The law has passed, and starting Monday the work will begin to create a new state-based insurance exchange that will transform the way healthcare is paid for in the state of Idaho.

"The exchange will be as independent as you can get without getting the government completely out of it," said Idaho State Rep. Frank Henderson, R-Post Falls. "This is as close to private system as we could possibly get under the new federal laws."

Henderson joined two other state legislators at a Post Falls Chamber of Commerce luncheon last week to explain the politics behind establishing Idaho's new exchange.

The exchange is essentially a marketplace for the consumer, and eventually employers, to find and compare health insurance plans that are designed to comply with the new Patient Protection and Affordable Care Act (PPACA), which is commonly referred to as Obamacare.

Once the legislature established the exchange, Gov. Butch Otter appointed a 19-member healthcare exchange board to set the rules and regulations that will be necessary to implement the exchange by Jan. 1, 2014. Open enrollment begins Oct. 1 this year.

"It will take a lot of work to get there, but I think we'll get there," said Tom Donovan, deputy director of the Idaho Department of Insurance. "The real nuts and bolts are just beginning to be developed."

The exchange board meets for the first time on Monday, and after appointing an executive director, the board will hit the ground running. The board is charged with designing an exchange that will comply with the new PPACA regulations, while ensuring the needs of Idahoans are met in the process.

Some insurance reforms were already implemented in 2010, such as extending coverage for pre-existing diseases, raising the age of dependent coverage to age 26, and eliminating lifetime caps on what the insurance companies pay for healthcare.

"But the big one is coming in January 2014," Donovan said. "Rates for health insurance will no longer be based on an individual's health condition, pre-existing issues or gender."

The new rating system, he said, will take into account things like tobacco use, geographic area they live in and their age to set rate structures.

For instance, Donovan explained that the new healthcare plans will consider three age groups, people in the 0 to 20 age group will initially increase, but will remain stable until people reach the 21 to 64 age group. That age group may face a small increase every year. At age 65 and up people may see another adjustment, but most of those folks are expected to transition to Medicare.

"The impact we think we'll see is that people in the older age group will see a decrease from what they are paying now," he said, adding that people in the younger age groups may see an increase from what they are paying today.

Idaho State Senator John Goedde, who owns Panhandle Insurance Agency in Coeur d'Alene, agrees with Donovan.

"The cost will definitely go up for the young, and the old will go down respectively," Goedde said. "When you add in all the folks who are currently uninsured with pre-existing conditions, the younger folks could wind up paying quite a bit more."

Goedde said health insurance costs for the younger consumer group are expected to rise up 180 percent due to the new rating system. But there is also an advanced payment tax credit that will offset those increases for people who are within 400 percent of the federal poverty level.

For a family of four, that would be a household income of roughly $90,000 per year or less. That would make over 85 percent of Idahoans eligible for a federal subsidy - if they don't already have an employer-provided healthcare plan.

Under the new rules, anyone with access to an employer-provided health insurance will not be eligible for the tax credit subsidy.

"That's called the family glitch," said Mark Fisher, owner and president of Advanced Benefits Insurance.

"Often times an employer will offer to pay the health insurance premiums for an employee, and that employee has the option to pay additional premiums to add a spouse and other dependents," Fisher said. "If that option is available, that spouse and their dependents will not qualify for the subsidy, whether they choose to take that option or not."

But if they don't have insurance by 2014, they will face a fine, Fisher said.

"Those individuals had better be thinking about what they are going to do," Fisher added.

Donovan said the fines for individuals will start relatively low and increase year after year as the PPACA is implemented. In 2014 the fine for not securing insurance will be $95 a year per individual. By 2015 that will increase to $325, and it will rise to $695 by 2016.

"For the first year, we suspect a lot of the currently uninsured people will opt to pay the fine," he said. "But that will change as the penalties increase."

Small business impacts

Other big changes are expected of employers in 2014, Fisher said.

A business that employs under 25 full-time employment slots - known as full-time equivalencies, or FTEs - will qualify for some level of a federal subsidy, but that employer will not be required to provide insurance until they reach 50 FTEs.

The new law also redefines a full-time employee as one who works 30 hours per week.

"That is something most employers aren't aware of," said Fisher, who is now a PPACA Certified Professional.

That change could be significant for employers who are approaching the 50 FTE threshold, which will require them to provide health insurance in 2014, or pay a fine.

He gave an example of an employer who may have 40 full-time employees and 15 part time-employees who work 20 hours or more per week, may actually have 50 FTEs.

"In that case they would be required to provide coverage for their 40 full-time employees," he said, adding they would not be required to provide it for their part-time staff.

Another trouble spot for employers will be variable-hour employees, such as substitute teachers who work sporadically.

"There is a formula that you'll have to use to track their hours," Fisher said. "It's complicated, but it will be important to watch those hours."

Fredrick Roh, a partner in Paycheck Connections out of Scottsdale, Ariz., will be speaking about the impacts on business at two free seminars and one luncheon in Post Falls, Coeur d'Alene and Hayden this week. (See related story)

"The burden that everyone will face is figuring out where they qualify under this new law," Roh said. "I think the most important thing a business owner can do right now is attend as many meetings and seminars on the subject that you can and call your broker to educate yourself."

He said the new rules under PPACA can be complicated for some employers and some of the formulas that are necessary to project impacts on specific businesses are still being developed.

"This is a moving target at best, all of the regulations are fluid right now," he said. "And it's all going to play out in 2014."

However, waiting for the regulations to firm up could prove costly for some businesses, especially those on the cusp of 50 FTEs.

"Those employers need to be thinking now about how to manage the time of their workforce," Roh said. "They may have to make adjustments now because there will be a look-back period to determine how they are classified."

He said the look-back period has not been set yet, but could go back 90 to 180 days, or maybe even a year. No matter what the case, he said businesses that don't understand the nuances of the full-time equivalency rules and how they impact them may be in for a shock.

The paperwork is also going to be cumbersome, Roh predicts. He said individuals and businesses alike are going to have to determine for themselves where they fit within the new system, and if they misrepresent something, there will be penalties.

"The IRS just hired 116,000 new agents to deal with this," he said. "It's not a time to be playing games."

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