By George Watson Shoulder to Shoulder Communications
For many Americans, Thursday's news that House Republicans successfully passed legislation to repeal the Affordable Care Act left them panicked for the future of their health care coverage.
Democratic leaders aggressively decried the move, saying it will lead to an increase in deaths among the elderly and children. Posters on Facebook and Twitter exploded with anger, anxiety and fear.
But talk to the owners of Bernardini & Donovan Insurance Services in Redlands, local brokers with more than 30 years of experience in health care matters, and they will tell that for now, everyone needs to take a breath and calm down.
"The one thing that is important is, and social media is in meltdown mode over this, but it is completely unjustified because nothing has changed," said Adiran Donovan, co-owner of the local insurance company. "Just because there was a vote on this doesn’t make a lick of difference."
Donovan recounted hearing numerous pundits who called the bill "dead on arrival" because of several controversial aspects to it. Plus, as Donovan explained, any changes need to be negotiated with the health care industry, which has yet to happen.
"The approval of the ACA, even though President Obama had said this was his No. 1 goal and even though he had a super majority, and even though it wasn’t vetted by the American public, it still took 14 months to become law and three years to actually take effect," Donovan said. "Things of this magnitude take time."
He and his business partner, Michael Bernardini, compared the U.S. health care system to an ocean liner because of how long it takes to change directions.
"For Jan. 1, 2018, there is going to be very little change -- maybe some differences for mandates, but that's it," Bernardini said. "But a lot of insurance companies have already settled their rates for 2018. Let's say they pass a new law by August -- insurance companies can't comply with that. It's not going to happen."
The lack of certainty regarding health care has been growing since President Donald Trump was elected. He signed anexecutive order addressing the ACA on his first day in office. House Republicans posed abill to replace the ACA butshelved it soon after at the president’s behest when it did not appear to have the necessary votes.
Late last month,, House Republicans began floating their new ACAreplacement plan. And over the weekend, Trump and other White House officials talked about plans for a new health care proposal. The role of subsidies
One of the greatest concerns at the moment is whether the federal government will continue paying subsidies to insurance companies, which has been a key part of the ACA, Bernardini said.
Trump has threatened to withhold funding for federal subsidies, which are critical for insurers to cover bills beyond what the insured has paid. The subsidies allow insurers to offer coverage to low-income Americans. As of this past weekend, White House officials stated that subsidies will be paid through the end of the year, although it’s unclear if that will continue into 2018.
“That would create a lot of problems,” Bernardini said of a no-subsidy scenario.
Subsidies are calculated based on expected income.
“You report to Covered California that you’re going to make X amount,” Donovan explained. “If it’s less, then you qualify for more subsidies. If it’s more, you are going to write a check.”
Donovan recalled the story of a client who made more than expected and had to write a $10,000 check to the federal government.
So how does the federal government pay for these subsidies?
“That’s where things get interesting,” Donovan said.
Every person paying for insurance, whether it’s individual or through a group plan, pays a little extra to fund subsidies.
But that’s not all, Donovan said. Pharmaceutical companies, medical supply companies, even tanning salons are among the various industries that now are taxed to cover this expense. Compounding matters is they are all taxed different amounts.
The ACA created two types of subsidies: 1) Premium tax credits 2) Cost-sharing reductions.
“The primary subsidy is what they call APTC, which is a sliding scale based on income -- it offsets your premium,” Bernardini said. “The government sends (the subsidy) to the insurance company and they deduct it and send you a bill.”
The cost-sharing plan is for a much smaller segment of income – those earning between $17,000 and $30,000. Under the new GOP plan, the cost-sharing plan’sfuture is in doubt.
“The second subsidy, in these low incomes, not only do they pay less for insurance, they also get lower co-pays,” Bernardini said. “And the benefits are increased.”
Insurance companies have already been pulling out of this plan in some markets around the country because it’s financially unfeasible for them to continue.
That’s not happening in California. The relevance of choice
“California is different than a lot of parts of the country,” Donovan said. “There are one-third of the counties in the U.S. that will only have one carrier to chose from.”
Bernardini added, “And 60 percent of counties have just two.”
The problem, he said, comes down to a lack of population in rural areas. Greater volume is what insurance companies are looking for, he said.
Donovan continued, “The ACA was supposed to fix that. It didn’t happen.”
Bernardini then said, “Can you imagine being in this country and you can only go to Blue Cross? That’s why this is a bleak picture, and it’s why it is crumbling.”
What's actually different this year
For now, the biggest difference people are noticing from a year ago is what they have to prove on their taxes.
“Last year, when a consumer was filing taxes, he or she had to prove they had health insurance all year,” Bernardini said. “This year, if a person doesn’t fill it out, it still goes through.”
One aspect that raises a lot of concerns is the House GOP bill tackles the issue of preexisting conditions, which were removed from consideration under the ACA. The House GOP bill puts that back on the table.
Donovan explained that as proposed, people with preexisting conditions who did not get their insurance during a regular open enrollment period, and haven't had a qualifying event, to buy into a program, would be required to pay a 30 percent penalty for their premium for the remainder of the year. The preexisting condition would not be covered under the plan for the first six-months.
"What Republicans are looking at is future people and how to mitigate these costs," Bernardini said, adding that it's 5 to 10 percent of the population that drives 75 percent of the nation's health care costs.
"The reality is, if you have health care coverage now, they aren't to lose it," he said.
Finding a work-around
An interesting reaction to the ACA has been an increase in people that missed the open enrollment period looking to leverage their company by starting group plans.
Donovan has six clients that have gone this route.
“As long as they are doing it legally it’s OK,” Bernardini said. “It has to be a legitimate business.”
For individuals and small groups, the law requires insurance companies to pay out on claims at least 80 cents for every $1 they collect. For large groups with more than 100 employees, that amount is 85 cents on the dollar. In both cases, if less than the required amounts are paid out, insurance companies must return the difference to consumers.
“People always think, those damn insurance companies have CEOs making millions,” he said.
Of course, as with all things, there are negatives to that aspect of the law, particularly when it comes to large groups, Donovan said.
“That gives them 15 percent to pay us, marketing and their staff,” the broker said. “They have cut staffs and pushed it onto us. We used to have lots of people to call. Now it’s a lot less.”
Brokers' role in all of this
During open enrollment in the fall, insurance companies hire part-time employees, which doesn’t help with service, particularly for those with individual plans who need to speak with someone for assistance, Donovan said.
And that’s where having an insurance agent makes all the difference, Bernardini added. (See Five Things to Call Your Broker For) Medical groups know agents drive memberships through health plans to them, he explained.
“When the broker calls, they know we have multiple groups with them -- they know we will leave a program if we don’t get good service,” Bernardini said.
“Plus, we are a Premier Producer’s Program, which is based on volume. When we call Health Net, we get Roxanne. The average person gets a computer voice.”
In the end, the key is to keep on top of your health insurance, and as Donovan explained, that’s hard for the average person.
“Hire a good broker,” Donovan said. “There is no additional cost to the consumer. They are essentially already paying for the service, but they are only getting it with a broker.”
And if you're truly concerned about the House Republicans actions, both men agreed, contact your senator and let them know you feel.
"I would encourage people to know their facts before they contact their senator," Donovan said. "If you're just listening to the evening news, you aren’t getting an accurate understanding of what would happen. Take the time to educate yourself first."