Get Ready for the Affordable Care Act

By Richard McGrath, CIC, LIA

Massachusetts residents may feel some relief that the commonwealth is not among the 36 states participating in the HealthCare.gov federal healthcare exchange. But Massachusetts will have plenty of other challenges as it seeks to comply with the Patient Protection and Affordable Care Act (ACA).

The federal exchange opened on Oct. 1, 2013 and, because of hundreds of problems related to the site launch, only 26,794 people enrolled during its first month of operation. The federal government expected 500,000 enrollees, which is still a small percentage of the 48 million Americans who lack health insurance.

At a time when purchasing insurance through HealthCare.gov is still a frustrating experience, millions of Americans are having their insurance canceled, because it fails to meet the requirements of the ACA. The ACA required all Americans to have health insurance by Jan. 1, 2014 or else, pay a penalty.

Given that Massachusetts has had its Health Connector in place and an individual mandate requiring all residents have health insurance since 2006, you would think it would be easy to make the transition and comply with the ACA, widely known as ObamaCare. Not so.

The American Action Forum estimates that it will cost the commonwealth $521 million to conform to the ACA and become a fully accepted health insurance exchange.

Health Connector Changes

The Massachusetts Health Connector set up Commonwealth Choice (Connector 2.0), which has received “conditional approval” as the state’s health insurance exchange. However, given the changes needed to comply with ObamaCare, Massachusetts residents are encountering many of the same problems as people in other parts of the country.

One Massachusetts resident, writing to AP consumer reporter Mitch Lipka, wrote, “I have had a policy through the Connector since 2011. It worked great. Now I have received notice that I have to sign up again. My old login no longer works. Setting up a new one doesn’t work properly. Going to the call center is torture. No one answers and the same message on hold plays over and over again, telling people to go on line while the online site tells people to call the help line. Worst of all, it looks like my policy is discontinued.”

To be accepted as an exchange, Connector 2.0 will need to offer only health insurance plans that conform with the requirements of the ACA and it will need to offer ACA-approved tax subsidies. Anyone who has purchased insurance through Commonwealth Choice will have their policy expire on March 31, 2014, at which time a new fully compliant insurance policy must be purchased.

“The Health Connector is working with MassHealth and other state partners to plan for smooth coverage transitions among the nearly 240,000 Health Connector members – and some individuals in other state programs – who will be eligible for new programs in 2014,” according to the Health Connector website.

“Under those new programs, some current Health Connector members may move to MassHealth, while others may move to new programs within the Health Connector,” according to the website. “Many who are currently receiving subsidies as well as some who currently receive no government assistance will get advanced premium tax credits instead.”

Changes are also required to provide ACA mandated subsidies. Until now, Massachusetts has helped subsidize the cost of premiums for those within 300 percent of the federal poverty level.

The ACA offers tax credits to help reduce the cost of premiums for those with income up to 400 percent of the federal poverty level ($45,960 for an individual, $94,200 for a family of four in 2013). It also offers cost-sharing subsidies that reduce the deductibles, copayments, coinsurance and total out-of-pocket spending limits for people with incomes up to 250 percent of the federal poverty level ($28,725 for an individual, $58,875 for a family of four in 2013).

The penalties for noncompliance will also change. Currently, the penalty for those who fail to comply with the Massachusetts law is 50 percent of the lowest monthly premium for insurance available from the Health Connector. Under the ACA, the penalty for the first year is 1 percent of family income or $95 per adult and $47.50 per child, whichever is greater. The penalty increases over time and in 2016 will be 2.5 percent of family income, or $695 per adult and $347 per child, up to $2,085 for a family, whichever is greater.

More than 98 percent of Massachusetts residents have health insurance coverage, which is easily the highest percentage of covered residents in the country, but there are still tens of thousands of residents each year who elect to pay the penalty instead of paying the higher cost of health insurance premiums.

There are also some exemptions to the ACA’s individual mandate, including members of Congress and their staff. Other exemptions include those whose income is below the minimum threshold for filing a tax return and those who cannot afford coverage because premiums exceed 8 percent of their household income. Prisoners, Native Americans eligible for health insurance through the Indian Health Care service, illegal immigrants and people who object to insurance coverage for religious reasons are also exempt.

The Congressional Budget Office estimates that in 2016, after the major provisions of the ACA are implemented, 24 million people will be exempted from the mandate.

Other Requirements

The ACA also requires that employers with 50 or more employees working at least 30 hours a week provide those employees with health insurance, but the employer mandate was delayed for a year by President Obama and will not be enforced until Jan. 1, 2015.

The ACA also expands Medicaid beginning Jan. 1, 2014 to make government-funded coverage available to adults 19 to 65 years of age with income up to 133 percent of the federal poverty level, even if they have no children. The expansion will make an estimated 17 million low-income people nationwide eligible for Medicaid.

All approved plans must also offer extensive preventive care programs at no charge, including screening for blood pressure, cholesterol, colorectal cancer, depression, type 2 diabetes, syphilis, HIV and abdominal aortic aneurysms. They must also offer free counseling for alcohol misuse, tobacco use, dieting, obesity and sexually transmitted infections.

Finally, they must offer free immunization vaccines for hepatitis A and B, herpes zoster, human papillomavirus, influenza, measles, mumps, rubella, meningococcal, pneumococcal, tetanus, diphtheria, pertussis and varicella.

In addition, all plans must offer coverage for contraception without a copayment. The constitutionality of that issue will be taken up by the U.S. Supreme Court this winter, as many Catholic hospitals and some employers object to the provision on religious grounds.

To date, the ACA has spawned anywhere from 10,000 to 33,000 pages of regulations, based on various estimates. Whatever the number, there is a great deal of paperwork to process and each state will be required to conform with the federal law.

The changes created to date are just the beginning. Even if the HealthCare.gov website is able to be adequately repaired, many other challenges remain to be addressed – even in Massachusetts.


Richard A. McGrath, CIC, LIA is President and CEO of McGrath Insurance Group, Inc. of Sturbridge, Mass. He can be reached at rmcgrath@mcgrathinsurance.com.

This article is written for informational purposes only and should not be construed as providing legal advice.

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