Health Care MarketplaceNews & Research

Minimum Essential Coverage

Current healthcare law requires major medical policies to meet “minimum essential coverage” requirements. Any plan you buy today that’s approved by the Affordable Care Act (ACA or Obamacare) will count as minimum essential coverage, but you might not know what this means or how it impacts your quest for the right health insurance plan. In short, you benefit as a consumer and a patient by buying a comprehensive health plan. But you should also know that thanks to a big change taking place in 2019, you won’t be required to hold this kind of coverage anymore, which could open up some options for you if you don’t want or can’t afford major medical insurance. Knowing what’s in store could help you make a better decision about your health insurance for next year.

Qualifying Insurance Plans

The ACA established standards for all health insurance plans, whether they are privately purchased, employer-sponsored or obtained by some other means. Those plans that meet the lowest acceptable standard are considered minimum essential coverage, and Americans are encouraged to carry a plan that, at the very least, meets the ACA’s minimum guidelines. Such coverage is known as a qualifying health plan.

Minimum essential coverage is available from a variety of sources. Some of the most common types of minimum essential coverage are:

  • Major medical insurance purchased through the healthcare marketplace
  • Individual or family plans purchased outside the healthcare marketplace, as long as they meet the standards of the ACA
  • Job-based insurance, including group plans and self-insured plans
  • Medicare Part A and Medicare Advantage
  • Student healthcare coverage
  • Catastrophic insurance plans
  • Full coverage through Medicaid or the Children’s Health Insurance Program (CHIP)
  • TRICARE for military members
  • Work-based retiree coverage
  • Health insurance via COBRA

Short term health plans aren’t considered minimum essential coverage. Discount plans and policies with limited benefits, such as those that cover only hospitalizations or dental care, don’t qualify either.

Minimum Essential Coverage and the Individual Mandate

Under Obamacare, most American citizens must carry minimum essential coverage. Those who don’t hold a qualifying health plan may be required to pay a fine. This fee is commonly known as the individual mandate penalty, but its official name is the individual shared responsibility payment.

The affordability of Obamacare depends on both healthy people and those with medical problems carrying health insurance. If the risk pool has too high a concentration of people with health issues, insurers must raise premiums in order to keep meeting their financial obligations. When a large number of healthy people are also contributing premium payments, the risk pool balances out so that costs can stabilize. The individual mandate was designed to encourage people of all ages and medical statuses to participate in Obamacare – in other words, to stabilize the private health insurance market.

For 2018, if you don’t carry minimum essential coverage, you’ll be required at tax time to pay the greater of two calculations: $695 per uninsured adult and $347.50 per uninsured child in your household, or 2.5 percent of your household’s taxable income. There are caps in place to limit this burden.

Expanded Exemptions

The ACA in its original form included provisions for limited exemptions from the individual mandate. For example, if the only qualifying health plans available to someone were deemed unaffordable, then that person wouldn’t be required to pay the fine. In 2018, the Trump administration expanded the list of exemptions that allow people to skip out on the minimum essential coverage requirement.

Anyone who lives in an area where there are no marketplace plans available can get out of purchasing minimum essential coverage, and so can those who live in a region with only one marketplace insurer. Since the inception of the ACA, no county has ever been without any coverage, so that exemption has been unnecessary. However, in 2018, about 26 percent of people with an Obamacare plan had only one insurer option on the exchange. Instead of purchasing minimum essential coverage in 2018, those people could choose to opt out.

Another new policy relates to abortion. Those morally opposed to abortion now have the right to claim an exemption if all of the marketplace plans available to them cover abortion services.

Finally, the Trump administration also instituted a broad exemption for personal hardships. This covers a variety of circumstances that might make it difficult or impossible for a person to purchase major medical coverage that meets his or her personal needs.

Changes for Obamacare 2019

Even greater changes are in store for health insurance in 2019. The fine for not having qualifying health insurance will drop from $695 or more down to $0. The Tax Cuts and Jobs Act of 2017 zeroed out the penalty.

The elimination of the fine applies only to 2019 and the years to follow, so you won’t notice a difference at tax time until 2020. If you didn’t have minimum essential coverage in 2018, unless you can claim an exemption, you’ll still owe the penalty when submitting your tax return in early 2019.

Note that the individual mandate itself has not been removed. Theoretically, it could be interpreted that Americans are still expected to purchase minimum essential coverage. In reality, however, since there is no penalty for not buying qualifying health insurance, there’s no real obligation to do so. Without the accompanying penalty, the mandate is meaningless.

Removing the individual shared responsibility payment could have significant effects on the number of people who purchase qualifying health insurance through the marketplace or another source. The Congressional Budget Office has suggested that approximately 3 million to 6 million fewer Americans may have minimum essential coverage by 2021. The department has also estimated that, as a result, health insurance premiums will go up about 10 percent in that time.

The removal of the penalty is a federal change. States have the option to enforce their own individual mandate penalties. Currently, both Massachusetts and New Jersey have such laws. Other states may choose to follow suit in an effort to keep more people covered by qualifying health plans.

Health Insurance Options

If you don’t live in a state with its own individual mandate, you may feel a newfound sense of freedom when it comes to health insurance in 2019. Without any obligation to buy an expensive, comprehensive health plan, you might choose not to. But evaluate your healthcare needs first.

Even without the fee in place, you might find that purchasing major medical insurance remains your best choice. When you buy an ACA-compliant plan, such as those available through the marketplace in 2019, you’ll have access to the 10 essential health benefits outlined in the ACA. These include emergency treatment, mental health services, prescription drugs and maternity care.

On the other hand, particularly if you don’t qualify for advance premium tax credits, the elimination of the penalty might pique your interest in considering other options. Short term health insurance is a common alternative. These plans are less comprehensive in scope than major medical insurance, but they also cost significantly less. New Trump administration rules that take effect in October will allow you to keep one of these plans for nearly a year at a time and renew it for a total coverage period of up to 36 months. Before choosing to forgo a major medical plan, it’s a good idea to carefully weigh your options.

HHS Head Praises Trump for Healthcare Improvements

According to Health and Human Services Secretary Alexander Azar, President Trump is doing a better job with Obamacare than President Obama did. Speaking to the Nashville Health Care Council on September 28, Azar cited a projected decrease in 2019 health insurance premiums as evidence of the current administration’s achievements.  

Lower Premiums for the First Time in Years

The Obamacare insurance market appears to be stabilizing. For several months, the consensus has been that premium rates aren’t going to skyrocket in 2019. Azar had even better news to share with those in attendance at the council’s event: Many Americans may see lower premiums in 2019 than they did in 2018.

Nationwide, the average cost of a benchmark plan – the second-lowest silver plan in a market – will drop by 2 percent. This will be the first time that this figure has gone down since the Affordable Care Act went into effect.

Consumers will also have more choices when purchasing marketplace health insurance for 2019. In many markets, new insurers will offer on-exchange plans for the first time while insurers that left the markets in some areas are planning to come back for next year.

Per Azar, these are signs that Trump is doing what is best for Obamacare. From loosening regulations on non-ACA plans to removing the individual mandate penalty, Trump’s approach has been to increase consumer choices. In his speech, Azar claimed that moves like these have been significantly better for the healthcare industry than anything that Obama did.

Some experts disagree with Azar’s assessment. They argue that premiums aren’t rising this year simply because they rose too steeply last year. Insurers sharply increased 2018 rates in response to the elimination of cost sharing subsidies. In many cases, these carriers may have overcorrected, so they don’t need to hike rates again this year.

Others assert that Trump, who has repeatedly attempted to dismantle the ACA, cannot take credit for improvements to the health insurance industry.

Azar on the Future of Healthcare

Such critics will likely continue to be frustrated with Trump’s approach. Azar made it clear that the administration doesn’t believe that the job of repairing the ACA is finished. Although premium reductions may show that the market is beginning to stabilize, it’s still not the sort of system that the Trump administration has in mind. In fact, the HHS secretary emphasized to council attendees that Obamacare will never be satisfactory to this administration.

Instead, the administration remains focused on repealing the ACA and replacing it with a different system. Azar’s remarks point toward a healthcare system focused on individual consumer choice rather than government mandates. Legislative power would lie primarily at the state level instead of belonging to the federal government.

Azar spoke strongly against the idea of expanding the federal government’s role in healthcare. He firmly denounced the viability of a so-called “Medicare for All” system. This type of proposal would create a single, government-run healthcare system for all Americans.

Trump and his administration argue that such a system would be economically disastrous. Azar explained to his Nashville audience that medical providers wouldn’t receive large enough payments to keep them in business, and the costs of establishing and maintaining the program would be excessively burdensome on the federal government.

The way the Trump administration sees it, federal involvement in healthcare has done nothing but create a nationwide mess. They believe that the president is doing the best he can with the lot he’s been handed, but the only responsible long-term solution is less government intervention, not more.

House-Passed Legislation Seeks to Address Opioid Crisis

The House passed bipartisan legislation on September 28 to provide resources for fighting the U.S. opioid crisis. President Trump will soon have a chance to sign legislation that increases access to addiction treatment, provides for less-addictive alternatives for pain treatment and cracks down on the ordering of opioid drugs through the mail. Medicaid restrictions on substance abuse treatment will also be eased, including access to inpatient treatment.

While the legislation has been hailed as an important step forward in combatting the opioid epidemic, Sen. Elizabeth Warren has proposed spending up to $100 billion over the next ten years. Funding for the current year is set at $3.8 billion, an improvement from the $1 billion allotted in last year’s budget. But Democrats like Rep. Frank Pallone have criticized the legislation as not going far enough despite the increase in funding.

The Senate is expected to make changes to the legislation based on committee work in progress, including the provision of adequate funding. It’s expected that both House and Senate will be able to agree on final legislation by the end of the year and send it to the president for approval. Senate work on the bill mirrors the House legislation in many areas, making it more plausible for the two chambers to agree on the measure.

A crucial component of the legislation is the loosening of restrictions on the prescription of buprenorphine, a drug used to treat addiction. Nurse practitioners and physician’s assistants will now be able to write prescriptions for buprenorphine, which could help patients avoid dangerous drugs like heroin and fentanyl.

One of the loopholes fueling the opioid crisis is the loose enforcement of laws against mail-order opioid purchases. The legislation package, which combines 58 separate bills, classifies fentanyl as a controlled substance, giving more teeth to efforts to prosecute illicit drug providers. Another issue is a lack of access to a patient’s drug treatment and addiction history by a treating physician. Until now, privacy concerns have left it up to patients to let physicians know about any drug abuse problems. The new legislation requires full access to this information.

Synthetic opioids like fentanyl and tramadol require minuscule amounts to take effect according to the Centers for Disease Control and Prevention. This makes it easier to accidentally overdose. The death rate from synthetic drug overdoses doubled in 2016. These drugs can be produced in illegal labs and are sold on the street to unsuspecting buyers. Strength can vary from one batch to another, and a dosage that was safe one time can be a death sentence the next.

Research and training are also included in the ambitious House proposal, including funding for research into non-addictive alternatives to commonly prescribed painkillers. This could make a dent in the need for opioids, but it’s a long-term solution that doesn’t address the immediate crisis. Critics point to the need for immediate intervention for opioid drug addiction.

The Helping to End Addiction Long-term (HEAL) initiative sponsored by the National Institutes of Health (NIH) has nearly doubled research funding to $1.1 billion for 2018. It appears that the current legislation being worked on by Congress is also a significant beginning in combating opioid addiction in the U.S. The multi-pronged approach includes research, education, treatment and enforcement. It’s just a start, however, and to make inroads on the scourge of opioid addiction, more funding will be needed in the future.

What are my options if I can’t afford major medical insurance?

Although “affordable” is right in the name of the Affordable Care Act, many Americans find that the major medical coverage that Obamacare requires is too expensive for their budgets. As a result, some people choose to go without any insurance at all. But being uninsured is a scary prospect, especially if you have medical problems or a family to take care of. So if you don’t think you can afford major medical coverage, it’s time to start looking into alternatives. Here’s how to get health insurance in 2019 if you can’t pay the premiums for a major medical plan.

Cost Assistance

Before you write off the idea of getting an Obamacare major medical plan, make sure you understand the cost assistance that may be available to you. The ACA makes provisions for low- to middle-income Americans to help them afford traditional health insurance.

If your household income falls between 100 and 400 percent of the federal poverty level, you may be eligible receive premium subsidies to help cover the cost of your insurance premium. The subsidy amount for which you qualify is determined by your income level and the price of insurance plans in your geographic region. The federal government sends your subsidy directly to your health insurer, and you pay the outstanding portion of the premium each month. To take advantage of the premium tax credit, you can buy a plan through the health insurance marketplace or go through a broker as long as the plan you’re buying comes from an Obamacare exchange.

If your income is between 100 and 250 percent of the federal poverty level, you also have the option to choose a plan that offers cost sharing benefits. These are insurance plans that feature lower deductibles, lower coinsurance percentages and lower copays than those that are available to people with higher incomes. This extra cost sharing benefit is available only on silver plans, so you’ll need to pick a silver plan to take advantage of it. As a side note, silver plans tend to be the most popular option on the healthcare marketplace.

Medicaid

If you’ve never applied for Medicaid because you don’t think you qualify, consider it this year. Obamacare sought to expand Medicare eligibility so that more people could be covered through this joint federal and state healthcare program. The intent was that anyone whose household income was below 133 percent of the poverty level would be able to enroll in Medicaid.

But Medicaid regulations vary by state, and individual states have the right not to run expanded Medicaid programs. Rules about Medicaid eligibility also vary. Some states restrict access to pregnant women, children and the disabled, while others have opened up access to anyone who earns below the state’s earnings threshold. If you can’t afford major medical, look into your state’s Medicaid program to see if it’s an option for you.

Even if you don’t qualify for Medicaid, your children may qualify for the Children’s Health Insurance Program (CHIP), which is designed for people who earn too much for Medicaid but can’t afford coverage for their children. Look into CHIP for your kids even if you can’t apply for Medicaid.

Catastrophic Coverage

Catastrophic health plans are a low-cost form of coverage that you can buy through the healthcare marketplace, but only some people are eligible. To qualify for catastrophic healthcare coverage, you must be under 30 years old, or you must qualify for a hardship exemption because all other major medical insurance is deemed too expensive for you.

Catastrophic insurance covers the same services that other major medical insurance includes, but catastrophic plans have extremely high deductibles. Aside from preventive care and a few visits to your primary physician each year, you must pay the full cost of your medical treatment until you reach this level of spending. After you reach the deductible level, the insurance company will pay for any additional qualified healthcare spending that year.

Although catastrophic coverage can be purchased through the Obamacare 2019 marketplace, you can’t use a tax subsidy to help pay the premiums. If you qualify for subsidies, you may be better off buying a standard health insurance plan that requires lower out-of-pocket contributions toward your medical bills.

Short Term Health Insurance

Short term health insurance is available outside of the marketplace, and you don’t have to meet any income guidelines to qualify. These plans provide a limited set of benefits for a specific length of time. Also known as temporary health plans or limited duration plans, short term health insurance doesn’t count as minimum essential coverage, so it isn’t bound by ACA regulations to include any particular health benefits. Instead, short term insurers can select which types of services their plans will cover.

Limited duration plans typically focus on hospital visits, surgical procedures, trips to the emergency room and other major health needs, but they may exclude coverage for preventive care, prescription drugs or mental health services. Although this limited coverage can be a drawback if you have specific health needs, it can also be a positive thing. Covering only certain types of care allows insurers to keep short term insurance premiums low.

Insurers set specific health guidelines for their temporary health plans. Unlike with ACA major medical insurance, you can be turned down for a short term plan based on your medical history. Even if you are accepted for this type of health coverage, any preexisting conditions that you have will probably be excluded from your policy. Restricting coverage only to those who are relatively healthy is another way that short term insurers keep premiums in check.

In fact, short term health insurance plans often have monthly premiums that are hundreds of dollars less expensive than their major medical counterparts. If the idea of a low price tag appeals to you, you’ll be glad to know that beginning in October, you’ll be able to purchase a short term plan that lasts up to nearly a year in duration. You may be able to renew this plan for a total of 36 months of coverage, but the insurer has the right to reevaluate your medical history before issuing you another term of coverage.

Supplemental Products

Supplemental insurance products, also known as ancillary or voluntary benefits, are add-ons that can help round out your insurance coverage. If you buy short term health insurance in 2019, you might want to add some supplemental products. By grouping an assortment of insurance products, you can help create a reliable safety net that will help keep you out of financial trouble if a medical emergency arises. Voluntary benefits can also be used in conjunction with major medical insurance.

You might choose to use ancillary products on their own if you can’t afford health insurance. Just keep in mind that these benefits are not medical insurance and won’t contribute to your healthcare expenses in the same way that a comprehensive health plan will.

Some ancillary products are insurance plans that cover a specific type of care. Two of the most common are vision insurance and dental insurance. With plans like this, you may be able to receive routine exams and necessary care, such as oral cleanings, cavity fillings or eyeglasses. Plans may also contribute toward major eye or tooth procedures.

Other supplemental plans are designed to reimburse you a set amount of money when you require a particular type of care. These voluntary benefits can include accident, hospitalization and critical illness plans. The insurer does not send any payments to your healthcare provider, and you shouldn’t expect the money that you receive to cover the full cost of your care. However, you can use your reimbursement check to help pay your medical bills or deal with other expenses that arise in conjunction with your illness or injury.

If you’re not sure what to do about health insurance when you can’t afford it, talk to an insurance pro about your options. With open enrollment around the corner, now’s the time to browse plans and see what’s out there. And if you just can’t afford to spend a few hundred dollars a month on major medical, consider one of the above alternatives until you can. The bottom line is that you don’t need to forgo insurance altogether. There are options available to safeguard yourself and your family.

Pros and Cons of HSAs

There are lots of initials and acronyms in the health insurance industry, but one common set of initials used more frequently these days is HSA, which stands for health savings account. This increasingly popular choice among consumers (and employers that offer health benefits) allows you to set aside money in a tax-advantaged account to cover the cost of medical care each year. There are rules and regulations surrounding HSAs, and not everyone can or should use one. Wondering if an HSA is right for you? Let’s look at some of the pros and cons.

What is an HSA?

Health savings accounts allow you to set aside pre-tax dollars to pay for qualified medical expenses. Because you put the money into a savings account before taxes are deducted, you can lower your overall health costs, and withdrawals won’t get taxed as long as you use the funds to pay for medical care. You must have a high-deductible healthcare plan (HDHP) to qualify for a health savings account. The IRS sets limits on what counts as a high-deductible health plan and caps how much you can contribute to the plan per year.

In 2018, a health plan had to have an individual deductible of at least $1,350 for the year to qualify as an HDHP (double this amount for family plans). You can place up to $3,500 for an individual or $7,000 for a family into an HSA in 2019, up from 2018 limits of $3,450 for individuals and $6,900 for families.

How Does it Work?

A health savings account works similar to the way a 401(k) or other retirement account works. You make contributions each pay period or annually to pay for future major medical costs. What you don’t use that year remains in the account and is invested, growing tax-free money. If you must withdraw the money for anything other than medical costs and you’re not yet 65, there is a 20 percent penalty. Employers may offer this type of account as an employment benefit or you may contribute to one on your own, claiming the contribution as an “above the line” deduction when you file your taxes.

It’s important not to confuse a health savings account with a flexible spending account, which may be offered by your employer. With a flexible spending account, you do not own the account. Flexible spending accounts are owned by your employer, you can’t invest money in the account and funds do not rollover each year.

Highlights of HSAs

 

Tax Benefits


One of the biggest benefits to an HSA in 2019 is the tax benefits. If you make contributions through your employer, they’re taken from your check before taxes get withheld. This means that the amount on your paycheck lowers, which lowers the amount that gets taxed. If you add money to an account on your own, you can deduct them from your gross income when you file your income taxes at the end of the year. In addition, anything you earn on the investment of funds is also tax free.

Tax-Free Withdrawals

As long as withdrawals are used to pay for qualified medical expenses, there’s no penalty for withdrawal. You can withdraw funds for deductibles, copayments or other expenses that are not covered by your major medical insurance. If the funds are used to pay medical bills, there’s no penalty for withdrawal and you won’t be required to pay taxes on the funds you used.

Rollover and Portability

Another benefit to health savings accounts is that if you have money left in the account at the end of the year, it rolls over into the next year. This is different from a flexible spending account, which requires you to use all the funds placed in the account by the end of the year. Even if your coverage changes because you change jobs, as long as it’s a high-deductible plan and you change jobs or retire before you reach age 65, funds that are in your account continue to grow tax-free.

Access to Funds

Many health savings accounts provide you with a debit card that allows you to access the funds as you would any regular source of funds, like a bank account. If you need to pay for prescriptions or doctor visit, or meet a deductible, you can use the debit card to access your account. Healthcare providers may offer the option of paying a bill by phone with a debit card as well. You can even use the card at an ATM to access cash if your healthcare provider does not accept credit or debit cards. Unlike a 401(k) account or other type of investment account, HSAs give you easy access to your money so you can use it when you need (to cover medical bills).

The Downsides

High Deductible Requirement

There are disadvantages to HSAs, though. One of the biggest drawbacks is that you must have high-deductible major medical coverage. Although this type of coverage has lower premiums, it may be difficult to come up with the deductible even with money in an HSA if you’re facing a significant medical problem all at once. Paying a $5,000 deductible upfront can be difficult or even impossible for the average American family.

Since money for the HSA gets deducted from your salary each pay period, that’s also money you won’t have in your household budget each month. If the deductible is significant for your Obamacare plan, you may need to place a larger amount each pay period into your HSA in order to cover costs that might cause you some financial difficulty.

Not Enough Funds

Once the amount in your health account has been depleted, you can no longer use it to pay for healthcare costs. If you didn’t deduct enough from your salary, your medical costs could exceed the amount in your account. That means you’d be responsible for any excess costs for the rest of the year, directly out of your own pocket. With reports of increases in premiums and deductibles expected in the ACA 2019, the amount you need to add to your health savings account could be significant.

Failure to Seek Medical Treatment

If you have high-deductible health insurance in 2019, you may be reluctant to seek medical treatment, even if you have an HSA. You may feel as if you need to keep the funds in the account for retirement or that your medical condition is not serious enough to warrant a withdrawal. It’s important to understand that the account is there to offset the higher cost of your health insurance and you should use it to seek medical care no matter how minor you feel the injury or illness may be.

After Age 65

Once you reach age 65, you’re no longer eligible to put funds into a health savings account if you have Medicare. At age 65, you automatically become eligible for Medicare. If Medicare is the only health insurance you have, you can no longer contribute to the account as Medicare is not considered a high-deductible plan. If you’re nearing your 65th birthday and you still have an HSA account, you’ll need to stop contributing to your health savings account. Otherwise, the IRS can enforce penalties for excess contributions since you’re not legally allowed to contribute to the account once you have Medicare.

You can, however, continue to withdraw existing funds from the account to cover medical expenses, such as premiums for Medicare Part B. You can also withdraw funds for non-medical retirement expenses without the 20 percent penalty associated with early withdrawals for the under-65 crowd, but those withdrawals may be subject to federal and state income taxes.

One other important note about HSAs and Medicare: If you delay enrollment into Medicare, make sure you stop contributing to your HSA six months before you know you’ll have Medicare Part A. That’s because Medicare Part A has a retroactive effective date of six months, and once your Medicare takes effect, your HSA contributions become illegal. You will owe penalty fees for those contributions, even though you didn’t have Medicare at the time you made them. If you’re nearing age 65 and have an HSA, talk to a financial adviser about your options.

Recordkeeping

Keep all medical receipts for monies withdrawn from your HSA because you may be asked to prove that withdrawals were for medical services. You need to keep the receipts for as long as your tax return is considered open, which is three years after you file. In some cases, you may need to keep your receipts for as long as the HSA account is open.

If you have purchased an Affordable Care Act policy that has a high deductible, putting money in a savings account designed for healthcare costs may be a way to reduce your tax burden while also allowing you to meet those high deductibles. Although this type of account has many advantages, there are also disadvantages to consider before opening an HSA.

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