Bumpy road ahead

The Oct. 1 rollout of the new health insurance ex-changes is right around the corner, but advisers with entrepreneurial clients and early retirees are still a long way from finding out how their clients might benefit from using these state and federal marketplaces. One of the most pivotal parts of the Patient Protection and Affordable Care Act of 2010 is the establishment of state and federal exchanges that will provide individuals with guaranteed health insurance coverage, offered by an array of carriers. Entrepreneurs and job changers are among those who will benefit the most: They're being offered a possible alternative to benefits via the Consolidated Omnibus Budget Reconciliation Act — COBRA — a law that allows workers to continue for a limited time the health plan they had at their previous job, provided they are willing to pay the full premium. With the Affordable Care Act, those who have always wanted to start their own business or who have dreamed of early retirement can walk away from their jobs and get affordable coverage. But don't crack open the champagne bottles just yet. The road to full universal coverage is a bumpy one, and even with the enrollment date merely weeks away, only 17 jurisdictions have moved toward establishing their own health insurance exchanges: California, Colorado, Connecticut, the District of Columbia, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington. Seven states — Arkansas, Delaware, Illinois, Iowa, Michigan, New Hampshire and West Virginia — are planning for a partnership exchange, a hybrid model where the state takes on some duties and the federal government handles others. The remaining states will default to an exchange run by the federal government. Though officials at the Department of Health and Human Services expect all of the exchanges to be up and running by Oct. 1, skepticism remains among policy experts on whether the marketplaces will be fully functional by then. “My gut tells me it won't be delayed, but the exchanges won't be pretty right away,” said Paul Fronstin, director of the health research and education program at the Employee Benefit Research Institute. “Other than the experience at the state level, whether the federal government will be ready is anybody's guess.” When it comes to actual coverage, all plans offered on the exchanges will provide the same range of essential health benefits: prescription drugs, emergency services, hospitalization and preventive services, among other things.

Levels of coverage

Plans are broken down into three different levels of coverage, based on the extent to which the plan splits costs with the consumer on medical services. Bronze plans will cover 60% of costs, silver 70%, gold 80% and platinum 90%. High-end plans, such as gold and platinum, are generally geared toward heavy users of medical services: In exchange for a higher premium, the customer pays less when it comes to out-of-pocket expenses. Though all states are expected to have these exchanges, the market itself — pricing and plan options, for example — will differ from one jurisdiction to the next, based largely on the number of insurers who want to participate in the exchanges. For instance, Colorado has 10 carriers lined up for its marketplace. Some insurers have decided to back out of certain state exchanges. Aetna Inc., for instance, decided it wouldn't participate in exchanges in California, Connecticut, Maryland and other states. When it pulled out of Maryland, the company told insurance regulators there that the rates approved by the insurance commissioner were too low. Carriers' absences are noticeable in marketplaces that have only a handful of issuers — as is the case for Connecticut, which went from four to three insurers when Aetna backed away. In a second-quarter earnings call, Aetna chief executive Mark T. Bertolini said the company would “continue to take a cautious approach to our participation in the public exchanges as we evaluate the longer-term viability of these marketplaces.” The insurer is aiming for participation in the public exchanges “on a limited basis,” but it expects to have a role in many of the multiparty private exchanges that are now emerging, Mr. Bertolini said on the call. “It's unfortunate when companies exit a state,” said Enrique Martinez-Vidal, vice president of state policy and technical assistance at AcademyHealth, a health services research group. “You want as many as possible to participate in your market.” He added, however, that he didn't think the lack of company participation would have a major impact on the pricing within a given exchange. The jury is still out when it comes to pricing. The topic is a political football in Florida, where documents from the state Office of Insurance Regulation say that insurance premiums will rise because of the requirement that coverage be offered to all. On Aug. 1, Rep. Ted Deutch, D-Fla., sent a letter to Health and Human Services Secretary Kathleen Sebelius, arguing that the Sunshine State's legislature pushed for higher insurance costs in Florida's marketplace “by refusing to allow the insurance commissioner either to negotiate lower rates with companies or refuse rates that are too high.”

Costs vary

Kaiser Family Foundation predicts that consumer premiums will be higher on average next year in most states. The average annual consumer premium for a family silver plan will be $8,250, minus tax credits. While that may sound like a lot, the Kaiser Family Foundation/Health Research & Educational Trust 2013 Employer Health Benefits Survey found that premiums for employer-sponsored family health insurance rose to $16,351 this year. Of that amount, the average worker paid $4,565. Tax credits, however, can mean significant savings for individuals buying their own coverage. People with incomes that are up to 400% of the poverty level — or $94,000 for a family of four in 2014 — are eligible for tax credits. Among all individual purchasers, the average family tax credit would be $2,672, according to Kaiser.