EServing
UCLID MANAGERS
the independent agent since 1976
®
A Legislative Review Service by Euclid Managers
December 2010
EUCLID MANAGERS®
has served the independent agent
since 1976, offering a portfolio
of group health, professional
liability, individual life, health,
annuity and long-term
care products.
We proudly represent many
fine carriers including
Group Products:
UnitedHealthcare of Illinois
Delta Dental of Illinois
MetLife
Individual Products:
American General Life Companies
AXA/Equitable
Banner Life
Genworth Financial Insurance Co.
Guarantee Trust Life
HumanaOne
John Hancock Life
Lincoln National Life
MetLife
Prudential Financial
Transamerica
West Coast Life
…and many more!
Contact Information
Reflections
Health Care Reform - Subsidies
With 2011 right around the corner, 2014 can’t be far behind. Many of the
provisions of health reform in the ACA (Affordable Care Act) become
effective in 2014. With Republicans taking control of the majority in the
House of Representatives in January 2011, some provisions may, indeed, be
changed. However, until that happens, brokers and their clients should still
make plans based on the law as it currently stands.
This issue of Reflections provides an overview of the subsidies that are
effective in 2014.
continued on page 2
A letter from Karen Knippen
Many of us have been – let’s call it what it is – complaining – about the
Affordable Care Act (ACA). So far, the provisions that we’ve been dealing
with have had little to do with making health insurance “affordable."
The subsidies included in the ACA are one of the measures that attempts
to address affordability of coverage. That is a laudable goal. But, we cannot
afford to provide such rich subsidies unless we are also aggressively attacking
health costs. Otherwise, rising health costs will keep pushing up premiums
making ever more people eligible for subsidies. Hmm, sounds like the
dreaded “death spiral" we’re all familiar with.
In the meantime, you can count on Euclid Managers, working with our
carrier partners, to provide affordable, quality health insurance options for
your clients.
Happy Holidays and a safe and prosperous 2011!
Sincerely yours,
234 Spring Lake Drive
Itasca, Illinois 60143
Phone: (630) 238-1900
Outside Chicagoland:
(800) 345-7868
Fax: (630) 773-8790
Visit us at:
www.euclidmanagers.com
Karen Knippen, RHU, REBC, CLTC
EUCLID MANAGERS® has been serving the independent agent since 1976 with a portfolio of group health, professional
liability and individual life and health, annuity and long-term care products. We proudly represent UnitedHealthcare,
Delta Dental of Illinois, MetLife and HumanaOne. We encourage your feedback and suggestions. Please call your
EUCLID MANAGERS® Marketing Representative or Marcy Graefen at (630) 238-2915 for more information. Outside
Chicagoland, call (800) 345-7868. Website: www.euclidmanagers.com
Grandfather Status – Important Change
Revised rules have been issued that allow a group
health plan to change insurers and still maintain
grandfather status. The new rules are not retroactive
but apply as of November 15, 2010. Group health
plans must still meet the other restrictions required
to maintain grandfather status. These restrictions are:
an increase in coinsurance, significant increases in
deductibles or copayments, significant cuts or
reductions in covered benefits or significant lowering
of employer contributions.
This revision applies to group health plans only. A
change in insurance company for an individual policy
relinquishes grandfather status.
Premium Subsidies
There are actually multiple subsidies designed to
work together that may have employees demanding
an opportunity to purchase coverage through the
exchange. In addition to the premium subsidy or
premium tax credit, there is also a cost-sharing credit.
The premium subsidy is based on a sliding scale and
is available for individuals and families with incomes
from 133% to 400% of the federal poverty level.
The tax credit is based on the premium for the second
lowest cost silver plan in the exchange providing
coverage to that person’s area. A silver plan is a plan
that provides the essential benefits and has an actuarial
value of 70%.
Only citizens and legal residents are eligible for
subsidies. Premium contributions are limited to
percentages of income for specified income levels
(e.g., for incomes up to 133% FPL, the premium
contribution will be limited to 2% of income).
-2-
Reflections
Premium Contribution As A Percent of Income
Income Level
Premium as a Percent of Income
Up to 133% FPL
2% of income
133-150% FPL
3 – 4% of income
150-200% FPL
4 – 6.3% of income
200-250% FPL
6.3 – 8.05% of income
250-300% FPL
8.05 – 9.5% of income
300-400% FPL
9.5% of income
The subsidies are available as a refundable and
advanceable tax credit. This means that someone
who wouldn’t otherwise pay taxes can get a refund
for paid premiums. An advanceable tax credit allows
a person to receive assistance at the time that they
purchase insurance.
People with public coverage are not eligible for
premium tax credits. Employees or others eligible
for coverage through an employer are not eligible
for premium tax credits unless the employer plan
does not have an actuarial value of at least 60%, or
unless the person’s share of the premium for employersponsored insurance exceeds 9.5% of income.
Free Choice Vouchers
Another wrinkle is the requirement that employers
will be required to provide “free choice vouchers" to
some employees. Those employees with incomes less
than 400% FPL and whose contribution for the
employer coverage is between 8% and 9.5% of
income must be given a voucher which they can use
to enroll in an exchange.
The amount of an employee’s voucher would equal
the contribution the employer would make to its own
health plan on behalf of the employee. Employees
receiving free-choice vouchers are not eligible for
subsidies.
Example of Cost to Eligible Individual
A person who wants to purchase a plan that is more
expensive than the “second lowest cost silver plan"
would have to pay the full difference between the
cost of the second lowest cost silver plan and the
plan that they wish to purchase. A person could
choose to purchase a more expensive plan. If so,
the full difference between the cost of the second
lowest silver plan and the plan selected will be borne
by the purchaser.
An example provided by the Kaiser Family Foundation
shows how the premium tax credits work:
• Pat is 45 years old and has an income in 2014 that is
250% of poverty (about $28,735)
• The cost of the second lowest cost silver plan in the
exchange in Pat’s area is projected to be about
$5,733
• Under PPACA, Pat would not be required to pay
more than 8.05% of income, or $2,313, to enroll in
the second lowest cost silver plan. The tax credit
available to Pat would be $3,420 ($5,733 premium
minus the $2,313 limit on what Pat must pay).
Cost-Sharing Subsidies
There are also cost-sharing subsidies to protect lower
income people from excessive out-of-pocket costs.
Those persons with incomes at 250% of poverty or less
will be eligible to enroll in richer plans that will
reduce their expected out-of-pocket expenses.
Other provisions limit the amount that people must
pay out-of-pocket for essential benefits. People with
incomes at or below 400% of FPL will have their
out-of-pocket liability capped.
Reduction in Out-of-Pocket Limit Based on Income
Income Level
Reduction in Out-of-Pocket
Liability
100-200% FPL
Two-thirds of the maximum
200-300% FPL
One-half of the maximum
300-400% FPL
One-third of the maximum
Limits are based on the maximum out-of-pocket limits
for HSAs. These amounts in 2010 are $5,950 for single
coverage and $11,900 for family coverage.
Employer Tax Credit
Small employers have been eligible for a tax credit
for health premiums beginning with 2010. This tax
credit is available to employers with 25 or fewer fulltime equivalent workers. There are other requirements
regarding wage levels, etc. A calculator to determine
if a firm qualifies is available at www.irs.gov.
In 2014, businesses with 10 or fewer employees
and average wages below $25,000 will get a credit
for coverage purchased in the exchange of up to
50% of the employer’s contribution toward an
employee’s insurance. This credit is only available
for two (2) years.
Conclusion
The subsidies of both premiums and cost-sharing are
intended to make health insurance more affordable.
This is a laudable goal. However, the subsidies as they
are currently in the law are broad and available only
for coverage that is purchased in the exchange.
Exactly how they will work is still to be determined.
Per the American Action Forum, “the net result of
the subsidies is that a family of 4 with an annual
income of $30,000 per year, purchasing an insurance
policy that cost $9,435, would receive a federal
subsidy of $8,481, and have to pay $954 themselves.
The same family with an income of $65,000 per year
would receive a subsidy of $4,458 and pay $6,077
themselves."
Despite the admonition to plan based on the law as it
is today, it’s important to note that the breadth of the
subsidies may be narrowed. The Congressional Budget
Office estimates that the subsidies will cost roughly
$350 billion between 2010 and 2019. Therefore, brokers
and employers should revisit the availability and scope
of subsidies as legislation and rules become available.
Reflections
-3-
EServing
UCLID MANAGERS
the independent agent since 1976
®
A Legislative Review Service by Euclid Managers
December 2010
Reflections
A service publication for brokers from
Euclid Managers®, proudly representing
UnitedHealthcare of Illinois, Delta Dental of Illinois,
MetLife and HumanaOne.
EServing
UCLID MANAGERS
the independent agent since 1976
®
Visit us online www.euclidmanagers.com.
Editor: Pamela D. Mitroff
Legislative Review is published by Euclid Managers®, 234 Spring Lake Drive., Itasca, IL 60143. For more information, contact your Marketing Representative or Marcy Graefen
at (630) 238-2915 or fax your request to (630) 773-8790. Outside Chicagoland: (800) 345-7868, Fax (877) 444-2250. © Permission to quote with credit to source.
Health Care Reform - Subsidies
Inside:
Best Wishes for a healthy
and prosperous 2011
234 Spring Lake Drive, Itasca, Illinois 60143
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EServing
UCLID MANAGERS
the independent agent since 1976
®