Sactoking's ACA Q&A Thread

[JEDI]

whats the theory behind insurance companies cant charge premiums for elderly more than 25% of young people?

 

[EagleKeeper]

whats the theory behind insurance companies cant charge premiums for elderly more than 25% of young people?

Keep the costs down until they are able to qualify for Medicare.

The complete package is a scheme to have those that can pay cover for the costs of those that can not.

 

[EagleKeeper]

Interesting question that is on the boundaries of the ACA.

There are contracting companies for temp workers that pay with W2 (Ex: Nationwide - Kelly, Robert Half, etc and I am sure that each major metro area has a slew of local companies).
That classifies them as employees under IRS tax rules. Taxes are withheld and they are eligible for un-employment

Are there insurance exceptions or are these companies required to provide insurance for those that work full time for the end clients.

 

[sactoking]

Interesting question that is on the boundaries of the ACA.

There are contracting companies for temp workers that pay with W2 (Ex: Nationwide - Kelly, Robert Half, etc and I am sure that each major metro area has a slew of local companies).
That classifies them as employees under IRS tax rules. Taxes are withheld and they are eligible for un-employment

Are there insurance exceptions or are these companies required to provide insurance for those that work full time for the end clients.

I believe the ACA says temp workers are subject to the "common-law test" to determine their employer for the purposes of who is responsible for providing insurance. Under the common-law test, whichever entity exerts more influence over hiring, firing, pay, when the employee works, etc. is deemed the employer.

 

[EagleKeeper]

I believe the ACA says temp workers are subject to the "common-law test" to determine their employer for the purposes of who is responsible for providing insurance. Under the common-law test, whichever entity exerts more influence over hiring, firing, pay, when the employee works, etc. is deemed the employer.

that would clear the contracting agencies then, because they are just a money pipeline.
And put the insurance headache back on the employer that the contractors are actually doing the work for.

 

[chucky2]

sactoking again, thanks for your thread!

Recently reading another thread I again started to wonder where all this subsidy money was going to come from, since the common phrase thrown about when the topic comes up is, Oh, well, you'll/they'll get a subsidy, so don't worry about the price of care (or words/intention to that affect).

Then I read your OP and it had this in it:

"Q: The ACA gives subsidies to certain people (by income) who purchase insurance on an exchange. Where will that subsidy money come from?
A: From a technical perspective, the subsidies are funded by a combination of direct taxation, indirect taxation, and diverted tax cuts.

Q: What guarantee do we have that Congress will maintain proper funding for these subsidies in the next 5 to 10 years?
A: The "subsidies" are not actually subsidies but instead tax credits and they don't have to be "paid for" in the traditional sense; they are paid for through reduced tax revenue. So long as the law remains as it is now Congress cannot "de-fund" the payments any more than they could refuse to pay a legally obtained tax refund."

So lets say someone makes $30k a year and has to buy their insurance on the exchange. Clearly, they're not paying much in Fed taxes after they send in their taxes for the year (or more likely, collect their tax return for the year). Can the subsidy that is their reduced tax burden actually see them getting a tax refund that puts them at more than $0? As in, they have paid negative taxes?

Chuck

 

[sactoking]

So lets say someone makes $30k a year and has to buy their insurance on the exchange. Clearly, they're not paying much in Fed taxes after they send in their taxes for the year (or more likely, collect their tax return for the year). Can the subsidy that is their reduced tax burden actually see them getting a tax refund that puts them at more than $0? As in, they have paid negative taxes?

Chuck

It's a bit of a complicated answer and gets a bit esoteric and involved in parsing language, so forgive me if the explanation isn't the best. For the sake of simplicity, let's assume that you are single, no dependents, and make $5,000 (net of payroll tax but gross of income tax). You have no tax issues and can file an EZ form.

Your income, $5,000, goes on line 1. You have no taxable interest on line 2 or unemployment compensation on line 3. That means your Adjusted Gross Income on line 4 is $5,000. Nobody can claim you as a dependent so you enter your exemption of $10,000 on line 5. Your line 6 taxable income is $0.

Based on your taxable income and the tax table your tax liability for the year is $0.

Because your line 4 AGI is <$13,980 and your line 1 income is <$13,980 you qualify for the Earned Income Tax Credit in the amount of $384. Your net tax contribution is -$384, which you can have refunded to you.

However, when dealing with the Premium Tax Credit the net tax contribution cannot be refunded (to the extent it results from the Premium Tax Credit). For example, if you make 133% of the Federal Poverty Level ($15,282 for a single person) you can qualify for a tax credit that requires your annual premium to be no more than 2% of your income (~$305). Any cost in excess of that amount is paid by the government to the insurer on your behalf with no limit (subject to the provisions of 26 USC § 36B).

In a random county where I live, the annual premium for a person aged 64 on the second-lowest cost silver plan (the bellweather for the tax credit) is $13,393. That means my tax credit is $13,088 ($13,393 - $305). My tax liability for the year is $528 (based on taxable income of $5,282). My net tax contribution is -$12,520 ($528 - $13,088). The caveat is that I can only see that $13,088 tax credit if I buy the 2nd low silver plan. If I go cheap and buy the lowest bronze plan ($9,593 in that state/county) my tax credit is $9,288 ($9,593 - $305); the difference, $3,800, is lost to me.

I guess it's a way of saying that the "difference" in tax credits is lost (nonrefundable) if you elect to go with cheaper coverage.

 

[chucky2]

So does that mean if they choose the Silver (and why not, Silver is higher than Bronze I'd assume), and they are at -$12,520, they actually receive $12,520? Or is their plan sent that money from the Fed directly?

EDIT: As an edit, is there a break even for the Fed on single no deduction folks for the 2nd lowest cost Silver? Such as, and I'm completely making up a number, at $45,323 someones taxes have covered at least their subsidy?

 

[sactoking]

So does that mean if they choose the Silver (and why not, Silver is higher than Bronze I'd assume), and they are at -$12,520, they actually receive $12,520? Or is their plan sent that money from the Fed directly?

It depends. IF they somehow pay 100% of the premium out of pocket during the year then yes, they can get the money paid to them when they file their taxes. Assuming that most people at those income levels can't afford the premiums until they file their taxes, you can get it paid in advance in monthly installments, but only if the money goes directly to the insurer.

EDIT: As an edit, is there a break even for the Fed on single no deduction folks for the 2nd lowest cost Silver? Such as, and I'm completely making up a number, at $45,323 someones taxes have covered at least their subsidy?

Impossible to tell. The tax credit is based on modified adjusted gross income and not taxable income. There are enough potential exemptions, deductions and credits between those two numbers that taxable income for any given MAGI may range from 0 to MAGI.

 

[chucky2]

I'm curious then, how does the Gov know that I would have insurance and that I've had insurance all year that I've been paying on? Does the insurance company send them some kind of tax form at the end of the year that indicates months covered and premiums paid?

 

[sactoking]

I'm curious then, how does the Gov know that I would have insurance and that I've had insurance all year that I've been paying on? Does the insurance company send them some kind of tax form at the end of the year that indicates months covered and premiums paid?

Yes.

Do you remember a few months back when the employer mandate was delayed? Ostensibly, it was delayed because the system used by employers to report the coverage for employees wasn't going to be ready. The system used by insurers is allegedly ready, so there is no corresponding individual mandate delay.

 

[chucky2]

Ok, that's good to know...I'd say something snide here but since I want this thread to not be trashed I'll bite my tongue.

So my last (I think) question is: Where is the money coming from to subsidize people who have plans that are paying less in taxes than the plans cost?

 

[sactoking]

Ok, that's good to know...I'd say something snide here but since I want this thread to not be trashed I'll bite my tongue.

So my last (I think) question is: Where is the money coming from to subsidize people who have plans that are paying less in taxes than the plans cost?

I don't follow your question.

 

[chucky2]

If someone gets $10000 back in subsidies but pays less than $10000 in Fed taxes, where does the money come from for the Fed to make that net negative (between the Fed and the person they're subsidizing) subsidy?

 

[sactoking]

It's a net loss in tax revenue. It can't be accounted for on an individual or household basis. The "extra" money "comes from" total overall tax collections. The policymakers basically say 'tax collections should be $1 trillion but we'll start this program and only collect $900 billion instead.' The cost, then, isn't true accounting cost so much as it is opportunity cost.

 

[chucky2]

That's...insane...

 

[nanette1985]

This thread is awesome. Thanks.

So, my son and several of his friends are still trying to access the website. What happens is that they are dumped into a place to apply for Medicaid. But this is NJ, so they are told that NJ no longer takes applications for Medicaid.

I'm curious, since NJ got a lot of federal $ to expand Medicaid, and our darling Mr Christie took the $ and put it elsewhere, is something bad going to happen to NJ - What about the other similar states?

And on a practical note, how else can my son and his friends get affordable health insurance?

 

[sactoking]

This thread is awesome. Thanks.

So, my son and several of his friends are still trying to access the website. What happens is that they are dumped into a place to apply for Medicaid. But this is NJ, so they are told that NJ no longer takes applications for Medicaid.

I'm curious, since NJ got a lot of federal $ to expand Medicaid, and our darling Mr Christie took the $ and put it elsewhere, is something bad going to happen to NJ - What about the other similar states?

And on a practical note, how else can my son and his friends get affordable health insurance?

I can't get too far into specific scenarios for people for a variety of reasons. I can say that since New Jersey accepted the Medicaid expansion money they can't just "close" enrollment. When you speak of "the website" which one are you referring to? Healthcare.gov? Which website is it "dumping" you in to? I found that they should be able to apply online at http://www.njfamilycare.org/apply.aspx. The website is pretty bad (from a layouf POV) but it seems to be functional. Any other options available to them would depend on their incomes.

 

[overst33r]

Can someone who does not qualify for medicaid and is unemployed due to relocation (DNQ for unemployment benefits) receive subsidies? If so, how?

If not, assuming they don't get insurance, how will their fine be assessed if they get a job with healthcare coverage sometime later in the year. Will they prorate the fine?

 

[sactoking]

Can someone who does not qualify for medicaid and is unemployed due to relocation (DNQ for unemployment benefits) receive subsidies? If so, how?

Eligibility for a tax credit and cost-sharing subsidy is based on annualized income. It's also dependent upon whether your state expanded Medicaid eligibility, since there is a 100% FPL minimum to qualify.

If you make less then 100% FPL and your state didn't expand Medicaid, and you fall into a Medicaid-ineligible category (e.g. single, childless male), then you're not eligible for anything.

If not, assuming they don't get insurance, how will their fine be assessed if they get a job with healthcare coverage sometime later in the year. Will they prorate the fine?

Tax penalties are calculated on a per-month basis and everyone gets a single lapse of two months or less forgiven.

 

[JEDI]

how does obamacare bronze + silver plans cut down on healthcare cost for the insurance company if they limit choices the customers get on hospitals and doctors?

do these hospitals and doctors get a lower payout than gold and platinum plans?

 

[sactoking]

Bronze, silver, gold, platinum refer to the actuarial value of a plan. Generally speaking, actuarial value is the overall percentage an insurer expects to pay for all treatments under that plan for a "normal" consumer, not counting premiums. E.g. a silver plan (70% actuarial value) expects to pay 70% of all treatment cost for a normal consumer in a plan year, including deductibles, out of pocket maximums, coinsurance and copays but not including premiums.

A doctor that is part of a network plan agrees to a certain contracted price for a service, ceterus paribus, regardless of the actuarial value of the insurance used. The split of the service cost between insurer and consumer is what changes, not the provider's contract price.

Limited network plans ("skinny networks") are a phenomenon of PPOs and PPO hybrids (since HMOs are generally exclusive provider networks). PPOs traditionally do not use a gatekeeper model, meaning that you do not need a referral to see a specialist. Under the PPO model you get the in-network price so long as you see any qualified provider in the network, but that does not mean that all providers are under the same contracts. A highly desirable medical group may be able to command a larger contract price with an insurer, but the insurer is going to pay the same percentage (since most PPOs use coinsurance).

Example: A plan has a 80% coinsurance after deductible. There are two specialists in the network, one a highly desirable medical group and the other a new practice with few clients. The insurer contracts with the new practice to provide a specific service for $100; the insurer will pay $80 for that service if the insured's deductible is met and $0 if it is not. The medical group has leverage and gets the insurer to agree to a $200 contract price for the same service; the insurer will pay $160 for that service if the insured's deductible is met and $0 if it is not. The insurer will pay 100% of the cost in both cases if the insured has met the annual out of pocket max.

***WARNING: MATH FOR ILLUSTRATIVE PURPOSES. NOT ACTUARIALLY SOUND***
The insurer anticipates 2000 instances of the service being rendered in the plan year.
500 at the new practice (@ $100 ea)
1500 at the medical group (@ $200 ea)

At the new practice:
50 occur before the deductible is met (total insurer cost: $0)
375 occur after the deductible is met (total insurer cost: $30,000)
75 occur after the OOP max is met (total insurer cost: $7,500)
Total cost at the new practice: $37,500

At the medical group:
425 occur before the deductible is met (total insurer cost: $0)
980 occur after the deductible is met (total insurer cost: $156,800)
95 occur after the OOP max is met (total insurer cost: $19,000)
Total cost at the medical group: $175,800
Total cost to the insurer: $213,300
Total insureds: 10,000
Premium cost per insured per month: $1.78

***END OF ILLUSTRATIVE MATH***

Now, take that same scenario but remove the medical group from the picture (i.e. a skinny network). All of the medical group loss costs are gone and the insurer loses the 8,000 enrollees, leaving 2,000 people to accumulate $37,500 in service expenses. That a pmpm (per member per month) rate of $1.56. By skinnying up the network the insurer reduces premium by $0.22 pmpm. That's good for hitting the 60% and 70% actuarial values of bronze and silver plans because the rules allow deductibles and whatnot to be manipulated only so much. Since gold and platinum require higher actuarial value the expensive providers can be added back in to boost the value.

***WARNING: MORE ILLUSTRATIVE MATH***
In the example above, with 10,000 members, the insurer had 500 instances of the service being rendered at the practice and 1500 instance at the medical group, for a total of 2,000 instances. The total cost of all instances was $350,000 (500*$100+1500*$200). The insurer paid $213,300. The insurer paid 60.9% of the cost, which is bronze level.

Removing the medical group, there were 500 instances of the service being rendered at $100 each for a total cost of $50,000. The insurer paid $37,500. The insurer paid 75% of the cost, which is between silver and gold.

***END OF ILLUSTRATIVE MATH***

Wait a minute, you say. Doesn't that go against the example? Not really. Look at the incidence of occurrence. The practice had 500 services and 2000 enrollees, so 1 in 4 enrollees received the service. The medical group had 1500 services and 8000 enrollees, so 1 in 5.3 enrollees received the service. Additionally, the practice enrollees were more likely to reach the OOP max than the medical group enrollees (15% v 6.3%).

Moral of the long-winded answer: premium rate setting is fucking complicated and attempts to distill it down to a sound byte play well in the media but are really irresponsible.

 

[rudeguy]

Sacto-

Do you know if the ACA has anything to do with drug prices going up so much? My son's insulin has went from $135 a vial to $240 a vial.

 

[sactoking]

Sacto-

Do you know if the ACA has anything to do with drug prices going up so much? My son's insulin has went from $135 a vial to $240 a vial.

Funny you should ask, I'm learning quite a bit about Rx pricing recently...

We've got a (state level) proposal to "lock" prescription drug formularies, so that whatever the formulary is on January 1 is the formulary for the whole year, with a few exceptions. There has been quite a bit of pushback from our insurers who allege that premiums will go up.

Not getting too deep into the weeds, it looks to me like the ACA is having little direct effect on Rx prices. One of the laments of certain healthcare reform proponents was that the ACA did little or nothing to reform prescription drug pricing in the US, which has been alleged to be heavily skewed in the advantage of "big pharma."

There may be indirect effects, such as the somewhat recent media reports of insurers using tiered formulary design as a stand-in for certain discriminatory underwriting practices.

 

[rudeguy]

Funny you should ask, I'm learning quite a bit about Rx pricing recently...

We've got a (state level) proposal to "lock" prescription drug formularies, so that whatever the formulary is on January 1 is the formulary for the whole year, with a few exceptions. There has been quite a bit of pushback from our insurers who allege that premiums will go up.

Not getting too deep into the weeds, it looks to me like the ACA is having little direct effect on Rx prices. One of the laments of certain healthcare reform proponents was that the ACA did little or nothing to reform prescription drug pricing in the US, which has been alleged to be heavily skewed in the advantage of "big pharma."

There may be indirect effects, such as the somewhat recent media reports of insurers using tiered formulary design as a stand-in for certain discriminatory underwriting practices.

I really appreciate your informed answers on this stuff.