In Part II of this blog series on the Patient Protection and Affordable Care Act (PPACA), I will explore the following statement: “Adults with pre-existing conditions became eligible to join a temporary high-risk pool, which will be superseded by the healthcare exchange in 2014.To qualify for coverage, applicants must have a pre-existing health condition and have been uninsured for at least the past six months. There is no age requirement. The new program sets premiums as if for a standard population and not for a population with a higher health risk. Allows premiums to vary by age (4:1), geographic area, and family composition. Limit out-of-pocket spending to $5,950 for individuals and $11,900 for families, excluding premiums.”

In addition, the premiums (effective September, 2010) for this high-risk pool were set as follows:

• Premium to be set at a standard rate for a standard population
• Premium for older individuals allowed to be up to 4 times the premium for younger individuals
• Premium for tobacco users allowed to be up to 1.5 times the premium for non-tobacco users

What is disturbing about this premium scheme is that individuals who cannot control their age are required to pay much more than individuals who can control their tobacco-related habits. Does this seem disturbing to anyone else?

While there is a limit on out-of-pocket spending, there is no ceiling on premiums (yet) and no floor for benefits. There is a 40% excise tax on premiums greater than $27,500 for families and $10,700 for individuals. However, this tax on health insurance companies does not go into effect until 2018. In addition, the healthcare exchange mentioned in the provision does not take effect until 2014.

The healthcare exchange is a government subsidy that will be provided to families based on size and annual income as a percentage of the federal poverty line. For instance, a family of 4 whose income is 400% above the poverty line (in other words, $88,200) will have a maximum out-of-pocket premium of $8,379 (9.5% of income). However, for another two years there is no premium ceiling, and for another six years there is no penalty for charging high premiums. Further, there is no premium ceiling at all for families whose annual income is above $88,200. What can this mean for a middle-class family in the US?

In the same year as the healthcare exchange takes effect, the government will also begin imposing a $2,000 tax per employee on employers who do not offer health insurance and employ more than 50 individuals. Thus, in two years, a family of four making $90,000 annually can lose its health benefits and be forced to purchase its own insurance for which there will be no subsidy and no premium ceiling.

What if the primary breadwinner of this family loses his job but has a pre-existing condition that may not be insured for 6 months to 10 years by a new healthcare package, based on the state in which the family resides? Even if he finds a new job right away, will he have to refuse healthcare for six months in order to enter the temporary high-risk pool of individuals, some of whom may have to pay up to four times the standard premium because they are older? Will this individual be able to afford this high premium when combined with insurance costs for his family? How will he insure his family during those six months? I have yet to find answers to these questions in the PPACA. I hope I am missing something.

I plan for this blog to be the first in a series of questions I have regarding different aspects of the Patient Protection and Affordable Care Act (PPACA, in the hope that it will help me not only gather more details that I have yet to uncover through further research but also spark some intelligent conversations that can help us all understand, as American citizens and healthcare consultants, the future of healthcare in this country.

While reading a summary explanation of the PPACA I was confused by the following items: 1) 40% excise tax on health coverage in excess of $10,200/$27,500, to raise $32 billion in funding, and 2) Impose a $2,000 per employee tax penalty on employers with more than 50 employees who do not offer health insurance to their full-time workers.[1] Item #1 will not go into effect until 2018 while item #2 will be in effect by 2014. In other words, by 2014, employers who, in 2009, paid an average of $13,375 on a policy covering an employee’s entire family will have to pay only $2,000 to not insure that same employee and his/her family.[2] When considering the scenario that even self-insured employers will save on healthcare costs by simply paying the penalty, what exactly is this “imposition” incentivizing?

Now, let’s consider item #1. By definition, an excise tax is “an internal tax or duty on certain commodities, as liquor or tobacco, levied on their manufacture, sale, or consumption within the country.”[3] It is more commonly known as a tax on luxury goods. Planned to be in effect by 2018, this 40% excise tax will be imposed on “Cadillac” plans that cost more than $10,200 per individual and $27,500 per family for everyone else while $11,850 per individual and $30,950 per family in annual premiums for retirees and employees in high risk professions. “Cadillac” plans, as they are referred to, are often based on age, gender, health, and for an employer-based plan the pooled risk of employees. These plans usually come with low deductibles and generous benefits, so it is easy to take a guess at the impacts of the excise tax. Payers will want to remain below the thresholds and thus will lower premiums. However, since there is no requirement to provide a certain minimum package of benefits to any insured individual or family, payers will decrease benefits or increase co-pays and deductibles, or both. Again, the same question arises: What is this “imposition” incentivizing? Also, if an expensive healthcare plan is required for professionals like firefighters who risk their lives as part of their jobs, is a “Cadillac” plan a luxury good to be excised or a necessity to be provided?

Combined, these two items created the following dilemma for the healthcare consumer. If your employer no longer offers health insurance and your annual household income is more than $88,200 (disqualifying you for a cost-sharing subsidy) but less than $100,000, can you afford healthcare insurance for you and your family? There are more factors to be considered in answering this question. I hope to address those factors in this series through much research.