In the last few months, we’ve seen many Health Care Reform rules and regulations being introduced by the Health and Human Services Department. Every time that happens, the media gets hold of it, and all kinds of articles are written in the Wall Street Journal, the New York Times, and the TV network news programs talk about it. All the analysts start talking about the pros and cons and what it means to businesses and individuals.
The problem is that one writer often looked at the regulation and wrote a piece about it. Then, other writers start using details from that first article and rewriting parts to fit their theme. When the information gets widely distributed, the regulations and rules get twisted and distorted. What shows up in the media sometimes doesn’t truly represent the reality of what the laws say.
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There’s a lot of misunderstanding about what is going on with ObamaCare, and one of the things that I’ve noticed in discussions with clients is that there’s an underlying set of myths that people have picked up about healthcare reform that isn’t true. But because of all they’ve heard in the media, people believe these myths are true.
Today, we will talk about three myths I hear most commonly. Not everybody believes these myths, but enough do, and others are unsure what to think, so it warrants dispelling these myths now.
The first one is that healthcare reform only affects uninsured people. The second one is that Medicare benefits and the Medicare program aren’t affected by healthcare reform. And then the last one is that healthcare reform is going to reduce the costs of healthcare.
Health Care Reform Only Affects Uninsured
Let’s look at the first myth about healthcare reform only affecting uninsured people. In a lot of the discussions I have with clients, there are several expressions they use: “I already have coverage so that I won’t be affected by ObamaCare,” or “I’ll just keep my grandfathered health insurance plan.” The last one – and this one, I can give them some leeway because part of what they’re saying is true — is, “I have group health insurance so that I won’t be affected by health care reform.”
Well, the reality is that healthcare reform is going to affect everybody. Starting in 2014, we’re going to have a whole new set of health plans, and those plans have wealthy benefits with lots of extra features that the existing programs today don’t offer. So these new plans are going to be higher cost.
Health Care Reform’s Effect On People With Health Insurance
People who currently have health insurance are going to be transitioned into these new plans sometime in 2014. So, the insured will be directly affected by this because the health plans they have today are going away, and they will be mapped into a new ObamaCare plan in 2014.
Health Care Reform Effect On The Uninsured
The uninsured have an additional issue in that if they don’t get health insurance in 2014, they face a mandate penalty. Some of the healthy uninsured are going to look at that penalty and say, “Well, the penalty is 1% of my adjusted gross income; I make $50,000, so I’ll pay a $500 penalty or $1,000 for health insurance. In that case, I’ll take the penalty.” But either way, they will be directly affected by health care reform. Through the mandate, it affects the insured as well as the uninsured.
Health Care Reform Effect On People With Grandfathered Health Plans
People who have grandfathered health insurance plans are not going to be directly affected by health care reform. But because of the life cycle of their grandfathered health plan, it’s going to make those plans more costly as they discover that there are plans available now that they can easily transfer to that have a richer set of benefits that would be more beneficial for any chronic health issues they may have.
For people who stay in those grandfathered plans, the pool of subscribers in the program will start to shrink, and as that happens, the cost of those grandfathered health insurance plans will increase even faster than they are now. Therefore, people in grandfathered health plans will also be impacted by ObamaCare.
Health Care Reform Effect On People With Group Health Insurance
The last one, the small group marketplace, will be the most notably affected by health care reform. Even though the health care reform regulations predominantly affect large and medium-sized companies and companies with 50 or more employees, smaller companies will also be affected, even though they’re exempt from ObamaCare.
Many surveys and polls are starting to show that some of the businesses that have ten or fewer employees are going to look seriously at their option to drop health insurance coverage altogether and no longer have it as an expense of the company. Instead, they will have their employees get health insurance through the health insurance exchanges.
Some carriers now anticipate that up to 50% of small groups with ten or fewer employees will drop their health insurance plan sometime between 2014 and 2016. That will greatly affect all people who have group health insurance, especially if they’re in one of those small companies that drop health insurance coverage.
It’s not just the uninsured going to be affected by health care reform; everybody will be impacted.
Health Care Reform Will Not Affect Medicare
The next myth was that healthcare reform would not affect Medicare. This one is funny because right from the very get-go, the most notable cuts were specifically targeting the Medicare program. When you look at Medicare’s portion of the overall federal, you can see that in 1970, Medicare was 4% of the U.S. federal budget, and by 2011, it had grown to 16% of the federal funding.
If we look at it over the last ten years, from 2002 to 2012, Medicare is the fastest-growing part of the major entitlement programs in the federal government, and it’s grown by almost 70% during that period.
Because of how large Medicare is and how fast it’s growing, it’s one of the key programs that ObamaCare is trying to get a handle on so it doesn’t bankrupt the U.S. Medicare will be impacted. The initial cuts to Medicare have already been set at about $716 billion.
Medicare Advantage Cuts And The Effects
Of those $716 billion cuts, the Medicare Advantage program gets cut the most and will see the bulk of the effects. What that’s going to do is increase the premiums people pay for their Medicare Advantage plans and reduce those plans’ benefits.
Increased Medicare Advantage Costs
Many people now choose Medicare Advantage plans because they have zero premiums. When given a choice on Medicare plans, they view it as an easy choice because it’s a free program for them, “Sure, I get Medicare benefits, I don’t pay anything for it; why not.” Now, they’re going to see Medicare premiums start to climb and go from zero to $70, $80, $90, $100. We’ve already seen that with some of the Blue Cross Medicare Advantage plans this year. It’s going to get worse as we go forward in the future.
Reduced Medicare Advantage Benefits
To minimize the premium increases, what many Medicare Advantage plans will do is increase the copayments, increase the deductibles, and change the co-insurance rates. To keep the premiums down, they’ll push more of the costs onto the Medicare Advantage recipients. Increased tips and reduced benefits are what we’re going to see coming in the Medicare Advantage plan.
Fewer Medicare Physicians
And then, if that wasn’t bad enough, as Medicare doctors begin receiving lower and lower reimbursements for Medicare Advantage people, they will stop taking new Medicare Advantage recipients. We will see the pool of doctors to support people in Medicare starting to shrink unless changes are made over the next five years. So Medicare will be affected, and it will be affected dramatically by health care reform. Everybody’s on pins and needles, waiting to see what will happen there.
Health Care Reform Will Reduce Healthcare Costs
The last one, and probably the biggest myth about healthcare reform, is everybody thinking that ObamaCare will reduce healthcare costs. That’s completely hogwash. Early in the process, when they were trying to develop the rules and regulations, the emphasis and one of the goals for reform was to reduce healthcare costs.
But somewhere along the line, the goal shifted from cost reduction to regulation of the health insurance industry. Once they made that transition, they pushed cost reductions to the back burner. There are some small cost reduction components in ObamaCare, but the real emphasis is regulating health insurance. For example, the new plans have much richer benefits than many plans today: richer benefits mean richer prices.
Health Care Reform Subsidies: Will They Make Plans Affordable?
Many people hope, “The subsidies will make health insurance plans more affordable, won’t they?” Yes, in some cases, the subsidies will help to make plans affordable for people. But if you make $1 too much, the cheap plans are suddenly going to become very expensive and can cost thousands of dollars more over a year. Will a subsidy make it affordable or not affordable is subject to debate now. We will have to see what the rates look like for these plans.
New Health Care Reform Taxes Passed On To Consumers
Then there’s a whole ton of new healthcare reform taxes added into the system to help pay for ObamaCare. That means everybody who has a health insurance plan, whether it’s in a large group, a small group, or just as an individual, is going to be taxed to pay for the cost of reform. Healthcare reform adds various taxes on health care that insurance companies will have to collect and pay, but they’re just going to pass it right through to us, the consumers.
The Mandate Won’t Reduce Uninsured Very Much.
During the initial years of health care reform, the mandate was pretty weak. The order says that everyone must get health insurance or pay the penalty (a tax). What that’s going to do is make healthy people sit on the sidelines and wait for the mandate to get to the point where it finally forces them to buy health insurance. People with chronic health conditions who couldn’t get health insurance previously will jump into healthcare at the beginning of 2014.
At the end of that year, the plans’ cost will go up in 2015. I can guarantee that will happen because young, healthy people will not be motivated to get into the strategies. They won’t see the benefit of joining an expensive program, whereas the chronically ill people will get into the programs and drive the costs up.
