Column 46

Column May 10th

I had an interesting conversation with a physician  that made me realize I have missed a very important message to our readers.  It is very important for consumers to understand that there is a robust market for private insurance.  The only reason you would want to apply for individual coverage through the Exchange is IF you think you may qualify for subsidy or Advanced Premium Tax Credit (APTC). 

            All the statistics you are reading about the results of open enrollment do not include those who enrolled outside the Exchange, directly with insurers.  At the end of the first special open enrollment period 3 million Californians found health insurance through Covered California and approximately 1.8 million more found coverage through the private insurance marketplace.  Agents enrolled about 40% of those on the Exchange and a higher percentage off the Exchange.

Dylan Roby, who directs UCLA's Health Economics and Evaluation Research Program, estimates that only 10 percent of Covered California's 1.2 million enrolls are nonsubsidized paying customers (Medi-Cal claimed nearly 2 million of Covered California's enrollments).  So at least  some folks have the message that they don't want to add the additional layer of bureaucracy  if they don't need to do so.


We have had lengthy discussions about the day of reckoning in 2015 when these subsidies are reconciled on your 2014 tax return.  There is some reason to be a bit more relaxed about this day.  The ACA imposes limits on the excess amounts to be repaid under certain conditions.


"For households  with incomes below 400% FPL, the law includes specific limits that apply to single and joint  filers separately-limits that will be indexed by inflation in future years" according to Bernadette Fernandez, Specialist in Health Care Financing in her paper dated March 12, 2014.  The paper explains how these rules limit the amount of the subsidy that may need to be repaid and it is substantially less than the actual maximum subsidy for each category.  A link to this paper is found on our website: It's on the home page and says "Want to know more about the subsidies ".


The paper states that If Household Income (expressed as a percentage of the Federal Poverty Level) Is less than 200%, the maximum amount to be refunded is $600.  If it is at least 200% but less than 300%: $1,500 and at least 300% but less than 400%; $2,500.  Note: The applicable dollar limit for single filers is 50% of the joint filer limit.  When some families are receiving subsidies of as much as $1000 monthly, this is quite a substantial spread.


Expressed as a table below:



These limits have been modified multiple times, so I would certainly not guarantee there won't be further changes.  I continue to apply the motto "nothing is so constant as change" to this entire project. 


Speaking of change: there has been a change to the Model Notice for employees eligible to continue their benefits under COBRA Consolidated Omnibus Budget Reconciliation Act). So employers with 20 or more employers should look for changes to their notice from the COBRA vendor or look at the model notice on the website:  I expect we will see the state of CA follow with updates required to CALCobra notices for groups with under 20 employees.  But since the insurer is responsible for that notice, those groups won't have to pay too much attention.


The updates make it clear to workers that if they are eligible for COBRA continuation coverage when leaving a job, they may choose to instead purchase coverage through the Health Insurance Marketplace.  Since a loss of other coverage can create a qualifying event for open enrollment in an individual policy this is an important reminder.  However, it's important to remember that there may be reasons to continue with the prior employer's plan.  Those include things like the provider network, the Rx formulary and the fact that you will not be given credit for deductibles and coinsurance met under the prior plan.  Your new plan will require that you start a new deductible accumulation period for all insured members. 


The good news is that you have options.  Under the old rules, you had to qualify based on your health history for individual insurance.  Now health history is not even a question.