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In the past two weeks, about 11,000 Denial of Coverage notices were generated by Covered CA and sent to consumers with the incorrect Open Enrollment dates for the Individual Marketplace. These notices were sent to consumers that applied outside of Covered California's Open Enrollment period.  A change in the law resulted in a change to the Open Enrollment period. The incorrect dates on the notice were October 15, 2014 through December 7, 2014. The 2015 Open Enrollment period is November 15, 2014 to February 15, 2015.

As we are preparing for the next open enrollment period as well as the fact that many folks are new to the insurance world, it's a good time to review some basic terms.

Deductible - the dollar amount an insured individual must pay for covered expenses during a calendar year before the plan begins paying co-insurance benefits.

Co-pay/co-payment - the amount an insured individual must pay toward the cost of a particular benefit. For example, a plan might require a $25 co-pay for each doctor's office visit.  This may or may not apply to the deductible.  Read the fine print!

Co-insurance - the percentage of covered expenses an insured individual shares with the carrier. (i.e., for an 80/20 plan, the health plan member's co-insurance is 20%.) If applicable, co-insurance applies after the insured pays the deductible and is only required up to the plan's stop loss amount.

Stop-loss - the dollar amount of claims filed for eligible expenses at which the insurance begins to pay at 100% per insured individual. Stop-loss is reached when an insured individual has paid the deductible and reached the out-of-pocket maximum amount of co-insurance. When comparing plans be sure that you are clear on that number!

Formulary:  This is the insurance company's list of preferred medications. In the new health insurance world this formulary is likely much smaller than it was in the past.  This means that many brand name Rx are not covered or required a special authorization request.  Be sure to refer to the online list as it can change.  If you have a high deductible health plan and are funding a Health Savings Account (H.S.A) you can use those funds to pay for non-covered medications.

H.S.A. Health Savings Account:  This is a tax-favored account that can be held at any bank assuming you have an H.S.A. qualified high deductible health plan.  The funds that are contributed are tax deductible for federal purposes (not CA).  When funds are used to pay qualified medical expenses, they are withdrawn federal income tax free.  There is no "use it or lose it provision" so you can accumulate funds without restriction, other than the annual contribution limit. Funds in the H.S.A. can even be used to pay Medicare Part B premiums when you turn age 65.


What is community rating and how will it affect rates?

Along with guaranteed issue, health care reform requires health insurance companies to move to modified community rating for individuals and small businesses. By pooling a group of people together, healthy people help balance health care costs for people who aren't healthy. The risk and cost is shared among everyone in the pool.

Health care reform has introduced new rules for community rating, which is why it's called modified community rating. Insurance companies can't base rates on any person's health history. Instead, rates can be based on age, tobacco use (but not in California), family size and location. The law limits how much coverage can cost. The highest rate can't be more than three times the lowest rate.  

All individual customers in a state will be in one risk pool and all small business customers will be in another risk pool. In addition: These laws prevent insurance companies from creating separate risk pools that charge higher or lower rates.

Unfortunately this new 3:1 ratio is has raised rates for younger people.  It reduces rates for older, but not all that much.  That is why it's important that young people with a grandfathered plan must be cautious.  In 2014 new or Non-Grandfathered plans have much higher rates for folks under 35.

Note: All information in this column is provided" to the best of my knowledge" subject to final regulation by the respective agencies.