At SimplyInsured, we are avidly watching the changes in regulations and rates in the national health insurance market. As we head into 2013, we created a quick guide for startups summarizing the major changes to expect, and our advice on how to manage the changes.
Changes to Health Insurance in 2013
HEALTH INSURANCE RATES ARE GOING UP 10-30% IN 2013
Most of the major health insurance companies are raising their rates by 10-30% in 2013 – many are going into effect in January. In California, the worst offender is Anthem Blue Cross – they have filed for a 26% price increase across the board.
It’s not just California, either. Aetna’s CEO stated publicly that he expects health insurance premiums to “rise by 100% in some areas.” At SimplyInsured, we did our own analysis of prices from last year to this year, across public statements from the major insurance companies. Many large states are expecting significant growth in increase premiums in the coming year.
Kaiser and Cigna have not announced major rate increases – yet. This is a great time to switch to one of those providers and lock in low rates for 6-12 months. If you’re on a company or group plan, you can lock your rates down for even longer; state regulations prevent insurance companies from increasing or decreasing rates by more than 10% in a given year. We have a comprehensive listing of the most affordable plans from all the major providers, which you can browse them at www.SimplyInsured.com.
EMPLOYERS MUST REPORT HEALTH EXPENSES ON W-2’S
Starting in 2013, employers must report any health insurance related spending to the IRS and employees on their W-2 form. Similar to 401K deposits and life/workers compensation insurance, this is a mandatory reporting requirement starting this year. The penalties for failing to disclose these numbers accurately can be steep. Nobody wants an IRS audit.
Make sure you do this. Don’t get audited by Uncle Sam.
TAXES ARE GOING UP – BUT SO ARE TAX CREDITS
Taxes are going up by 1% on all incomes over $200K/year – which may affect some startup founders earning significant salaries or capital gains in 2013 or 2014. But – smaller startups can also save $5,000-$10,000 per year in taxes with the Small Business Health Care Tax Credit.
SMALL BUSINESS HEALTH CARE TAX CREDIT
One often overlooked beneift of the Affordable Care Act is a provision known as “Small Business Health Care Tax Credit for Small Employers”. This tax benefit is for small businesses with up to 25 employees and average wages of up to $50,000 per employee – which is perfect for early stage startup companies looking to save $5,000-$10,000 in taxes. The exact wording of the law is pretty complicated, so we’ve included this simple calculator to help you figure out your savings.
Health Insurance Tax Credit Calculator (2013) Monthly Premium per Employee ($) Number of Employees (#) Avg. Employee Wages per Year ($) Tax Credit (calculate) –
Make sure you speak to your accountant or tax advisor this year to take advantage of this tax credit. The credit actually increases by ~50% in 2014, meaning savings of $7,000-$15,000. The IRS reported that less than 7% of eligible companies took advantage last year. Make sure you’re in the savvy part of that statistic next year!
INCREASED COVERAGE TRANSPARENCY AND PLAN CHOICE
There are two major benefits to transparency in 2013: the mandate of Summary of Benefits and Coverage (SBC) forms and the launch of Health Insurance Exchanges towards the end of the year.
SUMMARY OF BENEFITS AND COVERAGE (SBC) – THE INSURANCE CHEAT SHEET
One significant provision of the Affordable Care Act is to require all insurance companies to publish detailed, “plain English” explanations of the terms and benefits for every insurance plan. Unfortunately, the government mandated templates are still fairly confusing and full of legal jargon, but at least there is a standardized template with which to compare health insurance plans. We’ve attached a snapshot of the template below – the added detail will definitely benefit transparency for people wanting to do their homework.
The mandated insurance templates are a great first step, but for easy comparison and “plain English,” check out SimplyInsured’s “What If” feature. Our algorithms model expected costs for ~100 conditions and medical emergencies – providing interactive, custom out-of-pocket estimates that are easily comparable between plans. We built the tool to be interactive and significantly easier to use than government templates.
HEALTH INSURANCE EXCHANGES:
Starting October 1, 2013 – the federally managed Health Insurance Exchanges are required to be up and running for open enrollment. The exchanges are also mandated to be operating by January 1st, 2014. Why is this good? The exchanges will open up the insurance market to people “trapped” in their current employer insurance plans. The exchanges will give consumers freedom to choose health insurance from any plan and provider on the open market. In addition, several expanded Medicare and Medicaid subsidies will give options to low-income individuals and those suffering from pre-existing conditions.
The insurance exchanges will be a blessing for many people, but they will not go into effect until early 2014. If you want to save money now, the best option is to find an affordable plan on the private market. Saving $100/month starting today is a sure win, compared to potentially saving money in the future when insurance premiums are higher.
We’ll keep you updated as we learn more – good luck in 2013!