My Personal Finance Blog

It won’t be long before everyone will be able to afford health care.  This will be possible because of the healthcare reform that President Obama set up.  With the healthcare reform every state will be required to carry health insurance exchanges where small businesses and individuals will be able to shop for affordable health insurance.  The purpose of the exchanges is to bring lower prices on insurance for all people and small businesses.

It won’t be long before all small businesses will be expected to carry insurance on their employees.  This will be difficult for some small businesses.  Health insurance exchanges will make it affordable for them to carry the health insurance that is needed.  There will even be multi-state insurance so you can see a doctor out of your state and it will still be covered by your insurance.

Health insurance pays a large portion of your medical bills.  It could be 60% or even 80%.  There will be a copay.  With this size percentage being paid by the insurance company everyone should be able to afford to pay for their medical bills and will not end up in a financial bind because of medical bills.  All it takes is one major injury or illness to put you in deep debt.  Health insurance exchanges will make it possible for you to get insurance at a price you can afford.  People who can’t afford to pay for their own insurance will be able to get help through the state that they live in.

It is expected that health insurance exchanges will be in operation in every state by 2014.  This will be great for small business since it is going to be mandatory for all businesses to carry insurance on their employees.  All small businesses that have less than 100 people working for them will be able to use health insurance exchanges.  Eventually larger businesses may be able to use them as well.  Right now it is only set up to help small businesses.  There are many small businesses that cannot afford to buy insurance for all their employees.  When health insurance exchanges are set up it is expected that health insurance will go down in price so everyone can afford it.

Will health insurance exchanges be helpful?  They should be able to help everyone with health insurance.  The amount of money you will save when you have health insurance will be phenomenal.  People won’t have to worry about going into debt or filing bankruptcy due to medical bills.  Right now medical bills are the number one reason for bankruptcy.  Health insurance exchanges are going to take that all away by bringing affordable health insurance to you.

Health insurance companies won’t be able to pick who they want to have as customers.  All people will be eligible for insurance.  By 2014 all citizens of the US are expected to have insurance for medical bills.  Once everyone can afford to buy health insurance, medical bills should become a thing of the past.  This will help to keep people out of debt.

The world is often a confusing place and nowhere is the confusion likely to be so complete as in the tax system. Here we have the best brains in the Government taking on the best brains in the private sector. The Government wants the maximum tax take. The private sector wants to arrange things so that no one with money ever has to pay any tax. Somewhere in the middle the two world-views collide and, usually, some tax is paid. Anyway, when President Obama signed the healthcare reform bill into law, some of the largest employers in the US let out a collective sigh of pain. As an example, Caterpillar is the world’s largest manufacturer of excavators and bulldozers. The day after the President’s signature, Caterpillar announced it was taking a charge of $100 million to earnings over an expected loss of tax benefits. A number of other influential corporations have also made allowances in their accounts. The reason is that the healthcare reform ended a tax break given to cover the cost of supplying drugs to early retirees.

Let’s take this step by step. If a person continues to work, he or she will be covered under the employer’s plan. All other things being equal, working up until you are entitled to Medicare gives continuity of coverage. But there was always a problem if someone took early retirement. Health insurance companies were reluctant to insure older people who might more quickly develop serious medical problems. So, to give people aged between 55 and 64 a bridge until they became eligible for Medicare, employers were given a tax break to enable them to pay for their ex-employees’ drugs. With the disappearance of the tax break, employers were therefore left with an obligation to pay for drugs without any relief.

Acting through Kathleen Sebelius, Secretary to the Department of Health and Human Services, President Obama has announced a $5 billion package to offset the loss of the tax break. This will run from June 2010 to January 2014 when the individual health insurance plans offered through the new exchanges should come onto the market. It is estimated that about 4,500 private and public employers will be eligible to claim from this new fund. The intention is to provide continuity of coverage under the current health plans and it will be condition that the employers maintain their contributions, i.e. federal money is a top-up not a substitute for payment by employers. Ms Sebelius has also made it clear that the individual health plans offered to early retirees must include coverage for chronic and high-cost diseases and disorders. Employers cannot cherry pick the diseases to be covered. That means the victims of heart attacks or those diagnosed with diabetes and cancer will get continuing support under the plans if federal funding is to be drawn down.

In general, the business community has been slow in showing its gratitude. The feeling seems to be that Government made a mistake when pushing through the reform bill and was now offering a fraction of the total money required to fill in the hole. Nevertheless, the President has recognized the problem and made funds available to help offset it. Whether these funds will prove sufficient is something we will have to wait and see. For the retirees, it should mean access to benefits with fewer hassles.

There are times when you get an overview and then it hits you, “Somethings just don’t add up.” Well, you remember Wellpoint, don’t you? This is the friendly company that, around January or February, announced it was going to increase premium rates by up to 39% in a number of states around the Union. President Obama got himself all worked up, citing them as the real reason why all the Democrats in Washington should band together and take a stand against the insurance industry. Then, sure as eggs is eggs, there was a stampede to get the healthcare reform bill to the President for him to sign it into law. Those Democrats sure did have fun beating on Wellpoint. So the big question is what happened next? Here’s one of the largest corporations in the insurance market demanding premium increases. Did it get its way?

The answer starts off in California where the maximum rate of 39% was due to take effect. The state referred the proposed increase to independent auditors for an opinion. The answer came back negative. It seemed Wellpoint couldn’t add up. Well, that’s oversimplifying things a little. But the reality is that the numbers Wellpoint offered to support their premium increases were based on some very shaky mathematical assumptions. When news of the report became public, Wellpoint withdrew the proposed increase. Acting on this, Kathleen Sebelius who is Secretary of the Department of Health and Human Services sent out a letter to all state insurance commissioners encouraging them to review every proposed premium increase. This is the first sign that the balance of power is shifting against the insurance industry and in favor of the consumer. For too long, insurance companies have hidden behind complicated mathematical explanations and gamed the system. With the Affordable Care Act now law, Sebelius is encouraging every state to give itself the power to approve rate increases. The first sign of continuing good news for consumers comes out of Connecticut where Attorney General Blumental forced an audit of Blue Shield and Anthem Blue Cross, both Wellpoint subsidiaries. Connecticut’s Insurance Commissioner Sullivan rejected these companies requests for increases last year. It seems likely the same thing will happen this year.

By moving so quickly to encourage states to review all proposed rate increases, Secretary Sebelius is demonstrating one of the key advantages now available to the Federal Government under the new laws. That the interests of the consumer will be put before the interests of the health insurance industry. This means every state should be going through a routine of analysis every time premium rate increases are proposed. The assumptions, evidence, claims histories and trends asserted should all be rigorously tested. If there are any problems, the increases should be denied. The aim should always be to ensure affordable individual health insurance plans are available to the majority of people living in the US. For too long, the insurers have been allowed to bamboozle regulators with math and complicated explanations. With independent audits now coming into play, the kind of success enjoyed by the citizens of California should be felt around the US.

Well, for better or worse, the healthcare bill has been signed into law. There is no immediate benefit in being angry. There are a number of legal actions started by various Attorneys General alleging that the reforms are unconstitutional. Even if some of these cases succeed on the issue of mandatory insurance for private individuals, this will not necessarily strike down the whole bill. The likelihood is we will be left with all the provisions dealing with small businesses. Keeping it real, we have to start planning for the future on the law as it is. The good news is that the main raft of provisions will not become active until 2014. This gives the lawmakers plenty of time to have second thoughts. Just as important, there are sets of regulations to be written clarifying the detail of how some of the new features are to work at state level. However, this is an outline of what we can expect.

The states are to establish SHOP exchanges where small businesses can group together and buy insurance. For these purposes, until 2016, a business is considered small when it has no more than 50 employees, with states having the option of increasing the limit to 100 employees. To calculate numbers, you pro-rate the full- and part-time employees. Independent analysts predict group premiums will drop no more than 4%, while the value of the cover will rise by up to 3%. To bridge until the exchanges are operating, a tax credit system will come into force. If your business has less than ten employees with an average annual pay of less than $25,000, the credit is 35% of the health plan cost. There are partial credits where the number of employees is less than 25 and their average annual pay is less than $50,000. When the exchanges start, the credit increases to 50% for the first two years.

With immediate effect, there are a ban on terms designed to cap the value of claims, and limits on the right of insurers to cancel policies except in cases where actual fraud can be proved. As from 2014, the insurers must accept all employees without regard to pre-existing conditions. Their calculation of premium rates can only be based on location, age and whether an individual smokes. As from 2014, small businesses with more than 50 employees will be required to provide a health plan or pay an annual penalty of $750 for every full-time employee denied cover. This can rise to $2,000 if coverage is still denied.

So, tomorrow, you will be going out into the same market as before the reform bill became law. Finding cost-effective small business insurance will continue to be a struggle. Indeed, many insurers may increase premiums now so that, when the SHOP exchanges do come into force, they have a margin to play with to deal with the competition. However, when you buy, check that the new terms on the total value claimable and restrictions on the right to cancel have been introduced. If you buy your small business insurance through an agent, ask direct questions. It saves time fighting over whether wording is unlawful later on.

Recently, President Obama made a big speech. He was worried about education standards. He wanted to divert more resources into improving basic reading skills and giving people a better understanding of the world around them. It was interesting to see how many voices were raised in complaint. They did not agree it should be a high priority for people to know more about the world. These are the voices of big businesses like insurance that rely on you not understanding how policies work. There is more profit to be made if people do not read and understand what they are buying. How bad is this problem? The answer comes in a recent survey carried out by the National Association of Insurance Commissioners (NAIC). It seems only 45% of you have any real sense of confidence when you buy insurance policies, more than 60% failed to define simple concepts from health and auto policies, and 86% did not understand the terms being used in the healthcare reform debate. When insurance is so important to financial survival in the US, it is disheartening that people are not making decisions based on the best information.

Here is a quick test:

• if some property is stolen from your vehicle, can you claim its value on your auto policy?
• is your credit history taken into consideration when you buy a policy?
• when you buy a liability policy which insures 100/300/100. what does the last figure mean?

When you want insurance, you could make a policy decision only to buy through an agent. Being able to talk to a person gives you access to their knowledge and experience. It can give you more confidence. Except most agents will charge you a fee or there will be commission deducted out of your premium instalments, so this advice can come expensive. Is it worth it when you can do a little study and learn what you need to know. As a starting point, look at http://www.InsureUonline.org/. Getting more savvy means saving money and getting a better deal by buying a policy online. So long as you shop around, getting as many car insurance quotes as possible, you should always be able to find a good deal. But, if you are still uncertain, do not be afraid to pick up the telephone before writing out a check or authorizing a credit card payment. Now you make a choice. Your state has a Department of Insurance and all of them run help lines to answer your questions. Alternatively, call the car insurance company directly. Make sure you understand your policy before you find out the hard way when making a claim. In other words, you should always protect yourself and avoid future losses by asking before you buy.

The answers to the questions are: property stolen from your vehicle is covered by your homeowners policy not the auto insurance policy; your credit score is a key factor for setting your premium rate in the majority of states; and the final $100,000 is the maximum amount payable for damage to property.