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Future of health care exchanges on the line

Omaha World-Herald, November 4, 2012

  By Martha Stoddard

HUMBOLDT, Neb. — Mary Durman is not unique.

After losing health insurance, she developed symptoms of a health problem, but put off seeing a doctor — until the pain became unbearable.

Cancer was diagnosed, but it had spread by then, and the 56-year-old woman's chances of beating it had plummeted.

It's stories like hers that drive advocates of the controversial federal health care overhaul.

But it's experiences like those of Gary Reiners that fuel opposition to the 2010 law.

The Lincoln teacher retired five years ago, but huge jumps in his health insurance costs that he blames on the new law won't allow him to take it easy.

Despite crippling rheumatoid arthritis, Reiners, 61, has to take substitute jobs to keep the premiums paid.

Both Nebraskans focus their hopes and fears on health insurance exchanges, the centerpiece of the sweeping federal law.

***

As envisioned, health care exchanges will be one-stop shops for consumers. People can compare and buy private health insurance, get set up with federal subsidies to make coverage more affordable or enroll in Medicaid if eligible.

The outcome of Tuesday's presidential and congressional elections will be critical in determining whether exchanges are implemented.

If President Barack Obama wins a second term, his signature legislation will continue moving forward, and states will face a key Nov. 16 deadline.

They will have to submit plans by that date if they want to create their own exchanges or partner with the federal government. For states that do not submit plans, the federal government will set up exchanges.

If Republican Mitt Romney wins, many states are likely to ignore the Nov. 16 deadline, and the law's future will be murky.

Romney has promised to "repeal and replace" the law as soon as possible.

Full repeal may be difficult unless the GOP controls both houses of Congress, but he could use bureaucratic tools to stall implementation of the exchanges.

The Republican governors of Nebraska and Iowa are pinning their hopes on a Romney victory and have postponed exchange-related decisions until after the election.

Gov. Dave Heineman said last year he doesn't want a federally run exchange in Nebraska, calling the prospect a federal takeover of the state's health care system. More recently, he questioned the value of a state-run exchange, saying: "The only thing we get to decide is who to tax and how much."

Heineman has declined to indicate before the election what his decision may be. His administration, however, is preparing for the state to operate an exchange.

The Nebraska Department of Insurance has issued a request for proposals to build the computer infrastructure and set up a call center. Agency budget requests for the upcoming budget period include the costs of creating an exchange.

State Insurance Director Bruce Ramge said Nebraska will be ready to submit a plan if that is the governor's choice.

"We don't know what the decision will be. We need to be prepared to go either direction," he said.

Iowa Gov. Terry Branstad has taken the position that "an exchange built by Iowa, for Iowa, is better than a one-size-fits-all exchange built by bureaucrats in Washington," according to spokesman Tim Albrecht.

He said Branstad has pulled together officials from several state agencies to work on exchange planning, with the goal of meeting the Nov. 16 deadline.

Both governors have accepted federal money to plan and design a state exchange.

Nebraska has received $6.5 million. Iowa has gotten $26 million, most of which the state is using to replace the computer systems that have to coordinate with the exchange in determining eligibility for Medicaid.

Insurance companies, agents, health care providers and others have pushed for both states to run their own exchanges, arguing they should keep control of what they can and tailor the exchanges to local needs.

"We think Nebraska would be better than the federal government to help Nebraskans figure out what's best for them," said Bruce Rieker, vice president of the Nebraska Hospital Association.

If the governors choose state-run exchanges, details of their plans may not be unveiled until the documents are submitted to the federal government.

Iowa State Sen. Jack Hatch, a Des Moines Democrat, said he has not been briefed on the possibilities under consideration.

"The governor may be doing something in the catacombs of the Capitol, but we don't know about it," he said.

Nebraska State Sen. Jeremy Nordquist of Omaha said state officials have sought input but haven't laid out proposals for public response.

Key questions include how to fund exchange operations, the governance of the exchange and what regulations would be imposed on insurance companies.

Exchanges are to start operating by Jan. 1, 2014. Coupled with federal subsidies, they will open up coverage choices for many.

At the same time, almost all Americans will be required to get health coverage or pay a penalty. Insurance companies will be barred from using a person's health status to deny or limit coverage or set premiums.

***

The new health care exchanges could bring relief to Mary Durman and her husband, Alan.

Their health insurance disappeared, along with Alan Durman's job, when Armstrong World Industries closed its cabinet-making plant in Auburn, Neb., in December 2009.

Buying health insurance in the individual market was out of their reach. The Durmans were quoted prices of $800 to $900 a month.

The insurance available through Alan Durman's new job, as a nursing assistant at the local nursing home, was even pricier. Their share of the premiums would have eaten up all of his take-home pay.

Her job, at the Southeast Nebraska Community Action Agency, did not offer insurance.

So they went without. They set aside the $306 per month they had been spending on premiums to pay for prescriptions and one annual visit each to the doctor.

"I can't even tell you how scary it is to lose your insurance," she said.

Mary Durman began having symptoms of a problem in early 2011, but she ignored them. She also ignored the pain that started in summer 2011, because she could still function.

The pain finally forced her into the doctor's office this June. When the diagnosis of uterine cancer came back, she panicked.

"I said 'What am I going to do now? I have no insurance,'" she said. "I'm terrified of getting back in a situation where we're broke again."

She discovered her only coverage option was the federal high-risk insurance pool, created under the new law to help people until the exchanges start. It offers subsidized coverage for people with pre-existing conditions who cannot find affordable insurance.

The pool provided a way to pay for her cancer treatment, plus the doctor visits and laboratory tests she should have been getting to manage her diabetes.

She pays $421 a month in premiums plus $7,000 a year in out-of-pocket costs.

But her husband remains uninsured. Now 60, she said, he's hoping to hang on until he becomes eligible for Medicare in five years.

The exchanges would let both get insurance for less than they now pay for her alone. They could buy through the exchange because the insurance available through his job costs more than 9.5 percent of his income.

Her cancer would not bar them from buying through the exchange because insurance companies could no longer deny people for pre-existing conditions. The high-risk pool will end once the exchanges are created.

A health law calculator developed by the University of California, Berkeley's Center for Labor Research and Education estimates the Durmans would have to pay about $256 a month toward premiums.

Federal subsidies would pay the remaining $1,286 a month of estimated premiums.

The actual amounts could differ depending on the plan they chose and the specifics of their situation when they enrolled.

Looking at the estimates, Mary Durman caught her breath and her eyes widened.

"That would be pretty awesome," she said. "That would be great."

***

The new law would give Gary Reiners little relief for his worries.

He had hoped to do a little traveling after he retired from 34 years of teaching English, speech and debate.

The rising cost of health care and insurance is eating away at his dream.

After retiring, Reiners paid about $440 a month for health insurance. That ended after six months, and he had to search the individual market for a policy that would accept someone with a pre-existing condition.

He found one at about twice what he had been paying. Two years later, the premiums were up to almost $1,100 a month for the same policy.

He cashed in some of his savings to make the payments and racked up credit card debt to pay his share of the costs for foot surgery and follow-up treatment last year.

The premiums were set to rise another 30 percent this year. He found a different plan that costs $438 a month but provides minimal coverage, such as five office visits a year, no more than $7 on generic medications, nothing on his annual physical, a few hundred dollars a day for hospitalization.

"I had to have peace of mind of having some kind of insurance," Reiners said. "I want to take care of myself."

He doesn't hold out much hope the exchanges would improve his situation.

According to the University of California calculator, his retirement pay is too high to qualify for a federal subsidy, and it estimates his monthly premium at $569, with a limit on out-of-pocket costs at $6,050.

If those figures prove correct, Reiners could probably manage the premiums and save some on his out-of-pocket expenses.

But he would still struggle to afford insurance, and he worries that the exchanges would not live up to the promises.

He fears that plans through the exchange could leave significant coverage gaps.

The lowest tier would have to cover only 60 percent of average expected costs. Other tiers would cover more but cost more.

Insurance representatives have told Reiners to expect his premiums to remain high, and he believes companies will still find ways to push out high-cost people.

He's troubled by layoffs of health care workers blamed on the new law and wonders whether quality of care would suffer.

"I think there's going to be a huge amount of frustration," he said. "(The law) was meant to help, but I don't know how much help it's going to be."

About health care exchanges

By this time next year, Nebraskans and Iowans may be able to sign up for insurance through newly created health insurance exchanges. The exchanges are the centerpiece of the federal Affordable Care Act, intended to make sure nearly all Americans have health coverage. States face a Nov. 16 deadline to declare whether they will set up their own state exchange, partner with the federal government on an exchange or leave the job entirely to the federal government.

What are the key dates?

Tuesday: Election Day. The outcome of the presidential and congressional elections could affect the future of the federal health care overhaul and, ultimately, the health insurance exchanges.
Nov. 16: Deadline for states to submit plans to operate their own exchanges or partner with the federal government. The federal government will create exchanges for states that don't submit plans.
Jan. 1, 2013: Deadline for the federal government to certify whether states are ready to operate their own exchanges.
Oct. 1: Open enrollment begins for insurance plans offered through exchanges.
Jan. 1, 2014: Insurance exchanges to begin operation.

What if Mitt Romney wins the election?

It is not clear. Romney has promised to "repeal and replace" the federal law as soon as possible. He said he would start with an executive order that "paves the way" to issue waivers for all 50 states, though some experts question whether such waivers are possible under the law. Romney could not repeal the law outright unless he got 60 votes in the Senate to end a probable Democratic filibuster. If he got 50 votes in the Senate, he could chip away at the law, using the budget reconciliation process. He also could hobble the law by delaying rules and regulations, pushing back deadlines and shutting off funding.

What is a health insurance exchange?

Exchanges are essentially central marketplaces for insurance. They will offer policies for individuals, families and small employers. People can use them to compare and buy policies. Purchases can be made online, through a call center or through an insurance agent. People who buy through the exchange may get federal help paying premiums and out-of-pocket costs, based on their income. Exchanges will help qualifying people sign up for Medicaid.

Who might use an exchange?

Any U.S. citizen and legal immigrant can buy insurance through an exchange. Among those who might use it are part-timers, the self-employed, early retirees, people between jobs and employees of small businesses. Exchanges could be especially attractive to people without insurance. In Nebraska, 229,600 people, or 15 percent of those too young for Medicare, lacked insurance in 2010-11. In Iowa, the number was 329,500, or 13 percent of those under age 65.

Where did the idea come from?

Massachusetts and Utah created state health insurance exchanges before the federal law was passed. The federal law borrows ideas from both plans. Under a 2006 law, passed while GOP presidential candidate Mitt Romney was governor, Massachusetts prescreens and approves policies sold through its exchange. The state also provides subsidies. The Utah exchange, established in 2009, makes it possible for employers to compare and buy policies.

Why buy through an exchange?

Exchanges will allow side-by-side comparison of insurance policies and may increase choices. Policies will have to meet minimum standards. Navigators, as they're called, will help consumers understand their insurance choices. People who buy through an exchange may qualify for federal subsidies.

What insurance changes would affect people buying insurance inside or outside of an exchange?

Key changes take effect in 2014. Insurance plans must cover health care services in 10 key areas. People cannot be turned down because of their health history, and policies must cover pre-existing conditions. Insurance premiums can vary based only on age, home area and tobacco use and cannot be based on health factors. Out-of-pocket costs, such as deductibles and co-insurance, are capped. The caps vary by income, with the top amount being equal to the maximum that people can put into tax-free health savings accounts. That maximum was set at $6,050 for 2012.

What if an employer already offers insurance?

People generally cannot get subsidies through an exchange if their employer offers insurance. However, they may qualify for a subsidy if the employer coverage is considered unaffordable or inadequate. Coverage is considered unaffordable if premiums cost more than 9.5 percent of family income and inadequate if the policy does not cover at least 60 percent of average costs. Employer plans typically cover 80 percent or more of average costs.

How would the subsidies work?

People who qualify can get tax credits to help pay premiums and subsidies to help pay other out-of-pocket expenses. The credits will be available when a person buys insurance and can be claimed whether or not a person owes income taxes. The tax credits will be available on a sliding scale for families with incomes from 100 percent to 400 percent of the federal poverty level. Out-of-pocket subsidies will be available for families with incomes from 100 percent to 250 percent of the poverty level.

The poverty level is updated each year based on the cost of living. Here is the federal poverty level for 2012:

Family/household size Annual income
100 percent 400 percent
1 $11170 $44680
2 $15130 $60520
3 $19090 $76360
4 $23050 $92200
5 $27010* $108040
(Add $3,960 for each additional person.)

Would insurance be available outside of the exchanges?

Yes, insurance companies can continue to sell plans for individuals and employers outside the exchange. Large employers must buy insurance outside the exchange until at least 2017. No subsidies are available for people getting coverage outside the exchange.

Would everyone have to buy insurance?

Yes, nearly everyone must have health coverage or pay a penalty. The requirement does not apply to people who make too little to file an income tax return; people who cannot find coverage that costs less than 8 percent of their income, counting tax credits and employer contributions; members of Indian tribes; illegal immigrants; and a few others.

What would be the penalties for not having insurance?

The penalty will be phased in over three years. In 2014 it is 1 percent of family income or $95 per adult and $47.50 per child (up to $285 per family), whichever is greater. In 2016 and beyond, it will be the greater of 2.5 percent of family income or $695 per adult and $347.50 per child (up to $2,085 for a family).

Contact the writer: 402-473-9583, martha.stoddard@owh.com

Original Article


 
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