Health Insurance Exchanges and what they mean to your financial plan
Healthcare expenses are often a neglected component of a financial plan. But as a highly inflationary cost, healthcare should be a critical factor in planning and retirement cash flow analysis. As we integrate healthcare expenses into your plan, we should consider the potential impact of the Affordable Care Act (ACA), particularly its provision for Health Insurance Exchanges. These exchanges will enable even self employed, unemployed or post-COBRA individuals to buy affordable health insurance regardless of age, preexisting health conditions or work status.
Health insurance for all
For individuals who don’t purchase health insurance through their employers, finding adequate insurance is often expensive. The new Health Insurance Exchanges, scheduled to open on October 1, 2013, will offer a marketplace for people to purchase affordable health insurance. There are two types of exchanges: state public exchanges and employer sponsored private exchanges. Public health exchanges will enable anyone to purchase health insurance regardless of age, health or other circumstances that in the past have prevented them from doing so. Less publicized but also important are private exchanges, established by large employers and often referred to as defined contribution health plans.
On October 1, 2013 a health insurance exchange will open in every state. Residents may select health insurance offered through the state and enroll in a plan online. Some states will run their own exchanges, some will be administered by the federal government, and some will partner with the federal government to run the exchange together. All will have the following framework:
–– Essential health benefits will be a mandatory component of the exchange plan. Beginning January, 2014, ten categories of benefits must be offered. These include preventative and wellness assistance, maternity and newborn care, prescription drugs and emergency services. Each state will have a “benchmark” plan that will serve as a standard to which insurance providers must adhere. The level of coverage in each benefit category may differ depending on what’s outlined in the state’s benchmark plan.
–– Bronze, silver, gold and platinum health insurance plans will be for sale. Exchanges will feature a variety of health insurance plans with the level of care, cost and benefits varying by level. Each plan will be assigned a medal designation: bronze will offer the lowest percentage of coverage and platinum the highest. There will also be a catastrophic plan, with minimum benefits, for young adults under age 30.
Many states have set up websites to publish enrollment policies and procedures, the provisions of the benchmark plans, state-specific guidelines and information from the insurance providers that will be selling their programs to the state’s residents. If you and your family need coverage, review the plans available through the health insurance exchange for your state. Check your state’s general website for the exchange’s address, or go to healthcare.gov. If you decide to use a health insurance exchange, we should assess the costs and incorporate them into your financial plan.
Private exchanges are administered by insurers and benefit firms with whom large employers often have other benefit relationships. Instead of the traditional model of purchasing insurance through payroll deductions, a private exchange allows employers to provide a fixed contribution to employees. The employees can then select a plan from those offered by the employer’s exchange. Employees who choose a plan that is more costly than the contribution provided by the employer must make up the cost difference. Employees who select a cheaper plan will usually get the remaining funds. Beginning in 2015, large employers will be required to provide health insurance to employees who work more than 30 hours per week. Many may use private exchanges as a way to fulfill the requirement and control their health insurance costs, which can rise sharply from year to year.
Let’s have a conversation
So many of our clients are concerned about the sources and rising costs of healthcare. The new healthcare exchanges give clients more options once they leave their employer, and may even allow some to retire before they qualify for Medicare at age 65. As we think about your current healthcare expenses and the ones you may incur during retirement, let’s keep the ACA and the new health exchanges in mind.
UBS Financial Services Inc.
Smith Wealth Management Group
Dustin A. Smith
Sr Vice President–Wealth Mgmt
Corporate Stock Benefit Consultant
801 Laurel Oak Drive
Naples, FL 34108-2764