Twelve Frequently Asked Questions
1. What happens to premium subsidies for Medicare and for private insurance when healthcare costs increase?
Medicare premium subsidy levels will be set as a result of each year's health plan bids and FFS estimates--in effect keeping subsidy levels in sync with the market. Without Congressional action, private insurance subsidy increases will be limited to GDP growth plus one percent. No restrictions will be imposed on insurer premium surcharges for additional coverage.
2. The report implies that premium subsidies will be based only on income. What about assets?
The assumption is that most assets are derived from income. Determining premium support on the basis of both would have the effect of double counting.
3. Assuming that the end of the ESI tax exclusion results in employers abandoning their employee coverage, what will be the impact on older employees who must pay more for insurance on the open market?
Older employees will be protected in two ways. First, all employers will be required prior to the ending of the tax exclusion to notify employees of the actuarial value of their benefits, taking into account age and family size. Second, older individuals will receive higher premium subsidy amounts.
4. Aren't those states that currently provide the least Medicaid coverage going to get an unfair boost as Medicaid for children and families is switched to full federal funding as part of the overall private insurance structure?
This is somewhat true in state budget terms. However, premium subsidy funding will come from federal revenues, which are in turn derived from state residents' taxes. The new structure should be more fair to low-income states, although disadvantageous to any state with high average incomes and low Medicaid coverage.
5. The ending of the ESI tax exclusion will increase state revenues as well as federal revenues. How should state revenue increases be applied?
This will be a state-by-state decision. States may wish to provide additional funds for the aged and disabled enrollees in the residual Medicaid program or for families facing financial or medical emergencies.
6. What is the advantage of premium subsidy "vouchers" for private insurance over tax credits or tax deductions, as others have proposed?
While they have a similar effect as tax credits in subsidizing healthcare premiums, premium subsidy vouchers have the advantage of being available and of known value at the time insurance is obtained rather than many months later at tax filing time. Tax deductions are inherently inequitable, because they favor those in higher tax brackets.
7. Can employees be assured that their wages will increase sufficiently to balance the loss of the ESI tax exclusion?
All employers will be required to notify their employees prior to ADVANTAGE FOR ALL implementation of the value of their healthcare benefits. It is assumed that as employers abandon their ESI plans they will feel obligated (perhaps also under pressure from employee organizations, or simply to avoid very unhappy employees) to increase wages by at least the amount of the prior benefits.
8. How will the proposed age adjustment for private insurance premium subsidies work?
The age adjustment is intended to partially compensate older individuals for the higher premium costs they face. Since it is not possible to anticipate actual insurer rates for older versus younger persons, the adjustment will be limited to three times the base rate.
9. After implementation of the various parts of ADVANTAGE FOR ALL, who--if any--will still be uninsured?
Undocumented aliens will not be covered by ADVANTAGE FOR ALL. Additionally, there will inevitably be some individuals who are "unknown" to government agencies--those who do not file tax returns, have no driver's licenses, and have no contact with social services agencies.
10. How will the ending of the ESI tax exclusion affect self-insured companies and their employees?
The same tax and other rules will be applied to self-insured employers as to others. While large employers typically self-insure to cut insurance overhead (since they can bear the risk of higher than expected claims costs), it is expected that most employees will choose to opt out of the newly-taxed self-insurance plan because ADVANTAGE FOR ALL will offer a better deal.
11. Will employers really abandon their employee coverage?
It is assumed that the majority of small- and medium-sized employers will be happy to drop their employee coverage, because of the cost and effort involved. Other--especially larger--employers are expected to do so also, because most of their employees will be better off taking the premium subsidies and supplementing this to meet their own needs. Employees must be free to opt out of their employers' plans, whether the plans are insured or self-insured.
12. What help will be available for the many millions who must select and enroll in new health plans?
The ACA exchanges have already provided a smaller-scale trial for a similar process, using community organizations and social services agencies as "guides." However, for ADVANTAGE FOR ALL, we expect such groups to be supplemented by various types of state-licensed "brokers," including both companies and individuals, much as for tax return filing.