News Column

Health Changes Small for Majority

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For the majority of Americans -- those with health insurance -- the changes to come from the most ambitious overhaul of the social safety net in a generation turn out to be relatively modest, experts say. The effect on the pocketbooks of most New Jerseyans is expected to be slight.

Medical costs will not plummet. Premiums will still rise, albeit at a slightly slower rate. Some insurance policies will change, but for most, that will mean better value for the premium dollar.

"The dirty little secret, despite all the politics, is this is basically a very incremental law," said Alan Weil, executive director of the National Academy for State Health Policy. "The average citizen, despite the controversy over the law, will not see fundamental changes."

The most important -- and popular -- provisions for those with insurance have largely been implemented already. They include the consumer protections that bar lifetime caps on benefits, prohibit denial of coverage to people with pre-existing conditions, and make insurers account for how they spend premium dollars and how much they raise rates. They also extend coverage to children up to age 26 on their parents' policies, a provision through which 69,000 young people in New Jersey now are insured.

In terms of dollars and cents, however, the impact of the law on individual families is complicated. It must be seen through the prism of their current insurance status and income, analysts say. The complexity of this overhaul of the insurance marketplace, and the intricate ways in which each part of the reform interacts with the others, make a bottom-line prediction difficult.

The net effect of the law's mandate that almost everyone have health insurance will help hold down the upward pressure on premiums, said Joel Cantor, director of the Rutgers Center for State Health Policy. Now when premiums rise, it will be by a slightly lower percentage than if the law had not been passed, he said.

"I don't think the day this goes into effect, we'll see $1,000 off on our health insurance premiums," Cantor said, but it will mean "one less cost pressure."

In broad strokes, here's what to expect:

* Those with private insurance -- 5.3 million New Jerseyans or 61 percent of the population -- can expect to see the slowing of premium hikes. As millions of uninsured people are added to insurance rolls starting in 2014, there will be less cost-shifting by health providers to cover the costs of the uninsured.

Rebate checks also will be sent this summer to 45,000 New Jerseyans with private insurance, either directly or to their employers, from enforcement of the law's 80/20 rule. That requires insurers to spend 80 cents of the premium dollar on health care, not administration or salaries. The biggest rebates, averaging $359 apiece, will go to employees of large companies, where insurers have a higher bar to meet: 85 percent of premiums must be spent on health- related costs. In sum, New Jerseyans will receive $7.7 million.

* People with Medicare -- 1.1 million New Jerseyans or 12 percent of the population -- who have high prescription costs will pay less for their medication. The law gradually closes the so-called "doughnut hole," or gap in coverage under Medicare Part D, reached by those who spend more than $2,930 out of pocket on their medications.

* New Jersey's coverage of poor families with children will continue under Medicaid, but a new group -- childless adults -- will be added, if Governor Christie decides to go along with the law. The Supreme Court's decision took away the penalties for states that do not implement that part of the law, leaving more discretion to the states. New Jersey already meets the threshold set by the law when it comes to families with children. The state currently provides Medicaid coverage to 1 million people, or 11 percent of the population.

* The uninsured -- 1.3 million or 15 percent of the state's population -- have a few possibilities. The poorest -- single adults with less than $14,857 income a year, or couples earning less than $20,124 -- would qualify for Medicaid, if the governor agrees to its expansion. That would take care of about 300,000 people in 2014.

Most of the rest could shop for insurance on a newly created state health exchange, required under the law. The exchange would be available to single people whose incomes are as high as $44,680, or families with incomes as high as $92,200, based on the 2012 federal poverty level. Enrollment through the exchange is expected to grow from about 189,000 in 2014 to more than 500,000 after eight years.

Christie said after the Supreme Court ruling that he'll veto the state Legislature's effort to create an exchange. He has already done so once. It may not be known until after the November presidential election if he'll propose an alternative or allow the federal government to set one up, as the law provides.

The exchanges would provide plans that vary in price depending on the level of coverage. Those who buy through the exchange would be subsidized via tax credits, under the law. A few scenarios: A family of four earning $22,050 could be required to pay no more than $441 per year toward the $12,000 premium. A family of four earning about $88,000 would be required to pay $8,379 towards that same premium.

If the cost of insurance on the exchange is unaffordable, people would be exempt from buying insurance and paying penalties. The law sets the definition of "affordable" on a sliding scale.

Small businesses could also shop for insurance for their employees on the exchange.

But here's the catch, and the most hotly debated part of the law: If a business with more than 50 workers doesn't provide insurance to its employees, or if an individual who files federal income taxes doesn't buy coverage, the business or individual will have to pay a penalty. For businesses, the penalty is roughly $2,000 per employee. For the individual, it is $695 ($2,085 per family) or 2.5 percent of income, whichever is greater.

The White House projects that 1 percent of Americans who will be able to afford health insurance will choose not to buy it. The secretary of Health and Human Services could give hardship exemptions.

This penalty was at the crux of the Supreme Court's deliberations and the element that got the most media attention. Chief Justice John Roberts called this penalty a "tax" in his decision Thursday. Congress is within its constitutional powers to levy a tax, he said in upholding the law.

Opponents of health care reform, including Christie and Steve Lonegan, state director of Americans for Prosperity, a group associated with the Tea Party, have seized on his language. The law is a "massive tax on middle class Americans," Lonegan said Saturday, adding that the state's economy can ill afford the effect of the penalties on small businesses.

The additional costs of insuring their workers would simply be passed through to customers in the form of higher prices, say some business owners, such as Albert Manzo of The Brownstone catering venue in Paterson. Or, as Manzo suggested, it might make better business sense to pay the penalty.

Democrats, on the other hand, say the law has the opposite effect.

"People who have insurance are going to get a tax cut," said Rep. Frank Pallone, D-Monmouth, an architect of the reforms. "They're going to get coverage and pay less."

The law would eliminate the "freeloader tax" that every insured American pays in extra premiums for people who use the health care system but lack coverage, they say.

"They won't have to pay $1,000 extra in health care costs to cover the cost of people without insurance," said U.S. Sen. Bob Menendez. "Ninety-five percent of Americans will never be subject to any penalty at all," he added. "The remaining 5 percent who willingly choose not to have coverage and pin the cost on all of us, they're the only people subject to any tax."

Each side will press its message going into the November elections, the next acid test for health care reform in America.

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