By now, many of you may be aware that the Local 802 plans have been overhauled to ensure that the medical coverage meets minimum value standards under the Affordable Care Act.
Since the law was passed Plans A and B have been running under waivers granted by the government, allowing them to retain their annual caps ($50,000 and $5,000 respectively) on benefits. Under the ACA, insurance policies can no longer set a limit on how much they pay out per year per person. The reason for the waivers is that Plan A and Plan B would have been unsustainable financially, given the level of contributions required for coverage. October 1 is the beginning of the Local 802 plan year and under the law it will no longer have the waivers. This meant a major change in the structure of the plan was inevitable.
Because the trustees knew they would have to make a major change, they decided to make sure that the medical coverage met “minimum value” under the law. Minimum value means that certain benefits have to be covered, including hospitalization, maternity care, preventive care, prescriptions and immunization. It also means that when an individual has paid out of pocket (not including premiums), $6,350 in a year, the plan must pay for any further covered services 100 percent. That maximum for a family is $12,700. While that is a lot of money, it means that no one is stuck with a six-figure medical bill for one illness.
Minimum value is surprisingly expensive. A plan that pays 70 percent of medical expenses (silver on the exchange) was found to cost over $9,000 a year when our actuary crunched the numbers for our plan. To make the lower tier plan minimum value meant getting more income to the fund or it was not going to be possible.
The trustees also attempted to make the cost of coverage through Local 802 less expensive than coverage through the state exchange/marketplace. The reasoning was that if the coverage could not be of equal value and less expensive, it was time to get out of the health insurance business.
The plan is also spending more than it takes in. Though it is healthy right now (enough in reserve to pay 17 months worth of benefits if all income stopped today) it will not stay healthy if it continues to spend this way. The highest tier, Plan A+ with hospitalization, costs an average of $14,125 per member per year. That is compared to the required contribution of $8,600 per year. In order to make this overhaul work, the trustees had to find new sources of income. The result was two tiers: Plan A+, which is much like the current Plan A+ with hospitalization (a “gold” plan), and a new Plan A which is a low “silver” plan with similar benefits to the high plan but with higher deductibles and co-pays. The threshold for qualifying had to rise – for Plan A+ it is now $4,500 and for the new Plan A it is $2,000. Note that neither level really reflects the actual cost. Additionally, it was necessary to implement participant premiums for both levels, $100 per month for an individual and $400 per month for a family. Both premium levels are intended to be lower than the premiums for comparable plans on the exchange/marketplace. Because the premium and qualification levels are below cost, the fund is “sharing the pain” so to speak with the members who are shelling out the new premiums. The trustees will be watching closely what happens and making adjustments as we go so the plan does not get spent down to a dangerously low level.
Because these are big changes, the trustees decided to temporarily make it possible for current Plan A+ ($4,300) folks to pay up to $4,500 plus the premium and current Plan A ($1400) folks to pay up to $2,000 plus the premium. This is temporary because, depending on how many people make that choice, the fund could be taking on even more people at a level below cost.
Some of the collective bargaining agreements have “escalator clauses” that allow Local 802 to require higher contributions from employers when the financial health of the plan requires it. Those clauses have been exercised.
People whose contribution levels fall below $2,000 will be on a new Plan B. This plan is not health insurance, but it does offer premium-free optical and dental coverage. A musician on Plan B can claim not to have employer-paid health insurance and can then go to the state exchange/marketplace and possibly qualify for a subsidy to help pay the premium of a policy there. To protect this status the trustees disqualified Plan B from the HMO buy-up. The possibility of a buy-up was making it harder for folks on Plan B to qualify for the subsidies. The dental and optical coverage are also available to folks on Plans A and A+ for an additional premium.
These adjustments are not easy to make. Most people in the U.S. have employer-paid coverage which often pays 80 percent of the cost. This makes most people unaware of the staggeringly high cost of health care. Musicians and others who are in the more fractured side of the economy have insulated themselves by not being completely covered. Many did fine, but others found themselves bankrupt after a serious illness. Because we are no longer insulated, many of us are finding it painful to pay the higher premiums, even if we think we are getting a better value. One of the hopes is that the ACA will be effective in flattening out health-care inflation. If that happens, we can all breathe easier – those of us who pay directly for our coverage and also everyone else who lives in an economy that is increasingly eaten up by health-care costs. Time will tell.
Martha Hyde is a multi-woodwind player who performs on Broadway. A member of Local 802, she is also a trustee on the Local 802 Health Benefits Fund. Contact her at EarMar4@verizon.net.