The Patient Protection and Affordable Care Act (PPACA) is just around the corner and will affect all Americans on January 1, 2014. Independent manufacturers’ reps will be affected in many different ways. One thing is for sure, it’s neither as bad nor as good as you think. Inaccurate information is being distributed everywhere and disguised as fact. How it affects you and your business will depend on factors including age, number of employees and state of residence, to name a few.

It would be wrong to dismiss the Health Care Financing problem we have in this country. Many people cannot currently afford insurance. Some are more than willing to purchase insurance but are turned away as the result of pre-existing conditions. PPACA was designed to break down both access and cost barriers to health insurance coverage.

The Supreme Court held up the requirement that all individuals must obtain health insurance effective 1-1-14. In return for this individual mandate, individuals will find guaranteed access to private market PPACA-approved plans while low-income individuals will find easy access to government premium subsidies through State and Federal Exchange programs. Individuals not currently covered will be required to enroll during a special national open enrollment period. Penalties and denial of access will apply to those who delay.

There are financial penalties on individuals who do not obtain insurance. Penalties start in 2014 at $95 or 1 percent of income per person and rise in 2016 to $695 or 2.5 percent of income. Penalties in subsequent years have yet to be published.

Small Employers (2-50 in 2014) may not be subject to the mandate, but they are subject to PPACA. Richer, more expensive benefits will be the only choices available.

If you are an employer in the small group market you will be subject to:

• Maximum waiting period for new employees of 90 days (60 in California).
• Maximum Deductible of $2,000 per individual.
• Modified Community Rating — Rate Compression.
• New Reporting and Employee Notification requirements.
• Mandated Essential Health Benefits in all plans (child dental!).
• Plan offerings limited to “Metallic Plans.”

PPACA requires insurers to offer plans that fall into four levels of coverage. Plans are deemed Platinum if they offer a benefit with an “actuarial value” of 90 percent, Gold at 80 percent, Silver at 70 percent and Bronze at 60 percent. For example: If you purchased a Bronze plan it would be assumed that average medical expenses incurred over a year would be covered at 60 percent.

Insurers are hard at work designing plans and submitting rates for approval that will fit into these categories and still include all of the benefits mandated under Essential Health Benefits and limited out-of-pocket costs to the insured. I expect to see the plans and benefits later this summer as they are released into the public.

As a small-business owner, one thing is for sure — everything changes on January 1 or on your first renewal in 2014. It would be wise to work with your insurance agent now to delay your renewal in 2014 as long as possible to let the market settle before having to join the parade. Rates will go up.

The Employer Mandate requires that every employer who employs 50 full-time employees, or full-time equivalents, offer coverage that includes Minimum Essential Coverage with an actuarial value of 60 percent. Coverage is to be offered to all full-time employees at a cost to the employee that does not exceed 9.5 percent of the employee’s W-2 income for employee-only coverage. There is no requirement that the employer pay for dependent coverage. They are required to make dependent-child coverage available for purchase. Note: Making coverage available to spouses is not required. If a spouse has access to the group plan, that spouse cannot go to the exchange and receive a subsidy.

It is important to note here that employers subject to the mandate include those companies that are part of a controlled group. A controlled group is a group of companies with similar ownership. You could be subject to the mandate even if you employ only a few employees!

Large employers are subject to the mandate on January 1, 2014, or on their first annual renewal after January 1, 2014. Those subject to the mandate should be working with an insurance broker who knows this law. The work you do now will determine which employees you have to cover in 2014. Those with variable-hour employees must not delay attention to this advance work. On Tuesday, July 2, 2013, the IRS announced the employer penalties and reporting requirements for the employer mandate would be delayed for one year. Even though employer penalties have been delayed to 1-1-15, no other part of the law has been delayed at this time. The mandate is still in effect but not enforceable during the 2014 calendar year.

How You Purchase Health Insurance is Changing

Proof of good health and pre-existing conditions will no longer be an impediment to the individual purchasing insurance. Small group rates will be based solely on the age, location and the plan you choose.

New rating reforms require rates to be spread across communities and ages in a new way. Younger individuals will find rates rising much faster and those in the 55+ brackets may see a decline in the rate of increase. Those of us enjoying lower-cost high-deductible small group insurance plans will be shocked to find that deductibles over $2,000 will now be illegal! How this actually manifests in the market is yet to be seen.

Downside? There are a few dirty little secrets you don’t hear about. Although states will offer coverage through “Exchanges,” the same plans will be available outside of the exchange at the same price. Most important, Exchange plans will have special provider networks. Current plan designs and physician availability you currently enjoy will not be the same inside the exchange! Blue Shield of California reported a 39 percent reduction in physician access for plan purchases inside the California Exchange.

What is An Exchange?

There are three basic types of Exchanges. Individual Exchanges, SHOP Exchanges (Government Run) for small employers and Private Exchanges (Non-Government). Overall, an Exchange is a place where an individual or an employee in a small group can choose the plan and insurer of their choice.

In the SHOP Exchange, the employer joins the Exchange and lets the employees choose a plan with the employer choosing a funding level. (This is nothing new in California as the private market has been doing this for years.) Although the advertising for these Exchanges will come from the state, you do not have to purchase it directly from a government employee! Agents will have this in their portfolio along with the private-market plans (although Government Navigators will not be able to show you the private market).

A final note on the SHOP Exchange: As of 2014, it will be the only place a Small Employer will be able to purchase insurance and continue to be eligible for the Small Business Tax Credit. If you are currently eligible and receiving the Small Business Tax Credit you must move to a SHOP exchange for it to continue. You can use the NFIB calculator to see if you qualify for the credit (www.nfib.com/advocacy/healthcare/credit-calculator). Remember, the physician access will be lower in the SHOP exchange. Have your agent investigate the differences.

Individuals with incomes below 300 percent of the Federal Poverty Level (FPL) who are seeking government subsidies will find the Individual Exchange as a preferred avenue to coverage. Those in the lowest income brackets may be eligible for subsidized premiums as well as subsidized out-of-pocket costs.

One other very important thing to watch in your State Exchange will be the coverage of specialty drugs. We found a loophole in the California Exchange that exposes individuals now covered for certain drugs to massive expense. Certain individuals could incur $11,200 in prescription out-of-pocket costs if they were to move to the exchange product. No subsidy can overcome that kind of coverage reduction. We have brought this loophole to the attention of the state and our pleas have fallen on deaf ears. Whether others adopt this loophole or whether California will make the needed fix, is yet to be seen. Buyer beware!

For those who hope the act is repealed, I see nothing that would lead me to believe anything is going to stop this legislation from being fully implemented. However, I am confident that we will continue to work with the legislature to decrease many unintended consequences of this law.

Where Do You Get Help?

Although the mandates, regulations and fines that surround non-compliance may be perplexing, any qualified professional insurance agent can walk you through your personal maze.

California companies are encouraged to contact me. A referral to professional agent in your area can be found nationally at www.nahu.org/consumer/findagent2.cfm. Just as you would not send me to the corner grocery to buy your widget, I would never recommend you take health advice from a government navigator. Any professional agent will provide you with all of your new options in and outside any new government programs.

In the end, PPACA will remove barriers that kept many from health insurance coverage in the past. Unfortunately, the act did nothing to slow the rate of increase in health-care spending. On the contrary, it will accelerate health-care spending simply by providing access to so many overnight.

As a nation, we need to focus on getting and staying healthy. It is the only way to reduce health care spending.

Checklists for Individuals

Stay insured Make a list of provider and Rx needs Contact an agent 10-1-13 for 1-1-14 plans Consider keeping your grandfathered plan Develop a plan for personal wellness

Checklist for Employers

Determine your status as a small or large employer Large employers start planning immediately Know when PPACA affects you Stay on top of the paperwork to avoid penalties Work with a trusted advisor