Initial Thoughts on Health Reform’s Impact
By Robert Freedman, Senior Editor, REALTOR® Magazine
Health insurance reform will surely be controversial for a long time to come but now that it’s in effect, what does it mean to REALTORS®?
First, if you buy your own coverage and have a policy you like, your coverage is grandfathered, so you’re set and need to do nothing.
If you’re a broker and already offer health insurance to your salaried workers, you may continue to offer your existing plan. It’s also grandfathered; you may continue to enroll new employees and terminate employees who leave your firm without jeopardizing your grandfathered status.
Ratings and Standards
Second, the law creates a uniform, national set of insurance ratings and underwriting standards. These new rules spell out the criteria that insurers can use when evaluating applications for individual and small-business coverage. The goal is to create a set of rules that more closely resemble what today are generally the rules applicable to large group policies.
Insurers can still charge different premiums based on the risk factors you bring to the table such as age, the type of policy purchased, and geographic area, but the cost differentials are greatly curtailed, from about 30:1 to 4:1 in some cases (meaning, an insurer can’t charge you, say, 30 times what it charges someone much younger than you). Also, insurers can no longer deny coverage or base premiums on a preexisting condition or your claims history or gender.
Third, the law seeks to expand the individual and small-business insurance markets, which are the markets through which real estate brokers and sales associates principally shop for coverage.
The goal is to increase access to affordable coverage by increasing competition among insurers by expanding the pools of insureds, encouraging them to enter new markets, and by allowing the markets to cross state lines. The eventual goal is to merge the individual and small group markets into one larger market. In any case, as an independent contractor, you’ll be able to shop for coverage in both the individual and the small-business markets, so your options are expanded.
Fourth, the law creates the insurance exchanges that received so much attention in the media. These are in effect the new insurance marketplaces through which individuals and small employers shop for coverage. Because insurance ratings and underwriting standards are made more uniform, shopping for coverage through the exchange’s online services or through an insurance broker is simplified, at least in theory, because comparison between plans is made easier.
Fifth, the law requires you, as an individual, to buy health insurance (that’s how the pools of insureds are to be increased) and gives incentives to businesses to make health insurance available to their employees. That means you’ll have to buy coverage if you don’t already have it or face a penalty unless you can show you can’t get coverage for less than a certain percentage of your income—10 percent—or would otherwise face a financial hardship. If you can’t get an exemption for one of these reasons, you pay a fine if you fail to get insurance.
The employer mandate covers businesses with more than 50 employees. Most real estate brokerages, as small businesses with fewer than 50 employees (the sales associates, as independent contractors, don’t count against the employee total), are expected to be exempted from the mandate. Large employers subject to the mandate that fail to comply face a penalty. Affordability credits, to help offset costs, are available to both individuals and very small employers, including very small nonprofit associations that are employers. So, some local associations of REALTORS® could be eligible for the tax credits, too.
The new law clocks in at about 1,000 pages, so there’s a lot to it and not all of the provisions kick in at once, so it will be years before you feel the full effect of the changes. Look for more coverage in the May 2010 issue of REALTOR® Magazine, which you should see in mid-April. More detail is available from NAR on REALTOR.org.
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