Time To Sign Up for 2016 Health Insurance

By: John Stanford, AEO Government Relations

Beginning November 1^st 2016, the enrollment period to sign up for health insurance is open for both individuals and small businesses. In anticipation of the sign up period, AEO’s policy team has prepared this FAQ to help ensure you know what you need to know. 

What is an enrollment period?

For most individuals and businesses, health insurance can only be selected during an annual enrollment period. Lasting three months, this is a time for consumers to shop between plans and select coverage for the following year. Missing the enrollment period will mean you cannot select insurance for 2016, which comes with a hefty penalty (see below).

Throughout the year, special events like starting a business, losing/getting a job, getting married or having/adopting children, allow for special enrollment periods to select new plans.  

What are the key dates for 2016 Open Enrollment?

Here is a timeline for this year’s enrollment period (note the December 15^th deadline!):

• November 1 – enrollment begins: you can shop plans via www.healthcare.gov (you may be directed to your states marketplace)

• December 15 — Last day to enroll for January 1, 2016 coverage: This is important because if you do not have coverage of some kind on January 1, you may face a penalty

• January 31 — Individual enrollment period closes

• April 2016 – Penalties for not having health insurance in 2015 due ($395 or 2% of your income, whichever is higher)

• Throughout 2016: Small businesses may sign up for insurance through small business (SHOP) marketplaces

What are the penalties for not having health insurance insurance? When would I pay them?

There are two sets of penalties relating to health insurance. Penalties faced by all of us as individuals, and penalties employers may face.

In 2016, the penalty for not having individual insurance is $695 or 2.5% of your income – whichever is higher. This is an increase from 2015.

For employers, there are two types of penalties, but only if you have 50+ employees. Again, there are no penalties for businesses with less than 50 employees for not offering health insurance. For more than 50 employee-sized companies, penalties will be assessed for not offering coverage or offering coverage that is deemed unaffordable. More on employer penalties is available here.

Penalties are paid on tax returns the following year – failure to get coverage in 2016 would be paid in April 2017.

Are more people really signing up for insurance?

AEO was recently at the White House to discuss the upcoming enrollment period. At the meeting, the Administration shared the latest numbers on the impact of the Affordable Care Act up until now:

• Since 2013, 17.6 million Americans have gained insurance, reducing the uninsured rate by 39%
• 29 states (including DC) have expanded Medicaid

Enrollees, however, will now be tougher to find and engage. Of the remaining uninsured, 50% are between 18-34 years of age and 40% fall between 139-250% of the poverty level (up to roughly $60,000 a year for a family of 4).

Does that mean healthcare costs are going down? It certainly does not feel that way.

Healthcare costs are going up. In the years leading up to the Affordable Care Act (ACA), healthcare spending (not premiums specifically, but all health dollars) was increasing by 10-20% each year. This was a byproduct of the high cost of the uninsured, an aging population, and system inefficiencies. It was generally agreed by economists that reform was necessary to address overall healthcare costs.

The ACA sought to solve this by expanding the insured market. The theory was that the high cost of the uninsured would be reined in because insurers generally achieve better pricing for services and prescription medicines.

Among other things, the ACA eliminated insurers’ ability to charge differently for pre-existing conditions and removed lifetime caps on coverage. It also had two mandates to achieve increased coverage: individual – requiring everyone have insurance of some kind; and employer — requiring larger employers (more than 50 employees) offer insurance of some kind to their employees. Both mandates have penalties for failure to comply (see above).

But Premiums Keep Going Up. Why is that?

Now, we have an insured pool that is sicker and costlier than before. This drives the average cost of insurance, and by extension, premiums up. Health insurers are still unsure just how sick these people are and what it will cost. So we can expect to see major fluctuations as insurers get more data on the pools they are covering.

For small businesses shopping in the small business marketplace, the pool remains one of the smallest segments of the health insurance market. This means that prices for America’s entrepreneurs are the most likely to face sharp increases.