MONEY Taxes

Why Obamacare Has Made Tax Filing an Even Bigger Headache This Year

piggy bank with band-aid on head
Getty Images

This is the first year that health reform crops up on your tax return. And a new study finds that many Americans who got help with health insurance premiums in 2014 now owe the IRS money.

This tax season, for the first time since the health law passed five years ago, consumers are facing its financial consequences. Whether they owe a penalty for not having health insurance or have to reconcile how much they got in premium tax credits against their incomes, many people have to contend with new tax forms and calculations. Experts say the worst may be yet to come.

When Christa Avampato, 39, bought a silver plan on the New York health insurance exchange last year, she was surprised and pleased to learn that she qualified for a $177 premium tax credit that is available to people with incomes between 100% and 400% of the federal poverty level. The tax credit, which was sent directly to her insurer every month, reduced the monthly payment for her $400 plan to $223.

A big check from a client at the end of last year pushed the self-employed consultant and content creator’s income higher than she had estimated. When she filed her income taxes earlier this month she got the bad news: She must repay $750 of the tax credit she’d received.

Avampato paid the bill out of her savings. Since her higher income meant she also owed more money on her federal and state income taxes, repaying the tax credit was “just rubbing salt in the wound,” Avampato says. But she’s not complaining. The tax credit made her coverage much more affordable. Going forward, she says she’ll just keep in mind that repayment is a possibility.

It’s hard to hit the income estimate on the nose, and changes in family status can also throw off the annual household income estimate on which the premium tax credit amount is based.

Like Avampato, half of people who received premium tax credits would have to repay some portion of the amount, according to estimates by The Kaiser Family Foundation. Forty-five percent would get a refund, according to the KFF analysis. The average repayment and the average refund would both be a little under $800. (KHN is an editorially independent program of the foundation.)

Tax preparer H&R Block has also looked at the issue. It reported that 52% of people who enrolled in coverage on the exchanges had to repay an average of $530 in premium tax credits, according to an analysis of the first six weeks of returns filed through tax preparer. About a third of marketplace enrollees got a tax credit refund of $365 on average, according to H&R Block.

The amount that people have to repay is capped based on their income. Still, someone earning 200% of the poverty level ($22,980) could owe several hundred dollars, says Karen Pollitz, a senior fellow at the Kaiser Family Foundation. People whose income tops 400% of poverty ($45,960 for an individual) have to pay the entire premium tax credit back.

Experts say the message for taxpayers is clear: if your income or family status changes, go back to the marketplace now and as necessary throughout the year to adjust them so you can minimize repayment issues when your 2015 taxes are due.

Many people are learning about what the health law requires and how it affects them for the first time when they come in to file their taxes, says Tara Straw, a health policy analyst at the Center on Budget and Policy Priorities. For the past 10 years, Straw has managed a Volunteer Income Tax Assistance site in the District of Columbia as part of an Internal Revenue Service program that provides free tax preparation services for lower income people.

Some of the recently initiated owe a penalty for not having health insurance. For 2014, the penalty is the greater of $95 or 1% of income. The H&R Block analysis found that the average penalty people paid for not having insurance was $172. Consumers who learn they owe a penalty when they file their 2014 taxes can qualify for a special enrollment period to buy 2015 coverage if they haven’t already done so. That would protect them against a penalty on their next return.

People may be able to avoid the penalty by qualifying for an exemption. Tax preparers rely on software to help them complete people’s returns, including the forms used to reconcile premium tax credits and pay the penalty for not having insurance or apply for an exemption from the requirement. For the most part, the software is up to the task, Straw says, but it comes up short with some of the more complicated calculations.

Case in point: applying for the exemption from the health insurance requirement because coverage is unaffordable. Under the health law, if the minimum amount people would have to pay for employer coverage or a bronze level health plan is more than 8% of household income they don’t have to buy insurance. That situation is likely to be one of the most common reasons for claiming an exemption.

But to figure out whether someone qualifies, the software would have to incorporate details such as the cost of the second lowest cost silver plan (to calculate how much someone could receive in premium tax credits) and the lowest cost bronze plan in someone’s area. The software can’t do that, so tax preparers must complete the information by hand.

“That one in particular has been vexing,” says Straw.

The gnarliest filing challenges may yet come from people with complicated situations, such as those who had errors in the IRS form 1095A that reported how much they received in premium tax credits, experts say.

Take the example of a couple with a 20-year-old son living at home who bought a family policy on the exchange. If midway through the year the son gets a job and is no longer his parents’ dependent, the family’s premium tax credit calculation will be off. The family needs to work together to figure out the optimal way to divide the credit already received between the two tax returns. The goal is to maximize the benefit to the family and minimize any tax credit repayment they may face.

“A lot of tax software is just not designed for that kind of trial and error,” says Straw.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

MONEY Health Care

Good News. Obamacare Hasn’t Led to Less Health Coverage at Work

"Benefits Meeting" announcement on bulletin board
Getty Images—(c) KLH49

A new survey finds that so far employers don't seem to be cutting worker hours to get out of offering health insurance benefits.

There has been much hand wringing over the health law requirement that large employers this year offer insurance to workers who put in 30 or more hours a week or face penalties for not doing so. The new rules would cost employers a bundle, some fretted, as part-timers clamored for company coverage previously unavailable to them. Others worried that employers would cut workers’ hours to get under the cap.

A new study found that so far there’s little cause for concern: Average enrollment in company plans was essentially unchanged between 2014 and 2015 at 74% of all workers.

The survey of nearly 600 employers by benefits consultant Mercer found that in 2015 the average percentage of employees who were eligible for coverage increased one point to 88%, but it was offset by a drop in the enrollment of eligible workers of one point on average, to 83%.

Part of the explanation for the stable results stems from the fact that most employers were already in compliance, says Beth Umland, Mercer’s director of research for health and benefits.

In 2014, employees had to work 25 hours a week on average to be offered health insurance, according to Mercer. That figure has edged up since 2011, when it was 23 hours weekly, but is still well below the law’s 30-hour threshold.

Still, while the expansion in eligibility wasn’t a big change for many employers, “if you were impacted you were really impacted,” says Tracy Watts, Mercer’s national leader for health care reform.

Food and lodging companies were most affected by the new rules, with the average percentage of workers who were eligible for coverage increasing from 57% to 60%. Other industry sectors that felt the change included health care, where per diem nurses and other professionals take on short-term assignments, and higher education, which employs many part-time adjunct professors, says Watts.

But most employers aren’t changing their practices to discourage health plan enrollment, the survey found. Seventy-three percent said they had no plans to change, while 16% said they ensured that newly hired part-timers work fewer than 30 hours weekly, and 19% said they reduced the hours of employees who consistently or occasionally worked more than 30 hours a week.

Even though the health law aims to encourage employers to offer coverage by imposing fines on those who don’t do so, not all take advantage of the offer. Workers might not sign up because they have other options under the health law. Low-income workers may be eligible for Medicaid in states that have expanded coverage to adults with incomes up to 138% of the federal poverty level. Young people can stay on their parents’ plan until they turn 26 under the health law, and many people continue to get coverage through their spouses.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

MONEY Health Care

Your Boss May Be Able To Force You To Buy Health Insurance

The health reform law requires most companies to offer workers good health coverage. It also lets them enroll employees automatically.

Under the health law, large employers that don’t offer their full-time workers comprehensive, affordable health insurance face a fine. But some employers are taking it a step further and requiring workers to buy the company insurance, whether they want it or not. Many workers may have no choice but to comply.

Some workers are not pleased. One disgruntled reader wrote to Kaiser Health News: “My employer is requiring me to purchase health insurance and is automatically taking the premium out of my paycheck even though I don’t want to sign up for health insurance. Is this legal?”

The short answer is yes. Under the health law, employers with 100 or more full-time workers can enroll them in company coverage without their say so as long as the plan is affordable and adequate. That means the employee contribution is no more than 9.5% of the federal poverty guideline and the plan pays for at least 60% of covered medical expenses, on average.

“If you offer an employee minimum essential coverage that provides minimum value and is affordable, you need not provide an opt out,” says Seth Perretta, a partner at Groom Law Group, a Washington, D.C., firm specializing in employee benefits.

If a plan doesn’t meet those standards, however, employees must be given the opportunity to decline those company plans, under the health law. They can shop for coverage on the health insurance marketplaces and may qualify for premium tax credits if their income is between 100% and 400% of the federal poverty level.

Those premium subsidies aren’t available to workers whose employer offers good coverage that meets the law’s standards.

Experts say they don’t expect many employers to strong arm their workers into buying health insurance. Those that do may be confused about their responsibilities under the health law, mistakenly believing that in order to avoid penalties they have to enroll their workers in coverage.

“That is just dead wrong,” says Timothy Jost, a law professor at Washington and Lee University who’s an expert on the health law.

“Nothing in the Affordable Care Act directs employers to make their coverage mandatory for employees,” says a Treasury Department spokesperson. The law requires large employers “to either offer coverage or pay a fee if their full-time workers access tax credits to get coverage on their own in the marketplace.”

Employer penalties for not offering insurance that meets the health law’s standards can run up to $3,000 per employee.

For employers, forcing coverage on their workers could be counterproductive. “Do you really want to limit employees’ ability to select whether they get this coverage? What impact does that have from talent management perspective?” says Amy Bergner, managing director at human resources consultant PwC.

The practice of automatically enrolling employees in health insurance isn’t new. Many employers have been doing it for years. Some enroll new employees in the least expensive company plan, for example. But employees have generally had the option to opt out of the coverage if they wish.

Automatic enrollment makes it simple to satisfy the health law’s requirement that most people have health insurance, experts say.

The health law stipulates that employers with more than 200 full-time workers are required to enroll newly hired full-time employees in a plan unless the employee specifically opts out of the coverage. However, the provision won’t take effect until the Department of Labor issues regulations.

Employees who are unhappy about being required to buy into a company plan could complain to the Department of Labor, some experts say. It’s unclear whether such efforts would succeed.

Employment law experts point to a 2008 decision by the Department of Labor dealing with state laws that restrict employers from making deductions from workers’ paychecks without their consent. The department issued an advisory opinion saying that federal ERISA law pre-empted a Kentucky law that required an employer to get an employee’s written consent before withholding wages to contribute to a group health plan.

Although that decision doesn’t have the force of law, it suggests how the Labor Department views such issues, says Cheryl Hughes, a principal at Mercer’s Washington Resource Group.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

MONEY Ask the Expert

The Right Way to Kick Your Kid Off Your Health Insurance

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Robert A. Di Ieso, Jr.

Q. I am covered by my employer’s health plan, but I’m not happy with it. My son is 21 and currently covered under my plan. While I realize that I am not eligible for Obamacare, I am curious if I can terminate my son’s policy so that he might be eligible.

A. Since the open enrollment period to sign up for coverage on the state marketplaces ended Feb. 15, in general people can’t enroll in a marketplace plan until next year’s open enrollment period rolls around.

If you drop your son from your employer plan, however, his loss of coverage could trigger a special enrollment period that allows him to sign up for a marketplace plan. Whether he’s entitled to a special enrollment period depends on whether his loss of coverage is considered voluntary, say officials at the Centers for Medicare & Medicaid Services.

In general, voluntarily dropping employer-sponsored coverage doesn’t trigger a special enrollment period for individuals or their family members. But if you drop your son’s coverage on his behalf without his consent, his loss of coverage wouldn’t be considered voluntary and your son could qualify, according to CMS.

Whether he’ll be eligible for premium tax credits to make marketplace coverage more affordable is another matter, says Judith Solomon, vice president for health policy at the Center on Budget and Policy Priorities.

If you claim him as your dependent, he generally won’t be eligible. If you don’t claim him as your dependent, he would have to qualify for subsidies based on his own income.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

MONEY Health Care

Why Your Next Doctor’s Bill Could Be Surprisingly Painful

Figuring out if a medical provider is on your health insurance plan isn't always as straightforward as you'd think. And that can mean a much higher bill than you expect.

“Is this doctor in my insurance network?” is part of the litany of questions many people routinely ask when considering whether to see a particular doctor. Unfortunately, in some cases the answer may not be a simple yes or no.

That’s what Hannah Morgan learned when her husband needed surgery last fall to remove his appendix. When they met with the surgeon at the hospital emergency department near their Lexington, Ky., home, Morgan asked whether he was in the provider network for her husband’s individual policy, which he bought on the Kentucky health insurance exchange. The surgeon assured her that he was. When she got home, Morgan confirmed that he was in network using the online provider search tool for her husband’s plan.

But when she read the explanation of benefits form from the insurer, the surgeon’s services were billed at out-of-network rates, leaving the couple on the hook for $747.

The surgeon’s office later told her that he belonged to two different medical groups. One was in Morgan’s husband’s health plan network, the other wasn’t. Following multiple phone conversations with the surgeon’s office and the insurer, the in-network rates were applied and the Morgans’ share of the bill shrunk to $157.

“I did everything I was supposed to do,” says Morgan, 26. “You feel kind of hopeless. I thought I did it right, and there’s still another hoop to jump through.”

Consumers who use out-of-network providers can rack up huge bills, depending on the care required. Health maintenance organizations generally don’t cover any non-emergency services provided by physicians or hospitals outside the plan’s network of providers. Preferred provider organizations typically do cover out-of-network services, but pay a smaller percentage of the charges, 70% instead of 80%, for example. Out-of-network services may have higher deductibles and higher out-of-pocket maximums as well.

Although it’s not routine, physicians may belong to more than one medical group, say experts. Surgeons, for example, may join a couple of medical groups to expand the number of hospitals that they’re affiliated with.

Even then, sussing out in-network providers may not be straightforward. Just because a medical group is in someone’s provider network, consumers can’t be confident that all the physicians in the medical group are also in network.

“Physician groups can be in network even though individual physicians in that group may not be,” says Susan Pisano, a spokesperson for America’s Health Insurance Plans, a trade group.

That situation might occur if some of the physicians in a medical group agreed to accept the rates negotiated with an insurer, but others did not, says Dr. Jay Kaplan, an emergency physician who’s president-elect of the American College of Emergency Physicians. The physicians who didn’t accept the network rate would be out-of-network for a patient, even if other members of the medical group were in network.

Consumer advocates say the lack of transparency is unfair to consumers.

“It’s 2015. Federal law requires Americans to buy health insurance,” says Mark Rukavina, a principal at Community Health Advisors in Chestnut Hill, Mass. “There’s something fundamentally wrong when you can only figure out what questions to ask after the fact.”

In addition to confusion about doctors who are part of more than one practice, consumers may also run into billing troubles if their doctor operates practices in different locations and accepts different insurance plans at each, say billing experts.

A podiatrist may see patients at one office location two days a week, and at another office location the rest of the week. Each practice may accept different insurance plans, and a patient may be in network only at one location.

If the physician’s office submits the paperwork to the insurer with the tax identification number for the wrong office location, the patient may get hit with an out-of-network charge. In that case, the patient may have to contact the doctor’s staff and ask them to resubmit the charges through the other practice. Generally that should solve the problem, experts agree.

Adding to the confusion is the fact that even if a physician is in a consumer’s insurance network, the hospital or clinic she works at may not be or vice versa. When undergoing a procedure or treatment, the patient could get hit with out-of-network facility and other charges.

More consumers may face out-of-network problems as health plans shrink the size of their provider networks in an effort to keep costs down.

“Health plans work very hard to see that consumers have the information they need and resources to turn to when they have questions,” AHIP’s Pisano said, noting that the Healthcare Financial Management Association and AHIP’s foundation have online guides to help consumers. Still, she added, “There is clearly also a responsibility on the part of providers to be more transparent.”

Consumers such as Morgan shouldn’t have to bear the burden when that is unclear, says Rukavina.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

MONEY Taxes

You Just Got a Break If You Messed Up Your Obamacare Tax Credit

The IRS will give you more time to pay back any excess premium subsidies when you file your taxes.

Consumers who received too much in federal tax credits when buying insurance on the health law’s marketplaces last year got a reprieve of sorts from the Internal Revenue Service this week. Although they still have to repay some or all of the excess subsidies, the IRS won’t ding them with a late payment penalty if they don’t repay it by the April 15 tax deadline.

“They’re trying to make this work,” says Timothy Jost, a law professor at Washington and Lee University who’s an expert on the health law.

Under the law, people with incomes between 100% and 400% of the federal poverty level ($11,670 to $46,680 for an individual in 2014) who did not have insurance through their job could qualify for tax credits to make premiums more affordable. They could elect to have these subsidies paid in advance directly to the insurance company, and many did. A typical tax credit was about $3,000 annually.

The amount people received was based on an estimate of their 2014 income. At tax time, that amount has to be reconciled against consumers’ actual income on IRS Form 8962. If consumers or the marketplace underestimated their 2014 income, they may have received too much in tax credits and have to pay back some or all of it.

How much people have to repay is based on their income and is capped at $2,500. People with incomes over 400 percent of the poverty line have to repay the entire amount, however.

This penalty reprieve only applies to the 2014 tax year. The IRS will allow people to repay what they owe on an installment basis. But be forewarned: Interest will continue to accrue until the balance is paid off.

MONEY Taxes

How Obamacare Could Make Tax Filing Trickier This Year

Affordable Care Act health insurance marketplace navigator Herb Shook pulls up information on his computer to help someone re-enroll in an Affordable Care Act health insurance plan Friday, Nov. 14, 2014, in Houston.
David J. Phillip—AP If you got a health insurance subsidy via the online marketplace, you may have more work to do on your tax return.

For the first time, you'll need to show that you had health insurance last year. For some, that means more paperwork.

In addition to the normal thrills and chills of the income tax filing season, this year consumers will have the added excitement of figuring out how the health law figures in their 2014 taxes.

The good news is that for most people the only change to their normal tax filing routine will be to check the box on their Form 1040 that says they had health insurance all year.

“Someone who had employer-based coverage or Medicaid or Medicare, that’s all they have to do,” says Tricia Brooks, a senior fellow at Georgetown University’s Center for Children and Families.

The law requires people to have “minimum essential coverage,” but most types of insurance qualify.

But for others, here are several situations to keep in mind.

If you were uninsured for some or all of the year

If you had health insurance for only part of 2014 or didn’t have coverage at all, it’s a bit more complicated. In that case, you’ll have to file Form 8965, which allows you to claim an exemption from the requirement to have insurance or calculate your penalty for the months that you weren’t covered.

On page 2 of the instructions for Form 8965 you’ll see a lengthy list of the coverage exemptions for which you may qualify. If your income is below the filing threshold ($10,150 for an individual in 2014), for example, you’re exempt. Likewise if coverage was unaffordable because it would have cost more than 8% of your household income, or you experienced a hardship that prevented you from buying a marketplace plan, or you had a short coverage gap of less than three consecutive months. These are just some of the circumstances that would allow you to avoid the penalty.

In addition, you don’t have to pay a penalty if you live in a state that didn’t expand Medicaid to adults with incomes up to 138% of the federal poverty level $16,104.60 for an individual in 2013) and your income falls below that level.

Some of the exemptions have to be granted by the health insurance marketplace, but many can be claimed right on your tax return. The tax form instructions spell out where to claim each type of exemption.

If you do have to go to the marketplace to get an exemption, be aware that it may take two weeks or more to process the application. Act promptly if you want to avoid bumping up against the April 15 filing deadline, says Timothy Jost, a law professor at Washington and Lee University who is an expert on the health law.

If you don’t qualify for a coverage exemption

If none of the exemptions apply to you, you’ll owe a penalty of either $95 or 1% of your income above the tax filing threshold, whichever is greater. The penalty will be prorated if you had coverage for at least part of the year. The amount of the penalty is capped at the national average premium for a bronze level plan, or $2,448 for an individual in 2014.

The instructions for Form 8965 include a worksheet to calculate the amount of your penalty.

If you received a premium tax credit for a marketplace plan

Under the health law, people with incomes between 100% and 400% of the federal poverty level ($11,490 to $45,960 for an individual in 2013) could qualify for premium tax credits for 2014 coverage bought on the exchanges. If consumers wished, the tax credit was payable in advance directly to the insurer. Many chose that option.

The marketplace determined the amount of premium tax credit people were eligible for based on their estimated income for 2014. At tax time those estimates will be reconciled against actual income. People whose actual income was lower than they estimated may have received too little in advance premium tax credits. They can claim the amount they’re owed as a tax refund.

People whose income was higher than estimated and received too much in advance premium tax credits will generally have to pay some or all of it back. The amount that must be repaid is capped based on a sliding income scale, but people whose income is 400% of poverty or higher will have to pay the entire amount of any tax credit back.

If you bought a plan on the marketplace, you’ll receive a Form 1095-A from your state marketplace by Jan. 31 that spells out how much your insurer received in advance premium tax credits. You’ll use that information to complete Form 8962 to reconcile how much you received against the amount you should have received.

Assuming the information on the form is correct, “It should be easy to reconcile,” says Judith Solomon, vice president for health policy at the Center on Budget and Policy Priorities. Tax software programs and tax preparers should know how to make the calculations, she said.

In addition to using commercial tax software or hiring tax preparer, many lower income consumers and seniors can get free tax preparation assistance through the IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) programs.

Despite resources to help consumers, this first filing season is likely to be bumpy, particularly for people who have complicated family situations or who receive inaccurate information from the marketplace.

“There is just so much confusion out there,” says Jennifer Tolbert, director of state health reform at the Kaiser Family Foundation (KHN is an editorially independent program of the foundation.). “People are going to see these forms and not have any idea what they’re supposed to do with them.”

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

MONEY Health Care

Why You Could Have to Foot the Full Bill for a Weight-Loss Drug

The government has approved more drugs that suppress your appetite, but not all insurers will pick up the tab for the prescription.

In December, the Food and Drug Administration approved a new anti-obesity drug, Saxenda, the fourth prescription drug the agency has given the green light to fight obesity since 2012. But even though two-thirds of adults are overweight or obese—and many may need help sticking to New Year’s weight-loss resolutions—there’s a good chance their insurer won’t cover Saxenda or other anti-obesity drugs.

The health benefits of using anti-obesity drugs to lose weight—improvements in blood sugar and risk factors for heart disease, among other things—may not be immediately apparent. “For things that are preventive in the long term, it makes plan sponsors think about their strategy,” says Dr. Steve Miller, the chief medical officer at Express Scripts, which manages the prescription drug benefits for thousands of companies. Companies with high turnover, for example, are less likely to cover the drugs, he says.

“Most health plans will cover things that have an immediate impact in that plan year,” Miller says.

Miller estimates that about a third of companies don’t cover anti-obesity drugs at all, a third cover all FDA-approved weight-loss drugs, and a third cover approved drugs, but with restrictions to limit their use. The Medicare prescription drug program specifically excludes coverage of anti-obesity drugs.

Part of the reluctance by Medicare and private insurers to cover weight-loss drugs stems from serious safety problems with diet drugs in the past, including the withdrawal in 1997 of fenfluramine, part of the fen-phen diet drug combination that was found to damage heart valves.

Back then, weight-loss drugs were often dismissed as cosmetic treatments. But as the link between obesity and increased risk for type 2 diabetes, heart disease, cancer and other serious medical problems has become clearer, prescription drugs are seen as having a role to play in addressing the obesity epidemic. Obesity accounts for 21% of annual medical costs in the United States, or $190 billion, according to a 2012 study published in the Journal of Health Economics.

The new approved drugs—Belviq, Qsymia, Contrave and Saxenda—work by suppressing appetite, among other things. Saxenda is a subcutaneous injection, the other three drugs are in pill form. They’re generally safer and have fewer side effects than older drugs. In conjunction with diet and exercise, people typically lose between 5% and 10% of their body weight, research shows, modest weight loss but sufficient to meaningfully improve health.

The drugs are generally recommended for people with a body mass index of 30 or higher, the threshold for obesity. They may also be appropriate for overweight people with BMIs in the high 20s if they have heart disease, diabetes or other conditions.

In 2013, the American Medical Association officially recognized obesity as a disease.

Nevertheless, “people still assume that obesity is simply a matter of bad choices,” says Ted Kyle, advocacy adviser for the Obesity Society, a research and education organization. “At least half of the risk of obesity is inherited,” he says.

Many people who take an anti-obesity drug will remain on it for the rest of their lives. That gives insurers pause, says Miller.

The potential cost to insurers could be enormous, he says.

Susan Pisano, a spokesperson for America’s Health Insurance Plans, a trade group, says the variability of insurer coverage of anti-obesity drugs “relates to issues of evidence of effectiveness and evidence of safety.”

In 2012, the U.S Preventive Services Task Force, a non-partisan group of medical experts who make recommendations about preventive care, declined to recommend prescription drugs for weight loss, noting a lack of long-term safety data, among other things. But its analysis was based on the older drugs orlistat, which is sold over the counter as Alli or in prescription form as Xenical, and metformin, a diabetes drug that has not been approved for weight loss but is sometimes prescribed for that by doctors.

The task force did recommend obesity screening for all adults and children over age 6, however, and recommended patients be referred to intensive diet and behavioral modification interventions.

Under the health law, nearly all health plans must cover preventive care recommended by the task force without cost sharing by patients. Implementation of the obesity screening and counseling recommendations remains a work in progress, say experts.

Dr. Caroline Apovian, director of the Nutrition and Weight Management Research Center at Boston University, says many of the patients she treats can’t afford to pay up to $200 a month out of pocket for anti-obesity drugs.

“Coverage has to happen in order for the obesity problem to be taken care of,” says Apovian. “Insurance companies need to realize it’s not a matter of willpower, it’s a disease.”

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

MONEY Health Care

The Key Numbers to Look for When You’re Picking a Health Plan

pill bottle with numbered pills around it
Tim Robberts—Getty Images

Monday is the deadline to buy insurance if you want it on January 1. But don't shop solely on the premium. A new study finds that many exchange-sold plans have lower-than-expected out-of-pocket caps, a boon for some health care consumers. But deductibles are up.

Consumers shopping on the health insurance marketplaces will find many plans with out-of-pocket spending limits that are lower than the maximums allowed under the health law, according to an analysis by Avalere Health.

Seventy-four percent of 2015 silver level plans’ out-of-pocket spending caps are below the $6,600 spending limit allowed for individual plans and $13,200 maximum for family plans, according to Avalere, a consulting firm. The average out-of-pocket maximum for 2015 individual silver plans will be $5,853, says Caroline Pearson, a vice president at Avalere. Silver was the most popular plan type this year, selected by about two-thirds of enrollees.

After a policyholder reaches the out-of-pocket spending limit during the year, the insurer pays all the bills, unless, for example, they involve doctors and hospitals not in the health plan’s network.

The vast majority of other plans also feature lower limits on out-of-pocket spending—which includes deductibles, copayments, and co-insurance, but not premiums. Seventy-one percent of bronze plan spending limits were below the allowed maximum (with an average spending limit for single coverage of $6,381), as were 94% of gold plans (average limit, $4,458) and 98% of platinum plans (average limit, $2,145).

Avalere said the average spending limits for single coverage were in most cases close to those for 2014 plans: bronze ($6,330); silver ($5,877); gold ($4,443) and platinum, $2,795.

Avalere’s analysis included plans sold on the federal marketplace that serves 37 states, as well as data from the California and New York state marketplaces. Consumers have until Feb. 15 to enroll.

The tradeoff for lower out-of-pocket spending maximums may be a higher deductible, says Pearson. The average deductible for silver plans will increase 7% in 2015, to $2,658. Other metal-level average plan deductibles are increasing as well.

Higher deductibles are likely helping keep premiums low, and low premiums are what consumers are looking for, Pearson says.

For people who are generally healthy, a lower premium may be more attractive than a lower deductible. They’re never going to meet their deductible anyway, so they’d prefer to save on monthly premiums.

But for people with chronic conditions, “the lower out-of-pocket maximum helps you because you’re going to exceed your deductible no matter what,” says Pearson.

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

MONEY Health Care

Why a Popular Way to Control Health Care Costs Is Under Fire

businessman with blood pressure cuff on his arm
Eric Hood—iStock

Employers are increasingly turning to wellness programs to keep workers healthy. But a new lawsuit is challenging whether your boss can force you to get medical tests—or pay more for your health insurance.

Do it or else. Increasingly, that’s the approach taken by employers who are offering financial incentives for workers to take part in wellness programs that incorporate screenings that measure blood pressure, cholesterol, and body mass index, among other things.

The controversial programs are under fire from the Equal Employment Opportunity Commission, which filed suit against Honeywell International in October charging, among other things, that the company’s wellness program isn’t voluntary. It’s the third lawsuit filed by the EEOC in 2014 that takes aim at wellness programs, and it highlights a lack of clarity in the standards these programs must meet in order to comply with both the 2010 health law and the landmark Americans with Disabilities Act.

Honeywell, based in Morristown, N.J., recently got a reprieve when a federal district court judge declined to issue a temporary restraining order preventing the company from proceeding with its wellness program incentives next year. But the issue is far from resolved, and the EEOC is continuing its investigations. Meanwhile, business leaders are criticizing the EEOC action, including a recent letter from the Business Roundtable to administration officials expressing “strong disappointment” in the agency’s actions.

In the Honeywell wellness program, employees and their spouses are asked to get blood drawn to test their cholesterol, glucose, and nicotine use, as well as have their body mass index and blood pressure measured. If an employee refuses, he’s subject to a $500 surcharge on health insurance and could lose up to $1,500 in Honeywell contributions to his health savings account. He and his spouse are also each subject to a $1,000 tobacco surcharge. That means the worker and his spouse could face a combined $4,000 in potential financial penalties.

“Under the [Americans with Disabilities Act], medical testing of this nature has to be voluntary,” the EEOC said in a press release announcing its request for an injunction. “The employer cannot require it or penalize employees who decide not to go through with it.”

Honeywell sees the situation differently. “Wellness is a win-win,” says Kevin Covert, vice president and deputy general counsel for human resources at Honeywell. In time, the company expects to see lower claims costs while workers avoid health problems. Sixty-one percent of employees who participated in the company’s screening last year reduced at least one health risk, he says.

Further, Covert says, it’s easy for employees and their spouses to avoid the tobacco surcharge. Smokers can take a 15-minute online tobacco cessation course, while non-smokers can simply call up the health plan and certify that they don’t smoke.

“The way they described the program was quite hyperbolic,” Covert says.

Employers are watching the Honeywell case closely because many have similar incentive-based wellness plans, says Seth Perretta, a partner at Groom Law Group, a Washington, D.C., firm specializing in employee benefits.

Eighty-eight percent of employers with 500 workers or more offer some sort of wellness program, according to a 2014 national survey of employer-sponsored health plans by the benefits consultant Mercer. Of those, 42% offer employee incentives to undergo biometric screening, and 23% tie incentives to actual results, such as reaching or making progress toward blood pressure or BMI targets.

Despite employers’ enthusiasm for wellness programs, “there’s no good research that shows these programs actually improve health outcomes or lower employer costs,” says JoAnn Volk, a senior research fellow at Georgetown University’s Center on Health Insurance Reforms.

The health law encourages employers to offer workers financial incentives to participate in wellness programs. It allows plans to incorporate wellness incentives — both penalties and rewards — that can total up to 30% of the cost of employee-only coverage, an increase over the previous limit of 20%. If the wellness activity aims to help someone reduce or quit smoking, the incentive can be even higher, up to 50% of the plan’s cost.

Under the ADA, employers aren’t allowed to discriminate against workers based on health status. They can, however, ask workers for details about their health and conduct medical exams as part of a voluntary wellness program. What constitutes a voluntary wellness program under the law? Employers, patient advocates and policy experts want the EEOC to spell out what “voluntary” means under the ADA and clarify the relationship between the health law and the ADA with respect to wellness program financial incentives.

“The EEOC has chosen litigation over regulation,” says J.D. Piro, a senior vice president at Aon Hewitt, who leads the benefits consultant’s health law group.

The EEOC is always reviewing its guidance, but there’s no timeframe for issuing further guidance, says spokesperson Kimberly Smith-Brown.

Consumer advocates say it’s critical not to confuse incentive programs with comprehensive workplace wellness.

“The incentives are meant to engage employees,” says Laurie Whitsel, director of policy research at the American Heart Association, “but they’re not the comprehensive programming we’d like to see employers offer.” It’s really important to have a culture of health, Whitsel says, including an environment that supports a healthy workplace, from a smoke-free work environment to healthy food in the cafeteria.

Patient advocates voice another concern: That wellness program financial penalties may be so onerous they actually limit people’s access to the medications and primary and preventive care they need to get and stay healthy.

“When penalties become that high, it really is a deterrent to affordable, quality health care,” says Whitsel.

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

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