Illness and medical debt are major reasons behind half of all personal bankruptcies The need for insurance is real, but it must be real insurance.
There’s health insurance and then there’s real coverage. Everyone in Massachusetts who has a health card probably thinks they have real insurance. Most do, but some don’t.
Clearly, a discount card is not health insurance. Coverage that is capped at a few thousands dollars per year is not real insurance.
Even presumably large caps on benefits can be problematic. Anyone admitted to a hospital with a plan that pays only $500 a day will realize they don’t have real protection when they find out that a hospitalization can cost well over $2,000 a day.
By Jan. 1, most adults in Massachusetts will be required to have real insurance. Otherwise, they will face penalties that could reach more than $900 per year. Worse, some medical services may not be covered by their plan, leaving them in real financial hardship.
You will be hearing a lot about a new term: minimum creditable coverage. It’s the minimum amount of insurance you must have to avoid those tax penalties. You can always buy a better plan, but minimum creditable coverage establishes a floor, not unlike the minimum wage.
If you get your insurance through the Health Connector, MassHealth or Medicare, it meets the new standards. The same for plans that are compliant with federal rules regarding High Deductible Health Plans and Health Savings Accounts. If you get health insurance through your company, ask if it’s MCC-compliant. It probably is.
Health insurance carriers are required to certify whether plans are MCC-compliant. If you purchase insurance on your own, be sure to check with your insurance carrier.
Specifically, your plan must provide:
A comprehensive set of services (e.g., doctor visits, hospital admissions, diagnostic surgery, mental health and prescription drug coverage).
Doctor visits for preventive care that are not subject to a deductible.
A cap on annual deductibles of $2,000 for an individual and $4,000 for a family.
For plans with up-front deductibles or co-insurance on core services, an annual maximum on out-of-pocket spending of no more than $5,000 for an individual and $10,000 for a family.
No caps on total benefits for a particular illness or for a single year.
No policy that covers only a fixed dollar amount per day or stay in the hospital, with the patient responsible for all other charges.
For policies that have a separate prescription drug deductible, it cannot exceed $250 for an individual or $500 for a family.
A “safe harbor” provision we are developing will also recognize that some plans that don’t meet every aspect of minimum creditable coverage are actually quite comprehensive and people who have them shouldn’t be penalized.
According to a recent study from the Commonwealth Fund, about 25 million Americans with insurance do not have adequate coverage to protect them from financial hardship.
Illness and medical debt are major reasons behind half of all personal bankruptcies. Most of those households had insurance. The need for insurance is real, but it must be real insurance.
Jon Kingsdale is executive director of the Commonwealth Health Insurance Connector Authority.