Health Care Law Hits Home in Complex Ways

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The health insurance overhaul signed into law last month has been billed as the most sweeping reform in generations.

And it is.

In broad strokes, the law provides tax credits for small businesses that offer health insurance, and subsidies for people who buy it for themselves. More people will be eligible for Medicaid, and insurers won't be able to charge more for those with preexisting conditions.

But when it comes down to how the law mixes with the variables of everyday life, things get complicated.

Take Linda Marie McCullough. The legislation was meant to put health insurance within reach of people just like her. But she might not be able to afford it, even with substantial subsidies.

For small-business owners like Pattiy and Steve Knox, there are tax rebates meant to take the sting out of group premiums. But will the help be too little, too late?

Sharon Velasquez, a hairdresser on Medicare, has pretty good coverage right now. If surgery pushes her into the so-called doughnut hole where prescription drug coverage cuts out, will the overhaul help her pay the bills?

Those are among the innumerable questions about the biggest change to U.S. health care in a generation.

The artist

Falling ill is something Linda Marie McCullough dares not think about.

The West Hollywood resident juggles several jobs, and she hasn't had health insurance for eight years.

"It's scary," she said. "I know I'm rolling the dice right now."

McCullough spent years as a working actress and model -- in the 1970s she appeared on "Welcome Back, Kotter" -- and, because this is Hollywood, she would rather not give her age.

These days, McCullough calls herself a self-employed freelance artist. She works a variety of jobs that include painting murals, housekeeping and photography.

McCullough last saw a doctor four years ago, about the last time she had a mammogram and gynecological exam.

One of her teeth needs a crown; she can feel the filling trying to pop out. But with her average monthly earnings ranging from $2,300 to $2,600, and her rent and living expenses topping $2,100 a month, McCullough said there was no way she could contemplate dental work.

"I just have to wait," she said.

It will be years before McCullough feels any effect from the health care overhaul, because the parts that apply to her don't kick in until 2014. And dental isn't covered anyway.

"Even then, what's in it for her depends on her annual salary," said Marian Mulkey, senior program officer at the nonprofit, nonpartisan California Healthcare Foundation.

In 2014, McCullough will be required to buy health insurance, and insurance companies won't be able to refuse to sell it to her.

Under the new law, individuals who earn up to about $44,000 a year -- four times the poverty level for one person -- would be eligible for government subsidies to help cover premiums, deductibles and co-payments.

If McCullough's annual income remains about $31,000, she would be eligible for such assistance, Mulkey said.

"People are prevented from having to pay over a certain share of their income on premiums," Mulkey said.

But even with subsidies, for a person on McCullough's salary, a monthly premium could still cost $200 to $300, or upward of $2,400 a year, analysts said.

McCullough was not aware until told that under the new law, those who don't buy health insurance will face fines. She said the most she could realistically afford for premiums on her current income would be $150 a month.

"I don't feel the government owes me anything," McCullough said. "But maybe we could meet halfway."

It's hard to say whether the government would meet her halfway, but there are indeed provisions for people like her.

The law includes a hardship exemption for people who cannot afford insurance, analysts said. It protects those who would face premiums of more than 8% of their annual income. Such people would also be able to buy low-cost policies that would cover only catastrophic medical costs.

The trainers

The boom years were good to Pattiy and Steve Knox and their Body Image gym in North Hollywood. Flush with clients and goodwill, the Knoxes moved their business to a trendy spot on Lankershim Boulevard, packed it with gleaming equipment and offered health insurance to their three employees.

As the economy soured, the couple struggled to pay the premiums -- about $20,000 a year -- for the small-group policy. The Knoxes had already increased their deductible to $3,500, figuring that it would keep premiums down but provide basic coverage in an emergency.

But it still wasn't enough. In January, with revenue down by nearly half, the Knoxes canceled their health insurance policy, leaving the couple, their two children and three employees uncovered.

Already, the couple has spent about $2,000 -- for Steve's ongoing recovery from a shoulder injury and two trips to the doctor for their kids.

When Pattiy punctured a lung working out, she wound up with bills for nearly $8,000. She's still paying them off. "The only thing I got out of it," she said bitterly, "is a payment plan."

John Arensmeyer, chief executive of the nonprofit Small Business Majority, said the Knoxes and their employees could benefit from the health care overhaul. Because the company is so small -- there are just two full-time positions and six part-time gigs -- it will not be required to provide health insurance for its workers.

But if the Knoxes decide to buy a policy for the company, they will be eligible for a tax credit of about 35% of their cost on premiums. That's about $8,000 if premiums stay the same as last year.

In 2014, Arensmeyer said, that credit will rise to 50%.

But even if the Knoxes pay for half of their employees' premiums, that doesn't mean the workers will be able to afford the other half. And the government won't provide subsidies for the employees because the law does not subsidize premiums when the employer is receiving the tax break.

If the company's plan is too expensive, the workers at the gym will be allowed to buy their policies through insurance exchanges set up by the federal government. In this scenario, their relatively low incomes will make them eligible for subsidies to help pay those premiums.

A little-known provision of the health care law could offer the workers even more help.

Say, for example, the Knoxes purchase a group plan for their employees but one worker decides to buy a policy at the exchange instead. The gym could issue a voucher in the amount it would pay toward the group plan for that person, who could then use the voucher when buying coverage from an exchange.

The gym's lowest earners -- part-timers who earn minimum wage -- could be eligible for free coverage because the new law has relaxed requirements to qualify for Medicaid, the public health care program for the poor. For example, a worker earning up to about $29,330 for a family of four could obtain Medicaid.

As for the Knoxes, if they do not obtain insurance through their business, they will be required to pay for it themselves in 2014. They would, however, qualify for a subsidy because they make less than about $88,000 for their family of four.

Pattiy Knox said she would like to buy insurance for her workers again.

But once again, the mechanics of the law run into the practical problems of small-business owners. The government subsidies to help her buy the insurance would come in tax credits, meaning Knox would have to pay upfront to get group coverage, and the business currently isn't generating enough profit to do that.

"It sounds pretty good," she said of the credit. "But we don't have the cash flow."

The hairstylist

At 65, Sharon Velasquez is still working three days a week cutting and styling hair. She plays bingo, takes jaunts with friends to Las Vegas and makes a mean chocolate eclair cake.

A widow, the Burbank resident is happy with her health coverage, which comes from Medicare and includes separate policies to pay for deductibles and prescription drugs.

Velasquez has a Medicare supplemental plan through Blue Shield and pays $139 a month. The plan, sometimes referred to as a "Medigap" policy, covers any holes in Part A and B Medicare coverage.

But her comfortable lifestyle might change after a planned May 4 surgery to repair a torn tendon in her shoulder. She'll continue renting her chair at a shop -- for now -- but doesn't know when she will be well enough to return. It could take a year to recover.

The overhaul won't affect Velasquez's Medigap policy or increase her premiums.

Kevin Prindiville, a staff attorney with the National Senior Citizens Law Center, based in Washington, said Velasquez wouldn't see any decrease in services either.

The new law, however, could affect Velasquez through her pharmaceutical coverage.

She's enrolled in a prescription drug benefit through AARP and pays about $35 for five generic prescriptions each month for diabetes, cholesterol and high blood pressure. She also pays $40 a month for the plan.

If Velasquez's surgery causes her to take more expensive medications, she could potentially fall into what's known as the "doughnut hole," said Gerald Kominski, associate director of the UCLA Center for Health Policy Research.

Here's how that might happen: Under the Medicare Part D program, seniors pay 25% of their drug costs up to $2,830 a year. After that, they pay 100% until their out-of-pocket total reaches $4,550, at which point catastrophic coverage kicks in and seniors pay just 5% of the cost for the rest of the year.

The gap between the yearly limit and the point at which catastrophic coverage kicks in is called the doughnut hole.

So will Velasquez fall into the hole? At the moment, her chances are slim because she takes generic, relatively cheap drugs.

Typically, people in the doughnut hole take relatively high-cost brand-name drugs or multiple brand-name drugs, said Tricia Neuman, director of Medicare Policy Project with the Kaiser Family Foundation.

Still, Velasquez's medication needs could change -- and if she does reach the hole this year, she will be entitled to receive a $250 rebate.

In 2011, she could receive a 50% discount on the total cost of brand-name drugs.

Like so much with the health care overhaul, how it will touch people's lives depends on their circumstances -- and on when the provisions take effect. Consumers like Velasquez, McCullough and Pattiy Knox will have to learn about, and perhaps adapt, to the legislation over time.

For Velasquez, though, at least one thing is constant. Her injury is on her left side, and she's right-handed. She expects to be back at bingo, ready to play.

Copyright © 2014, Los Angeles Times
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