Health Care Reform: What You Need to Know

After years of political fighting, a Supreme Court decision and lots of confusion, the 2010 Affordable Care Act (ACA) began implementation on October 1. For those who have health insurance coverage through their employers or through Medicare or Medicaid, you can pretty much drown out the noise. If you are an uninsured U.S. citizen or legal resident, you must be enrolled in qualifying health coverage in 2014 or face a penalty. This is known as the “individual mandate” and it is the cornerstone of the ACA. The government has established a web site called Healthcare.gov to manage all aspects of the ACA.

Here’s a refresher on what you need to know:

What is qualifying health coverage? Employer-provided insurance; government programs like Medicare, Medicaid, CHIP; COBRA; privately purchased insurance; or coverage you purchase on a state or federal marketplace.

What are “Exchanges” or “Marketplaces”? Starting on October 1, there will be Marketplaces (also known as “exchanges”) for those who do not have insurance and for small businesses with up to 50 employees. The state and federal governments are not providing the coverage; rather they are aggregating the information for consumers through one platform—the Marketplace. It’s like using Travelocity to understand the cost of various airlines flying to your desired destination, rather than visiting each airline’s website to find the same information.

ACA envisioned that most states would establish and run their own online health insurance Marketplaces, with federally run Marketplaces as a backstop. However, only 16 states and the District of Columbia have done so; seven more are partnering with the federal government to operate their Marketplaces. In the other 27 states, people without insurance will use federally managed Marketplaces to shop for coverage.

Individuals can choose among 4 plans: bronze, silver, gold and platinum, which are intended to cover 60 to 90 percent of health costs that a health plan would pay for an average person. Insurers don't have to offer all four plans, but within the health insurance marketplaces, all insurers must offer at least one silver and one gold plan. Costs of each type of plan vary by state.

What are the penalties for NOT having coverage? The greater of:

• 2014: $95 per uninsured adult in the household, capped at $285 per household OR 1 percent of the household income
• 2015: $325 per uninsured adult in the household, capped at $975 per household OR 2 percent of the household income
• 2016: $695 per uninsured adult in the household, capped at $2,085 per household OR 2.5 percent of the household income

Are there exemptions from penalties? Yes, for economic hardship (income below 100 percent of poverty level, those who are unable to pay for coverage that is more than 8 percent of household income), religious objections, American Indians, those without coverage for less than 3 months, undocumented immigrants and incarcerated individuals.

Will Uncle Sam help financially? Tax credits for individuals and families making between 100 and 400 percent of the federal poverty level to purchase insurance through the Marketplaces and are ineligible for coverage through an employer or a government plan, like Medicare and Medicaid. Current household income limits for 100 to 400 percent of the poverty line are:

• $11,490 (100%) up to $45,960 (400%) for one individual
• $15,510 (100%) up to $62,040 (400%) for a family of two
• $23,550 (100%) up to $94,200 (400%) for a family of four

If you are eligible for the credit, you can choose to have all or some of the credit paid in advance directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014; or you wait to get all of the credit when you file your 2014 tax return in 2015.

Tax credits to buy health coverage will be available to small employers with up to 25 workers and who have average wages of $40,000 or less.

The government will also help low income people with out-of-pocket (unreimbursed) expenses. If income is between 100 percent and 250 percent of the federal poverty line ($23,550 to $58,875 for a family of four), you can qualify, BUT only if you enroll in a silver plan.

How will ACA change health benefits and coverage?

• Eventual elimination of lifetime limits on coverage and annual limits on coverage
• Elimination of pre-existing condition exclusions by 2014
• Requirement to extend dependent coverage to age 26
• Insurers will not be allowed to charge women or persons with medical problems higher rates.
• Premiums of older people can't be more than 3X as expensive as those of younger
• Coverage will be portable, even if you leave a job
• Limit any waiting periods for coverage to 90 days
• Require health plans to report the proportion of premium dollars spent on clinical services, quality, and other costs and provide rebates to consumers. Insurance companies pay out 74 cents on every dollar-new rules will increase to 80-85 cents
• Develop standards for insurers to use in providing information on benefits and coverage and to promote administrative simplification
• Limit deductibles in the small group market to $2K for individuals ($4K for families)
• Create a new federal body that could block insurers from raising rates

Will there be changes to Medicare? Higher-income Medicare beneficiaries (those who earn more than $85,000 per person or $170,000 per couple) will pay slightly more for their prescription drug coverage, or Medicare Part D. This is expected to affect about 5 percent of beneficiaries.

Most Medicare recipients will see their drug costs go down as the ACA begins to close the "donut hole," which is a coverage gap that forces Medicare beneficiaries to pay 100 percent of their prescription drug costs up to a certain amount. This gap is expected to be fully closed by 2020, but those who fall into the gap this year will get a 47.5 percent discount on certain brand-name drugs and a 21 percent discount on generic drugs until they reach the out-of-pocket limit.

Will there be changes to Medicaid? ACA will mean an expansion of Medicaid to anyone under 65, with income eligibility levels of 133 percent of poverty level.

When do employers have to do something? On July 2, 2013, the Obama Administration announced that it would delay implementation of the “Employer Mandate” until 2015. As of 2015, employers of 50 or more full-time workers that do not offer coverage will pay a fee of $2,000 per worker for each full time employee over the first 30 employees. Small businesses with fewer than 50 employees can start shopping for coverage on October 1st through the Small Business Health Options program, or SHOP Marketplace.

How much ACA cost? The net cost is now estimated to be $1.375 trillion over the 10-year period from 2014 to 2023, according to a July 30 CBO estimate.

Who is paying for ACA?

• As of Jan 2013, the IRS levied an additional 0.9 percent increase in Medicare payroll taxes on individuals earning more than $200,000 and couples with income of more than $250,000 a year
• As of Jan 2013, unearned income (interest and capital gains) subject to additional 3.8% tax
• As of Jan 2013, a 10 percent tax on indoor tanning salons
• Starting in 2014, the government will impose fees medical device manufacturers
• A tax on individuals without qualifying coverage (see above)
• Starting in 2018, there will be a new excise tax on high-premium ("Cadillac") insurance plans. Tax = 40% of premiums paid on plans costing more than $27,500 annually for a family

When will there be a reduction in health care costs overall? President Obama recently proclaimed, that in “the three years since ‘Obamacare’ passed, we’ve seen the slowest growth in health care costs on record.”

According to the Kaiser Family Foundation and CMS data, national health spending grew by 3.9 percent from 2009 through 2011, and near 4 percent in 2012; it’s projected to grow at a similar rate through 2013. Those are the lowest rates since the government started keeping track in 1960. BUT, independent experts believe the slowdown is largely due to the economy and a contraction of spending during the recession. Most agree that any cost savings provisions included in ACA have not yet been realized.