Are You Ready? What You Need to Know About Health Care Reform

Category: Health Insurance

Health care reform is a general term referring to the Patient Protection and Affordable Care Act (PPACA, or ACA). The ACA is a federal law that was passed in March 2010. It is intended to give more people access to affordable health care coverage and medical care.

Many of the most consequential provisions of the ACA are set to take effect beginning in 2014. It will have sweeping ramifications for consumers, state officials, employers and health care providers. Most of us will be impacted by the ACA in some way, either by changes to our employer-sponsored or privately purchased health plan, or because of the requirement for individuals without coverage to purchase it or pay a fine. You need to find out how your existing coverage (if any) will be affected, or if you will be required to purchase coverage on your own.

New Coverage Provisions Aimed at Consumers

Some new coverage provisions that are popular with consumers have already been implemented under the ACA. These include:

  • Some preventive services are now covered with no out-of-pocket costs.
  • Health plans cannot cancel your coverage once you get sick.
  • Children with pre-existing conditions cannot be denied coverage. This will apply to adults after 2014.
  • Insurers are required to provide rebates to consumers if they spend less than 80% – 85% of premium dollars on medical care. This provision is designed to reduce the amount that insurers spend on administrative costs in an effort to keep premiums down.

ACA Impact on Individuals and Families

Beginning in 2014, individuals must have health insurance or will be required to pay a fine. Known as the individual mandate, you can satisfy this provision with private insurance obtained on your own or through your job, or through government programs including Medicare, Medicaid, CHIP, Veterans Affairs, Indian Health Service, or TRICARE.

If you have health care coverage from your employer you most likely will continue to do so, particularly if you work for a large employer. Your employer might make changes to your plan design, and you can get those details from your employer.

If you work for a small employer, other changes may be coming and your employer should keep you informed. Some small employers are opting to no longer offer coverage to their employees.

If you do not get health insurance through your employer, you must purchase an individual health plan or pay a penalty. The penalty for individuals who do not obtain qualified health insurance in 2014 starts at $95 per year or up to 1% of income, whichever is greater. The penalty will rise to $695 per year or 2.5% of income by 2016.

Individuals who do not get health insurance from their employer but cannot afford to buy their own coverage may qualify for Medicaid or federal subsidies.

The health care law intended to expand state Medicaid programs to allow anyone with a household income at or lower than 133% of federal poverty level ($14,856 for individuals, $30,656 for family of four) to be eligible for Medicaid. However, expanded eligibility for Medicaid will vary by state. In June 2012 the Supreme Court ruled that states could not be forced by the federal government to make changes to their state-run Medicaid programs. In addition governors in several states have refused federal funds to expand their Medicaid programs. Therefore, expanded eligibility for Medicaid remains an unanswered question in many states.

If you do not qualify for Medicaid but still can’t afford health insurance, you might be eligible for government subsidies to pay for private insurance sold in the health insurance marketplace or state insurance exchanges. The exchanges are the federal and state-run health insurance marketplaces where you can shop, compare and buy health care coverage.

You can buy coverage on the exchanges beginning in October 2013, but coverage will start no sooner than January 1, 2014. Premium subsidies will be available for individuals and families with incomes between 133% and 400% of the poverty level, or $14,856 to $44,680 for individuals, and $30,656 to $92,200 for a family of four.

Some state insurance exchanges will be run by the state, while the federal government will run others. If your state exchange is run by the federal government, you will use the HeathCare.gov website to compare and purchase coverage. This website can also help you find out how to access the marketplace in your state.

ACA Impact on Businesses

Beginning in 2015, businesses with 50 or more employees that don’t provide health care coverage and have at least one full-time worker who receives subsidized coverage in the health insurance exchange will have to pay a fee of $2,000 per full-time employee (the first 30 workers are excluded from the fee). This is commonly referred to as the employer mandate.

The employer mandate was originally set to take effect in 2014, but has since been delayed by one year. The delay of the employer mandate has consequences for other parts of the law. Employers now need not comply with certain reporting requirements of the ACA until 2015. But the reporting requirements make it possible for the federal government to determine who is eligible for tax credits or subsidies when purchasing coverage on a government-run exchange—which is set to start in October 2013. Without the information provided by employers, eligibility for subsidies and tax credits will be determined by a self-reported “honor system.”

Employers also face a slew of new regulations and requirements for the plans they offer to employees.

New Penalties and Fees

The ACA imposes a variety of new taxes and fees on individuals and businesses. These include but are not limited to:

  • Beginning in 2013, individuals who earn over $200,000 per year and married couples who earn more than $250,000 per year will see a Medicare payroll tax rate increase from 1.45% to 2.35%.
  • These earners will also face a new tax on unearned income (investments, interest, dividends, etc.) of 3.8%. 
  • Beginning in 2018, a 40% excise tax will be applied to the portion of most employer sponsored health coverage (excluding dental and vision) that exceeds $10,200 per year for individuals or $27,500 for families. This is often referred to as the “Cadillac tax.”
  • New taxes and fees on medical device manufacturers and health insurers will likely be passed on to consumers in the form of higher premiums.

Where Can I Go to Find Out More?

It is important to learn all you can about health care reform and how it will affect you, your family and your employer. Will your employer continue to provide coverage, or will you need to purchase coverage on your own? Will you be getting health care coverage for the first time?

HealthCare.gov is a comprehensive resource for finding out everything you need to know about health care reform and what it means for you, your family and your business.

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