Affordable Care Act FAQs
Will everyone have to buy health insurance?
Starting in 2014, most people will be required to have health insurance or pay a penalty if they don't. Coverage may include employer-provided insurance, coverage someone buys on their own, Medicare, or Medicaid.
Several groups are exempt from the requirement to obtain coverage or pay the penalty, including: people who would have to pay more than 8% of their income for health insurance, people with incomes below the threshold required for filing taxes (in 2012, $9,750 for a single person and $26,000 for a married couple with two children), those who would have qualified for Medicaid except their state did not expand the program, those who qualify for religious exemptions, members of Indian tribes, undocumented immigrants, and people who are incarcerated.
The penalty for people who forego insurance is the greater of $695 per year (up to $2,085 for a family) or 2.5% of income (income is defined as total income in excess of tax filing thresholds). These penalties are phased in over time at $95 in 2014, $325 in 2015, and $695 beginning in 2016 (with annual increases after that) and 1% of income in 2014, 2% in 2015, and 2.5% starting in 2016. The total penalty for the year will not exceed the national average of the annual premium of a bronze level health insurance plan offered through the health insurance marketplaces. The Congressional Budget Office projects that 3.9 million people will pay the penalty in 2016.
Health insurance plans will provide documents to people they insure that will be used to prove that they have the minimum coverage required by law.
What is the Health Insurance Marketplace?
Health Insurance Marketplaces (also known as Exchanges) are new organizations that will be set up to create more organized and competitive markets for buying health insurance. They will offer a choice of different health plans, certifying plans that participate and providing information to help consumers better understand their options.
Beginning in 2014, Marketplaces will serve primarily individuals buying insurance on their own and small businesses with up to 100 employees, though states can choose to include larger employers in the future. States are expected to establish Marketplaces--which can be a government agency or a non-profit organization--with the federal government stepping in if a state does not set them up. States can create multiple Marketplaces, so long as only one serves each geographic area, and can work together to form regional Marketplaces. The federal government will offer technical assistance to help states set up Marketplaces.
How does the provision allowing young adults to remain on a parent's insurance work?
The health reform law contains a provision that requires private insurers to continue dependent coverage of children until age 26. Department of Health and Human Services regulations specify that a young adult can qualify for this coverage even if he or she is no longer living with a parent, is not a dependent on a parent's tax return, or is no longer a student. Both married and unmarried young adults can qualify for the dependent coverage extension, although that coverage does not extend to a young adult's spouse or children. For employer plans that were in place prior to March 23, 2010, young adults can only qualify for dependent if they are not eligible for another employer-sponsored insurance plan. Insurers that do not offer coverage to dependent children will not be required to offer this coverage to young adults.
The extension of dependent coverage to age 26 will go into effect on September 23, 2010, but plans will not be required to comply with the regulations until the first plan year beginning on or after that date. However, some insurers have said that they will begin to make the extension of dependent coverage available prior to September 2010 for young adults who would otherwise lose coverage.
Regulations also state that young adults who gain dependent coverage under the health reform law cannot be charged more for coverage than similar individuals who did not lose coverage due to the end of their dependent status. Young adults newly qualifying as dependents under the health reform law must also be offered the same benefits package as similar individuals who were already covered as dependents.
Currently, some states require that private insurance extend coverage to young adults in their twenties. These state requirements do not extend to self-funded insurance plans, but the new federal health reform law is designed to apply to these self-funded plans.
What protections are there in the new health reform law for people with pre-existing conditions?
Starting in 2014, all health insurers will have to sell coverage to everyone who applies, regardless of their medical history or health status. At that time, insurers will not be allowed to charge more to individuals with pre-existing conditions, nor will they be able exclude coverage of those conditions from the insurance plans they sell.
The law provides new protections for children with pre-existing conditions that will take effect on September 23, 2010. Insurers will not be permitted to deny coverage to children due to their health status, or exclude coverage for pre-existing conditions.
While adults will not have the same protections as children in the years prior to 2014, some adults may be eligible for a temporary national high-risk pool open to all U.S. citizens and legal residents who have had trouble buying insurance due to a pre-existing condition and have been uninsured for at least six months. This federally subsidized coverage, officially known as the Pre-existing Condition Insurance Plan, will provide temporary coverage until the broader coverage provisions take effect in January 2014. States can operate their own high-risk pool or have the federal government carry out the program. The federal government began accepting applications for enrollment in their high-risk pool on July 1, 2010, with coverage beginning on August 1, 2010. Premiums for this coverage will be based standard premiums for the general population, and therefore will not be higher due to the health problems faced by the high-risk pool beneficiaries. In addition, the amount that premiums can vary based on age will be limited. The high-risk pool insurance must cover 65% of medical costs and the maximum cost sharing is set at the Health Savings Account limits ($5,950 for an individual and $11,900 for a family of four).
How will existing employer health plans be affected by health reform?
Employer plans that were in place on March 23, 2010, the date the new health reform law was enacted, are referred to as "grandfathered plans" and are subject to some of the new rules but exempt from others. Beginning on September 23, 2010, grandfathered employer plans are required to eliminate any lifetime limits on coverage and restrict any annual limits on coverage, eliminate pre-existing condition exclusions for children, and if the plan provides dependent coverage, extend that coverage to adult children up to age 26. Beginning in 2014, grandfathered employer plans will be required to eliminate any annual limits on coverage, eliminate pre-existing condition exclusions for adults, and limit waiting periods for coverage to no more than 90 days. Grandfathered employer plans will not, however, be required to alter their benefits to meet the new minimum benefit standards nor will they have to limit enrollee cost sharing or provide coverage for preventive services with no cost-sharing. In order to maintain its grandfathered status, a plan cannot reduce or eliminate benefits to treat particular conditions, increase employee cost-sharing (including deductibles, co-insurance, and co-payments) above certain thresholds, reduce the employer share of the premium cost, or change insurers. Once a plan loses its grandfathered status, it will have to comply with all the new rules.
What preventive services will be covered?
Since July 2010, any new plans offered by employers or insurers — not including so-called "grandfathered" coverage that people already have — have to provide coverage for a range of preventive services, including: services recommended with a rating of "A" or "B" from the U.S. Preventive Services Task Force, immunizations recommended by the Centers for Disease Control and Prevention's Advisory Committee on Immunization Practices, and additional services for women contained in guidelines issued by the Health Resources and Services Administration (including routine mammograms for women over age 40). In addition, plans are required to cover these preventive services without any cost-sharing for patients.
How are small businesses affected by health reform?
The health reform law includes a number of provisions that reform the insurance market and encourage small businesses to offer health insurance. Coverage offered in the small group market and in the exchanges established for small business to purchase insurance, must meet minimum benefit standards; allow premiums to vary only by age, tobacco use, and geographic location; be subject to reviews of premium increases; and comply with other consumer protections.
The provisions to encourage small firms to offer coverage apply only to firms under a certain size.
Fewer than 25 Employees:
Beginning in 2010, business with fewer than 25 full time equivalents and average annual wages of less than $50,000 that pay at least half of the cost of health insurance for their employees are eligible for a tax credit. The full credit is available to employers with 10 or fewer employees and average annual wages of less than $25,000. The credit phases-out as firm size and average wage increases. The credit is capped based on the average health insurance premium in the area where the small business is located.
The tax credit will be introduced in two phases. For tax years 2010 to 2013, eligible employers may receive a tax credit of up to 35% of the employer's contribution toward the employee's health insurance premium. For tax years 2014 and later, eligible small businesses that purchase coverage through the state Exchange may receive a tax credit of up to 50% of the employer's contribution toward the employee's health insurance premium. Employers are eligible to take the tax credit for two years. Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 25% of the employer's contribution toward the employee's health insurance premium for tax years 2010 to 2013, and up to 35% for tax years 2014 and later.
Fewer than 50 Employees:
Businesses with fewer than 50 employees are exempt from penalties faced by larger employers that do not offer coverage. The penalties for larger employers (50 or more employees) do not go into effect until 2015, a year later than originally scheduled.
Fewer than 100 Employees:
Small businesses with fewer than 100 employees will be able to purchase coverage through Small Business Health Options Program (SHOP) Exchanges beginning in 2014. These state-based exchanges are intended to allow employers to shop for qualified coverage and more easily compare prices and benefits. In 2017, states will have the option to allow businesses with more than 100 employees to purchase coverage through the SHOP Exchanges.
Will employers that don't provide health benefits have to pay a penalty?
The health reform law does not require employers to provide health benefits. However, it does impose penalties in some cases on larger employers (those with 50 or more workers) that do not provide insurance to their workers or that provide coverage that is unaffordable. Larger employers that do not provide coverage will be assessed a penalty if any one of their workers receives a tax credit when buying insurance on their own in a health insurance Exchange. Enforcement of this provision will begin in 2015, a year later than originally scheduled. Workers with income up to 400% of the poverty level are eligible for tax credits. The employer penalty is equal to $2,000 multiplied by the number of workers in the business in excess of 30 workers (with the penalty amount increasing over time).
In some instances, larger employers that offer coverage could be subject to penalties as well. If the coverage does not have an actuarial value of at least 60% -- meaning that on average it covers at least 60% of the cost of covered services for a typical population -- or the premium for the coverage would exceed 9.5% of a worker's income, then the worker can obtain coverage in an Exchange and be eligible for a tax credit. For each worker receiving a tax credit, the employer will pay a penalty of $3,000 up to a maximum of $2,000 times the number of workers in excess of 30 workers.
How does the new law apply to companies with self-funded plans?
Self-funded plans--those where the employer accepts the risk for the health benefits it provides, rather than buying coverage from an insurance company--are generally exempt from state insurance regulations and are instead regulated by the Employee Retirement Income Security Act (ERISA). The new health reform law contains many provisions that apply nationally to both self-funded plans and fully insured plans. Some of these provisions include the extension of dependent coverage until age 26, no cost sharing for preventive services, the limit on waiting periods to no more than 90 days, maximum patient out-of-pocket costs, and no lifetime or annual limits on coverage. However, self-funded plans will not be subject to meeting the minimum essential health benefit requirements. "Grandfathered" plans (i.e., those that were in place on March 23, 2010) are not subject to all the above requirements.
How will the health reform law help people with their out-of-pocket expenses?
The new law has several provisions that are aimed at making private health insurance more affordable that will take effect in 2014. First, premium tax credits and cost-sharing subsidies will be available for U.S. citizens and legal immigrants purchasing coverage on their own in the new health insurance exchanges. The premium tax credits will be available to those with incomes up to 400% of the poverty level (estimated at about $47,000 for an individual or $96,000 for a family of four in 2014) and will limit what a person has to pay toward the premium to a specified percentage of income. The amount people will have to pay will range from 2% of income for those with income up to 133% of the poverty level to 9.5% of income for those with income between 300 and 400% of the poverty level. In addition to premium tax credits, people with incomes up to 250% of the poverty level (estimated at about $29,000 for an individual or $60,000 for a family of four in 2014) will be eligible for cost-sharing subsidies that will reduce what they will have to pay out-of-pocket for covered health services.
Second, the law establishes limits on what people buying insurance in the exchanges and some others will pay out-of-pocket for services covered by health plans. These limits are set initially at $6,400 for an individual and $12,800 for a family, and grow over time. For people purchasing coverage in the exchanges who have incomes at or below 250% of the poverty level, the out-of-pocket limits will be reduced.
Affordability and Subsidies FAQs
Who will be eligible for subsidies to make health insurance more affordable?
Beginning in 2014, tax credits will be available to U.S. citizens and legal immigrants who purchase coverage in the new health insurance exchanges and who have income up to 400% of the federal poverty level ($43,320 for an individual or $88,200 for a family of four in 2009). To be eligible for the premium tax credits, individuals must not be eligible for public coverage—including Medicaid, the Children's Health Insurance Program, Medicare, or military coverage—and must not have access to health insurance through an employer. (There is an exception in cases when the employer plan does not cover at least 60 percent of covered benefits on average or the employee share of the premium exceeds 9.5% of the employee's income.)
The premium tax credits will be advanceable and refundable, meaning they will be available when an individual purchases coverage and will be available regardless of whether or not an individual owes any taxes. The premium tax credits will vary with income and are structured so that the premium an individual or family will have to pay will not exceed a specified percentage of income, ranging from 2% for those with incomes up to 133% of the poverty level (about $14,400 for an individual) to 9.5% for those with incomes between 300 and 400% of the poverty level ($32,490 to $43,320 for an individual).
Will members of Congress and their staffs have to buy their health insurance in the new exchanges?
The health reform law requires that in 2014 the federal government only provide health coverage to members of the House of Representatives and the Senate through the new health insurance exchanges that will be created. The same requirement also exists for Congressional staff who are employed by a member of Congress. It appears that Congressional committee staff and certain other Congressional staff members may be excluded from this requirement because they do not work directly for a member of Congress.
Medicaid and CHIP FAQs
Who will be eligible for Medicaid?
As enacted, the ACA expands state Medicaid programs beginning in 2014 to cover nearly all individuals under age 65 with incomes up to 138% of the federal poverty level ($15,856 for an individual or $26,951 for a family of three in 2013). The ACA establishes a uniform minimum Medicaid eligibility level and income definition across all states and eliminates a prohibition that prevented states from providing Medicaid coverage to adults without dependent children except under a waiver of federal rules. However, while the Supreme Court upheld the ACA, it limited the federal government's ability to enforce the Medicaid expansion to low-income adults, effectively making implementation of the Medicaid expansion a state choice. This means eligibility for Medicaid for this population will vary depending on whether a state implements the expansion. If all states implemented the expansion, an additional 21.3 million people could be added to Medicaid. Undocumented immigrants are not eligible for Medicaid regardless of their income, and legal immigrants who have resided in the U.S. for less than five years are also not eligible, though states have the option of extending Medicaid coverage to legal immigrant children and pregnant women who are in the 5-year waiting period.
Financing and Taxes FAQs
Will employees be taxed for the portion of the health insurance premium that is paid by the employer?
Starting for the 2012 tax year, W-2 forms provided by employers (in the beginning of 2013) show employees how much their health insurance costs. However, the reporting is for informational purposes only; employees will not be taxed on this amount.
A separate provision of the health reform law creates a new tax on so-called "Cadillac" insurance plans provided by employers. Beginning in 2018, plans valued at $10,200 for individual coverage or $27,500 for family policies will be subject to an excise tax of 40% on the value of the plan that exceeds these thresholds. The tax will be levied on insurers and self-insured employers, not directly on employees.
The threshold amounts will be increased for inflation beginning in 2020, and may be adjusted upwards if health care costs rise more than expected prior to implementation of the tax in 2018. The thresholds are also adjusted upwards for retired individuals age 55 and older who are not eligible for Medicare, for employees engaged in high-risk professions, and for firms that may have higher health care costs because of the age or gender of their workers.
How does the Affordable Care Act (ACA) of 2010 change the Medicare Part D coverage gap, sometimes called the "doughnut hole"?
The ACA gradually reduces the amount that Medicare Part D enrollees are required to pay for their prescriptions when they reach the coverage gap. When the coverage gap is fully closed in 2020, beneficiaries will be responsible for paying 25 percent of the cost of their prescriptions under the standard drug benefit. Medicare Part D plans will cover 75 percent of the cost of generic prescription drugs and 25 percent of the cost of brand-name prescription drugs, in addition to a manufacturer discount of 50 percent on brand-name drug prices for prescriptions filled in the coverage gap.
What will happen to Medicare Advantage plans?
The health reform law reduces payments to Medicare Advantage plans, gradually bringing them closer to the average costs of traditional Medicare. In 2011, the law froze the maximum county-level payments to plans (called "benchmarks"). In 2012, to reduce payments, based on the Medicare costs in the county relative to other parts of the country. In addition, the law reduces the amount plans are permitted to keep when bids come in below the benchmark (known as "rebates"), which achieves savings for Medicare but also reduces the amount available to plans to provide extra benefits. In 2012, some Medicare Advantage plans began to receive bonuses based on quality ratings, as the result of both the health reform law and a CMS demonstration program.
The effect of the reductions in benchmarks and rebates is expected to vary across counties and by firm. Companies offering Medicare Advantage plans may respond to these payment changes in several different ways, depending on the circumstances of the company, the location of their plans and their historical commitment to the Medicare market. Plans will continue to be required to provide all benefits that are covered by traditional Medicare, but may charge higher premiums, increase cost-sharing, reduce their network of providers, or reduce "extra benefits" such as dental care or eyeglasses.
The law also includes new consumer protections. Plans are subject to new rules that limit cost-sharing that can be imposed on enrollees for certain services. Medicare Advantage plans will also be required to maintain a medical loss ratio of at least 85 percent beginning in 2014, restricting the share of federal payments and premiums that Medicare Advantage companies can use for administrative expenses, including profits.
How does the Affordable Care Act (ACA) affect physician fees?
The ACA provides bonus payments for primary care physicians in underserved areas and increases payments to rural health care providers.
The ACA does not address issues related to the sustainable growth rate (SGR) formula that determines physician payments, which was established by the Balanced Budget Act of 1997. The formula would have required reductions in payments every year since 2002; however, the scheduled reductions have been overridden by various laws, including the American Taxpayer Relief Act of 2012, which postponed the scheduled reduction in physician fees under Medicare through the end of 2013.
How is the Affordable Care Act (ACA) expected to affect Medicare spending?
The ACA includes several changes to Medicare benefits and spending, including some provisions that increase program spending and some that decrease program spending. On net, the Congressional Budget Office (CBO) estimated that the Medicare provisions in the ACA would reduce Medicare spending by $716 billion between 2013 and 2022.
Savings: Medicare savings provisions include phasing down payments to Medicare Advantage plans, reducing updates in payment levels to hospitals and other providers, increasing premiums paid by higher-income beneficiaries, and various delivery system reforms (such as establishing accountable care organizations and creating incentives to reduce preventable hospital readmissions). The ACA also authorized the Independent Payment Advisory Board (IPAB) to recommend policies to reduce Medicare spending if projected spending exceeds specific target growth rates.
Spending: Medicare spending provisions include providing free coverage for some preventive services and closing the coverage gap in the Part D prescription drug benefit (the so-called "doughnut hole") by 2020. The law also includes higher payments for primary care physicians.
Revenue: The ACA establishes new sources of revenue dedicated to the Medicare program, including an additional payroll tax on earnings of higher-income workers and a fee on the manufacturers and importers of branded drugs.
What happens if a state does not implement the health reform law?
If a state does not establish Exchanges or implement the new insurance rules according to the standards in the new law (and subject to further interpretation by federal regulations), then the federal government will step in and perform those functions. The Supreme Court upheld the ACA but limited the federal government's ability to enforce the Medicaid expansion to low-income adults, effectively making implementation of the Medicaid expansion a state choice. For states that move forward with the Medicaid expansion, the federal government will fund the vast majority of the costs, the number of uninsured will decline and states could see savings related to reductions in uncompensated care costs, shifting other state costs to Medicaid or due to broader economic effects. States that do not move forward with the Medicaid expansion could see large gaps in coverage because individuals with incomes below 100% FPL generally cannot receive subsidies to purchase coverage in the newly established health insurance exchanges and will not gain any new affordable coverage options.
CONFUSED? STUCK? NEED HELP?
Our licensed professionals are available to answer your questions, assist you in using our Calculators, and help you get the best coverage at the lower cost.