The major provisions of the Affordable Care Act that affect patients are explored below.
The individual mandate requires all US citizens and legal residents to obtain qualifying health insurance coverage with some exemptions. Those who do not comply will face tax penalties. The individual mandate is effective January 1, 2014, but those who obtain coverage by March 31, 2014 will not face penalties. In order to satisfy the individual mandate, health insurance coverage must meet minimum essential benefit criteria, and coverage obtained through an employer or public health plan like Medicare or Medicaid can satisfy the mandate.
The tax penalty that individuals will face for not complying with the individual mandate is the greater of $95 or 1% of income in 2014, $325 or 2% of income in 2015, and $695 or 2.5% of income in 2016. After 2016 the penalty will be increased annually by a cost-of-living adjustment. Exemptions from the individual mandate are granted for financial hardship, religious reasons, Native Americans, those without coverage for less than three months in a year, undocumented immigrants, incarcerated persons, those for whom the lowest cost health insurance option exceeds 8% of their income, and those with incomes below the tax filing threshold, which in 2009 for taxpayers under 65 was $9,350 for singles and $18,700 for couples. We encourage individuals who are exempted from the individual mandate due to financial hardship to find out if they are eligible for Medicaid. You may be eligible if your state has chosen to expand Medicaid coverage, and you can find out by utilizing the health insurance marketplace in your state.
Health insurance marketplaces/exchanges are established to aid individuals in obtaining health insurance coverage. The exchange serves as an online marketplace for the uninsured and those currently purchasing individual plans. Those who receive coverage through their employer or through public health insurance like Medicare and Medicaid generally won't have a need for the marketplace. The marketplaces opened on October 1, 2013. States have the option of operating their own exchange, operating an exchange in partnership with the federal government, or allowing the federal government to run the exchange. To find out your state's status, click here.
Since marketplaces are new and consumers will likely have many questions regarding them, we feel this topic deserves it's own full discussion, which can be found here.
Premium credits and cost-sharing subsidies are available to individuals whose income is between 100% and 400% of the federal poverty level and who obtain private coverage through the marketplace/exchange. Those who receive coverage through an employer are generally not eligible for premium credits unless the employer plan does not meet certain requirements. Premium credits and cost-sharing subsidies go into effect on January 1, 2014, and some small businesses are eligible also.
To be eligible for premium credits and cost-sharing subsidies, individuals must be U.S. citizens or legal immigrants with incomes up to 400% of the federal poverty level. In 2013, that's about $46,000 for an individual and $94,000 for a family of four in the continental United States. You can find out if you're eligible for credits and subsidies by utilizing the marketplace in your state (visit Healthcare.gov) or by using this subsidy calculator. Employees who are offered coverage by their employer are not eligible for premium credits unless the employer plan does not cover at least 60% of the plan's estimated total allowed benefit costs or if the employee share of the premium exceeds 9.5% of income. Small businesses are eligible for tax credits if they have no more than 25 full-time employees and equivalents and average annual wages of less than $50,000.
The ACA requires guaranteed issue, which prohibits insurers from denying applicants coverage due to pre-existing conditions. A related provision is the partial, or adjusted, community rating that prohibits insurers from setting premium prices based on health status. In other words, all applicants of the same age and geographical area must be offered the same premium price regardless of gender or pre-existing conditions, although those who use tobacco can incur a surcharge. These provisions generally apply to individual and small group plans and are effective January 1, 2014.
Medicaid expansion goes into effect January 1, 2014 and broadens Medicaid eligibility to all non-Medicare eligible persons under age 65 with incomes up to 133% of the federal poverty level. Under current law, undocumented immigrants are not eligible for Medicaid. States may opt out of Medicaid expansion if they prefer, and several have done so. To find out your state's status, click here. Individuals can utilize their state's marketplace to find out if they are eligible for Medicaid by visiting Healthcare.gov.
States that choose to expand Medicaid coverage will allow individuals with incomes up to 133% of the federal poverty level to be eligible for Medicaid coverage. The ACA also allows for a 5% income disregard, making the effective income eligibility limit 138% of the federal poverty level, which in 2013 is around $15,900 for one person or $32,500 for a family of four. To pay for the increased coverage, states that participate will receive 100% federal funding in 2014 through 2016, 95% federal funding in 2017, 94% federal funding in 2018, 93% federal funding in 2019, and 90% federal funding in 2020 and subsequent years.
The ACA defines minimum standards for health insurance plans in the marketplace including essential health benefits (EHB) and minimum essential coverage (MEC). Services covered under these standards include preventive services at no out-of-pocket cost to the patient, emergency room and hospital care, outpatient care, and prescription drug coverage among others. Other new provisions include a ban on lifetime benefit limits, a ban of annual spending caps on essential health benefits (effective January 1, 2013), and young adults are allowed to remain on their parents health insurance plan until they turn 26.
Every health insurance plan sold in the marketplace will cover at least 10 essential health benefits. These are outpatient care, emergency room care, hospital (inpatient) care, maternity and newborn care, mental health and substance use disorder services, prescription drug coverage, rehabilitation services, lab tests, preventive and wellness services (including chronic disease management), and pediatric care (including dental and vision care for kids). The ACA requires that many preventive services covered under these plans be offered at no cost to the patient when received from an in-network provider. These no-cost preventive services include blood pressure screening, diabetes and cholesterol tests, many cancer screenings, routine vaccinations, and regular wellness visits for infants and children. A full list of the preventive services can be found on the AHRQ website.
The medical loss ratio, which went into effect on January 1, 2011, requires insurers to spend 85% of their premium dollars for large group health plans and 80% of their premium dollars for individual and small group health plans on clinical services, quality, and other medical costs, leaving 15% or 20% of premium dollars respectively for administrative costs and profits. Health plans are required to provide a rebate to policyholders if they do not reach those percentages. The purpose of the medical loss ratio is to ensure that health plans are spending the bulk of their premiums on patient care as opposed to executive salaries, shareholder dividends, and the like. Health plans started reporting on the medical loss ratio is 2010, and rebates were effective on January 1, 2011.
Medicare payment reform benefits Medicare patients by gradually decreasing the coinsurance rate in the Medicare Part D coverage gap, or "doughnut hole", from 100% to 25% by 2020. Pharmaceutical manufacturers are required to provide a 50% discount on brand-name prescription drugs filled in the doughnut hole beginning in 2011. In addition, federal subsidies will be phased in beginning in 2013 that will cover 25% of brand-name drug costs in the coverage gap by 2020, which will effectively close the doughnut hole in 2020. Federal subsidies for generic drugs will be phased in beginning in 2011 and will cover 75% of generic drug costs for prescriptions filled in the doughnut hole by 2020.
As of January 1, 2013, higher income individuals began paying an increased Medicare tax rate on earnings over $200,000 for individuals and $250,000 for married couples filing jointly as well as an additional 3.8% Medicare tax on unearned, or investment, income. Also, all tax filers can now only deduct qualified medical expenses that exceed 10% of their adjusted gross income as opposed to the previous threshold of 7.5%.
The Medicare tax rate hike results from an increase in the Medicare Part A tax rate by 0.9%, taking the tax rate from 1.45% to 2.35%, on earnings over $200,000 for an individual and $250,000 for married couples filing jointly. The 3.8% tax on investment income is new and applies to higher income taxpayers also. The increase in the deduction threshold applies to everybody, not just higher income earners, but it does not apply to individuals age 65 and older until 2016.
Miscellaneous provisions include:
This section should give you a solid understanding of how the Affordable Care Act affects patients. To reiterate a recurring point, a big thing for consumers to keep in mind is that if you currently receive coverage through an employer, most likely not much will change in terms of your health benefits or how you receive them. However, if you are uninsured or are currently purchasing an individual plan, the health insurance marketplace and other requirements of the ACA will most likely change the way you obtain and maintain health insurance coverage.
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