On June 28, 2012, the Supreme Court finally reached its decision on the constitutionality of the Affordable Care Act, upholding several of the original laws and tweaking others. Many of the ACA’s most deeply impacting regulations took effect in the beginning of the year in 2014, including the Individual Mandate, acceptance of all adults regardless of health status or risk by private insurers, the introduction of state- and federal-run health insurance exchanges, subsidies and Medicaid expansion. The final version of the law is now in place, and includes the following points which were upheld or modified after the major lawsuit over Obamacare was closed.
A major cause for legal dispute over Obamacare was the requirement for the majority of American citizens to obtain insurance or pay a penalty fee. The Individual Mandate was ultimately passed, despite criticism of being unconstitutional. The individual mandate was passed as the IRS can consider it a tax, and deduct it from annual income taxes. On January 1, 2014, all individuals who do not have health insurance coverage must agree to get a health insurance plan or will pay a tax of sorts on their unwillingness to do so. Some individuals can complete a waiver exempting them from this tax due to low income, referred to as a hardship exemption. Otherwise, the fine serves as a cheaper alternative to coverage for risk-takers who would rather stay uninsured. Each year, the value of the penalty increases, deducting the greater of a percentage of income or a certain dollar amount out of your tax return.
In order to avoid the penalty, you must carry what the law calls “minimum essential coverage”, which is defined as an exchange plan, an employer-sponsored plan, an individual health insurance plan, grandfathered plan or any other type of coverage that qualifies according to the Department of Health and Human Services. If you have only a stand-alone plan, such as dental or prescriptions, you will not be exempt from paying the tax.
Penalty Structure for Being Uninsured
2014: $95 per person or 1% of income
2015: $325 per person or 2% of income
2016 and later: $695 per person or 2.5% of income
Starting in 2017, penalties will also increase with inflation.
This fundamental piece of health care reform, insurers not rejecting an individual for a health plan based on their health status, is presently the policy of all private and public health plans according to the law of the land. As of March 2010, all children with pre-existing conditions were allowed to receive health insurance from any carrier as a result of the ACA. Since January 2014, adults have the same right. The pre-existing condition provision of the ACA also ensures that premium rates do not increase for anyone as a result of health status or medical history. Previous buffers used by health insurance companies to avoid the cost of treatment such as exclusion periods and elimination riders have also been removed by the federal law.
This remains an incredible improvement and milestone for health insurance, as getting a plan has always been determined by rigorous underwriting rules discriminating against individuals who would be a costly investment for the insurance company. Since the inception of the ACA, the Pre-Existing Condition Insurance Plan created a temporary health plan for adults with such conditions to get covered before this provision took root. As of 2014, high-risk pools and PCIP were no longer necessary as everyone, sick and healthy, can purchase coverage from any insurer without bias. High-risk pools (not PCIP) run by state-level organizations are still open to help balance health plan enrollment, however.
The newest form of coverage in our nation, the health insurance marketplace, is set up in every state to offer health plans to individuals, families and small business owners at a reasonable cost. How will they manage to make coverage affordable amidst an economic crisis, rising inflation and growing health care and insurance costs? Tax credits issued by the government. Each qualified health plan sold by a private insurer exclusively on the exchange can be reduced in cost if the applicant’s income is within a certain range. Subsidies/tax credits cannot be applied to any other individual health plan, just those on the exchange. This system is designed to help low- to moderate-income individuals and families gain coverage and be able to afford medical care. Subsidies may also be contributed to cost sharing if your income is low enough.
Exchanges are administered by a non-profit organization or government agency. Plans provided through the exchange must meet federal criteria applying to a set of essential benefits, which includes services within at least ten categories such as outpatient services, emergency care, lab work, preventive and wellness, chronic disease management, maternity and newborn care, and prescription medications. The marketplace has created a competitive environment for carriers to work for the benefit of the consumer, not the other way around. Exchanges also serve as an incentive for the private insurance market to bring down their rates and increase their quality of care to compete with exchange plans. You can buy coverage online, at a local health center where people are specially trained to help you apply, or through a licensed, certified insurance agent or broker, such as East Coast Health Insurance.
In order to make coverage obtainable for the large population who cannot afford health insurance, but earn too much to qualify for Medicaid, federal subsidies will be awarded to those who buy coverage on the exchange. After the Supreme Court ruling, the requirement for a household income eligible to receive subsidies was set in the range of 138 to 400 percent of the federal poverty level (FPL). In states that have not expanded Medicaid, tax credits will be issued to policyholders with poverty-level income or higher to reduce premiums and medical costs. Subsidies can lower your premiums if you earn up to 400 percent of FPL, or contribute to both monthly premium rates and out-of-pocket expenses if you earn up to 250 percent of FPL.
Medical Assistance or Medicaid programs in many states have grown to include more uninsured, low-income residents by increasing eligibility. Under the original version of the health reform law, Medicaid in each state would allow approximately 30 million Americans the ability to acquire free, government-funded health insurance coverage. One of the primary reasons the ACA is such a landmark bill was that it initially made it mandatory for states to offer Medicaid coverage to all low-income adults, not just parents. The law proposed the expansion of Medicaid to include adults without children earning up to 138% of FPL, or about $15,856 for a single earner, to enroll in Medicaid in each state.
Prior to the Supreme Court ruling, a fee would be charged to state governments that did not choose to offer Medicaid to more people, an idea that was ultimately turned down. Currently, participation in Medicaid expansion is optional for every state without a penalty fine. In fear that the program will be too costly for states to support, several government officials agreed not to alter any of the admission criteria for their state programs. This allows states to leave millions of low-income individuals without health care coverage without a penalty, where applicable, but the good news is that many states have expanded Medicaid.
25 states have given more of their low-income population access to free or low-cost coverage under health reform-style Medicaid expansion. In such states, adults who earn up to 138 percent of FPL qualify for this public insurance program. This includes childless adults as well as parents, which is an innovation in the majority of states as children in some families may qualify for public coverage and their parents do not.