Affordable Care Act Basics: Essentials of Health Reform
Know Your Options and Obligations
The health law makes it possible for you to get coverage, but in order to make sure people exercise their rights to insurance, it is now mandatory to buy a policy. Otherwise, you pay a penalty tax. Additionally, you may already be covered and able to coast right past the clamor of marketplace enrollment if you have a certain type of plan.
Should you change your current health plan?
As of March 2010 when the Affordable Care Act became law, suddenly health insurance could fall into three categories:
- Grandfathered plans (issued before March 2010)
- Transitional or non-grandfathered plans (purchased between 2010-2013)
- Reformed plans (issued for a Jan. 1 2014 effective date or later)
If you have a grandfathered health plan, you don’t have to change your coverage in 2014, as the ACA doesn’t affect your insurance — yet. Eventually, grandfathered plans may be eliminated. These plans don’t have to follow the ACA health plan requirements entirely, which may or may not be beneficial.
If you purchased a comprehensive health plan after the health law was made effective in 2010, you also aren’t required to switch to a reformed plan, but you may prefer to do so for various reasons, notably coverage options and the inability for insurers to restrict coverage due to health problems. Each of these plans contains some features of Obamacare coverage, including If a transitional policy doesn’t meet the criteria for coverage under the ACA, it may be updated.
If you purchase a health plan that begins January 1, 2014 or later, your plan will follow the regulations of the ACA, including essential health benefits.
How The 3 Plan Types May Vary
Paying for Coverage Under the ACA
Penalty, tax credit or full price? Depending on your income and insurance coverage, you may have a few options for paying for health insurance in 2014 and beyond. If you opt not to buy a plan, you may have to pay a penalty, whereas if you buy coverage on the exchange and your income is under 400 percent of FPL, you can receive financial assistance.
Why the penalty? For one, the government wants people to enroll in the new exchanges, and another reason is to offset the cost of providing care to uninsured Americans. If more people have coverage, fewer will have to see their taxes increase in order to cover the uninsured.
Tax credits are a helpful development of the health reform law, making it possible for more middle-income individuals and families to obtain coverage they can afford.
In order to qualify for assistance with health insurance costs, you must:
- Live in the United States
- Be a U.S. citizen or national, or otherwise legally reside in the country
- Not be incarcerated
- Not have access to affordable health insurance through your employer, Medicare or any other source
- Earn below 400% of the current federal poverty level
Based on the size of your household and how much you earn, you may qualify for a subsidy, also known as a tax credit. The amount of your premium tax credit is determined on a sliding scale by your earnings and the cost of coverage as a percentage of income. Specifically, the cost of coverage is based on the second cheapest silver plan on the exchange in your area. This is referred to as a benchmark plan in the ACA.
The lower your income, the higher your tax credit will be, and you may be eligible for tax credits to help pay for cost sharing if you earn up to 250% FPL. For premium tax credits, you cannot pay more than:
- 3% of income at 133% FPL
- 4% of income at 150% FPL
- 6.3% of income at 200% FPL
- 9.5% of income at 300 – 400% FPL
Tax credits can be applied to any health plan, but the value will vary based on the difference between the cost of the benchmark plan and your maximum monthly premium.
Click here for more Subsidy specifics.
One of the less lovable sides of the ACA is the requirement to tax people who could afford insurance but choose not to buy it. Not to worry for those who don’t feel the need to get coverage: the penalty costs much less than insurance does. Each year, the penalty will increase, however, in an attempt to make coverage look more appealing than the tax.
In 2014, the penalty is 1% of taxable income or $95 for an adult, $47.50 for each child, whichever is higher.
In 2015, it increases to 2% of income or $325 for each adult and $162.50 for each child, whichever is higher.
In 2016, the penalty is 2.5% of income or $695 for each adult and $347.50 for each child, whichever is greater.
Beginning in 2017, the penalty will increase with annual cost-of-living inflation.
Understanding Your Health Insurance Choices
One of the major changes to health care and coverage introduced by the ACA is the health insurance marketplace. Learning how to use this system to your advantage is can be tremendously helpful, especially if you qualify for a subsidy. In addition to marketplace plans, private health insurance companies sell coverage off the exchange that also includes an array of benefits and increased coverage without discrimination under the ACA.
Coverage Options On and Off the Exchange
Once you get the basics of coverage under the ACA, you can decide what will be the right source of coverage for you. Each plan on and off the exchange covers ten types of essential health benefits (EHBs), which are commonly used or otherwise important health care services.
Qualified health plans effective in 2014 and onward must cover at least 60 percent of your medical care after deductible. This is also called actuarial value, or average yearly costs per policyholder, which ranges up to 90 percent with most insurers’ comprehensive, or qualified, plans.
Essential Health Benefits
These are featured in every plan deemed acceptable to avoid the penalty under the ACA. Whether you choose a plan on or off the exchange, in order to meet the health law’s criteria, you must have a plan with at least 10 categories of essential coverage. These categories include:
- Preventive and wellness services and chronic disease management
- Pediatric care, including oral and vision
- Emergency services
- Prescription drugs
- Laboratory services
- Mental health and substance-use disorder care
- Ambulatory patient services
- Maternity and newborn care
- Rehabilitative and habilitative services and devices
Metallic Coverage Tiers
Reformed coverage on and off the exchange is offered in four tiers: bronze, silver, gold and platinum. Each “metal” represents the level of protection you receive based on actuarial value from lowest to highest.
Bronze Plans cover 60% of medical costs, you pay 40%
Silver Plans cover 70% of medical costs, you pay 30%
Gold Plans cover 80% of medical costs, you pay 20%
Platinum Plans cover 90% of medical costs, you pay 10%
View our Health Insurance Exchange page for extensive details.
Other Coverages Available On and Off the Exchange
Consumers aren’t cornered into choosing one type of plan just because the laws changed. It has created more options on top of those already available. Exchanges also offer more minimal coverage for younger Americans up to age 30 with catastrophic plans. A wide selection of qualified health plans and other plans are offered through sites like ECHealthInsurance.com, where you can compare and contrast a variety of products.
Because East Coast Health Insurance uses Quotit for our insurance technology systems, and they were approved as a federally-facilitated exchange broker entity by the government, and also because our agents completed marketplace training, we are able to help people enroll in various state exchanges. We continue to offer plans off the exchange, as well, which is more practical if you want a larger network and/or don’t qualify for subsidies.
Plans sold on the traditional market (off the exchange) are not unlike the exchange plans in terms of metallic coverage tiers, EHBs, and a range of deductibles. They also include additional benefits such as dental, vision, accident, critical illness and short-term coverage. The cost of coverage may range based on the provider network size or number of prescription coverage options you need.
Shopping for Reformed Health Plans
If you want to buy a health plan that includes all of the best features of the ACA, including nondiscrimination for gender and pre-existing conditions, EHBs and a higher actuarial value, you’ll want to apply during open enrollment. Otherwise, it may be difficult to obtain coverage unless you have a qualifying life event.
Qualifying events may include getting married, having a child, death of a family member, becoming a legal U.S. resident, moving to a new coverage area (zip code), or loss of essential health coverage. Government errors are also qualifying events, if a worker, officer or agent employed by the exchange or Department of Health and Human Services makes an error that causes you to lose coverage.
If you still have any questions about health reform and how it affects you, please view our Obamacare information or contact us at 888 803 5917. A licensed agent will personally explain the law and can even help connect you with the coverage of your choice if you’re ready.