Health Care Reform Update

The Patient Protection and Affordable Care Act (PPACA) requires all Americans to have “minimum essential coverage” starting January 1, 2014.  This useful guide will help you determine how Health Care Reform will affect you.

The Individual Mandate

You can satisfy the individual mandate through health coverage sponsored by your employer, an individual health insurance policy from an insurer/HMO or through coverage under a variety of government plans. Each is considered a form of “minimum essential coverage.” Those who do not maintain “minimum essential coverage” will be assessed a tax penalty.  The penalty is on a sliding scale for three years and is 1/12th of the greater of:

• For 2014, $95 per uninsured adult in the household or 1% of the household income over the tax filing threshold
• For 2015, $325 per uninsured adult in the household or 2% of the household income over the tax filing threshold
• For 2016, $695 per uninsured adult in the household or 2.5% of the household income over the tax filing threshold

The penalty will be 1/2 of the amount for individuals under the age of 18.

The following exceptions to the penalty for not maintaining minimum essential coverage apply to individuals:

• Religious reasons
• Not covered for a period of less than three months during the year.
• Hardship waiver obtained.
• Not lawfully present in the U.S.
• Incarceration
• Income below 100 percent of the poverty level.
• Inability to afford coverage where required contributions toward coverage exceed 8 percent of household income.

Essential Health Benefits

Starting January 1, 2014, most individual and family health plans will be required to cover all “Essential Health Benefits” as defined by the applicable state. The Department of Health and Human Services (HHS) has instructed each state to select an existing health plan as a “benchmark” to establish the services and items to include in the Essential Health Benefits package for the state for 2014 and 2015. Therefore, what constitutes “Essential Health Benefits” will vary from state to state, and could change for 2016 and beyond.

Essential Health Benefits under the law must include the following general categories:

• Ambulatory patient services
• Emergency services
• Hospitalization
• Laboratory services
• Maternity and newborn care
• Mental health and substance abuse disorder services (including behavioral health treatment)
• Pediatric services, including oral and vision care
• Prescription drugs
• Preventive and wellness services and chronic disease management
• Rehabilitative and habilitative services and devices

The law states that plans of all sizes that cover benefits designated as Essential Health Benefits must cover these benefits with no annual dollar limits or lifetime maximums. In other words, any service or item included in a state’s Essential Health Benefits package must be covered with no annual or lifetime dollar limits.

Exchanges

To help make the cost of purchasing health coverage more affordable for individuals and small employers, the Patient Protection and Affordable Care Act provides for the creation of Health Insurance Exchanges, new health insurance marketplace, starting January 1, 2014. An Exchange is a marketplace for purchasing individual and small group insurance products. They are to be established by individual states for their citizens. If a state elects not to establish an Exchange, HHS will establish the Exchange for that state. Exchanges are required to be available for the purchase of coverage starting October 1, 2013.

Through these Exchanges, consumers will be able to select from four different levels of individual health insurance policies (bronze, silver, gold or platinum) offering different levels of costsharing (e.g., coinsurance/co-pays, deductibles and maximums). These levels represent the level of cost-share the policy holder will have, they are not coinsurance levels:

When individuals purchase coverage through the Exchange, the Exchange will determine if they’re eligible for a federal premium tax credit to help subsidize the cost of the Exchange coverage. It is not yet known what the exact costs will be for coverage purchased on Exchanges.

It is estimated that about 19 million people who secure coverage through an Exchange are likely to be eligible for the federal premium assistance tax credit. This credit is available to individuals and families with household incomes between 100% and 400% of the federal poverty level. In 2012, this range of income for a family of four is about $23,000 to $92,000.

The amount of the tax credits will be determined on a sliding scale based on income, with the lowest incomes receiving the largest tax credit. These amounts will decline incrementally as income levels rise, from 2% of income for those at 133% of the federal poverty level to 9.5% of income for those at 400% of the federal poverty level.

The tax credit amount will be determined by the Secretary of Health and Human Services and based on the amount by which premiums exceed a threshold amount. This will be the maximum percentage of income required to be paid toward the second-lowest cost Silver-level exchange plan.

The following chart portrays percentages of 2012 federal poverty levels for a family of four, and what the estimated threshold amounts would be based on the percentage amounts.

Medicaid Expansion

Under the Patient Protection and Affordable Care Act (PPACA), states may elect to expand Medicaid eligibility to 133% of the Federal Poverty Level. In 2012, the Federal Poverty Level for a family of four at 133% was $30,657.*