By Jeff Hyde, Leavitt Group
A Simple Guide to Health Care Reform for Individuals
Do you feel confused and overwhelmed trying to understand the implications of the Affordable Care Act (ACA)? If so, you are not alone. Recent polls are finding that a large majority of people don’t understand health care reform and are unsure of exactly what is required to be in compliance with this new mandate. This article outlines the basics of the Affordable Care Act.
What is the Affordable Care Act (ACA)?
The ACA, commonly known as ObamaCare, is a federal statute that was enacted to provide all U.S. citizens and legal residents access to quality affordable health insurance. It was intended to lower the uninsured rate and to reduce the cost of health care over the long term. One provision of the ACA requires U.S. citizens and legal residents (with some exceptions) to obtain health insurance by 2014, or to pay a tax for not having insurance.
How will the Affordable Care Act affect individuals?
Through the ACA, individuals who are uninsured will now have access to various types of government-approved health coverage (or health coverage that meets new benefit mandates imposed by the ACA). Even if you are covered by your employer’s (or your spouse’s employer’s) plan, you will have the opportunity to purchase insurance in the individual marketplace, and you might qualify for subsidies if the employer plan does not offer you coverage that meets the requirements for minimum value and affordability. There are no exclusions for individuals with pre-existing medical conditions. The ability to get an advance premium tax credit (a subsidy that covers part of the cost of the insurance premium) makes it much more affordable for individuals. Those who qualify for Medicare or Medicaid or who have the option of purchasing health insurance through employer-sponsored plans will still be able to obtain coverage through those options.
How much does health care coverage cost under the program?
The cost will vary based on the plan you choose and whether or not you qualify for a subsidy. The two types of subsidies are the advanced premium tax credit and the cost-sharing reduction. When you apply for insurance in the individual marketplace, the marketplace will automatically calculate whether or qualify for either or both of these subsidies. The tax credit will be based on your family size and your income level as it pertains to the federal poverty level. There are some who will not qualify for the tax credit because it is only available for those whose household income is 400 percent or less of the federal poverty level.
How does the premium tax credit work?
The premium tax credit is applied when the individual purchases health insurance. The federal government will send a check directly to the insurance carrier that the individual chooses. This payment is sent every month for the subsidy amount each individual is approved for.
Example subsidies are as follows:
Family of 4, income of $50,000 = 66% of premium paid by subsidy
Family of 6, income of $50,000 = 81% of premium paid by subsidy1
Am I better off keeping my current health insurance or should I apply for this new coverage?
This depends on what your current insurance carrier is providing as well as your annual income and family size. If health coverage is available to you through your employer, you are eligible to buy health insurance in the individual marketplace, but you are not eligible for a subsidy unless your employer-provided coverage does not meet affordability or minimum value requirements.For some, it will make more sense to stay with their current plan, while others will be better off purchasing coverage through the individual marketplace because they qualify for the premium tax credit. Those with a higher income will most likely be better off staying with their current provider for the time being.
Is there a penalty for individuals who don’t have health insurance?
Individuals who do not have health insurance or coverage under a government health program beginning in 2014 will be assessed a tax (also known as a penalty).
The tax will be applied as follows:
Year 2014: $95 per person or one percent of the annual household income, whichever is greater.
Year 2015: $325 per person or two percent of the annual household income, whichever is greater.
Year 2016: $695 per person or 2.5 percent of the annual household income, whichever is greater.
When is the deadline for obtaining coverage?
Open enrollment for the individual marketplaces is from October 1, 2013 – March 31, 2014. Individuals have until December 15 to apply in the marketplaces for the January 1 effective date. The marketplaces are now open, so anyone who needs to obtain coverage can do so now. If the website is not working well for the marketplace in your state, you can apply by phone or mail in an application. The phone number for the federally-facilitated exchanges in 800-318-2596.
Do I need to insure my whole family?
Every U.S. citizen is required to have health insurance or they will have to pay the penalty. The penalty is half the adult rate for children (under 18 years of age). For a family, the maximum “fixed dollar” tax amount cannot exceed the tax on three adults (e.g., for 2014, the maximum tax on a family will be $285, which is 3 x $95).
Misconceptions of the Affordable Care Act
Misconception #1: The Affordable Care Act or “ObamaCare” is health insurance.
Clarification: The Affordable Care Act is not health insurance, a health plan, or a health policy. It is simply a statute that defines how the health insurance market should function and includes guidelines for how insurance carriers should operate and how citizens should purchase insurance. Individuals will still purchase health insurance from an insurance company, and no one will have a health plan called “ObamaCare.”
Misconception #2: There is no penalty for individuals who do not have health insurance.
Clarification: A tax (or penalty) will be assessed on individuals who do not have health insurance beginning in 2014. This penalty will be first assessed on the tax return they file in 2015 for the 2014 tax year and then will continue for each following year for individuals who do not have health insurance.
1 Estimates only. Calculations will vary based on each unique situation. Not typical of all households. Information provided by the Henry J. Kaiser Family Foundation.
Jeff Hyde is a benefits consultant with the Leavitt Group. He has been in the insurance industry since 2008 and focuses on group benefits and life insurance. Through effective team selling and his experience in group benefits and life insurance, Jeff has been instrumental in providing Leavitt Group clients with effective solutions to their group benefits needs.