The health insurance reforms adopted as part of the Patient Protection and Affordable Care Act (PPACA), and the subsequent reconciliation bill, are phased-in over 5 years. Most provisions will not take effect until January 1, 2014. However, there are some new protections that have already been implemented:
- Lifetime limits are prohibited and annual limits are restricted
- Enhanced appeal procedures are available to consumers
- Children under 19 years of age cannot be denied coverage
- Children up to age 26 may remain on a parent’s policy
- Preventive services must be coverage and cannot have cost-sharing
- New rate review transparency requirements are in place
- Medical loss ratio standards limit insurers’ overhead
- A standardized summary of benefits must be used by all insurers, allowing for easier comparison of plans
In addition, subsidized coverage for people with pre-existing conditions that cannot find coverage in the private market is now available in every state through January 1, 2014.
No. Health plans in effect as of March 23, 2010, are grandfathered under the law and will be considered “qualified coverage” that meets the mandate to have health insurance that begins January 2014 as long as the issuer continues to offer it without substantial changes.
The key goal of the health care reform law is to ensure that nobody can be denied coverage or be priced out of coverage due to a health problem. However, if you allow people to wait until they have a health problem to purchase insurance, then the market simply will not work. There would be few choices available to consumers, and those choices would be expensive for everyone. So, the law requires everyone to have minimum coverage, thus creating a pool of both sick and healthy individuals.
Every plan sold or renewed in the individual and small group market after January 1, 2014, must include all the benefits in a “benchmark” plan – a plan chosen for the state based on coverage currently available in the state – and will cover services in the following categories:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance abuse disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
All plans sold or renewed in 2014, must limit the out-of-pocket exposure of consumers to approximately $6,000 for individual and $12,000 for families. These limits will be indexed to average premium growth in future years. In addition, the deductible for plans in the small group market will be limited to $2,000 for individuals and $4,000 for families in 2014, also indexed to average premium growth in future years.
Also, all plans must design their cost-sharing (deductibles, copays, coinsurance) to fit into specific levels of coverage. The levels of coverage are defined as follows:
- Bronze Level – The plan must cover 60% of expected costs for the average individual
- Silver Level – The plan must cover 70% of expected costs for the average individual
- Gold Level – The plan must cover 80% of expected costs for the average individual
- Platinum Level – The plan must cover 90% of expected costs for the average individual
The exchange will group coverage by these “metal” levels, allowing consumers to easily compare comparable options.
Yes, though they may not charge older individuals a premium that is more than 300% of the premium charged a younger individual. Currently, rates can vary based on age as much as 700% in some cases. In addition, insurers may not vary rates based on health, claims, genetic information, or any other health-related factors. Insurers may only vary rates in a state by age (within limits), tobacco use, geography, and the number of family members covered.
The health reform law requires that insurers and employers that provide dependent coverage to children make that coverage available to adult children of enrollees up to their 26th birthday. This requirement became effective for “plan years” beginning September 23, 2010, so parents will be able to enroll a child in group coverage during the next open enrollment period. Children can be added to an individual policy when it is renewed.
Of course, adding an adult child to the plan will likely increase your premiums. If the child is 19 or older, the insurer may exclude coverage of pre-existing conditions for a period of time, as allowed by existing state and federal law, until the prohibition on preexisting condition exclusions takes effect in 2014.
The law and subsequent regulations prohibit insurers from denying coverage for children based on health status or excluding coverage of their pre-existing conditions if otherwise covered under the policy. This protection became effective after September 23, 2010. A child can be added to an existing policy under the enrollment rules of the policy. If you are seeking a child-only policy, you will need to inquire whether child-only coverage is available in your state. If you are covered under a group plan, you may add your child to your policy at the next open enrollment period.
Subsidized coverage is now available in every state to individuals with pre-existing conditions who have been uninsured for at least six months through the Preexisting Condition Insurance Program. This program, either run by the federal government or the state, provides coverage that immediately covers preexisting conditions at premiums that are capped at the average cost of private coverage in your state’s individual market.
Beginning January 1, 2014, insurers will be prohibited from discriminating against individuals with pre-existing conditions in offering or pricing health insurance policies. In addition, for those with qualifying incomes, subsidies will be available to reduce premiums and cost-sharing for plans purchased through the Exchange.
My family income is about $45,000, but my employer does not subsidize our health insurance and we cannot afford it on our own. What will the new law do to make coverage more affordable?
Low- and moderate-income individuals and families whose employers do not subsidize health insurance coverage will be eligible for subsidies that enable them to purchase coverage through the Exchange in their state. The amount of these subsidies, which will reduce premiums and out-of-pocket costs for deductibles, copayments and coinsurance, will depend upon the size of your family and your household income.
Exchanges are the central mechanisms created by the health reform bill to help individuals and small businesses purchase health insurance coverage. On October 1, 2013, an Exchange in every state will begin enrolling individuals and small businesses into qualified health plans. The Exchange, operated by the federal government or by the state, will provide information to consumers about their coverage options and what assistance is available to them. The Exchanges will also administer the new health insurance subsidies and facilitate enrollment in private health insurance, Medicaid, and the Children’s Health Insurance Program (CHIP). The federal law does not require anyone to purchase health insurance through the Exchange, though subsidies will only be available for plans sold through the Exchange. You will be able to purchase this coverage right on the Exchange’s website or through your agent if he or she is approved to sell Exchange plans. If you would rather buy other health insurance through an insurance agent or broker, you will be free to do so.
If your insurance company “rescinds,” or retroactively cancels, your health insurance coverage, it is now required to provide advance notice of its intention to do so, and may only do so if you committed fraud or made an intentional misrepresentation of an important fact. If your insurer notifies you that it wants to rescind your policy, and you have not done either of these things, request more information from the company. If you are not satisfied with their explanation, immediately contact your state Department of Insurance to file a complaint.
Yes, nothing in the legislation would infringe upon the ability of an individual to contribute to a Health Savings Account (HSA), or discourage an individual from doing so. The minimum level of coverage required to meet the individual mandate was specifically designed to allow for the purchase of a qualified high deductible health plan that would complement the HSA.
Unfortunately, the grim fact is that health care spending is likely to continue rising faster than general inflation well into the future, resulting in higher premiums. While some individuals and families with health problems may see their premiums decrease significantly under the new rating rules, for most Americans premiums will continue to increase from year to year. However, the new regulations are designed to prevent unreasonable and unexpected spikes in premiums and, over time, to slow the growth in health care spending.
- If you do not have health insurance, you do not have to wait until January 1, 2014 to get covered. You may be able to purchase private insurance for yourself by contacting us or our agents directly.
- You may be eligible right now for health coverage under Medi-Cal. For more information, consult the Department of Health Care Services here.
- If you’ve been turned down by health insurance companies because of a pre-existing medical condition, you could be eligible for coverage through a temporary, state-run program. More information about that program can be found here.
- If you have not yet turned 26 years old and your parents have health insurance, you are now eligible for coverage under your parents’ plan. For more information about coverage for young adults, visit www.healthcare.gov/law/features/choices/young-adult-coverage/index.html.
- If you’d like, provide your email address here to receive a reminder from us on open enrollment, which begins later in the year.
Covered California will operate a specific program, the Small Business Health Options Program, that will offer new health insurance choices to small businesses and their employees. The program is designed specifically for employers with 50 or fewer full-time equivalent employees to give them unprecedented opportunities to offer a variety of Qualified Health Plans to their employees. Through Covered California, both employers and their employees can choose the plans that fit their needs and their budget.
The new health care law, the Affordable Care Enacted in March 2010, the federal Patient Protection and Affordable Care Act, commonly referred to as “Obamacare,” provides the framework, policies, regulations and guidelines for implementation of comprehensive health care reform by the states. The Affordable Care Act will expand access to high-quality affordable insurance and health care., does not require employers with fewer than 50 full-time equivalent employees to provide health insurance for their employees. Employers with 50 full-time equivalent employees or more that do not offer full-time equivalent employees (and their dependents) the opportunity to enroll in minimum essential health coverage may be subject to penalties beginning in 2014.
While employers with fewer than 50 full-time equivalent employees will not face penalties, there are many good reasons employers choose to provide employees with health insurance. Providing health insurance to employees helps you recruit and retain the best talent. Giving employees access to health coverage can keep small health problems from turning into costly big ones. Preventing illness can reduce absenteeism and increase productivity.
The health care law does not require businesses to provide insurance. For businesses with fewer than 50 full-time equivalent employeesThe federal government has not yet defined “full-time” or “full-time equivalent” for purposes of determining whether a business is small or large. More information will be forthcoming in the months ahead., there are no penalties for not providing health insurance. Beginning in 2014, businesses with 50 or more full-time equivalent employees may have to pay a penalty if they do not offer minimum essential coverage to their full-time employees. Businesses with fewer than 50 full-time equivalent employees are not subject to these penalties.
Businesses with 50 or more full-time equivalent employees may pay a penalty if they do not offer coverage for employees who work an average of 30 or more hours per week. Note that there is no penalty for part-time employees not offered coverage.
Businesses that provide health care coverage are eligible for tax credits if, for the tax year, they have 25 or fewer full-time equivalent employees who are paid an average annual salary of less than $50,000. To qualify for tax credits, the employer must also contribute at least 50 percent toward the employee’s premium cost. This contribution requirement also applies to add-on coverage including vision, dental and other limited-scope coverage.
Employers with 10 or fewer full-time equivalent employees paying an annual wage of $25,000 or less qualify for the maximum credit. Nonprofit or tax-exempt employers must meet the same criteria as other small businesses and their tax credits will be lower.
The tax credit you receive as an employer will depend on a number of factors including the number of full-time equivalent employees and the amount you spend on insurance premiums. Tax credits are available in the tax year 2013 for employers with 25 or fewer full-time equivalent employees but these tax credits become more generous starting in 2014. These tax credits are available for a total of two consecutive years.
The table below illustrates the two phases of tax credits to help employers — including tax-exempt employers — with fewer than 25 full-time equivalent employees cover premium costs.
- Maximum Tax Credit for Businesses as a Percentage of Insurance Premium Expenses
- Maximum Tax Credit for Businesses for Tax Exempt Organizations as a Percentage of Insurance Premium Expenses
PHASE ONETax Years: 2010-2013
Phase TwoTax Year: 2014
The first phase covers tax years 2010-2013 and during that time, there is a sliding-scale tax credit of up to 35 percent of the employer’s eligible premium expenses. Employers with 10 or fewer full-time equivalent employees and paying annual average wages of $25,000 or less qualify for the maximum credit. For tax-exempt employers, the same employee and wage requirements apply, but the maximum tax credit is 25 percent of eligible premium expenses during the first phase.
The second phase begins in tax year 2014, when the maximum tax credit increases to 50 percent of premium expenses and coverage must be purchased from a state health insurance exchange. The maximum tax credit for tax-exempt employers increases to 35 percent in 2014.
The amount of the tax credit cannot exceed the total income and Medicare tax the employer is required to withhold from employees’ annual wages, plus the employer’s share of the Medicare tax.
Covered California lets you easily compare and contrast a variety of Qualified Health Plans offered by private insurers that will be rated and underwritten by a new set of consumer-friendly rules. Everything you need is available online, by phone or in person. Covered California levels the playing field by giving you access to more plans, which are all part of an insurance pool made up of all small businesses in California, offering many of the advantages of large business insurance pools. Those advantages include purchasing power, lower cost, reduced more health plan choices. Covered California also will provide expert counsel to help small businesses identify the plans that work best for them and be a resource for private insurance agents to use.
Businesses that choose to work with Covered California will not sacrifice employer control. As a business owner, you will select the level of coverage you want to contribute and, within that level, your employees can choose which Qualified Health offered through Covered California best meets their needs. In this way, Covered California is bringing together the best of employer control and employee choice.
Your employees can help pay part of their health insurance costs. Their share depends on the level of coverage you choose and the plan they select. As part of the Affordable Care Act, all health plans are classified into one of four categories: bronze, silver, gold and platinum. These rankings make it easy for you and your employees to compare different health plans.
As the metal category increases in value, so does the percent of medical expenses that a health plan will cover. This means the gold- and platinum-level plans will cover the highest percentage of health care expenses. These expenses are usually incurred at the time of health care services – when you visit the doctor or the emergency room, for example. The health plans that cover the greatest percentage of health care expenses also usually have higher premium payments.
As the employer, you can set the category in which your employees must choose plans as well as how much you will contribute to the premium payment as either a fixed amount or as a percentage of total cost to the employees.
The cost of health insurance to the employer will depend on the choices you make, including:
- The level of coverage – bronze, silver, gold or platinum – you want to offer employees
- The amount of premium you as the employer will pay, which can be a set dollar amount or a percent of the premium and must meet the minimum threshold to ensure that the coverage is affordable to your employees
- Any amount you may want to contribute to family or dependent care
Once you make these decisions, your employees then choose the plan that best meets their needs.
Covered California will handle premium collection, enrollment and plan payments, and all other administrative tasks to make the offering for the workers’ plan choice as simple as possible for small employers. Even if your employees choose different plans, you only need to make a single payment to Covered California. Covered California will distribute that payment accordingly.
Health plan enrollment through Covered California is scheduled to open later in the year for coverage that will begin in January 2014. Initially, Covered California will serve businesses that have 50 or fewer full-time employees. Covered California will enroll businesses with no more than 100 full-time equivalent employees starting in October 2015 for coverage that begins in January 2016.
If your business has more than 50 full-time employees but fewer than 101, you will be able to buy insurance through Covered California starting in October 2015 for coverage that begins in 2016. Meanwhile, you can continue to buy your health coverage in the private small or large group market.
All of the insurance plans that Covered California will offer can insure employee spouses and dependents. This generally will cost more, so you will need to decide if you want to offer this coverage or leave the decision to your employees about buying insurance for their families through the individual exchange. Under the new insurance rules that take effect in 2014, your employees and their family members who do not have coverage through your business will be able to buy insurance through Covered California or in the individual market. If they do not have insurance, they may be subject to a penalty. Depending on income level, family members might also qualify for subsidized coverage or no-cost coverage through Medi-Cal.
California health insurance agents are expected to be an important outreach and enrollment channel for Covered California’s small employer program, as well as for the individual market. Covered California is working closely with insurance agents to make sure they can continue to serve you in the best, most informed way possible. Insurance agents who have been certified by Covered California are able to enroll their clients through Covered California. If you are using an insurance agent now, you may continue to do so and still take advantage of health insurance offered through Covered California.
Covered California’s small business program is designed for any business with 1 to 50 full-time employees. You must have at least at least one employee other than yourself who receives a W-2 tax form at the end of the year. However, if you are self-employed without any employees, you are not eligible for the small business program but should look into the individual marketplace operated by Covered California.
Resources For Individuals and Families
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