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Affordable Care Act FAQ

 

Insurance Coverage

Will everyone have to buy health insurance? What happens if they don’t? How will people prove they have health insurance?

Starting in 2014, most people will be required to have health insurance or pay a penalty if they don't. Coverage may include employer-provided insurance, coverage someone buys on their own, Medicare, or Medicaid.

The penalty for people who forego insurance is the greater of $695 per year (up to $2,085 for a family) or 2.5% of income (income is defined as total income in excess of tax filing thresholds). These penalties are phased in over time at $95 in 2014, $325 in 2015, and $695 beginning in 2016 (with annual increases after that) and 1% of income in 2014, 2% in 2015, and 2.5% starting in 2016. The total penalty for the year will not exceed the national average of the annual premium of a bronze level health insurance plan offered through the health insurance marketplaces. The Congressional Budget Office projects that 3.9 million people will pay the penalty in 2016.

Health insurance plans will provide documents to people they insure that will be used to prove that they have the minimum coverage required by law.

 

What is the Health Insurance Marketplace?

Health Insurance Marketplaces (also known as Exchanges) are new organizations that will be set up to create more organized and competitive markets for buying health insurance. They will offer a choice of different health plans, certifying plans that participate and providing information to help consumers better understand their options.

 

How does the provision allowing young adults to remain on a parent's insurance work?

The health reform law contains a provision that requires private insurers to continue dependent coverage of children until age 26. Department of Health and Human Services regulations specify that a young adult can qualify for this coverage even if he or she is no longer living with a parent, is not a dependent on a parent's tax return, or is no longer a student. Both married and unmarried young adults can qualify for the dependent coverage extension, although that coverage does not extend to a young adult’s spouse or children. For employer plans that were in place prior to March 23, 2010, young adults can only qualify for dependent if they are not eligible for another employer-sponsored insurance plan. Insurers that do not offer coverage to dependent children will not be required to offer this coverage to young adults.

Regulations also state that young adults who gain dependent coverage under the health reform law cannot be charged more for coverage than similar individuals who did not lose coverage due to the end of their dependent status. Young adults newly qualifying as dependents under the health reform law must also be offered the same benefits package as similar individuals who were already covered as dependents.

 

 

What protections are there in the new health reform law for people with pre-existing conditions?

Starting in 2014, all health insurers will have to sell coverage to everyone who applies, regardless of their medical history or health status. At that time, insurers will not be allowed to charge more to individuals with pre-existing conditions, nor will they be able exclude coverage of those conditions from the insurance plans they sell.

How will existing employer health plans be affected by health reform?

Employer plans that were in place on March 23, 2010, the date the new health reform law was enacted, are referred to as "grandfathered plans" and are subject to some of the new rules but exempt from others. Beginning on September 23, 2010, grandfathered employer plans are required to eliminate any lifetime limits on coverage and restrict any annual limits on coverage, eliminate pre-existing condition exclusions for children, and if the plan provides dependent coverage, extend that coverage to adult children up to age 26. Beginning in 2014, grandfathered employer plans will be required to eliminate any annual limits on coverage, eliminate pre-existing condition exclusions for adults, and limit waiting periods for coverage to no more than 90 days. Grandfathered employer plans will not, however, be required to alter their benefits to meet the new minimum benefit standards nor will they have to limit enrollee cost sharing or provide coverage for preventive services with no cost-sharing. In order to maintain its grandfathered status, a plan cannot reduce or eliminate benefits to treat particular conditions, increase employee cost-sharing (including deductibles, co-insurance, and co-payments) above certain thresholds, reduce the employer share of the premium cost, or change insurers. Once a plan loses its grandfathered status, it will have to comply with all the new rules.

 

What preventive services will be covered?

Since July 2010, any new plans offered by employers or insurers — not including so-called "grandfathered" coverage that people already have — have to provide coverage for a range of preventive services, including: services recommended with a rating of "A" or "B" from the U.S. Preventive Services Task Force, immunizations recommended by the Centers for Disease Control and Prevention's Advisory Committee on Immunization Practices, and additional services for women contained in guidelines issued by the Health Resources and Services Administration (including routine mammograms for women over age 40). In addition, plans are required to cover these preventive services without any cost-sharing for patients.

 

Employer Coverage

How are small businesses affected by health reform?

The health reform law includes a number of provisions that reform the insurance market and encourage small businesses to offer health insurance. Coverage offered in the small group market and in the exchanges established for small business to purchase insurance, must meet minimum benefit standards; allow premiums to vary only by age, tobacco use, and geographic location; be subject to reviews of premium increases; and comply with other consumer protections. The provisions to encourage small firms to offer coverage apply only to firms under a certain size.

Fewer than 25 Employees: Beginning in 2010, business with fewer than 25 full time equivalents and average annual wages of less than $50,000 that pay at least half of the cost of health insurance for their employees are eligible for a tax credit. The full credit is available to employers with 10 or fewer employees and average annual wages of less than $25,000. The credit phases-out as firm size and average wage increases. The credit is capped based on the average health insurance premium in the area where the small business is located. The tax credit will be introduced in two phases. For tax years 2010 to 2013, eligible employers may receive a tax credit of up to 35% of the employer's contribution toward the employee’s health insurance premium. For tax years 2014 and later, eligible small businesses that purchase coverage through the state Exchange may receive a tax credit of up to 50% of the employer’s contribution toward the employee’s health insurance premium. Employers are eligible to take the tax credit for two years. Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 25% of the employer’s contribution toward the employee’s health insurance premium for tax years 2010 to 2013, and up to 35% for tax years 2014 and later.

Fewer than 50 Employees: Businesses with fewer than 50 employees are exempt from penalties faced by larger employers that do not offer coverage. The penalties for larger employers (50 or more employees) do not go into effect until 2015, a year later than originally scheduled.

Fewer than 100 Employees: Small businesses with fewer than 100 employees will be able to purchase coverage through Small Business Health Options Program (SHOP) Exchanges beginning in 2014. These state-based exchanges are intended to allow employers to shop for qualified coverage and more easily compare prices and benefits. In 2017, states will have the option to allow businesses with more than 100 employees to purchase coverage through the SHOP Exchanges.

 

Will employers that don't provide health benefits have to pay a penalty?

The health reform law does not require employers to provide health benefits. However, it does impose penalties in some cases on larger employers (those with 50 or more workers) that do not provide insurance to their workers or that provide coverage that is unfordable.

Larger employers that do not provide coverage will be assessed a penalty if any one of their workers receives a tax credit when buying insurance on their own in a health insurance Exchange.

 

 

How does the new law apply to companies with self-funded plans?

Self-funded plans--those where the employer accepts the risk for the health benefits it provides, rather than buying coverage from an insurance company--are generally exempt from state insurance regulations and are instead regulated by the Employee Retirement Income Security Act (ERISA). The new health reform law contains many provisions that apply nationally to both self-funded plans and fully insured plans. Some of these provisions include the extension of dependent coverage until age 26, no cost sharing for preventive services, the limit on waiting periods to no more than 90 days, maximum patient out-of-pocket costs, and no lifetime or annual limits on coverage. However, self-funded plans will not be subject to meeting the minimum essential health benefit requirements. “Grandfathered” plans (i.e., those that were in place on March 23, 2010) are not subject to all the above requirements.

 

 

 

 

Affordable Care Act FAQ provided by the Kaiser Family Foundation. Full FAQ information can be found here.