The Affordable Care Act was signed into law on March 23, 2010 with some of the provisions going into effect immediately. The minimum coverage provision or individual mandate goes into effect on January 1, 2014. That means it’s imperative for individuals and families to know what’s coming, how to prepare, and what its impact with be for them.
Over the next several weeks, I’ll write about the Affordable Care Act. I will not write about the politics surrounding the act. Whether you love or loathe the ACA, my focus will be to prepare you for the roll out of the individual mandate. To that end, we’ll visit the goals of the Act, who’s required to have coverage, and the plans that are available. I’ll share parts of my journey and the decisions I face as a small business owner who has an individual health policy. We will examine the potential decisions employees of small businesses may face based on what their employer does or does not do. I’ll even touch on the financial aspects and preparation individuals should consider going forward.
There are three goals of the Affordable Care Act:
- Improve the quality while lowering the cost of healthcare
- Provide access to healthcare
- Offer new consumer protections
All US citizens and legal residents are required to have health coverage that qualifies under the ACA. Anyone without a qualifying health plan will be subject to tax penalties of $695 up to a maximum $2,085 or 2.5% of household income, whichever is greater. The penalties will be phased in from 2014 to 2016 and will be the greater of the flat fee or percentage of taxable income:
- In 2014 the flat fee of $95 or 1% of taxable income
- In 2015 the flat fee of $325 or 2% of taxable income
- In 2016 the flat fee of $695 or 2.5% of taxable income
Beyond 2016, the penalty will be increased based on annual cost of living adjustments.
Exemptions will be granted for financial hardship, religious objections, American Indians, those without coverage for less than three months, undocumented immigrants, and individuals serving prison time. In addition individuals for whom the lowest cost plan exceeds 8% of their income, and people with incomes below the tax filing threshold may be exempted.
Medicaid will be expanded to cover families making less than 133% of the poverty line; that’s approximately $29,000 a year for a family of four. Tax credits will be offered on a sliding scale to families with household income of 133% to 400% of the poverty line. Their premiums are also capped to between 6.3% and 9.5% of household income.
Health coverage will be purchased through State exchanges, for those States that chose to implement them. 17 states will operate a State based exchange including California, Colorado, Connecticut, the District of Columbia, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont, and Washington.
7 states will operate a partnership exchange where the State will provide administration in some areas and the Federal government in other areas. These states are Arkansas, Delaware, Illinois, Iowa, Michigan, New Hampshire, and West Virginia.
All other states have chosen to default to the Federal Exchange. People living in States utilizing the Federal Exchange will be able to sign up for coverage by going to www.healthcare.gov.
Regardless of which State you live in, plan pricing will be available October 1, 2013. This will also be the first day registration will begin.
The ACA does provide some interesting care options that are not available or limited in scope under current private individual plans. Maternity care (childbirth and prenatal) will be available along with greater access to mental health care. Pre-existing conditions will not be excluded either. Private individual plans will still be available in 2014 and beyond by the way and it will be interesting to see if they will expand their coverage in these areas.
People with private insurance currently, whether through an individual or family policy purchased directly or through an employer may experience changes in coverage and costs. Notification of any plan changes or cost will come directly from the insurer or the company’s human resources department.
People will have the ability to choose from four plans, and we’ll look at them, and what they are patterned after, next week. Share your comments or questions with us in the comments section of our blog or on our Google + and Facebook pages. We’ll all learn something from each other!
