By Sheryl Rowling
Q: There is so much confusing information in the media about ObamaCare. Can you please explain it in terms that a non-lawyer can understand?
A: I will certainly try. The Patient Protection and Affordable Care Act, unofficially known as “ObamaCare” seeks to reform the American health care system by providing broader access to public programs and by subsidizing private healthcare. It also aims to improve the quality of existing care, to control healthcare costs and to better regulate the health insurance industry.
The Basics
Most Americans will be required to have health insurance by March 31, 2014 or face a penalty. Although the majority of people receive coverage through work, many will need to acquire coverage through their states’ “Health Care Exchange.” Enrollment begins October 1, 2013 and coverage will start on January 1, 2014. The exchange offers plans by tier: Platinum, Gold, Silver and Bronze. The plans vary by cost of premiums, deductibles and co-pays. The average cost for a Silver plan will be about $330 a month.
The government will provide subsidies for many low to moderate income Americans (who are not covered by Medicaid or Medicare) based on income and state of residence. Subsidies are available for individuals earning up to 400% of the poverty line ($45,960 for an individual, $94,200 for a family of four). The lower the income of the individual, the higher the subsidy will be. Anyone earning above $45,960 is responsible for the entire cost of the ObamaCare health coverage plan they select. In addition to premium subsidies, those making less than $28,725 for an individual or $58,875 for a family of four (250% of the poverty line) are eligible for extra subsidies such as lower or no deductibles or co-pays. All subsidies are based on Silver plans and the government will pay those subsidies directly to the insurance company.
The state of residence will also affect the size subsidies since the cost of individual coverage will vary based on the number of insurers within that state. The fewer insurers available, the more expensive premiums are estimated to be. (Wyoming, Alaska and Mississippi will be the most costly, as residents will only have a choice of two insurers for coverage.) The subsidies are calculated on the cost of the second least expensive Silver plan in their state. Subsidies can be estimated by visiting: http://kff.org/interactive/subsidy-calculator/.
While the government hasn’t yet released its estimates on how many people will be eligible for subsidies, the nonprofit health care advocacy group Families USA estimates that approximately 26 million Americans will meet the criteria. Not all of the eligible are expected to sign up though. The Congressional Budget Office is forecasting that about 6 million people will receive subsidies next year; that number may grow to 22 million over the next 3 years.
How Will It Affect You?
One of the major causes of concern for many Americans is how ObamaCare will affect their health care costs. All policies are currently required to have more comprehensive coverage including mental health and maternity care. And, since ObamaCare requires more people to participate in these more comprehensive plans, will rates increase? It depends – if more healthy people sign up, there will be more competition in the market to push rates lower and more income from premiums to cover the cost of the additional coverage.
It also depends on who you are. Those who currently pay a small premium for a bare bones policy with a high deductible can expect higher rates. Young men, who pay little for coverage because they statistically rarely visit the doctor, can also expect a rate bump. On the other hand, the elderly can expect a rate decrease since the new law mandates that older enrollees cannot pay more than three times the rates of younger participants. By comparison, many older participants currently pay about five times as much. The chronically ill are also paying incredibly high premiums today, if they can even get coverage at all. Their rates will decrease as younger, healthier Americans enter the same risk pool. Women may also see lower rates, as laws now require the same rates for women and men.
It also depends on where you live. States that are highly-regulated may already include many of the provisions that were added by ObamaCare. States with little regulation will likely see significant increases because insurers will no longer be able to exclude less desirable patients and will have to cover more services.
Finally, it depends on what services you require. One of the most controversial coverage items is contraceptives. The plan provides that all employers and educational intuitions must cover the costs of contraceptives. After many Christian hospitals, universities and charities objected to this requirement, an accommodation was added to exclude religious organizations from this mandate.
Other Points
- You might have a more limited network of doctors.
- If you don’t buy insurance by March 31, 2014, a penalty might be added to your tax bill. It is the greater of $95 per adult or 1% of your household income. That number will rise to $695 per adult or 2.5% of income by 2016.
o Exceptions to this penalty include those who earn too little to file a tax return.
o Additionally, the penalty will not apply if the cheapest Bronze plan in their area is more than 8% of their income.
- Anyone on Medicare or Medicaid does not need to enroll.
- Companies of 50 or more full-time employees (30+ hours per week) must offer health insurance or pay hefty penalties.
- Until this program is actually set in motion, the government could still de-fund the plan. Given the budgetary issues facing the United States and the looming debt ceiling, Congress could opt to de-fund the program or push the starting date out by a year or two.
- The success of the program is based on enrollment from every age and health group. Those with health issues are almost guaranteed to sign up – which will imbalance the risk pool towards those who are more expensive to cover. If too many younger/healthier individuals decide to pay the tax penalty instead of health care premiums, the costs will be shifted towards those who don’t pay subsidies in the following years. Persuading the young to sign up will be a focus of the government and supporters of reform.
- Young adults can now stay on their parents’ health insurance coverage until age 26.
- Lifetime maximum payouts from insurance companies are no longer legal.*
Rowling is a certified public accountant, personal finance specialist, and principal of Rowling & Associates. She may be contacted via sheryl.rowling@sdjewishworld.com