ACA Key Impacts

 

 As you know, the Affordable Care Act, or ACA, was passed in 2010 to increase access to health care for all U.S. citizens. We’ve already seen a lot of changes, and in 2014 we’ll see a lot more!  The ACA provisions that become effective in 2014 will impact how people buy health insurance.  But these provisions will impact employers and consumers in different ways.  So we created a series of videos to help you understand how they will affect individuals, small employers and large employers. 

So let’s take a high-level look at some of the key provisions for 2014. You’ll see that these provisions depend on each other and support each other to make the whole system work!

First there are Health Insurance Exchanges, also known as Health Insurance Marketplaces.  You’ve probably heard a lot about them by now.  Exchanges will have a significant impact on how millions of people buy health insurance.

Most people get health insurance through their employers. But people who don’t have this option, as well as small businesses, soon will have a new option. They will be able to shop for health insurance on public exchanges. These online marketplaces will be available in every state beginning October 1, 2013. So people can start shopping on public exchanges in October for health plans that begin on January 1st, 2014. Individuals who qualify can get financial assistance through the public exchanges too.

Of course, people and small businesses also can continue to buy insurance as they do today – through a broker or agent, or directly from the insurance company.

Plans offered on and off a public exchange have to offer a core set of benefits. These “essential health benefits” include things like preventive and wellness services, prescription drugs, and coverage for hospital stays. 

Experts predict that by 2016, more than 25 million people will use exchanges to buy health insurance. You can find out a lot more about exchanges in the “What are Health Insurance Exchanges?” video. You can find it on the Reform Explained section of www.healthreformconnection.com.

Next up in 2014 are the Guaranteed Issue and Rating Changes provisions. These provisions say that individuals and small employers cannot be denied coverage or be charged higher premiums because of their health status or because of pre-existing conditions. So the cost of insurance for individuals and small employers both on and off an exchange can be based only on age, which area of the country they are in, family size, and whether or not a member uses tobacco.

With the addition of essential health benefits, guaranteed issue, and rating changes, costs for health plans could be a lot more in some areas of the country for some individuals and small employers. So now we begin to see how some of these provisions help to balance these increasing costs in a changing marketplace.

For example, the Risk Management provisions are intended to lessen the impact of adverse selection by compensating insurers for risks related to their members. One of the Risk Management provisions, risk adjustment, is permanent, and risk corridors and reinsurance are temporary for the first three years. This will help carriers adjust to the new requirements.

Starting in 2014, most U.S. citizens must have health insurance. If they don’t, they will have to pay a penalty. This is called the Individual Mandate. The penalty for not having coverage starts out relatively low. For example, the initial penalty for an individual is $95 or 1% of their household income, whichever is greater; but by 2016 the penalty for an individual is $695 or 2.5% of their household income, whichever is greater. So eventually, a lot more people could be buying health plans and accessing health care.

People who buy health plans on a public exchange may qualify for Tax Credits and Subsidies. This will help make health plans more affordable for people with lower incomes. For example, people who earn below 400 percent of the poverty level (that’s approximately $45,000 for a single person and $94,000 for a family of four) may qualify for subsidies to make their premiums more affordable and their deductibles and coinsurance lower.

We talked about the Individual Mandate. There is also an Employer Mandate. The Employer Mandate says that large employers have to offer affordable, minimum essential coverage to their employees. If they don’t, they may have to pay a penalty. There are also reporting requirements for employers and carriers under this provision. This provision is effective January 1, 2014, but enforcement has been delayed until 2015.

How will exchanges and other aspects of ACA be funded? There are taxes and fees that started in 2013 for employers, carriers, and self-funded plan sponsors. For example, these taxes and fees will help pay for the tax credits and subsides available on public exchanges and for the increasing costs of a lot more people having health care.

So let’s review. Health insurance exchanges will allow people to shop for insurance in a new, public online marketplace. The cost of insurance for individuals and small employers both on and off an exchange will be based only on age, which area of the country they are in, family size, and their tobacco use. The Individual Mandate will require most U.S. citizens to have health insurance beginning in 2014, but tax credits and premium subsidies are there to help reduce the cost. Large employers will have until 2015 before the requirements are enforced, to offer affordable, minimum essential coverage to their employees, although many already offer this coverage today.  Risk Management mechanisms are in place to offset the changing marketplace, and new taxes and fees will help fund these provisions of the law. Together these provisions build the framework for making health care accessible to all U.S. citizens.

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