Healthcare Reform Simplified: Individuals and Families

 

Post 2: Individuals and Families. A series of blog posts reviewing the basics of healthcare reform and how it will impact regular Americans.

Put on your swim suit, everyone is getting into the insurance pool.

Individual Mandate: Tax, Penalty or ?

The great debate of the Affordable Care Act (ACA) has been the individual mandate. In a trade-off for not denying health insurance to people with pre-existing conditions, insurance companies need everyone to get into the insurance pool. As an incentive to purchase health insurance you will have to pay an additional penalty on your federal taxes if you have not maintained health insurance during the year. The penalty gradually increases from 2014 to 2016 and then adjusted for cost of living. A nice flow chart is available from the Kaiser Family Foundation.

Year

2014

2015

2016 +

Individual

$95.00

$325.00

$695.00

Child

$47.50

$162.50

$347.50

Family

$285.00

$975.00

$2,085.00

or 1% of income

or 2% of income

or 2.5% income

*Credit for less than 12 months of coverage.

Dependents <18 years of age are assessed 1/2 the adult amount. Families can’t be penalized more than 3 times the adult penalty. For example, a family of 6 (2 parents, 4 children) will not be penalized more than 3 x $95 = $285 in 2014 verses $380 without the family cap.

Exemptions from the penalty:

  •  You are in jail
  • You are a member of an Indian tribe
  • You are an Undocumented immigrant
  • You are a member of a religion opposed to health insurance
  • Your income falls below the level that requires you to file a tax return
  • You would have to pay more than 8% of you income even with employer contributions or tax credits

You are deemed to have credible health insurance and avoid the

There is help for families of low or moderate incomes to afford health insurance.

penalty when:

  • You have a grandfathered health insurance plan
  • You purchased health insurance with the minimum requirements
  • You are covered by your employer
  • You are covered by the Veteran’s Administration program
  • You were part of TRICARE
  • You have Medicaid, MediCal or the Children’s Health Insurance Program (CHIP)

Where can I purchase health insurance?

You can purchase health insurance right from a health insurance company, find an agent or use one the new state Health Insurance Exchanges being developed starting in 2014. The new exchanges promise to have lots of functionality to help you determine the right plan for your situation and if you qualify for a low income subsidy. They will provide you with a comparison of all the available health insurance plan options in your area.

What plans will be offered?

All plans offered under the Affordable Care Act must have 10 Essential Health Benefits (EHB)

  1. Ambulatory patient services
  2. Emergency services
  3. Hospitalization
  4. Maternity and newborn care
  5. Mental health and substance use disorder services, including behavioral health treatment
  6. Prescription drugs
  7. Rehabilitative and habilitative services and devices
  8. Laboratory services
  9. Preventive and wellness services and chronic disease management, and
  10. Pediatric services, including oral and vision care

It is envisioned that the insurance companies will offer a set of plans with the minimum EHB at various levels of coverage or cost sharing: bronze at 60%, silver at 70%, gold at 80%, and platinum at 90% of actuarial values. In other words, the bronze plan would have you paying for 40% of the covered services while the health insurance company pays 60%.

Health insurance companies will be able to offer more benefits than the minimum EHB. In addition, there may be varying deductible levels offered as well. Regardless of the plan benefits, all of the plans will have to conform to a uniform Summary of Benefits description that will allow you to easily compare plans easily between companies.

How much will it cost?

Health insurance plan premiums will be based on your age, location, tobacco usage, and the type of plan you choose. Insurance companies will not be able to increase your rates because of pre-existing conditions or gender. The least expensive plans will be the bronze plans that have a 60/40 cost sharing arrangement.  It is hoped that the large pool of insured coupled with competition will stabilize premium rates if not drive them down from where they are today.

Is there help for low and moderate incomes?

Americans who earn less than 133% of the poverty level (approximately $14,000 for an individual and $29,000 for a family of four) will be eligible to enroll in Medicaid. States will receive 100% federal funding for the first three years to support this expanded coverage, phasing to 90% federal funding in subsequent years.

Tax credits to help the middle class afford insurance will become available for those with income between 100% and 400% of the poverty line who are not eligible for other affordable coverage. (In 2010, 400% of the poverty line comes out to about $43,000 for an individual or $88,000 for a family of four.) The tax credit is advanceable, so it can lower your premium payments each month, rather than making you wait for tax time. It’s also refundable, so even moderate income families can receive the full benefit of the credit.  These individuals may also qualify for reduced cost-sharing (copayments, co-insurance, and deductibles).

See also

Healthcare Reform Simplified Post 1: Why do we need healthcare reform?

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