Understanding the Affordable Care Act

In 2010, Congress passed, Obama signed, and the Supreme Court deemed constitutional (minus one important part) the most historic piece of legislation that the United States has seen since The New Deal: The Patient Protection and Affordable Care Act (ACA). From the moment the ACA became law, it has been controversial and divisive. Hyperbole, misinformation, distortions and even outright lies have been passed off as facts, creating fear and distrust. But the fear-mongering has not prevented the law from coming to fruition, even after a complete hijacking of the government through a manufactured crisis resulting in a complete government shutdown.

Open enrollment has begun and the implementation of the law is set to begin January 1, 2014; with full implementation by 2015 (when the large business mandate goes into effect). But the open enrollment period has been beset with problems: a lingering distrust, a lack of credible information and a computerized system that has proven to be amateurish at best. However, there IS a wealth of credible information available -- but requires time and effort on the part of the consumer to research and understand. After many months of intensive research, I have compiled information and have been speaking to audiences in my community, discussing the following:

• What is the Affordable Care Act?
• How are the states implementing this law?
• Why do we have to comply (why is the Individual Mandate is important)?
• Will it be affordable?
• What do I need to do?
• **Special Note for Small Businesses**

(please click on hyperlinks to read more information concerning the information given)

What is the Affordable Care Act (ACA)?

ACA gives more Americans access to quality, affordable health insurance, while helping to curb the growth of health care spending in the US. Insurance is made more affordable by providing the middle class with the largest tax cut for health care in history, reducing premiums and out-of-pocket costs for tens of millions of families and small businesses (who have previously been priced out of coverage). Health insurance "marketplaces" or exchanges have been set up to give Americans better choices for their health care dollars (which I'll discuss later). But the most important part of the ACA is that it requires the health insurance industry to be accountable to health care by laying out specific rules and regulations that give greater consumer protections, which keeps premiums down, prevents industry abuses, discrimination, and denial of care (to be discussed on greater detail). And finally, according to the nonpartisan Congressional Budget Office, this law reduces the deficit by more than $100 billion over the next ten years and more than $1 trillion over the second decade. It accomplishes this feat by cutting overspending and reigning in waste, fraud and abuse. The following graph shows the debt reduction, as reported by the CBO and published by The Washington Post:

What the ACA does to protect consumers from insurance abuses?

The first part of the ACA was implemented in 2010 and affected children and young adults, ensuring they received consumer protections, and the next phase is set to begin January 1, 2014 to include all Americans in the following ways, among others:

1. Eliminates lifetime caps / limits on benefits that individuals can receive.
2. Prohibits insurance companies from dropping insurance policies due to severe / chronic illnesses.
3. Prohibits denial of policies due to pre-existing conditions.
4. Extends coverage of dependants up to age 26.
5. Requires preventative services and immunizations coverage and most are now offered free of charge to the individual.
6. Requires insurance companies to spend at least 80% of their profits on health care costs while  requiring premium rebates if this is not met.
7. Requires standardized forms to easily summarize benefits and costs in an easy-to-understand format.
8. Requires a standard of benefits that provide adequate coverage even for base plans.

How are the states implementing the law?

uAll 50 states are “participating”, either through the creation of their own state run Exchange or a partnership between the state and federal government or by defaulting to the federal Exchange. Currently, only 17 states are creating their own state run Exchange. All other states will either run a joint Exchange with the federal government or default to the federal Exchange exclusively. Those with a joint Exchange, working in concert with the federal Exchange, as well as their own state Exchange, are seeing the greatest cost-effectiveness and consumer inclusiveness. Those states that default entirely to the federal Exchange are seeing the least of these. 

Unfortunately, the Supreme Court ruled that each state has the right to deny the expanded Medicaid dollars that are offered by the federal government. This has a drastic and devastating effect on millions of Americans. Expanded Medicaid was supposed to cover those people who make too much to qualify for Medicaid under the current regulations, but don't make enough to qualify for a government subsidy and are not offered insurance through their employers. So when states refuse the expanded Medicaid dollars, they are shutting out those people from having access to health care. And they are driving up the costs for everyone else in their states, as those who do have insurance must cover the missing "healthy" dollars from the system that those people would have added. In addition, those people will still resort to Emergency Room care for their illnesses, waiting until a problem is severe and much more costly, spreading that cost to everyone else. 

Fortunately, these people who find themselves caught in this hole will not be subject to the Individual Mandate; and the states who refused to accept the expanded Medicaid dollars can reverse their decision at any time, thereby granting their citizens the same opportunities as other, more progressive states.

Here is a map of the state decisions:

To view interactive details and for more information, click here.

Why do we have to comply (why is the Individual Mandate is important)?

In the same way that auto insurance is mandated, so is health insurance, and the reasons are fairly identical. No one can predict when they will get sick or injured, but when a person is insured, their costs are lower than someone who is uninsured; and the cost for everyone is raised when an uninsured person utilizes Emergency Room care. In addition, when everyone is insured, "healthy" dollars help offset the cost of "sick" dollars; in other words, the more people insured, the lower the costs for everyone. 

Depending on your state, the penalties for not maintaining auto insurance are severe. In my state of North Carolina, if you have a lapse in coverage (forget to pay your bill, for instance), you must turn in all tags for 30 days, which creates a major hardship for families who depend on personal transportation to get to work, school and other places. After the 30 days have passed, you must pay a hefty fine to get your tags returned. As harsh as these penalties are, they have proven to be a deterrent for avoiding auto insurance coverage. In contrast, the ACA Individual Mandate is a tax penalty. 

In other words, you won't lose your ability to drive your car or lose your home, but you will have to pay a tax penalty instead. The first year, the tax penalty is $95 per adult, $47.50 per child, with a family maximum of $285 or 1% of income,whichever is greater.  The next year, the penalty is increases to $325 or 2% income per family, and the third year, it increases to it's final amount of $695 or 2.5% income per family.

For more information concerning the Individual Mandate, click here.

Will it be affordable?

In order to make health care more affordable, the ACA has created "marketplaces" / exchanges for insurance plans that people can comparison shop. After signing up on the online exchange, you will be given specific information regarding your status, such as Medicaid or subsidy eligibility. Then you shop for the plan that best suits your needs and budget. 

Medicaid Eligibility

If you fall below 100% of the Federal Poverty Level (FPL) and you live in a state that has accepted expanded Medicaid dollars, you will be redirected to the Medicaid site to sign up for benefits. Your costs will be little to none.

Subsidy Eligibility

If you make between 100% and 400% FPL, you may qualify for a subsidy. The subsidy amount differs among various individual circumstances, so you may want to use the following tool from the Kaiser Family Foundation:

What do I need to do now?

We have a few options to take advantage of the ACA. The first way is to log onto the website, www.healthcare.gov and complete the instructions (there is also an information source that you can click on for more information before entering the system). Another option is to contact an authorized agent or Navigator in your area. You can contact your local health department for further information. Or you can contact the exchange by telephone: 1-800-318-2596.

**Special Note to Small Businesses**

Employers with fewer than 50 employees do NOT have to offer insurance and will NOT have to pay the Employer Shared Responsibility Payment (ESRP), the penalty for larger companies. But, these small businesses can look on the marketplace exchange to see  if they can offer affordable healthcare to their employees. The marketplace exchange for small businesses is Small-Business Health Options Program (SHOP). They can control the coverage they offer and how much they pay toward employee premiums. They can compare health plans online which helps them make a decision that's right for their business.

uThey may also qualify for a small business health care tax credit worth up to 50% of their premium costs. They can still deduct from their taxes the rest of their premium costs not covered by the tax credit. Beginning 2014 the tax credit is available only for plans purchased through SHOP.

Employers with 50 or more employees that do not offer employee insurance may have to pay the ESRP. However, it is important to note that 96% of businesses in America employee fewer than 50 employees and are not subject to the ESRP. Of those companies that do employ 50 or more people, the vast majority already offer their employees health care and are, therefore, not subject to the ESRP. This leaves a small percentage (only 0.2%) of businesses that fall within the possibility of paying the ESRP.

For more information on small business SHOP exchange, click here.

Once again, please click on all the above hyperlinks, as they connect to various sources that will aid you in making informed decisions and becoming a more informed consumer. Please feel free to comment on this blog and please share this valuable information.

Finally, the following is a 46 minutes video that summarizes everything you need to know about the Affordable Care Act and it is well worth the time to view: