The Affordable Care Act and You

The Patient Protection and Affordable Care Act, commonly referred to as Obamacare or the Affordable Care Act was signed into law on March 31, 2010. The goal of the Act is to make affordable health care accessible to all Americans. The Congressional Budget Office estimates that once the ACA is fully implemented 94 percent of Americans will have some form of health coverage. By the end of 2014 87 of 90 provisions of the law will be in place. The remaining provisions which include employer mandated health insurance for companies with 50 or more full-time employees will begin rolling out next year.

The Three A’s of the Affordable Care Act

To achieve the goal of ensuring that all Americans have adequate health protection the provisions of the ACA can be divided into three overarching sections; accessibility, affordability and accountability.

Accessibility

The most widely talked about aspect of the Affordable Care Act has been the creation of federal and state insurance marketplaces. The marketplaces enable insurance shoppers to search for coverage in two ways. The first is by dividing available options into three broad levels of coverage; bronze, silver and gold. The second enables consumers to do side by side comparisons of policy benefits and cost.

Affordability

The ACA has already slowed the rate of increase of health care costs by increasing the number of healthy people in the system and by improving delivery of services included preventative care. The act works to improve affordability is a second more direct way by providing premium assistance in the form of tax credits to individuals and families whose income is less than 400 percent of the federal poverty level.

Unfortunately, affordability is a hotly contentious piece of this legislation. For many people, health insurance has actually become more expensive under the ACA because many insurers have pulled out of certain exchanges.

Accountability

– Holding insurance companies, health care providers and pharmaceutical companies accountable for the care they provide ensures that consumers receive the best possible care. Changes in the relationship between insurers and policyholders include coverage for pre-existing conditions and an end to lifetime benefit caps. Providers have been given incentives to offer greater preventative care and rule changes now make it easier for lower cost generic medications to make it to market sooner.

An Affordable Care Act Time Line

Over the coming years the Affordable Care Act will continue to transform the health care is delivered if it stays in its existing form. While 97 percent of the provisions of the Affordable Care Act will be in place and active by the end of 2014 looking at a timeline of the changes will provide an understanding of not only what has changed but how the law works. The timeline includes the year, the number of provisions that were supposed to begin and the number that actually did as well as key provisions for that year.

2010 – 26 of 26 Provisions went into effect

  • Insurance companies must not justify unreasonable premium increases.
  • Small business tax credit for companies with fewer than 25 employees.
  • Lifetime limits removed from health insurance policies.
  • Adult dependent children can remain on parents’ insurance until age 26.

2011 – 18 of 20 provisions went into effect.

  • The Medicare prescription donut hole was filled, saving senior citizens an average of $545 per year.
  • Improvements to the way Health Savings Accounts can be used.
  • Grants of up to five years became available for small employers to establish wellness plans for employees.
  • 15 Member Medicare Advisory Board is delayed in Congress and is still not implemented.

2012 – 10 of 11 provisions went into effect.

  • Insurers must now provide uniform coverage summaries so that consumers can easily and accurately compare competing plans.
  • Data collection to identify and fix disparities in the delivery of health care begins.
  • More than a half dozen changes to Medicare and Medicaid went into place to reduce fraud, improve services and reduce cost.

2013 – 13 of 14 provisions went into effect.

  • Federal and state health insurance exchanges (Marketplaces) began enrolling consumers.
  • The financial disclosure provision which requires disclosure of relationships between health providers such as doctors, hospitals, pharmacists and manufacturers and distributors of drugs and medical supplies be disclosed.
  • Financial disclosure rules began requiring doctors, hospitals, pharmacists and others to report relationships.
  • Flexible spending account limits were raised to $2,500 with future adjustments tied to the cost of living.

2014 – 15 of 16 provisions went into effect.

  • Medicaid benefits are expanded to individuals and families earning less than 138 percent of the federal poverty level in 27 states and Washington, D.C.
  • Premium assistance, subsidies, are available to individuals and families earning less than 400 percent of the federal poverty level.
  • Individual mandate requiring everyone to have private health insurance, Medicare or Medicaid.
  • Health insurance availability is guaranteed for everyone regardless of pre-existing conditions.
  • Health insurance premiums can only be based on age. Higher rates based on poor health are no longer permitted.
  • Annual benefit limits are removed.
  • The employer mandate was delayed one year.

2015 – 2 Provisions will go into effect.

  • The employer mandate which was delayed in 2014 will go into effect for employers with more than 100 employees.
  • An increase in federal matching funds for CHIP will take effect on October 1st.

2016 – 2 Provisions will go into effect.

  • The employer mandate which was delayed in 2014 will go into effect for employers with more than 50 employees.
  • States may form compacts with each other to allow insurance plans to be sold across state lines.

2017 – There are no provisions scheduled for this year.

2018 – 1 Provision will go into effect.

  • This final provision is a tax on high cost employer sponsored health plans.

Breaking the Affordable Care Act Down by Title

The Affordable Care Act is like other large complex pieces of legislation in that it is broken down into a number of sections called Titles. Each title of the law addresses specific areas within the overall law. The Affordable Care Act is divided into 10 Titles of which each is briefly explained below.

Title I – Quality, Affordable Health Care for All Americans

This opening title makes fundamental changes to the way health insurance functions by providing substantial protections for consumers. One of the most significant changes is the elimination of “lifetime and unreasonable annual limits on benefits.” For health care consumers this means that if they fall victim to a catastrophic illness or injury all of their care will be covered by insurance. Prior to the act insurance companies were able to place arbitrary annual and lifetime limits on benefits resulting in patients running out of insurance and being unable to continue treatment.

Title I of the ACA will go a long way toward reducing the 60 percent of bankruptcies that were the result of medical treatments. 75 Percent of medical bankruptcies were initiated by people who had health insurance. In some cases, those financial collapses were not because patients exceeded their benefits, but because insurance companies cancelled their policies when they became sick. Title I makes it unlawful for an insurance drop a customer due to illness or injury and prevents them from raising premiums for people with pre-existing conditions. Finally, this tile allows dependent adult children to remain on their parents insurance until they are 26.

Title II – The Role of Public Programs

The focus of this section is public health programs for the poor and middle class. This title extends Medicaid benefits to individuals and families whose income is up to 133 percent of the federal poverty level. The extension of benefits is only available to those who live in one of the 27 states and the District of Columbia that have accepted federal grants to expand the program. This title also extends CHIP or the Children’s Health Insurance Plan through 2015. CHIP is similar to Medicaid in that it provides health insurance specifically for low income children.

Title III – Improving the Quality and Efficiency of Health Care

The most prominent feature of this section is the closing of the Medicare drug donut hole which will save senior citizens hundreds and in many cases thousands of dollars a year in medication costs. This title also addresses numerous procedures and protocols for delivering health care to seniors and the poor. Each of the changes is designed not only improve the quality of care, but the efficiency with which care is delivered by providing incentives to hospitals and other providers to improve senior care. This section also called for the creation of a Medicare Advisory Board to find additional ways to reduce costs, but is still awaiting congressional action to begin work.

Title IV – Prevention of Chronic Disease and Improving Public Health

Benjamin Franklin once said that “an ounce of prevention was worth a pound of cure.” While he was not talking about health care he was nonetheless correct. Preventing disease is far less expensive than treating or curing disease and this title makes that fact the law. It funds a wide range of public health and prevention programs designed to improve wellness and thereby reduce health care costs and ultimately health insurance premiums.

Title V – Health Care Workforce

In order to provide health care for the tens of millions of previously uninsured Americans the ACA includes a provision to fund scholarships and loan repayment programs for people pursuing a career in health care.

Title VI – Transparency and Program Integrity

A two prong approach is taken with this title to improve the transparency and integrity of health care. Greater transparency is achieved by requiring improved disclosure to patients of cutting edge research and treatment. There are also greater disclosure requirements concerning providers who have been identified as high-risk because they have defrauded patients in the past. States have been given the ability to prevent penalized providers in another state from setting up operations in a new state.

Title VII – Improving Access to Innovative Medical Therapies

In the past, patients have not always had access to necessary medications due to high cost. Anti-competitive practices which have traditionally driven the price of drugs higher are ended by this title. The statutes in this section improve the process of getting less expensive generic drugs to consumers.

Title VII – Community Living Assistance Services and Supports Act (CLASS Act)

This is a separate act within the ACA that was repealed in 2013.

Title IX – Revenue Provisions

In order to ensure that the other provisions of the law are paid for this title addresses the many facets of revenue. Revenue is generated through both new taxes and the closing of loopholes for existing taxes. The new taxes imposed under this section do not affect families earning less than $250,000 annually or small businesses. The majority of new taxes and fees are levied against large businesses (more than 500 employees) and the health care industry, especially pharmaceutical companies.

Title X- Reauthorization of the Indian Health Care Improvement Act

This provides for the reauthorization of the Indian Health Care Improvement Act (ICHIA) which provides essential health services to American Indians and Native Alaskans.

Small Business and the Affordable Care Act

The implementation of the mandate requiring businesses to offer health insurance to employees was delayed by one year. Small businesses with fewer than 50 full time employees (30 or more hours) are not required to offer health insurance. However, they can take advantage of the Small Business Health Options Program (SHOP) where they can visit a special health care marketplace to shop for plans. The SHOP program pools, small businesses to increase purchasing power resulting and lower premiums. This is important because historically small businesses have paid up to 18 percent more for insurance than larger businesses. To participate a small business must meet certain criteria that include offering the plan to all employees and meeting participation minimums.

Small businesses with fewer than 25 FTE employees in may be eligible for a small business tax credit of up to 50% of premiums paid. Qualifying small businesses may carry the credit back to 2010-2013. Since the cost of premiums exceeds the amount of the credit employers are able to both receive the credit and deduct the expense. Employers who do not have a tax obligation in a given year may carry the unused credit backward or forward as needed.

Shared Responsibility

The most controversial part of the law is the employer shared responsibility provision which is commonly called the employer mandate. Originally scheduled to begin in 2014 it was delayed one year to 2015. The provision affects businesses with 100 or more full time employees starting in 2015 and business with 50 or more full time employees in 2016. Qualifying businesses will be required to offer employer sponsored health insurance and pay at least 60 percent of the plan premiums or be subject to penalties.

There are two sets of penalty formulas under this provision; the first applies to businesses that do not provide health insurance at all. While businesses are required to provide health insurance the penalties are only assessed, if at least one employee receives a subsidy. The penalty is $2,000 per employee, regardless of whether they receive a subsidy or not. The penalty calculation exempts the first 30 employees. For example, if a business with 75 employees does not offer health insurance and one employee receives a subsidy the company will have to pay a penalty of $90,000 the first year. The equation looks like this; 75 employees minus 30 exemptions multiplied by $2,000 equal $90,000.

The second penalty formula applies to businesses where a sponsored plan is offered, but the minimum requirements are not met. Those requirements are that the company pays at least 60 percent of the premium cost, and that the employee contribution does not exceed 9.5 percent of family income. The penalty becomes effective if one or more employees choose to buy their own insurance and receives a subsidy. The penalty calculation exempts the first 30 employees and is calculated the same way as if no insurance is offered with one addition. The penalty for each employee who receives a subsidy is $3,000 rather than $2,000.