FAQs
Frequently Asked Questions About Health Care Reform
A: Starting in 2014, most people will be required to have health insurance or pay a penalty if they don’t. Coverage may include employer-provided insurance, coverage someone buys on their own, or Medicaid.
Several groups are exempt from the requirement to obtain coverage or pay the penalty, including: people who would have to pay more than 8% of their income for health insurance, people with incomes below the threshold required for filing taxes (in 2009, $9,350 for a single person and $26,000 for a married couple with two children), those who qualify for religious exemptions, undocumented immigrants, people who are incarcerated, and members of Indian tribes.
The penalty for people who forego insurance is the greatest of two amounts: a specified percentage of income or a specified dollar amount. The percentages of income are phased in over time at 1% in 2014, 2% in 2015, and 2.5% starting in 2016. The dollar amounts are also phased in at $95 in 2014, $325 in 2015, and $695 beginning in 2016 (with annual increases after that). The Congressional Budget Office projects that 3.9 million people will pay the penalty in 2016. The total penalty for the taxable year will not exceed the national average of the annual premiums of a bronze level health insurance plan offered through the health insurance Exchanges.
Health insurance plans will provide documents to people they insure that will be used to prove that they have the minimum coverage required by law
Q: How will the new provision allowing young adults to remain on a parent’s insurance work?
A: The health reform law contains a provision that requires private insurers to continue dependent coverage of children until age 26. Department of Health and Human Services regulations specify that a young adult can qualify for this coverage even if he or she is no longer living with a parent, is not a dependent on a parent’s tax return, or is no longer a student. Both married and unmarried young adults can qualify for the dependent coverage extension, although that coverage does not extend to a young adult’s spouse or children. For employer plans that were in place prior to March 23, 2010, young adults can only qualify for dependent if they are not eligible for another employer-sponsored insurance plan. Insurers that do not offer coverage to dependent children will not be required to offer this coverage to young adults.
The extension of dependent coverage to age 26 will go into effect on September 23, 2010, but plans will not be required to comply with the regulations until the first plan year beginning on or after that date. However, some insurers have said that they will begin to make the extension of dependent coverage available prior to September 2010 for young adults who would otherwise lose coverage.
Regulations also state that young adults who gain dependent coverage under the health reform law cannot be charged more for coverage than similar individuals who did not lose coverage due to the end of their dependent status. Young adults newly qualifying as dependents under the health reform law must also be offered the same benefits package as similar individuals who were already covered as dependents.
Q: What happens if a state does not implement the health reform law?
A: If a state does not establish Exchanges or implement the new insurance rules according to the standards in the new law (and subject to further interpretation by federal regulations), then the federal government will step in and perform those functions.
Starting in 2014, all families with income up to 133% of the federal poverty level (about $29,000 for a family of four in 2009) will be eligible for Medicaid, with the vast majority of the additional cost paid for by the federal government. The expansion in eligibility will be a required element of every state Medicaid program. States are not required to have Medicaid programs, though all states currently do, in large part, because the federal government pays the majority of the costs.
Q: How are small businesses affected by health reform?
A: The health reform law includes a number of provisions that reform the insurance market and encourage small businesses to offer health insurance. Coverage offered in the small group market and in the exchanges established for small business to purchase insurance, must meet minimum benefit standards; allow premiums to vary only by age, tobacco use, and geographic location; be subject to reviews of premium increases; and comply with other consumer protections.
The provisions to encourage small firms to offer coverage apply only to firms under a certain size.
Fewer than 25 Employees:
Beginning in 2010, business with fewer than 25 full time equivalents and average annual wages of less than $50,000 that pay at least half of the cost of health insurance for their employees are eligible for a tax credit. The full credit is available to employers with 10 or fewer employees and average annual wages of less than $25,000. The credit phases-out as firm size and average wage increases. The credit is capped based on the average health insurance premium in the area where the small business is located.
The tax credit will be introduced in two phases. For tax years 2010 to 2013, eligible employers may receive a tax credit of up to 35% of the employer’s contribution toward the employee’s health insurance premium. For tax years 2014 and later, eligible small businesses that purchase coverage through the state Exchange may receive a tax credit of up to 50% of the employer’s contribution toward the employee’s health insurance premium. Employers are eligible to take the tax credit for two years. Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 25% of the employer’s contribution toward the employee’s health insurance premium for tax years 2010 to 2013, and up to 35% for tax years 2014 and later.
Fewer than 50 Employees:
Businesses with fewer than 50 employees are exempt from penalties faced by larger employers that do not offer coverage. The penalties for larger employers (50 or more employees) do not go into effect until 2014.
Fewer than 100 Employees:
Small businesses with fewer than 100 employees will be able to purchase coverage through Small Business Health Options Program (SHOP) Exchanges beginning in 2014. These state-based exchanges are intended to allow employers to shop for qualified coverage and more easily compare prices and benefits. In 2017, states will have the option to allow businesses with more than 100 employees to purchase coverage through the SHOP Exchanges
Q: What is a health insurance exchange?
A: Exchanges are new organizations that will be set up to create a more organized and competitive market for buying health insurance. They will offer a choice of different health plans, certifying plans that participate and providing information to help consumers better understand their options.
Beginning in 2014, Exchanges will serve primarily individuals buying insurance on their own and small businesses with up to 100 employees, though states can choose to include larger employers in the future. States are expected to establish Exchanges–which can be a government agency or a non-profit organization–with the federal government stepping in if a state does not set them up. States can create multiple Exchanges, so long as only one serves each geographic area, and can work together to form regional Exchanges. The federal government will offer technical assistance to help states set up Exchanges.
Q: What protections are there in the new health reform law for people with pre-existing conditions?
A: Starting in 2014, all health insurers will have to sell coverage to everyone who applies, regardless of their medical history or health status. At that time, insurers will not be allowed to charge more to individuals with pre-existing conditions, nor will they be able exclude coverage of those conditions from the insurance plans they sell.
The law provides new protections for children with pre-existing conditions that will take effect on September 23, 2010. Insurers will not be permitted to deny coverage to children due to their health status, or exclude coverage for pre-existing conditions.
While adults will not have the same protections as children in the years prior to 2014, some adults may be eligible for a temporary national high-risk pool open to all U.S. citizens and legal residents who have had trouble buying insurance due to a pre-existing condition and have been uninsured for at least six months. This federally subsidized coverage, officially known as the Pre-existing Condition Insurance Plan, will provide temporary coverage until the broader coverage provisions take effect in January 2014. States can operate their own high-risk pool or have the federal government carry out the program. The federal government began accepting applications for enrollment in their high-risk pool on July 1, 2010, with coverage beginning on August 1, 2010. Premiums for this coverage will be based standard premiums for the general population, and therefore will not be higher due to the health problems faced by the high-risk pool beneficiaries. In addition, the amount that premiums can vary based on age will be limited. The high-risk pool insurance must cover 65% of medical costs and the maximum cost sharing is set at the Health Savings Account limits ($5,950 for an individual and $11,900 for a family of four).
Q: Who will be eligible for subsidies to make health insurance more affordable?
A: Beginning in 2014, tax credits will be available to U.S. citizens and legal immigrants who purchase coverage in the new health insurance exchanges and who have income up to 400% of the federal poverty level ($43,320 for an individual or $88,200 for a family of four in 2009). To be eligible for the premium tax credits, individuals must not be eligible for public coverage—including Medicaid, the Children’s Health Insurance Program, Medicare, or military coverage—and must not have access to health insurance through an employer. (There is an exception in cases when the employer plan does not cover at least 60 percent of covered benefits on average or the employee share of the premium exceeds 9.5% of the employee’s income.)
The premium tax credits will be advanceable and refundable, meaning they will be available when an individual purchases coverage and will be available regardless of whether or not an individual owes any taxes. The premium tax credits will vary with income and are structured so that the premium an individual or family will have to pay will not exceed a specified percentage of income, ranging from 2% for those with incomes up to 133% of the poverty level (about $14,400 for an individual) to 9.5% for those with incomes between 300 and 400% of the poverty level ($32,490 to $43,320 for an individual).
Q: How will existing employer health plans be affected by health reform?
A: Employer plans that were in place on March 23, 2010, the date the new health reform law was enacted, are referred to as “grandfathered plans” and are subject to some of the new rules but exempt from others. Beginning on September 23, 2010, grandfathered employer plans will be required to eliminate any lifetime limits on coverage and restrict any annual limits on coverage, eliminate pre-existing condition exclusions for children, and if the plan provides dependent coverage, extend that coverage to adult children up to age 26. Beginning in 2014, grandfathered employer plans will be required to eliminate any annual limits on coverage, eliminate pre-existing condition exclusions for adults, and limit waiting periods for coverage to no more than 90 days. Grandfathered employer plans will not, however, be required to alter their benefits to meet the new minimum benefit standards nor will they have to limit enrollee cost sharing or provide coverage for preventive services with no cost-sharing. In order to maintain its grandfathered status, a plan cannot reduce or eliminate benefits to treat particular conditions, increase employee cost-sharing (including deductibles, co-insurance, and co-payments) above certain thresholds, reduce the employer share of the premium cost, or change insurers. Once a plan loses its grandfathered status, it will have to comply with all the new rules
Q: How does the new law apply to companies with self-funded plans?
A: Self-funded plans–those where the employer accepts the risk for the health benefits it providers, rather than buying coverage from an insurance company–are generally exempt from state insurance regulations and are instead regulated by the Employee Retirement Income Security Act (ERISA). The new health reform law contains many provisions that apply nationally to both self-funded plans and fully insured plans. Some of these provisions include the extension of dependent coverage until age 26, no cost sharing for preventive services, the limit on waiting periods to no more than 90 days, and no lifetime or annual limits on coverage. However, it appears that self-funded plans will not be subject to meeting the minimum essential health benefit requirements, such as limits on deductibles.
Q: What preventive services will be covered?
A: Beginning in July 2010, any new plans offered by employers or insurers–not including so-called “grandfathered” coverage that people already have–will have to provide coverage for a range of preventive services, including: services recommended with a rating of “A” or “B” from the U.S. Preventive Services Task Force, immunizations recommended by the Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices, and additional services for women contained in guidelines issued by the Health Resources and Services Administration (including routine mammograms for women over age 40). In addition, plans will be required to cover these preventive services without any cost-sharing for patients.
Q: How will the health reform law help people with their out-of-pocket expenses?
A: The new law has several provisions that are aimed at making private health insurance more affordable that will take effect in 2014. First, premium tax credits and cost-sharing subsidies will be available for U.S. citizens and legal immigrants purchasing coverage on their own in the new health insurance exchanges. The premium tax credits will be available to those with incomes up to 400% of the poverty level ($43,320 for an individual or $88,200 for a family of four in 2009) and will limit what a person has to pay toward the premium to a specified percentage of income. The amount people will have to pay will range from 2% of income for those with income up to 133% of the poverty level to 9.5% of income for those with income between 300 and 400% of the poverty level. In addition to premium tax credits, people with incomes up to 250% of the poverty level ($27,075 for an individual or $55,125 for a family of four in 2009) will be eligible for cost-sharing subsidies that will reduce what they will have to pay out-of-pocket for covered health services.
Second, the law establishes limits on what people buying insurance in the exchanges and some others will pay out-of-pocket for services covered by health plans. These limits are set initially at $5,950 for an individual and $11,900 for a family, and grow over time. For people purchasing coverage in the exchanges who have incomes at or below 400% of the poverty level, the out-of-pocket limits will be reduced to one-third of the overall limits for those with incomes 100-200% FPL; by one-half for those with incomes 200-300% FPL; and by two-thirds for those with income 300-400% FPL.
Finally, deductibles for new plans offered by small employers will be limited to $2,000 for individuals and $4,000 for families (existing grandfathered plans will be exempt from this new requirement).
A: The Secretary of Health and Human Services will define the benefits health plans have to cover, which includes a number of service categories specified in the health reform law: ambulatory services, emergency care, hospitalization, maternity and newborn care, prescription drugs, mental health and substance abuse services, rehabilitative services and devices, labs, chronic disease management, and oral and vision care for children. The scope of benefits will be the same as that provided under a typical employer health plan.
The minimum benefit requirement applies to new plans sold to small businesses (those with up to 100 workers) and individuals beginning in 2014, but not to so-called “grandfathered” coverage that people already have or to coverage provided by larger employers.
Q: Will members of Congress and their staffs have to buy their health insurance in the new exchanges?
A: The health reform law requires that in 2014 the federal government only provide health coverage to members of the House of Representatives and the Senate through the new health insurance exchanges that will be created. The same requirement also exists for Congressional staff who are employed by a member of Congress. It appears that Congressional committee staff and certain other Congressional staff members may be excluded from this requirement because they do not work directly for a member of Congress.
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