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A Guide to the Changing Health Insurance Landscape

health insurance medsSince the 2,700-page Affordable Care Act was signed into law three years ago, it has remained controversial. Whatever you may think about “ObamaCare,” however, it is a fact of the health insurance landscape and is continuing to move toward complete implementation. So it’s important to understand how the law could affect the health insurance coverage you have, the health care you receive, and the tax bill you pay on April 15.

In this article, we’ll help you begin to understand the law, what major changes have already gone into effect, the changes going into effect this year, and the major changes that lie ahead.

In Effect Before 2013

Some of the most significant changes brought on by the Affordable Care Act have already taken effect since President Obama signed it into law on March 23, 2010. These include:

  • Health insurance companies are required to offer coverage to people with preexisting conditions, with a limit on out-of-pocket expenses (excluding premiums) of $6,350 per year for individuals and $12,700 for families.
  • Health insurance companies are banned from setting lifetime dollar benefit limits on essential medical expenses, like hospital stays.
  • Health insurers cannot drop coverage for people when they become sick.
  • Children under the age of 26 must be allowed coverage under their parents’ policies, a change which has extended health insurance coverage to an estimated 2.5 million young people.
  • All new policies must include coverage for preventive care and medical screenings without patients being subject to a deductible or copayment.
  • The Medicare Part D “donut hole” gap for prescription drug coverage is narrowed by 50%, and those people affected receive a $250 rebate. (The gap refers to a point where ordinary Medicare subsidies reach their limit, but catastrophic coverage provisions don’t kick in, which means retirees pay a higher price for prescriptions.)
  • Health insurance companies are required to pay out 80% to 85% of the premiums they collect in benefits or issue rebates to policyholders. (In 2012, health insurers paid out $1 billion in rebates to 13 million Americans, or about $151 per family.)
  • Eligibility for Medicaid ― the federal health insurance program for the poor― was raised to 133% of the federal government’s poverty income level.

 

Changes in 2013

By comparison with the changes already in effect, those that take effect this year are less significant, with the exception of higher taxes for high-income taxpayers. As of January 1 of this year, the following provisions went into effect:

  • A 0.9% Medicare income surtax for single filers who make more than $200,000 a year and couples filing jointly with taxable income above $250,000.
  • An additional Medicare tax of 3.8% on unearned (investment and passive) income for the same filers as the Medicare income surtax above.
  • An increase from $1.25 million to $2 million on the annual limits insurers will pay per year for treatment of chronic illnesses or major life-saving procedures, such as organ transplants.
  • A reduction from $5,000 to $2,500 on the maximum amount individuals can contribute to a flexible medical savings account.
  • A requirement for health insurers to provide a new from called a Summary of Benefits and Coverage. This is supposed to be a simple, easy-to-read description in chart format that explains how the plan works, what it covers and doesn’t cover, and compares plan choices with no “fine print.”
  • By October 1, state health exchanges will be available to qualifying individuals to meet the Act’s mandate. In states where no state-sponsored health exchange exists, the federal government will make an exchange available.

New in 2014 and Beyond:

The Mandate

The biggest changes associated with the Affordable Care Act ― the individual mandate (the requirement that all Americans secure health insurance coverage) and the requirement that most businesses offer health insurance to their employees or face a penalty ― go into effect in 2014.

For individuals, these changes mean:

  • Individuals and families with income of up to 133% of the federal definition of poverty (around $14,000 for an individual and $30,000 for a family of four) will qualify for Medicaid, which provides free or low-cost medical care.
  • People with incomes equal to between 133% and 400% of the poverty level (around $43,000 for individual and $92,000 for a family of four) will be eligible for tax credits for private health insurance policies they purchase through the health exchanges.
  • For those with income more than 400% of the poverty level, there will be no tax subsidies for purchasing health insurance. At these levels, individuals can take advantage of $2,500 medical savings accounts and deduct medical expenses that exceed 10% of their income.
  • Fines for individuals and families who fail to obtain health insurance coverage are the greater of $95 per adult or 1% of income in 2014, and rise to $325 per adult or 2% of income in 2015, and $695 per adult or 2.5% of income in 2016. Starting in 2017, annual increases in the fines will be indexed for inflation.

For businesses, these changes mean:

  • Businesses with at least 50 full-time employees will be required to offer health insurance coverage to their employees. Required employee contributions can’t exceed 9.5% of their income and plan deductibles can’t exceed $2,000 for individuals or $4,000 for families. The penalty for failing to offer coverage will be $2,000 per employee.
  • Businesses with fewer than 50 employees are not required to provide health insurance, but businesses with fewer than 25 employees who earn no more than an average of $50,000 will be eligible under the act for a tax credit equal to 50% of what they pay toward employee premiums (provided that these employers pay at least half of each employee’s premium).

One of the aims of the Affordable Care Act is to reduce the amount Americans and the federal government spend on health care. According to the Organization of Economic C0-Operation and Development, Americans spent more than $8,200 per person on health care in 2010. That was more than two and half times the average for the world’s 30 most highly developed countries and 60% more than the next biggest spending country, Norway.

Fortunately, our health care costs have been rising at a lower rate over the past four years than they have over the last 52 years. Economists acknowledge that is at least in part due to the recession and sluggish recovery; but, according to a recent article in Forbes, Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, attributes much of the reduction to the Affordable Care Act changing the way health care is being delivered.

Copyright © Integrated Concepts 2013. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects. The appropriate professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.
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