By ELIZABETH O’BRIEN
Not entirely sure what’s in the Patient Protection and Affordable Care Act? You’re hardly alone. Only the most die-hard of policy wonks could claim mastery of the sprawling health-care legislation, which was written by five different congressional committees and runs to nearly 1,000 pages.
For the rest of us, now is a good time for a refresher, because the next 12 months will bring significant changes, particularly for small-business owners, the currently uninsured and self-employed people with pre-existing conditions—a group that includes more baby boomers than younger workers.
The law’s biggest provision—which creates insurance exchanges intended to make coverage more affordable and available to individuals and small businesses—takes full effect on Jan. 1, 2014.
Open enrollment in these “marketplaces,” as the exchanges are called, starts this October. You’d have to go back to the mid-1960s and the implementation of Medicare for the last time that the government made such sweeping changes to our country’s health-care system, according to Sherry Glied, professor of health policy and management at Columbia University.
And the Affordable Care Act is even bigger in scope: “People are still pinching themselves that it happened,” Glied said recently at a seminar for health-care reporters.
Amid all the pinching and politicking that has ensued since the bill’s passage back in 2010, it’s easy to lose sight of what the law really means for Americans, how it might change people’s lives in ways big or small. Indeed, many people have strong opinions about the law but are fuzzy on the details. Some 78% of the uninsured don’t know about the new health insurance exchanges, for example, according to Enroll America, a nonprofit group working to educate people about the law and enroll them in insurance plans. Many people mistakenly think the Affordable Care Act creates an entirely government-funded insurance plan, like the one Canada has.
Instead, the law creates the framework for each state to operate an insurance exchange with a menu of coverage options offered by private insurers. These exchanges will operate online, and some policy analysts expect they will offer consumers a Travelocity-type shopping experience. If it works as intended, the law will rein in runaway health-care costs while making the system fairer for everyone.
Some critics doubt the law will eventually reduce costs, saying it will only add to the country’s budget deficit. And some question whether it will really make coverage affordable. It’ll be years before anyone can judge the law’s long-term success, of course. But meanwhile, consumers who understand how the system works will have an edge in taking advantage of it.
Drug and dependent coverage expands
Some of the Affordable Care Act’s provisions have already taken effect. Those whose adult children are now covered under their health plan until age 26—or those whose children under age 19 are no longer denied coverage due to pre-existing conditions—have experienced some of the law’s early reforms. Individual tax filers with incomes above $200,000 and married filers with incomes above $250,000 just saw some of their payroll and investment taxes raised to help fund Medicare. Seniors are receiving expanded preventative services and discounts when they hit the prescription drug coverage gap in Medicare Part D.
But there is much more to come, and more work to be done in coming months. Most states are still laying the groundwork for their insurance marketplaces. States can choose to operate an exchange themselves, to operate one in partnership with the federal government, or to essentially allow the federal government to operate one for them.
Many states, including some whose governors opposed the law, have decided to let the federal government run their exchanges. States can also choose whether they will passively certify all health plans meeting certain requirements that want to sell on their exchanges, or whether they will actively select the plans that will participate. The Commonwealth Fund, a private foundation working toward the creation of a high-performance health system, has an interactive map that illustrates the decisions each state has made. (See the map here)
The main beneficiaries of the exchanges will be the uninsured and those currently covered by individual or small group plans—whose coverage tends to be more costly, and to contain more limitations, than coverage under group plans provided by bigger employers.
Early retirees and older freelancers will be among those the law’s advocates say should have an easier time securing coverage starting next January. Those under the Medicare eligibility age of 65 who aren’t covered under a workplace plan often have trouble finding coverage due to pre-existing conditions.
Under the law, beginning in 2014, no insurance plan will be able to deny coverage due to pre-existing conditions. A handful of so-called “guaranteed issue” states currently require insurers to cover all comers, and have the high premiums that accompany such a policy, but for most states this represents a big change.
What’s more, insurers can only charge customers based on four criteria: age, tobacco use, family composition (essentially, the size of the family and the relationship of its members) and geography. There are few such pricing restrictions in effect now, and in many cases, insurers can charge more to cover people with current or past illnesses. These new pricing restrictions—called “rating reforms” in industry parlance—will apply to most plans in the individual and small group markets, both inside and outside the exchanges.
Starting next year, most people who aren’t already getting coverage through an employer will be required to either buy health insurance or pay a penalty. Those with gross incomes up to 400% of the federal poverty level will qualify for subsidies to lower the cost of coverage on the individual exchanges. Those levels for 2012 were $44,680 for an individual, $60,520 for a family of two, and $92,200 for a family of four (the numbers are higher for residents of Alaska and Hawaii). Those whose income exceeds those amounts—about 9% of the uninsured population, according to Enroll America—can buy insurance on the exchange but won’t get a subsidy.
The vast majority of people on the individual market will see premium decreases due to the subsidies and the changes in how insurers can charge customers, Glied said. (Young men, who have historically paid low premiums, might see premium increases in some cases, she noted.) The Kaiser Family Foundation has a health reform subsidy calculator on its website that gives consumers a sense of the government credit they’ll receive on the exchanges. For example, a single 60-year-old in a medium-cost area of the country making $40,000 per year can expect a projected subsidy of $6,372 annually, bringing the person’s annual premium costs down to $3,800, from $10,172. (See the Kaiser foundation’s calculator here .)
Older, more affluent people who don’t qualify for subsidies might not see big reductions in their insurance costs on the exchanges, however. It remains unclear how those premiums will price out, according to Georgetown University Health Policy Institute’s Center on Health Insurance Reforms. But some people who currently struggle to get insurance at all would be able to get it.
Choices for employers
Most employers who currently provide health coverage for their employees aren’t planning to scrap it and shift their workers to the state exchanges, experts say. For one thing, employers with at least 50 full-time employees, or the equivalent in part-time hours, may face penalties if they don’t provide certain coverage to an employee and that employee instead buys subsidized care on a state exchange. Currently, 83% of U.S. employers with 50 or more employees already provide health insurance, according to Mercer, a benefits consulting firm. Many of those that don’t are in the retail and hospitality industries.
Employers with up to 50 workers will be able to buy coverage for their employees under Small Business Health Options Program or “SHOP” exchanges starting in 2014, and they may qualify for tax credits to do so. Many small businesses owners worry that complying with the Affordable Care Act will substantially increase their costs, and news reports have drawn attention to owners who plan to restrict hiring or reduce worker hours to remain below the threshold of 50 full-time employees or the part-time equivalent, under which they won’t face any penalty for not providing insurance. But Ben Geyerhahn, an entrepreneur and director of special projects for the Small Business Majority, an advocacy group, said that there are few such businesses on the cusp.
Just because the law’s biggest changes are centered on the individual and small group markets doesn’t meant that those with large-group employer plans won’t see any effects. In fact, most of the changes to this market have already happened, experts say, including the removal of lifetime coverage limits for certain key health benefits. These changes have generally increased employers’ costs—by a range of roughly 2% to 5%—and some may already have passed along part of this increase to their employees in the form of higher premiums, said Eric Grossman, senior partner in Mercer’s health and benefits business
Most Americans won’t wake up on Jan. 1, 2014 to changes under the Affordable Care Act. But some 37 million will experience changes due to the law next year, Glied said. That is more than 10% of the population. And the law touches those who won’t see major differences in their coverage. “This is pretty big,” Grossman said. “It applies to everyone.”
( This story originally ran on marketwatch.com Jan. 25, 2013, 7:01 a.m. EST )
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