Health Care Reform is the new name for what health insurance will look like in America starting in 2014. Also known as Obamacare, the Patient Protection and Affordable Care Act was signed into law on March 23, 2010.
Most people are confused about what health care reform is. What it will do to your current health insurance? How it will affect you? On this page, we will begin to answer those questions.
We’ll cover the purpose of Obamacare, what mandates are, how the subsidies work, when the California Exchange will be available and what to expect from it, and how the initial open enrollment period works.
What Is the Purpose Of Health Care Reform? Why?
To understand Obamacare you need to know why it was created and what its purpose or goals are. From the earliest speeches Obama made regarding health care reform, the primary reasons it was created were:
- Health insurance For Everyone, so no one would be declined
- Reduce health care waste, so health care would not cost a dime more
- Increased medical benefits – so medical bills associated with accidents and illnesses wouldn’t cause bankruptcy
Obamacare throws out almost everything we have today and creates a completely new system. The new health care reform program will roll out over the next 4 years starting in October 2013 when the health insurance exchanges begin operating. At that point, the uninsured will be able to enroll for coverage that will start on January 1st, 2014.
Now you know the reasons why Obamacare was created and what the purpose is. Next, we’ll cover the important parts of Obamacare you need to understand.
How can health care reform provide health protection for everyone when some people have pre-existing health conditions that are expensive, and others don’t want health protection because they are young and “invincible”?
The first rule that Obamacare creates is to Mandate that everyone have health insurance, so premiums from the healthy people help pay the costs of those with expensive health conditions.
What is the Health Care Reform Mandate?
There are two Obamacare mandates. One for individuals and families, and one for businesses. The mandate says that everyone must have health insurance. If you don’t get coverage, then you owe a penalty.
The penalty will be paid to the IRS when you file your income taxes each year. Are you curious about how the IRS will know if you don’t have health insurance?
Businesses and health insurance companies will report the social security numbers of their members with health insurance. So if your social security doesn’t show up, you don’t have health insurance.
During 2014, the mandate penalty for individuals and families will be 1% of your Modified Adjusted Gross Income (MAGI), or $95 for an individual and $285 for a family, whichever is greater. Media outlets typically quote the $95 mandate penalty, even though the majority of people will pay 1% instead.
For businesses with 50+ employees, the mandate and penalty have been postponed until 2015. At that point, employers with 50 or more full-time employees will be required to offer affordable health benefits to their employees and their families. If not, then the business will have to pay a tax called the Employer Shared Responsibility Payment (ESRP). The ESRP will be either $2,000 or $3,000 per employee that gets covered with a subsidy.
For more details about the mandate, and examples showing how to calculate the mandate, click here.
Now that you have some idea what the mandates are and how they work, let’s move on to the next part of Obamacare.
We have to buy coverage starting in 2014, but where are we going to buy this coverage? The Obamacare bill created exchanges where you can comparison shop between plans to find the best one for your needs.
How are these health care exchanges going to work? And for that matter, what is an Exchange?
What Is A Health Care Reform Exchange?
The Obamacare health exchanges were created to simplify the process of shopping for health plans. Congress believed that the current process of getting quotes online and comparing plans was too complicated. So they decided to create a brand new marketplace and limit the choices to just the approved health care reform plans.
In California, the state decided to create its own exchange for individual and family plans called “Covered CA,” and another to provide group health plans for businesses called the “Small Business Health Options Program (SHOP)”. The state is spending $910 million to create these brand new exchanges.
The primary purpose of the Covered CA exchange is to enable people that qualify for subsidies to get lower-cost coverage. The only way to get a subsidy is to sign up for a plan using the exchange. If you get coverage outside of the exchange, you won’t get a subsidy, but you will find additional plans to choose from.
Another thing to be aware of is that most California carriers will only offer policies with a limited provider network inside the exchange. If you have a doctor you want to keep, you may not be able to use the Covered CA plans, and will have to shop outside the exchange to get a policy with the full carrier network.
For more details about how the Covered CA and SHOP exchanges work and how to use them, click here.
Okay, so inside the California exchange there will only be a small set of health plans that the carriers will be offering. What are these plans? What benefits do they offer? How much will they cost?
What Are The New Obamacare Health Plans?
While crafting the Affordable Care Act, legislators decided that every plan provided by health care reform would need to be more full featured than the majority of plans available prior to the start of the Affordable Care Act. As a result, each of the plans offered in 2014 must provide at least the 10 Essential Health Benefits:
- Ambulatory Patient Services
- Emergency Services
- Maternity and Newborn Care
- Mental Health and Substance Use Disorder Services, including behavioral health treatment
- Prescription Drugs
- Rehabilitative and Habilitative Services and Devices
- Laboratory Services
- Preventive and Wellness Services and Chronic Disease Management
- Pediatric Services, including oral and vision care
Here in California, the state politicians decided to add even more benefits, so all the California plans will also provide coverage for acupuncture.
There will be 5 types of plans offered in the California exchange:
- Platinum – provides 90% actuarial value
- Gold – provides 80% actuarial value
- Silver – provides 70% actuarial value
- Bronze – provides 60% actuarial value
- Catastrophic – available for people age 30 and under
These are the health care reform Metal Plans.
Actuarial value means that the insurance will pay for that amount of the expected health care costs. For example, buying the Gold coverage means that your policy should cover 80% of all your medical expenses.
Each carrier that participates in the California exchange will offer these plans. Therefore, on the exchange, the plans will be standardized and offer identical benefits. The only difference between the plans will be the provider network and price.
Off the exchange, the insurance companies have more flexibility and are allowed to “tweak” their offerings to meet the actuarial value (i.e. for Silver they can offer a policy that provides an actuarial value between 68 – 72%). So outside the exchange, not all Silver plans will be identical.
For more details about the health care reform plans, what the benefits look like, and the best use of each metal type, click here.
At this point you know there is a penalty next year if you don’t get coverage. You know that there will be 5 plans offered in the Covered CA exchange and more outside the exchange. And you know that the exchanges are set up to provide a shopping place for people who qualify for subsidies.
Who qualifies for a subsidy? How much are the subsidies? In the next section we’ll explore these details.
What Is The Health Care Reform Subsidy?
The Obamacare subsidy is a tax-credit that will be used to reduce the monthly premium cost of the health care reform metal policies. To qualify for a subsidy, your income must be less than 4 times the federal poverty level.
If you are single, then as long as your modified adjusted gross income (MAGI) is less than $44,280, you could qualify for a subsidy. For a California family of 4, as long as your MAGI is less than $92,400, then you too could qualify for a subsidy.
These subsidies will reduce the monthly premiums you pay for your health coverage. At tax time in 2015, you and the IRS will verify that the MAGI number you used to qualify for a subsidy was valid. If your actual MAGI on your 2014 tax return was higher than you expected, then you will be penalized and have to pay back part or all of the subsidy you received.
Knowing how to predict your income during 2014, and correctly claiming a subsidy is important. For more details about how to determine your eligibility, tables showing the MAGI income levels, and how to claim a subsidy, click here.
You now have a better understanding of what Obamacare is, what the “metal” policies are, what the penalty is for not having coverage, and how to determine if you qualify for a subsidy. All of this will take effect on January 1st, 2014; so how will the transition from today to 2014 take place?
How will you transition from the policy to have today, to the new Obamacare policies in 2014? Will you need to do anything? What if you currently don’t have health insurance?
We’ll answer those questions in this next section.
What Is The Health Care Reform Initial Open Enrollment Period?
The initial open enrollment period for Obamacare will start on October 1st, 2013, and end on March 31st, 2014. For a total of 6 months you will have the ability to enroll in Obamacare.
This 6-month health care reform initial open enrollment period will happen only once. Next fall, in 2014, the annual open enrollment period will be October 15th to December 7th.
This first enrollment period is primarily for people that don’t have health insurance, and for people that have individual or family health insurance that started after March 23 of 2010.
If you are uninsured, you will be able to shop for a policy during the Oct-Mar time-frame. During this period you can choose between policies offered in the California exchange (if you qualify for a subsidy), and policies offered outside the exchange. When you enroll to get a policy, the policy will take effect on January 1st, 2014.
For individuals and families that currently have coverage, your current plan will be mapped into one of the new health care reform metal policies. Your existing coverage will end on December 31, 2013, and your new Obamacare metal policy will start on January 1st, 2014. You will then have until the end of March 2014 to decide if you want to stay in the mapped policy, or if you want to move to another metal policy. You will be able to change your plan multiple times, but the last change before the end of March will be the plan you have for the rest of 2014.
Once the Obamacare initial open enrollment period ends, on March 31st, 2014, you will no longer be able to sign up unless you have a qualifying event. Let me repeat that one more time because this is very important. AFTER March 31, 2014, IF YOU DON’T HAVE INSURANCE YOU WILL NOT BE ABLE TO ENROLL.
You will be forced to wait until the next annual enrollment period in October of 2014.
For more details about the initial open enrollment period, along with a description of the qualifying events, and the timelines for this transition period, click here.
So there you have it, Health Care Reform in a nutshell. There are many more details about Obamacare, and we will be adding more information on a regular basis. If there is something specific you would like to know, put it in a comment below, and we’ll get the information to you quickly, or call us and we’ll help you out.
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