The Affordable Care Act (ACA) or Obamacare, includes numerous provisions that took effect between 2010 and 2020. Policies issued before 2010 are exempted by a grandfather clause from many of the changes to insurance standards, but they were affected by other provisions. Significant reforms, most of which took effect on January 1, 2014, include:
Guaranteed issue prohibits insurers from denying coverage to individuals due to pre-existing conditions, and a partial community rating requires insurers to offer the same premium price to all applicants of the same age and geographical location without regard to gender or most pre-existing conditions (excluding tobacco use).
Minimum standards for health insurance policies are established.
An individual mandate requires all individuals not covered by an employer sponsored health plan, Medicaid, Medicare or other public insurance programs (such as Tricare) to secure an approved private-insurance policy or pay a penalty, unless the applicable individual has a financial hardship or is a member of a recognized religious sect exempted by the Internal Revenue Service. The law includes subsidies to help people with low incomes comply with the mandate.
Health insurance exchanges operate as a new avenue by which individuals and small businesses in every state can compare policies and buy insurance (with a government subsidy if eligible). In the first year of operation, open enrollment on the exchanges ran from October 1, 2013 to March 31, 2014. The original purchase deadline date to be covered for January 1, 2014 was December 15, 2013, but the deadline was pushed back, first to December 23, 2013 and later to December 24, 2013. For plans starting in 2015, the proposed enrollment period is November 15, 2014 – February 15, 2015.
Low-income individuals and families whose incomes are between 100% and 400% of the federal poverty level will receive federal subsidies on a sliding scale if they purchase insurance via an exchange. Those from 133% to 150% of the poverty level will be subsidized such that their premium costs will be 3% to 4% of income. In 2013, the subsidy would apply for incomes up to $45,960 for an individual or $94,200 for a family of four; consumers can choose to receive their tax credits in advance, and the exchange will send the money directly to the insurer every month. Small businesses will be eligible for subsidies.
Medicaid eligibility expanded to include individuals and families with incomes up to 133% of the federal poverty level, including adults without disabilities and without dependent children. The law also provides for a 5% “income disregard”, making the effective income eligibility limit for Medicaid 138% of the poverty level. Furthermore, the State Children’s Health Insurance Program (CHIP) enrollment process is simplified. However, in National Federation of Independent Business v. Sebelius, the Supreme Court ruled that states may opt out of the Medicaid expansion, and several have done so.
Reforms to the Medicare payment system are meant to promote greater efficiency in the healthcare delivery system by restructuring Medicare reimbursements from fee-for-service to bundled payments. Under the new payment system, a single payment is paid to a hospital and a physician group for a defined episode of care (such as a hip replacement) rather than individual payments to individual service providers. In addition, the Medicare Part D coverage gap (commonly called the “donut hole”) will shrink incrementally, closing completely by January 1, 2020.
Businesses which employ 50 or more people but do not offer health insurance to their full-time employees will pay a tax penalty if the government has subsidized a full-time employee’s healthcare through tax deductions or other means. This is commonly known as the employer mandate. In July 2013, the Internal Revenue Service delayed enforcement of this provision for one year.