Health Care reform: Big changes are coming
Most Americans have been hearing about the new health care reform law, the Patient Protection and Affordable Care Act (PPACA), for several years now, but many have seen very little change despite all the discussion. However, big changes are coming, and significant portions of the new law will take effect on January 1, 2014. In preparation, the federal government and private health insurers soon will begin announcing plans for implementing these changes. With thousands of pages of new regulations, it can all be very confusing. Arkansas Blue Cross and Blue Shield staff members are working hard every day to be prepared to help our members navigate the new marketplace. When the time comes, you can count on Arkansas Blue Cross to help you understand how the new law will affect you and to help you be aware of any decisions you need to make around your health insurance coverage.
Will your health plan be affected?
For many of our members, the new health care law will not change their health coverage in significant ways. For example, there are no provisions of the law taking effect in 2014 that impact our Medicare plans. Many of our large employers already have made the coverage changes the law requires and will be making no further adjustments to their benefits. (However, new taxes and fees may lead to an increase in cost.) The members who likely will be most aware of the changes are those who buy insurance for themselves and their families (either directly from Arkansas Blue Cross or through an agent) and those who are insured through employers with fewer than 50 full-time employees. We will be reaching out to these members – either directly or through their agent – beginning this summer to make them aware of the new rules and provide them with new choices where appropriate.
What do you need to know today?
People (or businesses) who had a policy in place prior to the passage of the health care reform law in March 2010, and – in the case of group – have not made certain changes to their plans, have "grandfathered coverage." That means that if you like the plan you have, you can keep it and you do not have to make the changes required of health plans purchased after that time. For many of our members, keeping their "grandfathered" health plan will be the most affordable option after the new rules are in place. Others will find new coverage to be more affordable and will have the opportunity to change. Until all the regulations that define the law are issued, no one can tell you for sure what the best course of action will be. But we do know one thing – if you lose your grandfathered coverage, you cannot get it back. So the most important thing for you to know today is that preserving your grandfathered coverage until the new law is completely defined is the best way to ensure you have affordable options.
Will you get an advance premium tax credit?
Many Americans who purchase their insurance coverage through a health insurance marketplace will qualify for advance premium tax credits, often called subsidies, beginning in January 2014. These advance premium tax credits are paid monthly to the insurance company chosen by the policyholder and help cover the cost of the premium for the health plan the individual or family purchases. In order to receive an advance premium tax credit, you must meet certain income requirements and not have access to affordable coverage through your employer. (It is important to note that the law determines what "affordable" employer coverage is and that may not always seem "affordable" to consumers.)
The amount of any advance premium tax credit you might be entitled to is based on your household income, your family size and the cost of certain government-approved health insurance plans (benchmark plans). For example, a family of four with a household income of $47,100 annually would be required to pay 6.3 percent of their household income for health insurance. The advance premium tax credit would cover the difference between the 6.3 percent and the cost of the benchmark plan. A single individual earning $34,470 per year would be required to pay 9.5 percent of his annual income and the difference between the 9.5 percent and the cost of the benchmark health plan would be covered by the advance premium tax credit.
The benchmark plan is only used to calculate the amount of the advance premium tax credit. If you are entitled to an advance premium tax credit, you can use it toward the purchase of any government-approved plan. In this way, some Arkansans will be eligible for free coverage. Their advance premium tax credit will be calculated based on the cost of the benchmark plan, and they can apply those dollars to a plan with more limited coverage and a lower monthly premium.
How do you find out if you are eligible?
Beginning this October, Arkansans (and all Americans) can visit new online "health insurance marketplaces" (also known as exchanges) being established by the state and/or federal government. Arkansas' health insurance marketplace will be run by the federal government in partnership with the state. These health insurance marketplaces allow Americans to apply for advance premium tax credits and to shop for health insurance. In addition to the Web site, Arkansans will have access to assistance by phone and in person to help with the process.
Individuals (not eligible for Medicare), families and small businesses can all shop for coverage online through the health insurance marketplace. The health plans available through the marketplace are all offered by private insurance companies, like Arkansas Blue Cross, that have decided to sell policies through the marketplace and have satisfied all necessary state and federal requirements. If you are eligible for an advance premium tax credit, you must purchase a plan through the marketplace in order to receive the assistance. By applying through the marketplace, you can determine if you will receive an advance premium tax credit and the amount of the tax credit you are entitled to. Then, you can review the health plans offered on the Web site and choose the one that best meets your needs and budget. After you have made your choice, you can enroll for coverage through the marketplace as well. Any portion of the premium you owe you will pay directly to the insurance company you have selected. The marketplace is responsible for paying the insurance company any advance premium tax credit on your behalf.
The amount of any advance premium tax credit you may be entitled to is based on your income for the previous calendar year as reported on your income tax return. If your income is actually higher for the current year than for the previous year, you may have to repay part of the advance premium tax credit. If your income is lower than anticipated, you may be entitled to additional money in the form of a tax refund.
What kinds of health plans can you buy on the health insurance marketplace?
Whether the health plans are sold on or off the health insurance marketplace, there are a number of new rules governing the medical services that health plans must cover and the way in which premiums must be calculated. These rules take affect on January 1, 2014, and apply to almost all health plans sold after March 2010. (Health plans offered by larger employers are generally "self-funded plans" and do not have to comply with all the new rules. Medicare plans also are excluded from these provisions.)
After January 2014, all new health plans must cover certain medical services that the law describes as "essential health benefits." These services must be part of every non-grandfathered plan. For example, Arkansas Blue Cross offers maternity coverage as an optional benefit for our members who purchase their own insurance rather than getting coverage through their employer. Those who don't want to pay for maternity coverage simply do not add that benefit. After 2014, all health plans must include coverage for maternity services. Although many of these medical services already were covered by health plans, adding additional coverage requirements and new rules around out-of-pocket costs will make these plans more expensive. New rules around how premiums must be calculated also will make health insurance more expensive for many Arkansans. For example, young people will pay more than they have in the past and older people will pay less. Because health status can no longer be considered, those with health conditions may find that insurance is less expensive for them, while those who are healthy will likely pay more. And several new taxes, which were put in place to cover the cost of the new health reform law, will increase the cost of coverage for most everyone.
Health plans sold both on and off the marketplace will be required to meet certain "actuarial value" rules. In other words, there will be "bronze" health plans which are designed to cover 60 percent of the cost of medical services an individual is likely to receive (a 60 percent actuarial value plan), "silver" plans that cover 70 percent, "gold" plans that cover 80 percent and "platinum" plans that cover 90 percent.
Many health plans sold after March 2010 are required by law to comply with these new regulations around what must be covered and how premiums are to be calculated. These health plans are called "qualified health plans" because they meet all the new federal requirements. Beginning in 2014, most Americans will be required to have a qualified health plan, a grandfathered health plan or pay a tax or penalty.
Who pays the penalty?
Under the health care reform law, most Americans are required to purchase qualified health insurance or pay a tax or penalty. This portion of the law is often called the "individual mandate." The penalty for not having coverage is:
2014 — $95 per person or 1 percent of adjusted gross income (whichever is greater)
2015 — $325 per person or 2 percent
2016 — $695 per person or 2.5 percent
Remember that grandfathered plans, even if they do not meet all the requirements necessary to be "qualified," satisfy the individual coverage mandate and allow you to avoid the penalty. The penalty is collected by the IRS from any tax refund due.
You are exempt from the penalty if:
- You are between jobs and without insurance for three months or less
- You have religious objections
- You are an undocumented immigrant
- You are in jail
- You are an Alaska Native or a member of an American Indian tribe
What can you expect from Arkansas Blue Cross?
If your health plan is impacted by the changes in 2014, we will be reaching out to you. We have spent the past two years working to understand the new law, how it will affect each of you, our valued members, and developing plans for guiding you through the transition. In October, Americans will have their first opportunity to visit the new health insurance marketplaces. Prior to that time, we'll be asking many of our members to contact us for a health insurance review. During that call or visit, we will work with you to help you understand your choices and assist you in selecting the plan that best fits your budget. Until then, be sure to maintain any grandfathered coverage you have in case that is the best option. For more than 60 years, Arkansans have trusted Arkansas Blue Cross to provide them affordable medical coverage. And some things never change.