Deciphering the Affordable Care Act - Part 2
by Bob Williams
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The Patient Protection and Affordable Care Act has two major areas that we’re exploring: health insurance coverage for individuals and families; and health insurance plans to be offered through the workplace.
If you’re an employer, understand that small businesses are exempt from the requirements and penalties. Small employers are defined as any employer with less than 50 full-time and full-time equivalent employees. Full-time employees are those who work an average of 30 or more hours a week. Employers are required to offer full-time employees (and their dependents) insurance; part-time employees are used in the calculation of “full-time equivalent” employees, but employers are not required to offer part-time employees insurance.
The legislation requires employers with 50 or more full-time workers to offer health insurance. That coverage should, according the legislation, cover at least 60 percent of medical costs, and premiums should be no more than 9.5 percent of the worker's total wages. It should be noted, however, that this provision has been delayed by the U.S. Treasury Department until 2014, to give employers more time to comply with the record-keeping provisions – or to come up with alternate methods.
If the company fails to offer health care coverage, it's fined. If the company offers health care coverage, but it doesn’t meet the plan’s basic requirements of coverage and affordability, it’s fined on a per-affected-employee basis.
Employers with 200 or more full-time employees will be required to automatically enroll employees into the health insurance plan offered by the employer. Their employee may elect to opt out of coverage.
Put a Carrot on That Stick
Generally, the legislation installs a system of phased-in tax credits for employers who offer health insurance coverage to their workers. For example, small employers – with 25 employees or less, and average annual wages of less than $50,000 – will receive a tax credit if they purchase health insurance for employees.
That tax credit starts at 35 percent of the employer’s contribution to the employee’s health care coverage premium, and escalates to as much as 50 percent in Phase II.
Shrinking the Health-Insurance Cracks
The legislation installs a system of premium credits and cost-sharing subsidies for individuals and families who meet income limits.
Generally, full-time workers who are offered health care coverage by their employer are not eligible for premium credits. However, if the employer’s plan does not have an actuarial value (the percentage of total average costs for covered benefits that the plan will cover) of at least 60 percent, or the employee’s share of the premium exceeds 9.5 percent of their income, then the employee is eligible for premium credits.
Legal immigrants, barred from enrolling in Medicaid during their first five years in the U.S., will be eligible for premium credits.
As we mentioned in our last visit, the plan establishes four levels of coverage (Bronze, Silver, Gold and Platinum), increasing in cost and actuarial value; that is, the higher the cost, the more they cover. Bronze covers the least; Platinum the most.
Health Insurance Power-Ups
Eligible families and individuals can use the premium credits to purchase insurance through the Exchanges. The credits will be set on a sliding scale, depending on percentage of income.
We won’t bore you with the bucket of numbers, but suffice to say that if your individual or family income is up to 133 percent of that Federal Poverty Level we talked about last time, your premium for health insurance can’t be any higher than 2 percent of your total income. Upward from there is a sliding scale of up to 400 percent of the FPL, where premiums can’t be higher than 9.5 percent of your total income.
Cost-sharing subsidies will be available to reduce the amount the eligible individual or family pays for covered expenses, and has the effect of increasing the value of the basic plan. It all depends on your income level; those at or slightly above the poverty level can get the biggest increase in effectiveness with a subsidy. Those with higher incomes can get subsidies, but won’t see the same boost in effectiveness. The logic: those with higher incomes can afford better care.
When applying for premium credits, applicants must provide verification of both citizenship status and income in order to determine eligibility.
That’s our ACA-in-a-Nutshell. There’s LOTS more in this legislation that we – and most probably, you – don’t have time to examine just now. But we hope we’ve given you an idea of what’s coming down the road.
Oh, and don’t worry. We’ll always be there to keep you safe.
We would like to thank the Henry J. Kaiser Family Foundation for its work in this area.
Summary of the Affordable Care Act, The Henry J. Kaiser Family Foundation, April 23, 2013
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