The Patient Protection and Affordable Care Act, (the Act), nicknamed “Obamacare” by many was signed into law on March 23, 2010. Since the signing occurred so long ago, and would not take effect until what was then the distant future, many put it on the back burner. The majority of the provisions in this act take effect in two very short months, so it is time to bring the Act back into perspective and see how the new laws will impact you. On January 1, 2014 it is full steam ahead, so like it or not, here is what you need to know.
- The major purpose of the legislation is to ensure that all legal residents of the United States have health insurance, whether through a private insurance company or one of the newly set up state exchanges. There are a few minor exceptions, but basically everyone must have health insurance.
- The Act will create state managed American Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges that will allow individuals and employers with less than 100 employees to purchase health insurance. These exchanges will vary by state, the details of which can be found here.
- There are five levels of coverage that will be available through the exchanges that meet the minimum insurance requirements. The costs of these plans will vary by state, but the benefits will not. Those plan levels are as follows, listed by lowest cost to highest cost:
- Catastrophic – Least expensive, but only available to individuals up to 30 years of age.
- Bronze – 60% of benefit costs are covered, up to an out of pocket maximum of $5,950 for individuals and $11,900 for families.
- Silver – 70% of benefit costs are covered, up to an out of pocket maximum of $5,950 for individuals and $11,900 for families.
- Gold – 80% of benefit costs are covered, up to an out of pocket maximum of $5,950 for individuals and $11,900 for families.
- Platinum – 90% of benefit costs are covered, up to an out of pocket maximum of $5,950 for individuals and $11,900 for families.
Provisions for business owners:
- Employers with 50 or more full time equivalent employees must provide affordable health insurance to their employees or face paying a penalty. Affordable health insurance is defined as health insurance that costs less than 9.5% of an individual’s household income. There are many circumstances, however, where it could be significantly less expensive for the employer to pay the penalty than to provide affordable health insurance.
- Employers with fewer than 50 full time equivalent employees are not subject to any penalties and are not required to provide health insurance to their employees under the Act.
- Employers with fewer than 50 full time equivalent employees who make on average less than $25,000 per year may be eligible for credits of up to 50% of the amount paid to provide health insurance to their employees.
- Employers with more than 200 employees must automatically enroll their employees in health insurance plans. It is the employee’s option to opt out of this coverage.
Provisions for employees and individuals:
- A tax will be imposed on all individuals beginning in 2014 who do not have an acceptable level of health insurance. The tax will be phased in over three years and is calculated as the greater of the following, up to a maximum of $2,085 per year:
- For 2014 – $95, or 1% of household income
- For 2015 – $325, or 2% of household income
- For 2016 and beyond – $695, or 2.5% of household income, increased beginning in 2017 by a cost of living adjustment
- Effective January 1, 2013, all individual taxpayers making over $200,000 per year and married taxpayers making over $250,000 per year will be required to pay an additional tax of 3.8% on all unearned income from interest, dividends, annuities, royalties and rents which are not derived in the ordinary course of trade or business, excluding active S corporation or partnership income, and an additional Medicare tax of .9% on all earned income.
- For individuals and households making less than 400% of the federal poverty level, credits will be available to aid in the purchase of healthcare through the state exchanges.
These are only a few of the many provisions contained in the 900+ pages of the Act, many of which will impact the medical industry as a whole. However, these are the ones that most people will likely notice first, since they will create additional costs that Americans must pay for out of pocket. If you are interested in reading the Act, here it is in its entirety.