After more than three years of piecemeal implementation, the Affordable Care Act reaches an important new phase in 2014, when most of the law’s major provisions finally kick in.
For consumer advocates who’ve championed health care reform, the wait is over.
“Wednesday is not only the start of the New Year, it also ushers in a long-awaited era of affordable health coverage and care for families across America,” said Ron Pollack, executive director of Families USA, a consumer health advocacy organization. “At long last, much-needed help is on the way.”
Many of the biggest changes, like the health insurance marketplaces and subsidies to help consumers purchase coverage, debuted in 2013. But marketplace insurance policies don’t take effect until January, and the federal government won’t make subsidy payments to insurers until mid-January.
In addition to those new provisions, here are some of the major changes the health care law ushers in for 2014.
The individual mandate:
The signature provision of the Affordable Care Act requires most individuals and their dependents to have health insurance in 2014 or pay a penalty for noncompliance in 2015 when they file their 2014 taxes.
People who enroll for coverage no later than March 31, 2014, will avoid the penalty. The 2014 penalty is 1 percent of annual income, or $95 per person, whichever is greatest. The penalties increase each year and become 2.5 percent of income, or $695 per person, in 2016. Each uninsured child will draw a $47.50 penalty in 2014. It grows to $347.50 per child in 2016.
The penalty is the most unpopular provision of the law, but necessary to make it work as planned. That’s because it outlaws questionable insurer practices, like arbitrarily canceling policies, denying coverage to people with pre-existing conditions, and imposing annual and lifetime spending limits on medical benefits.
Those new consumer protections would drive up premiums because older, sicker people – who couldn’t previously get coverage and who are the most costly to insure – would be most likely to enroll in new coverage. Younger, healthier people – the cheapest to insure – would avoid enrolling, knowing they could wait until they became ill to purchase insurance.
By requiring all people to get coverage, the individual mandate discourages this behavior and promotes a mix of healthy and less healthy people to enroll in coverage. That diversity of new enrollees is designed to help keep premium costs in check.
People with limited incomes or other special circumstances can get exemptions from the coverage mandate. Exempt groups include: recognized religious sects that oppose insurance, undocumented immigrants, prison inmates, members of a federally recognized Indian tribe, and those with incomes too low to file a tax return.
An estimated 9 million Americans are expected to gain health insurance in 2014, when 25 states and the District of Columbia implement the expansion of Medicaid, the state-federal health insurance program for the poor and disabled, according to the Kaiser Family Foundation. The nonprofit group studies health care issues.
Under the new guidelines, non-elderly adults who earn up to 138 percent of the federal poverty level will qualify for Medicaid coverage. That’s about $15,900 for an individual in 2013, or nearly $32,500 for a family of four.
Most of the new enrollees are likely to be low-income childless adults, a group Medicaid has traditionally shunned. The rest are expected to be low-income parents who currently earn too much to qualify and poor people with disabilities who don’t meet requirements for Supplemental Security Income, a federal cash assistance program run by the Social Security Administration.
As a group, the new Medicaid enrollees are projected to be young, poor and mostly female, according to data from the Health Research Institute, operated by PricewaterhouseCoopers. About 74 percent of new enrollees will be white, according institute estimates. Blacks will make up about 18 percent, while the other 8 percent will be Asian, Native American or biracial.
The 9 million new enrollees will likely grow to 12 million in 2015 and 13 million by 2020, according to government estimates. The federal government will pay all medical costs for the new enrollees in 2014, 2015 and 2016, and no less than 90 percent of their costs thereafter.
Insurance market consumer protections:
The Affordable Care Act’s list of new consumer rights and protections apply mainly to plans in the individual and small group markets.
In 2014, the new rules guarantee access to individual and small-group coverage regardless of current or past health problems. The rules also require each plan to cover at least 60 percent of medical costs, limit the amount that older policyholders can be charged and outlaw annual and lifetime benefit-spending limits.
In addition, they no longer allow insurers to vary rates based on gender, occupation or medical claims history.
If a plan denies a claim, insurers have to tell the claimant why and how to dispute the decision.
In 2014, all individual and small-group plans must cover a list of “essential health benefits,” which includes substance abuse services, pediatric dental and vision care, mental health treatment, preventive and wellness care and maternity and newborn care.
Small business tax credit:
Employers with less than 25 full-time equivalent workers who earn an average of roughly $50,000 a year or less could qualify for a tax credit worth up to 50 percent of their employer contribution toward workers’ premium costs.
Only employers who pay at least half of their full-time employees’ premium costs are eligible for the credit, which is only available if coverage is obtained through the SHOP Marketplace, which stands for the Small Business Health Options Program.
In states using the HeathCare.gov federal marketplace, employers seeking the tax credit can only choose a plan online because the SHOP Marketplace isn’t functional.
After selecting a plan, those employers must fill out an application, mail it in and then enroll directly through their chosen insurer. Applicants must inform the insurer that they have filled out the application and are seeking the tax credit.
The credit is greatest for companies with less than 10 employees who earn an average of $25,000 or less.
Health insurance tax:
Beginning in 2014, health insurers will join medical device makers and drug companies as industries that must pay new taxes in exchange for the new revenue they’ll see as an estimated 25 million people enroll in private coverage over the next decade.
The premium tax on insurers is expected to raise $8 billion in 2014 and more than $100 billion over the next 10 years, according to estimates by the congressional Joint Committee on Taxation.
The money will help pay for the health care law’s expanded Medicaid coverage and financial assistance for people purchasing marketplace health coverage.
The joint committee has estimated the tax would cause premiums to increase between 2 percent and 2.5 percent as insurers pass the tax on to consumers. In 2016, it estimated the tax would add another $350 to $400 to the annual cost of coverage for a family of four.
A coalition of business groups backed by the U.S. Chamber of Commerce supports legislation by Reps. Charles Boustany, R-La., and Ami Bera, D-Calif., that would delay the tax for two years. The health insurance industry supports a full repeal of the tax.