On June 28, 2012, the U.S. Supreme Court ruled the Affordable Care Act (ACA) as constitutional and it will be implemented as written – unless there is future legislative action that changes or rescinds the law.
The court did rule on a change of course for some provisions (primarily the expansion of Medicaid and the role the states will play) but the key components of the ACA remain intact. The major provisions of the law will be effective in 2014.
Everyone, with minor exceptions, will be required to be covered by a Qualified Health Plan (QHP) in 2014. Most of us will continue to be insured by an employer-sponsored plan. The premiums paid by the employer will continue to be tax deductible and those employer-paid premiums will continue to be not reported to the employees.
How will the law affect you, your family, your employer?
Noteworthy Provisions Already Implemented
Key Provisions Scheduled in the Future
- Pre-Existing Conditions. All group and individual health plans, including self-insured plans, now have to cover pre-existing conditions for children – up to age 19. Starting in 2014, insurance companies cannot deny coverage to anyone with a pre-existing condition.
- Prohibition of Coverage Limits. No carrier may impose a Lifetime Limit for any fully insured group, self-insured group, or individual plan. Annual limits will be allowed until January 1, 2012, but only on non-essential benefits, and after that, there will be no annual policy cap. (Note: non-essential benefits should be fully defined by the end of 2012.) The minimum mandated annual limit that every plan must provide in 2012 is $1.25 million in coverage. Note that a number of businesses (almost 1,500) did receive a waiver to this annual limit rule and can currently provide coverage with less than this limit. In 2014, the waivers go away and everyone that purchases or that is provided a QHP will have no dollar cap on coverage.
- Dependent Coverage to Age 26. All plans will now have to cover dependents up to age 26. Yes, this includes adult children that no longer attend college, those not living with their parents and even those adult children who are married (if married, this provision does not extend to the spouse or any children of the adult child). This provision only applies to plans that already offer dependent coverage and election to this provision does have some exceptions.
- Certain Mandated Preventive Care Services with No Cost Sharing. All group and individual health plans, including self-insured plans, will have to cover specific preventive care services with no cost sharing. They will also have to cover emergency services at the in-network level regardless of provider.
- In 2013, Increased Medicare Tax on High-Income Individuals. Raises the Medicare Part A (Hospital Insurance) on wages by 0.9 percent on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly. There would also be a 3.8 percent assessment on unearned income for these high-income taxpayers. The law defines unearned income as interest, dividends, capital gains, annuities, royalties and rents. Tax-exempt interest won’t be included, nor will income from qualified retirement accounts.
- Also in 2013, contributions to a Flexible Spending Account (FSA) for medical expenses will be limited to $2,500 per year, increasing annually by the cost of living.
- In 2014, a QHP will be required to be carried by all US citizens and legal residents. Exceptions do apply. There would be a phased-in tax penalty for those without coverage, starting at the greater of $95 annually or 1 percent of gross income, in 2014, and rising to the greater of $695 annually or 2.5 percent of gross income in 2016.
- In addition, in 2014, potential penalties on employers with 50 or more full-time workers (or “Large Employers” that do not provide a QHP to its employees. The penalty would equal $2,000 per worker, although the first 30 workers would not be counted. The penalty would only be assessed if any full-time employee (defined as working 30 or more hours per week) receives a federal subsidy to purchase a QHP. The subsidy is available if the income (individual or family) is below a certain federal poverty level (currently about $89,000 annually for a family of four). The QHP must be purchased through the state’s Health Insurance Exchange for the applicant to receive the premium subsidy. The definition goes further to include the possibility of a penalty to a Large Employer even if they do provide a QHP. This potential penalty would be $3,000 for every full-time employee that receives a premium subsidy through the Exchange. The penalties, calculations, definitions and exceptions are very complicated with many variables to consider.
The areas discussed above are a fraction of the law’s vast impact. In addition to the individuals, families, and business owners, the law will also greatly affect your state’s budget, health insurance companies, physicians, hospitals, and even nutritional content disclosure. Almost every aspect of daily life will have some brush with this law. Numerous websites can be helpful for additional information to understanding this complex law. A couple of very beneficial sites are: http://www.aetna.com/health-reform-connection/ and hhtp://healthreform.kff.org/.
It is safe to say the debate regarding the ACA’s merits will be a heated topic in the 2012 presidential and congressional elections. Regardless of the law’s ultimate fate, the landscape of health insurance for individuals, families, business owners, and health care providers and payors has changed substantially and will continue to do so.
Jerry Rinehart operates Rinehart and Associates and past president of Tallahassee Chapter of CLU and ChFC.