Affordable Care Act: Are you covered?

08/26/2013 11:00 AM

10/01/2013 10:11 AM

Californians beginning Oct. 1 can start enrolling for health coverage next year on the new state insurance marketplace called Covered California.

The federal health care law becomes operational three months later on Jan. 1. That’s when most people must have health insurance or face a fine. Most of the roughly 31 million Californians with job-based, individual or government coverage probably have nothing to worry about. But if you’re unsure – or among the uninsured – we’ve prepared a guide to bring you up to speed.

Individual mandate

Starting in 2014, the Affordable Care Act requires most individuals and their dependents to have health insurance or pay a penalty. Although a key factor in reducing the number of uninsured Americans, the mandate is the most unpopular part of the law. But it’s necessary to make the law’s insurance market reforms work properly. The ACA bars insurers in the individual and small-group markets from denying coverage to people with pre-existing health problems, charging higher premiums based on their health and, in 2015, placing annual and lifetime limits on covered benefits.

Without the individual mandate, these new consumer protections would cause sharper premium hikes because they would encourage older, sicker people to get coverage, while healthy people would wait until they get sick to buy insurance. The mandate is designed to discourage this behavior and promote a mix of healthy and less-healthy people to enroll for coverage. That diversity of new enrollees is designed to help keep premium costs in check.

Medicaid expansion

Hoping to reduce the ranks of nearly 49 million uninsured Americans – including more than 7 million in California – the new law allows states to expand the number of people eligible for Medicaid (Medi-Cal in California). That’s the state-federal health insurance program for the poor and disabled.

In California, lawmakers moved to expand coverage for the poor by 1 million recipients in 2014. Individuals with incomes less than $15,000 and families of four with income less than $31,180 will be eligible.

The federal government has pledged to pay all medical costs for the newly eligible Medicaid enrollees in 2014, 2015 and 2016 and no less than 90 percent of their costs thereafter. The June 2012 Supreme Court decision allows states to decide whether to participate in the Medicaid expansion.

As of July 1, 23 states and the District of Columbia are moving forward with expansion, 21 states are not and six others are still debating the issue, according to the nonpartisan Kaiser Family Foundation, which studies health care issues.

Insurance marketplaces

As part of broad changes to the way health insurance is bought and sold, the Affordable Care Act creates new online health insurance marketplaces where individual and small-group coverage can be purchased from qualified health plans. California’s marketplace launches in October with open enrollment for coverage in 2014.

Marketplace plans will be divided into four categories based on the portion of medical expenses they cover: Bronze plans cover 60 percent; silver plans cover 70 percent; gold plans cover 80 percent and platinum plans cover 90 percent. Plan members pay the remaining portion.

The marketplaces will also offer “catastrophic coverage” for people under age 30 and those aged 30 and over with low incomes who can’t get affordable insurance or who have a hardship exemption from the individual mandate.

Catastrophic plans protect against high medical costs from accidents or a major illness.

Small employers and their workers will also be able to purchase coverage through the marketplaces, using the Small Business Health Options Program.

Some small employers with less than 25 workers will be eligible for a tax credit worth up to 50 percent of their premium contribution.

Tax credits

The tax credits are structured to protect people from spending more than a set portion of their income on coverage. The amount of the tax credit depends on the applicant’s income and the cost of coverage. The tax credits could range from a few hundred dollars to more than $10,000. Low-income people will get larger tax credits than those with higher incomes. The amount of the tax credit is revealed after submitting an online application through Covered California. The money is sent directly to the applicant’s insurance company to be applied to the premiums.

Insurance market changes

The individual market has long been problematic for consumers. It’s known for high customer dissatisfaction and turnover, high coverage denial rates, lean benefits and premiums subject to frequent increases.

The new rules guarantee access to individual and small-group coverage regardless of current or past health problems. They also require each plan to cover at least 60 percent of medical costs, and in 2015, limit annual out-of-pocket costs, such as co-payments and deductibles. The new consumer protections also limit the amount that older plan members may be charged; outlaw annual benefit-spending limits; and no longer allow insurers to vary rates based on gender, occupation or medical claims history.

The law requires all individual and small-group health plans in 2014 to cover a list of “essential health benefits,” including substance abuse services, pediatric dental and vision care, mental health treatment and others.

Calculating costs

Covered California’s shop-and-compare tool lets individuals estimate what their health care expenses will be by answering a series of simple questions such as the number of people in a household, household income and ZIP code. The tool can be accessed at coveredca.com.

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