The new health reform law is the most far-reaching health legislation since the creation of the Medicare and Medicaid programs.
The following is a look at the impact of the law, which will extend insurance coverage to 32 million additional Americans by 2019, but which will also have an effect on almost every citizen.
Here are some commonly-asked questions about how you might be affected:
Q: I don’t have health insurance. Will I have to get it, and what happens if I don’t?
A: Under the legislation, most Americans will have to have insurance by 2014 or pay a penalty. The penalty would start at $95, or up to 1 percent of income, whichever is greater, and rise to $695, or 2.5 percent of income, by 2016. This is the individual limit; families have a limit of $2,085 or 2.5 percent of household income, whichever is greater. Some people can be exempted from the insurance requirement, called an individual mandate, because of financial hardship or religious beliefs or if they are American Indians, for example.
Q: I already have insurance through my job. Is this plan going to cost me more?
No, if you have coverage you already like and you see providers you like, nothing should change for you. Premium prices should not change, and in fact, there are subsidies for people who struggle to pay their premiums in Massachusetts that will be increased under federal reform.
Your existing health premiums, your doctor and your hospital will not be affected by this law. But that said, if your employer decides to go with a different insurer or HMO, or decides to offer a more restricted network at a lower premium or a wider network at a higher premium, you might be forced to change doctors or hospitals.
Q: I’m a small business owner; Do I now have to buy insurance for all my employees like they require in Massachusetts- what’s the difference between the state plan and the federal plan?
There’s really good news for small business owners. We know they struggle to pay for health care coverage for their employees and we know they want to be able provide health insurance for their employees. Under the federal bill, if you’re a small employer with 50 or fewer employees, you will qualify for a 35% tax credit on the money that you spend to pay for people’s health benefits.
If you’re a business in Massachusetts with 11 or more workers and you don’t provide health insurance, you have to pay an assessment of little under $300 a year or $25 dollars a month… The federal plan applies to employers with 50 or more workers, but the financial pressures are stronger.
Q: I want health insurance, but I can’t afford it. What do I do?
A: Depending on your income, you might be eligible for Medicaid, the state-federal program for the poor and disabled, which will be expanded sharply beginning in 2014. Low-income adults, including those without children, will be eligible, as long as their incomes didn’t exceed 133 percent of the federal poverty level, or $14,404 for individuals and $29,326 for a family of four, according to current poverty guidelines.
Q: What if I make too much for Medicaid but still can’t afford coverage?
A: You might be eligible for government subsidies to help you pay for private insurance that would be sold in the new state-based insurance marketplaces, called exchanges, slated to begin operation in 2014.
Premium subsidies will be available for individuals and families with incomes between 133 percent and 400 percent of the poverty level, or $14,404 to $43,320 for individuals and $29,326 to $88,200 for a family of four.
The subsidies will be on a sliding scale. For example, a family of four earning 150 percent of the poverty level, or $33,075 a year, will have to pay 4 percent of its income, or $1,323, on premiums. A family with income of 400 percent of the poverty level will have to pay 9.5 percent, or $8,379.
In addition, if your income is below 400 percent of the poverty level, your out-of-pocket health expenses will be limited.
Q: How will the legislation affect the kind of insurance I can buy? Will it make it easier for me to get coverage, even if I have health problems?
A: If you have a medical condition, the law will make it easier for you to get coverage; insurers will be barred from rejecting applicants based on health status once the exchanges are operating in 2014.
In the meantime, the law will create a temporary high-risk insurance pool for people with medical problems who have been rejected by insurers and have been uninsured at least six months. This will occur this year.
Starting later this year, insurers can no longer exclude coverage for specific medical problems for children with pre-existing conditions nor deny coverage to children with pre-existing illnesses.
Insurers later this year will also be barred from setting lifetime coverage limits for adults and kids. In 2014, annual limits on coverage will be banned.
New policies sold on the exchanges will be required to cover a range of benefits, including hospitalizations, doctor visits, prescription drugs, maternity care and certain preventive tests.
Q: How will the legislation affect young adults?
A: If you’re an adult younger than 26, you’ll be able to stay on your parent’s insurance coverage as long as you are not offered health coverage at work. This provision officially takes effect in September, but insurers may not have to comply until the beginning of a new health plan year – which often happens in January.
In addition, people in their 20s will be given the option starting in 2014 of buying a “catastrophic” plan that will have lower premiums. The coverage will largely only kick in after the individual has $6,000 in out-of-pocket expenses
Q: I own a small business. Will I have to buy insurance for my workers? What help can I get?
A: It depends on the size of your firm. Companies with fewer than 50 workers won’t face any penalties if they don’t didn’t offer insurance.
Companies can get tax credits to help buy insurance if they have 25 or fewer employees and a workforce with an average wage of up to $50,000. Tax credits of up to 35 percent of the cost of premiums will be available this year and will reach 50 percent in 2014. The full credits are for the smallest firms with low-wage workers; the subsidies shrink as companies’ workforces and average wages rise.
Firms with more than 50 employees that do not offer coverage will have to pay a fee of up to $2,000 per full-time employee if any of their workers get government-subsidized insurance coverage in the exchanges. The first 30 workers will be excluded from the assessment.
Q: I’m over 65. How will the legislation affect seniors?
A: The Medicare prescription-drug benefit will be improved substantially. This year, seniors who enter the Part D coverage gap, known as the “doughnut hole,” will get $250 to help pay for their medications.
Beyond that, drug company discounts on brand-name drugs and federal subsidies and discounts for all drugs will gradually reduce the gap, eliminating it by 2020. That means that seniors, who now pay 100 percent of their drug costs once they hit the doughnut hole, will pay 25 percent. Beginning in 2011, drug companies will be required to give a 50 percent discount on brand-name drugs for prescriptions filled in the doughnut hole.
And, as under current law, once seniors spend a certain amount on medications, they will get “catastrophic” coverage and pay only 5 percent of the cost of their medications.
Meanwhile, government payments to Medicare Advantage, the private-plan part of Medicare, will be frozen starting in 2011, and cut in the following years. If you’re one of the 10 million enrollees, you could lose extra benefits that many of the plans offer, such as free eyeglasses, hearing aids and gym memberships. To cushion the blow to beneficiaries, the cuts to health plans in high-cost areas of the country such as New York City and South Florida — where seniors have enjoyed the richest benefits — will be phased in over as many as seven years.
Beginning this year, the law will make all Medicare preventive services, such as screenings for colon, prostate and breast cancer, free to beneficiaries.
Q: How much is all this going to cost? Will it increase my taxes?
A: The package is estimated to cost $938 billion over a decade. But because of higher taxes and fees and billions of dollars in Medicare payment cuts to providers, the package will narrow the federal budget deficit by $143 billion over 10 years, according to the Congressional Budget Office.
If you have a high income, you will face higher taxes. Starting in 2013, individuals with earnings over $200,000 and married couples earning more than $250,000 will pay a Medicare payroll tax of 2.35 percent, up from the current 1.45 percent. In addition, high-income taxpayers will face a 3.8 percent tax on unearned income such as dividends and interest over the threshold.
Starting in 2018, the law will also impose a 40 percent excise tax on the portion of most employer-sponsored health coverage (excluding dental and vision) that exceeds $10,200 a year for individuals and $27,500 for families. The tax is often referred to as a “Cadillac” tax.
The law also will raise the threshold for deducting unreimbursed medical expenses from 7.5 percent of adjusted gross income to 10 percent.
The law also will limit the amount of money you can put in a flexible spending account to pay medical expenses to $2,500 starting in 2013. Those using an indoor tanning salon will pay a 10 percent tax starting this year.
Q: Under the new law, do pre‐existing conditions no longer matter?
Effective September 23, 2010, insurance companies cannot limit coverage for children on individual or group policies with pre‐existing medical conditions. For adults with individual policies, this provision goes into effect in 2014.
Q: Are there annual or lifetime maximums on coverage under the new law?
Effective September 23, 2010, there are no lifetime maximum limits on coverage. In addition, there will be no annual limits on group plans. For individual plans, annual limits may be allowed based on what Health and Human Services deems reasonable. This information is not yet available.
Q:Under health care reform, what happens to rescission?
Effective September 23, 2010, rescissions will occur only in cases of customer fraud or intentional misrepresentation.
Q: Is it true that anyone who applies for coverage will be issued coverage?
Under the Guarantee Issue provision, effective in 2014, anyone who applies for coverage must be issued coverage.
Q: What will happen to my premiums?
A: That’s hard to predict and the subject of much debate. People who are sick might face lower premiums than otherwise because insurers won’t be permitted to charge sick people more; healthier people might pay more. Older people could still be charged more than younger people, but no more than three times as much.
The bigger question is what happens to rising medical costs, which drive up premiums. Even proponents acknowledge that efforts in the legislation to control health costs, such as a new board to oversee Medicare spending, won’t have much of an effect for several years.
Q: I have children in my 20s who can’t afford their own insurance. Does this new plan help them?
The national bill will extend health care benefits to young people up to the age of 26. We know that will bring peace of mind for both parents and young people who have not yet landed in the job market and been able to get their own health benefits.
The federal law has a provision similar to the one in Massachusetts. If a family has children under age 26, they can be covered under the family policy and this is an enormous benefit.
Q: What is the “Insurance Exchange”?
The insurance exchange will work in other states a little like the Massachusetts Insurance Connector works. They certify different insurance policies that can be purchased by small employers or individuals. The idea is each of the four different levels of insurance coverage would have different premiums but standard benefits.
The Insurance Exchange is built on some of the work we’ve already done here in Massachusetts. We have the Health Connector Authority which allows individuals and small businesses to go and competitively shop for their health insurance coverage. Exchanges will be available around the country.
Q: If I lose my job, can I keep my same insurance?
You can. There actually is a provision that will allow some assistance for maintaining your COBRA benefits. In Massachusetts, if you are somebody who has lost their job but wants to continue with the same insurance you have, you’ll receive a subsidy to help you pay for that COBRA coverage.
Q: Will it impact our taxes?
The Congressional Budget Office says the federal deficit drops by over $100 billion over the coming decade. For a small percentage of people who are highly compensated who make more than $200,000 a year, their Medicare taxes will go up less than one percent. For the rest of us, it will be the same.
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