Q. The Affordable Care Act has been upheld by the Supreme Court. Now what?
A. The law was ruled constitutional and implementation will continue to move forward. Beginning in 2014, states will set up health insurance Exchanges where people can buy policies. Rates will be competitive and consumers will easily be able to compare benefits and prices. Private insurers who participate will have to offer policies to anyone who applies, including those with pre-existing conditions. Everyone will be required to have health insurance whether they are covered through their employer, through Medicare or Medicaid, or by purchasing coverage through an Exchange.
Q. What’s a Health Insurance Exchange?
A. Each state will operate a health insurance Exchange, a virtual marketplace where individuals and small businesses will be able to buy comprehensive health plans at a variety of price points (imagine Travelocity or Amazon for consumers). California is developing its insurance Exchange and it will be prepared to offer a comprehensive list of plans before 2014. Exchanges are modeled on the Federal Employees Health Plan in which Members of Congress currently participate.
Beginning in 2014, Members of Congress will also purchase their plans through the new Exchanges.
Q. The Supreme Court also ruled on the “Medicaid expansion.” What does this mean?
A. The Medicaid program (called Medi-Cal in California) was established in 1965, as a way to insure the lowest-income Americans. It is funded by the states and the federal government, with a 50-50 share of costs. Today the program covers individuals and families living below the poverty level.
The Affordable Care Act expands Medicaid to cover those earning 133 percent of the poverty level or less ($40,773 for a family of four in 2012). The Supreme Court ruled that should states choose not to participate in the new law, they can still receive funding for their original Medicaid program.
Q. I’m unemployed and can’t afford health insurance. What does this ruling mean for me?
A. If you qualify for Medicaid, there are no costs to enroll. In 2012, you qualify if you earn $30,657 or less for a family of four. Families who make between 100 and 400 percent of the federal poverty level — or up to $92,200 for a family of four in 2012 — will be eligible for tax credits for insurance plans that are purchased through the Exchanges.
Q. My employer already provides coverage for me and my family and I like my plan. Do I need to do anything differently?
A. No. You just keep the coverage you have.
Q. I just graduated from college and don’t have a job yet. How will I get insurance?
A. Adult children can now remain on their parents’ insurance policy and be covered until they turn 26 years old.
Q. I’m uninsured now. When am I required to get insurance, and what happens if I don’t buy health insurance?
A. Beginning in January, 2014, all Americans will be required to have health insurance. We will also be required to indicate on tax returns whether or not we’re insured. If anyone chooses not to purchase insurance, they will be subject to a penalty.
The penalty is $95 per person in 2014 (or 1% of taxable income, whichever is greater); $325 in 2015 (or 2%); and $695 in 2016 (or 2.5%). Thereafter, the mandate is indexed to inflation, not to exceed the average cost of the plans in the Exchange.
Q. Why is there a penalty in the law?
A.The law is grounded on the principle of individual responsibility. Everyone will need medical care at some point in their lifetime. Requiring health insurance means that no one is “free riding” by being uninsured. Uncompensated care is one of the major contributors to rising healthcare costs. Unpaid medical bills are either shifted to the government (taxpayers), or shifted to those who do have insurance, which causes premiums to rise.
Q. I’m covered by Medicare. What does the law mean for me?
A. Your Medicare benefits will continue and they will improve. The law shrinks the Medicare drug coverage gap known as the ‘donut hole’ by requiring pharmaceutical companies to give a 50 percent discount on brand-name drugs. The ‘donut hole’ will eventually be closed entirely by 2020. The law also provides free coverage for key preventive health services and strengthens the solvency of the Medicare Trust Fund.
Q. I own a small business. How will the law affect me and my employees?
A. Businesses with fewer than 50 employees are exempt from penalties for not covering workers. Small businesses with fewer than 25 employees and with average wages of less than $50,000, are eligible for tax credits to help cover their workers. Small businesses will also be able to buy coverage through the Exchanges.
Effective March 2010, the tax credit covers up to 35 percent of the premiums a small business pays to cover its workers. In 2014, the rate will increase to 50 percent. Click here to find out if your business qualifies for the tax credit.
Q. Isn’t insuring all these people expensive? How can we afford this?
A. The Affordable Care Act is fully paid for. The nonpartisan Congressional Budget Office estimates the law will reduce the deficit by $143 billion over the next ten years, and by $1.2 trillion in the following decade.
Approximately half the cost of the law is paid for by eliminating fraud and inefficiencies in Medicare and Medicaid. The other half of the cost is paid for by imposing fees on certain healthcare industries that will benefit from 32 million more insured Americans; closing tax loopholes; and a tax paid by the top 2 percent of Americans (see next question).
Q. Will I have to pay more taxes under the Affordable Care Act?
A. Beginning next year, the law increases the Medicare tax by 0.9 percent on earnings over $200,000 for individual taxpayers, and $250,000 for married couples filing jointly. Under current law, employers and employees each pay a payroll tax of 1.45% to finance Medicare Hospital Insurance (Part A). The hospital insurance portion of the payroll tax will increase from 1.45% to 2.35% for wage income over the threshold amounts.
Example: a married couple earning $300,000 would go from paying $4,350 annually to paying $4,800, an additional $450.
The law also imposes a 3.8 percent tax on unearned income for high-income households ($200,000 for individual taxpayers and $250,000 for married couples filing jointly) or the amount that the modified adjusted gross income (MAGI) exceeds $200,000 for singles and $250,000 for those filing jointly, whichever is less.
Example: If the unearned income is $15,000, a 3.8% tax on unearned income is $570. If the income for those filing jointly is $275,000, 3.8% of $250,000 is $950. So in this example, they would pay the lesser amount of $570.
Important Things to Remember:
- If you have health insurance coverage today and are happy with it, you can keep it.
- If you do not have insurance today and are low income, the law ensures you will receive health insurance and will be able to afford it.
- If you can afford health insurance but choose not to purchase it, you will be required to pay a penalty so that the insured will not have to subsidize those who do not accept personal responsibility for their bills.
- The law ensures that health insurance companies cannot discriminate against anyone with a pre-existing condition.
- Lifetime insurance caps in health insurance policies have been eliminated.
- Health insurance companies can no longer drop customers because they become ill.
- Health insurance companies can no longer charge women higher premium rates than men.
- Health insurance companies are required to spend 80% of premiums on healthcare, not on bonuses and advertising. Should an insurer not meet the 80% level, their customers will receive a refund.