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Health Care Law Basics

What is the health care law?

The health care law—the Affordable Care Act—gives you more control over your health care by offering new ways to shop and pay for coverage with greater protections. It keeps in place today’s job-based insurance system and the Medicare health insurance program for people who are 65 and over and for some younger people with disabilities.

What is the individual mandate and why do we have it?

Beginning in January 2014, the health care law requires most Americans to have health coverage. The good news is that most people already have health coverage that meets the requirement, such as Medicare, Medicaid, TRICARE or veteran’s coverage, or a plan through an employer, or in some cases health coverage bought on one’s own. For those who need it, the law creates new ways to shop for coverage and more options to get financial help to pay for it. Under the law’s consumer protections, no one can be turned down for coverage because they have a pre-existing condition.

How will I know if my coverage is good enough to meet the requirement to have health coverage and avoid the penalty?

Most people already have health coverage that meets the requirement to have coverage and won’t have to pay a penalty. Medicare, Medicaid, TRICARE or veteran's coverage as well as coverage from an employer meet the requirement. Also, health coverage bought in the Health Insurance Marketplace or the Small Business Health Options Program (SHOP) will meet the requirement. Your health plan or employer will let you know if your coverage meets the requirement. You can find this information on the Summary of Benefits and Coverage.

Will I have to pay a penalty if I don’t have health coverage?

If you don’t have health coverage that meets the minimum requirements, you may have to pay a penalty. In 2014, for an individual, the penalty starts at $95 a year, or up to 1 percent of income, whichever is greater. The penalty will rise each year. The health care law says that certain people may not have to pay a penalty, including:

  • People for whom the regular payments (called premiums) are more than 8 percent of their income
  • People with income so low they don’t have to file taxes
  • People living in the United States illegally (undocumented immigrants)
  • People who have a gap in coverage of three months or less
  • People who are exempt because of their religious beliefs
  • American Indians and Alaska Natives
  • Americans living abroad for at least 1 year
  • People who have experienced a hardship (considered on a case-by-case basis)
  • People in prison

If you think you may be exempt from paying a penalty, you must apply for a waiver from your Health Insurance Marketplace.

What is the Health Insurance Marketplace?

The Health Insurance Marketplace is a new way to shop for health coverage. Through the marketplace, you can shop online and get help by phone or in person to find the plan that works for you and your family. The marketplace allows you to compare plans and costs on an “apples-to-apples” basis. You also can find out what kind of financial help you may be able to get to pay for premiums and copayments. For example, in 2013, an individual with a household income between about $11,500 and $46,000 or a family of four with a household income between about $23,600 and $94,200 would qualify for financial help. These are ballpark figures and will change every year. While people with very limited incomes will receive the greatest help, moderate-income families can often get help too. To learn more about the Health Insurance Marketplace, read The Health Care Law: More Choices, More Protections. To find the Health Insurance Marketplace in your state, visit www.HealthCare.gov or call 1-800-318-2596.

Does everyone have to buy their health coverage in the Health Insurance Marketplace?

The Health Insurance Marketplace is just for people who need to buy private individual health insurance. If you have insurance through Medicare or Medicaid, a military program or, in most cases, employer coverage, that coverage is separate from the marketplaces. If you need to buy private individual health insurance, you can generally still get coverage outside of the Health Insurance Marketplace. But financial help is only available for plans offered through the Health Insurance Marketplace. If you do need to buy coverage and want to find the Health Insurance Marketplace in your state, visit www.HealthCare.gov or call 1-800-318-2596.

How long do I have to enroll in a health plan?

If you need coverage for 2014, the Health Insurance Marketplace is open for you to shop through March 31, 2014. The marketplace open enrollment period for this year is longer to give you more time to get used to the new way to shop for coverage. If you want coverage that starts January 1, 2014, you have until December 23 to enroll and must pay your premium by December 31, 2013.

Can I buy coverage outside the Health Insurance Marketplace open enrollment period?

Generally, there is only one open enrollment period. But states can set more frequent enrollment periods, for example, allowing for two open enrollment periods each year. Also, health insurance companies can choose to sell their plans at times other than the open enrollment period. But in most circumstances, you will only be able to buy health coverage during the annual open enrollment period.

In certain circumstances, you may qualify for a “special enrollment period,” which will allow you to enroll in a plan at a time that is not the official open enrollment period. This could apply, for example, when you’ve experienced a change in your life, such as a birth or adoption of a child, a relocation out of the area or state, or a loss of another type of health coverage.

What is a “grandfathered” plan?

Grandfathered plans are health coverage plans that existed when the health care law was signed on March 23, 2010. The law allows grandfathered plans to continue to operate under many of the old insurance rules. Over time, grandfathered plans are likely to lose their status. If they do, the plans replacing them will follow all the rules of the law.

What is a medical loss ratio (MLR)?

The medical loss ratio (MLR) helps to make sure your monthly payments (premiums) go further in covering your health care. The MLR shows how much of a plan’s premium is spent on health care and quality improvement compared with the amount that is spent on administrative expenses, like marketing and profits. Health plans sold to individuals and small business employers must spend at least 80 cents of each premium dollar on health care and just 20 cents on administrative costs. Insurance sold to large employers (generally more than 50 employees) must spend at least 85 cents of every premium dollar on health care and just 15 cents on administrative costs.

How can I tell if my plan meets the medical loss ratio (MLR)?

Health plans must submit a report each year to the U.S. Department of Health and Human Services showing how much they spend on health care and other activities that improve care. You can find these reports at HealthCare.gov.

What happens if my insurer doesn’t meet the medical loss ratio (MLR)?

If a health insurer does not meet the medical loss ratio (MLR), they must give their consumers a rebate for the amount of premiums that were above the threshold. For example, if a plan was supposed to spend no more than 20 cents on the dollar for administrative costs, but actually spent 24 cents on the dollar, they would owe their consumers 4 cents on every premium dollar paid.

If you bought the coverage on your own, the health insurer owes you a rebate. If you have your coverage through your employer, the employer will get the rebate. In both cases, the rebate can be returned as a credit on your next year’s premium.

Understanding Your Health Coverage

How can I compare health plans?

Plans are offered in four different tiers, sometimes called “metal levels,” so it’s easier to make “apples-to-apples” comparisons among plans. The tiers—bronze, silver, gold and platinum—are based on how generous the plan is for the benefits and services covered. Bronze plans will have the lowest premiums, but the individual’s share of costs such as deductibles and copayments will be higher. Platinum plans will have the highest premiums, but fewer additional costs for consumers. The actuarial value is based on what an average group of consumers might pay under the plan, but your own costs may vary depending on how much care you need.

All health plans sold to individuals and small businesses will fit into one of these levels of coverage. This will make it easier to compare plans to find one that works for you and your family.  

Health plans seem confusing. Will they be explained better than before?

The health care law makes it easier for you to understand your health plan. As a result of the law, all insurers and employers will use a standard form to summarize the benefits and coverage offered under the plan. Known as the Summary of Benefits and Coverage (SBC), the new form includes important information about the coverage, such as the deductible, copayments, services not covered by the plan and whether people in the plan need a referral to see a specialist. It’s all presented in a way that makes it easier for consumers to make an “apples-to-apples” comparison of their coverage options.

The SBC must also include examples of the typical costs for two common medical conditions (managing diabetes and having a baby). Employers and insurers must make these summaries available when you shop for coverage, when you enroll in a plan or renew your coverage, or when there are significant changes to your benefits. You can also request a copy at any time. 

Does my health plan have to cover certain benefits?

Starting in 2014, all new plans sold to individuals and small employers must cover certain important health care services, known as essential health benefits (EHB). Each state has its own EHB, but all must cover the following:

  • Doctor’s office visits
  • Emergency room care
  • Hospital visits
  • Maternity and newborn care
  • Mental health and substance abuse treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care.

I have a pre-existing condition. Can I be charged more?

The health care law makes sure health plans can’t deny you coverage because of health problems you had before your insurance started (known as pre-existing conditions). They also can’t charge you more for your premiums if you get very sick.

How long can my child remain on my family health plan?

You can keep your children on your family health plan until they turn age 26, even if they don’t live at home, are married or attend school. If your health plan charges more for each child you cover, you may have to pay an additional amount to add your older child to your plan. It is important to know that not all employers have to offer a family plan. Check with your employer for the details about adding your adult child to your family plan.

Buying Health Coverage

I’m self-employed and want to buy coverage. Where should I go to buy my plan?

Most states consider self-employed people as individuals. That means you can shop for private individual health insurance on your own, through a broker or through the Health Insurance Marketplace. But financial help is only available with plans bought through the Health Insurance Marketplace.

States set the rules for what size company is considered a small business when it comes to buying health insurance. Small businesses are typically defined as companies employing from two to 50 people. They can go to the Small Business Health Options Program (SHOP) to buy coverage. To find out more, visit your Health Insurance Marketplace.

After I sign up for a particular plan, can I change my mind and sign up for a different plan instead?

If you decide you want to change plans after you’ve enrolled in one plan through the Health Insurance Marketplace, you can do so as long as the coverage hasn’t started (known as the “effective date”). Once your coverage begins, you’ll have to wait for the next open enrollment period to change plans.

In certain circumstances, you may be able to enroll in a plan at a time that is not the official open enrollment period. This could apply, for example, when you’ve experienced a change in your life, such as the birth or adoption of a child, a relocation out of the area or state, or a loss of another type of health coverage.

I am not a U.S. citizen. Can I buy health coverage through the Health Insurance Marketplace?

Only noncitizens living in the United States legally, sometimes referred to as lawfully present immigrants, can buy coverage through the Health Insurance Marketplace. They might also be able to get a premium tax credit if they qualify based on their income. Undocumented immigrants are not able to buy coverage in the Health Insurance Marketplace. 

Consumer Protections

What can I do if my health plan denies my claim for health benefits that I thought would be covered by the plan?

The health care law strengthens your right to file an appeal if your health plan will not pay for a medical service you received or won’t give you prior approval for a medical service you need. Before the health care law, your right to appeal your health plan’s decision, known as an internal appeal, varied greatly, depending on the state in which you lived. Also, most people in employer health plans didn’t have the right to request an outside review of their internal appeal. The law now offers you the opportunity to request a review of an internal appeal by an independent outside organization, known as a third party. This is called an external review. If your plan denies your claim for health benefits, they must provide you with information on the steps you can take to appeal that decision and how to get help doing it.

Is my employer required to provide me with health benefits?

In 2014, there is no requirement that employers provide health coverage for their workers. Beginning in 2015, large employers (those with 100 or more full-time equivalent employees) must provide affordable coverage, or pay a penalty. To be considered affordable, an employee’s share of the monthly payment (premium) can’t be more than 9.5 percent of their household income. While employers will be required to cover employees, they do not have to offer coverage for employees’ families. 

Starting in 2016, large employers will have to offer coverage for employees’ children. However, there is no requirement that the employer pay a portion of the monthly payment (premium) and there is no requirement that they offer coverage to employees’ spouses. Mid-sized employers (those with 50-99 full-time equivalent employees) have until 2016 to comply with the law.

Is there a limit on how much I have to pay out-of-pocket for my health care?

The health care law sets a limit on how much of a share of the costs you will have to pay for health care in the form of deductibles, copayments and coinsurance. The most you can pay out-of-pocket in 2014 is $6,350 for an individual plan and $12,700 for a family plan (the amount will rise slowly, year to year, with inflation). This does not include your monthly premiums. And, this limit only applies to costs you pay for care you receive from an in-network provider and for essential health benefits, which will probably be most health services covered in your plan, but not necessarily all of them.

Can my health plan limit how much they will pay toward my covered services?

No, health plans cannot put a dollar limit on how much they will pay for covered services you receive in a year (annual dollar limit) or over the total time you are enrolled in the plan (lifetime dollar limit). Previously, plans could limit the amount they would pay for covered services, for example, $100,000 in a year or $500,000 over the life of the policy. It’s important to know that health plans can still include other limits not tied to the cost of benefits. For example, your health plan may set a limit on the number of physical therapy visits it will cover.

Financial Help

Can I get financial help with the costs of my health coverage?

Some low- and moderate-income families can qualify for financial help to pay for their monthly payments premiums for a health plan bought through the Health Insurance Marketplace (but not for plans bought on your own, outside the marketplace). That help is provided through a premium tax credit, which will lower the amount of the premium you must pay. You can use the premium tax credit in a few ways. You can use some or all of it right away as a discount on your premium, so you owe less when you make your monthly payment. You also can choose to get a partial or full refund when you file your taxes the following year. The premium tax credits are based on a sliding scale, so that the greatest help is available to people with the lowest income. Use this Calculator, by the Kaiser Family Foundation, to get an estimate of the financial help you may qualify for if you buy coverage through the Health Insurance Marketplace.

If your income changes in the middle of the year—whether your income goes up or down—be sure to let your Health Insurance Marketplace know, in case your premium tax credit must be adjusted. If your income goes up and you don’t notify the Health Insurance Marketplace, you may owe more in taxes for that year.

If I have health coverage through my job, can I get financial help with the costs of my health coverage?

Most people who have health coverage through their employer are not eligible for premium tax credits in the Health Insurance Marketplace. In certain circumstances, you may be able to get a premium tax credit if your employer coverage is neither “affordable” nor “adequate,” as defined by the law, and you meet specific limited income levels. For example, in 2013, an individual with a household income between about $11,500 and $46,000 or a family of four with a household income between about $23,600 and $94,200 may be eligible for premium tax credits for coverage in the Health Insurance Marketplace. These are ballpark figures and will change each year. Check with your human resources department to learn more about your employer’s health plan or with your Health Insurance Marketplace to see if you quality for financial help. You can also use this Calculator, by the Kaiser Family Foundation, to get an estimate of the financial help you may qualify for if you buy coverage through the Health Insurance Marketplace.

I have retiree coverage from my former employer but it’s expensive. I’m not eligible for Medicare yet; will I be able to buy coverage in the Health Insurance Marketplace until then?

Once you become eligible for Medicare, you cannot get financial help for coverage in the Health Insurance Marketplace. Until then, you may be eligible for financial help in the Marketplace if your retiree coverage is neither “affordable” nor “adequate,” as defined by the law, and you meet specific limited income levels. However, it is important to know that if you decide to leave your retiree plan and enroll in coverage in the Health Insurance Marketplace, you may not be able to return to your employer plan. Before you make any changes, talk with your employer about how your coverage options may change now and in the future, when you’re eligible for Medicare.

Medicare and the Health Care Law

I have Medicare. Will I have to pay a penalty for not having health insurance?

Medicare is the federal health insurance program for people who are 65 or over and some younger people with disabilities. Your Medicare coverage meets the health care law requirement to have health coverage. So, you do not have to make any changes and will not have to pay a penalty.

I have Medicare. Do I have to buy additional coverage in the Health Insurance Marketplace so I don’t get a penalty?

If you have Medicare, you won’t have to pay a penalty because your Medicare coverage meets the requirement for having health insurance. You don’t have to make any changes. 

Will I be able to buy my Medigap supplemental insurance in the marketplace?

The Health Insurance Marketplace is not for people who have Medicare and its supplemental Medigap coverage. Medigap is not sold through the Health Insurance Marketplace. So, you will continue to shop for Medigap supplemental coverage as you always have. 

Will I have to go through the Health Insurance Marketplace if I want to get Medicare or if I want to make changes to my Medicare plan?

If you are new to Medicare or if you have Medicare and want to make changes, you do not go through the Health Insurance Marketplace. As before, you will continue to have an annual Medicare open enrollment period from October 15 to December 7, when you can make changes to your Medicare Advantage or Medicare Part D coverage. Medicare also allows you to change your plan—from a Medicare Advantage plan to Original Medicare, including Part D coverage—between January 1 and February 14 each year. To make changes during open enrollment, visit www.Medicare.gov.  

What is the Medicare doughnut hole?

Most Medicare Part D prescription drug plans have a coverage gap, also known as a doughnut hole. Before the health care law was passed, once your total spending on prescriptions reached a certain limit, you had to pay for all of your prescription drug costs on your own. After paying a certain amount on your own, your prescription drug plan would help pay for prescriptions again. Now, because of the health care law, the coverage gap is slowly closing. The gap will disappear in 2020. View our Health Care Law Timeline to see how much the doughnut hole closes each year. 

New Tax Rules

What happens if I don’t have insurance and have to pay a penalty?

The Internal Revenue Service will collect the penalty through your tax return. As of 2014, all plans and employers offering coverage must provide proof of coverage, which you should include with your tax filings. 

What is a Cadillac plan?

Cadillac plans are expensive health insurance plans offered by employers. These plans generally have high monthly payments (premiums) and low deductibles, and often cover even the most expensive treatments. Beginning in 2018, health insurance plans and employers will pay a 40-percent tax on these expensive plans. For example, if in 2018 premiums for employer health plans are more than $10,200 for individual coverage or $27,500 for family coverage, the insurer or employer will have to pay a 40-percent tax on the amount of the premium that is above this threshold amount. For example, if your individual coverage costs $12,200 a year, the insurer would owe a 40-percent tax on $2,000. The threshold amounts are higher for plans that have higher premiums because they cover early retirees (55 or older) who aren’t yet in Medicare, or workers in high-risk professions, or because there are more women or older workers in the plan.

Why does my W-2 from my employer include the cost of my health benefits?

The health care law requires employers to report the total cost of employer-sponsored health coverage on the W-2 forms they send to their employees each January. The amount is not taxable as income — that hasn’t changed. Rather, the goal of the reporting is to make employees aware of the total cost of the health benefits they get on the job; it is purely informational.

Is there a tax on real estate sales because of the health care law?

There has always been a Medicare tax on wages, split between the employer and the employee, but before now, income earned through investments rather than work was not taxed. Within the health care law, there is a rule that calls for high-income households to be subject to a 3.8 percent tax on investment income starting in 2013. The tax will only apply to individuals with adjusted gross income of $200,000 per year, or $250,000 for couples. However, this tax does not amount to a 3.8 percent sales tax on all real estate transactions. The bottom line is that the tax is on investment income for people with high incomes. It will not affect the majority of people.