Exploring Healthcare Reform Under the Affordable Care Act

By on July 9, 2013

Health care reform will affect everyone. Get a pulse on the rules, options and costs associated with this new era in American health insurance.

What is Health Care Reform?

Health care reform, as enacted by the 2010 Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act (HCERA), is intended to offer Americans greater access to quality healthcare through accountable insurance carriers at affordable prices.

The new law will require all individuals to obtain health insurance through a parent, an employer-sponsored group health plans or individually purchased plan. And employers may be required to offer qualified plans to employees – depending on the size of their operation. Most of the ACA health care reform provisions will be enacted by January 1, 2014, with some rules for employers postponed until 2015 and 2018.

Individuals and Health Care Reform

Beginning in 2014, the individual mandate requires everyone to show proof of health insurance through a parent, privately purchased plan or employer. Individuals not enrolled in coverage will be subject to fines of $95 or 1 percent of taxable income – whichever is greater. And penalties are expected to increase each year to adjust for cost-of-living expenses measured by the government. In 2015, the penalty for not showing proof of insurance goes up to $325 or 2 percent of wages. And in 2017 those fines increase to $695 or 2.5 percent of wages.

Businesses and Health Care Reform

Beginning in 2015, the Affordable Care Act will require employers with 50 or more full-time employees to offer qualified, affordable plans to their full-time employees. As the options for these healthcare plans become available, your trusted insurance broker and financial advisors can help you determine the cost and process for complying with regulations by 2015. Now that qualified plans and exchange markets are being established, it is time to begin estimating the effect these reforms will have on your bottom-line.

The Cost and Complexity of Compliance

In order to understand requirements and determine the options available to them, employers will need to thoroughly understand their workforce demographics. Each business owner, human resources or benefits department will have to track and account for each wage earner according to federal guidelines.

  • Businesses with 50 or more employees – required to provide health coverage or accept tax penalties, and file reports containing information about their personnel and health plans
  • Business with less than 50 employees – get access to subsidized exchanges and tax credits for offering qualified plans to employees

Standardizing Essential Health Benefits for all Public & Private Plans

Coming this October, health insurance carriers will have to design health care plans which cover a set of minimum care services before they can be offered on the public and private exchanges. These essential health benefits must cover the following services:

  1. Ambulatory patient services
  2. Emergency services
  3. Hospitalization
  4. Maternity and newborn care
  5. Mental health and substance use disorder services, including behavioral health treatment
  6. Prescription drugs
  7. Rehabilitative and habilitative services or devices
  8. Laboratory services
  9. Preventive Care – wellness services and chronic disease management
  10. Pediatric services, including oral and vision care

Purchase Coverage Through State and Federal Health Insurance Exchanges

The Health Insurance Exchanges will be open marketplaces for purchasing individual and group healthcare plans administered by private, state and federal entities. Public exchanges will offer small businesses and individual buyers access to affordable, subsidized health coverage. And private exchanges will offer (medium to larger) employers a way to control total costs by providing flexible, affordable and advantageous benefits to employees.

Most public and private exchanges are set to open for enrollment in fall of 2013. Individuals will want to begin reviewing and purchasing plans before the January 2014 deadline to enroll. Businesses and insurance brokers will want to continue analyzing their workforce demographics, as well as begin reviewing the options available once the health insurance exchanges come online. Then they will have a year to consult with expert and employees on packages which will benefit everyone by the time the employer mandate is enacted in 2015.

Bronze, Silver and Gold Healthcare Plans

Participating insurers will be required to offer plans that fit four standardized levels of coverage – bronze, silver, gold and platinum. Insurers don’t have to offer plans in all four levels, however they must offer at least one silver and one gold plan to participate within the health insurance exchanges.

Standardization will help businesses make better-informed comparisons between various plan options and also help guard against insurance company efforts to insure only the healthiest people while avoiding individuals with risker health conditions.

Each plan level must cover the same set of minimum essential health benefits, but the cost-sharing required will vary across the bronze, silver, gold and platinum levels. For example, bronze plans will have the least generous coverage with the highest out-of-pocket expenses for policyholders and platinum plans will have the most generous benefits at little cost to policyholders.

The four levels of coverage – bronze, silver, gold and platinum – are based on actuarial values which delineate the percentage of costs that a health plan would pay for an average person.

Actuarial Levels for Qualified Exchange Plans

Plan Level Platinum Gold Silver Bronze
Insurance Covers 90% 80% 70% 60%
Policyholder Covers >10% 20% 30% 40%

Make Health Care Reform Work for You

New can be scary, but it doesn’t have to be. These new changes are going to be difficult for everyone – individuals, businesses and insurers alike – to understand and implement. Create the best scenario for your situation by consulting a licensed insurance broker, risk management consultant, tax professional and/or financial advisor to understand the affect each provision of health care reforms will have on your health, personal budget, business operations and bottom-line.

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About Terri A. Kamoto

Senior writer for FSN - Terri is a former financial analyst dedicated to making personal finances, budgeting, investment and insurance advice accessible, up to date and easy to understand. It is hard to find professional advice written in a language someone without a financial background can understand. Terri helps companies synthesize industry lingo and expertise into clear and informative content which builds smarter, financially successful individuals. You can find Terri on !

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