The Affordable Care Act (ACA)–also known as Obamacare–is complex. This page will serve as a reference for understanding some of the most important ACA provisions. You can read my previous posts on Obamacare HERE.
The video below provides a high-level summary.
The remainder of this page, I explain some of the most important provisions of the Affordable Care Act.
If you don’t have insurance…
- You will need to buy it. Part of the ACA is an individual mandate. If you do not buy insurance, you face a penalty of between $695 and $2,085 depending on your income.
- If your income is below 138 percent of the federal poverty line… You now qualify for Medicaid. Before, only the disabled, pregnant women, children, and some parents qualified for Medicaid; now all adults who meet the income requirement will be eligible. In 2012, 138% FPL was $15,415 for an individual and $31,809 for a family of four.
- If you don’t have insurance and are not employed or self-employed… You can buy insurance through the health insurance exchanges. The exchanges, which went live on Oct 1, 2013, enabled individuals to buy insurance through a regulated market. Individuals will receive subsidies from the government to help them afford these plans, with the largest subsidies going to the lowest income individuals. Each exchange is administered on the state level and its structure varies from state to state. You can sign up at Healthcare.gov.
- If you don’t have insurance and work for a small firm… The health insurance exchanges are not only to be used by individuals, but also by small businesses. Thus, if you work for a small employer, your insurance may now be purchased through an exchange. Some, but not all, employed individuals who purchase insurance through an exchange will receive a subsidy.
- I am 26 years old or under. Although you need to buy insurance, children can be dependents under their parents for insurance purposes until they reach 26 years old.
- I am an undocumented worker. You are not eligible to purchase health insurance through the Exchange and are not eligible for Medicare, Medicaid or the Children’s Health Insurance Program (CHIP). Some undocumented workers are eligible for Emergency Medicaid if low-income.
- My parents are undocumented. What benefits do I qualify for? Citizen or lawfully present children of undocumented parents are eligible: to purchase from the state insurance exchange, for premium tax credits and lower copayments, and for Medicaid or CHIP.
- I already have insurance, what do I need to do? Nothing. If you have insurance already, likely through your employer, Medicare, Medicaid, the VA or other source, you will be able to keep your insurance.
I am an employer
- I am a firm with less than 50 employees. These businesses are not required to provide health insurance. If they wish to do so, they can purchase insurance through the Small Business Health Options Program (SHOP) Marketplace (a.k.a. the small business exchange).
- I am a large employer. If you are a large employer, starting in 2015, you will face a penalty ($2,000 per employee) if you do not offer affordable coverage that meets minimum value to all of your full-time employees and their dependent children. Full-time means the employee worked on average 30 hours a week over the measurement period.
I am a doctor, hospital, or other health care provider
There will be significant changes to how providers are reimbursed, particularly by Medicare. For instance:
- Physicians. Medicare will use a value-modifier evaluate physician quality and efficiency. Further, Medicare will examine using episode grouper software to measure physician efficiency and to take into account how the care provided affects downstream services.
- Hospitals. Hospital will participate in the hospital value-based purchasing system. The system provides incentive payments to hospitals that provide high quality care and low cost; the system reduces reimbursement rates for hospitals that provide low-quality and high cost. Additionally, Medicare will no longer pay for hospital readmissions caused by hospital-acquired conditions (HACs) such as infections. Hospitals with above average re-admission rates will be penalized by Medicare though lower reimbursement.
- Other providers. Your Medicare reimbursement will likely be cut. Medicare will reduce payments to providers based on the rate of growth of multi-factor productivity (MFP).Hospital will participate in the hospital value-based purchasing system. The system provides incentive payments to hospitals that provide high quality care and low cost; the system reduces reimbursement rates for hospitals that provide low-quality and high cost. If you are a skilled nursing facility (SNF), home health agency (HHA) or Ambulatory Surgical Center (ASC), Medicare will consider implementing VBP systems for you as well.
- Accountable Care Organization (ACOs).ACOs are groups of providers (e.g., hospitals, doctors, post-acute care facilities) that band together to provide care for Medicare fee-for-service (FFS) patients. ACOs not only receive payment from Medicare for the services they provide, but they also can earn extra income if they are able to reduce spending per patient among their assigned beneficiaries.
I work in the life sciences industry
Get ready for some more taxes
- Device Makers: The Health Care and Education Reconciliation Act of 2010 imposes a tax equal to 2.3% on the sales price of any taxable medical device by a medical device manufacturer, producer or importer of such device. The excise tax applies to sales after December 31, 2012. Section 3135 of the ACA also mandates Medicare to reduce reimbursement for advanced imaging services. The ACA also created an abbreviated licensure pathway for biological products that are demonstrated to be “biosimilar” to or “interchangeable” with an FDA-licensed biological product.
- Pharmaceutical firms: The ACA imposes an an annual fee based on a firms sales of branded drugs. The fee is a step-wise function with the aggregate industry fee increasing from $2.5 billion in 2011 to a maximum of $4.1 billion in 2018, and decreasing to $2.8 billion in 2019 and onward.
I am an insurance company
Your business is likely to change. Before the ACA, you could alter premiums based on whether a person had pre-existing conditions. Insurers are now prohibited from doing so. This provision is known as adjusted community rating. Additionally, insurers are prohibited from instituting lifetime or annual limits on the amount of insurance benefits that can be paid and your firm cannot rescind coverage (except for the case of fraud). Insurers will be required to allow children of your beneficiaries to be included as dependents under their plan.
The plans your firm offers will have its profits and administrative expenses are capped; each plan must spend at least 80 percent of the revenue they receive in premiums on medical care; a maximum of 20 percent will go to administrative costs and profits, including executive salaries, overhead, and marketing.
If your business decides decide to join the health insurance exchanges, there are additional restrictions. Plans are classified into bronze, silver, gold and platinum based on the amount of cost sharing you must incur (platinum has the highest premiums and lowest cost sharing; bronze has the lowest premiums and highest cost sharing).
Your business will also face additional fees. A 40 percent excise tax (i.e., the “Cadillac tax”) will be assessed, beginning in 2018, on the cost of coverage for health plans that exceed a certain annual limit ($10,200 for individual coverage and $27,500 for self and spouse or family coverage. Employers are likely to scale back insurance offerings and increase cost sharing.