June 7, 2013

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Reform by Any Other Name

Untangle the Jargon Surrounding Healthcare Reform

June 7, 2013


It’s been called healthcare reform, Obamacare and the Affordable Care Act. Depending on who you talk to, it’s been called a lot of other names as well—some we can’t print. Regardless of its name, the nation’s health insurance playing field has been altered forever. Its landscape is constantly changing, and its impact will be felt by nearly every American.

Multi-tiered, multi-faceted and regulated by multiple federal agencies, the major provisions of the Affordable Care Act (ACA) legally take effect on January 1, 2014, though some provisions were effective as early as 2010. As a company’s health insurance contract expires, the new contracts may well reflect anticipated cost changes in the form of higher premiums. Those companies positioning themselves right now for the new laws still have many, many questions.

Big Three Facets of Reform

“Final regulations issued under the ACA are not necessarily final,” says Susan Grassli, legal consultant for GBS Benefits, Inc. She says the regulations that have already been issued under the ACA total more than 20,000 pages and, if piled up, would stand more than seven feet high. And the paper tower is expected to grow. “We don’t have final regulations yet for several provisions of the ACA and some final regulations have since been amended,” says Grassli.

The reform was created by two laws—the Patient Protection and Affordable Care Act, and the Health Care and Education Reconciliation Act. Both were passed in March of 2010. Three U.S. Departments have the authority to collectively issue regulations for them: Health and Human Services, Labor and Treasury.

“There are a lot of definitions that vary by provision,” Grassli says. “For example, a large employer is defined at least five different ways throughout provisions of the ACA.

What Grassli calls the “Big Three” of healthcare reform consist of the individual mandate, which affects most everyone; the exchange, which is now known as the Health Insurance Marketplace, dealing mostly with individual or small-employer plans (but may include so-called “large employers” by 2017); and the employer-shared responsibility, often referred to as the play or pay provisions, which applies to large employers.

Individual Mandate

When the individual mandate was first introduced, it got most of the press because many questioned its constitutionality. In essence, the government was requiring every citizen to have health insurance, and some questioned whether the feds had the right to make that requirement. The question whether the individual mandate is constitutional ended up before the U. S. Supreme Court.

“In June of 2012, the U.S. Supreme Court issued its decision and found that the individual mandate is unconstitutional under Congress’s Commerce Clause power. In simplified terms, that means Congress does not have the power under the Commerce Clause to require citizens to buy health insurance,” Grassli says. “However, the Court also went on to say that because Congress has a broad power to tax and because the fees for non-compliance are a tax, the individual mandate is constitutional under Congress’s taxing power.”

Starting next January, most individuals must obtain “minimum essential health coverage” or be subject to a tax. That tax will be calculated for each month of non-compliance and levied on federal individual income taxes. So someone not complying could see their refunds diminished or their tax obligations increased.

How much so? In 2014, the tax would be the greater of $95 per person per year (PPPY), or 1 percent of the modified adjusted gross income (MAGI) of the household. In 2015, those amounts increase to either $325 PPPY or 2 percent of the MAGI. The scale continues upward in subsequent years. The tax is capped at three persons per household.

“Employers may start seeing employees who previously have not been interested in employer health coverage start opting into the plan in order to avoid the individual mandate tax,” Grassli says.

Health Exchange

The individual mandate easily leads into the health exchange, a health insurance marketplace that must be open in every state by January 1, 2014. The exchanges provide online health insurance “one-stop shopping” where individuals and small employers can find, compare, and purchase health insurance. “The ACA defines small employers under this provision as 100 or fewer employees, but states have the option for 2014/15 to define small employers as less than 50 employees. Utah opted for the less than 50 definition,” Grassli explains.

Utah developed its own exchange, called Avenue H, almost four years ago, and individuals and small employers have been enrolling since that time. However, open enrollment in exchanges nationwide begins this October 1. By New Years Day 2014, premium tax credits/cost-sharing reduction (subsidies) and Medicaid qualifications will be verified for those eligible. The federal poverty level (FPL) is the key to determining whether families can or will receive subsidies or Medicaid benefits. Tax credits may help individuals pay monthly premiums, while cost-sharing reductions could assist with co-pays and out-of-pocket expenses.

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