The Patient Protection and Affordable Care Act(PPACA), or the Affordable Care Act (ACA), for short, was signed into law on March 23, 2010, as part of the Health Care and Education Reconciliation Act of 2010, to be implemented in phases until fully effective in 2018. Since the bill is a federal law, state regulations are superseded by the PPACA and must conform accordingly.
The Affordable Care Act has mandated increased preventive, educational, and community-based health care services, and was designed to do the following:
- Set up a new competitive private health insurance market;
- Hold insurance companies accountable by keeping premiums low, preventing denials of care and allowing applicants with pre-existing conditions to obtain coverage (pre-existing conditions exclusions have been eliminated as of January 2014);
- Help stabilize budget and economy through reducing the deficit by cutting government overspending; and
- Extend coverage for adult children in both individual and group health plans until age 26.
In addition, it gives small businesses and nonprofits a tax credit for an employer's contribution to health insurance for employees. It prohibits insurance companies from rescinding health coverage when an insured becomes ill, and eliminates lifetime benefit limits.
Specific health coverage plans, such as retiree-only, stand-alone dental plans, Medigap, and long-term care insurance are generally exempt from the PPACA changes.
Because these provisions are controversial and health care laws are being challenged in the courts, agents should review current laws to be certain they are giving up-to-date advice.
Eligibility: The Health Insurance Marketplace makes health coverage available to any uninsured individuals. To be eligible for health coverage through the Marketplace, the individual
- Must be a U.S. citizen or national or be lawfully present in the United States;
- Must live in the United States; and
- Cannot be currently incarcerated.
If an individual has Medicare coverage, that individual is not eligible to use the Marketplace to buy a health or dental plan.
Health status (no discrimination): A group health plan or a health insurance issuer offering group or individual health insurance coverage may not establish rules for eligibility based on any of the following health status-related factors related to individuals or their dependents:
- Health status;
- Medical condition (including both physical and mental illnesses);
- Claims experience;
- Receipt of health care;
- Medical history;
- Genetic information;
- Evidence of insurability (including conditions arising out of acts of domestic violence);
- Disability; or
- Any other health status related factor.
When health insurers set their premium rates, they are only permitted to base those rates on 4 standards:
- Geographic rating area (location of residence within the state);
- Family composition (single or family enrollment);
- Age; and
- Tobacco use.
For individual plans, the location is the insured's home address; for small group plans, the location is the employer's principal place of business.
Essential benefits: Essential benefits include hospitalization, maternity, emergency services, wellness and preventive services, and chronic disease management.
- Note that all Health Insurance Marketplace plans must cover pregnancy and childbirth, even if pregnancy begins before the coverage takes effect.
Guaranteed issue: Insurance companies must accept any eligible applicant for individual or group insurance coverage. Enrollment for coverage may be restricted to open or special enrollment periods.
Guaranteed renewability: An insurance company that offers either group or individual health insurance coverage must renew or continue the policy at the option of the plan sponsor or the individual.
Pre-existing conditions: The law creates a new program, the Pre-Existing Condition Insurance Plan, to make health coverage available to individuals who have been denied health insurance by private insurance companies because of a pre-existing condition.
Appeal rights: If insurers rescind individual or group coverage for reasons of fraud or an intentional misrepresentation of material facts by the insured, they must provide at least 30 days' advance notice to allow the insured time to appeal. An enrollee or insured has the right to review their file, to present evidence and testimony as part of the appeal process, and to keep their coverage in force pending the outcomes of the appeals process.
Coverage for children of the insured: The law extends coverage for children of the insured to age 26 regardless of their marital status, residency, financial dependence on their parents, or eligibility to enroll in their employer's plan.
Lifetime and annual limits: Health plans are restricted from applying a dollar limit on essential benefits, nor can they establish a dollar limit on the amount of benefits paid during the course of an insured's lifetime.
Emergency care: Emergency services must be covered, even at an out-of-network provider, for amounts that would have been paid to an in-network provider for the same services.
Preventive benefits: The ACA requires that 100% of preventive care be covered without cost sharing. Preventive care includes routine checkups, screenings, and counseling to prevent health problems.
Cost-sharing under Group Health Plans: A group health plan must ensure that any annual cost-sharing imposed does not exceed provided limitations.
The ACA has established insurance exchangesthat will administer health insurance subsidies and facilitate enrollment in private health insurance, Medicaid and the Children's Health InsuranceProgram (CHIP). An exchange can help the applicant to do the following:
- Compare private health plans;
- Obtain information about health coverage options to make educated decisions;
- Obtain information about eligibility or tax credits for most affordable coverage;
- Enroll in a health plan that meets the applicant's needs.
B. Metal Tiers
Under PPACA, plans are classified into 5 categories of coverage in the Marketplace: four "metal level" plans and catastrophic plans.
The metal levels plans pay different amounts of the total costs of an average person's care. The actual percentage the insured will pay in total or per service will depend on the services used during the year. On average, the metal level plans will pay as follows:
- Bronze: 60%
- Silver: 70%
- Gold: 80%
- Platinum: 90%
Under the bronze plan, for example, the health plan is expected to cover 60% of the cost for an average population, and the participants would cover the remaining 40%. Participants with severe disease may pay significantly more.
All insurers that offer adult and family coverage under the metal levels must also offer child-only coverage.
Young adults under age 30, and individuals who cannot obtain affordable coverage (have a hardship exemption) may be able to purchase individual catastrophic plans that cover essential benefits. These plans offer lower monthly premiums but also feature high deductibles (several thousand dollars). The insured is usually required to pay all medical costs up to a certain amount. After the insured reaches the deductible, costs for essential health benefits will be by the catastrophic plan.
1. Benchmark Plans
A benchmark plan is the second-lowest priced silver plan available within a state health insurance exchange in a geographical region. Benchmark plans determine the specifics of the Essential Health Benefits required of every Affordable Care Act plan sold in the state. Tax credit amounts are derived on the cost of this benchmark plan and are then adjusted according to an enrollee's annual income. Consumers who are eligible for premium tax credits are not required to purchase the benchmark plan in their region and will not lose out on these credits by choosing a different plan.
C. Medical Loss Ratio (MLR)
The Medical Loss Ratio (MLR) indicates how much of the health coverage premium must go toward actual medical care, as opposed to administrative costs and profits. Under the Affordable Care Act, consumers will receive more value for their premium dollar because insurance companies are required to spend 80% (individual and small group markets) or 85% (large group markets) of premium dollars on medical care and health care quality improvement, rather than on administrative costs. That means that only 15%-20% of the premium may be applied to administrative expenses.
Insurers who fail the MLR test for a calendar year will be required to provide a rebate to their customers and refund excess premiums.
D. Enrollment
State insurance exchanges must provide for an initial open enrollment period, annual open enrollment periods after the initial period (currently scheduled from November 1 through January 31), and special enrollment periods. Unless specifically stated otherwise, individuals or enrollees have 60 days from the date of a triggering event to select a qualified health plan. Triggering, or qualifying, events include marriage, divorce, birth or adoption of a child, change in employment, or termination of health coverage.
Qualified individuals and enrollees may enroll in or change from one qualified health plan to another as a result of the following triggering events:
- A qualified individual or dependent loses minimum essential coverage;
- A qualified individual gains a dependent or becomes a dependent through marriage, birth, adoption or placement for adoption;
- An individual who was not previously a citizen or lawfully present individual who gains such status;
- A qualified individual's enrollment or non-enrollment in a qualified health plan is unintentional or erroneous and is the result of the error, misrepresentation, or inaction of an officer, employee, or agent of the exchange;
- An enrollee adequately demonstrates that the qualified health plan in which he or she is enrolled substantially violated a material provision of its contract;
- An individual is determined newly eligible or newly ineligible for advance payments of the premium tax credit or has a change in eligibility for cost-sharing reductions, regardless of whether such individual is already enrolled in a qualified health plan;
- A qualified individual or enrollee gains access to new qualified health plans as a result of a permanent move;
- A Native American, as defined by the Indian Health Care Improvement Act, may enroll in a qualified health plan or change from one qualified health plan to another one time per month; and
- A qualified individual or enrollee demonstrates that he or she meets other exceptional circumstances as the exchange may provide.
E. Essential Health Benefits
As mandated by the Affordable Care Act, all private health insurance plans offered in the Marketplace must provide the same set of essential health benefits. All health care plans must include at least the following 10 essential benefits:
- Ambulatory patient services;
- Emergency services;
- Hospitalization;
- Pregnancy, maternity and newborn care;
- Mental health and substance use disorder services, including behavioral health treatment;
- Prescription drugs;
- Rehabilitative and habilitative services and devices;
- Laboratory services;
- Preventive and wellness services and chronic disease management; and
- Pediatric services, including oral and vision care.
F. Qualified Health Plan
State insurance exchanges offer coverage through qualified health plans (QHPs). Qualified health plans may not have pre-existing condition limitations, lifetime maximums, or annual limits on the dollar amount of essential health benefits.
A health plan's status as a qualified health plan will be based on the plan's
- Benefit design;
- Marketing practices;
- Provider networks, including community providers;
- Plan activities related to quality improvement; and
- The use of standardized formats for consumer information.
G. Actuarial Value
Employers must provide at least a minimum value (MV) plan that covers 60% or more of the participant's expected health care costs. To determine if an employer's plan meets the requirement, an employer can use one of three methods: the MV Calculator, a Safe Harbor Checklist, or an Actuarial Certification.
- The MV Calculator uses standard population data along with the employer plan cost-sharing and benefits to determine whether a plan meets the requirements.
- The Safe Harbor checklist uses a standard population database along with data from a self-insured plan. If the plan's cost-sharing and benefits meet the 60% requirement or are more generous, the plan meets the MV.
- With the Actuarial Certification method, employers hire an actuary who uses the plan's cost-sharing and benefit coverages along with standard population data to determine if the plan meets the MV.
H. Tax Credits
Enrollment in the Health Insurance Market place began in October 2013, and tax credits for those who qualify became available in 2014.
After submitting an application for health insurance for a qualified health plan, individuals will be able to take an advance tax credit to reduce the cost of their health care coverage if purchased through an exchange. For the purposes of the premium tax credit, household income is defined as the Modified Adjusted Gross Income (MAGI) of the taxpayer, spouse, and dependents. The MAGI calculation includes income sources such as wages, salary, foreign income, interest, dividends, and Social Security.
Legal residents and citizens who have incomes between 100% and 400% of the Federal Poverty Level (FPL) are eligible for the tax credits. States have the option of extending Medicaid coverage to people under 138% of the FPL. Persons who receive public coverage like Medicare or Medicaid are not eligible for the tax credits.
Persons who are eligible for a premium tax credit and have household incomes between 100% and 250% of FPL are eligible for cost-sharing subsidies (reductions). Eligible individuals will be required to purchase a silver level plan in order to receive the cost-sharing subsidy.
The tax credit is sent directly to the insurance company, and reduces the insured's monthly health care premiums. Tax credits are based upon the individual's or family's expected annual income.
Small employers that offer health plans may be eligible for federal tax credits, depending on the average wages and size of the employer. These tax credits, available to low-wage employers (under $50,000 average per employee) with 25 or fewer workers, may cover up to 50% of premiums paid for small business employers and 35% of premiums paid for small tax-exempt employers.
To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP).
The credit is available to eligible employers for 2 consecutive taxable years.
1. APTC
Advance payments of the premium tax credit, or APTC, is a tax credit that can help individuals afford coverage bought through the Marketplace. These tax credits can be used right away to lower the monthly premium costs for insurance. If the insured qualifies, he or she may choose how much advance credit payments to apply the premiums each month, up to a maximum amount. If the amount of advance credit payments for the year is less than the tax credit due, the insured will get the difference as a refundable credit when the insured files the federal income tax return. If the advance payments for the year are more than the amount of the credit, the insured must repay the excess advance payments with the tax return.
APTC is paid on a sliding scale, from 100% of FPL to 400% of FPL. It is generally calculated based on attested projected annual income for the upcoming coverage year. Maximum APTC is calculated with reference to income and applicable second lowest cost silver plan.
I. Individual Mandate and Shared Responsibility
The Affordable Care Act requires all U.S. citizens and legal residents to have qualifying health care coverage. This is known as the individual mandate, and is part of the Act's Shared Responsibility Provision. If the individual does not have qualifying health care, a tax penalty will be assessed, based on the individual's taxable income, number of dependents, and joint filing status.
The shared responsibility payment for not obtaining or maintaining the minimum essential benefits coverage will be required to be paid for each month an individual went without coverage or an exemption. If coverage was active for at least one day within the taxable year, then the individual will not owe the payment for that month.
Certain groups, such as members of Indian tribes, religious objectors, persons in prison, undocumented aliens, and those with severe financial hardship or who are below the tax filing threshold (those who are not required to file income tax returns) are exemptfrom the penalty.
Employer Penalties: The following are penalties for employers with more than 50 full-time employees if at least one employee receives a premium tax credit for health care coverage:
| Coverage | Penalty Tax |
| Employer does notoffer coverage | $2,000 per full-time employee (first 30 employees are excluded) |
| Employer offerscoverage | The lesser of $3,000 per employee who receives a premium tax credit or $2,000 per each full-time employee (first 30 employees are excluded) |
Employers who have fewer than 50 full-time employees are exempt from these penalties.
J. Federal and State Health Insurance Marketplace
By 2014, each state was required to set up Affordable Insurance Exchanges, referred to as Marketplaces. These exchanges will either serve individuals and small businesses separately, or have a combined exchange to serve both individual and small business clients under one organization. In states that have chosen not to build their own Marketplace, a Federally-Facilitated Marketplace(healthcare.gov) is available that helps with eligibility and enrollment, plan management, and consumer support.
Under the proposed regulations, states that choose to set up an Exchange for Small Business Health Options Program (SHOP) must adopt the federal standards for the program or have a state law or regulation that implements the federal standards. Each state will establish insurance options for small employer participation. A SHOP is intended to give small employers the same purchasing power that large employers have, the opportunity to make a single monthly payment, and the ability to offer a choice of plans.
PPACA defines small employers as those with at least one but not more than 100 employees. Individual states can restrict participation in the Small Business Health Options Program Exchange to those employers with fewer than 50 employees until January 1, 2016. In 2017, states allowed large employers to purchase coverage through SHOP exchanges.
Insurance exchanges may or may not have open enrollment periods for small employers, but must admit small employers whenever they apply for coverage.
NY State of Health (NYSOH) is an organized marketplace designed to help people shop for and enroll in health insurance coverage. Individuals, families and small businesses can use the Marketplace to help them compare insurance options, calculate costs and select coverage. The Marketplace helps people to check their eligibility for health care programs like Medicaid and sign up for these programs if they are eligible. The Marketplace also tells what type of financial assistance is available to applicants to help them afford health insurance purchased through the Marketplace.
K. Chapter Recap
This chapter provided an overview of the Patient Protection and Affordable Care Act (PPACA), its coverage options and required benefits. Let's recap them:
| AFFORDABLE CARE ACT (ACA) | |
| Features and Coverages |
|
| Eligibility |
|
| Essential Health Benefits |
10 essential benefits:
|
| Insurance Exchanges (Marketplace) |
|
Chapter Complete