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Know Your Benefits

Know Your Benefits

Health Care Reform:
General Q&A for Employee

I’ve heard a lot about the health care reform law. When do the reforms become effective?
The health care reform bill, known as the Affordable Care Act (ACA), was signed into law in March 2010. The changes made by the health care reform law go into effect over a period of years. Many of the law’s key changes became effective in 2014, such as the requirement for individuals to buy health coverage or pay a penalty.

Are individuals required to have health coverage?
As of 2014, most individuals are required to obtain acceptable health insurance coverage for themselves and their family members or pay a penalty. This provision of the health care reform law is often called the individual mandate. Some individuals are exempt from the requirement.

If you are covered under a health plan offered by your employer, or if you are currently covered by a government program such as Medicare, you can continue to be covered under those programs.

Who is exempt from the individual mandate?
Certain individuals are exempt from the individual mandate. Listed below are a few examples of situations in which you may be exempt from the penalty for not maintaining acceptable health coverage. An extensive list of exemptions can be found at www.healthcare.gov.

  • Cannot afford coverage (that is, the required contribution for coverage would cost more than 8.05 percent of your household income)
  • Have income below the federal income tax filing threshold
  • Are not a U.S. citizen or national, or are not lawfully present in the United States

Most U.S. citizens must obtain health insurance coverage or they will be subject to penalties, with exceptions for low-income individuals and those unable to obtain affordable coverage.

What are the penalties for individuals who don’t have health coverage?
The penalty for not obtaining acceptable health coverage will be phased in over a three-year period. The amount of the penalty is the greater of two amounts: the “flat dollar amount” and the “percentage of income amount.”

2015:

  • 2 percent of your yearly household income.
  • $325 per person for the year ($162.50 per child under 18). The maximum penalty per family using this method is $975.

2016:

  • 2.5 percent of your yearly household income
  • $695 per person for the year ($347.50 per child under 18). The maximum penalty per family using this method is $2,085.

The penalty for a child is half of that for an adult. The annual penalty is calculated on a monthly basis, and is assessed for each month in which an individual goes without coverage. For example, if the flat dollar amount applies and a person goes without coverage for the entire year in 2015, the annual penalty amount will be $325 for that individual. However, if the individual has coverage for part of the year in 2015, the flat dollar amount penalty will be 1/12 of $325 for each month without coverage.

There is no penalty for a single lapse in coverage lasting less than three months in a year.

Does the law affect health flexible spending accounts (FSAs), health reimbursement arrangements (HRAs) and health savings accounts (HSAs)?
As of Jan. 1, 2011, the costs of over-the-counter medications can be reimbursed under a health FSA, HRA or HSA only if the medications are purchased with a doctor’s prescription. This restriction does not apply to the purchase of insulin.

Effective since 2013, there is an annual cap of $2,550 on employee pre-tax contributions to health FSAs. (The ACA does not change the limit on dependent care accounts, which remains capped at $5,000.) Also, if you are under the age of 65 and you withdraw money from your HSA for a purpose other than a qualified medical expense, you will be subject to an additional excise tax of 20 percent.

How long can my adult child remain covered under my health plan?
Health plans are required to permit children to stay on family coverage until they turn 26. This rule applies to all plans in the individual market and to non-grandfathered employer plans. Grandfathered plans must cover children up to age 26, even if they have another offer of coverage through an employer. Note that state law requirements may require offering coverage beyond age 26.

Is the coverage for my adult dependent taxable?
No, the value of the coverage is not subject to federal tax for the employee or dependent. The ACA revised the Internal Revenue Code to clarify that the cost of coverage for a taxpayer’s child is excluded from income through the end of the year in which the child turns 26.

Can I get coverage for my pre-existing condition?
Health plans cannot deny benefits or limit coverage for a child under the age of 19 because the child has a pre-existing condition (a health problem that developed before the child applied to join the plan). Effective for plan years beginning on and after Jan. 1, 2014, health plans cannot impose pre-existing condition exclusions on any enrollees. This applies to all non-grandfathered and grandfathered plans.

Are my health benefits subject to lifetime or annual limits?
The ACA prohibits health plans from placing lifetime limits on most benefits. A lifetime limit is the dollar amount on what the plan would spend for your covered benefits during the entire time you were enrolled in the plan.

Prior to 2014, the law also restricted the annual dollar limits that health plans could put on most covered benefits. Effective for plan years beginning on or after Jan. 1, 2014, no annual dollar limits are allowed on most covered benefits.

Can my health plan or insurance company terminate my coverage if I get sick?
Health plans and insurance companies are prohibited from retroactively dropping, or rescinding, your coverage when you get sick. Also, your coverage cannot be retroactively canceled solely because you or your employer made an honest mistake on your insurance application. Rescissions of coverage are allowed only in cases of fraud or material misrepresentation. This rule applies to all non-grandfathered and grandfathered plans.

Is my plan required to provide free preventive care?
All non-grandfathered group health plans and plans in the individual market must provide coverage for recommended preventive health services. If your plan is subject to this requirement, you should not have to pay a copayment, coinsurance or deductible to receive recommended preventive health services, such as screenings, vaccinations and counseling.

For example, depending on your age, you may have access (at no cost) to preventive services such as:

  • Blood pressure, diabetes and cholesterol tests
  • Many cancer screenings, including mammograms and colonoscopies
  • Regular well-baby and well-child visits, from birth to age 21
  • Routine vaccinations against diseases such as measles, polio or meningitis

If your plan is grandfathered, these benefits may not be available to you. Also, if your health plan uses a network of providers, these benefits may only be available through a network provider. Your plan may allow you to receive these services from an out-of-network provider, but may charge you a fee.

In addition, effective for plan years beginning on or after Aug. 1, 2012, non-grandfathered health plans must provide additional preventive services for women without cost-sharing, such as coverage for well-woman visits, breastfeeding support and contraception. Exceptions to the contraceptive coverage requirement apply to certain employers.

How does the ACA make insurance companies more accountable for how they spend premium dollars?
Health insurers, including insurers of grandfathered plans, must annually report on what percentage of premium dollars they spend on medical care, as opposed to profits, marketing and administrative expenses. You can see that information online and may be entitled to a rebate if your plan spent too much on overhead and profits. Health insurers must also post information about some rate increases along with a justification for them.

Did the health care reform law eliminate COBRA?
No. The ACA did not eliminate COBRA or change the COBRA rules.

How does the ACA help me learn more about my health plan coverage?
Under the ACA, your health insurance company or group health plan is required to provide you with an easy-to-understand document about benefits and coverage. This requirement is designed to help you better understand and evaluate your health coverage choices. This document is called a Summary of Benefits and Coverage, or SBC. You may also request a glossary of terms from your health plan or health insurer. The glossary includes definitions for commonly used terms in health insurance coverage, such as “deductible” and “copayment.”

Also, your Form W-2 may include information on the total cost of employer-sponsored health coverage. This information is provided to let you know how much your coverage costs. It does not mean that the cost of coverage is taxable to you. If your employer filed fewer than 250 W-2s last year, it was not required to provide this information on your Form W-2.

What is the new health insurance exchange, or Marketplace?
The health insurance exchange is an online marketplace that is designed to help make buying health coverage easier and more affordable. Effective 2014, the Marketplace allows individuals and small businesses to compare health plans, get answers to questions and find out whether they are eligible for tax credits for private insurance or health programs like the Children’s Health Insurance Program (CHIP), and enroll in a health plan that meets their needs.

When can I enroll in a health plan through the Marketplace?
ou will be able to get information from the Marketplace about the plans in your area. You will be able to enroll directly through the website or by calling a toll-free phone hotline. You may only enroll during the annual open enrollment period or, if you qualify, during a special enrollment period. If you are having difficulty finding a plan that meets your needs and budget, there are people available to help. These helpers are not associated with a particular plan and do not receive any type of commission, so the help they provide is unbiased.

What types of health plans are available through the Marketplace?
All health plans offered through the Marketplace have limits on cost-sharing and cover a comprehensive package of items and services, which are known as essential health benefits. In general, the Marketplace offers four levels of coverage for consumers. The levels are based on an actuarial value (AV) standard that measures the percentage of total average costs for covered benefits that a plan will cover. For example, if a plan has an AV value of 70 percent, a consumer would be responsible for 30 percent of the costs for covered benefits. The Marketplace’s coverage levels are bronze (AV 60 percent), silver (AV 70 percent), gold (AV 80 percent) and platinum (AV 90 percent).

How much does a health plan cost through the Marketplace?
The premiums for health plans offered on the Marketplace vary by type of plan and location. Different financial assistance programs are linked to the Marketplace, such as Medicaid and the Children’s Health Insurance Program.

Also, some individuals are eligible for a tax credit they can use right away to lower their monthly health plan premiums. The tax credit is sent directly to the insurance company and applied to the premium, so eligible individuals pay less out of their own pockets.

Who is eligible for the Marketplace’s premium tax credit?
Eligibility for the tax credit depends on your income and family size and your eligibility for other health coverage (such as coverage under your employer’s plan). The amount of the credit also depends on how much income your family expects to earn. To be eligible for the tax credit, you must enroll in a health plan through the Marketplace and you:

  • Must have household income for the year between 100 percent and 400 percent of the federal poverty level for your family size
  • May not be claimed as a tax dependent of another taxpayer
  • Must file a joint return, if married
  • Cannot be eligible for minimum essential coverage (such as coverage under a government-sponsored program or an eligible employer-sponsored plan

If you are eligible to enroll in an employer’s health plan that meets certain standards, you are eligible for minimum essential coverage. This would make you ineligible for the premium tax credit. An employer’s plan does not provide minimum essential coverage if the cost for employee-only coverage is more than 9.5 percent of your income for the year, or if the coverage does not meet the “minimum value” standard set by the health care reform law. More information on the health care reform law is available at www.healthcare.gov.

Sources: Department of Labor, Department of Health and Human Services

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