How the New Health Care Rules Affect You

On March 23 and 30, 2010, President Obama signed into law two significant health care bills titled "Patient Protection and Affordable Care Act" and the "Heath Care and Education Reconciliation Act". This historic legislation took about a year to put together and pass. It covers many aspects of our healthcare system with new laws related to insurance companies, Medicare, hospitals, and you. Not all the new laws will become effective immediately - many will begin in 2014. Here is a breakdown on some of the main points of the bill in relationship to how it will affect you and your family for years to come.

Changes Happening This Year

Effective June 23, 2010

• Access to insurance for the uninsured with pre-existing conditions - The new law introduces immediate access to insurance for Americans who are uninsured because of a pre-existing condition through a temporary high-risk group. This is an interim fix until the Exchanges are up and running in 2014 (explained later in this article). The new law requires the Secretary of Health of Human Services to establish a website to identify affordable health insurance coverage by state.

Effective September 23, 2010

• Insurance companies cannot deny children with pre-existing conditions - All employer plans and new individual plans are prohibited from establishing “pre-existing condition exclusions” for children. Example: Under the current law, for a child with asthma; the insurance company can exclude asthma treatment for up to the first 18 months of coverage. Under the new law insurance companies will no longer be able to do that.
  
  
• You cannot loose coverage if you become Ill - All health plans are banned from dropping people from coverage when they get sick.
  
  
• Dependent children under age 26 are covered – All health plans are required to allow dependent children to remain insured on their parents’ insurance policy, at the parents’ request. This law does not apply to children that are offered their own employer provided coverage from their work.
  
  
• No lifetime limits on coverage – All health plans are prohibited from placing lifetime caps on coverage.
  
  
• Annual limits on coverage are restricted - The law tightly restricts the use of annual limits by all employer plans and new individual plans, to ensure access to needed care. (Beginning in 2014, the use of any annual limits would be prohibited for these same plans.)
  
  
• No up-front costs for preventive care under new plans - The law requires new private health plans to cover preventive services with no co-payments or deductibles.
  
  
• New appeals process for new plans - New health plans will allow you to have access to an effective internal and external appeals process in the event you disagree on an issue you cannot resolve with your health care provider. With the new law, states will receive aid to establish offices (health insurance consumer assistance) in order to help individuals with the filing of complaints and appeals.

Changes Starting in 2011

Effective January 1, 2011

• Get more for you money – All health plans will be required to apply more of your premiums into your care, and less into profits, CEO pay, etc. This medical loss ratio requires plans in the individual market to spend 80 percent of premiums on medical services, and plans in the large group market to spend 85 percent. Insurers that don’t meet these new thresholds must provide rebates to policyholders – you!
  
  
• New community health centers will open - There will be increase funding for Community Health Centers to allow for more patients to be served.
  
  
• New public long-term care insurance program - A new, voluntary long-term care insurance program will be created. The program will be financed by voluntary payroll deductions to provide benefits to adults who become functionally disabled.

Sometime in 2011

• Insurance companies are accountable for rate hikes – Health insurance companies will have to submit justification for requested premium increases. The federal government will create a grant program to support states in monitoring unreasonable rate hikes.

Changes Starting in 2013 and Beyond

• Threshold for medical deductions increased to 10% of AGI - Starting in 2013, you will only be able to deduct medical costs that are over 10% of your adjusted gross income (AGI). This is an increase from the current 7.5%. This means your medical deduction on your tax return will be more limited resulting in smaller refunds. For individuals age 65 or over, the threshold will remain at 7.5% until 2016.


• You must have insurance - Effective in 2014, you must carry health insurance or you could be subject to fines. Following, are the fines that will apply:
  
  
  
  • Starting in 2014, the fines will begin at the greater of $95 or 1% of your modified adjusted gross income.
    
  • In 2015, the fines will be the greater of $325 or 2% of your modified adjusted gross income
    
  • In 2016, the fines will increase to the greater of $695 or 2% of your modified adjusted gross income.
  
  
• Government assistance for those with low incomes - Effective in 2014, low to middle-income individual and families can qualify for financial assistance. Health tax credits will be available through the “Exchange” to ensure people can obtain affordable health coverage. Credit with be available to people ineligible for Medicaid and below the 400 percent poverty rate.
  
  
• New insurance marketplaces put in place - Effective in 2014, new insurance marketplaces called “Exchanges” will be created. The temporary “high-risk pool” that starts in 2010 will be phased out and incorporated into the Exchange in 2014. The Exchanges will be available like a one-stop shop for anyone that wants to purchase insurance. You can learn more about the health insurance exchange here.
  
  
• Insurance companies cannot deny adults with pre-existing conditions - Effective in 2014, all health plans will be prohibited from denying coverage to adults with pre-existing conditions.
  
  
• New bans on insurance discrimination - Effective 2014, insurance companies will be prohibited from engaging in discriminatory practices that refuse to sell or renew policies due to a person’s health problem or pre-existing condition. Insurance companies are banned from charging higher rates due to health status or gender. Premiums can only vary depending on age, geography, tobacco use, and family size. Insurance plans can only vary by a maximum of 3-to-1 ratio when setting premiums based on age.
  
  
• Continuing Innovation and Lower Health Costs - Effective in 2015, the “Independent Payment Advisory Board” will be created to develop and submit proposals to Congress and the private sector. The objective of this board is to extend the obligations of Medicare by lowering health costs, improving patient’s outcomes, and promoting quality and efficiency.

Comments and Advice
In the coming weeks and years to come, you will no doubt hear more information about these new regulations from our government and media. The reorganization of today’s health care is reform. These are not just tiny “who cares?” types of changes coming from lawmakers in Washington. This mammoth overhaul will transform the health care foundation that we currently know today. Understanding what the bill means to you today; can help prepare you and your family with essential decisions on health care in the future.

Vincent Mangiapane, EA, Federal Analyst, Taxbrain.com