Individuals shopping for health insurance coverage may be weighing the costs and benefits of enrolling in a plan offered through the new public Exchange. Whether a “qualified health plan” (QHP) is purchased in the Exchange or the individual market, it must comply with landmark reforms mandated by the Affordable Care Act to make coverage affordable, reduce health care costs and improve health outcomes.
First, there is no medical underwriting in a QHP. Individuals cannot be turned away from coverage or charged higher premiums based on medical condition, gender or where a person works.
Second, QHPs cannot set premiums for older beneficiaries more than three times higher than premiums charged to younger beneficiaries. In addition to age, QHPs may adjust premiums based on geography, family size and tobacco use.
Third, preventive care is free in a QHP. Insurance companies cannot charge co-payments for certain preventive services, including blood pressure, cholesterol, diabetes, depression and other screenings, immunizations, comprehensive coverage of preventive care for women, and other preventive services for adults and children. Preventive care is provided free of charge before satisfaction of any deductible.
Fourth, a QHP must limit beneficiaries’ annual out-of-pocket expenses for co-payments and deductibles. This limit is updated annually for cost of living.
Fifth, QHPs must cover “essential health benefits” and cannot set annual or lifetime caps on covered benefits. The ACA does not mandate a specific benefit package. Instead, federal regulations require QHPs to cover items and services in each of the following ten categories of essential health benefits: ambulatory patient services, emergency care, hospitalization, maternity and newborn care, mental health and substance abuse, rehabilitative care, prescription drugs, lab services, preventive and wellness benefits, and oral and vision in pediatric plans. Coverage must be equal in scope to benefits covered by a benchmark employer plan in the state.
What the ACA did not reform is the complex variation in premiums, deductibles, copayments, provider networks and benefit design across a spectrum of private insurance plans offered in the new Exchange, or Health Insurance Marketplace. Beginning in 2014, all new policies must comply with one of four “metal levels” of coverage and cost-sharing, known as bronze, silver, gold and platinum plans. Bronze plans charge the lowest monthly premiums and provide the minimum level of coverage, paying 60% of costs while the beneficiary pays the remaining 40%. Coverage and premiums increase, and cost-sharing decreases, across the range of metal levels: silver plans must cover 70% of costs; gold, 80%; and platinum, 90%.
“Coverage” in this context is the estimated actuarial value of a plan’s coverage for an average population. It does not mean that a gold plan, for example, always pays 80% of costs and limits co-payments to 20%. Coverage varies from the average and may be lower – and co-payments higher – depending on the particular medical service provided.
When shopping for a plan review the co-payments, deductibles, exclusions, and limitations and check the plan’s network to ensure it includes a broad selection of providers. A plan’s benefit design cannot discriminate on the basis of age, disability, race, color, national origin, gender or sexual orientation.
To preview available plans and estimated premiums by county, go to the federally facilitated Texas Exchange at healthcare.gov and click on “See Plans Now.” Both PPO and HMO plans are available, although the choice of insurance carriers is more limited in rural counties.
A QHP can be purchased in the individual market, through an insurance agent or broker, without going through the public Exchange. The online Exchange is designed to provide one-stop comparison shopping of health plans. Enrollment through the Exchange is also facilitated by telephone and in-person assistance and paper application.
Enrollment through the Exchange is required to claim advance payment of premium tax credits, which subsidize premiums for beneficiaries with a modified adjusted gross income (MAGI) of 100% – 400% of the Federal Poverty Level. Generally MAGI is adjusted gross income (line 37, form 1040) plus tax-exempt interest (line 8b). The credit is refundable and, if not paid in advance, may be claimed when the individual files a tax return for the year. The amount of the tax credit is tied to the premium of a benchmark silver plan, so that older individuals who face higher premiums will receive a larger credit.
Under the ACA’s individual mandate, citizens and legal residents must have “minimum essential coverage” (MEC) for each month, qualify for an exemption, or pay a tax penalty. MEC includes government-sponsored programs, such as Medicare, Medicaid, CHIP and TRICARE, eligible employer-sponsored coverage, and QHPs offered by an Exchange.
MEC also includes certain non-qualified health plans in the individual market. Individual plans that were in effect on March 23, 2010 may be grandfathered from compliance with most ACA reforms. Catastrophic plans are available to people who are under 30 or exempt from the individual mandate, but do not comply with the new standards for benefits, coverage and cost-sharing.
The tax penalty for non-compliance with the individual mandate is the greater of $95 or 1% of income in 2014, increasing to $695 or 2.5% of income in 2016. Exemptions are provided for financial hardship, individuals whose income is below the tax filing threshold, those without coverage for less than three months or for whom the lowest cost option exceeds 8% of income, American Indians, members of certain religious sects, incarcerated individuals and undocumented immigrants. See Shared Responsibility Payment for Not Maintaining Minimum Essential Coverage, TD 9632, under “Affordable Care Act Tax Provisions” on www.irs.gov.