After I wrote a story last week, looking at the health-care law’s big public awareness gap, I got a number of comments like this one: “So, since nobody knows what benefits are in the bill, shouldn't you be 'Reporting' what they are?” That came from Bill A, and it was among at least a dozen asking for a better explanation of how the health-care law changes the insurance marketplace.
Bill’s right: I should be reporting on what the health-care law changes about insurance coverage (and I often do). Without any further delay, I thought now would be a good time for a short primer on what the Affordable Care Act will change about insurance benefits come 2014. If there are other questions that seem to be missing from this list, feel free to leave them in comments and I’ll do my best to answer them.
Who qualifies for new benefits? There are a lot of benefits that anyone with insurance coverage will be qualified to receive: Contraceptive coverage without co-pay, for example, or an end to lifetime limits on benefits. The biggest new benefits, however, arguably will go to those who earn less than 400 percent of the federal poverty line. These are the people who will either qualify for insurance subsidies or, in some states, Medicaid coverage (the health-care law extended Medicaid to cover everyone below 133 percent of the poverty line, but the Supreme Court made that expansion optional).
How do I know if that includes me? A chart helps here. The federal poverty line is updated annually, and depends on the number of individuals in a household. Here’s what it looks like in 2012:
These numbers are likely to change a little bit between now and 2014, when benefits roll out. But they give you a sense of who will qualify for insurance subsidies: Any household that earns less than four times the numbers laid out above.
How big are the insurance subsidies? Will they actually make coverage affordable? The health insurance subsidies are on a sliding scale: Those who earn the least get the most generous assistance. The cost of premiums is tethered to a percent of what an individual earns. Again, another chart helps here. This one, via the Kaiser Family Foundation, shows the maximum amount that a household can be expected to pay for insurance premiums, as a percent of income (FPL stands for federal poverty line).
As to the affordability question, we don’t know how much insurance will cost in 2014, given all the change that’s about to happen in the insurance market. The average policy in the individual market cost $6,328 in 2009, the most recent data available from America’s Health Insurance Plans, although there’s huge variation across states.
How do I get the subsidies? The health insurance subsidies are administered as a tax credit, applied annually to the tax burden of each household. Recipients can only use the credits on the health insurance exchanges, the new marketplaces that will launch in 2014 (there is a debate, though, about whether the credits can be used on federally-administered exchanges. For more on that, you can read up here).
It’s also worth noting here that the tax credits are both advanceable and refundable, meaning they’re available to individuals when they purchase coverage (but before they pay taxes) and regardless of whether an individual owes any taxes.
So, do I just get a check to pay for my health benefits? Nope! Perhaps surprisingly, most Americans won’t ever interact with their subsidies. As Tim Jost recently noted in Health Affairs, those subsidies get paid directly to the health insurance plans, rather than the subscriber.
Let’s say my income changes. What income does the government look at? When figuring out who is eligible for what, the federal government will look at a family’s “modified adjusted gross income,” or MAGI in health wonk terminology. MAGI includes any income filed for federal taxes plus foreign income and tax-exempt interest (those last two are traditionally excluded from the federal definition of income).
The challenge here is that taxes only get filed once a year, while income level can change much more often. That’s where the process of “reconciliation” comes in. That's the mechanism by which the government reconciles how much an individual received in health insurance tax subsidies, and how much they were actually eligible for. Here’s an especially helpful explanation, from Jost:
If over the course of the year household income turns out to be greater or less than projected, or if household composition or compliance with other eligibility requirements has changed, the final tax credit may turn out to be greater or less than the amount already paid. If the taxpayer turns out to have been eligible for more than had been paid, the taxpayer gets a refund. If, however, the government has paid more than the taxpayer in fact turns out to be entitled to, the taxpayer must pay the money back.
This all seems pretty confusing. Who is going to explain what this all means for me, specifically? A great question! The health-care law does require states to provide access to “navigators,” individuals who will assist with outreach and help answer questions about best options. There are also non-profit groups, like Enroll America, who are trying to do this kind of work. Insurance agents may also play a role too, given their expertise in the industry.
It’s worth playing around with the Washington Post’s interactive graphic to figure out how the health law affects you.
For those who prefer their news in cartoon form, the Kaiser Family Foundation has put together a fun video that covers much of the information above.