Frequently Asked Questions
- Office of Consumer Information and Insurance Oversight’s (OCIIO’s) FAQs
Related to the Affordable Care Act’s market reform provisions organized by subject matter. FAQs and responses prepared jointly by the Departments of Health and Human Services, Labor and the Treasury. Document prepared by Tom Bixby, Thomas D. Bixby Law Office LLC. Download Affordable Care Act FAQs.
- Frequently Used Terms (Glossary)
In the short-term, BCBSMT members’ premiums are not directly impacted by the health care reform law. BCBSMT is doing everything possible to keep premiums low, including lowering our administrative costs, helping members get the right care at the right time from the right provider, and promoting use of generic drug alternatives when appropriate.
It remains to be seen what the impact on premiums will be. People who are sick might face lower premiums because plans will not be permitted to charge sick people more than healthy people. However, healthier people might pay more. Older people could still be charged more than younger people, but the gap may not be as large.
The bigger question is what happens to rising medical costs, which drive up premiums. Even proponents of the health care reform laws acknowledge that efforts in the legislation to control health costs, such as a new board to oversee Medicare spending, won’t have much of an effect, if any, for several years.
No. However, plans will be required to meet specific medical loss ratios, and “excessive” rate increases will be reviewed by HHS in cooperation with state regulatory authorities.
Depending on your income, you might be eligible for Medicaid, the state-federal program for the poor and disabled, which will be expanded sharply beginning in 2014. Starting in 2014, low-income adults, including those without children, will be eligible, as long as their incomes don’t exceed 133 percent of the federal poverty level; which is equivdlent to or $14,404 for individuals and $29,326 for a family of four according to current poverty guidelines.
If you have children, Healthy Montana Kids remains a good option for children who qualify. Learn more at http://hmk.mt.gov/. BCBSMT is a proud partner of the HMK program, which is Montana’s version of the national Child Health Insurance Program (CHIP).
You might be eligible for government subsidies (premium credits) to help you pay for private insurance that would be sold in the new state-based insurance marketplaces called Exchanges, slated to begin operation in 2014. Premium subsidies will be available for individuals and families with incomes between 133 percent and 400 percent of the poverty level ($14,404 to $43,320 for individuals and $29,326 to $88,200 for a family of four).
The package of benefits and mandates incorporated into the health care reform laws is estimated to cost $938 billion over a decade. But because of higher taxes and fees and billions of dollars in Medicare payment cuts to providers, the package is estimated to lower the federal budget deficit by $143 billion over 10 years, according to the Congressional Budget Office.
If you have a high income, you may face higher taxes. Starting in 2013, individuals will pay a higher Medicare payroll tax of 2.35 percent for individuals earning more than $200,000 a year and couples earning more than $250,000, up from the current 1.45 percent. Also, you will face an additional 3.8 percent tax on unearned income such as dividends and interest over the $200,000/$250,000 annual income threshold.
Starting in 2018, the law will also impose a 40 percent excise tax on the portion of most employer sponsored health coverage (excluding dental and vision) that exceeds $10,200 a year for individuals and $27,500 for families. The tax is often referred to as a “Cadillac” tax.
The law also will raise the threshold for deducting unreimbursed medical expenses from 7.5 percent of adjusted gross income to 10 percent for those people who itemize their deductions when determining their income taxes.
The law also will limit the amount of money you can put in a flexible spending account to pay medical expenses to $2,500 starting in 2013. The law also disallows paying for over-the-counter medication with flexible spending account dollars unless those medications were prescrided by your physician or is insulin.
Coverage – General
If you are with BCBSMT, your coverage will continue to be high quality and provide you with easy access to in-network providers. The BCBSMT provider network is one of the most expansive in the state, including more than 95 percent of Montana’s doctors and medical providers and 100 percent of Montana hospitals.
If there are no longer exclusions that deny access to insurance for people with preexisting medical conditions, will there be a waiting period for preexisting conditions?
This provision does not apply to all policies until 2014. In 2014 there may still be open enrollment periods for individuals to purchase insurance. If a person does not purchase his or her insurance during the open enrollment period, it is possible that waiting periods could apply.
Under health care reform requirements, most Americans must have insuranceeither through individual coverage or emplyoer provided coverage, by 2014 or pay a penalty. The penalty would start at $95, or up to 1 percent of income, whichever is greater, and rise to $695, or 2.5 percent of income, by 2016. This is an individual limit; a family penalty limit of $2,085 would apply, also starting in 2014. Some people can be exempted from the insurance requirement, called an individual mandate, because of financial hardship or religious beliefs or if they are American Indians, for example.
How will health care reform affect the kind of insurance I can buy? Will it make it easier for me to get coverage, even if I have health problems?
If you have a medical condition, health care reform will make it easier for you to get coverage. Plans will be barred from rejecting applicants based on health status once the Exchanges are operating in 2014. In the meantime, the law will create a temporary high-risk insurance pool for people with medical problems who have been rejected by plans and have been uninsured at least six months. The Montana Comprehensive Health Association fulfills this role in Montana. Learn more at www.mthealth.org or call 1-800-447-7828, Extension 2128.
Starting in 2010, insurers cannot impose a pre-existing condition exclusion on coverage of children under 19 years of age. Additonally, they can no longer set lifetime coverage limits on essential benefits for adults and children. In 2014, annual limits on coverage will be banned. Insurers may still impose lifetime and annual limits on “non-essential benefits.” The federal government has yet to issue an exact definition of what benefits will fall within the “essential benefits” category.
New policies sold on the Exchanges beginning in 2014 will be required to cover a range of benefits, including hospitalizations, doctor visits, prescription drugs, maternity care, and certain preventive tests.
Coverage – 26 Years Old and Under
If you’re an adult, but younger than age 26, you can generally stay on your parent’s insurance coverage.
In addition, starting in 2010 individuals in their 20s will be given the option of buying a “catastrophic” plan that will have lower premiums. The coverage will largely only kick in after the individual has increase $6,000 in out-of-pocket expenses. Updates will be provided by BCBSMTas more information becomes available about this coverage option.
Does health care reform require issuers in the individual health insurance market to offer children under 19 non-grandfathered family and individual coverage at all times during the year?
No. To address concerns over adverse selection, issuers in the individual market may restrict enrollment of children under 19, whether in family or individual coverage, to specific open enrollment periods if allowed under state law. This is not precluded by applicable health care reform regulations.
For example, an insurance company could set the start of its policy year for January 1 and allow an annual open enrollment period from December 1 to December 31 each year. A different company could allow quarterly open enrollment periods. Both situations assume that there are no state laws that set the timing and duration of open enrollment periods.
How often must an issuer in the individual market provide an open enrollment period for children under 19?
Unless state laws provide othewise, issuers in the individual market may determine the number and length of open enrollment periods for children under 19 (as well as those for families and adults). The federal government, in partnership with states, will monitor the implementation of the preexisting condition exclusion policy for children and issue further guidance on open enrollment periods if it appears that their use is limiting the access intended under the law.
How do these rules affect existing enrollment requirements in States that already require guaranteed issue of coverage for children under 19 in the individual market?
If a State requires continuous open enrollment or requires issuers to maintain an open enrollment period of a particular length or open enrollment periods of a particular frequency, then the State requirement will apply. The State law is not preempted by any current federal requirements.
“Premium assistance” programs allow States to provide payments to help people eligible for Medicaid and Children’s Health Insurance Programs (CHIP) enroll in private coverage. Won’t the policy to
ban pre-existing condition exclusions in new plans for children lead cash-strapped States to steer high-cost children into individual market policies for children as a way to limit their own liability?
Federal law prohibits Medicaid and CHIP from denying children coverage based on their health status. Moreover, it limits the extent to which these programs can provide payment to support coverage in individual market policies. “Premium assistance” programs in CHIP allow States to provide payment to private policies to cover children if doing so both protects children and is cost effective to the Federal and State governments. Premium assistance is not designed as a strategy to transfer vulnerable children to individual market coverage. The federal government will enforce its current policies on premium assistance and consider new ones if evidence emerges that children with preexisting conditions are being diverted inappropriately from Medicaid or CHIP to private insurance plans that are required to offer guaranteed issue to children regardless of their health status.
Coverage – Over 65 Years Old
The Medicare prescription-drug benefit will be improved substantially. Seniors who enter the Part D coverage gap, known as the “doughnut hole,” will receive $250 a year from the federal government to help pay for their medications.
Drug company discounts on brand-name drugs and federal subsidies and discounts for all drugs will gradually reduce the gap, eliminating it by 2020. That means that seniors, who now pay 100 percent of their drug costs once they hit the doughnut hole, will eventually pay no more than 25 percent of their drug costs out of pocket.
And, as under current law, once seniors spend a certain amount on medications, they will get “catastrophic” coverage and pay only 5 percent of the cost of their medications.
Meanwhile, government payments to Medicare Advantage, the private-plan part of Medicare, will be frozen starting in 2011, and cut in the following years. If you’re one of the 10 million enrollees, you could lose extra benefits that many of the plans offer, such as free eyeglasses, hearing aids, and gym memberships. To cushion the blow to beneficiaries, the cuts to health plans in high-cost areas of the country such as New York City and South Florida — where seniors have enjoyed the richest benefits — will be phased in over as many as seven years.
Health care reform makes all Medicare preventive services, such as screenings for colon, prostate, and breast cancer, free to beneficiaries.
As an employer, how can I calculate my potential health insurance savings with the new Small Business Tax Credit?
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It depends on the size of your firm. Companies with fewer than 50 workers will not face any penalties if they don’t offer insurance.
Companies can get tax credits to help buy insurance if they have 25 or fewer employees and a workforce with an average annual employee wage of up to $50,000. Tax credits of up to 35 percent of the cost of premiums will be available initially and will reach 50 percent in 2014. Full credits are available for the smallest firms with lower-wage workers. Subsidies shrink as companies’ workforce numbers and average wages increase.
A cafeteria plan is a written benefit plan maintained by an employer under which all participants are employees and each participant has the opportunity to select the particular benefit that he or she desires among a range of offered benefits. Under a cafeteria plan, employees may choose among two or more benefits consisting of cash (a taxable benefit) and qualified nontaxable benefits. A common qualified nontaxable benefit is coverage under an accident or health plan.
A cafeteria plan can be funded by employer or employee contributions or a combination of both. Employee contributions for qualified benefits under a cafeteria plan generally are made on a pre-tax basis through salary reduction.
Cafeteria plans are subject to various rules, including what are called “nondiscrimination rules.” Generally, this means that a plan may not discriminate in favor of highly compensated individuals as to eligibility for the plan or as to contributions and benefits.
The health care reform laws provide for a “safe harbor” from the nondiscrimination requirements for cafeteria plans for small employers. The safe harbor would require that the cafeteria plan satisfy minimum eligibility and participation requirements and minimum contribution requirements.
The health care reform laws also establish a new simple cafeteria plan. Eligible employers for the cafeteria plan are those that employed an average of 100 or fewer employees on business days during either of the two preceding years.
Participation requirements for a simple cafeteria plan are met if:
(1) All employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate, and
(2) Each employee eligible to participate in the plan may, subject to terms and conditions applicable to all participants, elect any benefit available under the plan.
The contribution requirements are met if the employer is required to make a contribution to provide qualified benefits under the plan on behalf of each qualified employee in an amount equal to, (and without regard to whether a qualified employee makes any salary reduction contribution):
A uniform percentage (not less than 2 percent) of the employee’s compensation for the plan year, or an amount that is not less than the lesser of:
(1) Six percent of the employee’s compensation for the plan year; or,
(2) Twice the amount of the salary reduction contributions of each qualified employee.
Questions Raised During BCBSMT’s Healthcare Reform Road Shows
Yes. The changes that would cause loss of grandfathered health plan status typically are those that are made to the group or individual health plan itself (for instance, a change in benefits or an increase in the amount of cost sharing a member must bear). Because a change in a stop loss carrier does not impact the health plan itself, a change in a stop loss carrier should not cause a plan to lose grandfathered status. Additionally, on November 15, 2010, federal regulators issued an amendment to the grandfathering regulations clarifying that a group’s change of insurers (for new or renewing coverage on and after November 15, 2010) will not cause loss of grandfathering status for the group’s health plan. Therefore, if there was any lingering doubt before about whether a fully-insured group could change stop loss carriers and remain grandfathered, this most recent amendment to the grandfathering regulations should put that concern to rest.
The health care reform law requires that those non-grandfathered health plans which provide benefits for emergency services, cover such services without requiring prior authorization and, in the case of a non-participating provider (if the plan has a provider network), without imposing any limitation of coverage that is more restrictive than would be applied to a participating provider and at the same level of cost sharing that would apply to services provided by a participating provider.
This requirement is applicable to emergency services provided by the emergency service department of a hospital, and includes medical screening examinations, ancillary services routinely available to the emergency department to evaluate an emergency medical condition and any further medical examination and treatment, within the capabilities of the staff and facilities available at the hospital, necessary to stabilize the patient.
The health care reform laws contain several provisions that expand eligibility for and protect the Medicaid program. However, as far as we currently understand the law, none of the healthcare reform law’s immediate insurance market reforms apply to Medicaid coverage.
One of the immediate insurance market reforms contained in the new health care reform law requires non-grandfathered health plans to allow its female members to access OB/GYN services without requiring a referral from the members’ personal care physicians. This requirement would not apply to Medicaid. As far as we currently understand the law, none of the healthcare reform law’s immediate insurance market reforms, including the OB/GYN requirement applies to TRICARE coverage.
Does the mandate requiring large employers to provide coverage for their employees, also extend to providing coverage for employee dependents?
No. The health care reform law does not require large employers to provide coverage for employee dependents.
Not necessarily. The health care reform law will require ‘applicable large employers’ to provide certain minimum health coverage to their employees starting in 2014 or be assessed penalties for a failure to provide such minimum coverage. ‘Applicable large employers’ are those that have more than 50 employees. However, any workers who worked for the company for 120 days or less as seasonal employees will not count towards determining whether the employer employed more than 50 employees. A ‘seasonal worker’ is one who works on a seasonal basis. According to applicable federal regulations, ‘labor is performed on a seasonal basis if, ordinarily, the employment pertains to or is of the kind exclusively performed at certain seasons or periods of the year and which, from its nature, may not be continuous or carried on throughout the year.’
Whether a worker is seasonal or temporary will depend on the nature of the work being performed and must therefore be examined on a case-by-case basis. For example, an individual who is hired to sell Christmas trees would be seasonal and could also be considered a temporary employee. On the other hand, an individual who is hired for a limited period to reorganize a filing system is temporary but would not be seasonal because the nature of the job is not one that is exclusively performed at certain seasons or periods of the year.
The health care reform law defines an ‘applicable large employer’ as one who employed more than 50 full time employees on business days during the preceding year. The law is silent as to whether the number of days that seasonal workers were employed is business days or calendar days. However, since the definition of ‘applicable large employer’ looks to how many employees were employed on business days, the exemption for seasonal workers would likely be based on business days as well.