A close-up view of the Affordable Care Act

By Jeff Bahr

With a positive nod from the Supreme Court on June 28, the Affordable Care Act (ACA) has now become the law of the land. In the end, the vast majority of the plan remained intact – save for the “limiting” of the Medicaid expansion.

Major changes are slated to take effect on Jan. 1, 2014. At this point, individual states are required to have health insurance exchanges set up for uninsured people to purchase coverage. According to the precepts of the plan such exchanges must operate in a nondiscriminatory way. Put another way, people with pre-existing medical conditions will be as welcome as anyone else, and subsidies will be provided to those who lack sufficient finances to obtain such coverage.

Like any piece of sweeping legislation, the Affordable Care Act invites probing questions and closer scrutiny. Just how will this new law affect the average citizen living in these United States? Let’s take a look.

For the unemployed and others who can’t afford healthcare

Starting in 2014, Medicaid will expand to cover people who are under 65 and earn income up to 133 % of the federal poverty level ($30,657 for a family of four in 2012). Families who earn between 100 and 400 % of the federal poverty level ($92,200 for a family of four in 2012) will be eligible for tax credits to help offset the costs of insurance plans secured through state-run exchanges.

Medicaid limited expansion ruling

One possible fly in the ointment, however, is the limiting of Medicaid expansion under the Supreme Court’s ruling. Expansion has now become an option for each state – not a requirement as it was originally cast. No one is completely certain what impact this decision will have over the long term, but this much is known: If a state opts to take advantage of Medicaid expansion, the ACA will provide enhanced federal matching funds – paying 100 % of the cost of expansion enrollees for 2014-2016 and up to 90 % thereafter. If a state declines, the same group of people will receive federal premium subsidies on a sliding scale, but will not benefit from cost-sharing caps available to those receiving subsidized premiums.

Is anything else limited in Medicare expansion ruling?

No. The rest of the law stands. Most importantly, states must set up health insurance exchanges. If they fail to do so, the federal government can step in and operate the exchanges itself.

For retirees receiving Social Security who purchase prescription drugs

Under the new law, the infamous Medicare drug coverage gap known as the “doughnut hole” will at first shrink dramatically and eventually be eliminated. This prompted praise from the AARP, who stand firmly behind the law. “(The) AARP supported this law because it helps many Medicare recipients avoid financially burdensome increases in prescription drug costs by closing the Medicare prescription drug coverage gap, or “doughnut hole,” reads a declaration on AARP’s website.

Help on this area arrives on two fronts. Pharmaceutical companies will be required to extend a 50 % discount on brand name drugs to anyone receiving Social Security benefits. Federal subsidies will fill in the rest of the gap by 2020.

For people who already have healthcare insurance

The Congressional Budget Office (CBO) estimates that private health insurance premiums will increase by approximately 5.7 % each year, from 2012- 2020. Estimates provided by the CBO show that, relative to what would have occurred in the absence of the law, premiums in the individual insurance market would rise a little higher. For those working in large companies who are currently receiving employer-sponsored healthcare, premiums will be a bit lower. Employees enrolled in company sponsored healthcare plans at small firms (50 or less employees) will see their premiums stay about the same.

Will higher taxes arise as a result of this law?

The ACA will affect some people who are covered through their employers, especially those in higher tax brackets. Starting in 2013, Medicare tax will be increased by 0.9 % on earnings over $200,000 for individual taxpayers and $250,000 for married couple filing jointly. Additionally, a 3.8 % tax will be imposed on unearned income for high-income households.

What penalties will people be subject to if they don’t purchase coverage? And when will such penalties take effect?

By 2014, most Americans will be required to have health insurance. Federal penalties will be in place to make sure that people comply with the new law. According to the Commonwealth Fund, the penalty will be $95 or one % of taxable income whichever is greater. This penalty rises to $325 or 2.5 % of taxable income in 2016, up to a maximum of $2,085 per family.

How will the ACA effect small-businesses?

Employers with less than 50 employees are exempt from penalties that would otherwise be imposed upon them if they didn’t cover their workers. Companies with 25 employees or less that pay average annual wages below $50,000 and provide health insurance to employees will be eligible for a “small business tax credit” of up to 35 %. In 2014, the tax credit will rise to 50 %.

How can I learn more?

A good starting point is a visit to the official federal government website at: www.healthcare.gov. Managed by the U.S. Department of Health and Human Services, the site reviews insurance options, provides tools for the comparison of plans and physicians, and details the ACA’s effect on individual consumers and their unique situations.

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