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A Patient’s Guide to the Affordable Care Act

Now that the “Affordable Care Act” (also known in the media world as “Obamacare,” a term the president says he deservedly takes great pride in), is the “law of the land,” what does that mean for you and your family? We researched the viewpoints of dozens of experts—doctors, nurses, hospital administrators, public-health advocates, insurers—and asked them to help us explain it all to you. (Click on the questions below to reveal the answers.)

Question 1: You think you can explain the Affordable Care Act? Really? Where do you even start?

Here’s what you have to know: As of January 1st, 2014, most Americans will be required to have health insurance or pay penalties. Most employers will have to provide insurance or face penalties. The states and the federal government are setting up exchanges to make shopping for insurance easier, and to let you see if you qualify for a tax credit toward your premium.

Question 2: I’m scared my company will stop offering health insurance once the ACA kicks in. Could that happen?

Forecasts about what employers will do once the exchanges come online in October vary wildly. One survey found that zero out of 512 companies planned to drop health insurance, while another poll of 1,300 employers reported that 30 percent would. The problem with surveys that ask about future economic decisions, experts say, is that companies don’t actually make those decisions until they have to.

Here’s what we do know: Census Bureau data says employer-backed coverage for those under 65 eroded in nine of 10 years between 2000 and 2010, with only 58.6 percent of employers offering it in 2010. Employers have been dropping coverage because it’s unaffordable, and this will continue regardless of the ACA, said a health management and policy professor. It’s possible now that some employers will drop it and blame the ACA for their decision.

The ACA makes dropping employee insurance almost a no-brainer. While it costs an average of $15,000 for an employer to provide insurance for a worker plus family, the employer will only pay a $2,000 penalty per employee for dropping coverage—a savings of $13,000 a pop. What’s more, the penalty only applies if the employee goes to the exchange, gets a policy and gets a subsidy. If the employee stays uninsured—or goes to the exchange and doesn’t qualify for a subsidy—the employer is off the hook.

But numbers don’t tell the whole story. What will ultimately stop many employers from dropping coverage—and has stopped them to this point—is the need to remain competitive in the labor market and attract the best employees. In fact, 87 percent of employers in one survey said they offer coverage to retain good workers. Theoretically, the tipping point would be if a large number of employers decided at the same time to drop coverage, effectively removing the benefits incentive from the table. Doing so, of course, would require a seriously organized effort.

Question 3: Will the insurance plan I have through my employer change?

Technically, no. The Affordable Care Act doesn’t mandate that employers have to change the insurance plans they offer to employees. In fact, a grandfather clause in the ACA states that plans that existed before the law was passed are exempt from many of its provisions—so long as those plans only undergo modest, routine changes. If your employer should make significant changes to your plan, such as cutting benefits or increasing your co-pays, it would no longer qualify for grandfather status, so your employer would need to offer you a new plan. In 2010, the Obama administration estimated that about half of employer plans would lose grandfather status by the end of this year.

Question 4: What are the “essential health benefits” that everybody’s talking about?

The term refers to a core package of health-care services, defined by the federal government, that’s required of all individual and small-group plans created since the passage of the ACA in March 2010. (Large-group and employer-provided plans are exempt; most already include these benefits.)

The EHB designate 10 broad service ca­tegories—emergency services, maternity and newborn care, prescription drugs, ambulatory patient services and more—but it’s up to the states to decide what specific services fall within each category. Twenty-two states went with a default option for deciding, as defined in the ACA.

Question 5: I’ve shopped for health insurance before, and it was one big headache. Will the ACA change that?

In theory, yes. Health insurance exchanges are online marketplaces intended to make insurance shopping easier by allowing for side-by-side plan comparisons based on quality and price. All policies offered on the exchange must include the essential health benefits, and there are caps for out-of-pocket expenses. Plans will be categorized in tiers according to their cost-sharing structure:

  • Bronze for lower-priced plans in which the insurer pays 60 percent of costs and you pick up 40 percent.
  • Silver for plans with a 70-30 cost-sharing split.
  • Gold for plans with an 80-20 split.
  • Platinum for plans with a 90-10 split.

Another plus: You’ll only have to fill out one application—a draft version posted online in March ran 15 pages for a family of three, and the government estimated it would take up to 30 minutes to complete—and if you qualify, you’ll see how much of a tax credit you’re eligible for right after you submit it. The exchanges will also include online calculators, glossaries and other resources.

Question 6: Washington state will have state run exchange beginning at the Website wahealthplanfinder.org How will that differ from the federally-run exchanges?

There will be little difference on the front end between state-run and federally-run programs; both will include policies at various coverage and price levels, and use standard enrollment forms, marketing strategies and more. The difference is the back end, which will be managed by states, the feds, or a combination of both. (Under the ACA, states can reevaluate this choice each year.)

Question 7: I’m happy my 25-year-old son can stay on my insurance. But what happens when he turns 26? His employer doesn’t offer insurance.

The Washington state age limit is still 26 for children, so beginning in January, your children older than this will be able to get coverage through the exchange. If your son makes around $43,000 or less a year, he’ll be eligible for tax credits to help him pay for it. The credits can be applied to his premium each month, so he doesn’t have to wait until tax time for a rebate. If he’s really cash-strapped and willing to take a bit of a gamble, your son can get catastrophic coverage until age 30; it covers the essential health benefits and three visits with a primary-care doctor each year. Note that while his monthly premiums will be lower, cost-sharing for expenses beyond the covered benefits (if he needs an emergency appendectomy, say, or breaks his arm skiing) will be higher than under more comprehensive plans.

Question 8: I am not yet a patient of Member Plus Family Health and it can take me three months to get an appointment with my doctor. Will I be able to get in faster once the ACA goes into effect?

Not likely, because there will be 29 million newly-insured people seeking out primary care docs (PCPs). With only one in three doctors now practicing primary care medicine, the Association of American Medical Colleges estimates we could face a shortage of 21,000 PCPs by 2015, swelling to more than 45,000 in a decade. Many older doctors are heading for retirement, and there aren’t enough med students choosing careers in primary care to fill their spots. While the ACA aims to create more primary-care residency slots through financial incentives and loan forgiveness for PCPs, some say it doesn’t do enough.

Question 9: If I can’t get in to see my primary-care doc, who is going to take care of me?

Under the new “patient-centered medical home” model, your PCP will be like an air-traffic controller, orchestrating and managing your care with other providers and ultimately saving money by eliminating redundancies (you won’t need two MRIs for two different specialists, for example), increasing patient safety, and encouraging patients to be more involved in wellness and prevention.

Question 10: My insurance premiums just keep going up. Will the ACA do anything about that?

Probably not. In fact, it may make the predicament worse. Part of the problem, many experts say, is that the ACA doesn’t do much to address the underlying driver of insurance premium inflation-—that is, the actual cost of health care. We spend an average of $8,233 per person annually on health care in the US, which is more than two and a half times the spending of most developed nations; and what’s worse, our health quality measures in many cases are not as favorable.

On top of that, the ACA requires a new health-­insurance tax and minimum coverage levels, and outlaws discrimination based on preexisting ­conditions-—all changes that will push premiums up.

The Obama administration says there are enough provisions in the law to hold down premiums, including the health exchanges, which it says will keep insurers competitive. There are also measures to shield younger consumers from rate spikes, like allowing them to stay on their parents’ insurance and offering wage-based tax credits. In the meantime, the administration is keeping a close eye on premiums, announcing in March that all requests for rate increases will be subject to review. The intention is to monitor market disruption now and tweak policies as needed before the meat of health-care reform goes into effect in January.

Question 11: Say I had to go to an out-of-network ER for chest pains. Will I have to pay extra fees?

According to the letter of the law, no, but there’s a catch. The ACA forbids insurers from charging higher co-pays or co-insurance amounts for out-of-network ER visits, and from imposing coverage limits that don’t exist for in-network care. However (and here’s the rub) nothing in the law prohibits hospitals from billing you later for any services your insurance doesn’t cover. This is called “balance billing,” and many states currently prohibit such billing for out-of-network care.

Question 12: My friend’s birth control pills are free and mine aren’t. Why the discrepancy?

The ACA’s contraception coverage provision went into effect last August, with insurance companies obligated to offer birth-control measures such as oral birth-control pills, emergency contraceptives (i.e., the morning-after pill) and sterilization at no cost to consumers. It applies to most insurance plans, except those offered through certain religious organizations. (The Obama administration and faith groups have been fighting over the religious exemption.) But the ACA didn’t mandate that all pills and methods be free; your insurer decides which prescriptions are covered. If your pills still require a co-pay and you don’t work for a religious organization, chances are your brand isn’t among those your insurer covers at no cost. Get a list of your insurer’s no-cost pills, then talk to your doctor about switching.

Question 13: I smoke. I’ve tried to quit, but I just can’t. Will the ACA help me?

Yes and no. The ACA requires your insurer to cover tobacco cessation as a no-cost preventative service. But if you don’t quit, your insurer can levy a penalty, charging up to 50 percent more for your premiums starting in January. And if you qualify for a low-wage tax credit for an individual plan through the exchange, you can’t use it to offset the smoking penalty—-just the premium. Experts worry many smokers will be priced out of health coverage.

Question 14: I’m young and single. I don’t get sick. I’m not going to buy insurance. What can the government do to me?

It depends. If buying insurance would cost you more than eight percent of your income even with the tax credits, you’re exempted. But if you can afford coverage and choose not to buy it, you’ll owe penalties when you file your taxes. Starting with your 2014 return, you’ll owe the greater of $95 or one percent of your taxable income; this maxes out in 2016 at $695 or 2.5 percent. (Penalties are higher for families.) Although it’s unclear what the IRS can do if you don’t pay those penalties—the ACAforbids using aggressive tactics to collect them—it can withhold tax refunds from you.

Question 15: I’m unhappy at my job. But I have diabetes, and if I quit, I won’t be able to get health insurance — right?

Wrong. There must be a lot of people with preexisting conditions who hate their jobs, because so many of the experts we talked to mentioned this point. “People stay at jobs they hate because they’re afraid they won’t be able to get insurance,” says advocate Carol Rogers. As of January 1st, you’ll be able to leave that job you hate and still afford coverage through an exchange, since charging more for those with preexisting conditions will be banned. “This provides a safety net,” says Penn’s Daniel Polsky. “There will be no gap in coverage” while you look for another job.

Question 16: My six-year-old was born with a heart defect. We’re already bumping up against our lifetime limit to pay for her care, and the doctor says she needs three more operations. Is there help for us?

So long as your plan isn’t grandfathered, rejoice: The ACA abolished both annual and lifetime coverage limits as of January 1, 2014.

Question 17: The government does a “so-so” job of running Medicare and Medicaid. Why should I think it will do a decent job with Obamacare?

There’s a lot of fraud and not a lot of innovation when it comes to the government’s health-care programs. But the new Center for Medicare and Medicaid Innovation, set up by the ACA, should help. It tests new service delivery and payment models and evaluates results, and is already paying off. In 2012, Medicare spending per beneficiary increased just 0.4 percent—and those costs have trended downward for the past three years. What’s more, the Congressional Budget Office (CBO) just slashed its projections for year 2020 Medicare and Medicaid spending by 15 percent, because the programs have seen their lowest rates of growth since the government started keeping records in 1960. And DOJ/DHHS investigations of Medicare and Medicaid fraud racked up $4.2 billion in fines last year, up from $4.1 billion in 2011. Eighty percent of all seniors agree that “Medicare is working well.

Question 18: My wife has suffered from depression for years. Does the ACA do anything for her?

They’re not officially a part of the ACA. Rules issued by the Department of Health in connection with the ACA have clarified what insurers must provide in the way of mental health coverage — clarification that patients and a­dvocates have been waiting for ever since passage of the 2008 Mental Health Parity and Ad­diction Equity Act. The changes will provide access to mental-health coverage for 32 million people who never had it before, and improve coverage for another 30 million. Insurers are now required to treat mental health serv­ices the same way they do services for physical health, with comparable co-pays, benefits and deductibles.

Question 19: I used to put $5,000 a year into my health-care flexible savings account. Now I can only put away half that. Why the change?

A couple of reasons. One, your FSA funds are pre-tax dollars, and the government needs all the money it can get. Second, under the IRS’s “Use it or lose it” rules, FSA money you squirrel away but don’t spend gets forfeited at the end of the year. Which leads to the third reason: Every December, doctors and surgeons see a flood of patients determined to use the last penny of their FSAs before the year ends, even if they don’t really need that new knee—or nose. The lower limit should help discourage such unnecessary health spending.

Question 20: Should I worry about having all my medical history stored electronically?

Maybe. How paranoid are you? Chances are your doctor’s office already has a computerized system; starting in a couple years, the ACA requires all physicians and hospitals to have switched. Under HIPAA rules as they’ve existed since 1966, doctors and hospitals always try to take the strongest possible security measures with your health information. Of course, any electronic system is potentially vulnerable to hacking. But Americans have been yielding their most intimate financial data to the IRS electronically for decades now. Chances are we’ll get used to this, too.

Question 21: I keep hearing that the ACA is going to kill small businesses. Will it?

Before the ACA, half of America’s uninsured were small-business owners and employees and their dependents. Premiums for small-business owners offering insurance rose by 123 percent from 1999 to 2009, and the percent providing coverage fell from 65 to 59. One of the main goals of the act was to provide these groups with affordable coverage. As of next year, small businesses with more than 50 employees that don’t offer acceptable health-­insurance plans will pay a penalty; those with up to 100 employees (or 50, in some states) can buy insurance for employees on the exchanges. Small businesses can get tax breaks of up to 35 percent of their share of premiums if they have fewer than 25 full-time employees (25 percent for nonprofits), increasing to 50 percent (35 for nonprofits) next year. Writing in Forbes, contributor Charley Moore said of the act’s impact: “[T]here is nothing to suggest that the health-care shakeup will hinder job creation and economic growth.” Penn’s Daniel Polsky expects it to spur entrepreneurship: “People who want to take risks and start a small business will be able to provide insurance for employees. There’ll be more competition for your business, and you’ll get a better price.”

Question 22: My 83-year-old mother is doing okay, but she takes a lot of medications and is paying extra for her Medicare Advantage plan. What will the ACA do for her?

If all goes as hoped, she’ll benefit from better coordinated and organized care; all her caregivers will know what the others are doing, to help avoid overmedication and drug interactions. The ACA phases out the prescription-drug “doughnut hole”; according to the Kaiser Family Foundation, “By 2020, Part D enrollees will be responsible for 25 percent of the cost of both brands and generics in the gap, down from 100 percent in 2010.” The potentially bad news is that to pay for insurance for the uninsured, the act is cutting funding for Medicare Advantage, through which 28 percent of seniors get private insurance. The government hopes to shift some of those seniors from Medicare Advantage to Medicare to save costs.

Question 23: With all the controversy over kids and vaccines, what does the ACA cover?

As part of its emphasis on preventive care, the ACA ­mandates that all the usual childhood vaccines—DTP, flu, polio, measles, chicken pox, etc.—as well as those for meningitis and HPV be free, with no co-pay, coinsurance or deductible, when given in-network. Adult shots are covered, too; for more on free services, go to healthcare.gov.

Question 24: We have health insurance through my husband’s employer. We’ve had it for years. Now his company says he and our kids will be covered under his plan, but I no longer will! Can they do that?

They can—and more and more will, to save costs. Under the ACA, this year, employers must pay a “per life” fee of just a dollar or two on each person insured under an employee’s policy. That fee shoots up to $65 next year. While the ACA mandates coverage of children up to age 26, it doesn’t require coverage of a spouse. A fifth of all employers now discourage spouses from enrollment, mostly by charging extra fees—an average of $100 a month. But last year, 10 percent of “large” and “huge” companies cut spousal coverage altogether. Insurance-industry experts expect that percentage to increase as insurance exchanges open. Employers justify the practice by noting that spouses are most often wives, and women use health care more and cost more to insure. Ironically, the ACA outlaws “gender rating,” or charging women more than men for identical insurance benefits, starting in 2014.

Question 25: I belong to a union, and I have top-notch health insurance benefits—no co-pays, no caps, no deductibles. What’s in the ACA for me?

Starting in 2018, so-called “Cadillac” insurance plans like yours will be subject to an excise tax, to be paid by insurers. Right now, you don’t get taxed for health insurance. This has led to people getting more of their income through health insurance. Plans have become bloated as a way of avoiding taxes. It’s not just hedge-fund managers and Wall Street titans who have Cadillac plans; it’s union members, government workers and university employees, too. The tax will start out at 40 percent of the amount of the combined employer and employee contributions of premiums of more than $10,200 for an individual and $27,500 for a family (not including vision or dental coverage), with annual increases for inflation thereafter. The idea is to discourage you and other Cadillacs from getting unnecessary medical care just because it’s covered by your plan. So expect that top-notch health care to become less awesome.

Question 26: Granted, I’m pretty well off, but in January, my paycheck shrank—and I’m not talking about the fiscal-cliff stuff. What’s going on?

January 1st brought a 0.9 percent hike (from 2.9 percent to 3.8) in the Medicare tax for individuals making more than $200,000 and couples making more than $250,000. There’s also a new Medicare tax of 3.8 percent on your unearned income—either your net investment income, or your modified adjusted gross income above those same limits, whichever is less. Congratulations! You’re in the top four percent of all taxpayers!

Question 27: My housekeeper is here illegally from Honduras. Will she finally be able to get health insurance?

Sorry, no. “Undocumented immigrants aren’t covered by the act.

Question 28: I’ve always deducted my medical expenses on Schedule A, since they’ve always been at least 7.5 percent of my adjusted gross income. Suddenly, my accountant says the threshold is 10 percent. Is she right?

She is if you’re under 65—and come 2017, the new set point will apply to everybody. Only some six percent of taxpayers utilized the deduction at 7.5 percent, and like most tax breaks, it favored the wealthy. The change is expected to raise $23 billion over the next decade to help pay for the ACA. (Paying the Alternative Minimum Tax? The threshold remains 10 percent.)

Question 29: I got a raise from my boss this year. (He doesn’t offer me health insurance.) But next year, he says, he’ll cut my salary and start up an employer-matching pension plan. He swears this will save us both money. How?

Since the ACA uses your wages and salary to determine whether you’re eligible for tax credits toward paying for insurance bought through the exchange, it makes tax sense to keep that total low. Contributions by your employer to a pension plan are exempt from payroll and personal income taxes; you’ll pay taxes on that money when you retire and your tax bracket is, presumably, lower. So putting money that would have gone to a raise into a pension plan does benefit you, if it keeps you below the threshold at which you can get premium assistance—and benefits your employer as well, since he won’t have to pay as much payroll tax.

Question 30: What’s wrong with the American health-care system! Isn’t it the greatest system in the world! Why did the President have to go and mess with it?

Last year, a report by the Organization for Economic Cooperation and Development (OECD), which has 34 member nations, showed that while Americans spend two and a half times more on health care than similar European states, we get far from superior results: We don’t live as long, we’re fatter, we’re hospitalized for asthma twice as often, we have more cesarean births and coronary bypasses. … We spend 17.6 percent of our GDP on health care, compared to an average in OECD nations of just 9.5 percent.

True, we lead the world in medical research and some cancer outcomes. But everything related to health care costs more here—often much, much more. The average hospital stay rings up at $18,000, compared to the OECD average of $6,200. The ACA is a very complicated act but if we all get behind it and work on it while we keep the values of the best patient care, we hope to wind up with a better system.

Portions of this FAQ were excerpted from information published in Philadelphia Magazine, May 2013.

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