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What’s in the new health care law? Part I: The exchanges

Now that health reform has been passed, we keep getting the same question over and over: “So… what’s in it?”

The short answer:  a lot of stuff. The final legislation was over 2,000 pages and covered everything from changes in the way government pays for wheelchairs to a totally new system for buying insurance. Now that we don’t have to worry that the entire thing will be changed tomorrow, we figured that it’s about time to take a closer look at what all made it into the final version.

There were ten different Titles in the bill, each dealing with a different part of the health care system. Today we’ll start with Title I, which covers the biggest change to the current system: health exchanges and new rules for insurance companies.

Why do we need exchanges?
Right now, if you need to buy health insurance it’s a mess:

  • There isn’t one place to compare all the available plans–to buy insurance you probably do a google search, maybe call a few insurance companies, and hope you get a good deal.
  • If you’re unemployed or don’t make much money, you’ll probably have to buy a crappy plan, if you can afford insurance at all.  If you have a pre-existing condition you’re out of luck.
  • If you come down with a serious illness, it will automatically trigger an investigation by the insurance company– they’ll go through your medical records looking for any excuse to drop your coverage.

Exchange are a more regulated way to buy insurance.

When do the exchanges start?
January 1, 2014.

How will the exchanges work?
An exchange is really just an independent agency that will connect you to insurance. You’ll be able to look on one website or call one phone number to compare every insurance plan in your area.

Four different categories of insurance will be available to everyone: Bronze, Silver, Gold, and Platinum plans. The categories are based on the “actuarial value” of the plans, which if you’re not an actuary, probably means nothing to you.  All you really need to know is that Bronze and Silver plans will have lower monthly premiums, but higher deductibles and copays. Gold and Platinum plans will have lower deductibles and copays, probably cover more extras, but will cost more.

There’s also a fifth category: people under 30 will be able to buy catastrophic coverage. Catastrophic coverage has a very high deductible- it’s only meant to kick in if something serious happens to you. However, the first three primary care visits every year will be free.

Who runs the exchanges?
This is maybe the most complicated part. The House bill would have created one national exchange for everyone, which would have made everything much simpler. A national exchange would be more efficient, easier to regulate, and easier to improve. Unfortunately, a national exchange couldn’t be added through reconciliation.

And so, the final law puts states in charge of setting up and running the exchanges.

  • Every state will have at least two exchanges- one for individuals and one for small businesses with up to 100 employees.
  • However, states will also be able to join together to form larger regional exchanges, if they choose.
  • Or, more than one exchange could operate within a single state- as long as they cover distinct geographic areas and there’s no overlap.

Who’s eligible to buy insurance in the exchanges?
American citizens and legal immigrants.

What will be covered?
Every plan will have to cover certain essential benefits: it’s up to the department of Health and Human Services to decide what exactly those will be, but the new law lays out some guidelines.  In general, plans will have to cover:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care.

Plans DO NOT have to cover abortion.

How much will insurance cost on the exchanges?
It depends. Insurance companies will be able to set their own premiums but there are some rules:

  • They can’t charge more for pre-existing conditions
  • They can’t charge women more than men
  • They can charge older people more, up to three times as much as younger people
  • Smokers can be charged 50% more
  • They can charge more based on where you live, but they have to give everyone in your area the same rate
  • Insurance companies will have to maintain a medical loss ratio of at least 80%- this means 80 cents of every dollar they collect in premiums has to go to paying for care.

Will I have to buy insurance?
Yep. If you don’t buy insurance you won’t go to jail or anything, but you will have to pay a tax penalty. They’re phasing the penalty in gradually during the first few years:

  • In 2014, the year the exchanges start, the penalty is only $95 or 1% of income, whichever is greater.
  • In 2015 it will be $325 or 2% of income
  • Then in 2016 the full penalty kicks in:  either $695 per person, or 2.5% of household income.

What if I can’t afford insurance?
There will be help, based on income:

  • If you make less than 400% of the poverty line (i.e. less than $43,320 for an individual; $88,200 for a family of four) you’ll pay on a sliding scale.  If insurance costs more than a certain percentage of your income, the government will pay the difference.
  • If you make less than $14,400 (or less than $29,327 for a family of four), you’ll be covered under Medicaid.

To see how much you’ll pay in premiums, the nonpartisan Kaiser Family Foundation has a great subsidy calculator. Just type in your income and your age– it spits out a bunch of information, but the line that says “Amount you pay for the premium” is how much you’ll pay for insurance annually if you get the silver plan.

Also, if you can’t find a plan that costs less than 8% of your income, then you won’t have to pay the penalty for not having insurance.

Anything else I should know?

  • Insurance companies won’t be able to reject you for having preexisting coverage, and they won’t be able to take away your coverage just because you got sick.
  • Plans that are sold on the exchange won’t have annual or lifetime limits, meaning that if something serious happens to you, the insurance company won’t be able to stop paying for care just because you hit your annual limit.
  • The new law also limits out of pocket expenses. The most a plan could have you pay out of pocket in a year is $5,950 for an individual, $11,900 for a family. And if you make less than 400% of the poverty line, the limits on out of pocket expenses are even lower.

What if I get health coverage through my job- does any of this affect me?
Not really, although you have to admit it’s nice to know that you’ll be able to get coverage if you lose your job.

Oh, but if you work for a company with more than 50 employees that doesn’t offer health care, they’re going to have to pay a tax penalty. They might start offering coverage so they don’t have to pay the tax.  Small businesses won’t have to pay the penalty, but they will get credits to help them offer insurance to employees. And since the health exchange for small businesses should make it easier for them to find affordable coverage, they might begin to offer coverage too.

How do I know that the exchanges are gonna work?
An interesting part of the new law: members of Congress will be required to get their insurance through the exchanges. They’ll be keeping a close eye on the new program to make sure it works for them.

All right, that’s it for this section. Tommorow we’ll talk about Title II: Changes to Medicaid and SCHIP.

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