In my book The Complete Guide to the Affordable Care Act, I discuss the Act in great detail. In this article I give you an excerpt from the book discussing the Health Exchanges.
An important provision of the Affordable Care Act is the creation of Health Insurance Exchanges. These exchanges are a set of government regulated and standardized health care plans from which individuals may purchase health insurance eligible for Federal subsidies. All exchanges will be fully operational in January 2014. These exchanges are intended to help insurers comply with consumer protections and to compete in cost effective ways. The other intention is to facilitate the expansion of insurance coverage to more people. It is important to note that exchanges are not insurers, but they do determine the insurance companies that are allowed to participate in them. Primarily the Exchanges’ objective is to help individuals and small businesses will less than 100 employees, purchase health insurance at reasonable rates. The theory behind Health Care Exchanges is the same theory that large employers and the government currently have with their insurance. The larger the population purchasing insurance from insurance companies, the lower the rates for the consumer. The Exchanges or Marketplaces, will allow individuals and small businesses to compare health plans side by side, and help them find out if they are eligible for tax credits for private insurance or other health programs.
These exchanges are to be run by the States. Under the Affordable Care Act, States had until December 14, 2012 to inform the Federal Government whether they intended to set up their own exchanges. Nineteen States have declared that they intend to participate in running their own Exchanges, seven States are planning to partner with the Federal Government on running their exchanges, and twenty five States will default to having the Federal Government run the Exchanges for them.
The Department of Health and Human Services has mandated an open enrollment period for these Exchanges that will initially begin October 1, 2013 and run until February 28, 2014. After this initial enrollment period, open enrollment will be from October 15th through December 7th each year. The intention of extending the initial enrollment period is that individuals and families will need the additional time to understand their new plan options. Further, it will allow them more time to enroll in coverage when the exchanges initially begin. Another reason that the initial period is extended is that it will spread out the work of the States and Federal Government who will be enrolling millions of new beneficiaries in the initial phase. During the open enrollment, individuals will be free to sign up for any plan, or switch coverage from their current plan. The Affordable Care Act would restrict people’s ability to switch or enroll in coverage plans outside of the enrollment period.
The mandate on the enrollment period ensures that individuals and families won’t wait until they have fallen ill to enroll in coverage. In addition, it will ensure that people don’t switch to a plan that provides more comprehensive coverage when they are about to have an expensive medical procedure. At the same time, the open enrollment period guarantees that people will have some freedom to initiate coverage or to select different coverage when they experience changes in their life. Under the Health and Human Services mandate, individuals can enroll in coverage or switch their exchange coverage outside the enrollment period, if they experience certain “triggering events,” during a “special enrollment period,” which is outside the annual enrollment period. An example of a triggering event would be the birth or adoption of a child.
During the special enrollment period, people may switch from one plan to another, but generally they would have to stay within their same plan coverage level. They could change from one plan to another within their coverage level, but they could not move into a higher coverage plan until the open enrollment period.
States that establish Affordable Insurance Exchanges are eligible for grants from the Federal Government. The Exchange Establishment grants are designed to recognize States that make progress towards establishing Exchanges. States have the choice on when they choose to apply for this grant funding. The funding is based on their needs and planned expenditures. Multi-year funding is available to States that move ahead at a faster pace establishing their Exchanges. These States, through a step-by-step approach can apply for funding for each project year. This funding is known as level one funding.
Initially, States may apply for either level one or level two establishment grants, which are based on their progress in establishing the Exchanges. During the establishment of the Exchanges by States, they can choose when to apply for these grants based on their needs and planned expenditures. In the years that follow, States will have multiple opportunities to apply for funding. These Exchanges Establishment grants will continue to be awarded through 2014.
The Exchanges will create four benefit categories of plans plus a separate catastrophic plan that will be offered. The following are the different categories for the plans.
· Bronze Plan – This plan represents minimum creditable coverage and provides the essential health benefits. It covers 60% of the benefit costs of the plan. The out-of-pocket limit is equal to the Health Savings Account (HSA) current law limit.
· Silver Plan – This plan covers the essential health benefits, and covers 70% of the benefit costs of the plan, with the HSA out-of-pocket limits.
· Gold Plan – This plan provides the essential health benefits, and covers 80% of the benefit costs of the plan, with the HSA out-of-pocket limits.
· Platinum Plans – This plan provides essential health benefits, covers 90% of the benefit costs of the plan, with the HSA out-of-pocket limits.
A Catastrophic Plan is available to those up to age 30 or to those who are exempt from the mandate to purchase coverage and provides catastrophic coverage only with coverage set at the HSA current law levels except that prevention benefits and coverage for three primary care visits would be exempt from the deductible. This plan is only available on the individual market. The HSA limits for 2013 are $3,250.00 for individuals and $6,250.00 for families. There is a special catch-up contribution allowed for taxpayers 55 or older of $1,000.00
Exchanges created with The Affordable Care Act, in regards to small businesses works where the Exchanges provide a market place in which insurance plans can be purchased cheaper than on the open market. The challenge for States is to create an efficient and affordable exchange that offers small businesses choices. States have the choice of operating one exchange that combines the Exchanges for small businesses and individuals or two separate Exchanges for individuals and small businesses.
For more information visit www.smalleynco.com
If you have any questions you can email Craig W. Smalley E.A.
Author of the books: It Starts With an Idea – Tax Tips for Small Businesses available on Nook and Kindle, The Ultimate Real Estate Investor Tax Guide, available on Nook and Kindle, The Complete Guide to the New Tax Law – American Taxpayer Relief Act of 2012 available on Nook and Kindle, Everything You Wanted to Know about the IRS – Audits, Appeals and Collections available on Nook and Kindle, Tax Avoidance is Legal! The Complete Guide to Individual Income Tax available on Nook and Kindle, The Complete Guide to the Affordable Care Act’s Tax Provisions available on Nook and Kindle, The Complete Guide to Retirement Plans for Small Businesses available on Nook and Kindle, The Complete Guide to Estate, Gift and Trust Taxation, available on Nook and Kindle, and The Complete Guide to Hiring an Accountant, available on Nook and Kindle.