Affordable Care Act Timeline

Unless you have been living under a rock you are aware of the Affordable Care Act or more affectionately called “ObamaCare”.  Time is ticking and deadlines for its final actions are around the bend.  Many of the requirements have already taken effect with many more around the bend.  This will help you to understand the whats and whens of many of them.

One of the items is the increase in Medicare tax, however it is intended to affect higher wage earners.  Effective January 1, 2013 the Medicare tax rate on wages has gone up from 1.45% to 2.3% on income of more than $200,000.  Additionally a 3.8% assessment on investment income from interest, dividends, royalties, rents and gross income from a trade or business earning over $200,000.  Let me repeat, gross income from a trade or business.  Also effective this year is the limit to contributions to Flexible Spending Plans for medical expenses to $2,500 per year increasing annually only by cost of living adjustments.  In addition, effective this year – employers will be required to provide each employee at the time of hiring (or current employees, not later than March 1,2013) written notice informing them of insurance Exchanges.

Next year, 2014, will bring many more mandates.  Effective January 2014 individuals who do not have health coverage will be required to pay a yearly penalty, phased in, of $695 per person(maximum of $2,085 per family) or 2.5% of household income.  Employers of over 50 employees that do not offer coverage and have at least one employee who receives a premium tax credit (a program to provide assistance to individuals for purchase of health coverage) will be assessed a fee of $2000 per full-time employee.  The first 30 employees are not counted for assessing the fee.

Those employers of over 50 employees that offer coverage but have at least one employee receiving the premium tax credit will pay the lesser of $3000 for each employee receiving the credit or $2000 per full-time employee.

Employers of more than 200 employees will be required to automatically enroll employees into the lowest cost plan offered if the employee doesn’t sign up for coverage or waive out.

Insurance Exchanges for individuals and small businesses must be operating so that individuals and small businesses (of up to 100 employees) can purchase the required qualified coverage.  Additionally this coverage must be guaranteed issue and renewable and pre-existing conditions limitations will be prohibited.  Rating can only vary based on area, family composition and tobacco usage (a 1.5 to 1 ratio) .  Also, dollar limitations on coverage must be eliminated and waiting periods for coverage can be no longer than 90 days.  In addition, health plans will also be required to cover clinical trials.

That all being said, the important parts of ObamaCare are that health insurers accept everyone who applies, cannot charge more based on medical conditions and include coverages that pay for many often uncovered medical procedures or conditions.  Guarantee issue policies virtually provide incentives for people to waive coverage until they get sick and need coverage.  Although a penalty is imposed for those who do not obtain coverage it is too low to persuade healthy people to pay for coverage.  The final result of it all will be that the insurance pool will be smaller and sicker forcing premiums upward.

Unlike the federal government, health insurance companies cannot run perpetual deficits.  Something will break and the likelyhood of health insurance becoming a public utility regulated by the government will be real and we will end up with a single-payer system (the true goal of the administration).

Be prepared to suffer sticker shock.