Health Insurance 101

  
 
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health insurance laws are confusing and some new changes don't go into effect until 2014Congress recently passed the Patient Protection and Affordable Health Care Act. This act reforms the existing health care industry and is expected to insure an additional 32 million people. This bill was passed with quite a bit of controversy surrounding it. Here you can see some of the ways these new insurance may affect you and your wallet.

By 2014, all Americans will have to purchase health insurance. Individuals that currently have health insurance will be affected the least by the new health care laws. Low and moderate income individuals will receive assistance from the government in order to purchase insurance. Individuals that fail to purchase insurance will be subject to fines and penalties. The first year, consumers who did not have insurance would owe $95, or 1 percent of income, whichever is greater. But the penalty would subsequently rise, reaching $695, or 2 percent of income. . Although most Americans who do not obtain health insurance would face a federal penalty starting in 2014, many experts question how strict the enforcement of that penalty would actually be.

More lower-income individuals under the age of 65 would be covered by Medicaid, the federal health insurance plan for the poor. Under the new rules, households with income up to 133 percent of the federal poverty level, or about $29,327 for a family of four, would be eligible.

Most other uninsured people would be required to buy insurance through one of the new state-run insurance exchanges.

For employers there are several changes. Businesses that fail to offer insurance will be subject to fines and penalties. Employers with less than 50 employees are exempt from this rule. Employers with less than 25 employees who choose to offer insurance would receive tax credits as long as employees average salary is $50,000 per year.

Insurance companies can no longer place restrictive annual limits or lifetime caps on the amount that they spend for medical coverage. In the past, insurance companies could places limits on the amount that they would spend for your medical expenses. If an individual had a disease such as cancer, these limits would have affected how much your insurance company would pay towards your treatment. Within three months of the law’s taking effect, people who have been locked out of the insurance market because of a pre-existing condition would be eligible for subsidized coverage through a new high-risk insurance program. 

That special coverage would continue until the legislation’s engine kicks into a higher gear in 2014, when coverage would be extended to a wider part of the population through Medicaid and new state-run insurance exchanges.

Those exchanges, or marketplaces, are meant to provide much more competitive, consumer-friendly online shopping centers of private insurance for people who are not able to obtain coverage through an employer. The exchanges would also help people who lose their jobs, quit or decide to start their own businesses.  If you lose your employer-related insurance, you will be able to move seamlessly into the exchange. Moreover, people of any age who cannot find a plan that costs less than 8 percent of their income would be allowed to buy a catastrophic policy otherwise intended for people under age 30.

Adults under the age of 26 can stay on their parents plan. Previously, adults 19 and over had to find their own insurance policy if they were not enrolled in college. All children will have access to medical insurance including children with pre-existing conditions. 

One of the biggest changes involves the Medicare prescription drug program. Its unpopular “doughnut hole,” a big, expensive gap in coverage that affects millions, would be eliminated by 2020. Starting immediately, consumers who hit the gap would receive a $250 rebate. In 2011, they would receive a 50 percent discount on brand name drugs.

Households that earn over $250,000 per year will be on the hook for higher taxes. in 2013, Affluent families with annual income above $250,000 would be required to pay an additional 3.8 percent tax on their investment income, while contributing more to the Medicare program from their payroll taxes. And eventually, the most expensive insurance policies would be subject to a new tax.

 

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