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What does Health Care Reform mean to YOU?

images Starting January 1, 2014, most Americans will be required to have health insurance or pay a fine. It's part of President Obama's Affordable Care Act. Whether you love it, hate it or are just plain confused, the ACA is the law of the land. The thousand-page law covers a lot of ground and figuring out what part of it has to do with you can be a challenge.

Don't Panic. We remain committed to helping you navigate the best route. Having a trusted adviser/agent/broker is essential right now. It doesn't cost you any extra to have a licensed agent/broker guide you, either.

We are optimistic about the new changes on the horizon and feel it creates opportunities for people who otherwise would be left in the dark. With the right support and information to back up your decisions, we are confident you will find value in Health Care reform.

Now is the time to understand the basics to better plan for next year. Knowledge is power.

Lets get started...

Most people have health insurance, either from their employer, through a private individual plan or through a government program such as Medicare or Medicaid. If you are one of these people, little about your situation will change because of the health law.But there are some caveats, so let's dive in.


Employer-based Health Insurance

If you receive health insurance at work, you are likely to continue to do so. But even after the health law takes effect Jan. 1, employers may change plans, premiums, deductibles or other elements of the insurance they offer, just as they can now.

The Affordable Care Act mandated several changes that benefit people with health insurance. No waiting until 2014 for these changes — they're already in effect:

  • Children can stay on a parent's plan until age 26
  • Your insurance company cannot drop you if you get sick
  • You get free preventive care with no co-pay and no deductible, including many cancer screening tests (although some plans already in effect may be exempt from providing this benefit)
  • Lifetime caps on coverage are banned

That's it. If you have employer-based health insurance, the health law's most significant changes are already in place.


The main change for Medicare beneficiaries is that the Affordable Care Act closes the so-called "doughnut hole." That's the coverage gap in Medicare Part D, which pays for prescription drugs. Under Part D, seniors pay a certain initial amount for prescription drugs, then pay all of their costs up to $4,700, when coverage starts up again. The ACA requires this coverage gap to grow more narrow over time. The gap will be completely closed by 2020.


Medi-Cal/Medicaid is the government health insurance program for the "poor".  If you are currently receiving Medi-Cal/Medicaid, you will continue to do so.

But what many people don't know is that Medi-Cal/Medicaid does not cover everyone who is poor. Under the Affordable Care Act, some states like California, are expanding Medi-Cal/Medicaid to cover more poor people who do not have health insurance.

I Am Covered Through the Low Income Health Program. What Do I Do?

In California, The Low Income Health Program (LIHP) was built as a "bridge to reform." On Jan. 1, you will transition to Medi-Cal.

I Buy My Own Health Insurance. What Does the New Health Law Mean to Me?

Right now, people who buy insurance for themselves or for their families can be denied or charged an inflated amount for coverage due to preexisting conditions.

Starting Jan. 1, those insurance practices will no longer be permitted. The new health law restricts what insurance companies are allowed to consider in setting premiums. Specifically, insurers may no longer use your health history to set rates. Instead, rates will be based on three factors only: age, where you live, and number of people in your family. You cannot be turned down or charged a higher premium because you are sick.

The Affordable Care Act also makes it easier for individuals to shop for insurance. Having an agent/broker to compare your options in the state health exchange or in the private carrier market will be a lot more stream lined. Each plan offered  must offer a standard set of "Essential Benefits". The goal is that consumers can make an "apples-to-apples" comparison of competing plans.


What the Health Law Changes for Individuals

Starting Jan. 1, 2014, most people must have health insurance or pay a fine. In the first year, that penalty is $95 per person or 1 percent of income, whichever is greater. The penalty rises to $695 per person or 2.5 percent of income in 2016. (Penalties for children are half the amount for adults.)

Some people are exempt from both the requirement and the penalty. These include people living in the U.S. illegally, members of federally recognized Indian tribes and people who are in prison. Other people may be exempt as well.

The Affordable Care Act provides a few paths to help uninsured people get health insurance. You can buy a plan at the state's new health insurance marketplace / state exchange. Alternatively, you may be covered by an expansion of Medi-Cal/Medicaid, the government's health insurance program for the poor. Your income will determine which one of these paths is for you.

You may also choose to shop for options in the private market like you do today.

Having an agent that can educate you on the programs you qualify for will ensure you have the most affordable plan of value that fits your needs.

The New Marketplace / state exchange

In the new marketplace, insurers will no longer be able to deny you coverage because of a current or past health condition. In addition, many people will qualify for government subsidies — in the form of tax credits — to help them purchase health insurance.

Expanded Medi-Cal/Medicaid program

Medi-Cal/Medicaid is the government health insurance program for people who are poor or disabled. Under the new federal law, some states like California, are expanding the income limits for the program. Many more poor people will qualify.

Which Program am I In?

Your income will determine whether you will buy insurance through the marketplace / state exchange or are covered by Medi-Cal/Medicaid. If your income is above these guidelines, you may be best obtaining a plan  directly with the carrier in the private market.

The health law is using a new calculation of income, called Modified Adjusted Gross Income (MAGI). In general, it's the total of your adjusted gross income — plus any tax-exempt income you might have. To estimate your MAGI, add the income on lines 8b and 37 from your tax return.

Look at the chart below. If your 2013 income is at or below the number that corresponds to your household size, you are probably eligible for Medi-Cal/Medicaid.

If your income is higher than the number you see below, you may buy insurance on the  state exchange or private sector.

One disclaimer: the income amounts shown are approximately 138 percent of the federal poverty level. That's the new upper limit for Medi-Cal/Medicaid.

This chart is intended as a rough guide. If your income is close to the one that matches your household size, you will need to apply for either Medi-Cal or state exchange in order to determine which program you qualify for.

Household Size Income
1 $15,850
2 $21,400
3 $26,950
4 $32,500
5 $38,000
6 $43,600
7 $49,100
8 $54,700



What the Health Law Changes for Small Business Owners

Under the Affordable Care Act, small business owners will be able to purchase health insurance for their employees on a special marketplace in the state exchange.

In Small Business exchange option, you will be part of an insurance pool made up of small businesses across the state. This is new under the health law. The goal is to give small businesses access to more plans and more buying power, just as large businesses have traditionally had.

If you currently offer health insurance and have a broker you work with, your broker can help you pick a plan on exchange or stay in the private market place. If your business qualifies for tax credits, youre better off in the state exchange as that is the only place to redeem those credits.

Does the Health Law Require That Small Businesses Provide Health Insurance?

No. The Affordable Care Act does not require that businesses with fewer than 50 full-time equivalent employees (defined as 30 hours per week) provide health insurance. But if your business has 50 or more FTEs, you could be subject to penalties starting in 2015 if you do not provide insurance.

What Businesses Are Eligible for This Tax Credit I Keep Hearing About?

First, the tax credit is available now. If you currently offer health insurance, you can claim the credit on your income tax return, if you are eligible.

The major qualifying factor is the size of your business. Only companies with 25 or fewer full-time equivalent employees are eligible. Eligibility is further determined by several other factors including:

  • Your average annual wages are less than $50,000 per full-time equivalent employee
  • You pay at least 50 percent of the health insurance premium for your employees

Both businesses and nonprofits are eligible. The tax credits are available on a sliding scale: up to 35 percent of premiums in tax year 2013 and up to 50 percent of premiums in tax year 2014. The state exchange can help you determine your own eligibility. Tax credits are available for a total of two consecutive years.

If I Decide to Provide Health Insurance to My Employees, How Does the state exchange help me?

Private health insurance companies will offer plans inside and outside the state exchange.

Health plans in the state exchange will be offered in "tiers" of coverage: platinum, gold, silver and bronze. The difference between the tiers is not what benefits are covered, but the cost of coverage. For example, platinum plans have higher premiums and people pay less when they see the doctor. Bronze plans have much lower premiums, but people pay more when they see the doctor.

Once you pick which tier of coverage you wish to offer your employees, you'll then decide how much of the premium you will pay, either a specific dollar amount or a percent of the premium. Making sure you meet the appropriate minimum contribution thresholds. Your agent/broker will make sure this is accomplished.  Your employees can then pick any plan within that tier, and they will pay the remainder of the premium.

If you obtain coverage through the state exchange, you will make a single monthly payment to the exchange, which will then handle premium payments to the specific health plans your employees choose.

Do I Have to Cover My Employees' Families, Too?

All of the plans offered in the state exchange will be open to spouses and dependents. But you will decide if you wish to offer to your employees only or to your employees and their families. If you decide against covering family members, they can still seek coverage on the individual market.


Medi-Cal/Medicaid is the government health insurance program for people who meet certain income and other guidelines. Many people mistakenly think that it covers all poor people. For example, unless they are disabled, adults who do not have children are probably not eligible for Medi-Cal/Medicaid.
What the Health Law Does

The Affordable Care Act provides significant funding for a dramatic expansion of Medi-Cal/Medicaid in some states like California. The program is called Medicaid outside of California.

Starting Jan. 1, 2014, anyone earning up to 138 percent of the federal poverty level is eligible for Medi-Cal in California.

(You may have heard 133 percent, but 5 percent of income isn't counted. This means the effective threshold is 138 percent of the poverty level.

In real dollars, that means individuals making up to about $15,850 a year or a family of four making up to about $32,500 are now eligible for the insurance. The state estimates that 1.4 million more people will qualify for Medi-Cal starting on Jan. 1.

In the Past, I've Found the Sign-Up Process Confusing. What Do I Do?

The Affordable Care Act mandates changes in the application process. California is now working to streamline and simplify its systems so enrollment will be easier. In particular, the health law uses a new definition of income for Medi-Cal. It's called Modified Adjusted Gross Income, or MAGI. Your assets will no longer be used in determining whether you are eligible.

I'm on Medi-Cal/Medicaid Now. Do I Have to Do Anything to Keep My Coverage?

No. You will continue receiving benefits. You don't need to do anything new. But, just like you do now, you will need to continue to reapply periodically to maintain your benefits.

Many people who are eligible right now are not enrolled. You can check here to see if you qualify.

I Am Covered Through the Low Income Health Program in California. What Do I Do?

The Low Income Health Program (LIHP) was built as a "bridge to reform." On Jan. 1, 2014, you will transition to Medi-Cal. Right now, we are still waiting for details from the state as to how that will happen. We will update this guide when that information is available.


Jolene Bibian