Health Care Reform Update, Part 3: Health Insurance Exchanges & Medicaid Expansion
Eileen St.Pierre, The Everyday Financial Planner
Big changes in the way we shop for health insurance coverage will be coming as soon as this October. This column is the third in a 4-part series providing an update on the health care reform law. It focuses on the new health insurance exchanges and the controversy over Medicaid expansion.
Health Insurance Exchanges
- State-based health insurance exchanges will be established where those who cannot get insurance can compare and shop for plans. Enrollment in these exchanges is scheduled to start October 2013 with plans becoming effective on January 1, 2014.
- As of March 2013, 17 states and the District of Columbia have set up their own exchanges. Seven states are partnering with HHS on the running of their exchanges. But 26 states, including Oklahoma, have opted to let the federal government run their exchanges.
- Subsidies, through the form of refundable tax credits, will be available for families earning up to 400% of the poverty line ($88,200 for a family of four today), but they cannot be eligible for Medicare or Medicaid, and cannot be covered by an employer. The tax credit is set so that families will pay no more than 9.5% of their income on a basic health plan in 2014 and the cap will rise over time.
- Shopping for all these plans will take place in the new Health Insurance Marketplace where you can explore every qualified plan in your area. You can also apply for Medicaid, the Children’s Health Insurance Program (CHIP), and for the advance tax credit (subsidy) you can use to offset monthly premiums. Unlike most tax credits, you will not have to wait until you file your taxes to get the credit. You can use the credit right away – the credit will be automatically sent to your insurance provider.
- All plans sold or renewed in 2014 must limit out-of-pocket costs to $6,000 for individuals and $12,000 for families. Deductibles must also be limited – $2,000 for individuals and $4,000 for families. Both of these limits will be indexed to average premium growth in the future.
- There will be 4 levels of coverage for plans offered on the exchanges. These plans differ in the percentage of expected costs they cover for an average person: Bronze (60%), Silver (70%), Gold (80%), and Platinum (90%).
- Illegal immigrants are not allowed to buy insurance through the exchanges even if they pay completely with their own money (they are not eligible for Medicaid either).
- Separate exchanges will be created for small businesses to purchase coverage – through the Small Business Health Options Program (SHOP). Implementation of this program has been delayed until 2015.
- Medicaid will be expanded to include individuals with income up to 133% of the poverty line, including adults without dependent children. The federal government will pay 100% of the cost of covering the newly eligible through 2016.
- In June 2012, the Supreme Court ruled the federal government cannot penalize states for not participating in the Medicaid expansion by withholding Medicaid funds. This ruling essentially allows states to opt out of Medicaid expansion.
- As of March 2013, 14 states (including Oklahoma) have decided to opt out and 3 other states are leaning towards this decision. Five states remain undecided. On the other hand, 24 states will participate in Medicaid expansion, and 4 other states are leaning towards saying yes.