PPACA 101-Learn the Basics

Today, we're going to be going over some of the basics. Some of the details will be glossed over, but feel free to ask questions in the comments.

PPACA stands for the "Patient Protection and Affordable Care Act", and is sometimes referred to as "ACA" "Affordable Care Act", "HCR" "Health Care Reform", or "Obamacare".

It was signed into law by President Obama on March 23, 2010, and the myriad provisions implement over time. The first changes were active at enactment, and changes continue until January of 2020.

The law is massive and far reaching, it started around 2,700 pages long, and somewhere around 15,000-20,000 additional pages of rules and guidance have been released in the past few years. 

What you need to know:
It is the law, and as much as has been done to repeal, de-fund, and fight it, it looks like it's going to stay. Specifically, in NY, Governor Cuomo has stated that we will have an exchange regardless of whether it is required on a federal level. At least for us, this is the future, no doubt about it.

In NY, it actually fixed our individual market. We are highly regulated, and already had in place most of the regulation that PPACA proposed. With the "Individual Mandate" (discussed later) our rates will be reduced. We are unique in the nation with respect to our insurance market, and this is not a universal result. Don't expect most other states to have decreased rates.

Exchanges will be opening October 1, 2013. The "Initial Open Enrollment Period" will be Oct. 1-Mar. 31, with plan effective dates starting January 1. 

You are NOT required to purchase insurance, or utilize the exchanges. They will, however, be the only way to claim a subsidy (essentially, an advance credit on your taxes to help pay for the cost of insurance, scaled according to your family size and income.) There will likely be other ways to claim this subsidy in the future, but as of today, this is the only officially confirmed method. We will be discussing this in more detail in later posts.

The Individual Mandate is, as ruled a few years back, a "tax" levied against those who do not have insurance. For the first year (2014), it is the GREATER OF $95 PER INDIVIDUAL or 1% of HOUSEHOLD income, capped at the price of the cheapest plan available. For 2015, it becomes $325 or 2% of income, 2016 is $695 or 2.5%. After that, the 2.5% stays the same, the flat dollar amount is tied to inflation. To make things more confusing, dependents under the age of 18 are taxed at half the flat-dollar amount, and the flat-fee is capped at 300% of the initial fee.

Quick example, Family of 5, 3 young children, 2014. $95 for each parent, $47.50 for each child, up to the 300% limit of $285 (so the 3rd child doesn't have a penalty, technically). Since it's the greater of the flat-fee or 1% of income for 2014, if the household income was over $28,500, the fee will just be 1% of income (maximum % tax is capped at the cost of the cheapest Bronze level plan offered on the exchange. You will never pay more than it costs to actually be covered.) As New Yorkers, I'm sure you realize, $28,500 does not support a family of 5, most of us will be paying the percentage.

To avoid this penalty, you will need to have, quite simply, a plan that meets the PPACA requirements for plan design, "Minimum Essential Coverage" and certain "Essential Health Benefits". Plans that don't meet these newly established requirements will still result in a penalty being generated. There are ways to waive out for religious reasons or "hardship" (unable to afford a plan, even with subsidies). This process and procedure is not well defined and completely untested at this point. We will look into the details of these meanings later. Moral of the story, it's almost certain your existing health plan does not meet these requirements.

Feel free to leave questions in the comments, and look out for more posts coming soon, as we start to dig into more detail on how this will effect sole proprietors, small businesses, large businesses, and individuals in NY.