In the midst of all the political hype over the Patient Protection and Affordable Care Act (PPACA), often dubbed “Obamacare,” many of us are uncertain about what the act actually does and its present and future impact on our health insurance. President Barack Obama signed the act into law in March of 2010 with the goal of helping more uninsured Americans access health insurance coverage, lowering the overall cost of healthcare, and ultimately holding the insurance industry more accountable. In essence, the PPACA mandates several important health insurance reforms, some of which are already in effect, and others that will not go into effect until 2014 and 2015.
Provisions Already in Effect
According to the Democratic Policy and Communications Committee, a few key provisions of the PPACA that have already been enacted mandate that:
- Preventive care be covered in full without any out-of-pocket costs.
- Insurers must allow young adults to remain on their family’s insurance until age 26.
- Insurers cannot establish a lifetime limit on benefits.
- Insurers cannot exclude coverage of children with pre-existing medical conditions.
- Insurers cannot drop insurance after an individual files a claim unless fraud or intentional misrepresentation is involved.
- Small businesses will be issued tax credits up to 35% for offering health insurance coverage to their employees.
Provisions to Go into Effect in 2014
Some of the more sweeping reforms to health insurance will not take place until 2014. According to HealthCare.gov, a federal government website managed by the U.S. Department of Health and Human Services, a few provisions that will go into effect in 2014 include:
- An Affordable Insurance Exchange in which individual consumers can buy health insurance directly if it is not offered by their employer, and in which small businesses can purchase health plans.
- Most people who can afford health insurance will be required to buy it or else opt out by paying a fee that will offset the cost of the uninsured. If an individual does not have access to an affordable, basic plan, he or she may be exempt from this requirement, however.
- Employees who can’t afford their employer’s health plan will have the option to use the funds their employer would have provided for their health coverage and apply it toward a more affordable plan in the Affordable Insurance Exchange.
- Insurance companies under Obamacare will no longer be able to deny coverage or refuse to renew policies for people with pre-existing medical conditions, or charge higher rates due to a person’s gender or health status.
- The small business tax credit already in effect will be raised to 50% from 35%.
The 85/15 Rule
Another important part of the PPACA is the 85/15 rule, in which insurance companies that sell to large groups are required to provide consumers with a rebate if the insurers do not spend at least 85% of the premium on either healthcare services or activities to improve the quality of health care, according to HealthCare.gov. The other 15% may be spent on administrative costs, such as advertising, salaries, etc. The intention of the 85/15 rule is to help consumers get greater value for their health care dollar.
For insurers that sell to individuals and small groups, the 80/20 rule applies, in which 80% of a consumer’s premium must be used on health care services/health care quality improvement, and 20% can be spent on overhead. Insurance companies who do not meet the 85/20 rule will issue their first round of rebates this year, which may be issued to consumers in the form of a check, reimbursement to their credit card account, or in a reduction in premiums, HealthCare.gov explains. For insurance companies, 85/15 will be the percentages to shoot for in coming years if they intend to avoid paying out rebates.
Controversy over Affordable Care Act
While many Americans celebrated the health care reforms enacted through the PPACA, others were unhappy with the changes, saying the federal government is overstepping its bounds. Beyond this, there is even controversy over whether insurance companies want Obamacare or not. A recent op-ed article in Forbes pointed out that the American Health Insurance Plans (AHIP), a lobby for the health insurance industry, quietly funneled a whopping $102.4 million into advertising meant to convince the public to shoot down the PPACA — all while publicly stating support for the legislation.
However, it may not all be insurance companies vs Obamacare. Insurance companies support Obamacare because it will increase access to health insurance coverage and reform the delivery system, according to AHIP. However, AHIP also believes the Affordable Care Act will ultimately “raise costs and disrupt coverage for individual market customers, employers, and seniors,” according to the AHIP website.