This morning, the Supreme Court made the historical decision to uphold the Affordable Care Act (ACA) as well as the controversial “individual mandate” that would require every American to buy health insurance or face a penalty. Under tax laws, they ruled that the mandate is indeed constitutional. To put it simply: Americans can either buy insurance or pay higher taxes.
The other critical decision involved Medicaid. Under ACA, Medicaid enrollment will expand by about 15 million in 2014 and by 17 million by 2016, a 28 percent increase. Most adults under 65 with incomes below 133 percent of the federal poverty level will be eligible (that’s $15,415 for an individual; $26,344 for a family of three in 2012). States were worried that if they didn’t comply with the new conditions, the Federal government would pull their current funding. The Supreme Court ruled that this would be unconstitutional.
So how will this decision affect American consumers? As of now, everything currently in the ACA will go forward as planned. The only thing that might change is that if some states oppose the Medicaid expansion, the Federal government would have little recourse.
As it stands, in 2014, the penalty for someone who forgoes purchasing insurance will start at $95 a year or up to 1 percent of a person’s income, whichever is greater. By 2016, that will rise to $695 per person, or 2.5 percent of income. The law hopes to make buying insurance more affordable for Americans by allowing consumers to compare plans online and buy insurance through exchanges. Low-income individuals will either qualify for Medicaid or receive tax credits to help offset the costs.
“There’s no question that the 50 million who don’t have health insurance right now are the greatest beneficiaries of this decision,” says Jonathan Oberlander, a professor of health policy at the University of North Carolina, Chapel Hill. “People with pre-existing conditions are also huge winners in this. And the 160 million Americans who have employer-sponsored insurance are winners because they’re currently only one pink slip away from being uninsured. The ACA assures that if you lose your employer-sponsored insurance for any reason, you have a place to go to get coverage.”
But others argue there could also be losers. Wealthy Americans will see Medicare tax increases, insurers could face higher costs that could trickle down to consumers, and no one is sure how affordable the individual exchange market will actually be until it’s implemented in 2014 – potentially squeezing middle class Americans who don’t have coverage through their employer.
Here are the implications for different groups:
The changes ACA makes to Medicare, including limits on what can be charged for drugs when seniors exceed their coverage and fall into the “doughnut hole,” will all stay the same. Many price reductions for Medicare consumers are already in effect. Wealthier Americans though (individuals earning more than $200,000 a year and married couples earning more than $250,000), will see their Medicare tax increase.
Seniors under 65, who often struggled with finding affordable options because insurance companies could charge them much higher rates because of their age and health conditions, will benefit. Under the ACA, insurance companies have limits to how much more they can charge due to someone’s age.
Requiring healthy, young adults to buy health insurance is a key part of the health care bill. By doing so, insurance companies can afford to insure higher-cost Americans with pre-existing conditions and frequent medical needs. The provision that young adults can be covered by their parents’ insurance plan until the age of 26 is still in effect (some 3 million young adults have already been covered because of it). Those 26 and older can shop for insurance through the exchanges or pay the penalty.
Those with pre-existing conditions
Starting in 2014, insurers will be required to accept all applicants regardless of any pre-existing conditions. They will also be required to charge those with pre-existing conditions the same rates as healthy people. Requiring everyone to buy insurance, proponents argue, will help balance out the higher costs insurers face to cover this population. Though others predict that some consumers will see higher premium costs.
Those not covered under an employers’ health plan
Many argue that this group will see the greatest benefits from the ACA. An estimated 18 million Americans buy their own coverage on the individual market, and the ACA hopes to give them cheaper and more convenient options by allowing them to purchase insurance through exchange programs. The law also requires all insurers to cover preventive care such as mammograms, colonoscopies and immunizations – coverage that was difficult to afford through the individual market before.
Those covered though their employer
This group will continue to be covered by their employer, but some experts anticipate a rise in premiums, since insurance companies’ costs will increase as they’re required to cover more preventative care and can’t impose caps on annual or lifetime benefits. Others argue that since employers will also have access to the exchange market, some could see their costs fall. “There is tremendous uncertainty about what the impact is going to be,” says Oberlander. “But there’s not much reason to think it’s going to significantly increase costs.”
In 2018, the Cadillac tax is also set to go into effect, which would tax insurers if they charge more than a certain amount for a “Cadillac” elite plan. This could potentially encourage individuals and companies to choose lower-cost plans, as the costs to have these plans would increase.
Business with 50 employees or less will have access to state-run health insurance exchanges, and will be eligible for tax credits to help offset costs. They will not be subject to a penalty if they choose not to offer insurance, but their employees would need to find their own insurance through the exchange market.
Under ACA, business with more than 50 employees will face penalties if they fail to provide workers with affordable coverage starting in 2014. And firms with more than 200 workers are required to automatically enroll employees into an insurance plan, unless the worker opts out.