Like many Americans, you might find health care reform confusing. So let’s take a look at the basics: what exactly is health care reform?
Health care reform refers to a series of changes to health insurance and health care in the United States. These changes result from the 2010 federal health care reform law, the Patient Protection and Affordable Care Act (PPACA). Some of the new rules already are in place, and the rest will go into effect by January 1, 2014.
“This law is going to make a huge difference for a lot of people,” says Sally McCarty, senior research faculty at the Georgetown University Health Policy Institute. The PPACA will give Americans better access to health insurance and health care, and will make both more affordable, she says.
Here are four major changes that reform, also known as Obamacare, makes to our health care system. The law:
1. Requires most people to buy health insurance - or pay a penalty.
While there are a few exceptions – for example, you make so little money that you don’t have to file taxes, you have religious objections or are a member of an Indian tribe – most Americans and legal residents will have to buy health insurance. And they will have to show proof of insurance when they file their taxes.
“New rights bring new responsibilities,” says Sabrina Corlette, research professor at the Center on Health Insurance Reforms at Georgetown University. The fine for not having coverage? It increases over time and is the greater of either a percentage of your income or a set dollar amount, according to the Kaiser Family Foundation:
• $95 in 2014.
• $325 in 2015
• $695 in 2016
2. Gives everyone the ability to get and keep health insurance.
In the United States, having health insurance makes it easier to get health care ranging from doctor checkups to treatment for chronic conditions like diabetes to surgery. Most people get health insurance through an employer. But those who don’t must buy individual insurance on the open market, where they can be denied coverage if they have a pre-existing condition.
“That could be anything – even acne or bunions,” McCarty says.
Health insurers already must issue coverage to kids with pre-existing conditions, and all adults will be able to get coverage, too, when the health insurance exchanges open to sell plans that start in January 2014. The law also requires insurers to let kids stay on their parents’ plans to age 26. Once you get insurance, your insurer isn’t allowed to cancel your policy if you get sick.
3. Standardizes health insurance shopping and coverage.
The health insurance reform law requires each state to have a health insurance marketplace, called an exchange, operated either by the state or the federal government. Consumers can begin shopping at the exchanges in October 2013. All health insurance plans offered by the exchanges must offer benefits in 10 categories, including prescription drugs, maternity care, hospitalization, emergency services and mental health services. Most individual plans don’t include all of these benefits now, so reform will make individual insurance comparable to group coverage employees get through work, says John Rother, president and CEO of the non-profit National Coalition on Health Care.
Plans sold in exchanges will be divided into four tiers – platinum, gold, silver and bronze – based on what percent of health care costs the plans pay. “You will have a lot more choices than you have today,” McCarty says of shopping in the exchanges.
4. Limits the amount consumers have to pay out of pocket for health care.
The new health care reform law curbs costs to patients in several ways. First, insurance companies now have to offer preventive care like annual check-ups, mammograms and colonoscopies, for free. Patients won’t pay a deductible, copays or coinsurance. The law also prevents insurance companies from imposing annual or lifetime dollar limits on coverage: “This prevents you from being wiped out financially,” Rother says, adding that a serious medical crisis like cancer or a brain injury can rack up hundreds of thousands of dollars in bills.
5. Aims to make health insurance more affordable.
Depending on income and family size, some consumers will be able to get tax credits to help pay health insurance premiums. Consumers who earn up to 400 percent of the federal poverty level – or $94,200 a year for a family of four in 2013 – will be guaranteed to only spend a certain percentage of their income on health insurance premiums. This ranges from 2 percent to 9.5 percent, depending on income.
“A lot of middle-income folks will get help to defray the cost,” Corlette says.
The tax credit money will be sent directly to the insurance company so the consumer never has to pay that part of the premium out of pocket. The law also puts pressure on insurance companies to keep premiums down: insurers now have to explain rate hikes over 10 percent to officials from a state or federal rate review program. The insurer gives their reasons for the cost increase, and the government can accept or reject the change.
“Health care reform will address a lot of the current shortcomings of our health care system,” McCarty says.