Reading Time: 7 Minutes
The Affordable Care Act (ACA) has changed the landscape of the insurance industry, and insurance agents need to be aware of the changes to effectively serve their clients. The ACA has provided more options for consumers to obtain health insurance coverage, but it has also brought new challenges to insurance agents. In this blog, we will discuss some of the key things that insurance agents need to know about the Affordable Care Act.
1. ACA Marketplace and Open Enrollment Periods
The ACA established a health insurance Marketplace where individuals can purchase coverage. Insurance agents need to be aware of the open enrollment periods for the Marketplace, which typically run from November 1st through December 15th each year. Outside of this period, individuals can only enroll in a Marketplace plan if they have a qualifying life event, such as a change in family status or loss of employer-sponsored coverage. Insurance agents can assist individuals in the enrollment process and help them navigate the Marketplace.
2. Essential Health Benefits
The ACA requires that all individual and small group health insurance plans sold both inside and outside of the Health Insurance Marketplace must provide coverage for a set of Essential Health Benefits (EHBs). These benefits are:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
3. Pre-existing Conditions
Prior to the passage of the Affordable Care Act (ACA), insurance companies were allowed to deny coverage to individuals with pre-existing conditions, or charge them significantly higher premiums. A pre-existing condition is any medical condition that existed before an individual enrolled in a health insurance plan. This could include conditions such as cancer, diabetes, asthma, or heart disease.
Under the ACA, insurance companies are no longer allowed to deny coverage or charge higher premiums based on pre-existing conditions. This means that individuals with pre-existing conditions can no longer be discriminated against when they seek health insurance coverage. Additionally, insurance companies cannot limit coverage for pre-existing conditions, which means that individuals with these conditions can receive the care they need without fear of reaching a cap on their benefits.
The ACA also established the Pre-Existing Condition Insurance Plan (PCIP), which provided coverage to individuals with pre-existing conditions who had been uninsured for at least six months. The PCIP was phased out after the implementation of the Health Insurance Marketplace, which provides coverage options to all individuals regardless of their health status.
It's important to note that while the ACA prohibits insurance companies from denying coverage or charging higher premiums based on pre-existing conditions, it does not prevent insurance companies from varying premiums based on age, location, or tobacco use. Additionally, some health insurance plans may have waiting periods for coverage of pre-existing conditions, although these waiting periods are generally limited to no more than 12 months.
4. Employer Mandate
The ACA requires employers with 50 or more full-time employees to offer health insurance coverage that meets certain minimum standards. Insurance agents need to be aware of these requirements and help employers select a plan that meets these standards.
5. Individual Mandate
While the ACA originally included an individual mandate requiring all individuals to have health insurance coverage, this mandate was repealed in 2017. However, some states still have individual mandates in place, so insurance agents need to be aware of the individual mandate requirements in the states where they operate.
The ACA provides subsidies to help individuals with low to moderate incomes purchase health insurance coverage through the Marketplace. These subsidies are in the form of premium tax credits and cost-sharing reductions.
1. Premium Tax Credits: These subsidies are based on an individual or family's income and are designed to lower the cost of monthly health insurance premiums. Eligibility for premium tax credits is determined based on the individual or family's income in relation to the federal poverty level (FPL). In 2023, individuals who earn between 100% and 400% of the FPL ($12,880 to $51,520 for an individual in 2022) may be eligible for premium tax credits. The amount of the tax credit varies depending on income, age, family size, and geographic location.
2. Cost-Sharing Reductions: These subsidies help lower the out-of-pocket costs (such as deductibles, copays, and coinsurance) for individuals and families with incomes between 100% and 250% of the FPL ($12,880 to $32,200 for an individual in 2022). Cost-sharing reductions are only available to those who purchase a Silver-level health plan through the Marketplace. The amount of the cost-sharing reduction varies depending on income and the specific Silver-level plan.
To receive these subsidies, individuals must enroll in a health insurance plan through the Health Insurance Marketplace. The subsidies are applied directly to the monthly premium or the cost-sharing reduction, which means that individuals may pay less out of pocket for their health care expenses. Individuals can apply for subsidies when they enroll in a health insurance plan through the Marketplace or during the annual open enrollment period. Additionally, individuals may be eligible to enroll in a health insurance plan outside of the open enrollment period if they experience a qualifying life event, such as losing their job or getting married.
7. Medicaid Expansion
The ACA also expanded Medicaid eligibility to include individuals with incomes up to 138% of the federal poverty level. Medicaid is a joint federal and state program that provides health care coverage to eligible individuals and families with low incomes. This expansion was fully funded by the federal government for the first three years, with the federal government gradually phasing down its funding to 90% by 2022. As of 2023, 39 states and the District of Columbia have expanded Medicaid, while 12 states have not.
Prior to the ACA, Medicaid eligibility was largely based on income and certain categorical requirements, such as being pregnant, having a disability, or being a child. As a result, many low-income adults who did not fall into these categories were left without access to affordable health insurance coverage.
The Medicaid expansion has had a significant impact on access to health care for low-income individuals and families. According to the Kaiser Family Foundation, as of 2021, more than 12 million people have gained coverage through the Medicaid expansion. This includes individuals who were previously uninsured, as well as those who were insured through other means but have since transitioned to Medicaid coverage.
The Medicaid expansion has also been shown to have positive health outcomes. Studies have found that states that expanded Medicaid have seen increases in preventive care, improved health outcomes, and decreased rates of uncompensated care. Additionally, the Medicaid expansion has been associated with increased access to mental health care services and improved financial security for low-income individuals and families.
It's important to note that not all states have chosen to expand Medicaid, which has resulted in a coverage gap for individuals with incomes below the poverty level who do not qualify for Medicaid but also do not qualify for premium tax credits through the Health Insurance Marketplace. This gap affects individuals in non-expansion states, who may struggle to access affordable health care services.
Insurance agents need to be aware of the Medicaid expansion in the states where they operate and help their clients determine if they are eligible for Medicaid coverage.
While the individual mandate has been repealed, there are still penalties for individuals who do not have health insurance coverage. These penalties vary depending on the state and can be significant.
It's important to note that the elimination of the penalty does not mean that individuals are no longer required to have health insurance coverage. The individual mandate still exists, and individuals who do not have health insurance coverage may face financial consequences if they become sick or injured and require medical care.
Additionally, the ACA includes penalties for employers who do not offer affordable health insurance coverage to their employees. Under the employer mandate, large employers (those with 50 or more full-time employees) are required to offer health insurance coverage to their employees or face a penalty. The penalty is assessed based on the number of full-time employees and whether or not coverage was offered.
Insurance agents need to be knowledgeable of these penalties in the states they sell insurance and help their clients understand the consequences of not having health insurance coverage.
9. Health Savings Account
The ACA also established health savings accounts (HSAs) as a means for individuals to save money tax-free to pay for qualified medical expenses. HSAs are a type of savings account that individuals can use to pay for current or future medical expenses, such as deductibles, copayments, and other out-of-pocket costs.
HSAs are available to individuals who are enrolled in a high-deductible health plan (HDHP), which is a type of health insurance plan that has a high deductible but lower monthly premiums. The funds contributed to an HSA are not subject to federal income tax at the time of deposit, and the funds can be used tax-free to pay for qualified medical expenses. Additionally, any unused funds in an HSA roll over from year to year and continue to earn interest tax-free.
10. Ongoing Changes
The ACA has undergone many changes over the years, and insurance agents need to stay up-to-date on the latest developments. For example, in 2020, the ACA was challenged in court, and while it was upheld, there may be further changes in the future. Insurance agents need to be prepared to adapt to any changes in the ACA and help their clients navigate the evolving landscape of health insurance coverage.
The ACA has brought significant changes to the insurance industry, and insurance agents need to be mindful of these changes to effectively serve their clients. Agents need to be familiar with the ACA Marketplace and open enrollment periods, essential health benefits, pre-existing conditions, employer and individual mandates, subsidies, Medicaid expansion, penalties, health savings accounts, and ongoing changes to the ACA. By staying informed and up-to-date, brokers can help their clients navigate the complex world of health insurance coverage and find a plan that meets their needs.