May 7, 2013

162017_132140396847214_292624_nThe Affordable Care Act (“ACA”) requires most U.S. citizens and legal residents to have health insurance and creates state-based American Health Benefit Exchanges (“AHBE”) through which individuals can purchase coverage. The ACA makes available to individuals and to families with incomes between 133% and 400% of the federal poverty level (for 2013, the poverty level is $19,530 for a family of three) premium and cost-sharing credits and expands Medicaid to 133% of the federal poverty level.

The ACA imposes a tax penalty on those who do not have health coverage: the greater of $695 per year up to a maximum of three times that amount ($2,085) per family or 2.5% of household income. To lessen the burden of the tax penalty for those without coverage, the ACA phases in the tax penalty as follows: $95 in 2014, $325 in 2015, and $695 in 2016 for the flat fee or 1.0% of taxable income in 2014, 2.0% of taxable income in 2015, and 2.5% of taxable income in 2016. The tax penalty will be increased annually by the cost-of-living adjustment after 2016. There are exemptions available for financial hardship, religious objections, American Indians, those without coverage for less than three months, undocumented immigrants, incarcerated individuals, those for whom the lowest cost plan option exceeds 8% of an individual’s income, and those with incomes below the tax filing threshold.

The ACA expands Medicaid to all non-Medicare eligible individuals under age 65 (children, pregnant women, parents, and adults without dependent children) with incomes up to 133% of the federal poverty level based on their modified adjusted gross income. However, undocumented immigrants remain ineligible for Medicaid under the ACA. All newly Medicaid-eligible adults will be guaranteed a benchmark benefit package that meets the essential health benefits available through the Exchanges, although the states in effect have an option whether to expand their Medicaid programs/benefits (as an incentive to the states, the federal government will provide the states 100% federal funding for 2014 through 2016, 95% federal financing in 2017, 94% federal financing in 2018, 93% federal financing in 2019, and 90% federal financing for 2020 and subsequent years for the newly eligible Medicaid beneficiaries).

The ACA requires states to maintain current income eligibility levels for children in Medicaid and the Children’s Health Insurance Program (“CHIP”) until 2019 and extend funding for CHIP through 2015. The ACA further provides states with the option to provide CHIP coverage to children of state employees who are eligible for health benefits if certain conditions are met. Beginning in 2015, states will receive a 23 percentage point increase in the CHIP match rate up to a cap of 100%. CHIP-eligible children who are unable to enroll in the program due to enrollment caps will be eligible for tax credits in the state Exchanges.

The ACA provides premium credits to eligible individuals and families with incomes between 100% and 400% of the federal poverty level to purchase insurance through the Exchanges that are tied to the second lowest cost silver plan in the area and will be set on a sliding scale (the ACA limits premium contribution to 2% of income for income level up to 133% of the federal poverty level; 3% to 4% of income for income level from 133% to 150% of the federal poverty level; 4% to 6.3% of income for income level from 150% to 200% of the federal poverty level; 6.3% to 8.05% of income for income level from 200% to 250% of the federal poverty level; 8.05% to 9.5% of income for income level from 250% to 300% of the federal poverty level; and, 9.5% of income for income level from 300% to 400% of the federal poverty level). The ACA also provides for cost-sharing subsidies to eligible individuals and families.

With regard to abortion services, the ACA provides that the federal premium or cost-sharing subsidies are not used to purchase coverage for abortion if coverage extends beyond saving the life of the woman or cases of rape or incest (if an individual who receives federal assistance purchases coverage in a plan that chooses to cover abortion services beyond those for which federal funds are permitted, those federal subsidy funds are not permitted to be used for the purchase of the abortion coverage and must be segregated from private premium payments or state funds).


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