How the Affordable Care Act (ACA) affects individuals
What the law means for you
The Affordable Care Act (ACA) established new standards and opportunities for access to health care in the United States. Congress enacted this law in March 2010. It set up new health insurance rules for everyone.
We want to help you understand what the law means for you.
Here are a few highlights of the law:
- Almost everyone is now required to have health insurance.
- Nobody can be denied health insurance coverage.
- Most health plans must include preventive care at no cost to you.
- For most health plans, your out-of-pocket costs for health care can’t exceed a set amount.
- You must get a clearly written summary of your benefits and coverage.
- Children can stay on the family health plan until they turn 26.
- You can buy a health plan through a public exchange, or marketplace. Or you can buy a health plan without going through the public exchange. These plans must cover a defined set of benefits.
- If you buy your plan through a public exchange, the government may help you pay for it.
The law covers most health plans sold today. But some parts don’t apply to plans that were sold before the law was passed. They are called grandfathered plans.
Coverage is for everyone
The ACA is based on the principle that everyone should have health insurance. Financially, this won’t work if people sign up only when they’re sick. So the law says that everyone must have health insurance coverage all the time. This is called the individual mandate. It applies to all U.S. citizens and legal residents.
You can get coverage through:
- An employer
- A government program
- An individual plan
To satisfy the coverage requirement, your health plan must meet certain standards.
Find out which plans meet the standards
If you don’t have coverage, you may have to pay a penalty. You pay any fee due when you file your federal income tax return.
People who can’t afford coverage may not have to pay a penalty.
No one gets turned down
The ACA says that health insurance companies must offer coverage to everyone. You can’t be turned down because of your health or any pre-existing health conditions. You also can’t be turned down because of your age or gender. This rule is called guaranteed issue.
The rule does not apply to grandfathered plans.
No discrimination in health programs
The ACA expands civil rights protections in health care and health insurance. This part of the law is called Section 1557, or the nondiscrimination rule. It says you can’t be treated differently based on your:
- Race
- Skin color
- National origin
- Sex (this includes gender, pregnancy and gender identity)
- Age
- Disability
This part of the ACA applies to all health care programs and activities of an entity that receives federal funds. It includes companies that sell plans on exchanges.
The law also sets up rules to help people with disabilities get access to care. And it requires free language help for those who have limited use of English.
No costs for preventive care
Most health plans now must cover preventive care. If you go to a doctor in your plan’s network, you don’t have to pay anything for preventive services. No copay. No coinsurance. There is no charge to you even if you have not met your plan’s deductible.
The U.S. government defines what must be covered under preventive care. The list includes:
- Recommended vaccines for children
- Screening tests for some conditions
- Certain women’s health services, including birth control
Find out more:
Some religious employers or organizations do not have to cover birth control and certain related services.
Learn about religious exceptions
Grandfathered plans are not subject to the preventive care requirements.
Limit on out-of-pocket costs
When you use health care services, you and your health plan usually share the expenses. Your share is called your out-of-pocket costs. They include deductibles, copays and coinsurance.
The ACA set a limit on the total dollar amount that you may be required to pay out of pocket. After you pay this amount, the plan pays 100 percent of covered costs. The out-of-pocket limit or maximum changes each year.
Grandfathered plans are not subject to out-of-pocket limits.
Refunds for low medical costs
The ACA says that health insurance companies have to spend most of your premium money on health care and quality improvements. For large group plans, we must spend at least 85 percent of the premium payments on these things. If you buy insurance on your own or through a small employer, we must spend at least 80 percent of the premium payments. If we spend less, we have to pay rebates.
These percentages are called medical loss ratios (MLRs). To figure our actual MLRs, we put policyholders in each state into pools. We calculate an MLR for each pool. We don’t calculate an MLR separately for each person or each employer.
Let’s say that the MLR for one pool is only 75 percent of premiums. In that case, we send out rebates. Most plans don’t get rebates.
Employers that get rebates may use them to cut premiums or improve benefits. Employers that insure their own plans don’t get rebates.
If a rebate is due for a given year, you’ll receive a notice on or before September 30 of the following year. In most cases, we send the rebate check to the employer. Employees will be notified also. If you are due for a rebate on a plan you bought on your own, we’ll send the check to you.
Summary of Benefits and Coverage
All health plans must provide a Summary of Benefits and Coverage (SBC) that follows a standard format. This makes it easy to compare plans. The SBC must be written in simple language.
A plan’s SBC shows what the plan covers and what your costs may be. Your health insurance company or employer must provide you with an SBC for your plan:
- When you shop for a plan
- After you enroll
- When you renew your old plan
- When there’s a change in the plan
- When you ask for a copy
Children covered up to age 26
If your health plan covers dependents, your children can stay on your plan until age 26. They can be covered even if:
- They are not students
- They are not living with you
- They are not dependents on your tax return
Buying a plan on a health exchange
The ACA set up a new way to shop for a health plan. If you don’t have coverage through an employer, you can buy it on a public exchange or marketplace. Some exchanges are run by states. If your state doesn’t have a health insurance exchange, you can shop on the federal government’s health exchange site.
On the exchange, you can:
- Sign up for a plan
- Renew your plan
- Change plans
If you want to sign up for health coverage outside of the Open Enrollment period, you must qualify for a special enrollment period. Qualifying reasons include major life events, such as the birth of a child or a job change.
Coverage for ‘essential’ health benefits
Health plans that you buy on your own or through a small employer must cover “essential health benefits.” This includes plans sold on health insurance exchanges. Essential health benefits include:
- Outpatient services
- Emergency services
- Inpatient hospital care
- Pregnancy, childbirth and newborn care
- Mental and behavioral health care and substance abuse services
- Prescription drugs
- Services that help an adult or child keep, learn or improve skills and functioning for daily living (habilitative services)
- Services to help people who have lost skills and functioning because of illness, injury or disability (rehabilitative services)
- Laboratory services
- Preventive and wellness care
- Chronic disease management
- Children’s health care (including dental and vision care)
The definition of essential health benefits in each state is based on a specific benchmark plan.
Saving money on health insurance
If you buy a health plan on a public exchange, you may be able to save on monthly premiums. If you qualify, the government will pay part of your premium for you. This is called a premium tax credit. The amount of this payment is based on your estimated income and household size.
If you receive a premium tax credit, you’ll need to file form 8962 with your federal income taxes.
Some people also can get help with the out-of-pocket costs of care.
Health insurance and your taxes
The ACA affects your federal income tax return in three primary ways.
1. Proof of health insurance coverage
When you file your taxes, you’ll have to check a box saying that you had the required health insurance coverage for the tax year. Your exchange, health insurance company or employer will send the IRS a form saying that you had coverage. The forms are 1095-A, 1095-B and 1095-C. You’ll get a copy for your records.
2. Penalty for lack of coverage
If you didn’t have a certain level of health insurance during some or all of the tax year, you may have to pay a fee. You pay this when you file your federal tax return.
3. Premium tax credits
If you bought an exchange plan and paid reduced premiums, you have to file another form with your federal tax return. To receive reduced premiums, you had to qualify based on your estimated income and household size. The government paid the rest of the premiums to the insurance company. This is counted as an advance premium tax credit.
When you file your tax return, you need to include a copy of form 8962. You’ll use this form to show whether your income matched your estimate. If not, you may qualify for a bigger credit or may have to pay back part of it.
You also can pay the full premium amount all year. Then, at tax time, you can see if you qualify for a tax credit.
Grandfathered health plans
Parts of the ACA don’t apply to some health plans. They are known as grandfathered health plans. These plans must have been offered before March 2010. They also must not have changed in certain ways, including:
- Signficantly cutting benefits
- Increasing costs
Certain other changes will also affect a plan’s grandfathered status.
Your insurer or employer must let you know if you have a grandfathered plan.
Grandfathered plans do have to comply with some provisions of the ACA.
- They must provide you with a Summary of Benefits and Coverage under your plan.
- If your plan covers dependents, coverage must be offered up to age 26.
Other requirements also apply.
Grandfathered plans don’t have to cover preventive services at no cost to you. They also are not required to cover your pre-existing conditions.
Grandfathered plans are different in other ways as well.
