Major Medical Insurance

PPACA Compliant Plans (Obamacare)
For Individual and Family
For below 65

 

Patient Protection Affordable Care Act [PPACA] compliant plans for Individual and Family

This Act, also often referred to as ‘Obamacare’ came into being in March 2012. Under this Act, all individuals and
their families below age 65 must maintain minimum essential health insurance coverage called major medical
health insurance, by purchasing Qualified Health Plan(s) directly from Insurance Companies, or through Federal/State Exchanges (called Marketplace), or through their Employer through Exchanges using Small Business Health Options Plan [SHOP]. Here are the highlights of these plans:

Things to know before I sign up for it

Tax penalty for no ACA coverage before Dec ‘18 for individual buyers

Prior to Dec 31, 2018, if you, the tax filer as individual or with family, did not have qualified health insurance coverage, you had two choices:

No tax penalty for no ACA coverage: Jan ‘19 and beyond for individual

In Sep 2018, individual mandate to pay tax penalty for not buying major medical plan was repealed from ACA, effective Jan 01, 2019. This has been a big relief to people who did not fall into low-income bracket to buy subsidized major medical plan, and who found premiums were getting out of their reach.   

So, what financial protections does ACA give for low-income individuals?

The existing system of covering health risks through insurance by private insurance companies for individuals and families in age range from birth to below 65 continues as before. The government has extended the existing insurance system by subsidizing the insurance premiums through mechanism of tax credits to eligible individuals and their families based on the income level and size of the family to make insurance affordable for those who cannot afford to buy. In addition, the health insurance coverage cannot be denied based on medical condition or pre-existing condition. The ‘affordability’ of health insurance has been related to the Federal Poverty Levels of the size of the family and income level of family to arrive at a number which defines ‘’subsidy’’ by the government for the insurance premiums.           

 Direct purchase of health insurance by individuals and their families

You, the tax filer, are the responsible person to show to IRS through tax return that you and your family had PPACA qualified health insurance including child up to age 26. The PPACA defines the feature of affordability for individuals and families’ related to the income level and size of the family. Federal Register publishes the Federal Poverty Levels for individual and family size.  You may compute your income as percentage multiple of Federal Poverty Levels for 2016 as follows:  

[Your Family Income / {11,880 + (Number of family members – 1) * 4,160}] * 100.

To illustrate, if your family comprises of four members, and your estimated annual income is, say $55,000, your income is [55,000 / 11,880 + {(4-1) * 4,160)}] * 100 = 225% of the Federal Poverty Level.

The eligibility for Premium Cap to purchase health insurance as set out in tabular form is approximately:

(6.3% + 8.05%)/2 * 55,000 = $3,946, viz.

3,946/12 = $328.85/month.

 

Advance Premium Tax Credit [APTC]

For purpose of benchmarking the eligible tax credit subsidy, the Marketplace treats cost of Silver Level of health plan by the carrier irrespective of the metal level plan [Bronze, Silver, Gold, and Platinum] that the consumer selects. If the Silver level plan costs, say $1,000 per month for this family of four, the Premium Tax Credit subsidy is $1,000 – $328.85 = $671.15/month. The Act set out  9.5% of the family income as the maximum premium payable by the family corresponding to 400% of FPL, and thus tax credit subsidy kicks in if cost of acquiring insurance coverage is more than this.

Cost Sharing Reductions [CSR]

In addition to the Advance Premium Tax Credit [PTC]  as elaborated in IRS Publication 974, if the income level of the family falls between 100% – 250% of FPL, which in this illustration is the case, there is additional financial help available to reduce ’Out-of-Pocket’ expense through further subsidies called Cost Sharing Reductions. In this case, only Silver Level plan helps picking up reductions of ‘Out-of-Pocket Maximum’ expenses by a formula of income range to Actuarial Value [AV] of the Silver Level plan as follows:

  • If household income is between 100% – 150% of FPL………. it is 94% AV Silver Plan
  • If household income is between 150% – 200% of FPL ……… it is 87% AV Silver Plan
  • If household income is between 200% – 250% of FPL ……….it is 73% AV Silver Plan

Note, that the family is free to purchase any of the four metal levels of health plans, depending on how best the family plans to handle costs, but the Cost Sharing Reductions Subsidy is [income 100% – 250% of FPL] is available only in Sliver Level plan.

What is Federally Facilitated Marketplace Exchange

This is the digital meeting place, www.healthcare.gov, which facilities insurance carriers who are offering their PPACA compliant health insurance products and it buyers, the individuals with families and business groups who buy the products. This site maintains records and transactions. This is the place where subsidies of tax credit and ‘Cost Share Reductions’ are enabled to the eligible individuals and their families. This Marketplace places latest information of this site about PPACA, and has its rules to abide by for the benefit of all.

    Licensed health Insurance Issuers must….

  • Offer all their group and individual market policies to any eligible individual. This is called “guaranteed issue” irrespective of any pre-existing health condition regardless of the age of the covered individual.
  • Spend the required percentage of premium dollars [85%] on medical care or else provide rebate to the policyholders.
  • Offer health insurance plans that cover benefits in at least ten categories, called Essential Health Benefits (EHB), which must carry no maximum dollar limits. These ten categories of EHBs items and services are required on all individual and small group plans starting in 2014.These 10 categories are: 1) Outpatient care; 2) Emergency care; 3) Hospitalization; 4) Maternity and newborn care; 5) Mental Health Services and addiction treatments; 6) Prescription Drugs; 7) Rehabilitative services and devices, 8) Laboratory Services, 9) Preventive services, 10) Pediatric services.
  • Issue four levels of coverage for health plans related to the Actuarial Value and Out-of-Pocket cost called metal plans: Bronze, Silver, Gold, and Platinum. This is standardization of coverage for better comparison with carrier’s competition. As the actuarial value of the plan rises, so does the corresponding premium but reduces the Out-of-Pocket cost. Actuarial Value is a mathematically computed number related to demographics of geographical area and cost of doing business in that defined geographical area. In simpler terms, a 70/30 means that insurance company picks up 70% of cost of medical services to a patient and the patient picks up 30% of the medical bills, called coinsurance. Typically, this 60/40 is the Bronze level, 70/30 is for Silver level, 80/20 is Gold level, and 90/10 is the Platinum level having high premiums and lowest Out-of-Pocket costs. It may be of interest for you to compare the cost of same medical service in Miami, FL with San Francisco, CA and Manhattan, NY. Even though the cities are comparable to traffic jams, the cost of health insurance may be substantially different.
  • In addition to the four levels of health insurance coverage plans, the insurance carriers may offer another euphemistic insurance called ‘catastrophic insurance’ (high deductible, high coinsurance, less than 60%, and low premium), is like eat cake when you cannot buy bread for individuals …
  • Premium rates vary by age, family composition, geographic area, and tobacco use.
Are there enrolling restrictions and limitations in ACA plans?

Yes, the annual Open Enrollment Period runs from Nov 01 to Dec 15. If you missed it, either you have to wait for next enrollment season, or you look for Special Enrollment Period. It is a good idea to check if you qualify for tax credit subsidy, and start early to shop for health plan that is PPACA compliant at your earliest during this timeframe.  

Special Enrollment Period [SEP]

If you could not enroll in regular open enrollment season mentioned above, you may qualify for enrollment to health plan if you qualify for any of the following qualifying life events:

Other exceptional circumstances that can be identified and acceptable to Marketplace.

What is Health Savings Account? [HSA]

IRS has been generous to innovative this tax favored savings plan for you to pay out of this account for your qualified medical expenses when you combine it with a qualified High Deductible Health Insurance Plan. IRS limits the maximum contributions into this account for single person as $3,350 and for family as $6,750. If you are 55+ old single you can contribute $4,350, or with family up to $7,750. These contributions are 100% tax deductible for the calendar year. The accumulated contributions in this account are ‘tax deferred’ for your retirement years when you cross 65+. This is your retirement savings account, just like IRA.           Read on….

 

Remember, you have to be filing IRS Form 8889 with your 1040 Tax Return to show what you deposited in your HSA account, and what you withdrew, tax-free, to spent on your qualified medical expenses, including dental and vision. IRS Publication 502 gives eligible and ineligible expenses from HSA. Briefly, you may use this account as follows:

  • Meet deductible of your qualified ‘High Deductible Health Insurance Plan for the calendar year before plan picks up its share as per terms of the plan and you pick up coinsurance and copayments. The plan has its maximum Out-of-Pocket expense limits before it picks up 100% payment.
  • Tax deductible is off the gross income to defined IRS limits.
  • Grow accumulations in this account tax-deferred.
  • Withdrawals are NEVER taxed when used for qualified medical expenses.
  • Roll over year after year. It will work like your IRA.
  • Portable, goes with you wherever you go.
  • Health insurance premiums when you are between jobs.
  • Qualified long-term care premiums.
  • Medicare premiums and out-of-pocket expenses.
  • Living expenses after age 65. Pay ordinary income taxes on withdrawals.

 

Other HSA Features

  • Any funds you withdraw for non-qualified medical expenses before you are 65 will be taxed at your income tax rate plus 20% tax penalty.
  • Once you meet the calendar-year deductible, health insurance pays the remaining covered expenses in accordance with the terms and conditions of your particular plan. Some plans pay 100% of covered expenses after the calendar-year deductible is met.
  • For a qualified High Deductible Health Insurance Plan, the IRS has defined ‘qualified plan’ as having Minimum Annual Deductible as $1,300 for single and $2,600 for family with corresponding maximum annual out-of-pocket expense as $6,450 and $12,000 respectively. When you are shopping for a qualified HSA plan, you may find that deductibles of plans are generally much higher than the IRS minimums so that the premiums are relatively lower. This is where you would like to work through numbers. If you are a taxes-savvy, health conscious, and retirement minded astute planner, you may find that the HSA is a great escape to save you taxes and build up for retirement savings.
  • In addition, here is more to it; the contribution to the HSA may be by your employer as well. Get to know more about it by browsing through IRS Publication 8889. This great feature should be of interest to employers for their business taxes planning and employee benefits. 
  • The employer may combine contributions to HSA of employees in addition to premium sharing with its employees by offering HSA compliant plans to the employees.

 

What are the basic costs of an individual and family plan?

Here are the terms you must be familiar with, and preferably understand them with some hypothetical examples:

  • Deductible: The amount you pay first before insurer comes to share your expenses with coinsurance.
  • Coinsurance: This is what you and insurer split for the medical expenses after you have cleared your ‘deductible’ threshold.
  • Copayment: You pay this fee upfront when you check in for a doctor.
  • Out-of-Pocket Maximum: This critical threshold that is all that has to go out of your pocket of preceding three items before the insurer picks up underwriting 100% of your medical expenses. Note, that there are two such Out-of-Pocket maximum: for network based expenses, and out-of-network. All medical care providers in the network have contracts with the insurer, and they have discounted rates of service for you as the beneficiary of your membership in the Plan.
  • Out-of-Pocket limits:  For year 2019, the ACA has capped upper limit to $7,150 for individual, and $14,300 for family. However, if one member of the family crosses its individual threshold, insurer picks up 100% of expenses. These Out-of-Pocket increase every year.
  • Out-of-Network: If you take medical services that fall out of your ‘in-network’ providers, you are exposed to much higher rates of service that you have to pick up, unless the Plan you purchased has upper ceiling of ‘Out-of-Network’ services. Look out for this financial risk. HMO plan do not cover Out-of-Network at all. If you have PPO plan, it will be set out in the Plan.
  • Balance Billing: When the medical services charge you for your Out-of-Network services, and what your insurance plan picks up to pay them, the rest is on you. There is generally no limit on it. These can be high voltage financial shocks.
  • Prescription Drugs Plan: Now, add to expected cost of prescription medications. They have their own deductible and coinsurance, and generally will not have maximum Out-of-Pocket. If you have to take branded medications, the costs can be substantial.

 

When you are browsing to compare plans, look over all the features of the plans, compare them with other offerings, and look for booby traps. You will find them!

What is the alternative to ACA plan?

We would recommend that you visit https://www.healthcare.gov/  if you happen to be in Open Enrollment Period of Nov 01 – Dec 15. This site pulls its shutters down even to look at plans till Nov 1, the date when it opens them for Open Enrollment time, and shuts off on Dec 15. If you have run out luck to see this magic timeframe due to any reason, and you do not have a life event to justify Special Enrollment Period to purchase an ACA compliant health insurance plan, we have customizable plans of Short Term Medical for you as the affordable alternative.

A comparison between ACA plan, STM plan, and additional Supplemental Medical Insurance plan is illustrated below. 

QUESTIONS?

Call us at 407-792-6060 or leave message below. We’ll get back to youwithin 24 hours.


 

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Licensed in FL, TX, VA | NPN: 8652757