Open enrollment for the Affordable Care Act, or Obamacare, health insurance exchanges occurred on October 1, 2013, and insurance coverage will begin on January 1.
Nearly all individuals must purchase health insurance coverage or pay penalties beginning on January 1, 2014. Known as “minimum essential coverage,” this requirement is intended to reduce the number of uninsured individuals and encourage young, healthy individuals to purchase health insurance coverage.
Individual health insurance exchanges will begin providing coverage in 2014, as well. Private health insurers will offer standardized health insurance options in a regulated marketplace—either online, over the phone or in person. Individuals without employer health insurance who earn between 100–400% of the federal poverty level ($11,490–$45,960 in 2013) may have access to assistance to help defray health insurance costs in the form of tax credits and cost-sharing subsidies. The amount that an individual will contribute toward health insurance costs will be capped at a percentage of their income. (See Percentage Chart.)
For example, individuals earning approximately $23,000 will pay slightly more than 6% of their income (approximately $1,450) toward health insurance. The federal government will cover the remainder of the costs. Penalties begin at either $95 or 1% of income above the filing threshold ($10,000 for individuals in 2013). The penalties increase to the greater amount of $325 or 2% of applicable income in 2015, $695 or 2.5% of applicable income in 2016, and will continue to rise with inflation in 2017 and future years.
Businesses with fewer than 50 full-time or full-time equivalent employees will not be required to offer health insurance to employees, but they will be responsible for distributing notices and reporting coverage if it is offered. All businesses must provide all employees with a Notice of Coverage Options document by October 1, 2013. If a small business does offer coverage, owners must distribute Summary of Benefits and Coverage documents.
Small businesses with fewer than 25 employees—with average wages below $50,000, and that contribute 50% or more to employees’ health insurance premiums—may be eligible for a temporary small business health insurance tax credit. This tax credit will only be available for two years on the Small Business Health Options Program (SHOP Marketplace) beginning in 2014. SHOP exchange health insurance offerings and options will vary between states and only be open in a limited capacity in many states next year.
Individual and small business insurance
Health insurance products available to individuals and small businesses will be more comprehensive, but also more costly, because insurance must comply with additional benefit mandates known as the Essential Health Benefits package. In addition to this broad list of benefit requirements, deductibles will be limited, premium variation will be restricted, out-of-pocket spending limits will be capped, and annual and lifetime caps on benefits will be lifted.
Next year, health insurance products and marketplaces will look very different. Individuals and businesses will have new responsibilities and opportunities, although nobody is certain what the substantial changes will bring.
Kevin Kuhlman is a manager of legislative affairs at the National Federation of Independent Business (NFIB), focusing his advocacy efforts on health care issues. He also manages the Small Business Coalition for Affordable Healthcare.