October 14 2013

Under the Affordable Care Act, commonly referred to as ObamaCare, individuals are required to have health insurance coverage by Jan. 1, 2014, or pay a fine. This provision of the law is called the individual mandate.

There are a number of ways that people can obtain coverage under ObamaCare if they do not currently get health insurance through their employer, do not already purchase coverage on their own or are not covered by a government health coverage program. Under ObamaCare, an individual can:

  • Enroll in Medicaid

  • Purchase health insurance through the health insurance exchange, a government-run forum through which individuals can buy health insurance coverage

  • Receive coverage through an employer that participates in the Small Business Health Options Program, or SHOP, a forum through which small businesses can buy health insurance coverage for their employees

The most realistic option for those newly eligible for coverage is the Medicaid program. Contrary to conventional belief, most of the newly insured in 2014 will not have private coverage: they will be enrolled in Medicaid.

MEDICAID
In 1965, the government began the Medicaid program, which is now one of the largest items in the federal budget. The program originated as health coverage for the country’s most vulnerable people. It was originally created as a safety net for the medically needy and the poor. Due to numerous program expansions, the program now covers about 3 million elderly, adults and children in Illinois.

The federal government sets the rules for the Medicaid program, and states operate individual systems. The Medicaid program is paid by both the federal government and the states, with the federal government paying for about half of Illinois’ total costs. Under ObamaCare, the federal government will pay for most of the total cost for new, previously ineligible enrollees for the first three years.

The ObamaCare law allows states to expand Medicaid coverage to almost all uninsured people younger than 65 who have incomes up to 138 percent of the poverty level. That means that a family of four with an annual income of up to $32,499, or up to $15,856 for an individual, will be eligible for Medicaid in Illinois.

Illinois lawmakers expanded the program earlier this year. Put simply, most Illinois citizens younger than 65 with incomes up to 138 percent of the federal poverty level will now be eligible for Medicaid. All other individuals who would be otherwise uninsured (and do not have employer-sponsored insurance that is both “qualified” and “affordable”) may participate in the individual health insurance exchange.

HEALTH INSURANCE EXCHANGES
The remaining two options for coverage are the individual and small business insurance exchanges. Private health coverage will be sold through both of these systems.

Insurance coverage purchased in the exchanges differs from current private insurance in two ways.

First, all plans on the exchange must provide a minimum set of essential health benefits. These mandated benefits are, under ObamaCare, required to be included in every policy sold under the exchange. Insurance coverage must include coverage for 10 categories:

    • Ambulatory patient services
    • Emergency services
    • Hospitalization
    • Maternity and newborn care
    • Mental health and substance abuse disorder services
    • Prescription drugs
    • Laboratory services
    • Rehabilitative and habilitative services and devices
    • Preventive, wellness and chronic disease management
    • Pediatric services including oral and vision care

The state of Illinois also requires that plans provide a minimum set of mandated coverage, offerings and benefits, although the state’s requirements are, for the most part, not as lavish as those required by the federal government under the exchange. While well-intentioned, mandates drive up the cost of insurance coverage. They also limit the individual consumer’s ability to select the type of coverage that best suits their own individual needs and preferences.

Second, individuals and small businesses that purchase health insurance coverage through the exchanges may be eligible for federal subsidies.

INDIVIDUAL HEALTH INSURANCE EXCHANGE
Individuals purchasing coverage on the exchange could qualify for federal subsidies for premium costs and cost-sharing (for costs such as copayments and deductibles) depending on their income. In other words, if your income is low enough (but not so low that you’re put on Medicaid), the federal government will pay some of the costs to help you buy private insurance on the exchange.

Subsidies for insurance premiums are based on income and are available on a sliding scale where the lower the income, the higher the subsidy. Those with higher incomes will receive smaller subsidies. The cutoff level for receiving a subsidy is 400 percent of the federal poverty level. In 2013, the cutoff for individuals is $45,960, and $94,200 for a family of four.

Individuals and families with incomes greater than 250 percent of poverty can receive subsidies to help pay for deductibles, copayments and out-of-pocket expenses.

SMALL BUSINESS HEALTH OPTION PLANS (SHOP)
ObamaCare establishes a health insurance exchange for small businesses with fewer than 100 employees (that can be limited to fewer than 50 employees by the state) to purchase group plans. Employers that pay at least half of their employees’ health premiums and that have fewer than 25 full-time equivalent employees with an annual wage of under $50,000 may be eligible for tax credits.

MOST NEW ENROLLEES WILL BE COVERED THROUGH MEDICAID 
Of the three ways to obtain health insurance coverage under ObamaCare, the majority of new enrollees will receive coverage through Medicaid.

In my next post, I will dive into the nuts and bolts of Illinois’ Medicaid operations and expansion, and how it affects the state. For example, I will examine how Medicaid squeezes out private coverage, why access to doctors and hospitals is so limited under the program and why it will likely cost more than originally predicted.

TAGS: individual health insurance exchange, individual mandate, medicaid, Obamacare, small business health option plans