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What does health care reform mean?

April 14, 2010
Just weeks after President Barack Obama signed the new health care reform bill, many Americans are still trying to figure out what just happened. There is still a lot of confusion about the benefits of the reform, which is now the "law of the land."

The new law will eventually make health insurance available to the more than 32 million uninsured Americans. It also will require most people to buy health insurance in the coming years and will offer subsidies to help reduce premiums for those who can't afford them. Some of the significant changes won't kick in until 2014, but some will begin as early as June and others will start at the end of this year. Some of those will include restrictions on insurance companies and protections for those who already have health insurance. There's also things in the law that will appeal to those on Medicare and for young adults.

According to DeAnn Friedholm, who works for Consumers Union, the nonprofit publisher of Consumer Reports, even though the new law is complicated, it does establish a key, important policy that you're going to have options regardless of your health situation or employment status.

"The basic thrust of this law is that all of those nooks and crannies, all those gaps where private insurance has left you without any options, those are going to be taken away," she told a reporter.

In an article by Tara Parker-Pope in The New York Times, several details about the new law were explained and questions from readers about the law were answered.

•I don't have health insurance. How soon will the new law help me?

The answer depends on your age and the reasons for not having insurance. If you haven't had insurance for six months, and you can't afford it or don't qualify for insurance because of a pre-existing medical problem, you may be eligible for a new federal "high risk" pool to be offered by the end of June.

The cost of monthly premiums hasn't yet been announced.

•How is the new federal pool different from what is already offered by state high-risk pools or Medicaid?

The federal plan is expected to offer more-affordable coverage than the existing state plans and will not impose the same income restrictions as Medicaid. State plans also typically impose high deductibles and premiums (some charge as much as $1,200 a month) and up to 12-month waiting periods before covering pre-existing health problems.

•What are the immediate benefits for people who already have insurance?

Beginning in September, insurance companies will no longer be able to rescind a policy once someone gets sick nor can they impose lifetime limits on coverage.

Today, honest mistakes on a lengthy insurance application — like forgetting to disclose a parent's high blood pressure — could be grounds for losing your insurance.

Under the new rules, companies generally can't rescind a policy for a minor application error.

•Won't all these changes increase my health care premiums?

How the changes will affect existing insurance costs is a source of fierce debate. Overall, the Congressional Budget Office has said that by 2016, the provisions in the new law will result in little, if any, increase in premiums for people with employer-sponsored plans. People with non-group plans (those not offered by employers) may see increases, but more than half the enrollees in non-group plans will qualify for federal subsidies, lowering costs for middle and moderate income families on average by about 60 percent, the CBO said.

Beginning in September, insurance firms will face new limits on administrative costs and executive compensation. Violations will trigger rebates to consumers.

"Middle and moderate-income families will have tremendous help in the pocketbook as a result of federal subsidies that will significantly lower (the) out-of-pocket burden," Ron Pollack, director of the consumer health group Families USA, said in the article. "And there is now a process where the federal government as well as the states will review premium increases to determine their reasonableness."

•Will small-business owners notice any immediate benefits?

This year, tax credits as high as 35 percent of premiums will be available to many small businesses that offer health coverage to employees.

•Will Medicare recipients receive any immediate benefits?

This year, Medicare recipients with high drug costs will get a rebate of up to $250. And in 2011, the plan will pick up a larger share of brand-name drug costs. In addition, Medicare recipients won't be charged co-pays or deductibles for preventive care like immunizations and cholesterol screening.

The drug rebate is the first step in a 10-year plan to close the "doughnut hole," the gap that occurs because Medicare Part D stops reimbursing for prescriptions after the first $2,830 in costs a year. The retiree must then pay all drug costs until they reach $6,440, at which point Part D pays again.

•If you have insurance through your employer …

You can keep your current plan. The plan will have to stop some practices within six months, like setting lifetime limits on coverage, but it doesn't have to meet the new coverage standards, unless the insurer makes significant changes in benefits or cost-sharing. If your employer's plan covers less than 60 percent of the costs, or you are paying more than 9.5 percent of your income to get it, you can buy on the exchange starting in 2014. If you have a disability, workers can choose to take part in a long-term-care insurance program starting in 2013. The program will provide cash benefits if they become disabled after paying premiums for some years.

•Within six months …

Plans that include coverage of children cannot deny coverage for a pre-existing condition. Plans cannot drop people when they become sick. Young adults can stay on their parents' plan until they turn 26. The rule does not apply to employer-sponsored plans if the child's job offers health insurance.

2014 and after …

Insurers cannot deny coverage because of a person's medical condition or charge higher premiums because of a person's sex or health status. All new plans have to offer a minimum package of benefits defined by federal government, including certain preventive services without any costs.

2010 to 2013 …

Small businesses will receive tax credits to offer coverage to their employees. If an employer pays at least half of its employee's premiums, it can receive a tax credit up to 35 percent of the contribution.

2014 and after …

Small businesses can buy insurance through the exchanges and get a tax credit up to 50 percent of employees' premiums for two years. An employer with more than 50 workers will pay a penalty if it does not offer health insurance and any of its full-time workers get subsidized coverage in the exchanges.

"Health care reform is now the law of the land," Timothy Stoltzfus, a professor at Washington and Lee University School of Law, said. "But most of the insurance reforms, including the consumer protections and exchanges, must be implements by the states. The law asks states to adopt the federal standard or their own equivalent standards. The federal government will enforce the law's requirements or set up a health exchange only in states that choose not to do so.

"This is a real opportunity for the states, and in particular state insurance commissioners, to design approaches that fit their own situations. But there is also a threat to consumers if states adopt laws that do not measure up to the federal standards. It is unfortunate that a quarter of the states have started off on the wrong foot, challenging the law rather than working with it creatively to serve their own citizens' interests."

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