The Affordable Care Act:
How It Works

Introduction

In March 2010, The Patient Protection & Affordable Care Act, more commonly known as the Affordable Care Act (ACA) or "Obamacare", was signed into law.  The following is our attempt to provide information and explanation about how the law works and how it may benefit our readers.



We will try to present this information in layman's terms and try to make it as easy to understand as possible.  It is a complicated subject so at least a general understanding of health insurance terminology will help.

Purpose of the Law

The purpose of the ACA is to make affordable health insurance available to more Americans.  Of course, at the time of this writing, there is no way to tell if that purpose will be effectively achieved.

What I do know from my research is that the law will make it possible for more people under the age of 65 to acquire and afford individual health insurance.  And that will make it possible for more people to pursue their dreams of Full-Time RVing sooner.

Major Provisions of the Law

As mentioned above, the ACA was passed in 2010.  Certain provisions were implemented in each year since then, but the major provisions that will affect the most people go into effect in 2014, including the Insurance Marketplace where individuals will be able to review benefits, coverages, and premiums.

The provisions impact everyone in some way.  The level of effect on you depends on where you currently get your health insurance: 

  • Employer provided
  • Individual purchase
  • Medicare
  • Medicaid
  • No insurance

In addition, the ACA has added requirements to every individual insurance policy issued after March 23, 2010.  And some requirements even affect policies issued before that date (Policies issued before March 23, 2010 are known as "grandfathered" policies).

Let's take a look at the portions of the ACA that I believe will have the greatest impact on individuals.

  • Establishment of the Health Insurance Marketplace where people will have more options to purchase individual policies
  • Establishment of a subsidy program that will assist individuals in purchasing Marketplace policies
  • Requires insurance polices to cover pre-existing conditions (pre-existing conditions CANNOT be used to charge higher premiums)
  • Only five factors can be used in determining premiums
  1. Age (However, older people can only be charged a maximum of 3 times the rate of younger people with the same plan)
  2. Geographic Location (though the ACA is a federal act, individual states and even local factors, including cost of living, impacts premiums)
  3. Tobacco Use (tobacco users can be charged up to 50% higher rates than those that don't use tobacco)
  4. Individual vs. Family (clearly, insurers can charge more for plans that cover more than one person)
  5. Plan Category (plans are designated as "Bronze", "Silver", "Gold", "Platinum" or "Catastrophic" which indicate varying levels of cost sharing between you and the insurance company - we'll talk more about these later)
  • All insurance policies in The Marketplace (and non-grandfathered plans outside The Marketplace) MUST offer the following "essential health benefits"
  1. Ambulatory Patient Services (outpatient care you get without being admitted to a hospital)
  2. Emergency Services
  3. Hospitalization
  4. Maternity & Newborn Care
  5. Mental Health, Substance Abuse, Behavioral Health Services
  6. Prescription Drugs
  7. Rehabilitative Services & Devices
  8. Laboratory Services
  9. Preventative & Wellness Services
  10. Pediatric Services 
  •  "Free" Preventative Care - no co-pays, or co-insurance as long as the care is from an "in network" provider
  • "In Network" co-pays and co-insurance will apply to EMERGENCY ROOM SERVICES even when those services are provided by an "Out of Network" provider
  • Young adults under age 26 can be insured on their parents' plan even if 1) they are married, 2) they are financially independent, 3) they don't live at home, or 4) they are eligible to enroll in their employer's plan
  • The uninsured must pay a fee (However, there are lots of exemptions)
  • Provides individuals with a more understandable "Summary of Benefits & Coverage"
  • Requires insurance companies to spend 80% of their revenue on health care as opposed to administration and marketing
  • Requires insurance companies to publicly justify rate increases over 10%
  • Ends lifetime and yearly benefit payout limits for "essential health benefits" listed above
  • Guarantees a right to appeal claim denials

There are of course, many, many more provisions and consumer protections in this very, very complicated law, but those listed above are the big ones that will affect most people on an individual basis, and that list will help us as we provide additional details later.

What is the Health Insurance Marketplace?

The Health Insurance Marketplace is the online website for individuals and small businesses to explore, research, review, and purchase health insurance policies.  The Marketplace is also known as a "Healthcare Exchange".

All policies that are part of The Marketplace will be issued by private insurance companies.

Although the ACA is a federal law, all the insurance companies offering policies in The Marketplace (or Exchanges) are regulated by the individual states.  Therefore, you can only get quotes and purchase policies from the state where you live (or are legally domiciled).

Most states are using the Federal Health Insurance Marketplace to provide policy information and quotes.  However, sixteen states and the District of Columbia are running their own Healthcare Exchanges (the Federal Marketplace links to the individual state Exchanges).

Here are the states with their own Healthcare Exchanges: 

  • California
  • Colorado
  • Connecticut
  • District of Columbia
  • Hawaii
  • Idaho
  • Kentucky
  • Maryland
  • Massachusetts
  • Minnesota
  • Nevada
  • New Mexico
  • New York
  • Oregon
  • Rhode Island
  • Vermont
  • Washington

Note that some states may only have one or two insurance companies offering policies in the Marketplace while others may have many more.  Policies, coverages, and premiums will vary greatly from state to state and even county to county.



Researching Health Insurance By Potential Domicile

For those that are contemplating Full-Time RVing, it will be difficult to "shop" on The Marketplace to compare policies and premiums during the process of choosing a domicile.  However, there are some features and tools that do provide sample premiums and will assist in some state-by-state comparisons.

On the Healthcare.gov website there is clickable box called "See Plans Now".  After answering a few questions including the state your are researching and the county (perhaps where a mail forwarding service is located), you will be able to see an overview of all the premiums and plans available.  You can see whether the plans are HMO, EPO, or PPO, and you can filter the results by insurance company and the "metal" designation of the plan (Bronze, Silver, Gold, Platinum, Catastrophic).

Note, however, that you can only get the information on The Marketplace for the thirty-four states that are using the federal exchange.  For the sixteen states that have established their own exchanges, you will be given a link to that particular state.   

Also, you can use the following link to search and compare various premiums by state, by county within each state, by insurance company, by plan type (HMO, EPO, PPO), and by premium for different types of plans. 

Data.Healthcare.Gov - Qualified Individual Medical Plans In The Federal Marketplace

That website gives you much more ability to sort the information that is pertinent to you.  I have done some minor testing of the Data.Healthcare.Gov database and the premiums matched what I found on the Healthcare.gov site via the "See Plans Now" button.

However, again note that ONLY the states that are using the Federal Marketplace are in the above database.  The sixteen states that have chosen to set up their own exchanges are NOT.

The tools just mentioned show you the "retail" premiums of the plans without the application of any subsidies.  And you won't be able to see more details about the plans like deductibles, co-pays, co-insurance, Health Savings Account features, total out-of-pocket costs, etc.

However, you can compare various plans for potential domicile states to get relative cost comparisons.  It is helpful that the three most popular domicile states for Full-Time RVers - Florida, Texas, & South Dakota - are all on The Marketplace (the federal exchange). 

Eligibility For Health Insurance Under The Law

In order to be eligible to purchase health insurance through The Marketplace, you:

  • Must live in the United States
  • Must be a U.S. Citizen or national or lawfully present in the United States
  • Must NOT be incarcerated

Note that those over age 65 that worked and contributed to Medicare through payroll deductions for 40 quarters (10 years) are NOT eligible to purchase health insurance through The Marketplace under the ACA.  However, those over age 65 that are NOT automatically eligible for Medicare but can "buy in", may enroll in either Medicare or purchase through The Marketplace under the ACA. 

Individual Mandate & Penalty For Not Having Health Insurance Under The Law

Under the ACA, starting in 2014, those that do not have health insurance will be required to pay a penalty under the "Shared Responsibility Provision".

This penalty is supposed to incentivize the uninsured that can afford health coverage to have it so that everyone else is not paying for their expensive health care.  In the alternative, if the uninsured chooses to pay the penalty rather than get insurance, at least the penalty helps provide revenue for the administration of the ACA. 

You are considered to have insurance if you have "minimal essential coverage" which includes:

  • Private individual insurance
  • Job-based insurance
  • Medicare
  • Medicaid
  • TRICARE (military)
  • Other plans

"Minimal Essential Coverage" does NOT include:

  • Coverage for only vision care or dental care
  • Workers Compensation
  • Coverage only for a particular disease or condition
  • Plans that only offer discounts on medical services 

The penalty (or fee) is:

  • 2014 - 1% of household income OR $95 per adult (and $47.50 per child), whichever is higher
  • 2015 - 2% of household income OR $325 per adult (and $162.50 per child), whichever is higher
  • 2016 - 2.5% of household income OR $695 per adult (and $347.50 per child), whichever is higher 

Of course, there are numerous timing, low income, and hardship exemptions.  The exemptions and how to get them can be found here:  Shared Responsibility Provision Exemptions.

Individual Health Insurance Options

In this section, we will discuss the impact of the ACA on private individual health insurance AND the options now available to individuals (including the self-employed) that don't have employer coverage, retiree coverage, Medicare, Medicaid, TRICARE, or other group/organization coverage.

 

You Already Have Private Individual Health Insurance

Grandfathered Plans

If your current health insurance plan was in effect prior to March 23, 2010, and it is still in existence, you have a "Grandfathered Plan".  Even if you joined the plan after March 23, 2010, it only matters that the plan was created before that date and has remained basically unchanged since then.

Many of the provisions of the ACA do not apply to "Grandfathered Plans", but some do.  That may be a good thing or a bad thing.  Let's look at what provisions apply and don't apply.

Under the ACA, even "Grandfathered Plans":

  • Must end lifetime limits on benefit payouts
  • Must end arbitrary cancellations of coverage
  • Must cover adult children up to age 26
  • Must provide a Summary of Benefits and Coverage
  • Must spend 80% of revenue on health care

"Grandfathered Plans" do NOT have to:

  • Cover preventative care for free
  • Provide the "essential health benefits" required in all non-grandfathered plans
  • Guarantee your right to appeal
  • Allow your choice of doctors
  • Limit "out of network" Emergency Services co-insurance to "in network" percentages
  • Publicly justify rate increases over 10%
  • End annual limits on benefit payouts (individual plans)
  • Cover pre-existing conditions (individual plans)

Note, a "Grandfathered Plan" can lose its "grandfathered" status if your insurance company increases premiums above certain levels or reduces benefits significantly.

Okay, so a "Grandfathered Plan" may not have some of the consumer protections and benefits implemented under the ACA.  But depending on your situation, it may provide you the benefits you need at a lower cost.

For example, by not being required to include all of the "essential health benefits" your insurance company may be able to keep your policy premiums down.  Most people contemplating full-time RVing don't need "Maternity & Newborn Care" or "Pediatric Services" or perhaps some of the other required coverages.

If your income is high enough that you are not eligible for "subsidies" to lower your premium costs, it is quite likely your "Grandfathered Plan" will be a better choice than going through The Marketplace.

On the other hand, "Grandfathered Plans" are not eligible for subsidies which are only available through The Marketplace.  So, if your income level qualifies you for a subsidy, you may very well be able to find a comparable plan in the Marketplace that will cost you less (maybe a little less or maybe a lot less).



Non-Grandfathered Plans

If you have an individual policy in a plan that was created after March 23, 2010, it is a "non-grandfathered plan".  And, it WILL have to include all the coverages and benefits required by the ACA.

Your insurance company may 1) make changes to your current plan to make it in compliance, or 2) determine not to make changes in your current plan and offer you alternative plans that are in compliance.  They have to give you 90 days notice (prior to the policy end or renewal date) in either case.

You may choose to purchase insurance through The Marketplace or directly with insurance companies that provide individual policies.  However, if you purchase outside of The Marketplace, you will NOT be able to take advantage of any subsidies you may be eligible for.

 

Individual Policies Through The Marketplace

The ACA requires designation of ALL individual insurance polices as "Bronze", "Silver", "Gold", "Platinum", and "Catastrophic".

These "metal" designations are supposed to make comparing policies easier, but I've found them to be very confusing.  We'll try to explain them as best we can.

First, let's deal with the one that's not a metal designation - "Catastrophic".  If you are under 30 years of age (or over 30 with hardship exemptions) , you can purchase a "Catastrophic" plan in The Marketplace.  These plans have very high deductibles and lower premiums and protect against worst case scenarios.  However, regardless of your income level, you CANNOT get a subsidy to help pay premiums for a "Catastrophic" plan.

The Metal Plans  

The premise of the metal designations is simple.  Plans with the same metal designation will have similar "out-of-pocket" costs.

  • Bronze plans will have higher total out-of-pocket costs and lower premiums.
  • Silver plans will have lower total out-of-pocket costs than Bronze plans, and higher premiums than Bronze plans.
  • Gold plans will have lower total out-of-pocket costs than Bronze & Silver plans, and higher premiums than Bronze & Silver Plans.
  • Platinum plans will have lower total out-of-pocket costs than Bronze, Silver, & Gold plans, and higher premiums than Bronze, Silver, & Gold plans. 

What makes these designations confusing is that the "total out-of-pocket costs" are determined by the "Actuarial Values" of the plans.  The "Actuarial Values" (meaning the average costs the plan pays) of the metal plans are:

  • Bronze - 60%
  • Silver - 70%
  • Gold - 80%
  • Platinum - 90%

What the heck does that mean?

Well, the "Actuarial Value" takes into account deductibles, co-pays, co-insurance, and overall cost sharing.  It's an average for the entire plan, so in any given year your "out-of-pocket" percentages may be completely different.

These are NOT co-insurance percentages (after deductibles are met) in the way many of us are used to (i.e. 80/20 plans, 90/10 plans, 70/30 plans).  You really have to look at all the plans in The Marketplace and compare them.

In addition to premiums, deductibles, and co-insurance percentages, you also have to look at plan types, network coverage areas, and "out of network" costs.  This can be especially important for RV travelers.

An HMO plan may be cheaper, but it may have very limited geographical network coverage and very high "out of network" deductibles and co-insurance when you are traveling out of the "home" area.  A PPO may have national network coverage, but very high premiums.  Many plans don't have Health Savings Account features, so check that out if that's important to you.

Of course, if you are "premium" shopping, your decision may be aided greatly if you are eligible for a subsidy.  We'll discuss those next.



Premium Subsidies (aka Advance Premium Tax Credits)      

The calculation of premium subsidies is very complicated, and I don't want to get too deep into that.  But, you certainly don't have to be "poor" to be eligible for a subsidy.  Many, many people thinking about Full-Time RVing will have their prime earning years behind them, and they will have income levels low enough to get a subsidy.

But note that you can ONLY get the Advance Premium Tax Credit (i.e. subsidy) IF you purchase your health insurance through The Marketplace.  There is no tax credit/subsidy if you purchase an individual policy outside The Marketplace.

You will be eligible for the tax credit/subsidy IF your total household income is anywhere between 100% and 400% of the federal poverty level.  The federal poverty level is different for individuals and families, so your tax credit/subsidy depends on both your total household income and your family size.  Additional factors are your state of domicile and the cost of policies on the Marketplace in that state.

Below is a table based on the 2013 federal poverty level that indicates what income ranges would be eligible for a subsidy. 

Table of Income Ranges To Determine ACA Subsidies (based on 2013 Federal Poverty Levels)


  • $11,490 to $45,960 for individuals
  • $15,510 to $62,040 for a family of 2
  • $19,530 to $78,120 for a family of 3
  • $23,550 to $94,200 for a family of 4
  • $27,570 to $110,280 for a family of 5
  • $31,590 to $126,360 for a family of 6
  • $35,610 to $142,440 for a family of 7
  • $39,630 to $158,520 for a family of 8

 

The lower your income falls in the above ranges, the higher your subsidy.  Note:  Your total household income is based on your federal Modified Adjusted Gross Income (wages, salary, dividends, interest, Social Security, etc.).

As you can see from the table, a lot of couples (the most common family size among Full-Time RVers) will be eligible for a subsidy.

Using Your Subsidy

Once you have set up a Marketplace account and entered all the pertinent information, including your estimated 2014 household income, you should get your maximum subsidy amount (if you are eligible).  It should be shown as a monthly amount.

You can apply all, some, or none of your maximum subsidy to the monthly premium of the policy you choose.*

  • If you apply all of your subsidy, your quoted monthly premium will be reduced immediately by the subsidy amount and that's the amount you will pay to the insurance company.  You will get no further credit/subsidy when you file your taxes.
  • If you apply some of the subsidy, your quoted monthly premium will be reduced immediately by the subsidy amount you choose to use and that's the amount you will pay to the insurance company.  At the end of the year, you can get the unused portion of your subsidy as a tax credit when you file your taxes.
  • If you apply none of the subsidy, then you will simply pay the insurance company the quoted monthly premium.  At the end of the year, you can get the entire subsidy amount as a refundable tax credit when you file your taxes.      

* - All of the above assumes that the income you estimated for the year was correct.  IF your income was greater than you estimated (when your subsidy was calculated) you may have to repay the subsidy or a portion of it when you file your taxes.  On the other hand, IF your income was lower than you estimated, you may be able to get an additional tax credit on your tax return for the year.



The health insurance premium subsidies may be the deciding factor for many when considering the timing of becoming a Full-Time RVer.  Perhaps it's the difference between waiting to become Medicare eligible or not. 

       

Health Insurance Through Employers

The "Rules" According to The Affordable Care Act

Self-Employed

Under the ACA you are "Self-Employed" (and not an "Employer") if you run an income generating business and have NO employees.  This is true even if you hire independent contractors (rather than W-2 employees) to do some work for you. 

Linda & I fall in this category.  Being "Self-Employed" we have the Individual Health Insurance options discussed above.

At the time of this writing, we have a high deductible PPO plan with a Health Savings Account feature and a national network of healthcare providers.  It is a "Grandfathered Plan", so we can keep it or we can shop for other plans through The Marketplace.

If we go through The Marketplace, our net income from Self-Employment will be the primary factor determining whether or not we will be eligible for a premium-reducing subsidy.  Because our Self-Employment net income fluctuates greatly, we could have a significant subsidy one year and no subsidy in another year.

 

Job Based Health Insurance - From The Employee Perspective

First of all, if you have health insurance through your employer, you have "minimal essential coverage" and will not be subject to the "shared responsibility provision" penalty charged to the uninsured.

If your employer does NOT offer health insurance (or you are a part-time employee averaging under 30 hours per week) then you can get health insurance as an individual (or family) through The Marketplace as discussed above.

If your employer does offer health insurance and you are a full-time employee, you can either 1) get your health insurance through your employer OR 2) you can get your health insurance through The Marketplace.  However, before choosing to go through The Marketplace, there are a few important considerations.

  • Most employers pay a portion of the employee's premium so you will lose this contribution if you go through The Marketplace
  • You won't be eligible for a subsidy IF the employer's offered insurance is considered both "affordable" and it meets "minimum value" (This is true even if your household income level would make you eligible for a subsidy on an individual plan)
  • Your employer's plan is considered to provide "minimum value" IF it pays at least 60% of total medical costs for a standard population (Basically this means that the plan has to be at least as good as a "Bronze" plan discussed above in the "Metal Plans" section. 
  • Your employer's plan is considered "affordable" IF the employee's share of premiums for an "individual only" policy is LESS than 9.5% of household income (and the plan meets the minimum value standard)

So, you must consider the decision of opting for Marketplace insurance over employer insurance very carefully.

Note that employers with fewer than 50 full-time employees are considered "Small Businesses" under the ACA and do NOT have to provide health insurance for their employees.  No employer is required to offer health insurance to part-time employees.  An employee is considered "full-time" under the ACA if he or she averages 30 hours per week or more.



 

Job Based Health Insurance - From The Employer Perspective

The ACA affects employers in different ways depending mostly on the size of the employer.

Certainly, offering employees affordable health care coverage with excellent benefits as part of their compensation package is an effective method for attracting and retaining employees.  However, rising health care costs makes it difficult, especially for small businesses, to afford health care without requiring the employees to pick up higher and higher percentages of their premium costs.

Let's take a look at how the ACA affects Large Businesses (those with 50 or more full-time employees) and Small Businesses (those with under 50 full-time employees).

Large Businesses (50 or more Full-time employees)

Under the ACA, starting in 2015, businesses with 50 or more full-time employees will have to pay a penalty (aka "Employer Shared Responsibility Payment") IF:

1) they don't provide health insurance options to their employees at all, OR

2) the health insurance offered and employer contributions made do not meet the standards of "affordability" and "minimum value".

We discussed the "affordable" and "minimum value" standards previously, but let's go over it again.

"Minimum value" means the health insurance offered covers at least 60% of the health care costs of a standard population.  Again, basically, the insurance has to be equal to the benefits, costs, and coverages of a "Bronze" plan in The Marketplace.

"Affordable" means that EVERY full-time employee's share of premiums for an "individual only" policy must be less than 9.5% of their annual household income.  If just ONE employee's premiums (considering employer contributions) is over 9.5% of their annual household income, the plan is NOT "affordable" and the penalties apply.

The Penalties (aka Employer Shared Responsibility Payment)

IF a large business opts to not provide health insurance at all, they will have to pay a penalty each year of $2,000 per full-time employee (excluding the first 30 employees).

IF a large business provides health insurance but does not meet the "affordable" and "minimum value" standards for any particular employee, they will have to pay a penalty of $3,000 for each full-time employee for which the health insurance does not meet the standards.

Note that, unlike employer health insurance premium contributions, "Employer Shared Responsibility Payments" are NOT tax deductible.

 

Small Businesses (Under 50 Full-time employees)

As mentioned earlier, a small business does not have to offer health insurance for its employees.  It may be in their best interest to do so from an employee attraction and retention standpoint, but there is NO "Employer Shared Responsibility Payment" if they don't NOR is there a penalty if they offer health insurance but it doesn't meet the "affordable" and "minimum value" standards.

If, however, a small business wants to offer health insurance, it may shop for plans through the Small Business Health Options Program (SHOP) Marketplace.

The SHOP Marketplace is similar to The Marketplace for individuals, and all the plans in SHOP must meet the same requirements and provide the same protections as individual policies.  In other words, all plans purchased through SHOP will automatically meet the "minimum value" standard discussed above.

In the beginning, SHOP will only be available to small businesses (under 50 employees), but in 2016 it will open up to large businesses with 100 or fewer full-time employees.

In order to use SHOP as an employer, the business must offer health insurance to ALL of its full-time employees and, in many states, at least 70% of the employees have to enroll in the SHOP plan.

 

Small Business Health Care Tax Credits

If a small business has under 25 full-time employees with an average salary of around $50,000 or less, the ACA provides a tax credit to incentivize these small businesses to retain their health insurance plans or to offer health insurance to their employees for the first time.

In order to get the credit, the business has to purchase insurance through the SHOP Marketplace AND pay at least 50% of its employees' premium costs.

If all the above criteria are met, the tax credit may be UP TO 50% of the total premiums paid by the business (35% for tax exempt employers).  The fewer employees and the smaller the average salary, the higher the tax credit percentage.

Summary

Whew.  My head hurts.  And we didn't even cover the ACA impact on Medicare (fairly minimal) or potential Medicaid eligibility.

I certainly have my own opinions on the Affordable Care Act, but I've tried to leave those out and just report what I found on the official Healthcare.gov website and numerous other internet resources that helped me confirm the information.

We've said for years that Health Insurance is one of the top two reasons many people never try the Full-Time RV Lifestyle, and it's certainly been one of the reasons why people haven't started Full-Timing sooner.  Perhaps the Affordable Care Act will change that.

If you see any glaring errors, would like us to address something I left out, or have questions, please Contact Us, and we'll see what we can do. 

Finally, to get specific information and advice about your personal situation, contact Kyle Henson at RVerHealthInsurance.com.  Kyle is a full-time RVer that understands the special needs of our mobile lifestyle, and he can assist with determining the best health insurance options for you.