What is the Affordable Care Act (ACA)?

The Affordable Care Act (ACA) is a set of legislation that was enacted in 2010 to make health insurance coverage more accessible and affordable for all Americans. It attempts to reform the health care system by providing more Americans with affordable quality health insurance and by curbing the growth in health care spending. The ACA is not a new health insurance plan, but rather a set of provisions, rights and benefits that affect the insurance coverage options that we have always had available in this country such as public programs (Medicaid), group coverage (employer sponsored insurance) and private individual market insurance plans. The ACA calls for changes to these types of coverage by requiring new consumer protections, ensuring a basic set of health care benefits, providing a new online marketplace for purchasing insurance, enforcing penalties for not having insurance, providing expanded opportunities for financial assistance to help purchase health insurance and putting caps on out-of-pocket spending. For most people, the ACA will reduce what they currently pay for health care. For a small percentage of people who purchase insurance through the private individual insurance market, the ACA may mean higher monthly premiums but those premiums will be purchasing more comprehensive coverage. In Minnesota, the ACA has resulted in changes to our public programs (Medical Assistance and MinnesotaCare), provided tax credits for purchasing insurance through the private market, and set coverage standards and affordability parameters for employer-sponsored insurance. It has also created MnSure, a new online marketplace for finding financial assistance and purchasing health insurance through the private market.

Some of the major provisions that have allowed more Minnesotans to access health insurance coverage include:

• No cost-sharing for preventive care, which means yearly check-ups and preventive screenings have to be offered without copays or the meeting of yearly deductibles;
• Young adults can remain on their parents’ policies until they turn 26;
• No exclusions for preexisting conditions;
• Guaranteed issue and guaranteed renewal;
• Health insurance premiums can be based only on age, geography and tobacco usage;
• No excessive waiting periods for coverage to begin;
• New financial assistance for those with middle incomes;
• No lifetime or annual dollar limits on key health benefits.

Most of these provisions go into effect January 1, 2014, however, the top three provisions are already in effect for some populations. It is anticipated that more than 300,000 currently uninsured Minnesotans will be able to access affordable and comprehensive insurance coverage because of these provisions.

The ACA requires all health insurance plans to cover a basic set of health care services, which makes comparing health insurance plans easier. The level of coverage and the specific services that fall under each required area of service can vary from plan to plan but consumers can be assured that whatever plan they select or have offered through their employer will cover some basic services in these areas:

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

The ACA has expanded the federal Medicaid program to cover more low-income Americans and it has established a new tax credit program (called Advanced Premium Tax Credits) that can help reduce the monthly premium costs for middle-income Americans who need to purchase insurance through the private individual market. In Minnesota, in addition to the expansions in Medical Assistance (our federal Medicaid program) and the establishment of the Advanced Premium Tax Credits, MinnesotaCare will continue to offer low-cost, comprehensive health care coverage to those who are income eligible. (See the income chart at the end of this section.)

Also, the ACA has requirements about how affordability is defined. This pertains to the percent of the costs of covered services that a health plan must pay compared to what the consumer must pay. This is referred to as actuarial values (see question below). The ACA makes it easier for consumers to understand what the actuarial values are of the plans they are interested in purchasing by classifying the plans by what is known as the “metal levels” – bronze, silver, gold and platinum. The ACA’s affordability standard prohibits insurance plans from having an actuarial value lower than a bronze level plan.

Consumers who need to purchase private individual health insurance can shop for a variety of health plans that are classified by cost into four levels. The levels are Bronze, Silver, Gold and Platinum. The difference between these levels is the share of health care costs paid by the insurance plan, versus the out-of-pocket expenses paid by the consumer. This is known as the actuarial value. With a bronze-level plan, the insurance carrier will pay 60% of the covered health care expenses for the average person. The consumer will pay approximately 40% of the expenses through copayments and deductibles. However, the monthly premium payments for bronze plans are the lowest. The higher the level plan you choose (platinum being the highest), the higher your monthly premium payments, but the less you pay in copayments and deductibles. You can choose the level of plan that best suits your needs. If you are a relatively healthy person who does not use a lot of health care services, you may opt to purchase a bronze plan with low monthly premium payments but high deductibles and copays. If you have a lot of health care needs, you may want to purchase a gold or platinum level plan where you pay higher premium payments but lower out-of-pocket costs in deductibles and copayments.

The ACA’s affordability standard says that insurance plans must meet at least a bronze level cost sharing. The standard applies to all types of insurance coverage – employer sponsored, public programs, private individual plans and so on.

The ACA set forth requirements for establishing a new online marketplace where individuals and small employers could come to shop for health insurance by finding out what their insurance options are and to compare cost and quality variations of the available plans. This new marketplace is called the “Exchange” and states were able to select if they wanted to participate in the federal exchange or create a state-based exchange. Minnesota chose to create a state-based exchange and it is called MnSure.

MnSure is an online, one-stop-shop for searching, selecting and enrolling in health insurance. The consumer has many health plans to pick from that are categorized into Bronze, Silver, Gold and Platinum levels. Consumers can pick a quality plan that best meets their needs. All of the plans offered on MnSure must provide the Essential Health Benefits Set and the affordability standard (see question about actuarial value). You can also apply for financial assistance using MnSure. Whether you qualify for financial assistance is based on your household size and income. Financial assistance programs include Medical Assistance, MinnesotaCare and the Advanced Premium Tax Credits. Next year, quality ratings and easy to use information to compare plans and providers will be available on MnSure.

It is estimated than more than one million Minnesotans will be served on MnSure by 2016. This includes more than 300,000 individual consumers, 150,000 small businesses and employees, and 850,000 people who may be eligible for public programs (Medical Assistance and MinnesotaCare). The changes in accessibility and affordability made to Minnesota’s health insurance plans as a result of the ACA are expected to reduce the number of uninsured Minnesotans by about 300,000 plus thousands of more underinsured Minnesotans will be able to find better coverage through MnSure.

In most cases, individuals will use MnSure during the annual open enrollment period. During open enrollment, you can shop for a health plan, change the plan you currently have or renew coverage for your current plan. You can also find out if you are eligible for financial assistance to help you pay your health insurance premium with Advanced Premium Tax Credits. For coverage effective in 2014, the open enrollment period began October 1, 2013 and will run through March 31, 2014. For coverage effective in 2015, the open enrollment period will be October 1 to December 31, 2014. There are a few exceptions to the open enrollment period. If you lose your job or experience another qualifying event (see question below), you can use the exchange to shop for insurance. If you think you qualify for Medical Assistance or MinnesotaCare, you can use MnSure at anytime. If you are an American Indian, you can use MnSure once a month to shop or change your health plan.

A qualifying event is a change in your life that alters your need for health insurance. If you experience a qualifying event, you can use MnSure at anytime to find an insurance plan that meets your change in status, change your plan or discontinue your plan. Examples of qualifying life events are moving to a new state, certain changes in your income, changes in your family size (having a baby or experiencing a death in the family), losing access to employer-sponsored insurance, getting a divorce or getting married.

The ACA does have a provision called the Individual Shared Responsibility provision. Basically, it requires all those legally residing in the United States to have health insurance that meets minimum essential coverage (which means it provides the Essential Health Benefits Set and meets the affordability standard). Examples of minimum essential coverage include:

• Employer-sponsored insurance
• COBRA/retiree coverage
• Coverage purchase in the private individual market
• Medical Assistance and MinnesotaCare
• TriCare and Veteran’s Coverage
• Medicare Part A and Medicare Advantage plans

If you have any of these types of coverage, you are meeting the Individual Shared Responsibility provision. If you do not have insurance coverage and chose not to get any, you may be subject to a penalty that needs to be paid when you file your taxes.

In 2014, the penalty for going without insurance is relatively low. It is $95 a year per adult in the household and $47.50 per child in the household who is uninsured or 1% of household income – whichever is greater. In 2015, the penalty increases to $325 per adult (half for each child) or 2% of income. In 2016, the fine will be even higher. The penalty is accessed on a maximum of three adults per household. This means the fine could be for three adults in the household or two adults and two children, etc. There is also a maximum cap on the percent of income that can be charged. The penalty is also prorated based on the number of months that you are uninsured. If you lose your coverage at some point during the year, you are allowed a gap of three months for which you will not be accessed a penalty, allowing you time to find another coverage option.

Yes, there are several exceptions to the penalty including if you:

• Have income below the tax filing threshold;
• Have religious objections to health insurance;
• Are eligible for services through an Indian Healthcare provider;
• Have a hardship cause such as homelessness, domestic violence, bankruptcy, eviction, foreclosure, unpaid medical expenses;
• Do not have an acceptable immigration status;
• Have a gap in insurance coverage that is less than three months;
• Are a member of a federally recognized Indian tribe
• Are currently incarcerated
• Cannot find an insurance option that is affordable (premiums cost more than 8% of your household income).

With the new provisions and requirements under the ACA, your options for insurance coverage are pretty much the same as they always have been. The big change is that the ACA now requires all of these insurance options to provide minimal essential coverage, which means it meets the Essential Health Benefits Set and the affordability standards. Your options include:

• Enroll in employer-sponsored insurance;
• Qualify for public health insurance (Medical Assistance or MinnesotaCare)
• Qualify for subsidized private insurance through MnSure (using Advanced Premium Tax Credits to reduce the cost of premiums)*
• Purchase unsubsidized private insurance (meaning you are not eligible for tax credits) either through MnSure or through an individual health plan (such as Medica, Blue Cross Blue Shield, HealthPartners, etc).

*The plans available through MnSure are offered by the health plans approved to sell products in Minnesota such as Medica, Blue Cross Blue Shield, HealthPartners and so on. These are the same companies that sell to individuals outside of MnSure.

About two-thirds of Minnesotans currently get their insurance coverage through their employer and this won’t change too much under the ACA. The ACA requires all employer-sponsored insurance to meet the Minimum Essential Benefits set and the affordability standard. It also has a “shared responsibility provision” for large employers (those with at least 50 full time employees) that requires them to pay a penalty if they don’t offer insurance that meets these standards. Small employers (those with less than 50 full time employees) have new opportunities through MnSure to provide insurance to their employees and have some incentives to help them afford it.

The ACA requirements for the MinnesotaCare program will help about 127,000 Minnesotans get coverage. Changes include removing the limits on the hospital cap, removing waiting periods, eliminating the asset tests and reducing monthly premiums. The program also has new income eligibility requirements. Adults, ages of 19 to 64, are eligible for MinnesotaCare if their income is between 138% to 200% of the Federal Poverty Guidelines (see the income chart at the end of this section). Most children will no longer be eligible for MinnesotaCare because of the higher income standards for the Medical Assistance program. The exception is for immigrant children who do not qualify for Medical Assistance. For more information on MinnesotaCare, visit the Learn About Programs section on the Bridge to Benefits site.

The ACA calls for expansion to the MA program that will help about 108,000 Minnesotans qualify. The changes to MA include higher income standards, the elimination of the asset test and simplified enrollment and renewal processes. If you are an adult between the ages of 19-64, you will qualify for MA if your income is under 138% of the Federal Poverty Guidelines. If you are a child under the age of 19, you will qualify if you live in a household with income under 275% of the Federal Poverty Guidelines (see the income chart at the bottom of this section). To find out more about the MA program, visit the Learn About Programs section on the Bridge to Benefits site.

The ACA established Advanced Premium Tax Credits (APTCs) for people who have incomes that are higher than those allowed for public programs but don’t have access to employer-sponsored insurance or other types of insurance coverage. Adults, ages 19 to 64, qualify for APTCs if their income is between 200% to 400% of the Federal Poverty Guidelines. Children under age 18 are eligible for the APTCs if they live in households with incomes between 275% and 400% of the Federal Poverty Guidelines (see the income chart at the end of this section). Those who qualify for the APTCs can use the credits to help purchase private individual insurance through MnSure. As the name implies, these tax credits can be used in advance. In fact, they are usually distributed monthly to help individuals and families pay their monthly premium payments. They are distributed directly to the health plan from which you elect to purchase your policy and you are then required to pay the remaining balance, if any.

The APTCs are based on your projected income for the year and your household size (see the income chart at the end of this section). Your household size and income determine where you fall on the federal poverty guidelines scale. For example, if your income/household size puts you between 200-250% of the federal poverty guidelines, the ACA says you should expect to pay 6.3 to 8.05% of your income in premium payments. This is called your Expected Household Contribution. That contribution amount is subtracted from the premium amount of the second lowest cost silver-level plan that is available to you through MnSure. The amount that remains is what you will receive in tax credits. You are not, however, required to purchase a silver-level plan. You can use your tax credits to purchase any plan you find on MnSure. It can be a bronze-level plan, which may mean that after your tax credits are applied, you will have a very small premium payment, if any, to make each month. Or, you may apply your tax credits to the cost of a gold or platinum plan, which will require you to pay an amount higher than your expected household contribution. Just remember that the “metal levels” are based on actuarial values. A bronze plan will have lower monthly premiums but higher out-of-pocket costs when you go to use your insurance, whereas a platinum plan will have higher monthly premium payments but lower out-of-pocket costs (see question on actuarial values). To learn more about the Advanced Premium Tax Credits, visit the Learn About Programs section on the Bridge to Benefits website.

In addition to the Advance Premium Tax Credits, the ACA allows another way to help people afford the insurance they purchase in the private individual market. This assistance is called “cost-sharing subsidies” and for those who qualify, the subsidies reduce the amount of out-of-pocket costs the consumer is expected to pay for co-pays and deductibles. You can qualify for the cost-sharing subsidies if your income is between 200% and 250% of the Federal Poverty Guidelines. Also, you cannot be eligible for other minimum essential coverage. You must purchase your insurance plan through MnSure and you must select a silver level plan in order to receive the cost sharing subsidies.

You will be required to file your taxes in order to qualify for the Advanced Premium Tax Credits, the cost sharing subsidies and MinnesotaCare. You do not have to file your taxes to be eligible for Medical Assistance.

MAGI stands for Modified Adjusted Gross Income. Public programs such as Medical Assistance and MinnesotaCare have always determined eligibility based on gross income. The ACA has changed the income standard to use Modified Adjusted Gross Income. The Advanced Premium Tax Credits and the cost sharing subsidies also use MAGI to determine eligibility. In most cases, MAGI is equal to Adjusted Gross Income as defined under the Internal Revenue Code (IRS). It is found on line 37 on a standard 1040 tax form. Basically, MAGI takes wages and other types of income such as pensions, unemployment compensation, dividends, interest and alimony received and then deducts things like education expenses, IRA deductions, moving expenses, health savings account deductions and alimony paid to come up with adjusted gross income.

When applying for financial assistance on MnSure, you will be asked to estimate your income and deductions based on what you expect to have in the upcoming year.

Your eligibility for the Advanced Premium Tax Credits and the tax credit amount you receive each month to help you pay for insurance is based on what you expect to earn in the upcoming year. At the end of the year, when you file taxes (which you must do in order to receive your credits) you will have to settle your account (so to speak) between what you expected to earn and what you actually earned. This is called reconciliation. If you actually earned less than you anticipated, you will receive the difference (in the form of a tax refund) between the tax credit amount you received and the amount you should have received. In addition, if you earned more than you anticipated, you will have to pay back the difference between the tax credit amount you received and the tax credit amount you were due.

To minimize your risk for having to repay your tax credit at the end of the year make sure you report any changes you experience in income, household size, and tax status to MnSure as soon as they occur. This way your tax credit amount will be recalculated so you can avoid overpayment and underpayment. If your income varies greatly and is hard to predict, you can elect to take a lower tax credit amount each month than you are eligible for in order to avoid repayments at year end. You can also chose to pay the full cost of your insurance premium each month and wait to receive your entire tax credit at the end of the year when you file taxes. 

Minnesota seniors, 65 and older, will continue to enroll in Medicare (and Medical Assistance if they are low income) as they have in the past. They should not use MnSure to shop for health insurance. The ACA improves Medicare by adding free preventive care, moving to close the “donut hole” in prescription drug coverage, and increasing payments to primary care doctors to improve access. The changes in eligibility and the elimination of asset limits in Medical Assistance do not apply to seniors.

For some Minnesotans with disabilities – those who need additional financial assistance or require more long-term care services – little is changing. You must continue to get an official disability determination so that you can access Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI) and some waivered services. The recent changes in asset limits and income limits for Medical Assistance do not apply to those with disabilities.

However, some people with disabilities will benefit from the reforms in the ACA. If you do not require financial assistance or more extensive long-term care services, you can enroll in public or private insurance through MnSure and not go through the Social Security disability determination process. Consumer protections and requirements -- such as eliminating pre-existing condition exclusions, eliminating annual or lifetime caps on covered benefits, prohibiting health status from being used to calculate premiums and requiring guaranteed issue and renewal of policies – will make getting health insurance more accessible and affordable for those with disabilities.