American consumers, who spent a year watching Congress scratch and claw over sweeping health care legislation, can now try to figure out what the overhaul would mean for them.
The uninsured are clearly the biggest beneficiaries of the legislation, which would extend the health care safety net for the lowest-income Americans.
The legislation is meant to provide coverage for as many as 32 million people who have been shut out of the market — whether because insurers deem them too sick or because they cannot afford ever-rising insurance premiums.
For people already covered by a large employer — most Americans, in other words — the effect would not be as significant. And yet, just about everyone might benefit from tighter insurance regulations.
“We think it’s a big step forward,” said Bill Vaughan, a policy analyst at Consumers Union. “It’s going to provide a peace of mind that many Americans who really want or need health insurance will always be able to get a quality product at a reasonable price regardless of their health or financial situation.”
There would be costs to consumers, too. Affluent families would be required to pay additional taxes. Most Americans would be required to have health insurance and face federal penalties if they do not buy it. And it is still unclear what effect, if any, the legislation would have on rising out-of-pocket medical costs and premiums.
But there is no question that the legislation should benefit consumers in various ways. Beginning in 2014, for example, many employers — those with 50 or more workers — could face federal fines for not providing insurance coverage. Several of the other changes would take effect much sooner.
Six months after the legislation is enacted, many plans would be prohibited from placing lifetime limits on medical coverage, and they could not cancel the policies of people who fall ill. Children with pre-existing conditions could not be denied coverage.
And dependent children up to age 26 would be eligible for coverage under their parents’ plans — instead of the current state-by-state rules that often cut off coverage for children at 18 or 19.
And within three months of the law’s taking effect, people who have been locked out of the insurance market because of a pre-existing condition would be eligible for subsidized coverage through a new high-risk insurance program.
That special coverage would continue until the legislation’s engine kicks into a higher gear in 2014, when coverage would be extended to a wider part of the population through Medicaid and new state-run insurance exchanges.
Those exchanges, or marketplaces, are meant to provide much more competitive, consumer-friendly online shopping centers of private insurance for people who are not able to obtain coverage through an employer.
In 2014, people with pre-existing conditions could no longer be denied insurance, all lifetime and annual limits on coverage would be eliminated and new policies would be required to meet higher benefit standards.
Even sooner, in 2013, affluent families with annual income above $250,000 would be required to pay an additional 3.8 percent tax on their investment income, while contributing more to the Medicare program from their payroll taxes. And eventually, the most expensive insurance policies would be subject to a new tax.
Here is a look at some of the main ways the health care overhaul might affect household budgets.
Although most Americans who do not obtain health insurance would face a federal penalty starting in 2014, many experts question how strict the enforcement of that penalty would actually be.
The first year, consumers who did not have insurance would owe $95, or 1 percent of income, whichever is greater. But the penalty would subsequently rise, reaching $695, or 2 percent of income.
Families who fall below the income-tax filing thresholds would not owe anything. Nor would people who cannot find a policy that costs less than 8 percent of their income, said Sara R. Collins, a vice president at the Commonwealth Fund, an independent nonprofit research group.
EXPANDED MEDICAID More lower-income individuals under the age of 65 would be covered by Medicaid, the federal health insurance plan for the poor. Under the new rules, households with income up to 133 percent of the federal poverty level, or about $29,327 for a family of four, would be eligible.
EXCHANGES AND SUBSIDIES Most other uninsured people would be required to buy insurance through one of the new state-run insurance exchanges. People with incomes of more than 133 percent of the poverty level but less than 400 percent (that’s $29,327 to $88,200 for a family of four) would be eligible for premium subsidies through the exchanges.
Premiums would also be capped at a percentage of income, ranging from 3 percent of income to as much as 9.5 percent.
EMPLOYMENT FLEXIBILITY The exchanges would also help people who lose their jobs, quit or decide to start their own businesses.
“If you lose your employer-related insurance, you will be able to move seamlessly into the exchange,” said Timothy Stoltzfus Jost, a professor at the Washington and Lee University School of Law.
Moreover, people of any age who cannot find a plan that costs less than 8 percent of their income would be allowed to buy a catastrophic policy otherwise intended for people under age 30.
Those With Insurance
EMPLOYER COVERAGE People who receive coverage through large employers would be unlikely to see any drastic changes, nor should premiums or coverage be affected. But almost everyone would benefit from new regulations, like the ban on pre-existing conditions that would apply to all policies come 2014.
There might even be cases where people would be eligible to buy insurance through an exchange instead of through their employer, Professor Jost said: those who must pay more than 9.5 percent of their income for premiums, or those whose plans do not cover more than 60 percent of the cost their benefits.
CHANGES IN MEDICARE One of the biggest changes involves the Medicare prescription drug program. Its unpopular “doughnut hole” — a big, expensive gap in coverage that affects millions — would be eliminated by 2020. Starting immediately, consumers who hit the gap would receive a $250 rebate. In 2011, they would receive a 50 percent discount on brand name drugs.
HIGH-COST INSURANCE Starting in 2018, employers that offer workers pricier plans — or those with total premiums of $10,200 or more for singles and $27,500 for families — would be subject to a 40 percent tax on the excess premium, said C. Clinton Stretch, managing principal of tax policy at Deloitte. Retirees and workers in high-risk professions like firefighting would have higher thresholds ($11,850 for singles, or $30,950 for families), pegged to inflation.
Although the taxes would be levied on the insurer, experts expect the assessment to be passed on to the consumer in the form of higher premiums or reduced benefits.