There has been a great bit of news this week about the Affordable Care Act and the state of North Carolina. Under Gov. Perdue, the state of North Carolina was going to establish a State Insurance Exchange for the new federal healthc are law. Upon further review, the state would like for the federal government to set up a Health Insurance Exchange instead and run it exclusively with little to no help from North Carolina. This column does not take a stand in favor of either position, but is here to explain the effects of the ACA on people.
As of Oct. 1 2013, residents of North Carolina will have the ability to select health insurance coverage if you have no existing health benefits in place; those new benefits will go into effect on Jan. 1., 2014. Based on the current guidelines for ACA, there are four levels of plans, Bronze, Silver, Gold, and Platinum. Each level will make the insurance company responsible for a percentage and the insured will be responsible for the difference. Bronze will pay 60 percent of medical bills, Silver 70 percent, Gold 80 percent and Platinum 90 percent. The Health Insurance Exchange may have all four levels, but they must have at least one in Silver and one in Gold. There are other factors which will affect exactly how the percentage is applied, but for this article, I am keeping the numbers simple. For example, if you have the Silver Plan and a person has met their deductible, the insurance company will pay will pay 70 percent of your medical bill and the patient will pay 30 percent. According to the ACA, the maximum amount a patient would have to pay out of pocket would be $5,950 for an individual and $11,900 for a family of four. After that amount, the insurance company pays 100 percent. There will be some difference for small employers, but for the moment, I will focus on individuals. Once again, I want to stress, this is the intent of the plan, since nothing of this size and complexity has ever been done holding out for specific numbers remains to be seen.
A unique feature of the Health Insurance Exchanges will be instant tax credits, which will be applied to the coverage of your selection. Once again, I must stress, the concepts we are talking about are “what should happen” when everything goes live. On Oct. 1, a person can go to an online site, input all their information — family size, ages, income and type of health coverage wanted. The site will compute your income and give the person a tax credit amount which can be applied to the health coverage selected. This example is for illustration purpose only; a family of four with a yearly income of $40,000 selects the Gold Plan with a $1,000 deductible. The cost of the coverage may be $600 a month, but because of the family income, the person qualifies for an instant tax credit of $380 to apply against the premium. The actual cost to the family is only $220 a month instead of the $600.
On the subject of Medicaid, North Carolina like many other states is selecting not to offer the Medicaid Expansion. However, should North Carolina elect to change and offer this expansion to Medicaid, I will discuss the program in detail during the week it is approved. For now, anyone who is not already on Medicaid, they will need to apply for coverage under the Health Insurance Exchange and will pay a small monthly premium for coverage depending on their income; in some cases, the person may pay nothing.
Almost all of the tax credits focus on income. The federal government uses the federal poverty limit chart to establish what income qualifies for Medicaid and for the tax credits as well. This new credit will not start until Jan1, 2014. Next week, we will see how an income of $75,000 a year can qualify for a tax credit for health insurance.
Darek Hunt, a Lumberton resident, has his master’s degree in Public Policy and Administration and is a doctoral student in Health Sciences. He specializes in health care administration and health policy.