Changing Care: Your Guide to the Affordable Care Act

By Linda Laarman and Karen Nordahl

We continue our series on the Affordable Care Act (ACA) with a focus on health insurance exchanges created by the ACA. Exchanges have the potential to open up new opportunities to people in Door County, where many are self-employed or work for small businesses.

As with any major systemic change, it will take a few years for health care exchanges to become institutionalized, and for successes and failures to be reliably evaluated. But the intent is to make a reasonable range of health insurance benefits more accessible and affordable, starting in 2014.

Although there’s overlap, the marketplaces for individuals and for small businesses are technically different. This article, like the first, focuses on individuals; we intend to cover small businesses in future publications. As we go to press, detailed information necessary for people to shop for exchange plans is not yet available – but presumably imminent. Exchanges are scheduled to open for enrollment Oct. 1, 2013. Coverage starts as soon as Jan. 1, 2014, with individuals needing to apply by Dec. 15 this year to get coverage Jan. 1.

What will an individual need to know to choose a plan?

No exchange plan can deny coverage or increase costs based on pre-existing conditions, and all are required to cover 10 “essential health benefits” (as described in last week’s article – volume 19, issue 28, Sept. 20; visit and search “Changing Care:  Your Guide to the Affordable Care Act”). Insurers participating in an exchange may package essential and other health benefits, and costs to individuals, in different ways. Once detailed information on exchange plans is made available (anticipated Oct. 1), individuals should be able to compare and contrast plans’ benefits and costs through side-by-side information.

When considering costs, individuals should evaluate not just premiums but also out-of-pocket costs. These include deductibles (the dollar amount the individual must pay before the plan pays anything), co-insurance (the split of cost-sharing between the plan and the individual, e.g. 80 percent: 20 percent) and co-payments (the dollar amount an individual pays for any particular service, such as a $15 charge for every office visit).

Plan categories:  The ACA divides exchange plans into four categories – bronze, silver, gold, and platinum – with categories assigned based upon the percentage of covered benefits the plan will pay. Although variations may occur, on average the percent of benefits to be paid by the plan will be 60 percent, bronze; 70 percent, silver; 80 percent, gold; and 90 percent, platinum. Higher percentages of payment will correlate with higher premiums. 

The ACA prohibits discrimination based upon gender or pre-existing conditions, but does allow premiums to go up with age. Plans are permitted to have up to three age-related bands, with the ratio for the oldest to the youngest limited at 3:1.

Those below the age of 30 may be offered policy options known as “catastrophic” plans, which are high-deductible plans designed to protect from worst-case scenarios, while also covering three primary care visits per year and free preventive benefits. Until age 26, individuals also may be able to qualify as “dependents” covered in a parent’s employer-sponsored plan.

Subsidies for lower income people: People with household income between 100 percent and 400 percent of the federal poverty level (FPL) may be eligible for subsidies to help defray the cost of coverage. (Note: “household income” is defined for this purpose by using a modified version of federal tax law’s adjusted gross income. Also, the reason for the 100 percent FPL threshold is that those below are eligible for heavily state-subsidized coverage – in Wisconsin, BadgerCare Plus.) The FPL is determined annually. In 2013, for example, it is $11,490 for a one-person household and $23,550 for a four-person household – so that 400 percent of the FPL amounts to $45,960 for an individual and $94,200 for a four-person household.

The first subsidy will operate to cap premiums at a percentage of income, applied on a sliding scale ranging from 2 percent of income for those at 100 percent of the FPL to 9.5 percent for those at higher incomes. The second subsidy will lower out-of-pocket costs (deductibles, co-insurance, co-payments). It also is applied on a sliding scale, reducing individuals’ out-of-pocket maximums (see below) as follows:


Income & Reduction in Out-of-Pocket Liability

100% – 200% of FPL  2/3 of maximum

200% – 300% of FPL  1/2 of maximum

300% – 400% of FPL  1/3 of maximum

Note that these descriptions of subsidies are generally based on a plan offering called “silver benchmark” coverage. Actual subsidies will vary, depending on particular plan coverage and other factors.

Maximum out-of-pocket costs for everyone: Even if an individual isn’t eligible for a subsidy, the ACA limits the maximum annual out-of-pocket cost for essential benefits, whether a person is covered by a bronze, silver, gold or platinum plan. For 2014, the annual limit is $6,350 for individual coverage and $12,700 for family coverage. 

To what extent will insurance be mandatory?

With limited exceptions, those who opt out of all health insurance options (exchange-plan coverage, employer-plan coverage, etc.) will be subject to a tax. In 2014, the tax is the greater of either 1 percent of income (as defined by the ACA) or $95 per adult and $47.50 per child (up to $285 per family). In 2015, the tax increases to the greater of either 2 percent of income or $325 per adult and $162.50 per child (up to $975 for a family). The taxes will increase again in 2016.

For healthcare exchanges to succeed, high-volume participation from all age and health ranges is critical. Some level of participation is therefore required for those currently uninsured, either through purchase of a plan or payment of the tax. While this tax is commonly called a “penalty,” proponents of the ACA use the term “contribution,” noting that those who choose to remain uninsured still need to participate in covering the cost of American healthcare.

Linda Laarman has practiced law for almost 35 years. A key area of practice has been advising employers on employee benefits and compensation matters.

Karen Nordahl has worked in the medical industry for more than 20 years, with a focus on providing educational resources and strategic support to providers and manufacturers on the topics of health policy, economics and reimbursement.

Key websites

Although the ACA is complex, many publications and websites can help explain key points.

• A key federal government’s site is, with a related phone number 800.318.2596.

• In July, Wisconsin’s Office of the Insurance Commissioner published frequently asked questions for consumers, available at On Sept. 19, the OCI published a list of insurers that would be offering exchange plans in Door and other counties, available at

• On Sept. 24, the U.S. Department of Health and Human Services published an issue brief, Health Insurance Marketplace Premiums for 2014, available at It focuses on expected premiums for exchange plans in the 36 states, including Wisconsin, where exchanges will be primarily run by the federal government.

Cost Calculator

Detailed Wisconsin plan information is expected by Oct. 1. Pending that information, individuals can get a rough estimate of costs (including subsidies) using a calculator published by the Kaiser Family Foundation (KFF). The KFF is a nonprofit research organization. Its calculator can be found at or via a link on the federal government’s site at


The Pulse inadvertently omitted Linda Laarman’s name as a co-author with Karen Nordahl of the Sept. 20 article “Changing Care:  Your Guide to the Affordable Care Act. Here Come the Health Care Exchanges.” We regret the error.