The Affordable Care Act
The Patient Protection and Affordable Care Act (ACA) became law in 2010. Since that time, a number of provisions have gone into effect, limiting cost increases for subscribers and making medical insurance more available to the public. Much of the ACA pertains to employee insurance coverage and does not impact retirees. Because LACERS administers retiree-only group medical plans, some of the provisions do not apply to our plans.
For Medicare-eligible Retired Members, Medicare Advantage plans will continue to be available into the foreseeable future, although federal government funding of these plans may change. For our Retired Members who are not yet eligible for Medicare, we will continue to offer medical plans and will look for opportunities available through the ACA to provide more cost-effective coverage without compromising quality.
The information contained in this article is subject to change. For the most updated information, visit the U.S. Department of Health & Human Services at www.hhs.gov/healthcare. Below is a quick reference of some of the ACA provisions that are in effect, or will go into effect in the future, that may impact our Retired Members:
Tax on High Cost Insurance (2020)
An excise tax of 40% will be imposed on insurers of employer-sponsored health plans with aggregate total costs that exceed $10,200 for individual coverage and $27,500 for family coverage.
Individual Mandate for Health Insurance Coverage (Effective 2014)
Effective January 1, 2014, all U.S. citizens and legal residents must have qualifying health insurance coverage or pay a tax. For 2014, the amount of tax is $95 per adult and $47.50 per child (up to $285 for a family), or 1.0% of household income, whichever is greater. In 2016, this amount increases to the greater of $695 per adult or 2.5% of household income.
Health Care Exchanges (Effective 2014)
Federal or state-run health care exchanges will be established to provide people without medical coverage a place to compare and purchase medical insurance. California has its own exchange called “Covered California.” Its Open Enrollment period runs from November 15th through February 15th. More information can be found at: www.coveredca.com
Health Insurance Premium and Cost Sharing Subsidies (Effective 2014)
Beginning 2014, premium subsidies are available to families with incomes up to 400% of the federal poverty level to purchase insurance through Health Insurance Exchanges. For 2014, 400% of the federal poverty level for a family of four is $95,400.
Federal Poverty Level 2014 at 100%
2014 Poverty Guidelines for the 48 Contiguous
States and the District of Columbia
Persons in family/
1 $11,670 2 15,730 3 19,790 4 23,850 5 27,910 6 31,970 7 36,030 8 40,090
For families/households with more than 8 persons,
add $4,020 for each additional person.
The subsidies come in two forms. First, a monthly premium assistance tax credit will lower the premium amount an individual or family must pay. Second, cost-sharing assistance will limit a person's maximum out-of-pocket costs, and for some it will also reduce other cost-sharing requirements (i.e., deductibles, coinsurance, co-payments). Subsidy eligibility and amounts are based on household income.
Medical Deduction Floor (Effective 2013)
Previously, medical costs that exceeded 7.5% of your adjusted gross income could be deducted. Effective January 1, 2013, the 7.5% floor is increased to 10%.
Unearned Income Medicare Contribution Tax (Effective 2013)
Effective January 1, 2013, a 3.8% Medicare tax is imposed on unearned income for people with incomes over $200,000 (or $250,000 for joint filers). Unearned income, for purposes of the Medicare tax, would include interest, dividends, royalties, rent, passive activity income (such as income passed-through from partnerships and S-corporations), and gain from the sale of property. With respect to the sale of a home, the 3.8% applies only to amounts that exceed gains of $250,000 for an individual and $500,000 for joint filers.
Increase in Medicare Tax for High Income Earners (Effective 2013)
Currently, the Medicare tax rate is a flat 2.9% on all wage income, with both the employer and the employee paying exactly one-half of this amount. Starting in 2013, the flat 2.9% Medicare tax will continue to apply to wages under $200,000 (or under $250,000 for married couples filing a joint return). However, there will be an additional 0.9% Medicare tax on wages over $200,000 ($250,000 for joint filers).
Tax on Medical Devices (Effective 2013)
Effective 2013, the IRS shall impose an excise tax of 2.3% on the sales of any taxable medical device.
W-2 Form reporting requirements (Effective 2012)
Beginning with the 2012 tax year, W-2 forms provided by employers to active employees (in the beginning of 2013) will show employees the value of their health insurance. However, the reporting is for informational purposes only; employees will not be taxed on this amount. The requirement was originally set to go into effect for the 2011 tax year, but implementation was delayed by the Internal Revenue Service. This reporting does not apply to retirees who do not receive a Form W-2.
Closing of Medicare Drug Coverage Gap (Effective 2012)
In 2013, Retired Members whose prescription drug costs have entered the coverage gap or “donut hole” will receive a 52.5% discount on brand drugs and 21% for generic drugs. The ACA is gradually closing the coverage gap, with it being eliminated by 2020 and Medicare Part D covering 75% of prescription drug costs.
Medical Loss Ratio Requirement (Effective 2012)
Medical insurance plans must have medical care and quality improvement costs represent at least 80% (for individual plans) or 85% (for fully-insured group plans) of the annual premium cost and issue rebates to subscribers or plan sponsors if these requirements are not met.
Medicare Part D Premiums for High Income Earners (Effective 2011)
Retired Members with incomes greater than $85,000 per year (or $170,000 for couples filing jointly) pay additional Medicare Part D premiums, referred to as Income Related Monthly Adjustment Amounts.