The Affordable Care Act is always making news, whether because of court challenges or technology issues. But getting relatively little attention have been the details of how it works—who needs to sign up and how, what subsidies are available and the costs and variations among the plans. Daniel G. Mazzola, CPA, CFA, a member of the NYSSCPA Personal Financial Planning Committee, took a step to rectify this in a Feb. 11 presentation for CPAs titled, "How Will The Affordable Care Act Affect Me?"

In his presentation—which was covered by NY1 News—Mazzola cut through the hype and misinformation that surrounds the ACA to talk about how the new healthcare system really did work. He started by noting the fundamental principles of how insurance worked under the act: no one can be turned down, and premiums cannot be based on health status, sex, occupation or medical claims history. Pre-existing conditions can no longer be a reason for denying coverage, and insurers can't cancel coverage because a policyholder becomes sick. A provision especially welcomed by families guarantees that children can stay on their parents' plans until they turn 26.

Much of Mazzola's talk centered on the exchanges, the insurance marketplaces where individuals can buy policies. Exchanges are simply places where individuals and small businesses can buy insurance, explained Mazzola. Their primary purposes is to help consumers who otherwise don't have any coverage—through an employer, for example. Prices are kept in check through competition, as multiple insurance companies within an exchange can set their own rates. However, they must follow ACA guidelines on cost-sharing and premium ratios between different groups of covered individuals. New York has a state-based marketplace titled “NY Health Benefit Exchange.” Details are available at http://info.nystateofhealth.ny.gov.  

Exchange plans are available at four levels: platinum, gold, silver and bronze. They differ in the percentage of the value of benefits paid, but Mazzola explained that each plan each plan offers same benefits, rights and protections. 

When choosing a plan, Mazzola stressed consumers have to be careful shoppers, because there is a wide range of costs even within one level in one exchange. For example, he showed how five different insurers in the New York plan vary their costs from each other and from location to location, even within one level. GHI charges $569.66 for a silver-level single adult in Albany but $656.27 for that same person on Long Island. Looking for a better rate? NY Fidelis is $342.05
In Albany and $360 on Long Island.

The huge difference in prices may be due to different actuarial assumptions and market share strategies. But Mazzola said the main reason for price differences is that different plans use different networks of doctors and hospitals to provide care at an agreed-upon price. "Less expensive silver plans are likely to offer access to a narrower network," he said.

Tax Credits and Cost-Sharing Subsidies

Exchanges do more than provide a marketplace, continued Mazzola. They also allow purchasers to take advantage of tax credits and cost-sharing subsidies, if they fall within certain thresholds as determined by a ratio with the federal poverty level (FPL). For example, a family whose income falls between 300 percent and 400 percent of the FPL does not have to pay more than 9.5 percent of its income on insurance. Cost-sharing can reduce the out-of-pocket maximums  for households earning up to 400 percent of the FPL.

Ultimately, said Mazzola, the new exchange system will force taxpayers to pay closer attention to their spending on medical services. "A trend towards Americans becoming knowledgeable and engaged consumers of health care rather than passive beneficiaries is a positive development."