Last reviewed: December 5, 2013. Due to the complexity of the law that may require very fact-specific analysis, this material is not intended to be legal, accounting, or other professional advice, and is provided as general information only.

AFFORDABLE CARE ACT OVERVIEW  

From DCCA Insurance Div December 9, 2013

The purpose of the Patient Protection and Affordable Care Act (“ACA”) is to decrease the uninsured population by increasing access to affordable health insurance. As part of this goal, the ACA has created what is known as the “individual purchase mandate”. This mandate requires almost everyone to have health insurance unless they fall into a federal exemption.

Some of the new features introduced by ACA are:

• guaranteed issuance and renewal of policies;
• banning the refusal of coverage because of a pre-existing health condition;
• the creation of the 10 Essential Health Benefit categories to provide a minimum floor of coverage;
• a new rating methodology for plans sold to individuals and small businesses; and zero cost-sharing on certain preventative services.

One major program created by the ACA is the establishment of health insurance “exchanges”, also referred to as “online marketplaces.” Hawaii’s online marketplace or exchange is known as the Hawaii Health Connector.

The Hawaii Health Connector has a website that allows individuals and employers to shop and compare health plans. Individuals with an annual household income from 139% and 400% of the Federal Poverty Level may qualify for premium assistance. Note that the Federal Poverty Level for Hawaii is different from the Federal Poverty Level for Alaska and the 48 other States.

Similarly, small businesses that employ fewer than 25 people may be eligible for a Small Business Tax Credit. These premium assistance programs are only available with health plans purchased through the Hawaii Health Connector.

Beginning in 2014, the ACA mandates that all U.S. citizens, U.S. nationals, Permanent Residents and lawful resident aliens have an acceptable level of health insurance, unless they are exempt under federal guidelines. People who are not exempt from the Minimum Essential Coverage requirement and who reject access to such affordable insurance will be subject to a penalty when filing 2014 tax returns starting in 2015 and thereafter.  

ACA creates new requirements for individuals and small businesses. ACA compliant plans are required to base rates only on age, tobacco use and whether the insurance applicant is an individual or family. These plans are available at the same price, either on or off the Hawaii Health Connector.  

Hawaii private employers (regardless of size) must recognize that the 1974 Hawaii Prepaid Health Care Act still applies even after the passage of ACA. Therefore, much of the FAQ and general information available on the federal government websites is not always correct, when applied to Hawaii employers and employees.

Recent update on “grandmothered” plans—a transitional policy for the first year 

On November 14, 2013, President Obama announced that States could decide whether to allow small group and individual health insurance policies existing on Oct. 1, 2013 to be renewed for a policy year starting between January 1, 2014 and October 1, 2014. To give Hawaii consumers the most options, the State of Hawaii has allowed Hawaii health insurers to offer the renewal option.  

Essentially, for 2014, Hawaii consumers have the greatest selection of choices:

1. “Grandfathered 2010” health plans. The federal law specifies conditions for grandfathered plans that existed in March 2010. Grandfathered health plans cannot be sold on the online marketplace or the Hawaii Health Connector. Many people will not have access to this option because their policies changed after March 2010.  

2. “Transitional renewal plans” also called “Grandmothered” health plans. These plans must have been in existence on Oct. 1, 2013 and renewed prior to October 1, 2014. They include some but not all of the ACA features. Transitional or Grandmothered health plans cannot be sold on the online marketplace or the Hawaii Health Connector. These plans will be subject to updated premium rates. You may only apply for a renewal policy, not a newly issued policy.  

3. “Fully compliant new 2014 ACA” plans. Non-Grandmothered plans must include all ACA features, including the 10 Essential Health Benefits. Fully ACA compliant plans will be sold on and off the Hawaii Health Connector. 

Pros and Cons of Keeping Your Old Policy  

Consumers may wonder whether to keep an existing Grandmothered plan or buy a plan that is fully compliant with ACA.  

The quality of the coverage being provided should be considered. The ACA has a minimum floor for coverage for fully compliant new 2014 ACA plans. This floor may be better than the coverage being provided under the Grandmothered plans, particularly in the individual market.  

The cost of premiums should be considered. The ACA has new rating factors which emphasize age rating. This will be more favorable for some people than others. Some people may find that the rates under the Grandmothered plans are better than new fully compliant ACA plans. For others, the opposite may be true.

In addition to the premium costs, the possibility of obtaining tax credits for the purchase of health insurance through the Hawaii Health Connector should also be taken into consideration. Note that as of December 5, 2013, the only way to obtain these premium assistance tax credits is by buying through the Hawaii Health Connector.