Health Care Reformed: What Will Change for You?

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He really can, it turns out. After more than a year of fiery debate on Capitol Hill and heated town hall meetings throughout the country, President Obama is finally getting ready to sign off on the centerpiece of his political agenda – the health care reform bill.

The House of Representatives passed the historic bill late Sunday with a 219 to 212 vote. (Not a single Republican voted Yes and 34 Democrats voted No.) A companion bill now heads to the Senate floor and, after an expected approval vote, goes to President Obama’s long-anticipated signature.

Speaking at the White House shortly after the vote, President Obama said that the House vote Sunday “answers the prayers of every American who has hoped deeply for something to be done about a health care system that works for insurance companies, but not for ordinary people.”

Rhetoric aside, what every American likely cares about is: How will health care reform affect my health policy (or the lack of it) and my financial bottom line?

The highlights certainly sound grand.

• By 2019, the new legislation will provide coverage to an estimated 32 million uninsured Americans – at a cost of a whopping $940 billion.
• Insurance companies will no longer be allowed to deny coverage on the basis of having a preexisting condition – or hike your premiums if you get sick.  (Right now, the number of people who have been unable to get insurance because of a preexisting condition are staggering: an estimated 12.6 million people, or 36% of adults 19 to 64 years old who have individual insurance or have tried to buy one in the past three years, according to a survey by health policy think-tank The Commonwealth Fund.) 
• Insurers will no longer be allowed to impose ceilings on annual or lifetime benefits, which often causes individuals who require expensive treatment to incur bankrupting out-of-pocked costs.
• Young adults, up until now left on their own as soon as they graduate from college, will qualify for coverage under their parents’ policies until the age of 26.

Pooling In The Uninsured

Today, nearly 46 million Americans do not have health coverage, either because they cannot afford it or because health insurance companies flat out refuse to sell them a policy. Ensuring that the majority of those individuals can get insurance at an affordable cost addresses the biggest problem in the system, says Sara Collins, vice president for the Affordable Health Insurance Program at The Commonwealth Fund. “Right now, most people get coverage through their employer,” she says.  “If you lose that coverage, it’s hard to find a plan that meets your needs.”

The new legislation will expand Medicaid eligibility and create so-called insurance exchanges where people will be able to buy insurance at subsidized premiums, provided they meet the income requirements. For a family of four, those are:

• If your annual household income is $29,000 or below, you will qualify for Medicaid regardless of where you live. Medicaid coverage will be extended to families earning up to 130% of the poverty level: a significant improvement over the current situation, which varies dramatically across states, says Collins. Currently, for example, adults who don’t have children do not qualify for Medicaid–regardless of their income–in 35 states. (Where more generous than those established by the new legislation, state eligibility requirements will remain unchanged.)
• If your annual household income is between $30,000 and $88,000, you will be able to purchase coverage through an insurance exchange, at subsidized premiums. The amount of the subsidy will be income-based, with those earning less getting higher subsidies, Collins says.  (A family earning $55,000 a year, for example, would have premium expenses capped at 8% of income, while a family earning $33,000 would have a cap at 4%.)

Until the insurance exchange program goes into effect in 2014, anyone who has been uninsured for six months or longer because of a preexisting condition will be able to enroll in a national high-risk pool program.

Taxing High-Cost Employer-Sponsored Plans

If you have insurance through your employer, chances are you won’t be affected by the new legislation – unless your company’s insurance plan is deemed too expensive. Beginning in 2018, employers who pay more than $10,000 for individual coverage or $27,500 for a family will be charged a special tax.  The idea is to discourage compnies from purchasing expensive health insurance, which in turn should ultimately prevent insurers from hiking their rates or offering expensive plans altogether, Collins says. (Most companies don’t pay that much. Currently, the average cost of a family policy in an employer-based plan is around $13,000.) These thresholds will be adjusted to factor higher premiums based on the average age or location of the insured group, Collins says.  In fact, starting in 2014, insurers will be restricted from increasing premiums on the basis of age.

Questioning reform

To be sure, the bill has its fair share of opponents. Industry consultant Robert Laszewski, the president of Health Policy and Strategy Consultants, writes in a recent blog post that the bill “doesn’t even come close to deserving to be called ‘health care reform’.”  He labels the bill unsustainable, argues that it will do little to change the status quo for those who profit most under the current system (the way physicians are paid, for example, will not change), and points out that “there is little in this bill that will mitigate or control” unaffordable health insurance rate increases because very little will be done to impact the underlying health care costs.

Do you think health care reform will ultimately improve your financial bottom line? Tell us how in the comments below.