Health reform: The big picture

Health reform is now a reality. Over the coming months and years, America's health system will change in many ways.

Here are the most critical facts about how those changes will affect you and your family.

• Everyone, including sick people, will be able get health insurance.
  Starting in 2014, Insurers will have to take you regardless of your health history, and premiums will be allowed to vary only slightly, on the basis of age and tobacco use, not health status. In the interim, people who can't get insurance because of pre-existing conditions will be able to buy into a temporary high-risk pool (but only if they've gone uninsured for at least six months).
• All health insurance will be good insurance.
  Insurers won't be allowed to put an annual or lifetime cap on the amount they'll pay out for your medical care. And the plans they sell will have to cover the full range of medical treatments. They won't be allowed to leave out something crucial, like prescription drugs or outpatient doctor visits. Members of Congress and their staffs would have to choose from among the same options available to other Americans buying coverage on their own.
• You'll know what kind of health plan you're buying.
  Starting in 2014, you'll shop for coverage on a centralized exchange that enables you to compare health plans side-by-side in terms of price, features, and various quality and customer satisfaction measures. In the interim, you'll have access to far more information on insurance companies than previously.
• If you get insurance through a job, you can keep it.
  If you work for (or own) a small business, depending on the number of employees and their average wage, you may be eligible for tax credits to make insurance more affordable, starting right away.
• If you're on Medicare, your benefits will improve.
  Your plan will now cover 100 percent of preventive care such as checkups, colonoscopies, and mammograms. And the notorious "doughnut hole" in the Part D drug benefit will start to shrink. In 2010, if you enter the hole, you'll get a $250 rebate. Starting in 2011, you'll also get a 50 percent discount on brand-name drugs, and by 2020 the doughnut hole will completely disappear. Changes in physician payment will, over time, increase the number of primary-care doctors, who are in short supply in some parts of the country right now.
• Everyone will have to have health insurance...
  Starting in 2014, you'll have to obtain it either through your job, from a public plan like Medicare or Medicaid, or on your own. If you don't have it, you'll pay a small fine.
  ...but you'll get help paying for it if your income qualifies you
  If your income is near the poverty line, you'll automatically qualify for Medicaid, even if you don't have dependent children. If your income is somewhat higher but still less than 400 percent of the federal poverty line (or roughly $73,000 a year for a family of three), you'll get a tax credit to offset the cost of coverage. This tax credit that will come to you as a rebate even if you don't owe income taxes. The lower your income, the bigger the credit.
• Some people still might not be able to afford coverage.
  Even with subsidies, premiums may be too high for some people. If you truly can't afford it, you will be allowed to opt out of coverage (and avoid the penalty for non-insurance).
• You won't be taxed to pay for health reform unless you're really affluent.
  The new health-reform law, along with the final modifications that passed the House and are under consideration in the Senate, increases Medicare tax rates for very high-income households. Starting in 2013, you'll be charged an extra 0.9 percent Medicare tax on your income over that amount if your adjusted gross income is more than $200,000 a year for an individual, or $250,000 for a couple. So a couple bringing in $300,000 a year would pay roughly $450 more a year in Medicare taxes on their income than they do now—that's less than two-tenths of 1 percent of their income.
  
  The modified bill would also levy a 3.8 percent Medicare tax on unearned income such as dividends and royalties, but, again, only if you earn $200,000 alone, or more than $250,000 filing jointly. (Right now, you pay Medicare tax only on earned income such as salaries from a job.) The tax doesn't apply to distributions from qualified retirement plans, IRAs, or 401(k) accounts.

The biggest changes in health care won't take place until 2014. That's when the health insurance mandate kicks in, along with the tax credits and health-insurance marketplace changes that make it all work.

But some things will happen immediately, or nearly so:

• Help for young adults. Young adults will be able to stay on their parents' individual or group policies until their 26th birthdays starting in October 2010, six months after reform became law. That's a major benefit for a population with a much higher-than-average uninsurance rate; today nearly 30 percent of adults aged 19 to 29 are uninsured, compared to about 17 percent for the under-65 adult population as a whole.
• Help for adults with pre-existing conditions. Within 90 days, the federal government will set up a temporary national high-risk insurance pool for people who can't get individual coverage because of pre-existing conditions and have been uninsured for at least six months. The premiums will be subsidized but only to bring the premiums costs down to 125% of the cost of coverage for a healthy person. The maximum annual out-of-pocket costs will still be substantial: $5,950 for individuals and $11,900 for a family. The pool will dissolve once "full reform" begins in 2014, at which point insurers will no longer be able to turn anyone down because of pre-existing conditions.
• Help for children with pre-existing conditions. Help comes sooner for kids. Beginning immediately, insurance plans will no longer be able to deny coverage for children with pre-existing conditions, although in most states they can charge more, at least until 2014.
• Expanded Medicare benefits. Starting immediately, people who land in the Part D drug coverage "doughnut hole" will get a $250 rebate. In 2011, Medicare will start paying 100 percent of the cost for preventive services such as vaccines and screening tests, and also for an annual checkup, without charging any co-pays or deductibles. It will also begin providing a 50 percent discount on brand-name drugs. The Part D coverage gap will start being phased out, and will close completely by 2020.
• An end to rescissions. Within six months of enactment, insurance companies will no longer be able to retroactively cancel individual coverage on people who get sick and start filing expensive claims. Often the companies have cancelled because the policyholder forgot to mention some minor, unrelated piece of health history, such as a teenage bout with acne, on their application. The practice, known as rescission, has provoked enormous consumer outrage and resulted in multi-million-dollar fines to insurers. After reform, the only way an insurer can cancel paid-up coverage is if the policyholder has committed outright fraud.
• A crackdown on excessive premium hikes. News of double-digit premium increases in many states have drawn attention to the fact that state regulators often don't have much authority over health insurer premiums. The White House proposes to immediately create a new national Health Insurance Rate Authority that would review premiums and, if they turned out to be unreasonable, have the power to lower them or even force health plans to pay back overcharges to consumers.
• Better value for your premium dollar. Right now, buying insurance on your own is a bit of a crapshoot because it's hard to tell good policies from bad ones. As soon as reform becomes law, health plans will have to start publicly reporting the proportion of your premiums that they spend on health services, as opposed to what they spend on administration, profit, marketing, and executive perks. Within a year after reform, if insurers are spending less than 80 percent of premiums on health care for individual or small group policies, or 85 percent for large-group policies, they'll have to pay customers a rebate. They'll also be prohibited from imposing lifetime benefit limits, and the use of annual benefit limits will be restricted, giving you more confidence in the policy you purchase.
• Help for small businesses. Starting immediately, small businesses can get a tax credit of up to 35 percent for their share of their employees' health premiums as long as they contribute at least half of the cost. Businesses with 25 or fewer employees, and average annual wages of less than $50,000, are eligible for the credits.