Health Care Reform-Individual Health Insurance

ACA Changes associated with….

Individual Health Insurance

Read below to learn how the new Health Care Reform law affects different segments of Individual Health Insurance.

Marketplace-Subsidized Insurance

Effective January 1st. 2014 Non-Grandfathered Individual Health Plans

Starting January 1st, 2014, some individuals and families will be eligible for an Individual Health Insurance Subsidy.   The level of subsidy available is determined by the individual or family’s percentage of household income.  Individuals and families making between 138% -400% of the Federal Poverty Level will be eligible for the subsidy.

The subsidy caps an individual’s premium at a certain level of income.  If the policy costs more than the cap, the government will pay the remaining premium.

Income and Premium Caps as a Percentage of Household Income

Income Levels Individual Healh Insurance Subsidy

Income and Premium Caps in Real Dollar Amounts

Individual Health Insurance Subsidy Amounts


Can anyone sign up for a subsidized plan?

Subsidy Access is contingent on access to employer group health plans.
  • Individuals are eligible for the individual premium tax subsidy only if they are not eligible for affordable coverage through their employer sponsored plan.
  • A plan is considered affordable if the employee’s portion of premium for employee, spouse and dependents does not exceed 9.5% of their annual household income.


Grandfathered vs. Non-Grandfathered

If your plan was in place prior to March 23rd, 2010 and you have made no significant changes to benefits (decrease of more than 15%) your plan may be Grandfathered.

If you would like help determining if your plan is grandfathered, please contact us.

The Health Care Reform Law affect these two types of plans differently. As you read through the rest of the reforms, we will mention whether they apply to Grandfathered, Non-Grandfathered, or both types of plans.

Each reform provision applies differently, so we will break it down for you below.

Preventive Care

Applies to:  Non-Grandfathered Plans Only

Effective: September 23rd, 2010

General Preventive Provisions

All non-grandfathered policies, group and individual, have 100% preventive coverage for defined services for plans written or renewing after September 23rd, 2010.

Services are defined by the United States Preventive Service Task Force’s A & B category services. (USPSTF List)

Examples of Services Classified as Preventive

  • Blood Pressure Screening
  • Cholesterol Screening
  • Colorectal Cancer Screening for adults over 50
  • Type 2 Diabetes screen for adults with high blood pressure
  • Immunization such as Flu shots, Pneumonia, tetanus and others
  • Obesity Screening
  • STD prevention and counseling for adults at high risk
  • Tobacco Use screening and cessation interventions

Children’s Preventive Services
Children have a separate list of preventive services. Below is a partial list of those services.

  • Autism screening for children at 18 months and 24 months
  • Behavioral assessment for children of all ages
  • Developmental screening for children under age 3
  • Depression screening for adolescents
  • Hearing screening for newborns
  • Immunizations including but not limited to Hepatitis A & B, Flue shot, Measles, Mumps, Rubella, Pneumonia
  • Obesity Screen
  • Vision Screening

To see a complete list of preventive services for children, please refer to the HHS website here.
Women’s Preventive Services: Added Effective August 1st, 2012
Included in women’s preventive coverage is…

  • Breast cancer screening every 1 to 2 year for women over 40
  • Breastfeeding support and counseling as well as access to breastfeeding supplies
  • Cervical cancer screen
  • Sexually Transmitted Infections counseling
  • Well Women’s visits
  • Certain contraceptive drugs and sterilization procedures no including abortifacient drugs.

To see a complete list of women’s preventive services, please refer to the HHS website here.

HSA & FSA Changes

Affects: All policy types, Grandfathered & Non-Grandfathered

Health Savings Account/HSA Changes

Effective January 1st, 2011

Effective January 1st, 2011, the following provision were changed in regards to Health Savings Bank Accounts.

  • Withdrawals from and HSA bank account for non-qualified medical expenses will face a 20% tax penalty as opposed to the 10% that was previously assessed
  • Over the counter medications were removed from the list of qualified medical expenses

Flexible Spending Account/FSA Changes

Effective January 1st, 2013

The limit for the medical expense portion of the FSA was set at $2,500 per employee. Before this limit was legally set, it was up to the employer to limit contributions.

Note: This does not limit the contribution to the Childcare or POP plans

Read more about both the HSA and FSA Changes here.


Essential Health Benefits

Effective: New plans or plans renewing on or after January 1st, 2014

Affects: Non-Grandfathered Plans

Every non-grandfathered policy must include coverage for the following 10 Essential Health Benefits.

  1. Ambulatory Patient Service
  2. Emergency Services
  3. Hospitalization
  4. Maternity and Newborn Care
  5. Mental Health and substance use disorder services, including behavioral health
  6. Prescription Durgs
  7. Rehabilitative and habilitative services and devices
  8. Laboratory Services
  9. Preventive and Wellness Services
  10. Pediatric services, Include Dental and Vision Care

While a majority of these Essential Health Benefits are already included on group policies, for some individual policies, this could be a significant increase in benefits.

To read more about EHB’s, visit the CMS webpage here.

Guaranteed Issue

Effective: January 1st, 2014

Affects: Non-Grandfathered Plans

All Non-Grandfathered policies will be guaranteed issue starting January 1st, 2014.

This means….

  • An individual cannot be denied a policy based on health conditions
  • They will have no pre-existing waiting periods
  • Individual policies will have no exclusion riders or declination

Metal Plans-Actuarial Value

Effective: January 1st, 2014

Affects: Non-Grandfathered Plans

All Non-Grandfathered plans will fall into four “Metal” tiers based on the plan’s Actuarial Value.

  • The Actuarial Value of a plan is defined as the total average cost of covered benefits, not including premium, that a plan will cover.
  • Individual Premium Tax Subsidies and Cost Sharing Subsidies only apply to the Silver Level Plan.

These classifications were created to make it easier for consumers to compare plans across carriers. Comparing plans within the same Metal Plan would help the consumer know what type of insurance they are buying.

Also, when you purchase insurance and receive a subsidy, the subsidized premium is based of the Silver Level plan.

Metal Plans by Percentage

Metal Plans Actuarial Value

Community Rating

Effective: New and Renewing Policies on or after January 1st, 2014

Affects: Non-Grandfathered Individual Policies

Staring in 2014, insurance carriers can no longer rate on health conditions, industry codes, gender rating, or any other factors. They are only allowed to rate policies on the following four factors.



  • Age (Max 3:1 Ratio): The largest differential in rates from the youngest (0-20 years of age) to oldest (64+) tier can be no more than three. For example, if the 0-20 age bracket was charged $100, the most the 64+ bracket could be charged is $300. This may cause a squeezing of rating and actually increase prices for younger individuals and decrease prices for older individuals. See the graphic below.Age Rating ACA


  • Family Size: Each person on the policy will receive their own rate. The maximum amount of people rated on in the 0-20 age bracket will be three. Everyone else will receive their own rate. For example, if you have four children under 20 years of age, you will be charged for three.This will change the way small groups are rated as most are currently composite rated, meaning every employee receives the same rate and age factors are averaged out over the entire group. This will no longer be allowed upon renewal for small group non-grandfathered plans in 2014.


  • Smoker Status: An insurance company is able to add a 50% surcharge to premiums for those individual who use tobacco.


No Health or Gender Rating: This change in rating has cause what is referred to as the ACA Teeter-Totter. The sick individuals will most likely see a decrease in rates and the healthy an increase in rates as the medical rating is removed to bring everyone to an equal rating factor. See the Graphic Below.

ACA Health Rating Change

For more information on rating rules, you can visit the Federal Register’s Release on ACA Rating.

About Optimized Benefits

Optimized Benefits is a Boutique Firm dedicated to providing smart solutions to the small and mid-sized business owners and their Employee Benefits plans
we have a focus on Retirement (401K) and Group Health plans

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Chicago IL 60601

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