Questions & Answers

Health Care Reform – for Individuals

As the Affordable Care Act (ACA), commonly known as health care reform, is implemented, you may have questions. The following Q&A can help you better understand how it may affect you.

The Basics

The primary focus of health care reform is to ensure that Americans of all ages and incomes have access to comprehensive major medical health insurance. The ACA provides stronger consumer protections and new coverage options. Here are a few key points to know about health care reform:
  • As a bridge to the reforms that take effect starting in 2014, the health care reform bill established a federal Pre -Existing Condition Insurance Plan for persons who were uninsured for at least six months and have a serious health condition. New enrollment under this program was suspended on February 16, 2013 and in corresponding state-based programs on March 2, 2013 in order to help ensure that persons already enrolled could keep their coverage through the end of 2013. Learn more at Starting in 2014, additional options may be available as job-based and new individual major medical plans won’t be able to exclude you from coverage or charge you a higher premium for a pre-existing condition, including a disability.
  • Parents have new options to cover their children and young adults. If you have children under age 26, you can insure them if your policy allows for dependent coverage, even if they have another offer of coverage through an employer. Both married and unmarried children qualify for this coverage. The only exception is that prior to 2014, certain existing job-based plans (known as grandfathered plans) may exclude children who can get their own job-based coverage.
  • Job-based health plans and new individual plans are no longer allowed to deny or exclude coverage to any child under age 19 based on pre-existing health conditions, including babies born with health problems.
  • Starting in 2014, if your income is less than 400 percent of the federal poverty level (approximately $45,960 for an individual and $94,200 for a family of four) and your job doesn’t offer affordable, minimum value coverage, you may receive a tax credit to help pay for insurance through the health care exchange.
  • Starting in 2014, you will be able to buy insurance directly in a health care exchange that covers essential health benefits and meets other requirements of health care reform. The exchange is designed to offer a range of choices and prices.1 The open enrollment period to buy exchange coverage that is effective January 1, 2014 begins on October 1, 2013 and generally ends on December 15, 2013.
The law is designed to increase the access of health care coverage, and requires almost all Americans to have qualifying health coverage (called “minimum essential coverage” under health care reform), or pay a penalty. Qualifying health coverage includes individual market policies, most job-based coverage, Medicare, Medicaid, CHIP, TRICARE and certain other coverage. More detail on the penalty is in the section tilted Coverage Options.
Yes, starting in 2014, insurers are required to provide guaranteed coverage regardless of health status. However, insurers can require that individuals enroll in annual open enrollment periods or in a special enrollment period defined by law. Special enrollment periods must be allowed due to certain events, such as the birth or adoption of a child, a change in marital status, or the loss of job-based coverage.
Yes. Pre-existing condition exclusions are prohibited under health care reform. Insurers are also required to provide guaranteed coverage regardless of health status.
No. Insurers will not be permitted to vary rates based on health status. Rates can only vary based on geographic region, age, tobacco use, and coverage category (e.g., individual or family coverage).

Health Care Exchange

Health insurance exchanges are a key provision of the ACA. An exchange is a web portal where individuals and small businesses can shop for and buy health insurance. Exchanges are operated by the state or, if the state chooses not to operate an Exchange, the federal government will operate a federally facilitated exchange in that state.2

The consumer assistance function of an exchange includes agents, brokers, and navigators who can help you understand your benefits options. To check eligibility for coverage and subsidies via an exchange, you can submit your application for enrollment through the exchange website, an agent, a navigator, or the issuer during the open enrollment period. You are not required to get insurance through an exchange – you can continue to use agents and other traditional means of obtaining coverage. However, premium tax credits are available only with qualified health plans purchased through public exchanges.

Open enrollment for exchanges began October 1, 2013, for coverage effective date of January 1, 2014. Advance premium tax credits (or subsidies) will be available through public exchanges for eligible individuals and families.

There will be a six-month initial open enrollment period, October 1, 2013 through March 31, 2014. However, if you want your coverage to be effective on January 1, 2014, you must enroll by December 15, 2013. If you enroll after this date, the effective date of your coverage will depend on when you enroll. In future years, there will be an annual open enrollment, October 15 to December 7 for coverage starting the next January 1. Special enrollment periods will also be available throughout the year to address life-changing events and other special circumstances, such as loss of job-based coverage.

If the state does not establish an exchange, the Department of Health and Human Services (HHS) will establish a federally facilitated exchange (FFE) for the state. Based on IRS guidance, premium tax credits will be available for the state’s consumers through FFE.
Individuals and families can submit the application for enrollment through their state’s exchange website, through, an agent, a broker, a navigator, or the issuer during the open enrollment period to check eligibility for coverage and subsidies.

Coverage Options & Requirements

Although many aspects of the new law are already in effect, major aspects don’t start until January 1, 2014, and regulations to implement many of those parts of the law are still forthcoming. Facing so much uncertainty, understanding what your health care plan options are may seem like a cumbersome and overwhelming task.
Individuals are required to have minimum essential coverage (MEC) or they will be subject to an individual tax penalty known as a “shared responsibility payment.” MEC includes most job based coverage, individual market plans (whether purchased on or off an exchange), Medicare, Medicaid and certain other types of coverage.
It depends. The law requires those without minimum essential coverage (MEC) to pay a tax penalty of either a set dollar amount or percentage of household income (whichever is greater).The penalties are phased in over the first few years of the law’s implementation and are featured in the chart below. You may be exempt from the penalty however, if the cost to you of the lowest available plan exceeds 8 percent of your income or you qualify for another exemption (including financial hardship, religious objection, or you are without coverage for less than three months, incarcerated, American Indian, or an undocumented immigrant).

Chart 1: Individual tax penalties assessed for not purchasing health care coverage

Year Fine dollar amount per individual
Up to a maximum of three times the amount per family
Percent of household income
2014 $95 1.0%
2015 $325 2.0%
2016 $695 2.5%
2017+ Increased annually by the cost-of-living adjustment. 2.5%


Federal premium subsidies are available if your employer fails to offer minimum value coverage that is affordable (i.e., that costs no more than 9.5 percent of your household income for single coverage). An advance premium tax credit will be available for households with income between 100 percent and 400 percent federal poverty level (FPL). Cost sharing reductions will also be available for households between 100 percent and 250 percent FPL. Public Exchanges will determine your eligibility for the tax credits and cost sharing reductions, based on applicable criteria.

However, if your employer is providing affordable, minimum value coverage, you will not be eligible for premium tax credits. Employer coverage is considered affordable if the total employee contribution for single coverage does not exceed 9.5 percent of an your household income. Minimum value is 60 percent actuarial value, which means that the health plan pays on average 60 percent of the cost of the covered benefits.

The Congressional Budget Office predicted that under the ACA the cost of health insurance will continue to rise at about the same rate until 2019, and then premiums should begin to level off. Employers everywhere are struggling to keep their healthcare costs in check and continue to provide the coverage their employees need. In the past, most businesses have paid a major portion of the premium increase and passed a lesser portion on to their employees. But in a challenging economy many businesses are finding they are unable to afford higher premiums, and more and more businesses are reluctant to pass the increase on to their employees. Given the circumstances, many employers are asking their insurers to increase the co-payments, deductibles, and out-of-pocket maximums of their plans. It’s inevitable, one way or the other employees will be responsible for more of their own health care expenses.

Impact on Employer-Offered Benefits

The law includes provisions that will limit employees’ ability to fund their out-of-pocket health expenses through their FSA, HRA or HSA accounts. ACA limits FSA salary reduction contributions to $2,500 per year and prohibits the purchases of over-the-counter medications through a FSA/HRA/HSA, without a prescription. Also, recent guidance from the IRS prohibits the use of stand-alone HRAs (meaning an HRA that is not offered in connection with another group health plan) as a means of reimbursing individual market premiums or paying out-of-pocket costs.

These limitations and caps will likely create more out-of-pocket expenditures. As out-of-pocket expenditures increase, voluntary plans such as critical illness and accident are more important than ever in offering financial protection and safety.

Technically, no. However, starting in 2015, employers with 50 or more full-time equivalent (FTE) employees will pay a penalty if the employer does not offer affordable, minimum value coverage to substantially all full-time employees and their dependents and a full-time employee purchases coverage through an exchange and receives a premium subsidy.

On Feb. 10, 2014, the federal government announced a delay to the employer shared-responsibility penalty, giving employers time to transition into the new rules. Given this delay, starting in 2015 businesses with 100 or more full-time equivalent employees need to provide affordable, minimum value health care coverage to 70 percent of all full-time employees and their dependents, unless the employer qualifies for 2015 dependent coverage transition relief, or face a penalty.

In 2016, the 70 percent threshold is increased to 95 percent, and the shared responsibility penalties will also apply to employers with 50 or more full-time equivalent employees.

No, in fact employer-offered benefits will take on more significance and necessity than ever before. Employees value employer-sponsored benefits, and a company’s ability to demonstrate value and goodwill towards its workers by offering employee benefits. In fact, the 2012 Aflac WorkForces Report reveals 79 percent of workers say benefits are influential over their job satisfaction, 75 percent say they influence loyalty, 72 percent say it impacts their likelihood to leave their employers, and 65 percent say benefits influence their productivity.

Health reform will clearly have an impact on benefits. With the establishment of minimum benefits standards and the option to move from employer plans to an exchange plan, major medical coverage will likely become more homogenous than it is today. This will make employer-sponsored supplemental insurance policy offerings even more important to recruiting a talented workforce.

Voluntary Benefits

No. The primary focus of health care reform is to ensure that Americans of all ages and incomes are protected by major medical health insurance. Because voluntary insurance, also called supplemental or excepted benefits, isn’t major medical insurance, the reform does not pertain to those products. Voluntary worksite benefits include accident, disability and stand-alone vision and/or dental plans, as well as cancer and hospital indemnity insurance.
Yes. As health care costs continue to rise, supplemental coverage works with major medical to help provide an essential safety net. Supplemental insurance policies, like the ones offered by Aflac, provide robust protection to policyholders. These policies can help people cope with incremental out-of-pocket costs associated with serious accidents or illnesses – costs major medical insurance was never intended to cover. In the event of a serious accident or illness, policyholders receive cash benefits that are often used to help pay for daily living expenses, such as mortgage/rent, gas, groceries, babysitting and other necessities, as determined by the policyholder.

1Individuals and the Affordable Care Act,
2To determine whether your state is operating an exchange or whether you may purchase coverage through the federally facilitated exchange, visit
32012 Aflac WorkForces Report, a study conducted by Research Now on behalf of Aflac, January 24–February 23, 2012.

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