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Explaining Health Care Reform to Clients

We are into the final month of the first open enrollment period for health insurance coverage under the Affordable Care Act (ACA). This initial open enrollment period runs through March 31, and the next round of open enrollment will begin Nov. 15.

ACA will continue to have a significant impact on the health care industry, particularly insurance. The ACA will also have a huge impact on clients and those who are seeking to enroll in coverage. The ACA document itself contains around 20,000 pages of rules and regulations, meaning that it isn’t exactly light reading material. But there are specific points in the document that your clients will need to know.

Large group coverage – that is, coverage of more than 50 lives – is not greatly affected by the reform, but small group coverage will see many changes that have ramifications for both individuals and small businesses. In its shortest, simplest form, it means two things: An insurance provider cannot deny coverage, and the government will help subsidize coverage for those who have a relatively low income. These points are not black and white, however. Like many rules and laws, they come with their exceptions.

Pre-existing Conditions

Quite simply, if your client is sick with a pre-existing condition, the insurance company must provide coverage. This does come with a small catch, however. Either your client must apply for coverage during the open enrollment period, or your client must have a “qualifying event” occur.

There are two categories of qualifying events. The first category requires enrollment within 30 days, and the second category requires enrollment within 60 days. Qualifying events include any of the following:

Your clients have 30 days to enroll if they or their dependents lose coverage because of:

» Termination of employment or reduction of hours.

» Death of the enrollee.

» Divorce or legal separation.

» Loss of eligibility as a dependent child.

» The group enrollee’s initial enrollment for Medicare.

» Loss of group coverage for retired enrollees, their spouses or any other dependents because of bankruptcy filed by a former employer on or after July 1, 1986.

Your clients have 60 days to enroll if:

» They or their eligible dependents lose minimum essential coverage.

» They acquire new dependents through marriage, birth or adoption.

» They become citizens, nationals or lawfully present individuals in the U.S.

» They are qualified but experience an error in enrollment.

» They are enrolled in another qualified health plan and can successfully demonstrate to the exchange that it has substantially violated a material provision of the contract.

» They are newly eligible or lose eligibility for advance payment of the premium tax credit, or they experience a change in eligibility for cost-sharing reductions.

» They become eligible for new qualified health plans offered through the exchange because of a permanent move.

Employers With 50+ Employees

Large group coverage isn’t being affected dramatically by the ACA. There is one change, though, and it’s straightforward: Any business that employs 50 or more employees must provide health care benefits or pay a penalty. If that describes your large group clients, then you may have already noticed some change, though it’s not likely to be much. There may have been some premium increases, but your large group client may have absorbed those additional costs or potentially passed them on to the employees. In either case, employees should not see much difference in their existing coverage.

Individual Mandate

The individual mandate states that everyone must have insurance. Beginning in 2014, every individual will be responsible for obtaining “minimum essential coverage” for themselves and for their dependents. Otherwise, those individuals not obtaining coverage will pay a penalty.

The penalty for an individual who fails to obtain coverage will be paid as part of their income tax return. In 2013, the penalty was $95 or 1 percent of the individual’s income – whichever is greater. By 2016, though, the penalty increases to $695 or 2.5 percent of the individual’s income. For families, the maximum penalty is three times the individual flat-dollar penalty (e.g., 3 x $95 in 2014). For dependent children who do not receive coverage, the penalty is half the cost of the individual’s flat-dollar penalty (e.g., $47.50 in 2014).


An exchange gives people additional access and more opportunity to buy insurance – more than they have experienced previously, although exchanges have existed for a while. There are two primary types of exchanges. A public exchange is run by either the state or federal government, or the two may work together. Every state has a public exchange available to its residents. For those who shop for coverage via public exchanges, subsidies and tax credits will be available to make insurance more affordable. Small group employers (fewer than 50 employees) can buy and offer insurance through an exchange as well.

A private exchange is not run by a government but by a private sector company, like a health plan or a consulting firm. These exchanges already exist today, but you can expect them to become more popular as employers look for new ways to offer affordable benefits to their employees.


Subsidies are granted by the government to keep premiums affordable. Anyone within 100 percent to 400 percent of the poverty level who purchases through an exchange will be eligible for a subsidy, as long as they are lawful citizens of the United States. These subsidies will be granted in the form of a “premium tax credit” to reduce the ultimate cost of the premium. The Henry J. Kaiser Family Foundation has an online calculator at that can help you and your clients figure their subsidy eligibility.

ACA is a very complex bill, and it’s not one that’s easy for the average person to understand. Your clients will depend on you to help them understand the fundamentals as you work together to help them obtain the coverage that suits their needs.


Andrew Bard is the vice president of sales for HCC Medical Insurance Services, a provider of international and travel health insurance plans. He serves as president of the Indianapolis Association of Health Underwriters and received the Global Benefits Leadership award in 2011. Andrew may be contacted at [email protected] .

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