Navigating the Affordable Care Act

Attorneys Bruce “Andy” Andrews, right, and David Drum of Sirote & Permutt discuss the policies of the ACA.

When the Affordable Care Act (ACA) Health Insurance Marketplace exchanges opened on October 1, insurance companies in Alabama were ready to accept enrollments in plans mandated by federal health care reform. Blue Cross and Blue Shield of Alabama, Humana, and United Healthcare are offering plans to the more than 640,000 uninsured Alabamians.

The enrollment process got off to a slow start on day one when consumers had trouble accessing the exchanges and completing applications for health plan coverage due to high volumes of traffic and other glitches on the web site. A major glitch appeared during the registration process as the site tried to confirm identities of those enrolling. While federal officials continue to fine tune the web site, users are still reporting problems.

In an October 17th Wall Street Journal report, insurance company executives said they were receiving faulty data from ACA marketplaces which was making it difficult for them “to handle even the first wave of consumers who were able to sign up for health insurance using federally- run exchanges during the glitch-ridden rollout of the new law.”

The report further stated that more than a dozen health insurance companies have received data from online marketplaces that is “riddled with errors, including duplicate enrollments, missing data fields, and spouses reported as children.”

According to an Associated Press poll, the bumpy start resulted in only about one in 10 people being able to buy health insurance during the first week of enrollment. Blue Cross and Blue Shield officials did not report major problems from their end. Calls to Humana and United Healthcare in Birmingham were not returned.

Blue Cross and Blue Shield spokesperson Koko Mackin says that call volume at their company has tripled compared to call volume from this same time last year. “It is too early to report enrollment numbers, but we have received thousands of calls from interested Alabamians who are looking at their options,” she says. “We understand there have been some glitches on the site, but these connectivity issues will get resolved.”

Mackin says the Blue Cross and Blue Shield staff has worked hard to develop the new ACA-compliant health plans that are on and off the exchanges. “We also made significant changes to our claims processing and customer service functions in order to meet the requirements of the new law,” she says.

The Marketplace Exchanges

Sixteen states are operating their own exchanges, while 34 states are either partnering with the federal government or are having the federal government run their exchanges. Alabama’s exchange is run by the federal government.

Following the Supreme Court ruling that upheld the individual mandate, which requires taxpayers to maintain qualifying health insurance or pay a penalty, and eliminated the requirement that all states expand Medicaid, Alabama Governor Robert Bentley decided that Alabama would not set up a state exchange.

“Alabama’s decision not to expand Medicaid and not to establish a state exchange are in line with a majority of the states,” says Bruce “Andy” Andrews, an attorney with Sirote & Permutt PC in Birmingham. “The governor stated his reason for not establishing a state-based exchange was the additional tax burden. His decision not to expand Medicaid was likewise due to cost.  He said the state simply cannot afford to expand Medicaid under its current structure. By going with the federal exchange, the state avoids the associated administrative costs for equipment and personnel.”

Andrews says the essential difference between a federal and state exchange is who has control over it and where the cost lies. “If our state managed its exchange, the state government would be more heavily involved. As it is, the federal government performs the exchange functions, such as evaluating and approving the plans offered in the marketplace,” he says.

According to the ACA, all approved insurance plans must contain 10 “essential health benefits:”

  • Ambulatory services
  • Prescription drugs
  • Emergency care
  • Mental health services
  • Hospitalization
  • Rehabilitative and habilitative services
  • Preventive and wellness services
  • Lab services
  • Pediatric care
  • Maternity and newborn care

The exchanges are set up to serve people who are currently uninsured or who buy individual health insurance. Small businesses also will shop for plans on the exchange through the Small Business Health Options Program (SHOP). To start the process of searching for information about available plans and to enroll, log in to

Navigators are available throughout the state to assist those who are shopping for and enrolling in plans in the exchanges. The federal government provided grant money for these positions in each state. Alabama’s grant recipients are Ascension Health; AIDS Alabama, Inc.; Samford University; Catholic Social Services – Archdiocese of Mobile; and Tombigbee Healthcare Authority.

Alabama’s Plans

The ACA groups health plans into four standard levels of coverage – Platinum, Gold, Silver, and Bronze. There is also a fifth category, catastrophic coverage, available to people under age 30 and to some people with limited incomes. These “metal levels” of coverage are based on the average amount of health care costs paid annually by the health plan. “For example, for a Platinum level plan, Blue Cross will pay throughout the year an average 90 percent of the cost of a member’s covered benefits. The member pays the remaining 10 percent,” Mackin says. “Similarly, for a Gold plan, we pay 80 percent and member pays 20 percent; for a Silver plan, we pay 70 percent and the member pays 30 percent; for a Bronze plan, we pay 60 percent and the member pays 40 percent.”

Blue Cross and Blue Shield, which writes more than 80 percent of the health insurance policies in Alabama, and Humana are offering individual policies through the exchange. Blue Cross and United Healthcare are offering policies to small businesses.

“We have been implementing the requirements of the ACA since its passage in March 2010,” Mackin says. “We want to make sure Alabamians can access health coverage and get all the help they need to navigate this new environment.”

According to Terry Kellogg, CEO of Blue Cross and Blue Shield of Alabama, his company and United Healthcare will offer plans statewide while Humana will offer plans in the counties of Jefferson, Madison, and Shelby.

“Blue Cross is offering 20 new health and dental plans in all metal levels in all 67 counties of Alabama, on and off the federally facilitated Health Insurance Marketplace,” Mackin says. “Blue Cross will offer individuals and small businesses 14 new health plans in the catastrophic, bronze, silver, gold and platinum levels and six new dental plans.”

Individuals can choose from nine health plans and three dental plans, and small businesses can choose from five health plans and three dental plans. “We are offering new health plans with broad physician and hospital networks,” Mackin says. “We do not plan to offer health plans with smaller, restricted provider networks. For individuals and small businesses, these are new health plans as required by the ACA.”

The ACA includes a grandfathering provision that allows people to keep plans they had on the date the law was enacted provided the plans are amended to meet some ACA requirements:

  • Reduce the waiting period so that it is no longer than 90 days;
  • Remove lifetime limits;
  • Comply with the limitation on annual limits;
  • Allow the extension to age 26 but limited to an adult child who is not eligible for enrollment in an employer-sponsored plan until 2014;
  • Provide the uniform coverage documents; and
  • Apply the standard definitions.

Of course, given that most plans did not have these features, very few plans will actually be grandfathered, meaning that most individuals will lose their current plan and be forced to buy another one.

Cyber Security

Protecting the personal and financial information of people who are enrolling in plans on the exchanges is vital. Security experts warn that the exchanges need to protect themselves against cybercriminals. In addition, consumers attempting to enroll in health plans on these online exchanges need to take precautions, such as making sure they are visiting the genuine insurance marketplaces and not entering personal information into imposter sites.

Blue Cross and Blue Shield employees are working to ensure the security of consumers enrolling in the company’s plans. “Blue Cross uses secure user account authentication practices, and we enforce secure information exchange protocols to transmit information to and from the federal exchanges,” Mackin says. “Our systems are developed in accordance with secure coding best practices and we use encryption technologies to protect consumer information. In addition, Blue Cross’ systems meet HIPAA Privacy and HIPAA Security regulatory requirements and are secured in accordance with Payment Card Industry Standards that protect credit card information.”


Financial assistance such as advanced premium tax credit subsidies and cost sharing subsidies may be available from the federal government for consumers who are purchasing healthcare coverage directly from a plan in the exchange. “Applying for tax credit subsidies is part of the exchange enrollment process,” Andrews says.  “The exchanges also function to trigger the employer mandate penalties that go into effect in 2015. If a person is a full-time employee of a company with 50 or more full-time equivalent employees and the company does not offer that full-time employee affordable health insurance that meets ACA requirements, the company will owe a penalty to the IRS when that employee receives a credit through an exchange.”

To determine eligibility for a premium subsidy, enrollees will provide information about income, household size and access to employer-sponsored health insurance.

For those who don’t qualify for a subsidy, plans also will be available outside the exchanges. Those plans will comply with ACA requirements, but may include different plan designs and additional carriers.


Along with the new health plans are new premiums because of the law’s requirements. The ACA’s impact on premiums varies based on several factors:

The health plan you choose – bronze, silver, gold or platinum; the county where you live; the number of members in your family, their ages and whether they use tobacco.
Member level rating is new and required by the ACA.  “In the past, we had one single premium and one family premium – no matter how many people were in the family. The ACA requires that each member on a policy be rated based on their age, address and tobacco use. Then all of these individual rates are added together to determine the family premium. As a result, larger families may experience higher premiums,” Mackin says.
Health underwriting and waiting periods for pre-existing medical conditions have been eliminated by the law. Individuals now have access to healthcare coverage regardless of their health condition, and premiums cannot vary based on an individual’s health status.

The ACA limits how much insurers can vary premiums based on an individual’s age.  “Today the law requires a 3:1 maximum ratio for age rating for adults. This means that premium rates for older adults are not allowed to exceed more than three times the rate of a younger person,” Mackin says. 

The Act also contains a number of fees and taxes that have been added to premiums.
On the federally facilitated exchange in Alabama, many individuals and families may qualify for advanced premium tax credits that may lower the amount of premiums they pay for coverage.  To be eligible for these premium tax credits, an individual’s annual income must be less than $45,960; for a family of four, their annual income must be less than $94,200.
According to a Sept. 30, 2013, news release from the U.S. Department of Health and Human Services, the average premium nationally for the second lowest cost silver plan on the exchanges is $328 before premium tax credits. “The average premium for the second lowest cost silver plan on the exchange in Alabama is $318 before premium tax credits,” Mackin says. “In addition, among the 50 states, Alabama has the lowest family premiums in the country for employers according to the federal government’s 2011 Medical Expenditures Plan Survey.”

The Cost of No Insurance

Beginning in 2014, most uninsured Americans who can afford to purchase coverage must obtain a plan that contains the 10 essential health benefits.

If you're already covered by a qualifying individual policy, an employer group plan, or a government program such as Medicare, Medicaid or the Veterans Health Administration, you're automatically in compliance with the individual mandate.

Those without coverage in 2014 face a tax penalty of one percent of their annual income or $95, whichever is greater, and a per-child fine of $47.50, up to a family cap of $285. In 2015, the penalty increases to the greater of two percent of income or $325, and by 2016, the penalty, which is added to the individual's federal income tax, increases to the greater of 2.5 percent of income or $695 per individual.

Excused from the requirement are incarcerated individuals, undocumented immigrants, members of American Indian tribes and congregants of religious groups opposed to health insurance. Those with incomes so low that they are not required to file a federal income tax return -- roughly $10,000 for individuals and $20,000 for families -- and those who would have to pay more than eight percent of their annual income for health insurance also will not be penalized for lack of coverage.

You won't have to demonstrate that you have coverage, or an exemption from the mandate, until you file your 2014 federal income tax in 2015.

The employer mandate outlined in the ACA has been postponed until 2015. At that time, employers will face a decision of whether to offer insurance for their workers or to pay the penalty for not providing required coverage. Andrews says this is the main issue they are discussing with clients. “In the past, insurance discussions addressed two issues –cost and coverage. Insurance packages are traditionally used by employers to attract and retain good employees,” he says. “Under the ACA, there are at least four issues to balance – cost and coverage, as well as penalties and participation rates.”

If a company chooses not to provide health coverage at all, the company will be charged a non-deductible penalty of $2,000 per full-time employee except the first 30. If a company does provide coverage but it does not meet the ACA requirements for a particular employee, the company will be charged a non-deductible penalty of $3,000 for that employee. Employers must decide whether providing insurance is more cost effective than paying the penalty and what effect that might have on retaining good employees.

“If an employer fails to offer health insurance that meets the ACA requirements to just one employee, the company will have a $3,000 non-deductible penalty. For employers in the top marginal tax rate, that is equivalent to spending approximately $5,000 for health insurance that is deductible,” Andrews says. “When you add the employee’s allowed contribution to the premiums, up to 9.5 percent of their household income, it rarely makes financial sense for employers to pay the penalty.”     


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