Q. I already had great employer-sponsored health insurance that covers my pre-existing conditions, even before the ACA was enacted. So how does Obamacare help me? It seems like the only thing the ACA is doing is making my employer jump through more hoops, and making my coverage more expensive.
A: You’re fortunate to have had great coverage, but many Americans were not so fortunate in the years before the ACA was enacted (and to be sure, we still have a long way to go in terms of ensuring that everyone has access to good quality health coverage that provides for their medical needs). But there are several ways that the ACA protects you as a member of an employer group plan:
- HIPAA made small-group plans guaranteed issue more than two decades ago, but did not set rules regarding the pricing of those plans. States were allowed to implement their own regulations for how group plans could be priced, and many states did not require modified community rating in the small-group market prior to the ACA. This meant small-group plans could be much more expensive for businesses with sick employees. Thanks to the ACA, premiums in the small-group market are no longer based on gender, medical history, or a small group’s claims history, and older enrollees can not be charged more than three times the rate for younger enrollees.
- Employers with 50 or more full-time equivalent employees have to offer at least minimum value coverage and make it affordable. Employees can’t be required to pay more than 9.83 percent of their income for employee-only health insurance in 2021, and employers face financial penalties for non-compliance.
- The medical loss ratio (MLR) provision in the ACA protects everyone with fully insured (as opposed to self-insured) employer-sponsored plans, as well as those who purchase their own coverage in the individual/family market. The MLR rule requires health insurance carriers in the individual and small group markets to spend at least 80% of premiums on healthcare; administrative costs cannot exceed 20% of premiums. In the large-group market, at least 85% of premiums must be spent on healthcare. Large groups are defined as having more than 50 employees, although four states have opted to include groups with 51-100 employees in the small group category. Insurers that spend too much on administrative expenses must rebate the excess to their enrollees. From 2012 through 2020, those rebates totalled $7.8 billion.
- The ACA imposed caps on out-of-pocket exposure, and eliminated annual and lifetime coverage limits (for essential health benefits) in both the individual and group markets, benefiting an estimated 105 million people.
- The ACA provided two years of tax credits to offset the cost of coverage for small businesses with 25 or fewer workers and average wages less than $50,000, as long as they purchased a plan through the SHOP exchange.
- Pre-existing condition waiting periods have also been eliminated from employer-sponsored health insurance plans. As Julie Rovner explains in this NPR piece, the provision was phased in during 2014; it took effect at each plan’s renewal date that year. Employers can still have waiting periods of up to three months before they offer health insurance to new full-time (30+ hours/week) permanent employees. But once the coverage takes effect, it will not have a waiting period for pre-existing conditions, regardless of whether the new employee had creditable coverage prior to joining the employer’s plan.
- Small group health plans have to cover the ACA’s essential health benefits.
- If you choose to leave your job before you become eligible for Medicare, you’ll be able to transition to an individual/family (self-purchased) health plan, regardless of your medical history. Before the ACA, pre-existing conditions were a major obstacle for people who were trying to buy their own health insurance, as coverage was only guaranteed-issue in a few states. The ACA also created premium subsidies to help most middle-class and lower-income Americans afford self-purchased health insurance.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.
