Making sense of health-care reform

The Affordable Care Act has already helped tens of millions of people. And even more changes will go into effect in the next few years. Here's what's already happened and what's still to come.

Already in effect

Seniors who reach the "doughnut hole"—the point when they have to start paying prescription drug expenses themselves—now get a 50 percent discount when buying brand-name drugs and a 7 percent discount on generic drugs (14 percent in 2012) that are covered by Part D. About 900,000 people have already taken advantage of the provision. And about 4 million people whose drug costs tipped them into the doughnut hole received a one-time $250 rebate check last year.

The new law allows young adults to stay on their parents' health-insurance plan unless they're covered on their own through an employer. About 1.2 million people 25 and younger will rejoin or stay on a parent's plan in 2011. College students who have insurance at school also got some new protection. Their plans can no longer have lifetime limits on coverage or be canceled due to illness.

Almost 6,000 companies have signed up for subsidies to help them keep their health-insurance programs for people who retire before age 65. The government had given $2.7 billion to them as of June 2011, preserving coverage for more than 5 million people between 55 and 65 and family members.

Two provisions of the law have helped about 27,000 adults and 160,000 children so far. There's a new program, the Pre-Existing Condition Insurance Plan (PCIP), for adults who have been denied coverage by insurers because of their health status. (People must be uninsured for at least six months to be eligible.) And insurance companies are no longer allowed to deny coverage to children younger than 19 who have a pre-existing condition. But insurers can still charge more for the coverage.

Some 18.9 million people on Medicare have received one or more free preventive services, including screening tests for glaucoma, heart disease, breast and cervical cancer, prostate cancer, and colon cancer. In addition, more than 1 million have had a free "wellness" visit.

Health insurers can't set lifetime limits on your coverage or cancel it if you get sick. Annual limits on coverage will be phased out over the next few years for most insurance plans.

The Federal government and many states will be scrutinizing proposed premium increases more closely for plans sold to individuals and small businesses. Those that are 10 percent or more will trigger an automatic review to gauge the "reasonableness" of the increase.

Businesses with fewer than 25 full-time workers can apply for tax credits to help them provide health insurance for their workers. The credits will cover up to 35 percent of the annual cost through 2013 and 50 percent starting in 2014. To qualify, a company's average annual wage for its workers must be below $50,000.

Healthcare.gov provides a comprehensive list of insurance options for small businesses and people younger than 65, including private plans, Medicaid, Children's Health-Insurance Programs (CHIP), and high-risk pools. The site also explains about health-insurance options, eligibility rules for public programs, and provisions of the new reform law.

Coming in 2012-2013

Insurers will have to give rebates—either as reduced premiums or directly to consumers—if they spend too much of their revenue on administrative or other business costs instead of medical claims. For large-employer plans, the cutoff will be 85 percent; for individual and small-business plans, it will be 80 percent. The Obama administration estimates that about 9 million people will get rebates in 2012 totaling $1.4 billion.

Insurers will have to use a form similar to the Nutrition Facts labels on food packaging to provide information on premiums, co-payments, deductibles, and out-of-pocket limits. This will make it easier for you to compare plans. Insurers will also have to calculate and disclose a patient's out-of-pocket costs for three medical scenarios, such as having a baby, treating breast cancer, and treating diabetes.

The maximum amount you can set aside tax-free to pay for medical expenses not covered by insurance will be $2,500 in 2013. The cap will increase by the annual inflation rate in subsequent years. In 2012 employers can still set whatever limits they want on their FSAs. The typical amount is between $2,500 and $5,000. The reform law will also prevent you from using FSA dollars to pay for over-the-counter drugs unless you have a doctor's prescription. Read more about FSA accounts.

Starting in 2013, you won't be able to claim a tax deduction for medical expenses not covered by insurance until they reach 10 percent of your gross income, up from the current 7.5 percent. And people with incomes over $200,000 for an individual and $250,000 for a couple will see their Medicare Part A (hospital insurance) tax rate increased from 1.45 percent to 2.35 percent on income over those levels. They'll also pay a 3.8 percent assessment on investment income. Seniors making more than $85,000 for an individual and $170,000 for couples will also pay a slightly higher Part B (doctor's insurance) premium.

2014 and beyond

This "individual mandate" is the subject of several legal challenges and will probably end up in the Supreme Court. But if the provision is upheld, you'll be required to have health insurance if you're a U.S. citizen or legal resident. If you don't get it from work, on your own, or through a public program like Medicaid or CHIP, you'll have to pay a penalty, starting at $95 a person in 2014 and increasing steadily after that. But you can appeal the penalty if you can't afford coverage. And a number of new initiatives, described below, will make it easier for people to get insurance.

Insurers must sell individual or group coverage to any person or business that wants it, regardless of pre-existing conditions or any other aspect of their health status. And they can't charge people more, or limit coverage, based on their health status, though premiums can vary by age, tobacco use, and geographic location.

States will have to open health-insurance "exchanges"—mostly web-based marketplaces where individuals and small businesses can compare and buy health insurance. All plans must offer a comprehensive set of benefits. Exchanges must also help people enroll in Medicaid or CHIP if they're eligible.

In the exchanges, families and individuals who meet certain income requirements will get subsidies in the form of reduced premiums and out-of-pocket costs. Subsidies will be based on income, with more help for lower-income people. But some help will be available for families earning up to almost $90,000.

Companies with more than 50 full-time workers who don't offer coverage and have workers that qualify for a health-insurance subsidy in the exchanges will have to pay a penalty.

People younger than 65 with income less than 133 percent of the federal poverty level will be eligible for Medicaid. In 2014, the income cutoff is expected to be about $15,000 to $16,000 for individuals and $30,000 to $32,000 for a family of four.