6 Improved Consumer Protections in the Affordable Care Act

Copyright © 2014 AARP. All rights reserved.

The Affordable Care Act improves the quality of healthcare you and your family receive. The consumer protections the ACA has established benefit people who already have insurance as well as those who will purchase health insurance as a result of this legislation.

Before the ACA, about 85 percent of people in the United States had healthcare coverage, whether through an employer plan, through a private insurance plan they bought directly, or through a government program such as Medicare or Medicaid.

Although the ACA stands to have a major impact on the other 15 percent, the reality is that many won’t be switching insurers or shopping for new plans because of the ACA. However, many current insurance plans will improve to abide by the law.

Covering preexisting conditions

This provision is a big deal for people with diabetes, heart disease, a history of cancer, or any other serious health condition. In the past, if you were that person and you lost your insurance coverage (because the insurance company terminated your coverage, because you lost coverage from your job, or for any other reason), you likely faced an uphill battle trying to purchase a policy from another insurance company.

When the company reviewed your application, your medical history was a red flag that may have sent you directly to the “coverage denied” pile.

As of January 1, 2014, all Americans are now eligible to purchase insurance, regardless of their health status or preexisting medical conditions. In other words, insurers may no longer deny coverage to anyone based solely on a preexisting health condition. Insurers also may not eliminate benefits, refuse to renew coverage, or impose a waiting period based on preexisting conditions.

Maintaining coverage during illness

For many years before the ACA’s passage, a common practice among insurers seeking to deny payments for costly medical care was to reexamine customers’ initial policy applications and cancel policies.

Even if you purchased a health insurance policy, paid your premiums on time, and otherwise lived up to your end of the contract, an insurer could still find a way to drop your coverage if you became seriously ill or injured and your care threatened to become too expensive. When this happened, the insured paid the price — and sometimes literally went bankrupt as a result.

Under the ACA, as long as you pay your premiums, and as long as you were truthful when filling out your application paperwork, your health insurance is guaranteed. The healthcare law prohibits insurers from rescinding coverage because of unintentional mistakes or minor omissions on an application, and it prohibits canceling coverage based solely on your illness.

Regulating coverage and premiums to eliminate bias

Before the passage of the ACA, an insurance company could legally charge women more than men for the same policy. An insurer could also deny coverage to a woman based solely on gender. Companies made such decisions because women generally use more healthcare services than men.

For example, to the insurer, a young woman might be considered a higher risk than a young man because she could incur substantial costs related to pregnancy.

Also before the ACA, an insurance company could — and often did — deny coverage to older people or charge them a significantly higher rate than a younger person for the same plan. (Insurers can still charge older people more, but the law sets limits.)

And insurers frequently charged much higher rates or denied coverage to people based on their health status: If you had a history of illness, you could be denied coverage because of it or, at a minimum, you would pay more for your coverage than a healthier person.

Removing coverage limits

Because of the ACA, an insurance company can no longer place lifetime dollar limits on your health coverage. In other words, insurers can no longer limit how much they will pay out in essential medical services over your lifetime. The ACA also bars insurance companies from imposing annual dollar limits on coverage.

These provisions, which especially help people with serious diseases that require expensive treatment, are automatically in effect on all private insurance policies purchased or renewed after January 1, 2014. If you have a policy whose plan year starts in October, for example, then as of October 2014, you no longer are subject to these limits.

The ban on annual and lifetime limits applies to both employer-sponsored and individual plans, but only for the cost of what the law calls “essential health benefits.” These benefits are fairly broad and include emergency services, ambulatory patient services (which means outpatient care), preventive and wellness services, prescription drugs, maternity care, lab services, rehabilitative services, and more.

However, be aware that certain types of treatments and costs may fall outside the scope of what the ACA deems essential health benefits. Be sure to ask your insurer for examples of costs that aren’t subject to this ban.

Limiting out-of-pocket costs

Another significant financial protection the ACA provides relates to out-of-pocket costs. The maximum out-of-pocket costs for any insurance plan sold on the Health Insurance Marketplace are $6,350 for an individual plan and $12,700 for a family plan. (The limits change each year to parallel increases in medical costs.)

Recognizing exemptions for grandfathered plans

Certain types of insurance plans are considered grandfathered and, therefore, are subject to only some of the ACA’s provisions, not all of them. What defines a grandfathered plan is quite specific.

A grandfathered plan refers to individual and employer plans that were in existence by the day the ACA was signed into law (March 23, 2010) and have stayed basically the same since that date.

You may have enrolled in your employer plan after that date, but if the plan existed and has stayed basically the same since March 23, 2010, it may be a grandfathered plan. If you enrolled in a plan sold in the individual market after that date, your plan isn’t grandfathered.

The first item to know is that your insurance company or employer must inform you if you have a grandfathered plan. In the information you receive explaining plan benefits, the insurer or employer must state whether a plan is grandfathered; you shouldn’t have to do any guesswork.

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