An Affordable Care Act Quiz for All of Us

The Affordable Care Act promised to deliver significant changes in health care and health insurance.  During the past two years, we’ve learned a great deal about what is included in this sweeping new law.  As with most wide-ranging laws, it can be hard to get the real facts and all too easy for misinformation about the law to spread.  Many people are surprised to find they don’t know this important new law as well as they thought.  Are you one of them?Affordable Care Act

Take our 20 question quiz to see how well you really know what’s in the Affordable Care Act.


Your Score:  

Your Ranking:  

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5 Must-Fix Items in the Affordable Care Act: Higher Insurance Costs

Supporters of the Affordable Care Act told us the law would make medical care and health insurance less expensive.  Advocates said there were several reasons.  More people will have insurance, including a lot more healthy young people.  Competition created by health insurance exchanges will bring prices down.  More people would gain access to preventive care.    

However, other parts of the Affordable Care Act got less attention.  These include some on which we commented earlier.  The question is what these changes and others do to the affordability promise.  In this last part of our series, we’ll look an issue that is surprising even supporters of the law.

Required Fix #5 – The Affordable Care Act’s Higher Health Insurance Premiums

affordable care act empty walletDespite its supporters’ promises, the Affordable Care Act will lead to increases in the health insurance premiums.  For some Americans, the increased costs will be hidden by government subsidies that limit a family’s health insurance to 9.5% of its income, as long as the family income is less than 400% of the poverty level.  People who do not qualify for premium subsidies are not as lucky.  

Insurance companies and consultants who have worked on health insurance reform agree rates are going up under the Affordable Care Act.  In a recent presentation to agents, United Healthcare estimated individual  rates would double.   Small group rates, they said, may increase 25% to 50%.  Other insurance carriers are talking about similar rate changes. In a report for the State of Oregon, Wakely Consulting Group, a Massachusetts firm associated with health reform there,  estimated individual premiums will increase between  24% and 38% due to the ACA changes, before premium tax credits. 

At Soter, we decided to put the premium ranges to a test.  Contact us to request a copy of the results.

Here are just a few of the reasons we believe Americans will see premium hikes.

1.  The ACA prohibits using health conditions for underwriting.

This one is nonsensical and one of the biggest failings of the Affordable Care Act.  Historically, health insurance has evaluated an applicant’s medical condition, much as auto insurance has considered someone’s driving record.  In auto insurance, a driver with an excellent record gets preferred rates over one with many tickets and several accidents.  In health insurance, a person with a history of chronic or major health conditions would pay a higher rate than a healthier person.  Jonathan Gruber, the MIT economist and chief architect of the Affordable Care Act, now concedes his economic formula did not adequately include this factor and admits the ACA will result in premium increases.

Effective in 2014, the Affordable Care Act prohibits medical history and current health as an underwriting criterion.  Insurance companies will only be permitted to consider age, family size, tobacco use and geographic area.  Consequently, two 30-year-old men will receive the same premium, even if one is in excellent health and the other has chronic liver disease and cancer.   For healthy people, especially healthy, young people, the effect of this community rating method will be significant.  Many expect insurance companies will drop preferred rates for healthy people and the associated premium increases will be between 35% and 66%.

2.  The ACA institutes more coverage mandates.

The Congressional Budget Office commented in 2010 that premiums for many people might go down by 7% to 10%, provided they had the same coverage [emphasis added].  The problem is that many people will not have the same coverage.

The Affordable Care Act defines ten categories of “essential benefits” insurance policies must cover.  These include items many health insurance policies offer as options, including substance abuse coverage, mental health benefits, behavioral health benefits, and pediatric dental and vision coverage.  In order to comply, millions of people will have to buy more coverage than they now have.  In some cases, it may also require them to buy more coverage than they may want or need.  In our tests, we found adding coverage to follow essential benefit requirements tacks on 4% to 26%, depending on the benefit or benefits added.

3.  The ACA imposes new taxes and fees.

Beginning in 2014, the ACA imposes a new sales tax on health insurance plans that sell policies to individuals, small businesses and beneficiaries enrolled in Medicare and Medicaid managed care.  While one of the goals of the ACA is to make coverage more affordable, the new tax on health insurance will have the opposite effect.

The Congressional Budget Office has said that this tax will be passed along to individuals and small businesses in the form of higher health insurance premiums. According to Doug Holtz-Eakin, former director of the Congressional Budget Office, this tax will add about 3% per year  to the average family premium.

4.  The ACA caps small business deductibles.

The Affordable Care Act caps deductibles for small businesses at $2,000 for individuals or $4,000 for families.  Rather than repeating it here, see our earlier post on the premium impact of this limitation.

5.  Subsidies don’t change the costs of products or services.

The Concise Encyclopedia of Economics describes a subsidy as “Financial assistance…to a person or group to promote a public objective…Although subsidies exist to promote the public welfare, they result in either higher taxes or higher prices for consumer goods.”

The Affordable Care Act relies on two government subsidies to make health insurance affordable: expanded Medicaid eligibility and premium assistance credits.  Neither changes the cost of health insurance.  They simply give financial assistance to promote the idea that government support is creating affordability.  In reality, the subsidies shift the financial burden to families that do not quality for assistance and to the government.

The Affordable Care Act needs attention before Americans are priced out of the health insurance that was supposed to become more affordable.

Will you going be able to afford the ACA’s premium increases?  We want to hear from you.


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5 Must-Fix Items in the Affordable Care Act: Premium Repayment

The promise of the Affordable Care Act is to make health insurance less expensive for American families.  The promise is based on premium assistance from the federal government for people who qualify.  But there is a surprise in store for many families.  If you didn’t know you might have to repay the premium subsidy you already used, you aren’t alone.

Required Fix #4 – Revise the Subsidy Repayment Tax

The Affordable Care Act offers advanced tax credits to help offset health insurance premium expenses.  At the end of the year, the ACA requires you to reconcile payments you receive against your actual eligibility.  If the tax credit amount you used is more than you should have received, you must repay the excess as additional tax (Source: IRS Revenue Bulletin 2012-24, TD 9590).

Originally, the Affordable Care Act limited repayment to a minimal amount.  In fact, the amount was roughly equal to what someone might pay if he or she did not buy insurance.  However, after the law was first passed, a series of amendments created a scaled repayment requirement for families with incomes less than 400% of the Federal Poverty Level (“FPL”).

For families with incomes less than 200% of FPL, the Affordable Care Act caps repayment at $300 for an individual or $600 for a family.  Between 350% and 400% of FPL, people must repay $1,250 for an individual or $2,500 for a family.  For incomes above 400% of FPL, families must repay the entire premium subsidy.

Here’s an example of what might happen to a typical family.  Numbers are from the Kaiser Family Foundation Health Reform Subsidy Calculator (

Last year, Brent and Janet earned a combined $88,000.  This year, Janet receives a small raise.  In December, Brent receives a $4,000 bonus bringing their income to $94,000.

This is where the Affordable Care Act gets interesting.  Affordable Care Act worryBrent and Janet’s health insurance premium for the year was $18,858.  Their income allowed them $8,498 in Affordable Care Act premium assistance.  Each month the state health insurance exchange gave them a $708 credit toward their premium.

When they filed their tax return in April, the IRS looked at the tax credit they received and compared it to what the family’s income allowed.   At $94,000, Brent and Janet were unable for premium help during the prior year.  Because their income is greater than 400% of FPL, they must repay the full amount of their tax credits.  Consequently, they now owe the IRS $8,498.

We commented earlier in this series that it isn’t just in upper income ranges where the repayment tax rears its head.  For example,

Glen is single and made $32,000 last year.  He is eligible for $1125 in ACA tax credits.  During the spring, Glen changes jobs, and his income increases to $40,500 for the year.  At his new income level, Glen is only eligible for $114 in annual premium help.  Consequently, the IRS says he owes an additional $1011 in tax.

We haven’t tried to explain here how the repayment caps work.  The IRS devotes more than a dozen examples on its website trying to illustrate it.  Many of the examples look like a college math test.

To be fair, some of the rules about when people have to report changes in family status or income are still emerging.  However, some things are evident.

  • Health insurance exchanges will have unprecedented access to personal information.
  • People will have to report life events more often to federal or state agencies.
  • People will struggle to pay the lump sum tax increase.
  • More people will incur the repayment tax than predicted.

What do you think?  Join in with your thoughts and questions.

For more information about how the Affordable Care Act might affect you and your business, leave a comment or contact us at Soter Healthcare.


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5 Must-Fix Items in the Affordable Care Act: The Disappearing Subsidy (or, How Government Budgeting Invaded Your Checking Account)

Affordable Care Act supporters promise health insurance will become more affordable.  This promise is largely based on help paying premiums for people whose incomes fall between 100% and 400% of the Federal Poverty Level (“FPL”). However, lurking within the more than 2,700 pages of the Affordable Care Act are several significant surprises for families who take advantage of this aid.


Required Fix #3 – Revise the premium subsidy methodology.Affordable Care Act, ACA

Many people are excited about tax credits that can reduce their health insurance premium.  However, it isn’t as easy as it might seem.  For many families, their premium help could disappear after it has already been used.  In other cases, they might not actually get the help they need.  

The Marriage Penalty

The Affordable Care Act’s premium assistance plan creates a new penalty for married couples.  Here’s an example:

John and Jennifer are each single.  John’s $37,000 annual income is just over 330% of the 2013 Federal Poverty Level Guideline (“FPL”).  Jennifer earns $40,000, roughly 360% of FPL.  Because each income is under 400% of FPL, each of them  would receive premium assistance toward insurance purchased through a health insurance exchange. 

However, if John and Jennifer are married, their joint income of $77,000 is well above 400% of FPL for a two-person family.  Consequently, they would not be eligible for premium assistance.  It gets even more interesting if John and Jennifer marry during the year.  In that case, they could lose their subsidy for the entire year.

The Independent Child Penalty

Most people know the Affordable Care Act allows children up to age 26 to remain on a parent’s health insurance policy, regardless of dependent status.  However, that’s not true when calculating premium assistance.  The ACA defines family size as the number of deductions for personal exemption allowed by Internal Revenue Code.  As a result, a family may have more people covered by insurance than for whom they receive premium credit.   An example illustrates one such case.

Doug and Ann Able have two children, age 24 and 26.  The children cannot be claimed as dependents on the Able’s tax return.  The Ables earn $72,000 a year.

Here’s where the ACA’s math gets interesting.  The insurance premium is based on the family of four.  However, for premium assistance purposes they are a two person family.

If the ACA considered the four people insured, Doug and Ann would be eligible for a premium subsidy of approximately $10,100 toward their estimated health premium of $18,000.  However, with a $72,000 income, they make more than  400% of FPL for a two person family, so their premium subsidy disappears.

The Compensation Penalty

The ACA premium assistance plan creates some significant penalties for families whose annual income increases.  In fact, a family member could get a salary or wage increase, even a bonus from his or her employer, and see a reduction in at-home funds.  Few people knew about that when the ACA was passed, including many of the law’s supporters.

The Affordable Care Act builds premium help on a sliding scale.  As income increases, the amount of premium assistance available decreases.  If someone crosses one of the income thresholds during a year, his or her premium subsidy decreases, sometimes to zero.  Here’s an example using the Health Reform Subsidy Calculator from the Kaiser Family Foundation (

Scott and Sally O’Malley are each 50 years old.  They have two children, Alison, 18; and Jack, 20.  Scott and Sally earn a joint income of $90,000.  The O’Malley family is eligible for a premium subsidy of $8,308 toward their $16.858 annual premium. 

In October, Scott received a $4,000 performance bonus.  Now the family income for the year will be $94,000, more than 400% of FPL.  The O’Malley’s premium assistance amount now drops to zero, leaving them responsible for the full premium for the entire year.  Even worse, they might not feel the effect until filing their tax return the next year.

It’s not just at the upper level where premium assistance shrinks.  At certain points in the sliding scale, the out-of-pocket premium paid by families can increase by hundreds of dollars with relatively small wage increases. 

However, that’s not the worst of the impact.  You might have to pay back what you already received.

How might the disappearing premium subsidy impact your family?

Next in the series: The Affordable Care Act’s Premium Subsidy Repayment Tax

For more information on how the Affordable Care Act will affect your family or business, contact us at or 855-54-SOTER.

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Five Must-Fix Items in the Affordable Care Act – The Small Business Deductible

Editor’s Note:  We initially expressed concern about the impact of the small business deductible cap in September 2012.  Since that time, the Department of Health and Human Services issued a final rule on the application of the small business deductible.  Under that ruling, the Affordable Care Act provision allowing small businesses to use medical expense reimbursement plans to increase plan deductibles is no longer available.

Blue text identifies updates from the original post.

Tom, Robin and Susan are neighbors.  Tom is a self-employed consultant.  Robin works as a senior manager at a large company.  Susan is an executive at a small, growing firm with 30 employees.  In 2014, can they select the same health insurance plan options under the Affordable Care Act?  Simple, right? 

Beginning in 2014, the Affordable Care Act created two cost-sharing limits for health insurance plans that do not exist today. The first applies to all health plans and caps out-of-pocket expenses at the maximum permitted for Health Savings Accounts ($6,350 for individuals and $12,700 for families in 2014).  The second limits deductibles to $2,000 for an individual or $4,000 for families on health insurance plans offered by small businesses.

Required Fix #2 – Eliminate the $2,000/$4,000 cap on small group health insurance deductibles.

Four intersecting facts highlight the problem with the small business deductible rule.

1.  The limit applies only to small businesses.  It does not apply to personal health insurance or large company health plans.

2.  The Affordable Care Act contains a provision that allows, but does not require, small businesses to increase the deductible by offering an HRA or contributing to an HSA.  Using this principle, if a small business contributes $1,000 to an employee’s HSA or offers a $1,000 HRA, the deductible can rise by that same $1,000.  This effect negates some of the intended benefit in reducing the employee’s out-of-pocket cost.  (Note: An employee’s HSA salary deferral is not included in this calculation.)

However, in 2013, the Department of Health and Human Services published a regulation that included the following ruling:

“Section 1302(c)(2)(A) of the Affordable Care Act permits but does not require, contributions to flexible spending arrangements (FSAs) to be taken into account when determining the deductible maximum. We proposed to standardize the maximum deductible for all health plans in the small group market at $2,000 for self-only coverage and $4,000 for [family] coverage…and not increase the deductible levels by the amount available under the FSA.” (Emphasis added)

3.  The maximum out-of-pocket cost rule still applies.

4.  The Department of Health and Human Services also ruled that health insurance exchanges and insurance companies can increase the deductible for plans they offer if needed to maintain the integrity of the new metal levels required by the Affordable Care Act.  This perverse ruling allows insurers to do what a small business otherwise could not.

Impact on Small Business Health Plans

Over time, business owners have turned to high deductible health plans to relieve financial pain for themselves and their employees.  In many cases, they added HSA or HRA benefits, and their employees have come to appreciate the tax savings and ability to carry unspent money into future years. 

The table below illustrates four typical plan options.  What’s important to note is that small businesses may not purchase two of the four plan designs.  Looking across each row, the maximum out-of-pocket is exactly the same for each insurance policyholder.  The only difference is the deductible.

Who Can Purchase Health Insurance with..


Small Business

Large Company

  • $2,000/$4,000 deductible with 80%   coinsurance & $6,250/$12,500 out-of-pocket maximum
  • No HSA or HRA




  • $4,000/$8,000 deductible with 80%   coinsurance & $5,950/$11,900 out-of-pocket maximum
  • No HSA or HRA




  • $3,500/$7,000 deductible with 100%   benefit after deductible
  • No HSA or HRA




  • $3,500/$7,000 deductible with 100%   benefit after deductible
  • $1,500/$3,000 HRA




The Affordable Care Act Small Business Deductible Impact on Premiums

For families who previously enjoyed the affordable care act misspendssavings from a higher deductible health plan, this change will  increase their monthly premium.  Using a standard High Deductible Health Plan offered in Minnesota as an example, reducing the family deductible from $9,000 to $4,000 increases the premium for a family of four by more than $6,800 a year. 

The deductible goes down but the maximum out-of-pocket remains the same, and the family will pay more than $500 per month more in premium. HHowever, if the family buys its own insurance, if the policyholder is covered by a plan offered by a large company, or if they work for a small employer with a self-funded health plan, they don’t have to deal with this restriction. 

The government will tell you that’s ok, because you can get a premium subsidy.  However, that only works for people earning less than 400% of the federal poverty level and buying their own insurance, and that comes with its own set of problems.

And So We Wonder

Why shouldn’t small business owners and employees have the same freedom to select health insurance deductibles as people at large companies or individuals?  The answer makes no sense to us, and that’s why the small business deductible makes our list of must-fix items in the Affordable Care Act.


What will this change do to your health insurance?

Next: The Affordable Care Act’s Disappearing Premium Subsidy


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