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How the Affordable Care Act will affect people

Most subsidies, penalties will be rolled out in next five years

When the federal Affordable Care Act is fully implemented in 2019, 3.1 million Californians will be newly eligible for subsidized health coverage. Another 1.5 million will be eligible for Medicaid coverage (Medi-Cal in California) for the first time.

An additional 2.1 million people statewide are expected to purchase insurance through the California Health Benefit Exchange, a state program that was formed to comply with the federal act.

In Palo Alto about 12 percent of residents will benefit from the Affordable Care Act coverage, according to the Henry J. Kaiser Family Foundation, a nonprofit organization focused on health policy analysis and health communications.

Who pays, and how much?

Everyone will need to have coverage or pay a penalty, which the U.S. Supreme Court has determined is a tax.

All Californians who make less than 138 percent of the federal poverty level ($15,415 for an individual, $31,810 for a family of four) will be eligible for fully paid coverage through Medi-Cal.

Subsidies in the form of tax credits will be offered to people with incomes between 138 and 400 percent of the federal poverty level. The subsidies can be applied toward premiums for health plans purchased through the exchange.

Typical subsidies for a family of four are shown below:

• Annual income of $35,137: tax credit of $12,840 (estimated insurance-premium cost: $1,405 annually)

• Annual income of $46,850: tax credit of $11,294 (estimated insurance-premium cost: $2,952 annually)

• Annual income of $93,700: tax credit of $5,344 (estimated insurance-premium cost: $8,901 annually)

Taking the penalty instead

Individuals who choose not to purchase insurance will pay an annual tax that will be phased in per family member:

• 2014: $95 ($47.50 for dependents under age 18)

• 2015: $325 ($162,50 for dependents under 18)

• 2016: $695 ($347.50 for dependents under 18)

Higher-income households earning more than 400 percent of the federal poverty level would pay a penalty as a percentage of taxable income:

• 2014: 1 percent

• 2015: 2 percent

• 2016: 2.5 percent

• After 2016, the penalty increases annually by the cost-of-living adjustment.

Who is left out?

Undocumented immigrants are not eligible for coverage. The Department of Homeland Security estimates that there were 10.8 million undocumented immigrants in the U.S. in 2010.

Major provisions since the act took effect in September 2010:

• Health plan coverage can no longer contain a lifetime or annual cap on essential health benefits. Persons with catastrophic or chronic illness won't run out of coverage. Annual dollar caps on certain benefits will also be eliminated by Jan. 1, 2014.

• Uninsured, dependent children can remain on a parent's policy until age 26, if a plan offers dependent coverage. Dependent children whose coverage ended or who were denied coverage before age 26 can enroll in dependent coverage.

• Children under age 19 with pre-existing conditions cannot be denied of health coverage.

• Insurance companies are prohibited from retroactively canceling a policy when a patient becomes sick or when a person or employer makes an unintentional mistake on paperwork.

• Plans must provide free preventive care, such as mammograms and colonoscopies without charging a deductible, copay or coinsurance.

• Improved Medicare prescription benefits are saving seniors on average $600 annually.

Provisions starting in 2014:

• Insurers will be barred from denying adults coverage or charging higher rates based on gender or health status.

• A program will help people with pre-existing conditions obtain coverage in the interim.

• Annual dollar limits on coverage will be prohibited.

• Almost everyone will be required to be insured or pay a penalty. Federal subsidies will help people who can't afford coverage.

• Most employers will have to pay the tax if they choose not to offer health insurance.

• A state-run health benefit exchange will help individuals and businesses to find and choose affordable policies. In California, a bill to create affordable, nonprofit insurance co-ops passed the state Assembly in May and could be decided by the state Senate in August.

• Medicaid will cover more low-income people.

More information:

A video by the Henry J. Kaiser Family Foundation on the coming changes, Health Reform Hits Main Street, can be viewed at http://healthreform.kff.org/the-animation.aspx

People can also enter their personal information to learn about how the health care reform will affect them at http://healthreform.kff.org/subsidycalculator.aspx

"Illustrating Health Reform: How Health Insurance Coverage Will Work," at http://healthreform.kff.org/profiles.aspx has profiles of people throughout the country and how they will be affected by the new law.

Sources: Henry J. Kaiser Family Foundation, California Health Benefit Exchange.

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