Today, September 23rd, 2010, is the day on which parts of the Affordable Care Act take effect.  As of today:

Children up to age 26 can be kept on their parent’s employer health insurance. In Massachusetts this has been the law since Mitt Romney reformed health insurance there and required everyone to get covered. Parents will pay for this coverage, so it’s not free.  Coverage for young adults is not expensive since most are very healthy and don’t go to the doctor. But many young adults have jobs without insurance or are finding it hard to find a job in these tough times. This is an inexpensive way to protect families from catastrophic medical bills if they have a sick child who would normally lose insurance coverage at 19 – or if they want to insure their 19-25 year old son or daughter just in case something should happen.  One of the largest groups of uninsured Americans is young adults. This is a way to get them covered.

Insurance companies must offer insurance to children with pre-existing conditions. If a parent works for a small company that offers health insurance, he will be able to get his sick child coverage. Or if a woman is self-employed and has a child with a health problem, she can get insurance coverage for her child.  Small group plans or family plans could previously refuse coverage to a child with certain conditions or illnesses.  That is no longer allowed.  The one catch is that the policies might be very expensive.

Insurers cannot charge you more for out-of-network emergency room care. If you’ve ever had a medical emergency while you were traveling and “out-of-network”, you probably had to fight with your insurance company and the emergency room over the bill you received. From now on, you will pay the usual co-pay that comes with your health insurance plan – if you have new insurance coverage.

Insurance companies can no longer cancel an individual insurance policy when a person gets sick.  Previously, when a person got sick, the insurance company would do everything it could to find something in the initial application for coverage and could say something like, “Aha, you had a yeast infection as a teenager - which you did not put on your application.  Now you have cervical cancer and we are canceling your policy because you did not divulge this pre-existing condition!”  This is no longer allowed. This really happened to someone!

Lifetime benefits limits are being phased out. This is phased in over three years, so as of today new policies can cap lifetime benefits at $750,000 for the next year.  Many insurance companies, like Blue Cross Blue Shield of Arizona, no longer have lifetime limits on their  policies.  Most policies I’ve seen over the last few years (from reputable companies) had limits of $3 million or $5 million.

Insurance policies must cover preventive care. This means that people who have a $5,000 deductible policy, which means they pay the first $5,000 for any and all medical care, can get preventive screening tests and the insurance company must pay for them.

I have a client who owns a small company and provides health  insurance for his employees.  When I suggested he look into the Small Business Health Care Tax Credit, he said he was not aware of this program that is part of the Affordable Care Act (aka “Obamacare”).

The Small Business Health Care Tax Credit takes effect this year (2010) and is designed to help small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.

To be eligible for the credit, employers must cover at least 50 percent of the cost of health care coverage, have less than the equivalent of 25 full-time employees and pay average annual wages below $50,000. Both taxable and tax-exempt organizations may qualify, but nonprofit organizations that are tax-exempt will be eligible for a credit of only 25 percent of health care costs.

In 2014, the tax credit will increase to 50 percent of health care premium costs for small businesses and 35 percent for tax-exempt organizations.

For more information go to the IRS web page on the Small Business Health Care Tax Credit for Small Employers.

More than 85.7 percent of Arizona small businesses with fewer than 25 employees will be eligible this year for tax credits to help pay the cost of employee health coverage, according to a new report issued by the consumer health organization Families USA. The tax credit program, a key element of the Patient Protection and Affordable Care Act, targets small employers with up to 25 workers.

In Arizona, this means 72,600 small businesses will qualify. The report, “A Helping Hand for Small Businesses: Health Insurance Tax Credits,” also notes that 18,900 Arizona small businesses will qualify for the maximum tax credit of 35 percent. These are businesses that employ 10 or fewer workers who earn an average wage of less than $25,000 and traditionally have the most difficult time affording insurance.

“Many small businesses—like the local diner, the hardware store down the street, or the neighborhood repair shop—face special challenges in providing health coverage for their small number of employees,” said Ron Pollack, Executive Director of Families USA. “They will now receive substantial help.

“For example, in 2008, employers with fewer than 10 workers had to pay, on average, nearly $350 more for each employee’s health insurance than firms with 50 or more workers,” Pollack said. “It’s no surprise, therefore, that less than half of these smallest businesses offered coverage to their employees. This new tax credit should certainly help to improve that record.”

“There’s been a lot of speculation about how many small businesses will qualify for tax credits, and this report clears up a lot of those questions,” said John Arensmeyer, founder and CEO of Small Business Majority. “We now have real numbers that show the vast majority of small businesses in Arizona will qualify for tax credits under the new law. That’s huge.”

Small businesses are financially less able to provide health coverage for their workers than larger businesses. Nationally, 72 percent of small businesses with 10 to 25 workers offer health coverage, while more than 95 percent of businesses with 50 or more workers offer coverage.

The new law aims to redress that imbalance with tax credits, offering the maximum credit of 35 percent to the smallest companies. Nonprofit employers also benefit, with a maximum credit of 25 percent. As the number of employees and their average wages rise, the tax credit is reduced on a sliding scale.

To further provide assistance, the law allows employers to count two half-time workers as one full-time worker, meaning that an employer with mainly part-time workers will be able to qualify for the tax credit.

“Employers have been willing to provide health coverage for their employees, but economies of scale have made this almost impossible for many small businesses,” Pollack said. “Starting this year, they will have access to a new tax credit to help provide this essential benefit, enabling them to hire and keep good workers who want and need health coverage.”

The report notes that the health reform law has additional provisions to aid small businesses now and in coming years. Among those provisions:

• Starting this month, small business owners are able to view all existing health coverage options in their state on a user-friendly website, Healthcare.gov
• Starting in 2014, small employers will be able to purchase quality coverage with strong consumer protections through state-based health coverage marketplaces called “exchanges.”
• Starting in 2014, small employers will be eligible for tax credits up to 50 percent, or 35 percent for nonprofits, to cover their workers with policies obtained through the state exchanges.
• Starting in 2014, insurers will be prohibited from charging small employers higher premiums based on their workers’ pre-existing conditions.