When Obamacare, otherwise known as the U.S. Health Care Reform Act, goes into effect January 1 next year, Americans will be faced with yet another way to find and buy health insurance. For the 50 million who don’t get health insurance through their employers or Medicare or Medicaid or on the private market, they’ll have to buy it through the new health insurance Exchanges. Those who don’t have health insurance and don’t buy it will face a federal fine. Blue Cross, Cigna (NYSE:CI), Humana (NYSE:HUM) and Kaiser among others will sell insurance to those who don’t already have it. They must follow standards set out in the federal act.
For some who are currently buying insurance on the private market, the exchanges may offer lower premiums and lower out-of-pocket costs. Some employers have already announced they plan to end insurance plans for certain employees and instead send them to the Exchanges. October 1 is the first date you can sign up; enrollment ends March 31, 2014. Here are five things you should know about the new Exchanges, also called the Health Insurance Marketplace.
1. There are four health plan categories – Bronze, Silver, Gold and Platinum
The Marketplace plans are separated into four primary levels: Bronze, Silver, Gold and Platinum.
The different levels are intended to meet various health and financial needs, and are based on the percentage that each plan pays towards health care services. The plan levels also indicate the percentage you will pay towards the health care you receive. Your portion of these costs is in the form of:
- Deductibles – the amount you owe for covered services before insurance kicks in;
- Copayments – a fixed amount you pay for a covered health care service; and
- Coinsurance – your share of the costs of a covered health care service.
For example, assume you have a $1,000 deductible, a $25 copayment and coinsurance of 20%. For some health care, such as a visit to your family doctor, you will owe the $25 copayment. For other services, such as a surgery, you must first meet your deductible, after which you will owe 20% of the costs. If the surgery cost $5,000, you would be responsible for the first $1,000 (to meet your deductible if you haven’t already done so) and then 20% of the remaining charges, or, in this example, $800.
This chart shows how much the different plans will pay of your health costs, not including premiums:
|Plan Level||What the Plan Spends||What you Spend|
The lower the amount of coverage, the lower the premium you must pay to maintain coverage. Bronze level plans have the lowest premiums, but also the lowest level of coverage. As the plan levels increase (from Bronze to Silver to Platinum), your monthly premium increases but so does the level of coverage. For example, you will pay a higher premium for a Platinum plan but you will pay less for each doctor visit, prescription, or health care service that you use.
Tip: If you expect to have a lot of doctor visits and require regular prescriptions, you may want to consider a Gold or Platinum plan. If you don’t expect to have a lot of health care bills, a Bronze or Silver plan may be appropriate. You will be able to compare plans on the Marketplace to find one that best fits your financial and health needs. Plans and costs vary by state and individual.
2. All Marketplace plans must cover Essential Health Benefits
Regardless of whether you choose a Bronze, Silver, Gold or Platinum plan, certain essential health benefits must be covered and your copayments and coinsurance for them count towards your deductible. These services include:
- Addiction treatment
- Ambulatory patient services
- Care for newborns and children
- Chronic disease treatment (such as diabetes and asthma)
- Emergency services
- Laboratory services
- Maternity care
- Mental health services
- Occupational and physical therapy
- Prescription drugs
- Preventive and wellness services (such as vaccines and cancer screenings)
- Speech-language therapy
Tip: These are minimum requirements. Many plans have additional benefits, so it’s important to look at the summary of benefits for any plan that you are considering to make sure it fits your budget and needs.
3. You might qualify for lower monthly premiums and out-of-pocket expenses
Many people will qualify for new federal subsidies that can help lower health costs, both the premiums and the care itself. When you get coverage through the Marketplace, you may be eligible for:
- Cost-Sharing Reductions, which help lower out-of-pockets costs such as deductibles, co-pays and coinsurance; and
- Advanced Premium Tax Credits, which reduce the amount you pay each month for your insurance premium.
Both subsidies are available only to qualified individuals who are:
- Ineligible for public coverage (Medicaid, Medicare and Children’s Health Insurance Plan)
- Unable to get qualified health insurance through an employer
Any savings are based on your family size and income. The Kaiser Family Foundation Calculator is a useful online tools that lets you enter your income level, family size, and ages of family members to get an estimate of your eligibility for subsidies, and what your insurance premiums might cost you.
In order to take advantage of Cost-Sharing Reductions, you must purchase a Silver plan on the Marketplace and your modified adjusted gross income (MAGI) must fall below these maximums:
|1||Up to $28,725|
|2||Up to $38,775|
|3||Up to $48,825|
|4||Up to $58,875|
|5||Up to $68,925|
|6||Up to $78,975|
|7||Up to $89,025|
|8||Up to $99,075|
Tip: Your modified adjusted gross income is your household’s adjust gross income plus any tax-exempt Social Security, interest and foreign income.
Advanced Premium Tax Credits are sent directly from the government to your health insurer and are applied to your premium each month. You must apply for this subsidy on the Health Insurance Marketplace. Unlike the Cost-Sharing Reduction, you do not have to buy the Silver plan; however, you still must meet certain income requirements, based on family size:
|Family Size||Income Range|
|1||$11,490 to $45,960|
|2||$15,510 to $62,040|
|3||$19,530 to $78,120|
|4||$23,550 to $94,200|
|5||$27,570 to $110,280|
|6||$31,590 to $126,360|
|7||$35,610 to $142,440|
|8||$39,630 to $158,520|
Tip: The amount of tax credit you receive depends on your income; you will pay more for your premiums if your income is near the top of the range and less if your income falls closer to the bottom. If your income falls below the range for your family size, you may qualify for coverage under your state’s Medicaid program.
4. If you can afford it, you will need minimum essential coverage – or pay a fee
If you can afford health insurance see tip below and you don’t have coverage in 2014, you may have to pay a fee of 1% of your yearly income or $95 per person ($47.50 per child), whichever is higher. The fee increases to 2.5% of income or $695 per person in 2016. While the penalty seems relatively cheap, it is important to remember that without health insurance you will also be responsible for the entire cost of your medical care.
To avoid the fee, you need coverage that qualifies as minimum essential coverage. For 2014, you will be considered covered (and won’t have to pay a fee) if you have any of the following plans:
- Any employer plan (including COBRA)
- Any individual insurance plan that you already have
- Any Marketplace plan
- Peace Corps Volunteer plans
- The Children’s Health Insurance Program (CHIP)
- TRICARE (active and retired military, families and survivors)
- Veterans health care programs
If you don’t have coverage in 2014 you may not have to pay the fee if you:
- Are a member of a federally recognized Indian tribe
- Are insured for at least nine months of the year
- Don’t have to file a tax return because of low income
- Have a very low income and you cannot afford coverage (you must complete an application on the Marketplace to determine whether your income qualifies you for an exemption)
- Participate in a health care sharing ministry
- Would qualify for Medicaid (under the new income limits) but your state has chosen not to expand eligibility
- Are a member of a recognized religious sect (such as the Amish and some Mennonite sects) that objects to health insurance
Tip: What determines if you can afford coverage? The IRS determines affordable coverage. Coverage is not considered affordable if it costs more than 9.5% of your pre-tax annual household income or if your income falls below income-tax thresholds.
5. Important Dates to Know
There are three important dates to know for the Health Insurance Marketplace:
- October 1, 2013 – Marketplace open enrollment begins
- January 1, 2014 – Health coverage can begin
- March 31, 2014 – Open enrollment ends
After open enrollment ends on March 31, 2014, you won’t be able to get Marketplace coverage until the next annual enrollment period unless have a qualifiying event, such as a divorce, marriage or baby.
If you qualify for Medicaid or the Children’s Health Insurance Program (CHIP), you can apply now and your coverage can begin immediately. You can find out if you qualify for either program on the Marketplace website at www.healthcare.gov (use the website search box to search for “Medicaid” and “CHIP”).
The Bottom Line
Most people will be eligible to purchase health coverage through the Health Insurance Marketplace. In order to qualify, you must:
- Live in the United States
- Be a U.S. citizen or national
- Not be currently incarcerated
If you are a U.S. citizen living abroad, you are not required to have coverage under the Affordable Care Act, and you won’t have to pay the fee for being without insurance.
To find additional information regarding the new Health Insurance Marketplace, as well as state-specific information and how to apply in your state:
- Visit www.healthcare.gov (allows you to link to Live Chat)
- Call 1-800-318-2596
- Follow twitter.com/HealthCareGov
- Contact your current health insurance company