What You Need to Know About Obamacare and Health Insurance Exchanges

Various provisions of the Patient Protection and Affordable Care Act (aka the ACA, aka Obamacare) have already taken effect, but the biggest changes are coming soon.

This week, we’re looking at one of the law’s major provisions: the ability of individuals and families to buy insurance directly via a health insurance exchange.

So…this Affordable Care Act thing is really happening?

Yes.

What’s a health insurance exchange and why should I care?

A health insurance exchange is where you buy an individual policy under the Patient Protection and Affordable—let’s just call it Obamacare, shall we?

Every state has an exchange, and they open for business on October 1.

Does that mean I can get insured starting October 1?

No. It means you can start shopping for a policy which will take effect on January 1.

How do I find my state’s exchange?

At HealthCare.gov. Some states don’t have their own exchange, and residents of those states will shop for plans at HealthCare.gov.

If I get insurance through my job, does this affect me?

Not directly.

If you have access to “affordable” insurance through your employer, you can’t buy subsidized insurance through an exchange, and you’ll lose the tax advantage of employer insurance if you buy an unsubsidized policy.

So who should shop for insurance through an exchange?

Anyone who doesn’t qualify for insurance through their employer or another source such as Medicaid, Medicare, or the VA.

This includes part-timers, freelancers, contractors, artists, employees at small companies, and anyone currently uninsured or underinsured.

What if I have a preexisting condition?

You can’t be denied or charged extra for a policy based on a preexisting condition, period.

If I already have an individual policy, do I need to drop it and buy a new one through the exchange?

No, but you may want to. Exchange-sold policies are eligible for subsidies; policies bought outside the exchange aren’t.

“In New York, for interest, almost everyone will get a subsidy of some sort, because prices in New York are relatively expensive,” says Jonathan Wu, cofounder of consumer financial site ValuePenguin.

He continues, “For those people, it makes a lot of sense to at least explore the option of buying individual insurance on the exchange.”

Subsidy, you say?

If your household income is under 400% of the federal poverty line, you’ll be eligible for subsidized premiums on insurance purchased through an exchange.

The goal of the subsidy is to ensure that you don’t pay more than 9.5% of your income on health insurance premiums.

To find out how much you would pay, estimate your income for this year and punch it into a simple calculator.

What if I underestimate or overestimate my income?

“If you project your income to be at a certain range and it actually exceeds that, you actually have to pay back a certain amount of the subsidy,” says Wu. On the upside, if you overestimate your income, you’ll get an additional tax refund in April.

Is this going to make health care cheap?

No. It’s the Affordable Care Act, not the Cheap Care Act.

Some people will see their premiums go up, others down. But it should make health care expenses much more predictable.

A person who is currently uninsured, for example, will certainly pay higher premiums (higher than $0) under Obamacare, but won’t necessarily suffer higher overall health care expenses.

Do I have to carry insurance?

No. But if you don’t, you’ll pay a penalty.

For 2014, the penalty is $95 or 1% of your income, whichever is greater.

What kinds of policies are offered through the exchanges? Do I need to worry about getting a lousy policy that won’t cover anything more serious than athlete’s foot?

No.

Adults under 30 and some people with low incomes can buy a catastrophic policy; everyone else has to buy a policy that covers the ten Essential Health Benefits.

What are the ten essential benefits?

1. Ambulatory patient services (aka outpatient treatments, minor surgery, and urgent care)

2. Emergency services

3. Hospitalization

4. Maternity and newborn care

5. Mental health and substance use disorder services, including behavioral health treatment

6. Prescription drugs

7. Rehabilitative and habilitative services and devices

8. Laboratory services

9. Preventive and wellness services and chronic disease management

10. Pediatric services, including oral and vision care

What if I currently have an individual policy that doesn’t cover all of these things?

You’ll probably have to upgrade.

“If you look at some of the states that aren’t as regulated—like Ohio, for instance—there are some plans that cost $50 a month,” with huge deductibles, says Wu.

“Plans like that that will just drop off, and people will be forced to switch.”

Okay, I want to buy a policy through my state exchange. How much is this going to cost me?

This is really two questions in one: How much will my monthly premium cost?

And how much will I owe on top of that when I see a doctor, fill a prescription, go to the hospital, or get a diagnostic test?

Or, to put it another way, how much will I spend for health insurance and how much for health care?

The answers depend on your income and what type of plan you choose. Exchange plans are classified as Bronze, Silver, Gold, or Platinum.

As you go up the bling scale, the plans charge higher monthly premiums but charge less for each service you actually use.

Here’s a handy comparison chart from the state of California.

Plans in your state may be structured differently but can’t, by law, be any more or less generous in their average benefit payouts.

A Gold plan in one state has to be comparable to a gold plan in another.

A family of four with two 40-year-old parents making $60,000 will pay a monthly premium of $475 for a Silver plan.

This looks way too expensive. Do I have any other options?

If your household income is between 100% and 250% of the federal poverty line, you’re eligible to buy a more heavily subsidized Silver plan.

More details from California.

Is there anyone who can help me figure out which plan to buy and what subsidies I’m eligible for?

The federal government is giving out grants to train free Obamacare “navigators” in states that don’t run their own exchanges.

States that do run their own exchanges will provide their own navigators.

Whether these navigators will be adequately trained or easy to access remains to be seen.

Scam artists are, undoubtedly, honing their pitch already: “We’ll get you the biggest tax subsidies the law allows, in exchange for a fee…”

What else should I know?

This law is big. In future installments.

I’ll be looking at health insurance options and requirements for small business, changes to your workplace plan, and changes to high-deductible plans and Health Savings Accounts.

I’ll also talk to individuals about how their health insurance situation has changed.

Do you have more questions about the Affordable Care Act?  Get expert answers.

Matthew Amster-Burton is a personal finance columnist at Mint.com. Find him on Twitter @Mint_Mamster.