The provisions of the Patient Protection and Affordable Care Act (PPACA) — sometimes referred to as Obamacare — have been phasing in for a few years now.
The biggest provision affecting consumers, though, is the requirement to purchase individual health insurance. That mandate doesn’t kick in until 2014.
But guess what? 2014 is just around the corner.
If you don’t have health insurance coverage in 2014, you will have to pay a fine, unless you qualify for an exception. Before 2014 arrives, it’s a good idea to understand how all of this works.
Here are 4 essentials you need to know about Obamacare:
1) Where To Get Health Insurance
First of all, you need to figure out your current insurance situation.
If you already have health insurance, or if you have Medicaid coverage, you don’t actually need to do anything. You can keep getting insurance through your current insurance company.
Or, if you want, you can shop around.
States are setting up health insurance exchanges where consumers can buy policies from private insurers. These exchanges are set up for those who can’t get health insurance through their workplaces. So those who are self-employed, or who don’t get benefits from work, can shop the health insurance exchanges to look for policies that fit their needs.
The health insurance system isn’t run by the government, even though government entities are in charge of the exchanges; as it has been for decades, private insurers provide the policies. And, of course, you can always shop on your own, with the help of online web sites that have been around for years (eHealthinsurance is one).
You aren’t forced to shop at the health insurance exchanges if you don’t want to. But if you qualify to shop them, it can make sense to compare the plans available via exchange to what’s available through other sources.
You might also qualify for Medicaid.
Some states are expanding their Medicaid coverage to include those who might not have received benefits before. As a result, you might have access to Medicaid, and you won’t need to turn to your employer or the state exchanges (or some other private arrangement) to get the coverage you are required to have.
2) What Type of Coverage is Available?
For the most part, your coverage — if you already have it — is likely to stay the same. Well, except for some of the reductions in benefits and increases in premiums that have been a part of the insurance system since health insurance became the norm.
On the state exchanges, you will be able to choose from three different types of plans: gold, silver, and bronze.
The gold plans have the greatest benefits and cost the most. They have lower deductibles and higher premiums. Bronze plans have fewer benefits and require more out-of-pocket expenses. However, the premiums are much lower. Silver plans are middle of the road, falling between those two extremes. What you choose will depend on your own situation, your coverage needs, and affordability.
What you pay for coverage at the different levels depends on four different factors:
- Your age
- Where you live (and the rate of risk involved)
- Number of people covered on your insurance plan
- Tobacco use
As you can see, pre-existing conditions are not considered in this calculation. One of the biggest factors is tobacco use, so if you are a smoker or use tobacco in some other form, you are likely to get a bigger break on your insurance coverage if you are able to quit.
3) How Will You Pay for Health Insurance?
The next big question for those who are being required to purchase health insurance is this: How will I pay for my health care coverage?
First of all, if you don’t have coverage, and you don’t qualify for an exemption, you will need to buy coverage or pay a fine.
The fine is designed to increase over time.
So, for the first couple of years (2014 and 2015) of the individual mandate, it might actually be cheaper to pay the fine than to get the health insurance coverage (assuming you don’t have a need for health insurance those years). For 2014, the fine is the greater of $95 or 1% of your income. As 2016 approaches, though, the fine will increase, and it will eventually make sense to just buy the health insurance.
Subsidies are being offered to those who purchase health insurance, based on income.
Those who make up to 400% of the federal poverty level (based on the size of your household), will receive help in the form of a discount premium or a tax credit to help pay for Obamacare. The Kaiser Family Foundation estimates that about 67% of the population will qualify for either Medicaid or the subsidy.
You can choose to take the subsidy in the form of a premium discount if you want to lower your monthly premium.
The government calculates how much of your premium the subsidy should cover, and then pays that amount to the insurance company. You are responsible for the rest. So, if your plan costs $600 a month, but you are eligible to have the government pay 80% of the premium, you are only responsible for 20% of the premium, costing you $120 a month.
It’s also possible to choose the tax credit option.
If you go this route, you pay the full premium. However, at the end of the year, you can apply for a tax credit. This tax credit is refundable, so if the tax credit ends up being for more than what you owe in taxes, you receive money back.
If you want to estimate your cost under Obamacare, the Kaiser Family Foundation offers a handy tool. The subsidy calculator asks you basic questions about yourself, based on the factors that are supposed to influence your premium. You can find out if you qualify for a subsidy, and how much you can expect to pay. There are some caveats with this tool, so it’s a good idea to read the fine print. Also, realize that the estimates are initially based on the Silver plan, although you can adjust your results to other levels.
I don’t qualify for a subsidy, but I went ahead and put in some information, as if I did qualify, with two adults aged 34 and one child, no tobacco users. I pretended like my income is $40,000. For the Silver plan, the cost would be $2,587 per year, or $215.5833 per month, for me. The government would cover the other $6,657 per year on my behalf (the total cost was estimated at $9,244 per year, or 770.33 per month).
The analysis also includes a look at the Bronze plan, which would amount to $1,005 per year, or $83.75 per month, after the application of the subsidy.
A willingness to pay more out of pocket can result in a bigger savings. It’s also worth noting that, at some income levels, the cost of a Bronze plan can be completely offset by the subsidy. That means that if you feel like you can’t afford health insurance, choosing the Bronze plan might mean that you get coverage without having to pay for it. You’ll have to run the numbers yourself to see how you might be impacted.
4) Choosing Your Health Care Coverage
It’s always been important that you carefully choose your health insurance coverage. Comparison shopping is vital, since the cost of health insurance goes up every year.
Even if you aren’t using Obamacare subsidies, and even if you aren’t buying insurance on the state-run exchanges, your premium is likely to be impacted by Obamacare. While some complain that health insurance costs are going up, it’s actually nothing new. Health insurance costs go up every year, and this has been a trend for decades. For the coming year, there are estimates that the rise in health costs for 2014 will actually be slower than the rise for 2013.
For example, I’m not changing anything about my health insurance situation (don’t need to; I have coverage, so, really, the PPACA doesn’t affect me in that way). For the coming year, my monthly premium went up about $80. However, in years past, my monthly premium increased by $85 or $90. So this is actually a savings in my situation. On top of that, one of my prescriptions, which cost a little more than $100 a month, is now completely covered as a result of Obamacare. So, for the coming year, I’m actually going to be ahead, even with the premium increase. That hasn’t happened since the first year I switched to a Health Savings Account.
Of course, the impact will be different for each person, depending on situation.
Since I already have health insurance coverage, and because of the prescription change, Obamacare is saving me money. For those who haven’t been buying health insurance, though, and who are now required to pony up, the situation is different. (Unless the subsidy is enough to completely cover the cost of health insurance.)
Final Word on Obamacare Changes Coming Up
It’s important that you consider your options, and look at the coverage available to you. Don’t forget to look online at health insurance comparison web sites, and check your state’s insurance exchange.
You might be surprised to discover that health insurance is more affordable than you thought.