Oct. 1 will be upon us before we know it, the launch date of the health insurance exchanges under the Affordable Care Act.
Note that while we’re hearing a lot about the Oct. 1 deadline for the exchanges, that’s when people can first start signing up in an open enrollment period that runs through next March. Coverage won’t begin, however, until Jan. 1, 2014.
We tend to hear more about the politics of all this (still!) than the mechanics of all this, so it’s worth talking about some of the basics for the people who it will affect.
Which is where we might as well start. Most people who have insurance through their employers will probably continue to have insurance through them and will likely see fairly small premium increases—around four percent—in line with the premium increases that have occurred over the last few years in the pre-Obamacare environment.
But lots of people won’t ever have to look at their state’s health insurance exchange website unless they’re curious or are helping an uninsured friend or relative.
So even if you’re not going to be directly affected by the changes in the law, it’s worth knowing the basics.
Who will be signing up? Two groups are eligible, individuals and small business owners. The individuals will be people who don’t have health insurance offered through their employers, mostly. However, there’s an exception for people whose employers coverage is unaffordable—their contribution to their employer-sponsored health insurance is more than 9.5 percent of their family’s income, or whose plan doesn’t meet the minimum requirements of plans on the exchange. Employers with less than 100 full-time employees can use the exchanges to purchase coverage for their workers.
Who can’t sign up? Anyone qualifying for Medicare, CHIP or Medicaid (including under the new Obamacare Medicaid expansion); people who have insurance through their employers (except for the affordability exception noted above); employers with more than 100 full-time employees (full-time is defined as 30 hours/week under the law); undocumented workers; and people who are incarcerated.
There will be people who choose not to sign up, and who will pay the penalty instead. Unfortunately, in plenty of red states that are refusing to expand Medicaid, there will also be a chunk of people who don’t qualify for existing Medicaid, and make to little to qualify for subsidies to buy on the exchange. For the moment, they’re left out.
There will be four levels of plans offered on the exchanges: Bronze, Silver, Gold and Platinum. Everyone, regardless of what plan they choose, will continue to get preventive services—annual exams, immunizations, cancer screenings, contraceptive coverage and the like—without having to pay anything additional out-of-pocket, no co-pays for these services.
All of the plans also have to include essential health benefits, items and services within these 10 categories: “ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.”
Beyond that, here’s the basic differential between the plans, how much you’ll pay for premiums, and what you’ll have to pay out of pocket:
- Bronze: The insurance company pays 60 percent of costs, you pay 40.
- Silver: The insurer pays 70 percent, you pay 30.
- Gold: The insurer pays pays 80 percent, you pay 20.
- Platinum: The insurer pays 90 percent, you pay 10.
Of course, you pay for the privilege of the insurance company paying more in premiums, just like insurance has always worked. How much you pay will depend on the insurer from whom you purchase the plan, the number of people to be insured by the plan, your age, whether you smoke, and the region in which you live. In some cases, the premiums for a silver plan from one company could be lower than the premiums for another’s bronze plan. That’s where the comparison shopping on the exchange comes in to give you the advantage of seeing them side by side.
There was to have been a cap on out-of-pocket expenses at $6,350 for an individual and $12,700 for a family in 2014, but that has unfortunately been delayed until 2015. (The cap applies to all level of plan, or will, eventually.)
There’s also a fifth option, for young people and those with no other affordable option: a catastrophic plan that is less comprehensive than bronze plans. Premium tax credits cannot be used to buy these plans.
How Subsidies Work
Now for the whole “Affordable” part of the Affordable Care Act. For a lot of people, those up to 400 percent of the poverty level ($46,000 for an individual and $94,200 for a family of four), insurance is made more affordable by federal subsidies, tax credits that will be applied when the purchase of insurance is made. (This is where the IRS comes in, and where Republicans get irrational and paranoid, in case you were wondering.)
The tax credit, or subsidy, is determined by identifying the second lowest cost silver plan that that is available to each member of the household. That’s the “benchmark plan.” The amount of the credit available will be equal to the total cost of the benchmark plan (or plans) that would cover the family minus the individual or family’s expected contribution for coverage. The expected contribution is determined by income. Here’s the table that shows how it’s calculated.
Okay, that’s how it’s designed to work in the law. The Kaiser Family Foundation’s subsidy calculator shows you what it means in practice. There, you can play around and get a general sense of how much of a subsidy you would be eligible for, though it doesn’t include a key factor: location.
That can’t be included yet, because not all states have reported the premium rates that have been submitted for their exchanges. But it’s fun to play with. I plugged in the numbers for median income and family size where I live, in Boise, Idaho, and found out that a family of three with $41,474 in annual income will pay a maximum of 6.73 percent of income for insurance, which boils down to $4,636 per year, $386 per month, or 42 percent of the total premium.
Here’s another fun place to play with the numbers, one of the best state websites explaining how to shop for health insurance: Nevada’s. Even for non-residents, it’s a great walk-through of how the shopping experience is going to work, for both individuals and small businesses (not completed quite yet). First you decide whether you’re shopping for you or your business, and then answer some basic questions: what county you live in, how old you are, etc. The step-by-step process is a great primer for what will be the real thing come Oct. 1 (hopefully all states will have as simple and straightforward website as Nevada!).
While the remainder of the states, and the federal exchanges in the states that chose not to create their own, get up to speed on premium rates, you can get a great overview of what’s happening in 17 states from this week’s Kaiser Family Foundation survey, which found that premium rates are coming in lower than expected around the country. Here are some examples from their findings.
The lowest monthly premium for a 40-year-old in the 17 states surveyed by Kaiser would be $146 in Baltimore. If that 40-year-old had an annual income of $29,000, government subsidies would reduce the monthly cost to $111, according to the report from the nonprofit health-research group. […]For $214 a month, the same Baltimore 40-year-old may upgrade to a “silver” plan that covers about 70 percent of medical costs and reduced out-of-pocket expenses. A $35 monthly subsidy would discount the premium to $179. […]
A 40-year-old in New York City would pay at least $308 a month for a bronze plan and $336 in Burlington, Vermont. Those who qualify for subsidies will see greatly reduced costs. For the same person earning $29,000 a year, the premium is cut to $111 in New York and $116 in Burlington.
The study found that in the Cleveland market, a single 25-year old adult making $25,000 would pay just $88 a month for the lowest-cost health insurance plan on the market after tax credits, while a couple over 60 with $30,000 in income and tax credits would receive their health insurance for free.
These tools and studies can give you some idea of how the process is going to work, and possibly how much you will be spending, if you’re going to be purchasing health insurance on the exchanges this fall. They’ll also be helpful if you’re talking to friends, family or coworkers about Obamacare and what’s happening with it, or if you’re going to be helping out someone you know to sign up.