Clear answers to your questions about the new health insurance plans

After years of discussion and amid continuing controversy, some of the most important parts of the Affordable Care Act will take effect in the next six months (see “ObamaCare Basics” below). Yet many people still aren’t clear on how these elements of “ObamaCare” will affect them. To help make clear what is happening, Bottom Line/Personal asked Kathleen D. Stoll, JD, director of health policy for Families USA, to answer 12 key questions…

ELIGIBILITY

Q: I read that my state decided not to set up a health insurance marketplace. Will there be any marketplace available to me?

A: Yes. Every state and Washington, DC, will have a marketplace (also called an “exchange”) of insurance plans from private insurers. Some marketplaces will be run by the states themselves…others by the federal government…and still others by a state/federal partnership. All of the marketplaces will help consumers compare plans and find financial assistance, if they are eligible, to help pay for coverage.

However, it is possible that differences in funding will result in less in-person support for consumers in states where the marketplaces are run by the federal government.

 

Q: I have Medicare. How will these health marketplaces affect me?

A: They won’t affect your coverage. Medicare recipients are not eligible for coverage through the marketplaces.

 

Q: I obtain health insurance through my employer. Will I have to shop for insurance through these marketplaces?

A: No. You can continue with your employer’s coverage. But if it offers limited benefits and/or little help with premiums, you might have the option of buying coverage through a marketplace instead. Once the marketplaces are up and running, they will provide details about what to ask your employer to determine if its group health coverage is so limited that you qualify for this option.

 

Q: I heard that some small businesses will drop their current insurance plans and leave it up to their employees to shop for their own plans in the marketplace. Is that true?

A: Many small-business owners are unsure whether they will drop coverage. However, employers with more than 50 employees that do not provide insurance plans will face penalties.

Instead of dropping coverage, some employers may switch plans, using the marketplaces to compare small group plans. To help pay for the cost of insurance, tax credits will be available to some small businesses.

COVERAGE

Q: What will the plans in the new marketplaces include?

A: Health insurance plans sold to individuals and small businesses both inside and outside the new marketplaces will have to provide at least “essential benefits.” This means that all policies will include prescription drug coverage, preventive services, maternity care, mental health services and other components currently missing from many individual insurance plans. And plans won’t be able to arbitrarily limit or cap the coverage received. Also, plans will have to meet rules about providing adequate networks of medical providers.

 

Q: Is it true that there will be only four health insurance plans?

A: That’s not true in most states, if any. All the health marketplaces will divide plans into four tiers—bronze, silver, gold and platinum—but that’s just to make it easy for consumers to determine quality of coverage. In most states, there will be a number of different plans within each of these tiers, likely from multiple insurers.

Plans must meet a certain actuarial value to qualify for a given ranking—that is, they must pay a predetermined percentage of total average costs for covered benefits—but even within a tier, plans could have different costs and benefits. For example, one plan might have relatively high deductibles and low co-pays, while another might offer the reverse.

The online marketplaces are supposed to list each plan’s costs and benefits in a consistent format and clear language to make the plans easy to compare.

 

Q: My son is 20. Why should he have to pay for a plan meant for older people?

A: He won’t have to. There will be certain low-cost, high-deductible plans available only to people under age 30. These are likely to be much less expensive than more comprehensive plans. But with high deductibles and less financial protection, these plans will be appropriate only for people who have sufficient financial resources to pay hefty medical bills out-of-pocket. Also keep in mind that under the new law, children are now allowed to remain on their parents’ health plans until age 26.

 

Q: If I use a marketplace, do I have to shop online for coverage?

A: Not necessarily. The marketplaces will offer shopping assistance through toll-free phone numbers and in person in many communities starting in October.

 

Q: I looked for the marketplace online but couldn’t find it. Where is it?

A: It won’t be available until October 1. Until then, visit www.Healthcare.gov/ Marketplace for updates.

TAX CREDITS

Nearly 26 million Americans will be eligible for tax credits to help them pay the cost of health insurance.

Q: Do I have to be poor to qualify for these health insurance tax credits?

A: Many middle-class families will qualify. The limit has been set at 400% of the federal poverty level (FPL). This year, that’s an annual income of $45,960 for an individual…$62,040 for a couple…or $94,200 for a family of four. However, your tax credit will decrease the closer you get to these limits.

Example: Because of the tax credit, a family of four with income of $35,325 (that’s 150% of the FPL) would be able to buy a typical silver-tier plan for $1,413 per year out-of-pocket, which equals 4% of the family’s income. If that family had an income of $94,200 (400% of the FPL), however, it would have to pay 9.5% of its income out-of-pocket—a much heftier $8,949 bill.

The tax credits will be based on the price of a typical silver-tier plan in the state. Families receiving tax credits can opt for pricier gold or platinum plans…or pay even less in premiums if they are willing to accept the more limited benefits of a bronze plan.

People won’t have to do this math on their own. Once the marketplaces are up and running in October, they’ll guide users through the process. A family of four earning $50,000 would be entitled to a subsidy of around $6,500.

 

Q: The subsidy is in the form of a tax credit. Does that mean I won’t receive it until I file my tax return?

A: No. People can elect to get credits in advance, but in that case, the government will pay the amount of the credit directly to the insurer and you will pay only the remaining portion of your premiums.

 

Q: If I sign up for 2014 coverage in late 2013, I won’t yet know my exact 2013 income. What should I do?

A: Your 2014 subsidy will be based on 2014 income. You will be asked to estimate your 2014 income when you apply. If your estimate proves too high, you can return to the marketplace, update your income and receive the credit you’re due. If your estimate is too low, you might have to pay back part of your subsidy. There’s no penalty for getting income estimates wrong.

OBAMACARE BASICS

Starting October 1, 2013, individuals and small businesses will be able to compare and sign up for health insurance policies through new online marketplaces. These policies take effect January 1, 2014.

Among the people who benefit the most will be those who have health problems but lack access to group coverage. Insurers will no longer be allowed to deny coverage or charge higher premiums based on preexisting conditions.

Also benefiting will be people ages 50 to 64 who lack group coverage, including early retirees. Insurers still will be allowed to charge older applicants more than younger ones, but they no longer will be able to charge older applicants the prohibitively high rates that they often imposed in the past.

Americans who choose not to obtain health insurance will have to pay a penalty starting in 2014. That penalty will be $95 or 1% of income, whichever is greater, in 2014, but the penalty will climb in future years, to $695 or 2.5% of income by 2016.

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