Will the newest changes to the health insurance landscape affect you, will Uncle Sam pick up part of the cost, what's the penalty for not buying insurance, and how much will you have to pay to become insured?
Oct. 1 will be a very important day for the Affordable Care Act, known as Obamacare. That’s when people will be able to buy health insurance on their state’s new online marketplace.
What does this mean to you? Money Talks News founder Stacy Johnson provides answers to four of the most common questions about the Affordable Care Act in the following video. Check it out, then read on for more detailed answers to those questions.
1. Will you be affected?
The marketplaces are where individuals and businesses with 50 or fewer employees can buy health insurance. The actual coverage begins Jan. 1.
Most people who have insurance now get it through a group plan at their workplace, so Oct. 1 won’t be an important date for them unless their coverage is expected to end or the coverage their employer provides is not considered “affordable.” (More on that below.) Oct. 1 is also a nonevent for those who get health insurance through a government program like Medicare.
But if you’re one of the 57 million Americans who have no health insurance at all, this is your opportunity to get coverage and protect yourself from financial calamity.
2. Will Uncle Sam cover part of the cost?
Most Americans will be able to get subsidies to help pay for the premiums if they buy insurance on a state marketplace. The first year, subsidies are available to individuals making up to $45,960 and a family of four making up to $94,200.
How much will you get? It depends on your income. CNNMoney explains:
The lower your income, the larger your subsidy. For instance, those making $17,235 a year will pay no more than 4 percent of income, or $57 a month, while those with incomes between $34,470 and $45,960 will pay a maximum of 9.5 percent of income, or $364 a month. The federal government will cover the rest.
Also, CNNMoney says: “In addition to premium subsidies, those making less than 250 percent of the poverty line, or $28,725 for a single person and $58,875 for a family of four, are eligible for extra subsidies to defray out-of-pocket costs, such as deductibles and co-payments.”
Other things you need to know about the subsidies:
- The subsidy is a tax credit, which you can choose to have applied directly to the cost of your monthly premiums when you buy insurance on a state marketplace. It’s likely most people will go that route to make the monthly premiums much more affordable.
- The Kaiser Family Foundation has an online calculator (see below) to help you figure out how much of a subsidy you’ll get, and has also issued a new report on the topic.
- Keep in mind that you can get a subsidy only if you buy your health insurance on a state marketplace.
Now, remember how we said that whether your employer provides “affordable” health insurance is important? If your cost for an individual (not family) plan at work exceeds 9.5 percent of your household income, you should buy your insurance on your state’s marketplace and become eligible for subsidies.
3. What if you refuse to buy insurance?
Obamacare comes with a mandate that just about everyone must have health insurance. If you remain uninsured and you’re not exempt, you’ll face a penalty, which you’ll pay when you file your 2014 taxes in 2015.
What’s the penalty? CNNMoney explains:
For 2014, the flat fee is $95 per adult and $47.50 per child, up to $285 per family. Or the penalty could be 1 percent of family income, if that results in a larger fine. (Income is defined as total income above the filing threshold, which is $10,000 for an individual and $20,000 for a family in 2013.)
By 2016, it will increase to a minimum of $695 per adult and $347 per child but no more than $2,085 for a family, or 2.5 percent of family income, capped at the average cost of a bronze plan sold on the marketplace. After 2016, that penalty will increase with the cost of living.
Some people won’t have to pay a penalty for not having insurance. Some examples:
- You are uninsured for less than three months of the year. If you’re uninsured longer than that, the penalty will be prorated by month.
- “Uninsured individuals with incomes so low they aren’t required to file a federal tax return or who can’t find coverage that costs less than 8 percent of their income do not face a fine,” says U.S. News & World Report.
- You would qualify for Medicaid under the new federal income limits, but your state is one of the 25 that decided not to expand eligibility for Medicaid.
- You’re a member of a recognized sect that has religious objections to health insurance.
It’s been estimated that 24 million people will be exempt from the requirement in 2016.
Of course, the real penalty, the government points out, is that you or your loved ones could be stuck paying a massive medical bill if you become seriously ill and don’t have insurance. Once open enrollment ends on March 31, you can’t sign up to buy insurance on a state marketplace unless you have a life-altering event, like moving to another state or getting a divorce.
4. What will it cost?
How much insurance purchased on a state marketplace will cost depends on a number of factors:
- Where you live. The cost of health care can vary greatly depending on your state and whether you live in a large city or a rural area.
- Your age. Older people can be charged up to three times the premiums set for younger folks. However, insurance companies can no longer charge women more than men, or charge people more or deny them coverage because of pre-existing conditions.
- Your family size.
- Whether you smoke. There is a big penalty for smokers in the price.
- What level of coverage you get. You’ll be able to pick from four levels of care, but even the lowest includes a standard of coverage that’s absent from many individual policies now.
- How large a subsidy you’ll get based on your income.
Some states have already disclosed how much the policies on their marketplace will cost. (These are the prices before a subsidy is applied.) Some examples:
- Montana. You can learn more about that here.
- New York. More about that here.
- Check to see if your state is among those in this Kaiser Health News report.
We’ve provided some steps you can take to get ready before the marketplaces open for business on Oct. 1.
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