CHC John Green Health Costs

Here’s Part 2 of our mini-series on the Affordable Care Act and how the health insurance landscape is changing; Part 1 is here.

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Who has to buy health insurance? Can’t I just ignore the Affordable Care Act?

So, who’s going to see their health insurance situation change?

The Affordable Care Act seeks to cover everybody with some form of health insurance.

If you’re uninsured, you’ll be urged to buy. Even if you don’t have employer-sponsored insurance, or some kind of public insurance, or parent-sponsored insurance, and you don’t feel the need for it, you’ll need to buy it or face a penalty, with a very few exceptions.

If you have insurance now that you bought yourself – Freelancers Union, or an individual policy like

mine through GHI/Emblem Health – you’ll have to replace it with a new plan from the new exchanges.  That goes for individuals and many small businesses covering only a few employees.

(For a quick primer on the U.S. health-care system, see the John Green video on this page.)

Price breaks, or subsidies.

If you have not been able to buy coverage because it’s been too expensive, the act is supposed to rectify that by offering subsidies (see below, and see the subsidy calculator here, and our future piece on prices and subsidies). To get a subsidy, you have to buy on the state or federal exchanges — not from a private broker, or on one of the new private exchanges.

Pre-existing conditions.

The chance to buy health insurance particularly important for people with pre-existing conditions, who have found insurance prohibitively expensive. Many people  with pre-existing conditions either go without insurance, or have high-deductible plans and high premiums, or are covered by a mix of state and federal programs.

Planning to go without?

There’s no way of knowing how many people will skip it entirely. There’s a whole industry guessing that people in their 20’s and 30’s who are uninsured will choose not to spend hundreds of dollars a month on insurance, which they view as having dubious value. There’s another group of people who will suddenly have a changed environment too: that is people in their 40’s, 50’s and 60’s, who are not on public insurance, and who for one reason or another are uninsured. That’s about 20 percent of the uninsured population, and they tend to be more interested in health insurance because they have more medical issues as a rule.

The Wall Street Journal recently did some great reporting about low- and middle-income Baby Boomers and what great blessings the new landscape offers them. Here’s a passage from a story: “A 60-year-old nonsmoker in Toledo, Ohio, would pay $420 a month for a basic insurance policy next year if he earned too much to get subsidies; if his income was $25,000 a year, however, his share of the premium would drop to $48 a month. …  One 62-year-old laid-off salesman, currently paying $1,328 a month for insurance for himself and his wife through his former employer, could see his monthly bill drop to $21.”

This calculator tool walks you through some of the calculations.

For young healthy people in Portland, The Journal did a similar set of reporting, showing calculations for all the various plans. A 35-year-old with a $35,000 annual income could pay as little as $158 or as much as $364, depending on the plan, according to their reporting; a 22-year-old with a $20,000 income, as little as $57 or as much as $226, subsidies included.

Of course, this is only the premium; the deductible should also be factored in to costs, and the lowest deductibles are on the most expensive plans.

How many people will need to buy health insurance on the new state-federal exchanges?

There are about 50 million uninsured people in the country, and they’ll be urged to buy; another 15 million people  buy their own health insurance because they’re self-employed, or otherwise are not covered by employer-sponsored health insurance, Medicare or Medicaid.

Beyond that, some big companies like GE and IBM have recently announced that they are discontinuing retiree health insurance, and substituting for that coverage a lump-sum payment that retirees can use to buy their own insurance. Those retirees may wind up on the public exchanges, or may go to private ones.

Do I have to buy health insurance? Not if you are …

Who’s exempt? Here’s a great list from Emily Bazar at the California HealthCare Foundation:

“But the law contains many exemptions. For instance, you won’t have to pay a tax penalty if:

  • you’re a member of a federally recognized Native American tribe,
  • you’re incarcerated,
  • you’re in the country illegally,
  • you belong to a religion that opposes accepting benefits from a health insurance policy,
  • you cannot find “affordable” coverage, meaning the cost of your premium would be more than 8 percent of household income, or
  • your household income is low enough that you’re not required to file a federal tax return. (Click here to find out if this means you.)”

What about the penalties?

If you don’t meet these criteria, you could be in for a penalty: whichever is greater of 1)  $695 per person (up to a maximum of $2,085 per family), or 2) 2.5% of household income, which will be phased in from 2014-2016.

The formula isn’t that complicated, but it has to be figured both ways (the fixed sum and the percentage). Here’s a calculator page that’s pretty clear from; it shows that the minimum penalty in 2014 is $95, which isn’t too scary.

My income is really low. Do I have to buy insurance anyway?

Note the exemption above for people who can’t find affordable covverage.

Also, for people with low incomes, there’s always Medicaid, the joint state-federal program for low-income people. The ACA is expanding Medicaid to people with incomes up to 138% of the federal poverty level, based on modified adjusted gross income. “This expansion creates a new minimum Medicaid eligibility level for adults and eliminates a limitation of the program that prohibits most adults without dependent children from enrolling in the program (though as under current law, undocumented immigrants are not eligible for Medicaid),” the Kaiser Family Foundation fact sheet explains.

Eligibility for, and availability of, Medicaid varies from state to state. While the  Affordable Care Act offered the expansion of Medicaid to all states (virtually paid for by the federal government), in order to extend coverage to a lot more low-income people than have it right now, many states have rejected the Medicaid expansion.

In those states, people will find a dramatically different landscape than in states where Medicaid and ACA coverage are likely to cover more people.

In some states that initially rejected Medicaid expansion, governors and legislatures have decided to support it. The landscape’s still changing.

Employer-sponsored health insurance is changing too, but in ways that are less visible. We have talked a bit about that elsewhere; that’s not the focus of this series.

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Next: Bronze, silver, gold and platinum? And why can’t I just buy catastrophic? The range of choices. 

Jeanne Pinder

Jeanne Pinder  is the founder and CEO of ClearHealthCosts. She worked at The New York Times for almost 25 years as a reporter, editor and human resources executive, then volunteered for a buyout and founded...