The wait is over. In the next few months nearly all the remaining pieces of Obamacare will fall into place.
On Jan. 1, just about everyone must have health insurance (with government help, if sorely needed) or face a penalty, and everyone must be able to get coverage, no matter how sick.
To make that happen, insurance exchanges in the 50 states and the District of Columbia are scheduled to start selling policies online Oct. 1. The largest overhaul of the country’s health system since Medicare was launched in 1966 will finally be up and running.
And with its arrival comes widespread confusion, made worse by delays, price scares, and continued political rancor. “Survey after survey shows there is enormous uncertainty on the part of consumers about what is coming in 2014,” says Kev Coleman, head of research for HealthPocket.com, a website that compares and rates plans.
Got questions? Here are answers to the 12 most pressing ones.
1. Will the new insurance exchanges make buying insurance on my own easier?
Every state and D.C. will have an online marketplace where you can compare policies, sign up for coverage, and claim a government subsidy if you quality. Find your state’s shopping portal at healthcare.gov. Since a majority of states opted not to create their own exchange, 35 will be at least partially run by the federal government, but that won’t make much difference to shoppers.
On every exchange you’ll see plans grouped by tier — platinum, gold, silver, and bronze, plus a low-cost catastrophic option for those under 30. The finer the metal, the more you’ll pay in premiums and the more of your costs the policies will pick up — 90% for platinum plans, 60% for bronze.
Premiums will vary within each tier, as will the deductible, co-pay, and co-insurance rate in most states. You’ll find basic screening tools, such as the doctors in each network; consumer reviews and quality ratings are probably a year or two away.
“Firms are eliminating scope in order to get up and running by Oct. 1,” says Dan Maynard, president of Connecture, which helped build the Maryland, Minnesota, and D.C. exchanges. You’ll have until March 31 to shop in the initial enrollment period (or any time, if you undergo a life change such as a job loss).
The number of insurers on your exchange will vary. So far a dozen are signed on in California, but states with less competition to begin with will see fewer. “The level of insurer participation is pretty striking,” says Ceci Connolly, managing director of PricewaterhouseCoopers Health Research Institute. “This is a big business opportunity.”
2. I’ve already got insurance at my job. Why does any of this matter to me?
For the nearly two-thirds of Americans under 65 who get health coverage through a job, you probably have a sweet deal already, and that’s unlikely to be soured. Companies pick up about 70% to 80% of the tab on average, according to the Kaiser Family Foundation.
And chances are your plan’s in-network out-of-pocket spending cap is already lower than the new Obamacare maximums: $12,700 for a family, $6,350 for singles. (Employers that use multiple vendors to manage medical, drug, and other types of expenses got a one-year extension on the cap.) And in 2014 your plan can’t put limits on annual payouts (the same goes for individual policies). Yes, the federal government gave employers with 50 or more full-time workers another year before they have to offer insurance or pay a fine, but that delay shouldn’t affect those who already have a workplace plan.
Still, you may not want to be tethered to a company indefinitely. Maybe you’d like to strike out on your own, switch to part-time contract work, or retire before you quality for Medicare at 65. Because insurers can no longer turn you down based on your health, you’re guaranteed to be able to find a comprehensive insurance policy. “A lot of people delay retirement just for health care coverage, so this offers more flexibility,” says Lisa Zamosky, health-reform expert at Web MD.
You’ll also have more long-term security if you find yourself out of a job. After a layoff, you can usually stay on your company plan for 18 months through COBRA, but without your firm’s subsidy, that coverage is pricey: The average group family policy tops $16,000 a year, says the Kaiser Family Foundation. The second-cheapest silver-tier plan for a family headed by 40-year-olds should run about $11,500 on average, Kaiser reports, and a job loss may entitle you to a subsidy. Plus, your coverage won’t expire if you fail to land a position with benefits in 18 months.
If you work for a firm with 50 or fewer employees, however, you may see one change. To give workers at small companies more insurance choice (in theory), Obamacare created separate small-business insurance exchanges.
Your employer can send you to your state’s exchange with a set amount to spend; you choose a policy and pick up whatever exceeds the budget. So far, only 16 states, including Colorado and New York, have set up small-business exchanges with a choice of plans. In the rest, the employer can offer workers one plan only on an exchange until 2015.
3. I’ve been buying my own insurance for years. What changes?
With health reform beefing up what individual plans must cover, you may find that your current policy isn’t up to snuff. When you renew in 2014, you must get a policy that picks up at least 60% of the average enrollee’s costs and covers 10 key areas, including mental health and prenatal care.
Today only a third of individual plans provide maternity coverage, according to HealthPocket.com; 61% pay for mental-health treatments, and a third have higher out-of-pocket spending caps than the law requires.
Watch the mail. Your insurer may cancel your policy or roll you onto a qualified plan. Note: If you’re intent on hanging on for as long as possible to a bargain bare-bones plan that falls short of the new requirements, see if your insurer will let you renew in December. Some will, says Carrie McLean, director of customer care at ehealthinsurance.com. That way you won’t have to pay up to meet the tougher standards until you renew next year.
4. Will the exchanges lower prices?
Yes, no, depends, time will tell. Despite all the headlines you may have seen — PRICES WILL PLUMMET! PRICES ARE DOUBLING! — this is a question with no single answer, in part because of all the competing forces at play. For starters, because the policies for sale for 2014 will have to be more robust than most of what’s on the market now, you can’t make an apples-to-apples comparison. Better coverage should cost more. But wait. The insurance-risk pool is changing too: more healthy people because virtually everyone has to buy (good for premiums), yet more sick people because no one can be left out (bad).
Plus, there’s the competition that’ll be drummed up by the exchanges, where plans will be easy to compare and formerly uninsured buyers may be low on cash.
“Insurers expect exchange shoppers to be extremely price-sensitive,” says Dan Mendelson, CEO of consultant Avalere Health. So you may see policies that, while meeting all the coverage requirements, are more restrictive in other ways, including limiting you to one-third to one-half of the doctors and hospitals you might have in-network today. “Carriers are trying to negotiate narrower networks so consumers don’t face huge sticker shock,” says ehealthinsurance.com’s McLean.
Given all this, where are rates likely to land? Nine states released previews over the summer, and in those states a 40-year-old nonsmoker would pay about $250 to $350 a month for a silver-tier plan, according to Avalere.
5. What about my premium? Up or down?
Since insurers can’t penalize you for any underlying health problems (except your smoking habit), you may save if you had been paying more because of, say, high blood pressure. And because the law limits how much more insurers can charge a 60-year-old than a 20-year-old — a 3-to-1 ratio, down from today’s typical 5-to-1 — early retirees will probably get a break, while young adults will potentially owe more if they don’t qualify for a subsidy (most will).
The Urban Institute reports that tightening the age spread would cost 21-to 27-year-olds $850 a year and save 57-to 64-year-olds $1,770.
6. Can I still buy insurance off the exchange?
In most states, yes. What you may miss out on are head-to-head comparisons of policies from multiple insurers. And since some states will allow less-robust plans to be sold off the exchange next year — mainly short-term plans — you might unintentionally buy one that hasn’t met minimum standards and then face a fine for not having insurance.
But if you’re not happy with your exchange options — perhaps your doctor isn’t in any of the plans’ networks — you can shop on your own.
7. Will I really have to pay a fine if I opt out?
Maybe. Most Americans must have health insurance by March 31, 2014 (and report it on their tax return). If not, a penalty will be added to your tax bill: the greater of $95 per adult or 1% of household income in 2014, climbing to $695 per adult or 2.5% of income by 2016.
But some can get out of the individual mandate, including anyone who earns too little to file a tax return. Higher earners will have an escape hatch too. If you must spend more than 8% of your income to buy the cheapest bronze plan in your area, you’re off the hook.
So if a policy starts at $9,600 a year where you live — what the Kaiser Family Foundation estimates for the average bronze plan for a family of four headed by 40-year-olds — an uninsured family earning too much to get a subsidy (about $94,000 but as much as $120,000) would not face a fine.
8. I keep hearing about subsidies. Who is eligible for one?
You (or your adult children) don’t have to be poor to qualify. You just need to earn less than 400% of the federal poverty level, which works out to $94,200 for a family of four today, or $45,960 for a single person.
The more you make, the less help you’ll get (see the chart at the end of this article). A new study from Kaiser estimates that 48% of those who buy insurance on their own today will be eligible, with the average subsidy for a family coming in at $5,548.
A few rules to keep in mind: To get the subsidy, you must shop on your exchange or, in the 35 states with a federally run exchange, via an approved online broker, such as ehealthinsurance.com. You pay what you owe; the government pays the insurer the subsidy directly. If you or your spouse qualifies for coverage at work, you probably won’t be eligible for a subsidy if you opt out in hopes of a better deal.
Figuring out whether you qualify may be tricky if your income fluctuates. Guess wrong, and come April 15 you’ll have to repay the subsidy you took in error. To avoid a tax bill, you can take only a portion of the credit you think you’ll qualify for, says Mark Luscombe, principal analyst for the tax publishers CCH. Collect the rest when you file your taxes.
9. I’m retired. What do I need to do?
Anyone on Medicare can ignore the fuss. Nothing changes about how you pick a plan or buy a supplemental policy.
Yet keep your guard up, or tell your parents to. In July, the Federal Trade Commission warned that identity thieves are already calling seniors and claiming, under the guise of Obamacare, that they must confirm personal information such as Social Security numbers or bank accounts.
“With a new program this big, you can expect scam artists,” says Nicole Duritz, who runs AARP’s education and outreach on health care.
Early retirees, on the other hand, may eventually have to act. In the coming years, companies that provide health benefits to retirees who are not yet eligible for Medicare may instead give them funds to buy their own policy on an exchange, says Ron Fontanetta, who heads the health care practice for consultant Towers Watson.
10. This all sounds pretty complicated. Do we have a logistical disaster in the making?
Given the scope of what the government is aiming to pull off, a little skepticism is understandable. The Federal Data Services Hub will link 51 exchanges, insurers, the IRS, the Treasury Department, Homeland Security, the Social Security Administration, and state health care agencies.
“This is one of the biggest IT projects ever initiated by the federal government,” says Dan Schuyler, director of exchange technology at consultant Leavitt Partners, which helps states create exchanges.
In June the Government Accountability Office released a report questioning whether the federally run exchanges would be ready. In August the Office of the Inspector General raised alarms over whether the system will be adequately secure. Health and Human Services officials reiterated that the Oct. 1 schedule stands.
The likeliest scenario, say many, is that the exchanges open on time, but applying goes slowly, especially if you’re seeking a subsidy. “The doomsday scenario is, the system crashes, but what’s more likely is that people just experience delays and frustration,” says Kevin Walsh, managing director of government health care solutions for Xerox.
Getting answers to questions may prove hard as well. Every state will have help lines and in-person assistance, but as of mid-August some states had not yet finished hiring or training staff. If you can’t find help, keep in mind that many traditional insurance brokers will be certified to sell plans on the exchange. Find one at nahu.org or iiaba.net.
11. Could the government still pull the plug?
Sure. This year the Obama administration has already delayed several provisions of the law until 2015, including the rule that large employers must offer insurance. But so far the government is standing firm on the individual mandate, and new research sheds light on why that may be.
Because most large companies already offer health coverage, eliminating the employer mandate will have little effect on the number of uninsured. The Urban Institute estimates it will be the difference between a 10.1% and 10.2% uninsurance rate.
Putting off the individual mandate, on the other hand, will dramatically cut the projected number of insured Americans next year, trimming today’s uninsurance rate from 16% to just 15.1%. “It’s important right from the get-go to get young, healthy people into the market,” says Timothy Jost, a law school professor at Washington and Lee University. “I don’t think the government will delay.”
12. What happens if too many opt out?
The success of Obamacare hinges on a delicate balance: Insurers have to cover everyone, regardless of how ill they are, and everyone has to have coverage, even those who never need to see a doctor (a group that’s called the “young invincibles”). Anyone with health problems will almost certainly sign on. And the hope is that subsidies will bring the healthy onboard too.
If too many invincibles decide to pay the modest penalty instead, people who don’t qualify for a subsidy will face higher premiums in 2015. In that case, subsidies should be enough to prevent a complete downward spiral of the healthy dropping out, says Rand mathematician Carter Price.
Still, persuading the young to get onboard is a priority for the federal government and supporters of reform. The comedy website Funny or Die is creating videos, Walgreens will be handing out pamphlets to customers, and ad campaigns are targeting moms. What happens if the efforts fall flat? As of now, no Plan B.