By: Lindsay Marsh
For a lot of people, the Affordable Care Act means little more than a raise in premiums– and it’s true, rates went up as much as 20% this year. We can expect them to increase again in 2016. To top it all off, those who don’t pay for health care must pay a penalty, which comes out to 2% of the household income or $325 per person ($162.50 per child under 18), whichever is higher. So you’ll either pay a lot of a little bit of coverage, or a lot for no coverage at all.
Needless to say, a lot of people are confused. The ACA, which has been not so affectionately termed Obamacare over the past few years, has led to a lot of strained conversations – not to mention wallets.
The best thing to do in situations like these is to get educated. What exactly is the Affordable Care Act? What is a subsidy? How do I qualify? We’re going to answer these questions for you, to try and help you understand the best course of action in the chaos that is open enrollment.
First, what is the ACA? The Affordable Care Act was designed to make it easier for individuals and companies to obtain health insurance. It did away with the preexisting conditions clause, which allowed insurance companies to turn individuals away for chronic conditions. Children are allowed to stay on their parent’s plans until they are 26 years old – even if they’re married, living out of the house, or are previously not on a plan with the parents. Depending on household income, individuals may even qualify for subsidies.
What is a subsidy? It’s a tax credit offered to individuals and families based on the total household income. Should the total household income fall into a certain bracket (for a family of four it’s between $23,850 and $95,400), the government will help pay for premiums with taxes. Individuals can either pay the premiums at a discounted price or pay the full price and be reimbursed with a tax credit at the end of the year. A full chart of household members and yearly income limits can be found here. If your income falls above or below those limits, you may not qualify for a subsidy. If you live in a state that has expanded Medicaid, a family of four may qualify for help if the household income is below $32,913. The state of Florida has not expanded Medicaid.
When it comes to actually applying for coverage, an individual has the option to go online and do it themselves, or have an insurance agent help them find and apply for a plan. For instance, Montoya and Associates agents are contracted with BlueCross BlueShield and can help clients find a plan through their network. They can either used Healthcare.gov (marketplace – if they qualify for a subsidy) or the Florida Blue website (off marketplace – if they do not). Based on an individual’s age, county, and smoking habits an agent can quote policies that will best suit their needs. Once an appropriate policy is chosen, an agent can walk an individual through the online or paper application. Should they qualify for a subsidy, the application will ask questions about past incomes and projected yearly income for the coming year. Social Security numbers will be needed for both on and off marketplace applications.
Because the subsidies are based on taxes, it is very important that the estimated household income is as accurate as possible. Should it change within the year, an individual must change the amount online in order to avoid tax repercussions.
The Affordable Care Act has been likened to a “Robin Hood Plan” by Bill Maher. It’s a take from the rich to give to the poor system that’s enraging those who are better off. But the tax credits aren’t coming directly from the larger premiums. According to NPR, the tax credits are being paid from savings within the Treasury. They’ve projected savings in Medicare payments to insurers/hospitals. They’re taxing families with incomes above $250,000 a year more for Medicare payroll. And the premiums for these health plans will pay for a steady amount of services, regardless of if the individual will use them. For example, a 25 year old single man will pay for maternity and pediatric benefits even though he doesn’t have a wife or kids. NPR says that this system is similar to group insurance, where everyone pays the same amount for a certain amount of benefits. The premium amounts do fluctuate, however, but based on risk caused by age.
Open enrollment for 2015 ends on February 15th, making the last day coverage can start is March 1st. If you haven’t signed up for coverage, you have less than a month to do so without incurring the Individual Mandate penalty. Remember that Individual Health Insurance is based purely on risk. How much you pay for is dependent on how much help you think you’ll need. In some cases, higher deductible plans are a great solution for individuals anticipating low maintenance medical care within the year. Lower deductible/copay plans are a great alternative for individuals who may incur a lot of hospital expenses. When thinking of it this way, the monetary help on procedures may balance out the higher premiums.
With all the complexity that surrounds this topic, we hope this sheds a little more light onto the Health Insurance industry and addresses some of your own questions. For more information about the Affordable Care Act, please visit www.healthcare.gov.