Monday, September 30, 2013


Health care is a very political subject because there is a ton of money involved, but you’re not asking about politics.  Also, while the big picture economics are very interesting (here is a great video), I’m guessing that you want to know how the law affects the economics of your pocketbook.  There is a lot to know so I’ll break it down into easily digestible sections here:


The Affordable Care Act (AKA Obamacare) goes into effect on January 1, 2014.  At that point every American that does not qualify for an exemption must have health insurance.  If you do not have health insurance you will have to pay a fee along with your 2014 tax payment.  

It can’t be just any weird insurance “plan” you invent, either (if your brain works anything like mine the first thing you thought was, “what if my buddy and I pay $10 into a pot every month and if either of us gets sick we’ll use the entire pot to pay for whatever tiny percent of our bill it covers, voila health insurance!”), no, it must be a legit “minimum essential coverage” plan.  The idea behind the fee is that if you don’t have insurance and you end up needing health care with an astronomical price tag you will probably go bankrupt, file for medicaid and make the government pay for your health care costs.  Since by “the government” we mean “us taxpayers” it makes sense that anyone who chooses this strategy should pay a little extra money into the government coffers up front.  That is why the government is calling the fee a “shared responsibility payment.”

What will the fee be if I don’t get insurance?

The fee that you will have to pay if you do not get health insurance will increase every year: from 1% of income (or $95 per adult, whichever is higher) in 2014 to 2.5% of income (or $695 per adult) in 2016. The fee for children is half the adult amount ($47.50 per child in 2014). The most a family would have to pay in 2014 is $285.  It is important to be clear here, though, that paying the fee does not mean that you are covered by health insurance, it just means that the taxpayers were reimbursed $95.00 for the thousands and thousands they will have to spend if you get cancer and can’t afford to pay the bills by your self.  There are a whole host of exemptions to avoid this fee if you qualify so make sure your CPA is up on the details.  If, for example, you are part of a religion that is fundamentally against insurance (including the free ones from the government like medicare) you can get out of the fee.  I have always wondered how G-d felt about insurance companies, so if any of you are members of such a religion please give the rest of us details on how you figured it out.  

How will you get health insurance and how much will it cost?  

Let’s assume, for the moment, that you are not part of a religion that is fundamentally against insurance and you actually want to buy some.  How much will it cost?  This is where we enter a whole new paradigm folks so pay attention:  If you do not already have health insurance you (or your friendly broker) will log onto the Marketplace after it opens on October 1, 2013 and compare the plans available.   Some states will run their own Marketplace so you’ll go to your own state’s website and find it.  (In California it is http://www.coveredca.com.)  Other states will not run their own Marketplace so you’ll find the federal one at www.healthcare.gov.   On the site you will input your financial info (here is a checklist of everything you will need) and then choose from the available plans.  The plan prices may be discounted if you are eligible for a subsidy (which depends on your income).  Your income, by the way, is going to be calculated in a particular way for this purpose: the Modified Adjusted Gross Income.  Here is a simple explanation.  Each plan will be labeled according to its coverage as either bronze, silver, gold or platinum so it is easy to cross-compare and know what you are buying.  Here is a chart to compare the different levels of plans put out by Covered California.  

If you cannot afford any sort of health insurance you may qualify for expanded medicaid program.  This is highly state specific though.  Here is my post on the expansion of California’s program (called Medi-Cal).

What is the difference between Marketplace plans and the private plan I have now?

1) Essential Health Benefits: Many current plans do not cover all of the “essential health benefits” that the law will require them to cover starting January 1, 2014.  These benefits include basics such as emergency care, pediatric care, hospitalizations, and drugs.

2) Pre-existing Conditions: One of the best pieces of news with all of these changes is that people who were not eligible for health insurance coverage before due to pre-existing conditions will now have the right to purchase health insurance through the Marketplace along with everyone else.  Insurance companies will be forbidden from charging a higher premium based on health status so the only two personal factors that will affect your premium are your age and whether or not you smoke.  The federal law allows insurers to charge people who use tobacco up to 50% more in premiums than people who do not use tobacco.  Can you think of a better reason to quit?

3) Subsidies: And, of course, the Marketplace plans offer subsidized premiums based on your income. 

I tried to cover the essential information for you in this post, but you’ll find a ton more on the www.healthcare.gov website.  
Also, if you really don’t have much of a life, you may be interested in reading the Affordable Care Act here.  

Here are all the important dates you need to know:

  • Oct. 1 is also the start of a six-month open enrollment on the exchanges, the period when people can choose the insurance plan they want and get covered for 2014.
  • Dec. 15, 2013—This is the date you need to enroll for insurance on the exchange and pay your first premium in order for your health coverage to go into effect on Jan. 1, 2014. After Dec. 15, you still can enroll, but your start date for coverage will be delayed by between two and six weeks, depending on what day of the month you enroll.
  • Jan. 1, 2014—Insurance coverage from plans sold on the health exchanges begin. Most people who don't have insurance coverage by this date will face a tax penalty of $95 for individual adults or 1 percent of their income, whichever is higher.
  • Mar. 31, 2014—The end of open enrollment on the exchanges. After that, you can only enroll in the exchange's insurance if you have a so-called qualifying life event, such as losing your job, having a child, or getting divorced.
  • Oct. 15, 2014—Open enrollment on the health exchanges for coverage in 2015 begins. In future years, Oct. 15 also will be the opening of enrollment for coverage.
  • Dec. 7, 2014—Open enrollment for 2015 coverage closes. In future years, Dec. 7 also will be the closing date for enrollment.
  • Jan. 1, 2015—You must have coverage for the year by this date or pay a penalty of $325 for individual adults or 2 percent of income, whichever is higher.
  • Jan. 1, 2015—Employers with 50 or more full-time workers must offer affordable, comprehensive insurance by this date or face penalties of $2,000 per employee.
  • Jan. 1, 2016—Penalty for adults not having health insurance jumps to $695, or 2.5 percent of income, whichever is highest.
  • Jan. 1, 2018—The so-called Cadillac tax on health plans kicks in. Insurers or self-funded plans must pay a 40 percent excise tax on plans that cost more than $10,200 annually for individuals and $27,500 for families.

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