It’s open enrollment season for a new era of health care, beginning now.
The new insurance marketplaces that are the centerpiece of the Patient Protection and Affordable Care Act (aka Obamacare) open tomorrow, and people who don't have insurance, or want to switch from their current coverage, will have until March 31, 2014, to enroll for coverage. Most people will also be required by law to have insurance by next year that meets minimum requirements or pay a tax penalty fee if they don’t. (There are an estimated 48 million Americans who lack insurance today.)
But few people yet understand what this means for them.
According to a survey released yesterday and conducted between July and September by The Commonwealth Fund, fewer than half of U.S. adults under the age of 65 are aware of the existence of the new marketplaces or know whether they qualify for financial assistance to buy insurance on them. Some of that lack of awareness is probably due to the political turmoil surrounding the law and some because it’s still the very early days—despite a number of outreach efforts.
Here’s what you may need to know.
What are the exchanges and who is running them?
The exchanges are a government-vetted online portal for buying insurance and comparing plans. Plans on the exchange must meet minimum coverage requirements, and are categorized into standard "bronze," "silver," "gold," and "platinum" levels based on the percentage of costs the insurer pays. Unlike in the past, insurers, both in and out of the marketplaces, are barred from charging people different prices or denying coverage based on their existing health conditions or their gender (though age will still matter). A catastrophic coverage option will also be available to people under 30.
Fourteen states have opted to run their own exchanges, where you might expect to see more customization and variation in options. All other states have opted to use the federal government's portal.
How are these marketplaces different than before?
Like travel sites such as Orbitz, the exchanges will make it easier for people to comparison shop on price and benefits. But they also represent a seal of approval. "These are important because they’re a real shift in the individual market," says Kevin Lucia, a project director at Georgetown University’s Health Policy Institute. "Today, it’s like the Wild West of shopping. You can’t tell what insurance companies are actually selling, and when you do identify them, there’s no practical way to compare plans."
Should I consider buying insurance on the exchanges?
Most people will still get insurance through their employer or a family member’s employer. The Congressional Budget Office estimates that 7 million individuals will enroll through the exchanges next year.
Anyone who doesn’t have insurance through an employer or a family member and who is not eligible for Medicaid or another federal program would want to consider purchasing private insurance on the exchange.
If you do have insurance through your employer, the exchanges could be worth exploring if your employer-sponsored premiums are unaffordable or if the benefits provided are not comprehensive.
How much will it cost and who is eligible for subsidies?
Costs for plans in different tiers will still vary greatly based on age, state, competition, and other factors. Last week, the federal government put out its own estimate that, before subsidies, the average premium for a mid-tier plan will be $328 a month.
People earning between 138% and 400% of the federal poverty level, or about $45,000 for individuals and $94,000 for a family for four, will be available for some subsidies on the exchanges. People earning less than 250% of the federal poverty line will also be eligible for help with co-pays, deductibles, or other fees.
The law was supposed to expand Medicaid to everyone making less than 138% of the federal poverty line—but the Supreme Court’s 2012 ruling gave states the choice to opt-out of the expansion. So there will be a subsidy gap in about the half of states that have opted-out—-a group of people who are neither eligible for Medicaid nor subsidies on the exchanges, says Sara Collins, vice president of health care coverage and access with the Commonwealth Fund.
Do I have to buy insurance?
No, but for some there will be a tax penalty for foregoing insurance. For most taxpayers and their dependents, the penalty will be $95 for 2014, $325 in 2015, and rise to $695 for 2016 and beyond. There are exemptions from the penalty, however, such as for those who are below the federal tax filing threshold or those who are unable to find a legally defined affordable option based on their income. The CBO estimates that fewer than 2% of Americans under the age of 65 will both pay a penalty and go without insurance.
If not insured through an employer, plans can still be purchased outside of the new marketplaces, though Lucia cautions a "buyer beware" approach for individuals who consider plans that may be less transparent about their benefits and terms.
Will there be glitches?
Probably. "Every major startup has glitches," says Lucia. "The important thing is that they have a team in place that are ... focused on resolving these glitches quickly."
States will also learn from each other and improve how they run the marketplaces, says Collins. For example, some states, like California, have chosen the approach to limit the number of plans available to avoid overwhelming consumers with too many choices. This year will essentially be a big test in how people interact with them.
The Congressional Budget Office estimates that the number of people who buy through the exchanges will rise to 25 million by 2018. The cost savings for the entire system rest on the fact that, because of the individual mandate, some of these enrollees will be young and healthy—balancing out the costs of insuring the older and sick.
The administration is betting on the fact that the ability to compare plans on the exchanges and the competition this brings will bring down premium costs over time.
"If enrollment holds and meets projected numbers, it’ll entice other carriers to come in and maybe entice new carriers to compete, and we’ll see more progress," says Lucia. "They [the insurers] are still trying to figure out what population of people are going to buy individual insurance ... over time, they’ll better understand their risk."