In early 2010, President Obama signed into law the Affordable Care Act (ACA), designed to expand access to healthcare coverage to millions of Americans. Some of the changes included new taxes and fees, and increased benefits known as Essential Health Benefits.
These benefits are the minimum requirements for all health plans – whether you get health insurance through your employer, buy it directly from an insurance company, with the help of an agent or broker, or sign up through the Health Insurance Marketplace. While certain plans will offer additional coverage, none can offer less. Essential Health Benefits include:
- Addiction treatment
- Ambulatory patient services
- Care for newborns and children
- Chronic disease treatment (such as diabetes and asthma)
- Emergency services
- Laboratory services
- Maternity care
- Mental health services
- Occupational and physical therapy
- Prescription medications
- Preventive and wellness services (such as vaccines and cancer screenings)
- Speech-language therapy
What ACA Insurance Will Cost You
Now that the ACA is into its third year, premiums for the second lowest-tier plan, the silver plan (see 5 Things You Should Know About the Health Insurance Marketplace), are expected to rise roughly 7.5% on average in the 36 states that rely on the HealthCare.gov marketplace. In some states, however, rates could rise considerably more. For example, Blue Cross and Blue Shield of Minnesota will go up 49% and BlueCross BlueShield of Tennessee will go up 36%, according to The New York Times.
Despite rising costs, many individuals and families will qualify for the two federal subsidies built into the plan to help lower health insurance costs for lower-income Americans: Cost-Sharing Reductions and Advanced Premium Tax Credits. The only way to take advantage of these subsidies is to purchase a plan through the Marketplace (check out www.healthcare.gov for more information). In addition, the expanded Medicaid program will continue to enable more people to qualify for free or low-cost care.
The Health Insurance Marketplace
In order to qualify for Cost-Sharing Reductions and Advanced Premium Tax Credits, you must purchase coverage through the Health Insurance Marketplace, either through HealthCare.gov or through your own state's exchange. In these Marketplaces private health insurance companies – including big names such as Blue Cross, Cigna, Humana and Kaiser – offer a variety of healthcare plans, separated into four “metallic” levels: Bronze, Silver, Gold and Platinum. The level determines the average percentage that the plan will pay towards your healthcare services:
|Plan Level||What the Plan Pays|
Bronze plans, for example, provide the lowest level of coverage (60%) but this level also have the lowest premiums – the amount that you pay each month to buy the plan. As the plan level increases (from Bronze > Silver > Gold > Platinum) so does the coverage – and your monthly premium.
Even within the same metallic level – Silver, for example – you will still have a number of coverage options from which to choose. These options affect both your premiums and out-of-pocket costs for deductibles, copayments and coinsurance. Compare these two hypothetical plans for a 35-year-old non-smoker:
|Silver Plan “A”||Silver Plan “B”|
|Coinsurance||20% after deductible||30% after deductible|
As the table shows, Plan A will cost you more up front for your monthly deductible, but your out-of-pocket expenses will be much lower. Conversely, Plan B will cost less each month, but you will pay more for healthcare expenses because of the higher deductible, copayment and coinsurance amounts.
Depending on your modified gross adjusted income (MAGI) and family size, you may be eligible for subsidies to reduce your healthcare costs. The Cost-Sharing Reduction is a discount available on Silver plans only; it can help lower your out-of-pocket costs for:
- Deductibles – the amount you owe for covered services before insurance kicks in;
- Copayments – a fixed amount you pay for a covered healthcare service; and
- Coinsurance – your share of the costs of a covered healthcare service.
As an example, say you visit the doctor and are charged $100. With your particular Silver plan, you normally have a co-pay of $25. Because you qualify for Cost-Sharing Reductions and you chose a Silver plan through the Marketplace, however, your co-pay may be as low as $5. Similarly, if your plan has a $3,500 deductible, it may be lowered to $500 with Cost-Sharing Reductions. Essentially, you pay for a Silver plan, but receive the increased coverage of a higher metallic level plan, which reduces your out-of-pocket expenses.
Cost-Sharing Reductions are available only to people:
- Who are ineligible for public coverage [e.g. Medicaid, Children’s Health Insurance Program (CHIP)]
- Who are unable to get qualified health insurance through an employer, and
- Whose incomes fall between 100 and 250% of the Federal Poverty Level (FPL):
|Family Size||100% FPL||250% FPL|
Tip: In order to receive Cost-Sharing Reductions, you must enroll in a Silver plan through the Health Insurance Marketplace and apply for the subsidy. And it’s important to note, the cost-sharing subsidies only apply to in-network expenses, so you have to be mindful about where you receive healthcare.
Advanced Premium Tax Credits
Many people are expected to qualify for Advanced Premium Tax Credits, a type of subsidy that lowers monthly premiums. Like the Cost-Sharing Reductions, you must be ineligible for public coverage and unable to get qualified health insurance through an employer in order to qualify for Advanced Premium Tax Credits. While you can choose any metallic level plan in the Marketplace, your income must fall between 100 and 400% of the Federal Poverty Level:
|Family Size||100% FPL||400% FPL|
Advanced Premium Tax Credits are sent directly from the government to your health insurer to reduce your monthly premium. If you qualify, you can decide how much advance credit payments will be applied to your premium each month – up to a maximum amount. You will receive a refundable credit when you file your federal income tax return if the amount of advance credit payments is less than the tax credit you should have received. Conversely, you will have to repay any excess advance payments with your tax return if your advance payments for the year are more than the amount of your credit.
The Kaiser Family Foundation calculator is an online tool that shows the subsidy you might receive based on your expected 2016 income, the number of adults and children enrolling in coverage, age, family size and tobacco use (many states impose a premium surcharge on smokers). Using the calculator, a family of four – two non-smoking adults (both age 25) and two children – with a family income of $50,000 could receive a tax credit subsidy up to 61% of their overall premium. In this example, an unsubsidized annual health insurance premium at the Silver level might be $8,495, of which $3,340 would be paid by the family and $5,155 (61%) would be covered through Advanced Premium Tax Credits.
Tip: In order to receive this subsidy, you must apply for Advanced Premium Tax Credits on the Health Insurance Marketplace. This subsidy is not automatic. If you qualify, you can take advantage of both Cost-Sharing Reductions and Advanced Premium Tax Credits to reduce both your monthly premium and out-of-pocket costs.
A catastrophic health plan doesn’t cover any benefits other than three primary-care visits per year before the deductible for the plan is met (like other plans, catastrophic plans also cover preventive services at no cost to you). The premium you pay each month should be considerably lower than for other plans, but the out-of-pocket costs (deductibles, copayments and coinsurance) are generally much higher. You may be eligible for a catastrophic plan if you are less than 30 years old or if you qualify for a “hardship exemption,” because you are considered unable to afford health coverage (this is determined during the application process and is based on your family size and income).
When you fill out an application on the Health Insurance Marketplace, you will see catastrophic plans listed among your plan options only if you qualify for them. If you do qualify for and choose a catastrophic plan, you will not be eligible for either Cost-Sharing Reductions or Advanced Premium Tax Credits.
Depending on your income and family size, you may qualify for Medicaid, a program that provides health coverage for eligible:
- Low-income individuals, families and children
- Pregnant women
- The elderly
- People with disabilities
Each state has its own rules about who qualifies for Medicaid. Under the Affordable Care Act, Medicaid eligibility expanded in many states, and an increased number of people qualified for benefits. If you are eligible, you can get free or low-cost coverage and you won’t need to buy a Marketplace plan. Many states also have a separate program – the Children’s Health Insurance Program (CHIP) – which provides health insurance for uninsured children in low-income families who do not qualify for Medicaid but cannot afford private coverage. You can fill out an application on the Health Insurance Marketplace to find out if you are eligible for Medicaid or CHIP benefits. You can also visit your state’s Medicaid website to apply and find out if you qualify.
In 2014, when the plan first went into effect, individuals and families who could afford health insurance (based on family size, income and the cost of plans available to them) but didn't get coverage owed a fee of 1% of their annual income or $95 per person ($47.50 per child under 18), whichever was higher. The fee for 2016 increases to 2.5% of one's annual income or $695 per person (($347.50 per child), whichever is higher.
In addition to the penalty, it is important to consider that without insurance you will also be responsible for 100% of your healthcare costs. Many people will find they are eligible for money-saving subsidies if they purchase coverage through the Health Insurance Marketplace, making health insurance significantly more affordable than expected. Medical expenses is the biggest reason Americans go bankrupt, according to a Harvard University study (see Top 5 Reasons Why People Go Bankrupt).
The Bottom Line
Many individuals and families will be able to compare and purchase their 2016 health coverage through the Health Insurance Marketplace, starting November 1. After you fill out an application, you can see if you qualify for Medicaid, CHIP, Cost-Sharing Reductions and/or Advanced Premium Tax Credits. You will also find out if you are eligible for a catastrophic plan that charges lower premiums but higher out-of-pocket costs.
In addition to Essential Health Benefits, all Marketplace and many other health plans must cover a set of preventive services such as shots and screening tests at no cost to you, meaning you will not have to pay a copayment or coinsurance. This is true even if you haven’t met your annual deductible. Preventive services include (but are not limited to):
- Alcohol misuse screening and counseling
- Blood pressure screening
- Cholesterol screening
- Colorectal cancer screening
- Depression screening
- Diabetes (Type 2) screening
- Diet counseling
- HIV screening
- Immunization vaccines
- Obesity screening
To find additional information regarding the Health Insurance Marketplace and subsidies, as well as state-specific information and how to apply in your state: