The Affordable Care Act (ACA), also known as ObamaCare, has been politically controversial from the start, dividing the parties, surviving a Supreme Court challenge, and serving as a major issue in the 2012 election.
But after all the fuss, it's still standing and later this year will begin to transform the way consumers obtain and pay for health insurance. The law goes into effect January 1, 2014.
For consumers who currently purchase their own health insurance, or who have no health benefits at all, it will bring about big changes. Currently, consumers must go to a variety of different insurance carriers to shop for and obtain a policy. The new law streamlines the process.
Health insurance exchanges, or marketplaces, form the bedrock of ACA. Each state will have one or more exchanges that will offer these benefit packages. Individuals may use the exchange to find the policy that's right for them and small businesses can turn to an exchange to shop for a group plan.
The exchanges will offer a variety of certified health plans and provide information and educational services to help consumers understand their options. Under the law, states have the option to establish one or more state or regional exchanges, partner with the federal government to run the exchange, or to merge with other state exchanges.
Regardless of how they go about it, every state is required to have a health insurance exchange for its residents by January 2014. Some states, like Virginia, have refused to set up their own, so their citizens will be covered by an exchange set up by the federal government.
Sign up in October
The health insurance exchanges will open for business October 1, at which time consumers under age 65 may select a health plan. Those 65 and older will continue to be covered by Medicare.
The exchanges will only offer benefit packages that are “certified.” In other words, they must cover certain things. If you currently have an individual policy with a very high deductible and minimal coverage, it is possible that you will be required to replace it.
California is among a handful of states that moved quickly to establish a health insurance exchange. Its exchange, known as Covered California, received federal approval in January.
“This is another significant step in California's long but determined march toward better health at an affordable price," Covered California’s Board Chair Diana Dooley said at the time.
Since then Covered California has been working with interested private health care plans to offer certified health benefit products online for individuals and small businesses. Starting October 1, consumers can begin using the exchange's website to shop for a plan.
Variety of plans
Insurance plans will vary — from generous to modest — but each plan must include basic, comprehensive medical coverage and prescription drug benefits. As with an online travel site, where you can compare airline fares and hotel rates, you’ll be able to compare the plans’ costs and benefits head-to-head online.
These certified health benefit plans are not cheap, which brings us to paying for these benefits. What you, as a consumer, pays will depend largely on your income.
Families below a certain income level will continue to receive Medicaid coverage. Most middle-class families who purchase individual policies will receive a federal subsidy to offset the cost.
Calculating your cost
Here's an example using the calculator. Let's assume a family of four, in a “medium” cost area of the country, is covered by an individual health insurance plan because the 45-year old principal policy holder is self-employed. According to the calculator, the unsubsidized cost of the average policy would be $14,245, or $1,187 a month.
But under ACA, the family would only have to pay a maximum of 9.5% of their income in premiums. The government would provide a subsidy of $7,120, meaning the premium would be $7,125, or less than $600 a month.
The subsidy will be provided through a tax credit. Ordinarily, consumers would have to wait until they file their federal returns before they receive the benefit. However, under ACA the tax credit available through the health exchange will be available immediately, to offset the cost of the monthly premium.
What to do
Starting October 1, go to your state's online health exchange and begin shopping for a plan. You can find it by using a search engine, entering the name of your state and the words “health insurance exchange.”
If you are currently covered by an employer-issued group plan, Medicare or Medicaid, you do not need to take any action.