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'Obamacare' Explained: What You Need to Know About Health Exchanges

Flickr/Carl Lovén
Flickr/Carl Lovén
By Mandi Woodruff

We're months away from cutting the ribbon on the new online marketplace for health insurance, but the vast majority of uninsured Americans -- the very people the Affordable Care Act is meant to help -- still have no idea whether they'll be in the shopping mood or not. According to a recent survey, nearly two-thirds of uninsured Americans say they haven't decided whether or not they'll buy health insurance by the Jan. 1 deadline (even though they'll have to pay a penalty if they don't).

Another 10 percent say they flat out won't buy in at all.

We understand the hesitation. Change is hard enough when it's simple to understand, let alone when it has to do with things like insurance, health care policy, and your own financial and personal well-being.

"People just don't understand how this is going to affect their wallet, what prices are going to be and what this could really cost them," said Laura Adams, senior insurance analyst.

Here's what you need to know:

What is this new health care exchange all about?

The health care exchange (aka the marketplace) is the centerpiece of the Affordable Care Act, an online marketplace where consumers can shop around for health care plans, just like auto insurance. All 50 states will have their own marketplaces, some of which will be run by the federal government and some of which will be run by individual states.

Delays notwithstanding, the marketplace opens Oct. 1 and people will have until Jan. 1 to pick up a policy if they want to escape penalties. There, you'll be able to choose from four different varieties of plans: platinum (highest benefits), gold, silver and bronze (lowest benefits).

Does everyone need to sign up for a health plan?

The health care exchange is open for every U.S. resident, but only the uninsured will face penalties for skipping out. If you are enrolled in your employer's health plan or pay for your own plan already, you can keep on keepin' on, although we'd at least recommend shopping around to see if there are more affordable plans out there.

What if you don't think you can afford it?

Obviously, if everyone could afford to enroll in health care, chances are we wouldn't have an Obamacare plan to deal with at all. As it stands, 61 percent of the uninsured respondents surveyed by InsuranceQuotes cited money issues as the main reason they haven't purchased health insurance.

To help, the government has put in place tax credits that are specifically designed to help low-income households cover the cost of a health care plan.

To qualify, individuals or families can earn household incomes up to 400 percent of the federal poverty level ($94,200 for a family of four in 2013). You can claim the tax credit in advance, rather than paying upfront for your health care plan and then waiting for a refund after tax season, Adams notes.

Generally, the government will apply those credits directly to your health insurer, which will reduce your premium cost.

To find out how big a tax credit you can expect, use the Kaiser Family Foundation's calculator.

What if you just don't want to enroll?

To make the reform easier to swallow, lawmakers have thrown consumers a couple of bones: For starters, the Jan. 1 deadline for enrollment is a soft one. You can start signing up when the exchange opens on Oct. 1 and you have until March 31 to enroll.

That gives people a three-month cushion to get their ducks a row. And on April 1, when the penalties begin, they start small and rise on a tiered scale up until 2016:

  • Families - $285 or 1% of total household income, whichever is greater.
  • Individual adults - $95 or 1% of total household income.
  • Families - $975 or 2% of income, whichever is greater.
  • Individual adults - $325 or 2% of income.
  • Families - $2,085 or 2.5% of income, whichever is greater.
  • Individual adults - $695 or 2.5% of income.

"It's designed to be this kind of gentle nudge that becomes not so gentle in a couple years," Adams says.

Some analysts predict young people will look at the first year penalties and shrug. If you're under 26, you can always sign up for your parents' health care plan. And paying a $95 fee may not seem all that tough a burden when you compare it to the potential higher cost of a year-round health care plan.

It's not the end of the world if that happens, but it could mean some trouble for Obamacare. A lot of the new plan's success rides on whether it can attract consumers who are both young and healthy along with the older, unhealthy sect in order to keep costs affordable for everyone. If young, healthy, uninsured people decide they'd rather pay a fee than shell out hundreds of dollars per year for a health policy they doubt they'll use, leaving mostly unhealthy, older people enrolled, it could throw things out of balance and make policies more expensive.

But given the results of this Kaiser Family Foundation poll, in which nearly 77 percent of 18- to 25-year-olds said health care is very important, those worries may be overblown.

What about Medicaid?

Families and individuals who earn less than 138 percent of the federal poverty level will still have access to Medicaid.

At best, Medicare coverage in states will be expanded under Obamacare. At worst, states will exercise their right to skip an expansion in favor of the status quo. So far, about 13 states have opted out of an expansion. This map shows where each states stands as of June 14.

How much can I expect my health care costs to rise?

We wish there were an easy way to answer this question. Because each state is in the process of submitting estimates from insurers, we can only guess at premium costs as numbers trickle in. The Wall Street Journal analyzed estimates from eight states and pretty much confirmed what experts had predicted - that the new health care plans will be more expensive for the young and the healthy.

"Healthy consumers could see insurance rates double or even triple when they look for individual coverage under the federal health law later this year, while the premiums paid by sicker people are set to become more affordable," the WSJ's Louise Radnofsky reports.

Even so, there's still a chance rates could decrease over time if insurance regulators decide to lower them in order to compete in the marketplace. And if that happens, then, well, Obamacare is officially doing its job. We've already seen that happen in Oregon, and as Politico's Jason Milliman points out, since all rates have yet to go through the state review process, anything could happen.

"The prices that many people can expect to pay, though, may remain a mystery for a few more months," he writes. "The feds, who are reviewing rates for exchange plans in more than half the states, have released limited information so far about who's even asked to sell on federal-run insurance marketplaces, let alone what they'd like to charge."

The bottom line: It's up to you whether or not you can afford to skip out on health care. For now, kick back and wait until the exchange opens in October until you start to worry. You can do some searching and see what rates are really out there before making your decision. Any speculation on costs before then is basically white noise as far as we're concerned.

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Jenny Brown

This monstrosity of a bill will destroy our country. All of you who wanted FREE healthcare, well, your gonna find's not exactly FREE! The IRS will be in charge of it and all of you who are raking in all that welfare, food stamps and every other social program, (the working class is paying for)...will find out that IN this law, the IRS will have FULL ACCESS to all your finances. In other words, they will have access to your bank accounts...they are stopping all CHECKS, welfare and social security and will be direct depositing your 'Free' money into a bank they will KNOW if you can afford this crap healthcare or not!

Now, will someone that knows what's what with this crap bill please tell me if after you sign up for this crap insurance, and you are making your monthly premiums, do you then get to go to the doctor for free, no co-pays, no bills coming afterwards and do you get all tests needed for free, as in MRI's, Cat Scans, Labs, X-rays, ANY TEST needed? Or do we still have to pay monthly premiums then pay whatever this insurance does not cover? If that is the case, WHAT HAS CHANGED? Except now you get fined or taxed if you don't carry insurance and how will the IRS collect that fee/tax if you don't have enough money in your accounts, that they have access to, to collect it? Do they start putting liens on your property and eventually force you out of your home for non-payment of your IRS INSURANCE FEE/TAX???
I'm thinking, the government is now forcing EVERYONE to carry insurance, but you still have to pay co-pays and whatever percentage of the medical bills the crap insurance you choose doesn't the government gets to get more money from the people, working or not to waste or spend on their cronies and pet projects.....if you disagree...please prove me wrong. I'll be waiting......

September 19 2013 at 5:43 PM Report abuse rate up rate down Reply
Barb Pearl Morgan

Actually, the subsidy will not be given to people who have low income below around $11,490. These folks are going to be referred to Medicaid. But, unless they change the asset limit for Medicaid, anyone that has very low income but still has some savings that they are using to live on would not qualify for Medicaid. So, if you earn $12,000 and have tons of money in the bank you can still get a subsidy but if you earn under $11,490 and have as little as $4,000 in the bank, you won't get anything. So, how does someone like this pay for health insurance?

July 22 2013 at 6:36 PM Report abuse +1 rate up rate down Reply

still UP and RUNNING ~

keep those COMPLIMENTS flowing !

July 20 2013 at 12:00 PM Report abuse rate up rate down Reply

I am going to be 65 in Nov. and this Health Care Problem is STUPID, instead of helping seniors, they are putting nails in our coffin! There should only be 1 and 1 only Health Care for all individuals! Get some sense, lets face it, Washington, Congressmen and women, senators and the President included DO NOT HAVE TO PICK< they are set for life with Health Care and enough gas perks to put money in thier back accounts! Life can be draining!

July 20 2013 at 7:47 AM Report abuse rate up rate down Reply
1 reply to Cheryl's comment

uuuuuuuh obummer care IS GIVING ALL
and that's what THEY WANT.

you HAVE THEIR DEFINITION of hell_care

July 20 2013 at 11:59 AM Report abuse rate up rate down Reply

to keep FEEDING

here's a good one--

over passes for obamas impeachment . org

type it on correctly AS IT IS FOR REAL.

July 17 2013 at 12:25 AM Report abuse +1 rate up rate down Reply

I waited for it to be passed to find out what's in it darlings. And what I am finding out is that this healthcare bill is going to be a disaster. I am glad I do not have to be a part of it dears.

July 12 2013 at 9:15 PM Report abuse +1 rate up rate down Reply

Nice post i really like it

July 12 2013 at 6:18 AM Report abuse -3 rate up rate down Reply

I don't believe the insurance companies will be able to secure big rate hikes related to the products offered through the exchanges. First, there is the 10% SUBSTANTIAL testing rule. This rule states that insurers will be required to provide very detailed, expensive and time consuming information to support exorbitant rate hikes. There is also the shaming factor. I seriously doubt an insurance company wants to be called out specifically by a Congressman or Senator as a price gouger. Third and most important the exchanges while for individuals and small businesses will actually be the equivalent of a VERY large group. Insurance companies do not want to price themselves out of this large part of the market.
I know I will definitely be moving to the exchange because products will offer better coverage for dollar of premium and I also qualify for a subsidy. I currently have a family plan that offers nothing more than expensive catastrophic coverage. The premium is about $7k plus a year with a deductible of $12k before dollar one is paid out in claims. This means it costs $20k before dollar one is paid out. Nothing except for annual check up and female annual check up is covered before the deductible. Here is an example I was told I needed arthroscopic surgery. Well, the cost for the surgery, the outpatient facility and other ancillary costs which would be paid at the contracted, 'reduced rate' is only slightly over $12k. I am deferring the procedure since it is not critical to Jan. 2014. My premium will be lower because of the subsidy, the deductible will be lower (I already checked the Silver plan co-pays and deductibles for my state) and I will not be out $20k to receive a few thousand in covered care.

July 11 2013 at 1:13 PM Report abuse -1 rate up rate down Reply
1 reply to spaceguy855's comment

uuuuh the bs about LOWER COSTS has already been out here exposed for the scatology and OUTRIGHT LIE that it is
and the insurance companies have already explaained and JUSTIFIED THEIR INCREASED COSTS,

all thanks to obummer.

July 13 2013 at 2:36 AM Report abuse -2 rate up rate down Reply

STOP the free welfare checks which were designed for EMERGENCY use. Even in the 1930s, the fear was people would become lazy being on the "dole" and not want to get off. Funny how certain ones wait for that check at the end of the month but somehow manage to have the latest IPhone, expensive sneakers and all that bling. Make people responsible for all the children they birth. Then and only then, can this country take all that money and help those who actually work for a living, pay their taxes and then get the shaft.

July 11 2013 at 1:01 PM Report abuse +1 rate up rate down Reply

Im in the FLAT OUT WON'T BUY IT ALL category!!! The IRS can fine me all they want!!! They still won't get a dime from me.They can't seize any property or anything else or put you in jail not like they can with a regular tax return. I dare the IRS!!!! With their scandal going on i bet there will be a backlash if they try to anything to anyone!!!

July 11 2013 at 12:20 PM Report abuse +1 rate up rate down Reply