Whether you are unemployed, lack access to health care at work, or are considering—or are forced into—early retirement, getting to know your options through newly created federal or state-run health care exchanges is time well spent.
“Think of it as one-stop shopping for your family’s health insurance,” says Jeff Munn, vice president of benefit policy development at Fidelity Investments. “Health care exchanges centralize information, allowing you to compare health insurance plans, determine any subsidies that might reduce your premiums, and then pick a plan that’s right for your family.”
The public exchanges vary from state to state. Each state has its own health care marketplace: Seventeen states and Washington, D.C., run their own versions, and the federal government operates exchanges in partnership with or on behalf of the other 34 states. Although providers and costs will vary from state to state, the policies and benefits are all required to cover at least the same basic types of services known as “essential benefits.”
If you’re unsure of how the Health Insurance Marketplace is designed to work, or if you’re simply curious about how these exchanges could help you, consider these six key questions:
|1.||Am I eligible?|
The public exchanges were generally designed to help those who don’t have health care coverage—or those who have health insurance but whose coverage doesn’t meet the Affordable Care Act’s (ACA’s) requirements—find health coverage that fits their needs. But anyone, regardless of current coverage status, can use the public health care exchanges to shop for insurance.
How much you’ll pay for coverage depends on a variety of factors, including income, family size, and the plan you select. You can shop on the public exchanges even if you have employer-provided coverage, though you may not want to, because most employers pay part of the premiums, and many have negotiated with health care providers to lower costs. As of 2013, more than 64% of the population was covered by employer-based health care plans, according to the U.S. Census Bureau.
|2.||What plans are available?|
The exchanges categorize plans into four levels, determined by the way health care costs are shared by the consumer and the insurance provider. Plans at the highest level, called “platinum plans,” cover, on average, an estimated 90% of an individual’s health care costs. Gold plans cover 80%, silver plans cover 70%, and bronze plans cover 60%. Individuals under age 30 can opt for catastrophic policies: These carry the lowest premiums of any plan, but they do not qualify for income-based subsidies.
At age 65, most people who are not actively working and are not eligible for an employer plan are enrolled in Medicare. If you enroll in Medicare, you aren’t eligible to purchase any additional coverage through the health exchanges. Nor can you buy Medigap or Medicare Part D prescription coverage through the exchanges—you would still need to purchase that coverage on your own. Read Viewpoints: “Answers to key Medicare questions.”
|3.||What are my expected costs?|
There’s a lot that goes into determining your total health care cost. Beyond your monthly insurance premiums, your health care dollars can be broken down into three buckets: deductibles, copayments, and out-of-pocket (OOP) expenses.
- Deductibles: The amount of money you typically pay out of your own pocket for covered health services before your insurance benefits begin to pay.
- Copayments and coinsurance: After you reach your deductible, you will then pay a percentage (10%, 20%, 30%, or 40%) for medical services known as a coinsurance payment.
- Out-of-pocket: The amount you pay out of your personal savings for covered medical services. This includes your deductible and coinsurance amounts. If you have high OOP expenses in a given year and hit the maximum, your insurance company then pays 100% of your covered services after you hit the maximum for the year.
Trying to predict your family medical services and prescription drugs usage for the coming year may not be easy, but it’s a critical step in helping you choose the right plan. If you live in a state served only by the federal exchange, a good place to see pricing options depending on different levels of deductibles and premiums is How to Pick a Health Insurance Plan.
|4.||Will my doctor accept my new plan?|
Not necessarily. Each plan offered through an exchange includes networks of health care providers. If your doctor is outside a particular plan’s network, you may want to switch to a new doctor who is in your network or you may end up paying more for care. Also, unless the plan pays out-of-network benefits, the plan may not pay any benefits to health care providers outside your plan’s network and you could be responsible for paying the entire cost.
During the application process, you can review plans to see whether your primary care doctor and other providers are considered in network. If your state has several insurers providing plans, you may find that one insurer’s plan will cover care from your existing doctor, while another insurance company’s plans won’t. Remember, just because your doctor is part of the overall network offered by an insurance carrier doesn’t mean he or she is part of all networks associated with all plans offered by that insurance carrier.
|5.||When and how can I sign up?|
Open enrollment in the marketplace for each year typically begins in early November and closes at the end of the following January. Unless you have a qualifying life event—such as moving to a different state, or a divorce or the birth of a child—you must wait until the next open enrollment period in the fall if you do not enroll by the deadline or if you want to change your plan.
To get started, applicants need to provide their Social Security number and information about their income and household size. Once they enroll, the exchange sends the person’s information to the insurance carrier. Insurance companies are no longer allowed to exclude applicants based on preexisting conditions, so they don’t need as much personal medical information as they used to, although you will need to provide information about your smoking habits.
|6.||Can I receive a subsidy?|
The ACA provides government subsidies for some people, based on income. People making from 100% to 400% of the federal poverty level for their household size may be eligible for a tax subsidy. Insurance premium subsidies are available to individuals under the ACA in every state, regardless of whether the state or federal government is operating that exchange.
The ACA requires all U.S. citizens to have health care coverage. A number of exemptions exist, but if you choose not to enroll in one of the health care exchanges, you could be required to pay a penalty, the so called “individual mandate” penalty. According to Healthcare.gov, you’ll pay the higher of these two amounts in 2016:
- 2.5% of your yearly household income. Only the amount of income above the tax filing threshold, about $10,000 for an individual, is used to calculate the penalty.
- $695 per person for the year ($347.50 per child under 18). Beyond 2016, the penalty is adjusted for inflation. You’ll pay the fee on the federal income tax return you file for the year you don’t have coverage.
For example, let’s say you are single and earn $40,000. Your penalty for not having coverage in 2016 would be $750, which is greater than the standard $695 yearly penalty.
Small business option
Businesses with 50 or fewer full-time employees can start offering health insurance to their employees under the Small Business Health Options Program (SHOP) marketplace. There is no time limit on the enrollment period for small business coverage, and employers can offer it at any time. Businesses can also use brokers or enroll directly through insurance carriers.
The SHOP marketplace is similar to the individual marketplace, but geared to handle the specific issues business owners will face. For instance, businesses will need to determine how much they will contribute to the cost of employees’ health care coverage, and then employees can purchase insurance through a variety of plan providers. Businesses also can earn tax credits—as much as 50% of the cost of employees’ premiums—but must meet several criteria to be eligible for those incentives.
Beyond the exchanges
Employees of some large corporations might already be familiar with the concept of a health care exchange. In recent years, some companies have given employees a lump-sum subsidy toward health coverage, and offered them access to privately run exchanges where they could comparison shop for plans. This trend is part of a larger transition away from defined benefit plans, where employers are tasked with making decisions on behalf of the employee, and toward defined contribution plans, where employees have more of a say in how they choose their benefits.
If you are a pre-65 early retiree—or are thinking about leaving your job soon, with or without COBRA coverage—visit www.Healthcare.gov to find a health plan that may be able to meet your needs, save you money, or help you bridge the insurance gap to Medicare eligibility at age 65.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917