Obamacare Simplified: what you need to know #PPACA #ACA #Obamacare #healthinsurance
The Patient Protection and Affordable Care Act (PPACA), otherwise known as Obamacare, is a hugely complex piece of legislation with around 22,000 pages of original law and subsequent rulings.
As highlighted in this recent WSJ post, most individuals do not understand the complexities of the law, compliance, and how these insurance products operate. This is no surprise. In fact, most of the legislators who passed the law don't know what's in it. I've been studying the law and subsequent rulings for over two years through my work with a leading insurer. While the federal law is complex, additional laws at the state level increase that complexity.
As we head into a new enrollment period (starting 10/1/14 for coverage effective 1/1/15), I'd like to highlight what you need to know before purchasing your coverage and how to get the most out of it. This excludes Medicaid and Medicare and is specific to the PPACA-compliant Metallic products sold to individuals and families.
Where to buy
You have a few options on where to buy your insurance plan. If you qualify for a subsidy, you will only get it on the State or Federal Exchange. If you go directly to an insurer or purchase on a private Exchange, you will not be able to obtain that subsidy. Many health insurance agents are licensed to sell on the State/Federal Exchanges and you can rely on them to help you select the best plan.
- State or Federal Exchange (subsidy provided based on your income compared to Federal Poverty Level)
- Private Exchange (does not provide subsidy). One well known Private Exchange is eHealth.
- Purchase directly from health insurer (does not provide subsidy)
- Insurance Agent (direct to insurer or through Exchanges to obtain a subsidy)
If you qualify for a subsidy (determined by income compared to Federal Poverty Level), you must purchase through an Exchange in order to get that credit. The subsidies will reduce your overall cost of insurance through Advance Premium Tax Credits, Cost Share Reductions (or both). Here's a handy tool for determining if you qualify for a subsidy. Many insurance agents are licensed to sell on the Exchanges and can guide you through selecting the plan that's right for you and your family. Agents can sell plans direct from insurers or through the Exchanges. There is little or no benefit in purchasing through an Exchange if you do not qualify for a subsidy and many consumers may prefer to purchase outside of the Exchanges.
Shop and compare: understand what you're buying
Individual PPACA-compliant plans are sold both in and out the Exchanges. You will often see the same plans sold within the Exchange and outside of the Exchanges. The big advantage of using the State/Federal Exchange is gaining a subsidy, if you qualify.
Understanding your health insurance costs
There is much more to the cost of your health insurance than the monthly premium, so look at the following cost components for each health plan you are considering. Depending on your situation and factors like overall health and age, going for the lowest monthly premium may not result in the lowest cost during the coverage period.
- Monthly Premium: the amount you pay monthly for your health insurance plan.
- Deductible: except for some preventive services and exams, the deductible is what you will pay out of pocket before the insurer pays ANY cost-share amount.
- Cost-share: this is the shared amount you and the insurer agree to pay on services AFTER you have satisfied the deductible amount. For example, on a Gold plan, you may have an 80/20 cost share with the insurer paying 80% of the cost of service while you will pay 20%.
- Co-Pays: typically required on office or emergency room visits (except preventive annual exams and related lab services that are fully covered). Some insurers will offer reduced co-pay amounts if you select a PCP (primary care provider).
Out-of-Pocket cost (OOP): this is the maximum amount that you will
pay during the coverage period (annual). This is the total amount of
your deductible plus your cost share and co-payments (this excludes
premiums). This can be VERY high on a Bronze plan, so look closely at
the numbers inside of the plan descriptions.
Metallic levels and how they work
- Platinum - the highest level of coverage, highest monthly premium, lowest deductibles, cost share, and OOP. May have zero copays.
- Gold - high level of coverage, high monthly premium, lower deductibles, co-pays, and OOP.
- Sliver - moderate premium cost with higher deductibles, co-pays and cost-shares. Higher OOP.
- Bronze - lowest cost premiums, but highest deductibles, cost-shares, and OOP amounts.
The most popular plans in 2014 have been the Bronze plans, due to the lower premium costs, but if you have health issues or are older and actually intend to use your health insurance, you may find that a higher metallic level is really a better value. So, do a thorough analysis of your options or consult a health insurance agent.
All plans include the Essential Health Benefits (EHB's)
- Ambulatory patient services
- Emergency services
- Mental health and substance abuse disorders/behavioral health treatment
- Contraceptive, maternity, and newborn care
- Prescription drugs*
- Rehabilitative and habilitative services/devices
- Laboratory services
- Preventive and wellness services, and chronic disease management
- Pediatric services, including oral and vision care
Many preventive services and specifically the annual physical exam and related lab services are not subject to deductibles, however, you should contact your insurer prior to each service in order to confirm coverage and your cost.
Narrow networks and drug formularies - no surprises
Understand the networks and drug formularies attached to each insurance plan you are considering before you finalize your selection. You will have to live with this for a year and if you don't do your homework up front, may be surprised to learn your current doctors and preferred hospitals are not within the plan's network. Insurers made significant reductions in provider networks and drug formularies when constructing these PPACA compliant plans. *If you are currently on medication, confirm with the insurer prior to purchase that your drugs are included in the formulary and the amount they will cover.
Recommendation: call or email the insurer before you purchase to be certain your doctors, hospitals, and drugs are included in the plan.
Health Spending Accounts
If you've previously had an HSA in the past, one thing to note is that HSA's have changed (for the better). Years ago, HSA's had a "use it or lose it" element so you had to spend your contributions within the plan year. Today's HSA's not only roll over the balance from year to year, but many are tied to interest bearing investment accounts. If you anticipate significant medical costs for fulfilling deductibles and other out of pocket costs (particularly if you are on a Bronze plan where both are typically high), an HSA may be for you. HSA's cannot be used to pay premiums. If you are interested in an HSA, talk to your health insurance agent or insurer to be certain you have a plan that can be used with an HSA. Here's a brief video on how an HSA works.
Enrollment and changes
Beginning October 1, 2014, you must enroll and purchase a plan for coverage effective January 1, 2015. If you are currently enrolled in an individual plan, you will need to re-enroll for coverage starting in 2015. Generally, you cannot change your plan coverage during the year, so choose wisely.
You CANNOT make any plan change during the year unless you experience a "life event". These include:
- Birth or Adoption
- Loss of employer sponsored health insurance
- Loss of coverage for a dependent child who has reached the dependent limiting age
- Exhaustion of COBRA
- Loss of eligibility for Medicaid or CHIP
- Divorce/Legal Separation
- Loss of retiree coverage due to former employer filing for bankruptcy protection
- Death of the policyholder
- Incur a claim that meets or exceeds a lifetime limit on all benefits under existing coverage
- Gaining status as a citizen, national or lawfully present individual
- No longer incarcerated
- Loss of coverage due to a permanent move outside of the plan’s service area
- Plan is due for renewal outside of Open Enrollment
in income that results in individual determined newly eligible or newly
ineligible for tax credits (APTC) or has a change in eligibility for
cost-sharing reductions (CSR)
Winners and losers
The law was intended to offer affordable coverage to individuals and families who were previously unable to obtain affordable coverage, often due to pre-existing conditions. Now, those who previously could not afford health coverage have subsidies and tax credits that make the insurance very affordable and in some cases, free (with Medicaid expansion). However, those who previously purchased their own individual coverage have generally seen their premiums increase as a result of PPACA and many argue that they are paying more for less - or for coverage they do not want or need (as in the debate over embedded contraceptive coverage).
Insurers potentially win in that they are selling more insurance, but the risk remains that because insurance is now covering more (and sicker) individuals, companies will incur increased costs or losses. There are a few things the law does to protect insurers from significant loss, but in the end, some insurers and consumers will lose.
With more insured patients, providers and hospitals expect to see reductions in losses resulting from uncompensated care.
Under the law, all individuals in the U.S. are required to have health insurance or incur a tax penalty (which may be significant, depending on your income). If your employer does not enroll you in a health plan, then you need to take action to purchase a plan for yourself and your family. You can purchase that plan through an Exchange, agent, or insurer. By carefully considering the costs and elements of the health insurance plans, you can choose the right one. If you need help in the process, ask friends for referrals to a good health insurance agent who can advise you in your choice.