Obamacare Explained Series: Don’t Have Insurance? Your Next Steps

With all the fighting about health care reform in the courts and the numerous attempts to repeal it, people are confused about their next steps. The Affordable Care Act (ACA) is still in effect, and we’re approaching a major threshold in the program. Starting in 2014, everyone will be required to have health insurance of some kind or pay a tax penalty. It looks clear on paper, but there are a lot of exceptions and state challenges to this law that is making it very difficult for people to get correct information.

Basically, everyone that complies with the law is going to fall into one of four buckets:

  • You’ll have employer-provided insurance
  • You’ll fall under government-provided insurance (Medicare/Medicaid/CHIP/etc.)
  • You’ll purchase your own insurance
  • You’ll be an exception and won’t need insurance (see below)

Here’s what you need to do to prepare for the new insurance requirement for each of these categories. More information can be found at the government’s healthcare site at www.healthcare.gov .

Exceptions

Let’s go through the easy category first. If any of these apply, you do not need to worry about getting penalized:

  • You’re part of a religion that opposes health insurance
  • You’re an undocumented immigrant
  • You’re incarcerated
  • You’re a member of an Indian tribe
  • Your income is below the threshold to file ($10,000 for an individual, $20,000 for a family)
  • You would have to pay more than 8% of your income for insurance after tax credits and employer contributions

Employer-provided insurance

Unless your employer has notified you that they are stopping their insurance plan, you will not need to do anything. Employers will have to make sure that their policies cover the minimum requirements that all insurance policies must cover under the Affordable Care Act (ACA). You most likely will not need to change your plan or your doctor, and you might even see some improvements in your coverage. However, some employers are reducing some benefits, like covering spouses, or increasing premiums according to CNN Money.

Government-provided insurance

If you currently have insurance that is provided by the federal government, you are exempt from the penalty. This includes Medicare, Medicaid, CHIP, TRICARE, and VA programs. Thanks to the ACA, many more people are now eligible for Medicaid. A family of four making $30,000 or less or an individual making $15,000 or less would be considered eligible. However, states have successfully fought against expanding their Medicaid coverage all the way to the Supreme Court. States now have the option whether or not to expand their coverage to meet the ACA guidelines. When the insurance marketplaces go online on October 1st, they will be able to tell you whether or not you are eligible for Medicaid or another government-provided healthcare program for your state. You can also try applying in advance through your state’s Medicaid program and see if you qualify. Many people have found that they now fall within the guidelines.

Insurance you purchased

There are two scenarios here. The first is that you already have your own health insurance that you purchased personally. If your policy follows the guidelines set forth by the ACA, then it will have been grandfathered in and you won’t have to purchase a new plan. Contact your insurance company to see if your plan meets the new guidelines.

If you don’t have insurance, or your current insurance doesn’t meet the guidelines, then you’ll be eligible to purchase insurance on the insurance marketplace (formerly the health insurance exchange) starting on October 1st, 2013. Plans purchased through the exchange will take effect on January 1st, 2014.

Which Metal are You?

The plans will be divided up broadly into four categories: bronze, silver, gold, and platinum plans. Each plan covers a differing amount of healthcare costs. Currently, bronze-level plans will cover 60%, while platinum plans will cover 90%. Everyone that isn’t already covered will have to purchase at least a bronze-level plan. The cost of the plans will vary depending on your income level, age, location, and health factors. The government is providing tax credits and other incentives to get people to purchase insurance, especially for low-income individuals that don’t qualify for Medicaid.  You can only get these benefits if you buy your purchases through the insurance marketplace, and if you make less than four times the poverty level. This is about $45,000 for an individual in 2012. Most people who purchase plans through the marketplace will not be paying the original market value of the insurance.

You will have until the end of March 2014 to get insurance before the penalty will kick in. You have a three month gap every year where the penalty will not apply. So, if you don’t have insurance yet, wait until October 1st then search for the insurance marketplace for your state so you can compare the plans or see if you qualify for Medicaid.

States are still deciding on their pricing, but as an example, check out what California has published regarding their costs are for each level. This is from Covered California, the insurance marketplace for California:

What if I don’t want to?

Anyone who doesn’t have health insurance and doesn’t fall under the exceptions will have to pay a penalty on their taxes. For 2014, the penalty is $95 per adult (half for a child) or 1% of income after the $10,000 threshold. For 2015, the penalty is $325 (half for a child) or 2% of income after the threshold. In 2016, it rises again to $695 per adult (half for a child) or 2.5% of income after the threshold. Subsequent years will increase based on the cost of living. There are maximum caps in penalties for families. The penalty will never be greater than the national average premium for a Bronze plan, and is pro-rated for the number of months you went without insurance.

Love it or hate it, you’re still on the hook for getting health insurance for the upcoming year. Tell your friends and neighbors about the insurancerequirement and make sure they sign up on October 1st. They can find their insurance marketplace through www.healthcare.gov. The first year of penalties isn’t so bad, but later years are going to cost quite a lot! Do you know how you’re going to handle your insurance requirement in the future? For more information as the marketplaces come online, check this website, your state’s insurance marketplace, or healthcare.gov.

Read more in our series on Obamacare Explained Series by following this link.

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