If you’re new to the healthcare landscape, you’re probably confused over all the political fighting you see over Obamacare and all the terms associated with health insurance. Shopping for healthcare coverage is confusing to many people, so know that you’re not alone. Once you’ve made the decision to start shopping for health insurance, it’s time to buckle down and learn some of the concepts that will help you find an affordable plan.
What is Health Insurance?
Health insurance covers some or all of the medical expenses associated with medical problems, chronic conditions, routine checkups and visits to your doctor throughout the year. Like other types of insurance, such as home or auto, it’s an investment in protection. Unlike other types of insurance, health plans are more likely to be used and could help you avoid long-term problems thanks to preventive care.
Nearly half of the people with health insurance in America get it through their employers. The remainder either qualify for a government program – like Medicaid (for the poor) or Medicare (for the elderly) – or buy their own private health insurance on or off of Obamacare exchanges, also referred to collectively as the “marketplace.” Here are some of the reasons why you need insurance:
- Health problems can arise at any time;
- Receiving medical care is expensive, and if you don’t have the money to pay for care yourself, you will need health insurance to help with the costs;
- Health insurance helps protect your financial wellbeing and your way of life; and
- It gives you access to a network of hospitals and doctors who may offer lower rates, saving you money on healthcare when you need it.
Additionally, the Affordable Care Act requires almost every American to carry health insurance. Also known as the individual mandate, this provision says that if you don’t have major medical insurance for nine months during each year, the federal government will impose a penalty. Here’s a closer look at the Affordable Care Act and what it means to you.
What is the Affordable Care Act?
Also known as Obamacare, the Affordable Care Act (ACA) is a healthcare reform law enacted in March of 2010. Then-President Obama and Congress passed the legislation to help make health insurance affordable for every American, particularly the 40 to 50 million people who didn’t have major medical coverage at all at the time. The ACA also expanded Medicaid guidelines (an optional state decision) so more low-income Americans could qualify for affordable coverage.
An important feature of the ACA is that it requires you to have health insurance. The penalty for not having health insurance during 2017 was the greater of 2.5 percent of your household’s taxable income, or $695 per uninsured adult and $347.50 per uninsured child in your household. The maximum penalty at the flat rate is $2,085. If you have health insurance for part of the year, the penalty is 1/12 of the yearly amount for every month you go without coverage. Although numbers haven’t been officially published, most healthcare experts believe the penalty for 2018 will remain the same as 2017. Other penalties, limitations and conditions do apply.
Most Common Health Insurance Terms
Here are a few of the most common terms used in the healthcare industry. As you’re sorting through your health insurance options for 2018, keep these terms in mind:
- Benefit: The type of service and agreed-upon amount that your insurance company pays for medical costs under a specific plan
- Coinsurance: What you will pay for covered services after you have met your yearly deductible
- Copayment: A flat fee you pay for medical expenses, such as doctors’ visits; Some plans have copays or coinsurance, or a combination of the two
- Deductible: The amount of money you pay each year before your insurance company pays its share for covered services
- Premium: A monthly payment you make to your insurance company in exchange for services
Buying Health Insurance Under the Affordable Care Act
When the ACA took full effect, healthcare exchanges were set up to allow you to easily compare and enroll in health insurance plans. The exchanges are run by either the federal government or your state government depending on where you live. You don’t have to use one to buy health insurance – off-exchange private plans still exist – but exchange-based plans are the only way to get cost assistance to reduce monthly premiums.
If you live in a state that does not run its own marketplace, you will use the federal government’s official website, HealthCare.gov, to begin your search for health insurance. For the following states, you’ll visit a state-based exchange, which you can visit via the links below or search for it on your own using your state name plus “exchange.”
- California (Covered California)
- Colorado (Connect for Health Colorado)
- Connecticut (Access Health CT)
- District of Columbia (DC Health Link)
- Idaho (Your Health Idaho)
- Maryland (Maryland Health Connection)
- Massachusetts (Massachusetts Health Connector)
- Minnesota (MNSure)
- New York (NY State of Health)
- Rhode Island (Health Source RI)
- Vermont (Vermont Health Connect)
- Washington (Washington Health Benefit Exchange)
To date, just 11 states plus the District of Columbia have created their own marketplaces. The exchanges are also known as marketplaces, and each marketplace will guide you through enrollment, allowing you to see your plan options and check if you qualify for cost assistance.
The Obamacare marketplace offers four different categories of coverage: bronze, silver, gold and platinum. There are also non-metal plans known as “catastrophic” plans, but these are reserved for people under age 30 or those experiencing certain financial hardships. Each metal plan covers a different percentage of overall healthcare costs (actuarial value, or how much you pay vs. what your insurance company pays), and plans within these tiers can vary widely in terms of premiums, copays, coinsurance rates, deductibles and so forth.
This metal category includes the lowest monthly premiums but requires you to pay higher out-of-pocket costs when you need medical care. In some cases, bronze plans can cost you thousands of dollars in deductibles each year. However, a bronze plan is a good choice if you are a healthy person with little to no healthcare requirements.
The silver category requires a moderate monthly premium, and your out-of-pocket expenses fall in the middle when you need medical care. Silver plans are the most popular among Americans who buy health insurance through the marketplaces. These are the so-called “benchmark” plans, meaning they’re used to determine how much cost assistance someone gets based on plan pricing in each area.
Gold plans include higher monthly premiums than silver and bronze in exchange for fewer out-of-pocket costs. The deductibles are much lower than silver and bronze plans, and this category is a good choice if you need a lot of medical care. By paying the higher monthly premium, you assume fewer out-of-pocket expenses.
The platinum category charges the most in monthly premiums, but you pay very little in out-of-pocket costs. Platinum plans are best for people with chronic medical conditions since these plans pay for the highest percentage of care in a year. This plan also offers low deductibles, which means the insurance company will pay for its share of your medical expenses sooner than it would in the other categories. The tradeoff is a substantially higher monthly premium.
How to Save Money on Your Monthly Premiums
When you enroll in a plan through the marketplace, you may qualify for a tax credit that will reduce your monthly premium payment. Whether you qualify for the credit depends on your estimated income for 2018. If you qualify, your marketplace will send an advance tax credit payment to your insurance company, which will then use the credit to lower your monthly premium payment. If your income falls between 100 and 400 percent of the federal poverty level, you qualify for a credit. For those who earn up to 250 percent of the poverty level, extra cost assistance is available to lower out-of-pocket costs (not just premiums). You can learn more about the costs of Obamacare in a separate article.
What is Open Enrollment?
You may have heard about open enrollment or seen news about it lately. Open enrollment is the period of time during which you can buy private (non-government and non-job-based) healthcare coverage for the next calendar year. The open enrollment period for you to obtain health insurance for 2018 is November 1, 2017 through December 15, 2017. This is the federal deadline. Some states have extended the deadline beyond Dec. 15 to enroll in a plan. For this year, there’s also a special enrollment period for victims of the hurricanes that struck certain states earlier this fall.
Why can’t you just sign up when you want to? The reason there’s an open enrollment period for health insurance is to prevent people from signing up for coverage only when they get sick. Open enrollment ensures that you have a health plan throughout the year, and it keeps insurance companies from only receiving monthly premiums when people are sick or need extensive medical care. Just as you wouldn’t be able to buy auto insurance right after an accident (and make a claim under the policy), you’re not allowed to buy health insurance only when you need it. In other words, open enrollment exists to keep costs down.