As ambitious as the Affordable Care Act (ACA) is in undertaking to overhaul the healthcare system so every American has access to reasonably priced health insurance and benefits, navigating the post-ACA landscape is not an easy task.
Amid so much flux, those who make an effort to learn how the system works will be best positioned to reap its benefits, said Carol McNeill-Skorupan, CFP®, a Middleton, Wisc. Financial Adviser. “People have to spend some time to really understand the system’s basic parameters. It’s a matter of getting the current landscape to work as best as possible for you.”
While the federal government has been working to fix the system’s initial bugs to make it more user-friendly and straightforward, the sheer magnitude of the changes brought about by the ACA, along with the penalties for failing to comply with certain requirements of the law, have forced individuals and business owners to educate themselves on the new system.
“There are winners and losers with this whole thing,” said McNeill-Skorupan. How to give yourself, your family and/or your business the best chance to come out a winner? Start by following the suggestions below, keeping in mind that additional changes are likely as policymakers pursue additional improvements to the fledgling system.
TIP 1: Start with a visit to Healthcare.gov, the hub for all things ACA, including Federal health insurance marketplace. There you can find out, first off, based on your state of residence, whether you need to go through the federal exchange or a state-run exchange, of which there are 16, according to StateReforum.org, (www.statereforum.org/where-states-stand-on-exchanges). If your state runs its own exchange, make that your next stop.
TIP 2: Learn the basics about exchange-based plan options. Plans available via the exchanges are offered by private companies. They all must provide certain essential health benefits, including hospital outpatient care, emergency services and hospitalization, maternity and newborn care, prescription drugs, pediatric services, mental health and substance abuse treatment, and more. Preventive services such as shots and screening tests also are covered at no cost.
There are five categories of exchange plans: Bronze, Silver, Gold, Platinum and Catastrophic. Each category is distinguished by the amount of medical costs paid out-of-pocket and by the plan. Designed for worst-case scenario protection catastrophic plans are available only to people under 30 and people who secure a hardship exemption.
No plan can turn you away or charge you more because you have an illness or medical condition. In other words, pre-existing conditions are no longer grounds for denial of coverage. What’s more, plans can’t charge women more than men for the same plan.
TIP 3: Consider the off-exchange option. The federal and state exchanges aren’t the only place to shop for a health insurance plan. You can also go directly to health insurance companies for “off-exchange” plans that comply with all ACA requirements. Call an insurance company directly or ask an independent insurance agent with expertise in health coverage for help finding a plan that fits your needs and complies with ACA. “Many insurers that have chosen not to offer plans on the exchanges are offering them off-exchange,” explains McNeill-Skorupan. “If you’re eligible for a subsidy, you need to purchase a plan from an exchange to get that subsidy. Otherwise, there are plenty of off-exchange plans that are [ACA-]compliant, with a cost that’s comparable to exchange plans.”
TIP 4: Prepare to pay. The maximum out-of-pocket costs for any marketplace plan for 2014 are $6,350 for an individual plan and $12,700 for a family plan. Use an ACA premium calculator such as that offered by WebMD (www.webmd.com/health-insurance/insurance-costs/insurance-cost-calculator) for an estimate of annual coverage cost.
TIP 5: Prioritize value over cost. “Depending on your needs, your age, your family situation and your health, the cheapest plan might not offer the best value,” McNeill-Skorupan points out.
TIP 6: Stay on top of deadlines. The open enrollment period for individuals seeking coverage via the federal and state marketplaces is March 31, 2014. Up until that date, enrollment is guaranteed; after that, it’s not, and people who aren’t enrolled by then must wait until the next annual open enrollment period, which begins Nov. 15, 2014, and runs until Jan. 15, 2015, for guaranteed enrollment. Buying insurance outside the open enrollment period requires a special waiver.
TIP 7: Beware penalties. People who can afford coverage but fail to enroll in an ACA-compliant plan may face a penalty that in 2014 amounts to the higher of 1% of yearly household income, capped at the national average yearly premium for a bronze plan, or $95 per person in the household ($47.50 per child under 18), capped at $285 per family. Penalties are due to escalate each year.
TIP 8: Pounce on subsidies if they apply. Subsidies based on income and the number of people in a household are available (but only via the exchanges) to cover a percentage of deductibles, copayments, and coinsurance. Subsidies are available to individuals with annual income up to $28,725, and to families with income up to $38,775 for a family of two, for example, up to $58,875 for a family of four, and up to $99,075 for a family of eight (thresholds are higher in Alaska and Hawaii). The Kaiser Family Foundation offers a subsidy calculator at http://kff.org/interactive/subsidy-calculator/ to help determine eligibility and subsidy amount.
TIP 9: Match the moving parts of a plan to your coverage priorities. In general, the higher the premium, the more out-of-pocket medical costs the plan will cover, and thus, the more cost certainty that plan will provide. For example, platinum plans likely will have the highest monthly premiums and the lowest out-of-pocket costs. Some other factors to consider: What are a plan’s copay and deductible parameters? Is there a plan that allows you to use your preferred doctors and medical facilities? Do you expect to make a lot of doctor visits or to need prescriptions regularly? Do you prefer an HMO or a PPO type plan?
TIP 10: For small business owners, the process of finding coverage for employees can be complicated, McNeill-Skorupan acknowledges. Start by visiting www.healthcare.gov/small-businesses/ for information on the Small Business Health Options Program (SHOP) Marketplace, the small business side of the ACA, which applies to employers with 50 or fewer full-time-equivalent employees. Self-employed people who own a business with no employees must get coverage through an individual exchange (or off-exchange).
Some businesses may qualify for a health care tax credit (available only for plans purchased through SHOP) that covers up to 50% of premium costs.
Each state has a SHOP Marketplace. Small businesses that use SHOP must offer coverage to all their full-time employees. Those that don’t purchase a plan via SHOP must otherwise have a plan in place that complies with ACA. Questions about SHOP? Call 1-800-706-7893 to speak with a representative.
TIP 11: Don’t be afraid to ask questions and seek guidance. Questions about the new health insurance system are bound to arise. For answers, ask an independent insurance agent, financial planner, health insurance provider or the exchange itself. To speak with a representative at the federal exchange, call 1-800-318-2596, 24 hours a day, seven days a week. Otherwise, contact the relevant state exchange.
This column is provided by the Financial Planning Association® (FPA®), the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning.