Open wide: the fine print

This is a sidebar to the feature story “Open wide," which originally ran in the Columbia Journalism Review. We have published it on Center for Health Journalism Digital with permission.

Who’s eligible?

Generally, people who do not have coverage otherwise—from an employer, Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), or the military—can buy insurance in an exchange and get a subsidy to help pay the premium. Those who are eligible for coverage through other routes can also buy insurance through the exchanges, but are not eligible for subsidies.

Two other categories should be noted:

If you think your employer coverage is inadequate If that coverage meets certain government tests but the employee feels it is still not good enough, she can shop in the exchange, but is not eligible for a subsidy.

If what you have to pay for employer coverage is out of your price range Workers who pay more than 9.5 percent of their adjusted gross income for employer coverage can buy a policy in the exchange for themselves or their families—or both—and get a subsidy. (A problem arises, however, when a worker’s contribution to an individual policy is less than 9.5 percent of income, but the contribution to a family policy is more than that. Family members in this situation are currently not eligible for subsidized coverage from the exchanges.)

When families are not eligible for subsidized health insurance, where are they going for coverage?

The penalties

People who don’t buy the required insurance can expect to pay tax penalties, as follows:

—In 2014 $95 per person, or no more than 1 percent of taxable income
—In 2015 $325 per person, or 2 percent of the taxable income
—In 2016 and beyond $695 per person or 2.5 percent

Families with low incomes will generally pay the flat amount, while those with higher incomes will pay a percentage of their income in 2016.

There will be a maximum penalty, figured in this way: one full penalty per each adult in the family, and an additional half an adult penalty per child—but the total penalty cannot exceed $2,085 if the penalty is a flat rate. If it is a percentage of income, it can’t exceed the cost of a bronze plan, the cheapest type of policy in the exchanges.

Will some people find it cheaper to take the penalty then buy insurance?

The jargon

Deductible the amount someone pays out-of-pocket before insurance begins to pay. This is usually lower for in-network providers than for those out of network.

Copayment a set amount paid for a particular medical service or drug. Historically they have been low, but in the last year or so they have been rising for certain services.

Coinsurance a percentage of a bill for a service that someone pays out of pocket.

How do these elements vary from policy to policy?

The tradeoffs

Risk versus coverage Buying insurance means weighing risk against the price of protecting yourself from that risk. In health insurance, it means considering your health, trying to predict what sort of medical problems may surface, and figuring out how much you can afford to cover those risks. In general, the higher the premium, the more comprehensive the coverage. Policies with lower premiums tend to carry more financial risk if you get sick.

Premiums versus coinsurance, copays, and deductibles Low premiums may also mean high coinsurance, copays, and deductibles. People may choose low premiums and hope that they won’t use many services during the year.

Will shoppers in the exchanges flock to low-premium plans, leaving themselves exposed to risk if they get sick?

The essential benefits

Under Obamacare, all policies sold in the individual market must cover 10 essential benefits: doctor visits and outpatient services; emergency care; hospital care; maternity and newborn care; mental health and substance-abuse disorders; prescription drugs; rehabilitative services and devices; lab tests; preventive services and chronic-disease management; and pediatric care.

What services patients actually get among these 10 will vary from policy to policy. An insurer can comply with the law while limiting the number of visits for physical therapy, say, or for some other services. Or an insurer can require policyholders to pay more out-of-pocket for particular services, or vary the deductible.

However, Obamacare limits what people will pay out of pocket to $6,250 this year for individuals and $12,500 for families (including deductibles).

How are insurers complying with the essential benefit standards while limiting services or varying the cost sharing?

The subsidies

The lower a person’s or family’s income, the larger the subsidy.

A family of four with an income of $35,325 (150 percent of the current federal poverty level), who bought a $14,000 silver policy—one designed to cover 70 percent of someone’s medical expenses—would get an estimated subsidy of 83 percent of the premium cost. The subsidy for a family with an income of $47,100 (200 percent of the poverty level) would cover about 72 percent of the premium. The same size family with an income of $70,650 (300 percent of the poverty level) would get a subsidy covering about 44 percent of the premium. Families with incomes greater than $94,200 get no government help.

The exact amount of the subsidy will, of course, depend on the policy someone chooses and the family size. It will be calculated automatically at the time of enrollment in the state exchange.

Will subsidies be adequate to buy coverage with low cost-sharing for people whose incomes are in the middle range?

Getting help

Where will consumers get help finding their way through the exchange jungle? The law provides for a system of “navigators” to help people sign up for coverage in the exchange, and also steer them to state Medicaid programs if they are eligible. Meanwhile, the Department of Health and Human Services set up another system, with “assisters” who will also give guidance. The assisters will be active later this year, during the initial open-enrollment period. (But note: Assisters will not be available in the 16 states where the federal government will exclusively run the exchange.) Another layer of helpers, called “certified application counselors,” will be available in some areas. They can work out of community health centers, hospitals, and consumer organizations.

How good is the counseling?