1. How does the Affordable Care Act determine how much I have to pay for health insurance?
The insurance premiums have set costs for each level of coverage, starting with bronze for the cheapest plans and going up to gold or platinum for the most expensive plans. But the ACA is set up to provide you with subsidies when your family income is below 400 percent of the federal poverty level. The federal poverty level is $23,050 for a family of four, meaning all families of four with incomes below $92,200 will qualify for a subsidy from the U.S. Treasury. The subsidies work on a sliding scale, putting a cap on the percentage of your income you should have to pay. The cap maxes out at 9 percent, with the U.S. Treasury paying the amount that exceeds the cap.
If your income is below 138 percent of the federal poverty level ($31,809 for a family of four), you can qualify for Medicaid if your state is one of the 26 that expanded Medicaid coverage.
2. If I live in a state that decided not to expand Medicaid coverage, such as in the South, how does it affect me?
As of Dec. 20, there were 21 states that decided not to expand Medicaid coverage as intended by the Affordable Care Act (with 4 others still considering expansion). This means that millions of people in those states—ironically some of their poorest residents- are left without coverage, which means many of those that Obamacare was intended to cover aren’t being covered.
The states opting out of Medicaid expansion start at West Virginia and sweep in a straight line across the entire South and up through the central plains from Texas to South Dakota and across to Idaho. Under Medicaid expansion, the federal government assumes 100 percent of all Medicaid costs until 2017, then 95 percent from 2017 to 2020 and 90 percent after 2020. So the costs to the states are minimal, particularly in the first six years.
The individuals who are affected most drastically in these Southern and Midwestern states are those whose incomes are between 50 percent of the federal poverty level and 100 percent of the federal poverty level. Medicaid coverage in most of these states starts at people whose incomes are at 50 percent of the federal poverty level and below. Federal subsidies for Obamacare begin at 100 percent of the federal poverty level. The donut hole in the middle is a painful reality for millions. For a family of four, the donut hole stretches from an income of $11,525 to $23,050.
3. How does the government know how much money I make?
When you sign up through the health care exchanges and provide your vital statistics, the system automatically checks your tax records to verify your income. Within a few hours, you will be sent an email telling you that the system has made a determination about your health care eligibility. When you log in again, you will be able to see the decision that has been made. If you qualify for a subsidy, the system will tell you the amount of the subsidy and direct you to go find a plan. When you are assessing plans, remember to subtract your subsidy from the amount of the premium. But remember, if your income over the next year is a lot higher than the previous year, you likely will be subject to a penalty when you file your taxes for the year because your subsidy amount didn’t reflect your actual income. You don’t have to use the entire subsidy when paying your premium. In other words, you can save all or part of the subsidy, paying the entire balance of the premium, and then apply the subsidy at the end of the year to increase your tax refund.
According to the latest statistics, 79 percent of the 6 million who have signed up for the ACA thus far qualified for subsidies or Medicaid.
4. What will happen to me if I don’t sign up for health insurance?
The intent of the Affordable Care Act is for all Americans to have affordable insurance. But the key to the program, and the way it is able to hold down costs, is in the sheer size of the pool. The more people who use it, the cheaper are the costs for everybody. It is especially important for young people to sign up, because they are less likely to actually need medical care, meaning the insurance companies can use their premiums to pay for the care of the older people who will use it.
For those who opt not to sign up, at tax time they will be hit with a financial penalty that will be levied against them like an additional tax to be paid. You will pay a tax penalty of 1 percent of your income or $95, whichever is greater (and the amount goes up steeply in later years). So if you make $50,000, your penalty will be $500.
5. Why did the government force so many plans to be canceled after President Obama assured us that wouldn’t happen?
In actuality, when he discussed the ACA in detail, President Obama had been saying all along that some plans that are inadequate and substandard and would have to be replaced by plans in the insurance exchanges. But most of the media and Republicans focused on his oft-repeated soundbite that “if you like your plan, you can keep it.”
In reality, many people who received notices that their plans were canceled were told they would be automatically enrolled into another plan by the same insurance company. Most of the canceled plans were those that are described as “catastrophic,” meaning they are intended to cover hospital costs for a major (catastrophic) illness or accident, but don’t really cover anything else—which is why they are usually cheaper than more extensive plans. These plans often had many clauses and exemptions in fine print that most people weren’t aware of until they actually tried to use them.
When President Obama’s mother Ann Dunham became ill with uterine cancer in 1994, she discovered that her insurance coverage didn’t pay for all of her treatments, causing her considerable financial distress. So the president is very familiar with the limitations of these plans.
Many people may claim they “like” their catastrophic plan because it is cheap—and they have never had to actually use it. But one of the purposes of the ACA was to ensure that these people were fully covered when they got ill and wouldn’t have exorbitant costs that send them into financial distress, as happened with Obama’s mother. That’s why the ACA set a minimum level of benefits that a plan must provide. If a plan doesn’t reach this minimum, the insurance company can no longer offer it—though the president backtracked and allowed companies to have people stay with their substandard plans for an additional year.
