By Polly Keary, Editor
The Washington Health Exchange is one of many insurance exchanges that open this week around the nation as part of the Affordable Care Act, and for many state residents, it will make insurance affordable that had been previously out of reach.
But the program is complex, and doesn’t work perfectly.
Here is some basic information on the Health Exchange, and the Affordable Care Act, to help you understand your options as the enrollment period begins.
What it is
The chief objective of the Affordable Care Act was to keep people from going broke over health care costs.
There were two parts to the strategy. The first was to get everyone insured. The second was to make sure that people could afford to cover whatever health care costs their insurance didn’t cover. American citizens had rejected previous proposals to create a government-paid system that would make health care free to everyone.
But no system of affordable care will work unless healthy people pay for sick people. That’s how private insurance has always worked, and that’s how taxpayer-funded systems in other countries work. And in the United States, where charity care and public hospitals paid for people who couldn’t pay for their own care (typically a quarter to a third of all care performed at any public hospital), those costs were passed on in higher rates to those who could pay, and to the property taxpayers who supported those hospitals.
The problem with the private insurance market has always been that people tend to not buy insurance until they think they will need it. A lot of young people, gambling on luck and their own health, put off buying insurance until they were older.
The solution that many economists recommended was to make insurance mandatory.
With more people buying insurance who were unlikely to need it right away, the overall cost of insurance would then theoretically be cheaper for all. In order to increase the chances that insurance companies didn’t just take all the new customers and drop rates not one dime, the government set up a system in which states such as Washington asked insurance companies to create policies that covered people for a basic set of services. The costs of those policies were limited, as was the maximum amount any subscriber would have to pay out of pocket in a year.
The states then picked out the best proposals and put them on a state “exchange,” a sort of online health insurance shopping mall. That mall opened this week.
How it works
Each of the eight insurance companies that Washington has included on the exchange offer at least three basic policies.
There are “bronze plans.” They have the lowest monthly costs, but they offer less coverage. They cover 60 percent of your medical costs; you pay the remaining 40 percent. Silver plans cover 70 percent, and gold plans 80 percent.
Obviously, however, a serious health problem can cost $1 million or more, and even 20 percent of $1 million would bankrupt all but a few.
So out-of-pocket expenses have been capped at a maximum of $5,950 for any one person in any one year for any one person enrolled on a state exchange policy.
However, for someone earning $30,000, that maximum, on top of insurance premiums, is hardly affordable either.
That’s where the two kinds of income-based help come in.
When you go on the website and look at all the plans available, you will first find your state area; Snohomish County is in Region 2. Then you can find the policies and prices available to you through each of the eight companies. The rates will depend on whether you use tobacco, which will boost your premiums by about 10 percent, and your age.
The rates listed are the base rates. Anyone, regardless of income, can buy the policies at those rates. But for those earning less than 400 percent of the poverty rate, or $43,320, as long as your employer doesn’t offer insurance deemed affordable based on your income, the government will chip in some in the form of a tax subsidy, which it will pay directly to the insurance company each month, cutting your bill.
You have to buy a silver plan or up to get the subsidy, though. And it can’t be the cheapest silver plan, it has to be the second cheapest silver plan or higher. Anyone buying the lowest-cost silver plan or a bronze plan, the cheapest plans that cover the least, will have to pay full price.
An important thing to note is that your income is not your gross income, but your MAGI, or modified adjusted gross income. That’s the adjusted gross income on which you pay income taxes, with a few things added back, like what you spent on student loans. If you lost a job this year or had some other significant dip in income, it’s important to know that your tax subsidy is based on your estimated 2014 taxable income, not last year’s actual tax return.
So what does that mean in terms of actual cost? A nonsmoker of 40, living in Snohomish County, who chose to buy a Lifewise Essential Silver 3000 plan would have a base rate of $313 a month.
But if that person’s MAGI was $28,000, the government would pay $152 of that each month, and the person would pay $161.
Cost Sharing Assistance
That’s not the only expense with which the government will help for people who qualify. There is also income-based help for copays and out of pocket maximums.
The most anyone with an exchange plan will have to pay out of pocket in a year is $5,950. And the most anyone with a silver plan (there’s no cost sharing help for bronze plans) is expected to pay is 30 percent of the cost of care until that cap is reached.
But the same person earning $28,000 would actually have an out-of-pocket cap of just under $4,000 in a year, and the plan would cover 73 percent of costs unit that cap was reached.
A person of 60 buying the same plan and earning $21,000 a year would have a base rate of $663 per month. The government would pay $219 per month, and the person $443. That person would have a maximum out-of-pocket cap of just under $3,000 per year, and the plan would pay 87 percent of all medical costs until that cap was reached, whereupon 100 percent of the rest would be covered.
What is covered
All insurance policies offered under the exchanges cover at least 10 things. Those things are: mental health and addiction treatment; maternity care; emergency room visits; prescription drugs, pediatric care, lab work, hospital care, outpatient care, rehabilitation and chronic disease care.
More than that, though, the insurance policies have to pay 100 percent of certain costs, including annual checkups, mammograms, vaccines and screenings. And you can’t be denied coverage, or even charged higher rates, for a preexisting condition.
Do I qualify for help with my premiums and with my costs?
Almost anyone, as long as a legal resident, can buy any of the insurance policies offered on the exchange. But to qualify for extra help with your insurance and your medical costs, four things must be true.
1. You must earn less than $43,320, or less than $58,280 as a married couple, or less than $88,200 for a family of four.
2. You must not already have an affordable policy, or the policy available through your work must not cover the basics.
The most you are expected to pay is 9.5 percent of your MAGI for any policy. That means if your MAGI will be about $30,000 this year, you can get a subsidized policy if your insurance at work costs you more than $237.50 a month.
The less you earn, the less of your income you’re expected to have to pay for insurance. So if you earn $20,000 a year, you can get a subsidized policy if your insurance costs you more than 6.3 percent of your income, or $105 a month.
You also can qualify if the insurance your employer offers, no matter how cheap, doesn’t cover the 10 basics covered by the exchange policies.
3. You must earn more than 133 percent of poverty level. If you earn less than that, you qualify for Medicaid and everything is covered.
4. You can’t be married to someone who has what is considered affordable coverage through his or her work. If you are, it doesn’t matter what it would cost to add you to that policy; you still don’t qualify for financial assistance with premium costs or medical costs beyond what your policy pays.
Do I have to buy insurance?
Yes. If you don’t currently have coverage, you have sign up for something, or on your next year’s taxes, you’re going to get hit with a $95 penalty. Those penalties are going to go up sharply in coming years, too.
Those enrolled in October will start paying for the insurance, and will have coverage, starting Jan. 1.
The enrollment period for new policies lasts until March.
After that, you can only sign up for a new policy if you lose the insurance you have, get married, change jobs or have another major life change that affects your current policy.
How do I buy?
To buy insurance on the exchange, start out by knowing what you make. Then, from there, go to the cost calculator found at www.wahealthplanfinder.org. Punch in your age and income, and find out what the government will pitch in.
Then go to plans and look at policies. Find the ones available in Area 2, and figure out which policies have what you need. They all have the basic 10 things, but some offer other extras such as lower out-of-pocket caps or benefits beyond the basics.
If you need help finding a policy in your price range that meets your particular needs, or if you have any questions at all, there are people called navigators waiting to help. Call 1 (888) WAFINDER for help.