Here’s what Obamacare’s launch means for you

Obamacare is live, and that means some major changes for Americans and how they get their health care, how much it will cost, and what the quality of that care will be. There’s a lot of confusion surrounding the law, so let’s go through its biggest changes.

The exchanges: Perhaps the biggest piece of the law launched today are the insurance exchanges in all 50 states. These marketplaces will initially only be for individual consumers but will eventually be a place where individuals and corporations can buy insurance. Most exchanges will be run by the federal government, either in whole or in part, and will feature heavily regulated insurance plans that fall into one of three cost-based categories: gold, silver, and bronze. Bronze will be the cheapest plan, silver the mid-priced plan, and gold the most expensive.

Each will be heavily regulated by the federal government and must be pre-approved by the Department of Health and Human Services (HHS) before it can be sold. The exchanges are supposed to be a one-stop-shop for individuals purchasing health insurance on their own.

In reality, the exchanges are going to launch with several key features missing. Most importantly, they won’t be able to determine if a consumer is eligible for Obamacare’s subsidies or not. For now, the government has said they’ll simply take your word for it. Don’t jump for joy just yet though, because eventually they will check your eligibility, meaning you could be buy a plan now and wake up next year with a much higher bill.

Other smaller problems will dog the exchanges and officials say they won’t know how many people enroll until next spring. Small businesses won’t have access to the exchanges right away, due to another problem that forced the administration to delay giving them access. Spanish speaker won’t have access to Spanish-language help in the exchanges either.

Health costs: For most people, Obamacare’s launch will bring higher prices. This is largely due to the coverage regulations the law puts in place. More coverage always makes insurance more expensive and most Americans won’t qualify for Medicaid or Obamacare subsidies. This will be particularly true of younger Americans, who the law anticipates will buy coverage and subsidize older, sicker Americans.

For this group, costs will skyrocket, meaning that they will have to buy pricey insurance plans they’re unlikely to use. Over time, more and more Americans will face this same problem as their employer-provided plans expire and their employer must choose whether to continue to provide coverage or push them onto exchanges.

Regardless, eventually all insurance will have to comply with Obamacare’s coverage mandates, meaning that regardless of whether you get your insurance from your employer or from the exchange your costs are almost certainly increase significantly.

Subsidies: Insurance bought on the exchanges can be bought with the aid of federal tax subsidies, providing that a consumer qualifies. To qualify for some kind of subsidy you must make no more than 400 percent of the federal poverty line — $45,960 for an individual – to get a subsidy, but those subsidies aren’t equal.

In reality, only a very few people will qualify for enough of a subsidy to make the costlier insurance options found on the exchange worth it. Even if you qualify, you could still end up paying hundreds of dollars per month for coverage for a single person or thousands per month for a family.

Consider the following example: A family of four making 400 percent of the federal poverty level — $94,200 per year – that wants to buy insurance on an Obamacare exchange. Under the law, they are eligible for a subsidy that restricts their premium to no more than 9.5 percent of their income. What is 9.5 percent of $94,200? $8,949.

Further, the subsidies are based on your tax filings, meaning that if you ended up earning more than you estimated, you could end up having to pay some of that subsidy back in the form of higher taxes or being disqualified altogether – seriously increasing your costs.

Lastly, the subsidies technically go to the insurance company whose plan you purchased, meaning that you’ll never see the money and will instead just be sent a bill for your health premium less the subsidy. So if you thought that subsidy was going to help even out your cash flow, you’re out of luck.

Matt Cover is Content Editor at Rare. Follow him on Twitter @MattCover. 

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