Most recent polls show that one-third of Americans don’t know much about
the Affordable Care Act, or ObamaCare. The law’s rollout began on
October 1. Now, it pays to review some basic questions that many
Americans will have about the law, and clear up some misconceptions.
Political bluster aside, the health
care law does not create a single-payer health care system like the
United Kingdom or Canada. Neither does the law dictate how much doctors
can be paid or set price controls on things like prescription drugs or
medical devices.
But the law certainly increases government involvement in
health care. The core of the law established “health insurance
exchanges” or marketplaces, in every state around the country plus
Washington, D.C.
These marketplaces are where Americans without coverage (or with
coverage that is unaffordable), can shop for health insurance. The plans
available will be run by private insurance companies.
Where the federal and state governments step in, however, is in
dictating how these plans can be priced and what services they have to
cover.
For starters, insurers will be barred from charging older applicants
more than three times what they charge the young; they will also be
prohibited from denying coverage to anyone; lastly, the law limits what
people can pay in “out-of-pocket” spending like deductibles and co-pays.
In addition to dictating how insurance plans can be priced, the
federal government set a minimum standard of “essential health benefits”
that all insurance plans sold on the exchanges have to cover – there
are 10 benefits in total and they include things like preventive
services (annual physicals for instance) and mental health services.
Some states like New York have chosen to add additional benefits to the
federal minimum – adding costs as well.
As with many things dealing with ObamaCare, the
answer is “it depends.” The health care law institutes a controversial
“individual mandate” which requires all Americans to purchase health
insurance.
Depending on your current insurance status and your income, the law
may decrease costs, leave them as they are, or increase them. For people
who receive insurance through their employers (more than half of the
country) and work full-time, the law does little to affect monthly
premiums.
For people who get coverage through government programs like the
Veteran’s Administration, Medicaid, or Medicare, the law also doesn’t
change much.
The biggest effect will be on those who currently buy insurance on
their own (between 10 and 15 million people) and the uninsured (about 50
million people)
.
Generally speaking, people buying coverage on their own will see
their premiums increase. In a study of 13 states plus Washington, D.C.
with my Manhattan Institute colleague, Avik Roy, we found that premiums
for this group will increase by 24 percent on average
The cost increase largely comes from the newly required benefits and limits on how insurers can price their products.
The newly insured, however, will fall into three groups – those with
incomes low enough to qualify for the law’s Medicaid expansion (below
$32,500 for a family of four); those with higher incomes that are low
enough to qualify for federal subsidies; and those whose incomes are too
high to qualify for subsidies.
People who end up receiving Medicaid coverage will pay
little-to-nothing for their insurance, but will tend to have poor access
to doctors.
People who buy insurance on the exchanges, and who are eligible for
subsidies, will receive some federal assistance with paying their
premiums, but the costs may still be prohibitive.
Lastly, those with incomes greater than $94,000 for a family of four
or about $46,000 for an individual will receive no federal help and will
see costs increase significantly.
While it’s hard to say how many people will fall into each group
(since people can choose to opt-out by paying a small penalty), it seems
ever more likely that premiums under ObamaCare – even with subsidies –
will be greater than they are now.
If you’re one of the people that ends up buying
insurance on one of ObamaCare’s exchanges (estimated to be around 7
million in 2014) how much you pay for health insurance will depend on
several factors.
For instance, health insurance costs vary quite a lot around the
country. The cheapest plan in Arizona would cost you $141 per month in
premiums; on the other hand, it’s a whopping $254 in Arkansas.
Then come the subsidies. If you’re the typical 20-something around
the country, you likely won’t get much in the way of subsidies – on
average, you might get $20 to help foot the bill. Of course, if you’re
lower income – say, a family of four living on $50,000 – family coverage
could cost you as little as $72 a month in Missouri.
Readers should also bear in mind that there’s more to the cost of health insurance than just the monthly premiums.
The cheapest plans on the exchanges will have deductibles (the amount
you have to pay before insurance kicks in) ranging from $4,000 to
$6,000 for individual coverage – about twice that for family coverage.
This means that for insurance to cover many services (except the
“essential health benefits” outlined earlier), you’ll have to spend
between $4,000 and $6,000 out of your own pocket first.
To make the most of these high-deductible plans, anyone buying
coverage on the exchange will need to work with their insurance company
to help set up a health savings account (HSA) that will allow them to
deposit pre-tax dollars for help with covering these out-of-pocket
costs.
Now that the rollout of ObamaCare has begun, consumers need to
understand how the law affects them. The majority of Americans will be
marginally affected. Those who do get coverage through the law, however,
will face a slew of changes.
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