By Michelle Andrews
As landmark dates approach in the health-care overhaul, readers are trying to figure out how the new insurance exchanges will work. Here are some recent questions:
Q. After the exchanges go live in 2014, will consumers still be able to buy individual health insurance directly from carriers, without going through those state-based marketplaces? I fear the rules of the plans operating within the exchange will make the premiums unnecessarily high for younger, healthy people.
A. Consumers will be able to buy individual health insurance next year either through the state insurance exchanges or on the private market. Regardless of where they buy a plan, however, all new individual policies will have to meet certain standards related to coverage and cost.
Under the law, premiums for older people cannot be more than three times higher than those for younger ones. Currently, the gap between how much younger, typically healthier people pay for coverage and how much older people pay is larger than that, leading some experts to predict that younger people’s rates will skyrocket next year.
An analysis published last month by the Urban Institute suggests that will not happen. Although premiums will be higher for many young people under the new rules, this increase will have very little impact on their out-of-pocket costs, the study found. The reason: The vast majority of young people will be eligible for subsidized coverage — through the exchanges, Medicaid or their parents’ health plans. On the health insurance exchanges, premium subsidies will be available to people with incomes up to 400 percent of the federal poverty level — $45,960 for an individual in 2013.
“If you’re young, you do want to go on the exchanges because you’ll qualify for subsidies,” says Jen Mishory of Young Invincibles, an advocacy group.
In addition to enrolling in regular plans, people up to age 30 will have the option of using the exchanges to buy less expensive, high-deductible policies that protect primarily against catastrophic events. Although these policies might require large out-of-pocket payments by members — the deductible probably will be more than $6,000, for starters — they will be required to cover preventive care without any co-pay or cost sharing, and three primary-care visits will be covered even if the deductible has not been met.
Q. If employers stop providing coverage and employees have to purchase individual policies on or off the exchanges, do the employees lose the option to make pre-tax contributions to their health savings accounts?
A. You’ll be able to make pre-tax contributions as long as you buy a policy that meets federal standards for plans that can be linked to health savings accounts.
This means a high-deductible policy. In 2013, HSA-qualified plans must have a deductible of at least $1,250 for individual coverage and $2,500 for a family plan, among other requirements.
The amount that individuals and their employers can contribute to the accounts limited to $3,250 and $6,450 for individual and family coverage, respectively. (The Internal Revenue Service makes cost-of-living adjustments to these and other limits annually.) Even if your employer no longer offers health insurance in 2014, any money in the HSA is yours to use for medical expenses.
Some of the policies offered on the exchanges may qualify as HSA plans, says Carrie McLean of eHealthInsurance.com, an online vendor. But it’s too soon to know whether carriers will offer such plans or the exchanges will choose to carry them, she says.
Q. In 2014, can someone who works for a company drop his coverage and buy it through a state exchange instead?
A. Next year, most people will be able to choose to buy a health plan on the exchange. As I said above, individuals whose income is less than 400 percent of the federal poverty level may be eligible for a subsidy. This can make buying a policy on the exchange an attractive option.
But even if you meet the income requirements, you won’t be eligible for a subsidized exchange plan unless your job-based coverage is considered unaffordable (because premiums for individual coverage cost more than 9.5 percent of the individual’s income) or inadequate (because the plan covers less than 60 percent of allowed medical expenses).
Q. What’s to stop people from just paying the individual mandate penalty and buying coverage when they need it, since insurers won’t be able to turn them down because of a preexisting condition?
A. If you decide to drop coverage altogether, the penalty for not having insurance in 2014 will be either $95 or 1 percent of your taxable income, whichever is greater. To discourage people from waiting to buy insurance until they’re sick, there will be an open enrollment period for buying coverage on the exchanges from October 2013 through March 2014. If you don’t sign up during that time and you subsequently get sick, you won’t be able to sign up until the following year in most cases.