report on ObamaCare

Taking Care of Your Healthcare

A new era is dawning for health insurance. As of January 1, 2014, nearly all Americans, for the first time in our history, will be required to carry some form of health insurance—the so-called individual mandate.

But most people won't notice a radical impact on their healthcare coverage—not in 2014, anyway. If you're already on Medicare or Medicaid, for example, or VA health benefits or CHIP, you don't need to do anything to comply with the ACA mandate. Ditto if you're covered by an employer's insurance plan (assuming the employer doesn't decide to discontinue it).

On the other hand, if you're uninsured, the new law, with its financial penalties, is squarely aimed at you. For most families lacking insurance in 2014, Uncle Sam will nick you $95 per adult and $47.50 per child, or 1% of your income (whichever is larger). The toll goes up in future years.

Online Insurance Shopping

Apart from the mandate and its penalties, the new law has altered the healthcare landscape in other ways not so widely (and heatedly) discussed. The most remarkable development is that just about anybody can now shop for health insurance via the online "exchanges" available in each state. Regardless of any pre-existing medical condition you may have, you'll find an insurer willing to take you on, without a higher premium.

The federal government operates the insurance exchanges for 34 states, while the other 16 and the District of Columbia sponsor their own marketplaces. Even if you're employed and already possess some form of health insurance, I recommend checking out your state's exchange to see whether you might be able to land a better deal than you've now got. The statewide exchanges went live October 1 and will be accepting 2014 enrollments through March 31.

For anyone interested in exploring options under the new law, your first stop should be the federal government's website www.healthcare.gov. From there, you can navigate to your state's health-insurance exchange and get quotes on a variety of plans that may suit your needs.

Unfortunately, the federal site—which by some estimates cost $634 million to build—had a very poor technical launch. It took me about two weeks of trying, on and off, to establish a user account. Even after my account was set up, the site repeatedly froze (and issued seemingly random error messages) as I was filling out my application. In the end, though, I was able to locate a plan that will provide essentially the same coverage I've got already for a 10.6% lower premium in 2014.

Five Levels of Coverage

As you surf among what may at first seem like a bewildering array of choices, keep in mind that the exchanges offer five distinct levels of insurance. All the plans feature essentially the same set of benefits, the main difference being the amount you have to pay out of pocket for drugs and medical services. Plans with a lower out-of-pocket expense charge you a higher premium, and vice versa. For people below certain income thresholds, tax credits may shrink your premium.

Whatever plan you choose, you can expect to shoulder part of your healthcare costs by way of an annual deductible. "Cadillac plans" that cover almost every last dime are a thing of the past. Here are the five main plan classifications under the new regime:

Catastrophic. Available only to people under 30 (and certain low-income individuals who can't afford other insurance), these bare-bones plans cover three annual primary-care visits and preventive services at no cost. After that, you have to meet a deductible of several thousand dollars. Because of the high deductible, catastrophic plans typically cost far less than other plans. For example, a 27-year-old single in Missouri (a state with healthcare costs close to the national average) could pay as little as $100 per month for a catastrophic plan with a $6,350 yearly deductible.

Bronze. The cheapest of the broadly available plans, bronze plans are designed to pay 60% of the average person's covered healthcare expenses, with 40% remaining in your court. Don't forget, though, that you'll have to satisfy a substantial deductible before the benefits kick in. Deductibles vary, but can range upwards of $5,000 for singles (double for families). Nationwide, premiums for bronze plans average $249 per month, with a low of $144 in Minnesota and a high of $425 in Wyoming.

Silver. Government projections call for these plans to cover 70% of the average person's healthcare expenses, with the remainder coming out of your pocket. While silver plans charge a higher premium than bronze, your deductible is likely to be significantly lower—in the neighborhood of $2,000 to $3,000 a year for an individual. Some silver plans require you to copay a portion of your medical costs; others don't.

Gold and platinum. These plans are best for people who expect a lot of doctor visits or need expensive prescription drugs. Gold plans are intended to meet 80% of the average person's healthcare costs, while platinum plans are supposed to cover 90%. Deductibles tend to be low (under $1,000), although some plans include a sizable copay provision. As the names imply, premiums for gold and platinum insurance run very high, as much as $1,600 a month (and more) for a family plan. Even with tax credits, I suspect that these plans will turn out to be too expensive for most people.

On the Bright Side

As the examples above should make clear, the Affordable Care Act carries no magic wand to whisk away the high cost of medical care. Still, the law—despite its annoying mandates and penalties—has spawned two opportunities you may be able to take advantage of, at least in the near term:

1) Uncle Sam offers tax credits for families of moderate means. The credit diminishes as your income goes up, but a family of two adults and two children, earning $50,000 a year, can collect a credit of up to $4,925 a year. This credit is automatically applied to your insurance premiums before you pay them.

2)  Insurers, looking forward to an influx of new customers from the individual mandate, are quoting somewhat lower premiums for 2014 than many observers had forecast. Thus, you may find that, for the next year anyway, your health-insurance costs remain steady or even drop modestly versus what you've been paying in 2013.

Why do I say these are only "near term" opportunities for insurance consumers? Because in the long run, the ACA will have many economic effects that its cheerleaders have ignored or downplayed. The tax credits will cost $19 billion in 2014 alone, according to the Congressional Budget Office—and the burden will increase rapidly as insurance premiums shoot up again in future years.

How do I know premiums will escalate? Because the insurers are almost certainly overestimating the number of healthy younger people who will sign up for insurance rather than risk a penalty. If not enough young people enroll, the brunt of medical-cost inflation in coming years will fall on a smaller population than the insurers now foresee. That can only mean huge premium hikes for people who stay in the system.

In short, Washington has only stuck a band-aid on the problem of financing medical care. However, if I can save a few nickels in 2014 by using the exchanges, I'll do it. I advise you to do the same.

-- via Richard Band