Will I have to buy Mandatory Health Insurance?
On June 28th, the Supreme Court approved the Affordable Healthcare Act, an insurance reform law also known as “Obamacare.” Under this act, all individuals are required to carry health insurance, and employers are required to provide group plans to their employees. Although there are some exemptions, people who fail to comply with these requirements will be fined.
Although the act is unpopular, it has gained support after its approval by the Supreme Court. If it works as designed, it should help lower the cost of health insurance for all Americans and play a role in reducing the cost of healthcare in general. Individuals may be concerned about their ability to pay for coverage, but the act does offer provisions that will help lessen the impact of insurance premiums on the budget of citizens.
In order to prepare for the changes, which are due to occur in 2014, it’s important to understand how the law works and what effect it will have on you and your family.
What the Act Does
Currently, health insurance providers attempt to maximize their profits while eliminating costs by cherry-picking their insureds. People who are deemed low risk by the insurance company will pay low premiums. All other individuals pay substantially higher premiums, and some people are denied healthcare altogether.
For example, insurance companies could traditionally deny coverage to people with preexisting health conditions. This is somewhat ironic, as people with chronic or recurring conditions usually have the highest medical expenses and thus have the most need for insurance. These individuals may also have a hard time procuring work due to their conditions, making group health insurance plans impossible to obtain.
The Affordable Healthcare Act attempts to remedy this problem, and it also provides assistance to people whose incomes are too high for Medicaid but who nevertheless cannot pay for private insurance. In addition to regulating health insurance companies, the act requires all states to provide an affordable insurance exchange program that will make coverage available to low-income people.
The reason for the insurance mandate is so that risk can be shared across the widest possible pool. With group insurance, premiums are usually kept low because everyone insured in the group pays the same rates but not all members will get sick at the same time. Because the insurance company will collect premiums from many people who do not file claims, the company can profit. The Affordable Healthcare Act functions in a similar way, spreading risk across the nation. Without this shared risk, insurance companies would not be able to stop excluding people due to their risks and histories.
How Much Will Health Insurance Cost?
The cost of insurance under the Affordable Healthcare Act will generally be lower than current insurance rates, but the exact figure will depend upon the income of the individual. All private insurance companies will need to offer cafeteria plays for both individuals and groups. These plans should cover a wide spectrum of needs and their rates will be generally similar to each other.
People who cannot afford health insurance through a private provider will be eligible for a policy through the state insurance exchange. This essentially allows the insured to share the cost of premiums with the state. Policies will cost more for people with higher incomes than those with lower incomes. Even people at higher incomes will pay less for insurance than they generally do under current insurance pricing structures, however.
For example, a single individual with an adjusted gross annual income of $30,000 would pay no more than $2,850 per year, or about $237 per month. This same person may spend $300 under a group plan or upwards of $500 per month for an individual policy before the act takes effect.
In order to benefit from the state insurance exchange, you must be a legal resident and tax payer in the state where you reside.
Do I Need to Buy Insurance?
If you already have health insurance through your employer, you won’t need to do anything before 2014 to get ready. Your employer will make all of the necessary preparations. Your rates may decrease, or the insurance company may offer a wider variety of plans, but you will not need to worry about purchasing additional coverage unless you are currently uninsured.
People who cannot afford insurance through a private provider or the state’s insurance exchange may still qualify for Medicaid. People under the age of 26 can continue being insured under their parent’s health insurance if they wish, so there is no rush for students to obtain insurance. Additionally, individuals are exempt from state penalties if insurance would cost over 8% of their annual incomes. Otherwise, you would need to either buy insurance or pay the fine.
The government fine for being uninsured varies depending on the size of a household, not its income. For example, a single person with an income of $30,000 would be required to pay a $695 penalty. A married couple would pay a $1,390 penalty. These penalties would be the same regardless of the household’s income, but the cost of insurance coverage would be substantially lower for low-income households than those with higher incomes.
In other words, it would be more affordable for a low-income couple to pay for insurance than it would be to simply accept the tax penalty. Individuals with higher incomes would pay more for insurance under the state insurance exchange, so it may make more sense to accept the tax penalty. On the other hand, they may be able to find more affordable coverage through an individual insurer once they reach a high enough income.
The fee is a tax penalty assessed at the end of the year when taxes are due. The government can withhold a tax return to cover unpaid penalties, but cannot file suit against you for unpaid penalties. Because the penalties are associated with taxation, people who are unemployed, illegal residents or otherwise do not pay taxes will be exempt from the tax penalty.
Although the Affordable Healthcare Act has been met with reluctance by many, it should serve to make health insurance affordable for all individuals. This will reduce the likelihood of a catastrophic medical condition destroying a person’s finances, and it will make it possible for all people to carry insurance. In the long run, it may even reduce the overall cost of healthcare.
Of course, all of these changes are contingent upon the outcome of the upcoming election. Mitt Romney has already stated that he will overturn the act if he wins the election, and other Republicans are currently searching for ways to vote against the act or reduce its effectiveness. Nevertheless, until we know for certain what will happen in 2014, it’s best to prepare for the Affordable Healthcare Act. By researching it now and determining how much you will owe and what you’re qualified to receive, you can begin budgeting for the new expense.