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Obamacare Explained: A Guide for Californians

Produced by KQED News and The California Report

How Does Covered California Work?

At a Glance

  • The state has set up a new online marketplace, called Covered California, where people can buy insurance.
  • All health plans offered in Covered California feature the same standard set of benefits.
  • Effective Jan. 1, 2014, insurance companies may consider only three factors to determine the cost of your premium: age, geography and family size. Your health history may no longer be considered in setting premiums.
  • To help you pay for insurance, the federal government is offering tax credits for people who qualify, based on their income.

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For millions of Californians, the online marketplace — Covered California — is the heart of the health law. If you are uninsured, or buy insurance for yourself or your family, Covered California is where you can shop. So far, two million people have purchased insurance on Covered California, and many others are eligible for subsidized coverage, but not signed up. If you do not have health insurance, you may need to pay a penalty. In tax year 2015, that penalty is 2 percent of your income or $325 per person, whichever is greater. If you do not have insurance in 2016, the penalty rises to 2.5 percent of income or $695 per person. (Penalties for children are half the amount of adults.)

Buying Health Insurance Today

Before the Affordable Care Act, if you bought insurance for yourself or your family, it may have been hard to find a policy with comprehensive benefits. Health insurance companies were generally not required to cover specific areas of care. If you had an illness, the health plan might have charged you a very high premium to get the care you wanted, perhaps more than you could afford. Or you might have found an affordable plan, but the company would not have covered the care you needed. For example, the company might have excluded specific illnesses based on your health history.

What Changed With the Health Law?

Under the Affordable Care Act, the state set up an online marketplace, called Covered California, where insurance companies, like Kaiser or Anthem Blue Cross, offer plans.

A big part of Covered California's responsibility is to negotiate with insurance companies to get the best quality plans — at the best price — for you to choose from. In 2016, 12 companies are offering plans on the Covered California marketplace, including statewide companies Anthem Blue Cross, Blue Shield, Kaiser and Health Net, as well as eight plans that will offer coverage in certain regions: Chinese Community Health Plan, L.A. Care, Molina Healthcare, Oscar, Sharp Health Care, United Healthcare, Valley Health Care and Western Health Advantage.

Before We Dive Into How Much This Will Run You, Let's Explain a Few Terms.

You've probably heard of premiums, deductibles and co-pays. In considering what health insurance policy to sign up for, you need to think about your health status, what health risks might come your way and your own financial ability to cover those risks. For example, do you have diabetes? You can probably calculate the cost of the prescription drugs you need. Are you an avid athlete who might sustain an injury? You might want to think about how much a broken leg might run you.

Here's some jargon to help you in your decision:

  •  Premium: this is the amount you pay, generally monthly, to a health insurance company for your plan.

  •  Deductible: this is the amount you pay — out of your own pocket — before your insurance begins to pay, although some services on Covered California plans are covered outside of the deductible. For example, on all Covered California plans, you can see your primary care doctor with just a copay. Some preventive services are free.

Two cautionary notes: First, you want to be careful to pick "in network" providers, as they are usually less expensive than doctors and other providers not in your network. Second, plans with lower monthly premiums generally have higher deductibles. When you're considering different plans, think of how much health care you are likely to use, then add your total annual premium and your deductible to consider what your annual costs might be.

  •  Copayment: this is set amount you pay — out of your own pocket — when you access care, such as when you see a doctor or buy a prescription drug.

  •  Coinsurance: this is a set percentage you pay — out of your own pocket — when you access care. Some plans may charge a copay, some may charge coinsurance.

  •  Out-of-pocket maximum: This is the maximum amount you will pay, out of your own pocket, in a year. For many Covered California plans, this is $6,250 for an individual or $12,500 for a family. Once you reach the out-of-pocket max, all your medical expenses are generally covered by your health insurer, at no additional cost to you. Again, this is for in-network care. If you go out of network, your costs could be higher.

How Much Will I Pay?

Under the health law, insurers may consider only three factors when setting premiums: your age, where you live and your family's size. Insurance companies cannot turn you down or charge you a higher premium because you are sick or had a previous illness or accident.

To set up Covered California, state law established 19 geographic regions. That's the "where you live" factor insurers may use in setting premiums.

You can easily compare specific plans and premiums available to you — according to where you live, your age and the number of people in your family — by using Covered California's online calculator.

I've Heard the Government Is Offering Subsidies to Buy Insurance. Tell Me More.

You may qualify for a subsidy — in the form of a tax credit — to help you pay for health insurance. Tax credits are available on a sliding scale, according to your income. About 90 percent of people who purchase a Covered California plan qualify for a subsidy.

If you earn between 138 and 400 percent of poverty ($16,243 - $47,080 for an individual; $33,465 - $97,000 for a family of four), you may qualify for a federal tax credit. The credit will be applied to the cost of your premium. You choose when you want to receive the credit. You might want to receive it monthly, so that you will pay less each month, or you may elect to receive it all at once when you file your taxes in the following year.

In order to receive the subsidy, you must buy a plan through Covered California. You cannot apply the subsidy to a plan you find outside of Covered California.

Covered California offers a calculator to help you estimate the cost of your insurance after the tax credit has been applied -- and to help you compare the prices of the different plans available to you. The tax credit is based on your ability to pay for the second-lowest-cost silver plan. But you can apply the credit to any plan you wish to buy (except for a catastrophic plan). More on the "tiers" of plans further below.

The health law is using a new calculation of income, called Modified Adjusted Gross Income (MAGI). In general, it's the total of your adjusted gross income — plus any tax-exempt income you might have. But to calculate your subsidy you don't use last year's income. When applying for insurance, you will be asked to state what you expect your 2016 income will be. If you think you will earn roughly the same next year, you can estimate your MAGI by adding lines 8b and 37 from your 1040 tax return. But if you think your income will change, you will need to estimate.

If you want more specifics of what income is counted — and what income isn't — check this helpful summary from the UC Berkeley Labor Center (pdf).

What If My Income Changes During the Year?

If your income changes, your subsidy amount may go up or down. You should contact Covered California right away to adjust the amount of subsidy you receive. If you estimate your income too low — and get a higher subsidy as a result — you could have to pay back some of the subsidy at tax time. Alternatively, if you estimate too high, you could get a refund.

What Kind of Coverage Can I Get?

Any plan offered in Covered California must include a standard set of benefits across 10 categories. These are:

  • Ambulatory patient services (that means routine doctor's office visits, lab tests, etc.)
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including pediatric dental care
What Is the Difference Between a Silver-Tier Plan and Other Plans?

Individual health plans in Covered California are offered in tiers of coverage: platinum, gold, silver and bronze. The difference between the tiers is not what benefits are covered. Under the health law, each plan must offer the same standard benefits.

The difference between the tiers is cost. If you pay more each month for the premium, you will pay less when you need health care. The less you pay each month for the premium, the more you will pay when you need health care, the more you pay for the premium, the less you pay when you need care.

The platinum tier has the highest monthly premium, but there is no deductible and you have a $20 copay when you see your primary care doctor.

At the other end of the spectrum, in the bronze tier, you will pay much less each month for the premium. But bronze plans have a $6,500 deductible and a $70 copay when you see your primary care doctor. Silver tier plans have a $2,500 deductible. All plans have a limit on your maximum out-of-pocket costs for the year. For most plans, what you pay for health care, after your premium, is capped at $6,250 for individuals and $12,500 for families. This is a big change under the health law. In the past, in some cases, out-of-pocket costs could have been tens of thousands of dollars.

You can decide which tier — and which plan — is for you by considering your own finances and health care needs. The best way to know your options is to plug your household income and other data into Covered California's calculator. It will show you specific plans that are available to you, what the cost will be to you, and what subsidy you are likely to qualify for.

I Would Like to Talk to Someone in Person. Where Can I Go For Help?

Covered California has certified thousands of people across the state to provide in-person assistance to help consumers enroll. There is help available in both English and Spanish — and some certified counselors speak other languages as well. This page of the Covered California website provides links to certified counselors and insurance brokers trained in Covered California insurance plans as well as county offices where you can go for help. You can also call Covered California: 1-800-300-1506.

I Can't Even Afford the Copayment or Deductible. What Do I Do Now?

In addition to the tax credit, the federal government also offers special subsidies based on income and family size. If your income is less than about 2.5 times the poverty level — $29,425 for an individual or about $60,625 for a family of four — you may be eligible. These subsidies can help reduce what you have to pay when you see the doctor or get other health care.

I'm 28 and Healthy. I Only Worry About What I'd Do If I Were Hit by a Bus. Which Plan Should I Pick?

You can certainly look at the bronze plan and see if the coverage makes sense for you. Covered California also offers a catastrophic plan. It does not cover doctor's visits or even emergency room visits, but is meant to protect you against catastrophic medical bills. This level of coverage is available to people up to age 30. It's also available to other people who can demonstrate that they are experiencing financial hardship and to certain people whose policies were canceled because they did not meet the requirements of the health law.

Even With All This Help, I Cannot Afford to Buy Insurance or Pay The Penalty. What Do I Do?

If you are looking at the least expensive plans, and your cost for the premium is greater than 8 percent of your household income, you are exempt from the requirement to have health insurance. You do not need to pay a penalty.

I Don't Like the Insurance My Employer Gives Me. Can I Buy Insurance on Covered California?

You can, but because you are turning down insurance you already have through your job, you are probably not eligible for the tax credits. But, again, there are exceptions. The insurance offered by your employer must be "affordable" as determined by two criteria. First, the total annual premium you pay for coverage for yourself must be less than 9.5 percent of your income. And, second, the plan must cover at least 60 percent of health care costs. Your employer can tell you how much your plan covers. If you do not meet these two criteria, your plan is not "affordable." You may visit Covered California, buy insurance there and apply for a tax credit.

I'm Covered by My Employer, But My Family Is Not. Are They Eligible for Subsidies?

If your employer does not offer insurance to your spouse and dependents, then, yes, they can buy insurance at CoveredCA.com, and they may be eligible for subsidies.

If your employer does offer family coverage, your family may not be eligible for subsidies — if the insurance for you, the employee, is "affordable" as described above. The "affordable" coverage from your employer negates other family members' eligibility for subsidies — unless your contribution is greater than 9.5 percent of your income and covers 60 percent of costs, as described above. It does not matter how expensive the spouse and dependent coverage is. If the premium for you, the employee, is "affordable," they are not eligible for subsidies with Covered California.

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