September 23, 2013 — Love it or hate it, Obamacare, otherwise known as the Patient Protection and Affordable Care Act, is going into effect. As a baby boomer you need to be prepared for an important first deadline that goes into place next week on October 1. That is the date that you can begin signing up for 2014 coverage at one of the health insurance marketplaces (exchanges) created by the Act. This article will outline 7 things you need to know about Obamacare, so you can be adequately covered and guarantee your rights under the new law. As you can see below, boomers too young for Medicare but not covered by their employer can probably save thousands of dollars on their medical insurance under the new law.
But first, we need to discuss your current health care insurance situation because, based on that status, the new law will affect you in different ways.
If you are currently on Medicare
If you are covered by Medicare the new law does not have a great effect on you, and the changes that are coming are mostly positive. Since you already have health insurance with Medicare, you do not need to go to one of the new exchanges for coverage. Your premiums will be unchanged, but you will have some new coverages.
– Under The Affordable Care Act, Medicare now covers certain preventive services such as mammograms or colonoscopies without charging you for the Part B coinsurance or deductible. You also can get a free yearly “Wellness” visit.
– If you’re in the donut hole, you’ll also get a 50% discount when buying Part D-covered brand-name prescription drugs.
One understandable fear with Obamacare is that doctors will stop accepting Medicare because of the reduced fees they will receive. The facts suggest there will not be a large number who do this. USA Today reported in August that more doctors than ever are accepting Medicare (1.25 million), in contrast to a Wall St. Journal article that reported that 9,500 doctors opted out of Medicare in 2012 (vs. 3,700 in 2009). Apparently more new doctors are accepting Medicare than older doctors leaving the system. USA Today reported 90% of primary care doctors accept Medicare.
Currently have health insurance through your company
Assuming your company continues to provide you with health insurance, you do not need to go to one of the health insurance exchanges for coverage. If you are in a higher income bracket, there might be some additional taxes and fees levied on you and/or your employer. You will also see some of the benefits attributed to the Affordable Care Act:
– Your adult children can be covered under your policy until they reach the age of 26.
– As of Jan. 1, 2014, annual and lifetime limits on “essential health benefits” are eliminated (except for certain grandfathered plans). This means that if you develop a very expensive medical problem, your coverage will not be shut off.
– No more pre-existing conditions. Insurances can’t deny you or charge you extra because of a pre-existing condition, or if you become sick after you take out a policy (but they can charge more based on your age and some other factors).
– Essential medical services. All plans, individual or group, have to include certain basic benefits in 10 categories. Those include: emergency services, maternity and newborn care, substance use disorder services, chronic disease management, outpatient services, pediatric care, etc.
Not currently covered by Medicare, Medicaid, or your employer
This situation applies to baby boomers who are no longer working, not covered by their employer, or who are not yet old enough (65) to qualify for Medicare. If you do not currently have health insurance (the Commonwealth Foundation estimates 20% of people age 50-64 did not have health insurance at some point last year) Obamacare requires you to get coverage, starting in 2014, or pay a fine. If you have health insurance and are paying for it yourself, the chances are very high that you qualify for a tax credit that will pay for most of those premiums.
Seven Things You Need to Know
The seven points below assume that you are not currently covered by Medicare, Medicaid, or your employer.
1. Find out if your state has its own Insurance Marketplace or uses the one provided by the federal government.
Currently 27 states have decided to use the federal marketplace. If your primary residence is in one of those states, you will use the federal exchange. If you live in one of the the states that have set up their own health insurance exchange, you will use that one. The federal government’s Healthcare.gov website makes this relatively easy – just go there and an easy menu will direct you to your correct exchange.
2. Determine what type of coverage you need
There are 4 types of plans available under Obamacare: platinum, gold, silver, and bronze. Although the same basic essential services must be covered, the level of benefits and their associated premiums differ. For example with a platinum policy you might pay no deductibles, but you will pay much higher premiums. It is often a question of your budget, and how many medical services you think you will need. People under 30 can have a “catastrophic” policy, which protects them against serious medical costs.
3. Register and choose a policy
At your state or federal exchange you will answer some basic questions about your age and number of people to be covered. Once you have chosen the type of coverage you want and can afford, you will be provided with a list of insurers so you can compare their coverages and premiums. Policies will vary in terms of which providers are in their networks, among other things. You will need to compare the plans and costs carefully, then you decide which company go with.
4. You might qualify for a tax credit or subsidy
During the application process you will be asked about your annual income, family size, and tobacco use. Assuming you are a baby boomer who is not working or who is underemployed, this is probably good news for you. Although the Affordable Care Act was designed to help lower income folks afford their health insurance premiums, the upper income limits are surprisingly high, up to 4 times the poverty level. So you could qualify for a tax credit if your income is $62,040 for a family of two, and $45,960 for an individual.
Additionally, there are tax credits and some limits on deductibles and co-pays, depending on the type of plan you have. You can determine how much you are going to save by using the Kaiser Foundation’s Health Insurance and Savings Calculator. We used the calculator to see what kind of theoretical savings a family of 2 (both aged 60 and non-tobacco users) might experience. The answer is – a lot. Of the estimated non-subsidized annual premium of $16,382 (for a silver plan), the subsidy in the form of a tax credit would be $10,682, knocking the cost down to $5,700 (9.5% of income). You can choose to have this tax credit paid directly to the insurer, making it available immediately in the form of a reduced premium. The cost and the subsidy would be a lot less on a bronze level plan.
5. You might have to pay additional taxes
If you are wealthy you will probably face some new taxes to help subsidize insurance premiums for folks who are less well off. For example if your adjusted gross income is more than $200,000 (individual) or $250,000 (joint-filing) expect to pay an extra 3.8% on your investment income and 0.9% additional Medicare premium. There are a host of other taxes and changes. Those include a 40% tax on so-called “Cadillac” health plans, as well as a 10% tax on tanning services.
6. Your insurance can’t be cancelled, but your rates can go up.
The good news here is that even if you get sick your insurer cannot cancel your insurance or jack your rates up. That is not to say that rates cannot go up every year, but at least they will be based on the experience of everyone in your class, not just you.
7. If you don’t have coverage you will have to pay a tax.
The idea here is to make sure everybody has health insurance. The penalties for not having health insurance start out small in 2014 ($95 for those making between $9,500 and $37,000), and increase to $695 by 2016. If you make more than $37,000 there is a complicated formula to determine the penalty, which in no case can go above the cost of a “bronze” plan (for those making more than $200,000 per year).
Perhaps no other in American history has generated such controversy, passion, and misinformation. We hope this article has helped set out the basic facts that you need to be concerned about as a baby boomer. The new law might be a benefit to you (particularly if you have a pre-existing condition) or don’t have much income. It might cost you if you are a big earner. Either way, the law is about to be implemented (for the moment!), so you might as well get prepared for it.
We have done our best to present the facts and helpful links to more resources about this dramatic new change in the health insurance landscape. If you have some good resources the rest of us should know about, please add them as Comments. Likewise if you have opinions about the best coverages to take or your experiences with registering at a health insurance exchange, we would all love to hear about them. However, the one thing we don’t want to hear about is political rants about Obamacare, pro or con. As Sgt Friday said, “Just the facts, m’am”. Political comments will be removed.
For further reading
Results of Topretirements poll about Medicare
Prices Set for New Health Care Exchanges (Wall St. Journal online
So You Are Turning 65 – Your Medicare Guide 101
5 Things to Know About Obama Care Coverage (Yahoo.Finance)