love to spend the next month and a half decking the halls, enjoying
festive parties, and shopping for gifts for your family and friends.
Unfortunately, if you’re one of the millions of Americans
who buy their own health insurance, the “silver and gold”
that will dominate your thoughts this holiday season is the silver
and gold (and bronze and platinum) designations of the Obamacare
right. Millions who buy individual health insurance have received
letters from their providers (or will soon receive them) saying
their policies have been canceled because they don’t meet
the requirements of the Affordable Care Act. Often the letters
suggest a “similar” ACA-compliant plan that is—surprise!—a
lot more expensive.
of the recipients these letters are an unwelcome holiday surprise.
They feel blindsided. In many cases they worry about whether they
can afford hundreds of dollars more a month in premiums or pay
a steeper deductible than before.
point out that the ACA-compliant “replacement” plans
are pricier because they offer more benefits—but many people
chose their (now canceled) plans precisely because they didn’t
want or need, say, maternity coverage or prescription drug coverage.
When you pay for your own health insurance you tend to make educated
purchasing decisions aimed at conserving costs and getting value
for your money.
these people are self-employed and have unpredictable cash flows,
or perhaps they found the individual marketplace offered a better
value than a spouse’s group plan. They deliberately bought
high-deductible plans to keep premiums low. Let’s say you’re
a middle-aged woman with a home-based business. Since you’re
past childbearing age you chose a catastrophic plan without maternity
coverage—and now you’re finding out that’s no
longer an option. It’s upsetting.
fielded many questions from people seeking to understand the new
health insurance rules and their personal finance implications.
Here are some of them along with my answers:
did my policy get canceled?
plans that were in effect as of March 23, 2010, were “grandfathered,”
meaning that you get to keep them even if they don’t meet
the standards mandated by the ACA. However, if the policy has
been altered since that date—i.e., if the deductible, co-pay,
or benefits changed at all—you can’t keep it. Most
policies have been changed since that date, for a variety of reasons,
so they are being canceled.
people who buy individual health insurance tend to change plans
often anyway—so some people are losing coverage because
they changed insurance policies in, say, 2011.
seen estimates that as many as 80 percent of individual policies
will end up being canceled. So if you haven’t gotten a letter
yet, chances are you will.
On the policy my insurance company recommended to replace my canceled
one, the premium has doubled and the deductible has gone up by
thousands of dollars. How can this be?
because of the essential health benefits that, by law, must be
included in new insurance policies that take effect in 2014. These
include maternity and newborn care, mental health and substance
use disorder services, prescription drugs, pediatric services
(including dental and vision care), to give a partial list. In
the past you were able to pick and choose from plans that excluded
some of these services and thus were less expensive.
the ACA includes “consumer protection” provisions
that have elevated prices. For example, it prohibits health insurance
companies from limiting or excluding coverage related to preexisting
health conditions. In order to absorb this cost and costs related
to other provisions, insurance companies have raised rates across
my family eligible for a subsidy?
on your family income and how many children you have. Beginning
in 2014 subsidies will be available to qualified individuals and
families whose incomes fall in the range of 138 percent to 400
percent of the poverty line (assuming they buy a policy on a government
exchange). At the top of the spectrum, an individual making just
under $46,000 would be eligible for a subsidy, as would a family
of four earning around $94,000.
are self-employed and end up receiving subsidies, be careful to
keep track of your earnings. If you end up making more than you
thought you would in a given year, you could end up having to
pay back part of your subsidy. Of course, the converse is also
true: If you make less than expected, you may receive a refund.
happens if I don’t replace my canceled policy?
do not replace your canceled policy with a qualified health plan,
you will have to pay a penalty fee on your tax return. The penalty
fee for 2014 is $95.00 per adult and $47.50 per child (up to $285)
or 1 percent of your annual income—whichever is greater.
This penalty rises sharply thereafter; in 2016 it will be $695
per adult and $347.50 per child (up to $2,085.00) or 2.5 percent
of annual income—again, whichever is greater.
it be smarter to just pay the penalty? (It’s much cheaper.)
some people will choose to go this route. I have noted some anecdotal
evidence suggesting that an “If I get sick then I’ll
get insurance since people with preexisting conditions can’t
be turned down” mindset is prevalent.
with this strategy is that beginning in 2014 you can purchase
subsidized health insurance (barring special circumstances like
the birth of a baby) only during Open Enrollment—between
October 15 and December 7 of each year. If you miss that window
and get diagnosed with a serious illness in January you would
have to wait many months to buy coverage on the government exchanges.
however, purchase a policy outside the exchange at any time—but
banking on the ability to get insured quickly enough is risky.
A major car accident or illness can happen too quickly to allow
you to buy a policy. The medical bills that you would rack up
almost overnight could devastate most people financially.
long do I have to choose a new policy?
a penalty fee you must apply for a Qualified Health Plan by March
31, 2014. This deadline was extended from February 15 due to serious
problems with the healthcare.gov website. But don’t let
the extension make you complacent.
current health insurance policy expires at the end of 2013, you
will still need to make a decision by December 15 to be covered
by your new policy on January 1.
can I find the best policy for me?
are several ways to do so. You can visit either healthcare.gov
or your state’s exchange if you think you might be eligible
for a subsidy. If you have an independent insurance agent you
like and trust, it might be best to call her.
of how you purchase your insurance you will find that qualified
health plans have one of four designations: bronze, silver, gold
and platinum. Bronze plans have the lowest monthly premiums and
the highest out-of-pocket costs. Platinum plans are the opposite:
They have the highest premiums and the lowest out-of-pocket costs.
the high-deductible bronze plans are the way to go for most relatively
healthy people. They have the lowest premiums. You just have to
be disciplined enough to set aside money for the higher out-of-pocket
costs that could occur. In fact, choosing a bronze plan that’s
compatible with a Health Savings Account is even better, as it
allows you to set aside money for medical expenses on a tax-free
talked to several insurance agents and insurers and have heard
conflicting information. How can I know what to believe?
is deeply confusing and not just to consumers. The insurance company
employees and agents have to learn many new rules and regulations
and this takes time. That’s why I suggest you talk to several
different insurers and agents and do a fair amount of research
before making a decision.
important to invest some time in this decision. A woman told me
she was looking for an HSA-compatible plan and, at first, her
insurance agent told her the company was no longer offering them.
The agent had been told this by two insurance company representatives.
After making several more phone calls and asking some probing
questions, the agent found out the company representatives had
been wrong. If something doesn’t sound right, it pays to
is this happening only to individual policyholders? Is it going
to affect people who get their insurance through their workplace?
most group policies already had more comprehensive (and expensive)
coverage in place that met more of the standards of the ACA. So
far it appears that most larger employer plans are seeing smaller
changes. However, some employers are choosing not to offer coverage,
asking employees to cover more of the cost, or deciding to go
with more part-time employees (fewer than 30 hours/week) for whom
they don’t need to provide coverage.
exactly what happens to most group coverage we’ll just have
to wait. Almost certainly, though, some smaller businesses will
face rate increases—and how this directly affects employee
pocketbooks will vary wildly.
seems that this has happened to a lot of people in my state. However,
I have heard from people in other states that their costs haven’t
increased. How can this be?
are various reasons for the disparity. Experts suggest that costs
spiked more dramatically in states that have fewer regulations
on insurance to begin with. Thus, states that previously did not
require insurers to provide benefits like preventative care and
contraceptives now have to—so their prices necessarily rise.
Also, in general, states where more insurers are competing for
customers will have lower prices.
is, Obamacare is helping some people in the short-term and hurting
others. As a financial counselor it is not my place to offer an
opinion on whether this law is a positive or negative force for
our country. I can only advise individuals to educate themselves,
seek out the best value for their needs and their wallet, and
go into this transaction—like any transaction—with
their eyes open.
is an internationally acclaimed and bestselling personal finance
book author, syndicated columnist, and speaker. He has worked
with and taught people from all financial situations, so he knows
the financial concerns and questions of real folks just like you.
Despite being handicapped by an MBA from the Stanford Graduate
School of Business and a BS in economics and biology from Yale
University, Eric remains a master of “keeping it simple.”
toiling away for a number of years as a management consultant
to Fortune 500 financial-service firms, Eric took his inside knowledge
of the banking, investment, and insurance industries and committed
himself to making personal financial management accessible to
Eric is an accomplished personal finance writer. His “Investor’s
Guide” syndicated column, distributed by King Features,
is read by millions nationally. He is the author of five national
bestselling books, including Personal Finance For Dummies, Investing
For Dummies, and Home Buying For Dummies (coauthor), among others,
which are all published by John Wiley & Sons, Inc. Personal
Finance For Dummies was awarded the Benjamin Franklin Award for
best business book of the year.
work has been featured and quoted in hundreds of publications,
including Newsweek, the Wall Street Journal, the Los Angeles Times,
the Chicago Tribune, Forbes magazine, Kiplinger’s Personal
Finance magazine, Parenting magazine, Money magazine, Family Money
magazine, and Bottom Line/Personal magazine; on NBC’s Today
show, ABC, CNBC, PBS’s Nightly Business Report, CNN, and
FOX-TV; and on CBS national radio, NPR’s Sound Money, Bloomberg
Business Radio, and Business Radio Network.
website is www.erictyson.com.
Finance For Dummies®, 7th Edition (Wiley, 2012, ISBN: 978-1-118-11785-9,
$22.99) is available at bookstores nationwide, major online booksellers,
or directly from the publisher by calling (877) 762-2974.