Health Insurance 101: Know Your Options

This is second in a three-part "starter course" on the Affordable Care Act (aka, Obamacare)

Unless you've been living under a rock, you know that this week marked the opening of state- and federal-run insurance marketplaces ("exchanges"). While we don't know how they'll be regarded over time, initial reactions to them run the gamut from cynicism and uncertainty to measured optimism.

The exchanges are the centerpiece of the 2010 health reform law, called the Affordable Care Act (ACA) or, more commonly, Obamacare. The hope is to get health insurance to more than 40 million adults who don't have it now.

Beginning this week, Americans can start enrolling for insurance through the new exchanges. (Find yours by going to healthcare.gov.) The federal government is running or partnering with local officials to run these in 36 states in all. The remainder of states and the District of Columbia are operating their own exchanges. People can enroll through March, with coverage beginning on January 1.

Though now able to sign up for coverage, a new survey shows public confusion persists over how the ACA will work. It's important to know that help is available, from certified "navigators" to companies like ours, Maxwell Health, which aim to help consumers, employers, and even insurance brokers navigate the rapidly changing health care landscape.

Here are answers to some common questions that are being asked:

How will the exchanges change the way I get insurance?

Americans traditionally obtained insurance through an employer (or spouse's employer), or via Medicaid or Medicare; and if they couldn't get coverage this way they would go straight to the carriers themselves -- an often expensive proposition.

The exchanges are meant to provide relief by allowing millions of consumers to use an online marketplace to compare affordable insurance plans and buy coverage on the spot. People with pre-existing conditions will no longer be denied coverage or charged more (this applies to most plans outside the exchanges, too). In addition, no one with pre-existing medical conditions will be turned away, and all plans must cover 10 essential benefits like maternity care, mental health services and prescription drugs, without rating people according to their medical histories.

What's the difference between public marketplaces and private marketplaces (exchanges)?

You may have heard about public vs. private marketplaces/exchanges. The public marketplaces are those mandated by the ACA, and in 36 states those marketplaces are being run, at least in part, by the federal government. Private marketplaces, or exchanges, are privately managed, customized insurance marketplaces.

For instance, Walgreens, Sears Holding, and Darden Restaurants have all announced that their part-time (and some full-time) workers will be utilizing private exchanges, with workers given a defined contribution -- a set dollar amount -- that they can use toward the purchase of any health plan on the marketplace.

How can I differentiate between one plan and another?

The marketplace is divided into four categories to help simplify decision-making: Bronze, Silver, Gold, and Platinum. As you can imagine, the relative quality (and price) of each correlates to their name. (It's worth noting that expected premium amounts for plans in states with federally-run exchanges were recently announced and were actually lower than previous estimates.)

How do I pick the plan that's best for me?

If you're like most people, cost is your primary concern when it comes to buying health insurance. You don't want to pay too much each month, nor do you want to face huge bills in the event of a catastrophic medical emergency or event. Additionally, lifestyle and family makeup factor into your insurance decisions.

First, determine the highest amount you'd be able to comfortably afford if a major medical event were to occur. Is your threshold $1,000? $10,000? That number roughly corresponds to your desired deductible. (Of course the higher your deductible, the lower your monthly payments, or premium will be.) Then, factor in the monthly cost you're able to afford. Is it $100? $500? The higher that number, the lower the first number (your deductible) will be.

The final determination should be your own health risk factors. If you're relatively young and healthy (not yet middle-aged, no pre-existing medical conditions or chronic conditions), you're probably going to want to pay a lower monthly premium in exchange for a higher deductible, because the odds of a major health occurrence are lower.

If you know you'll be using health care fairly often, it may make more sense for you to opt for plans with built-in, predictable costs such as copays. These plans often have higher premiums and lower deductibles because you'll pay a fixed amount for doctor visits or procedures, versus paying a negotiated rate like you would with a higher deductible plan. Families with young children often choose these plans due to likely more frequent doctor visits, and common childhood incidents that may require care.

What if I can't afford health insurance?

If you can't fit a health insurance premium into an already tight monthly budget, that doesn't mean you won't be able to get coverage at all. A tax credit is available for people who fall under a certain taxable annual income threshold -- between 100 and 400 percent of the federal poverty level (FPL). (To find out where your income is in relation to the FPL, you can go here.)

To determine how much your tax credit and monthly premiums will be, you'll need to determine two things: your expected contribution and the cost of your "benchmark" plan. (The Kaiser Family Foundation has a handy calculator just for this.) Your benchmark plan is your state's silver-tier health plan with the second-lowest monthly premium. The tax credit you'll receive is the difference between your expected contribution and the price of the benchmark plan. (The tax credit functions like a gift card -- if you qualify, the government will send the funds directly to your insurance carrier, which in turn, lowers your monthly payment. You can also opt to receive the credit back in full on your tax refund, but then you'll have to pay the full premium amount each month.)

I'm still confused. Who can help me?

So-called "navigators" have been certified specifically to help people like you. They are trained to provide unbiased advice on how to compare health plan options as well as answer questions about enrollment, subsidies and federal programs like Medicare and Medicaid. You can speak with a navigator by calling the toll-free call center at 1-800-318-2596, or find local help by entering your zip code on this page.

Independent insurance brokers are another useful tool. Many are taking this opportunity to expand their range of services to in-person or over-the-phone assistance. One broker (interviewed this week by the Employee Benefit Adviser) in Corpus Christi, Texas, is using his office location as a way to attract individual consumers into what he's termed a "Health Insurance Enrollment Center." In this way, brokers are seeing a shift in their customer base -- from the HR director to employees and consumers themselves.

Lastly, for smaller companies and startups that are grappling with these issues, companies like Maxwell Health can help by leveraging technology and a concierge approach to health care to simplify the burden of researching and selecting the best insurance plans for their employees.