Retire Early Lifestyle
Retirement; like your parents, but way cooler

 
 

Retire Early Lifestyle Blog  Free Newsletter Subscribe/Contact Us

Advertise on RetireEarlyLifestyle.com info here

In 1991 Billy and Akaisha Kaderli retired at the age of 38. Now, into their 3rd decade of this financially independent lifestyle, they invite you to take advantage of their wisdom and experience.

Obamacare in a Nutshell

                      Lynne Erickson

Lynne Erickson of Erickson Financial Services, Inc. has been a practicing health insurance broker in the state of Colorado since 2006. Her expertise is in the areas of personal health, dental and vision insurance and Medicare supplements. More information about Erickson Financial Services, Inc. can be found at www.colohealthinsurance.com

What is Obamacare?

The purpose of Obamacare was to enhance health insurance coverage and eliminate the possibility of being declined health insurance coverage for pre-existing conditions, while at the same time, reducing the cost of health insurance for the needy. In general, these goals were achieved for a small sector of the USA population. On the other hand, many Americans are finding that health insurance coverage is becoming even MORE unaffordable.

What is the "Marketplace"?

The "Marketplace," previously dubbed the "Exchange," is a new way to shop for, and compare health insurance plans. You may purchase health insurance both inside the "Marketplace" or outside of the "Marketplace," however, only insurance plans purchased inside the "Marketplace" can qualify for an advanced premium tax credit. Tax credits are not available for plans purchased outside of the "Marketplace." Rates and plans offered are generally the same both inside and outside of the Marketplace. I’ve found that some insurance companies are offering plans with different, larger networks outside of the Marketplace; however, tax credits are not available to offset the premiums on these plans.

 

Can I keep my current health insurance?

As of January 1, 2014, all health insurance plans sold must be compatible with the Affordable Care Act (ACA). If you have a grandfathered plan, you may be able to keep it. A grandfathered health plan is any health insurance plan that became effective prior to March 23rd, 2010, and has had no substantial changes to benefits that would have caused the plan to lose grandfathered status after March 23rd, 2010. Some insurance companies, such as Kaiser Permanente and Cigna are not going to honor grandfathered status and are cancelling all pre-Obamacare plans as of December 31, 2013. On the other hand, a few insurance companies, including Humana, Blue Cross and United Healthcare are honoring grandfathered status and are allowing members to keep their grandfathered plans if they choose to.

I keep hearing on the news that my health insurance is going to be more expensive. Is this true?

In general, the cost of health insurance is going up significantly as a result of Obamacare. There are three driving factors:

1.) Medical Loss Ratio (MLR).

Obamacare forbids health insurance companies from spending less than 80% of premiums collected on claims. Historically, insurance companies have always spent about 80% of premiums on claims, however, in the past, if they had a bad claim year, they could make up the difference by charging higher premiums in future years. As per the new MLR law, if the insurance company has a “good” claim year and happens to spend less than 80% of premiums on claims, they must compute the total difference and divide a refund equally among all members in that fiscal year. However, if the insurance company has a “bad” claim year and spends more than 80% of premiums, they have to eat the cost, because they are not allowed to keep reserves to make up for past losses anymore. Therefore, insurers are now going to error on the high side, knowing that they’d rather issue a refund than take a loss.

2.) Guarantee Issue with no waiting period for pre-existing conditions.

In the past, insurance companies could protect themselves from “adverse selection,” or choosing to buy insurance only when it is needed, by being allowed to medically underwrite a plan. Medical underwriting meant that an insurer could accept, decline, charge a higher rate, or exclude a pre-existing condition from coverage. These underwriting rules prevented consumers from trying to take advantage of insurance by only buying it after coverage was needed. As of January 1, 2014, consumers will now be allowed to buy guaranteed insurance during periods of open enrollment, without any worry of having to wait for coverage for pre-existing conditions. This means a person can go uninsured, wait until a procedure is needed, buy during open enrollment, have the procedure, and then cancel coverage the following month after treatment is complete. In the insurance business, we call this “shop and drop.” Because this behavior significantly increases the financial risk to the insurance company, insurers are pricing this risk into every new policy sold.

3.) Expensive new mandated coverages

The third and final driving factor for increased rates are new mandated benefits. Obamacare now requires all plans to cover previously optional services such as additional preventive care, contraception, maternity, drug abuse, alcohol abuse, mental health parity, pediatric dental, etc. There are thousands of new mandates, but the ones listed above are the most well-known. Consumers are no longer allowed to choose not to buy coverage for these types of health issues, even if they do not need or want it.

Qualifying for a Tax Credit

Tax credits will not be available to individuals who are eligible for Medicare or Medicaid, or for individuals or families who have access to "affordable" employer coverage that meets minimum essential coverage requirements. If your modified adjusted gross income falls between 133% and 250% of the Federal Poverty Level and you are not eligible for any of the other coverages listed above, then your insurance rates will be significantly subsidized in the form of an Advanced Premium Tax Credit. In order to qualify for the Advanced Premium Tax Credit, all applicants must first apply for, and be denied, Medicaid. Once denied by Medicaid, Individuals and families can proceed to apply for the Advanced Premium Tax Credit, then choose a plan and apply for the plan itself. Individuals and families whose modified adjusted gross income falls between 250% and 400% of the Federal Poverty Level are also eligible for a tax credit, however, because the tax credit is computed on a sliding scale, those with higher incomes will have substantially lower tax credits, and some may still find themselves paying more for Obamacare than they did for their pre-Obamacare plan.

 

Note that there is no asset testing to qualify for the Advanced Premium Tax Credit. The only figure that is used to determine eligibility is modified adjusted gross income (MAGI).

What Happens if I Don't Want to Buy Health Insurance?

What is the Penalty? Starting this year, health insurance will only be offered during open enrollment and during special enrollment periods, when a person experiences a qualifying life event such as childbirth, marriage, death of a spouse or divorce, involuntary loss of other coverage, etc. During these periods of time, a person cannot be denied for health insurance coverage or have a pre-existing condition excluded from coverage.

However, outside of these enrollment periods, a person will not be able to obtain a health insurance plan. During periods in between open enrollment, a person without coverage could be at risk for large medical expenses. However, should a person still decide to "opt out," that person may do so, in return for payment of a tax penalty. The first penalties will be due when individuals file their 2014 tax returns in 2015. A penalty is the greater of either a specified dollar amount or percentage of income. The annual penalties for 2014 through 2016 are noted below. Beginning in 2017, penalties will increase based on the cost of living.

•2014: Greater of $95 per adult and $47.50 per child under age 18, maximum of $285 per family, or 1% of income over the tax-filing threshold

•2015: Greater of $325 per adult and $162.50 per child under age 18, maximum of $975 per family, or 2% over the tax-filing threshold

•2016: Greater of $695 per adult and $347.50 per child under age 18, maximum of $2,085 per family, or 2.5% over the tax-filing threshold

•If the penalty applies for less than a full calendar year, the penalty will be 1/12 of the annual amount per month without coverage.

 

We at RetireEarlyLifestyle would like to thank Lynne for giving of her time and sharing her expertise on this insurance topic. If you have further questions about Obamacare, contact her at her above link.

Thanks Lynne!

About the Authors

Billy and Akaisha Kaderli are recognized retirement experts and internationally published authors on topics of finance and world travel. With the wealth of information they share on their popular website RetireEarlyLifestyle.com, they have been helping people achieve their own retirement dreams since 1991. They wrote the popular books, The Adventurer’s Guide to Early Retirement and Your Retirement Dream IS Possible.

For more information about financial independence and travel, visit our book store

Sign up for great stories, interesting tales, and superb retirement information.

Contact Billy & Akaisha  TheGuide@RetireEarlyLifestyle.com

Advertise on RetireEarlyLifestyle.com contact Ad-Info@retireearlylifestyle.com
Over 1,400,000 visitors annually.

Billy and Akaisha continue to journal and photograph their world travels.

HOME   Book Store

 

Retire Early Lifestyle Blog      About Billy & Akaisha Kaderli      Press     Contact     20 Questions     Preferred Links     Retirement     Country Info    
Retiree Interviews
      Commentary     REL Videos