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Small Business Employee Benefits and HR Blog

Employee FAQs - Individual Health Insurance Marketplaces

February 21, 2013
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Starting in 2014, the Individual Health Insurance Marketplaces will make it simple and more affordable for employees to get health insurance that can't be canceled or denied because of a pre-existing medical condition. Read on for Frequently Asked Questions regarding the individual health insurance marketplace.

What are the Individual Health Insurance Marketplaces?

When key parts of the health care law take effect in 2014, there’ll be a new way for employees to get health insurance. The Health Insurance Marketplace is designed to help individuals find health insurance. Starting October 1st, 2013, you will be able to shop online, in person or by phone for health insurance in every state. A special website will provide you with a variety of online tools so you can learn more about the range of health plans that will be offered through your state health insurance marketplace. Your employer can also designate a health insurance broker (or navigator) to provide you with support services available in person or by phone.

Your state health insurance marketplace will provide access to coverage that will start in January 2014. Purchasing insurance through a health insurance marketplace will have several advantages including:

  1. The ability to make "apples-to-apples" comparisons of health insurance based on metal levels. 

  2. The ability to receive federal financial assistance that can help lower your health insurance costs. 

Why should I buy health insurance?

Everybody uses the health care system at some point in life. You never know when an accident might happen or your family member will get sick and need to see a doctor. When that day comes, the expenses could be financially devastating.

Do I have to buy health insurance?

Starting in January 2014, most employees will be required to have health insurance or pay a tax penalty if they don't. Coverage can include employer-provided insurance, individual health insurance, Medicare or Medicaid.

The tax penalty phases in over three years and becomes increasingly severe. In 2014, the penalty will be 1 percent of annual income or $95, whichever is greater. By 2016, the penalty will be 2.5 percent of income or $695. This means that if you do not have coverage in 2014, you will be required to pay a tax penalty when you file your taxes at the end of the year.

Health Insurance Penalty Phase-In Schedule 
Pay the greater of the two amounts
Year Percentage of Income Set Dollar Amount
2014 1% $95
2015 2% $325
2016 2.5% $695

The total penalty for the taxable year can not exceed the national average of the annual premiums of a bronze-level health insurance plan offered through the health insurance marketplaces. Health insurance plans will provide proof of coverage for their customers.

Several groups are exempt from the requirement to obtain coverage or pay the penalty, including:

  • People who would have to pay more than 8 percent of their income for health insurance

  • People with incomes below the threshold required for filing taxes (in 2012, $9,750 for a single person and $27,100 for a married couple with two children)

  • People who qualify for religious exemptions

  • Undocumented immigrants

  • People who are incarcerated

  • Members of Native American tribes

If you do not have insurance and do not fit into one of these categories, then you will likely pay a tax penalty.

How will the Health Insurance Marketplaces help me find health insurance I can afford?

Each state will have a health insurance marketplace that will allow you to shop online, over the phone or in person to find the right insurance option for your health needs and budget. You will be able to compare different health insurance plans and learn if you qualify for federal financial assistance such as tax credits that will reduce how much you have to pay each month on a sliding scale, based on your income.

Who can buy health insurance through the state Health Insurance Marketplaces?

Generally, legal residents of your state who do not have access to affordable health insurance through their employer or another government program will be eligible to purchase health coverage from the state health insurance marketplace.

What kind of health insurance can I buy through the Health Insurance Marketplaces?

The health insurance marketplaces will offer Qualified Health Plans (QHPs) that are the same high-quality health plans available on the private market today. These QHPs will provide the essential levels of coverage and comply with consumer protections set forth in the Affordable Care Act.

Health insurance companies must offer the same products at an identified price whether they are offered through the Health Insurance Marketplace or in the open market.

In addition to these traditional health plans, the Health Insurance Marketplaces may also offer what is called "catastrophic coverage," which helps protect a person from financial disaster in the event of a serious and expensive medical emergency. Catastrophic coverage is not designed for day-to-day medical expenses such as doctor visits, prescription medicines or even emergency room visits. It is designed to cover excessive medical bills that occur above the limit that you would be able to manage financially. Generally, the catastrophic coverage will be available for those up to age 30.

There will be four basic levels of coverage: platinum, gold, silver and bronze. This ranking system will make it easy to compare plans in the same category or across categories. As the metal category increases in value, so does the percent of medical expenses that a health plan will cover. These expenses happen at the time of health care services – when you visit the doctor or the emergency room, for example. The health plans that cover more of your medical expenses usually have a higher monthly payment but you will pay less whenever you receive medical care. 

You can choose to pay a higher monthly cost so that when you need medical care, you pay less. Or you can choose to pay a lower monthly cost so that when you need medical care, you pay more. You can choose the level of coverage that best meets your health needs and budget.

health insurance marketplace plans

What if I already have health insurance?

If you already have health insurance provided by your employer that is affordable, you do not need to do anything.

If you are paying more than 9.5 percent of your household income toward insurance premiums, then you may be eligible for financial assistance available through the health insurance marketplaces. If you have insurance from your employer and apply for a tax credit, the health insurance marketplace will determine if that health plan is affordable and provides adequate coverage. If that coverage is determined to be affordable and adequate, then you cannot receive a government tax credit for new insurance.

If you have health insurance that you pay for yourself, you may be eligible for financial assistance such as tax credits that can lower your costs. You can purchase the same kinds of health plans from the health insurance marketplaces as you can in the private market, but you can only use tax credits if you buy insurance through the health insurance marketplace.

When can I purchase coverage through the Health Insurance Marketplaces?

The health insurance marketplaces will open October 1st, 2013, and continue enrollment until March 31, 2014. You must purchase health insurance during this open-enrollment period to obtain coverage in 2014. If you have a life-changing event such as the loss of a job, death of a spouse or birth of a child, you would be eligible for special enrollment within 60 days of the event. If you do not enroll during this period, you will not be assured a health plan will cover you – either through the health insurance marketplace or in the private market.

The next open-enrollment period begins in October 2014 for coverage in 2015. 

How much will it cost to purchase health insurance through the Health Insurance Marketplaces?

Generally, the cost of health insurance depends on:

  1. your age

  2. how much coverage you choose to purchase, and 

  3. whether you qualify for financial assistance such as tax credits.

The Health Insurance Marketplaces are the only place where you can use these tax credits to make insurance more affordable.

A cost-estimate calculator will help you estimate about how much you will pay per year for insurance coverage.

How do I know if I am eligible for tax credits?

Health insurance tax credits are available for individuals and families who meet certain income requirements and do not have access to affordable health insurance through their employer or another government program.

Eligibility for tax credits is based on a standard, called the "federal poverty level," that looks at your household income and the number of people in the household. The size of the tax credit is based on a sliding scale, with those who make less money getting a larger financial support to lower the cost of their insurance coverage. Individuals and families who make between 138 percent and 400 percent of the federal poverty level may be eligible for a tax credit. This means that an individual making up to $45,960 and a family of four earning up to $94,200 may be eligible for a tax credit.

The amount of the tax credit depends on household income and family size of eligible individuals. Here are some examples of potential costs. Starting in October 2013, the Health Insurance Marketplaces will make available the exact premium and plan choices so you can know exactly what your insurance will cost.

For more information on calculating your tax credit, see what is my health insurance tax credit?

Am I eligible for cost-sharing subsidies?

In addition to the tax credits that reduce your monthly premium payments, you may be eligible for cost-sharing subsidies that reduce the amount you pay when you get care. Eligibility for subsidies is based on income level and family size. You may be eligible for cost-sharing subsidies if your income is less than about $27,936 for a single person and less than about $57,636 for a family of four in 2012, which represents ~250% of the federal poverty level.

Cost-sharing subsidies are offered by the federal government to reduce the amount of money you have to pay for health care expenses such as copayments or coinsurance.

What if I have a pre-existing health condition?

You can still purchase health insurance regardless of any current or past health conditions. Starting in 2014, insurance companies will be required to sell policies to everyone regardless of current or past health issues, and they will be prohibited from using your health status to determine how much your health insurance will cost. You can purchase health insurance regardless of any current or past health conditions, and insurance companies cannot charge you a different premium.

This requirement means whether you buy insurance through a Health Insurance Marketplace or somewhere else, you cannot be denied coverage or even screened based on a pre-existing medical condition. It is important to remember that this requirement only applies during the open-enrollment periods.

Do I have to wait until January 1, 2014 to get health insurance?

If you do not have health insurance, you do not have to wait until the Health Insurance Marketplaces open to get covered. You may be able to purchase private insurance for yourself by contacting an insurance company directly or working with an agent.

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