Your Health Insurance Questions Answered

Health insurance is a contract with an insurance company, which agrees to pay some or all of your medical bills based on your "coverage," or the terms of your policy. In exchange, the insurer is paid a set amount of money -- a "premium" -- on a regular basis.

Most Americans have private health insurance, either through their employer's group plan or through buying their own individual policy. Others are covered under public "safety net" programs such as Medicare and Medicaid.

Why do I need health insurance?

It's no secret that health care is expensive today. The government says the cost to treat a broken leg can run $7,500 and an average three-day hospital stay can set you back $30,000. Without insurance, many Americans would be one health setback away from financial ruin. Regularly paying a set premium for health coverage assures that money will be available to defray the cost of everything from routine checkups to catastrophic medical bills.

What's the difference between a deductible, a copayment and coinsurance?

All three are medical charges you must pay out of your own pocket, even if you have insurance. Your deductible is the initial amount you must pay each year for covered health services before your insurer will start to chip in. Plans may have separate individual and family deductibles and/or deductibles for separate services such as hospitalization. A copayment is a fixed amount you pay toward each medical service, such as $25 for a checkup. Coinsurance is a fixed percentage, rather than a flat amount, that you pay toward each service.

What is the Affordable Care Act, and why did we need it?

The Patient Protection and Affordable Care Act, commonly known as Obamacare, was signed into law by President Barack Obama on March 23, 2010. It includes a broad range of reforms designed to make health insurance better and more affordable, rein in health costs and expand coverage among America's nearly 50 million uninsured. The act requires most Americans to have health insurance or face a penalty. It also makes it illegal for insurers to set dollar limits on coverage, drop you if you get sick or charge more or deny coverage because of a pre-existing condition.

Do I really have to buy health insurance?

The Affordable Care Act's "individual mandate" requires all Americans, with a few exceptions, to have health insurance that typically offers "minimum essential coverage." Going without insurance could bring a tax penalty. For 2014, that penalty is 1% of your annual income or $95, whichever is higher, and $47.50 for each uninsured child, to a family cap of $285. The penalty increases to the greater of 2.5% of income or $695 per person by 2016. The penalty will show up as an additional tax or a reduction in your federal tax refund.

I can't afford to buy health insurance. What should I do?

Depending on your income, you may be eligible for lower-cost, subsidized coverage purchased through Obamacare's state health insurance exchanges. Or, you may qualify for free or low-cost coverage through Medicaid or the Children's Health Insurance Program, aka CHIP.

How do I qualify for an Obamacare subsidy to cut health insurance costs?

If you earn between $11,500 and $46,000 per year for a single person or $23,550 and $94,200 for a family of four and do not have affordable employer-sponsored coverage, you could receive an "advance premium tax credit" to help with the cost of insurance purchased through your state's exchange, or marketplace. A premium discount is deducted from your federal income tax, and you decide how much to put toward your insurance payment each month. You also may qualify for help with out-of-pocket health care costs, if you earn less than $28,725 as a single person or $58,875 for a family of four.

What is a state health insurance exchange, or marketplace?

Obamacare requires each state and the District of Columbia to establish an easy-to-use online health insurance marketplace where individuals and small businesses can compare health plans and find coverage that fits their budget. The exchange also will tell you if you're eligible for a federal tax subsidy to help pay your premium or if you qualify for a government safety net program such as Medicaid. The inaugural open enrollment period for the new marketplaces runs to March 31, 2014.

Who is exempt from paying the penalty for not having health insurance?

The law excuses certain individuals from the penalty, including members of religious sects that have religious objections to health insurance, participants in health care sharing ministries, and those who are uninsured for less than three months of the year. You also could be exempt if your income is too low to require a federal tax return, you can't reasonably afford coverage, or you would have qualified for Medicaid had your state elected to expand the program as provided for under the Affordable Care Act.

I've had the same policy for years. Does health care reform affect my plan?

Some provisions of the Affordable Care Act do not apply to so-called grandfathered plans written before the law took effect. These include the freedom to choose your own doctor, preventive services at no additional cost, and the right to appeal if your insurer denies a claim. However, as with new policies, grandfathered plans are required to cover children up to age 26, provide a simple summary of coverage and costs, and cease any lifetime limits on benefits.

How can I be sure that my current coverage will allow me to avoid the Affordable Care Act penalty?

You're OK if you are currently insured through: an individual or group plan (grandfathered or not); a veterans health care program, including Tricare; Medicare; Medicaid; the Children's Health Insurance Program, or CHIP; Peace Corps volunteer plans; or COBRA continuation coverage for the unemployed.

Does the Affordable Care Act affect my employer's group plan?

Yes. For employer-based insurance, it means: preventive services at no additional cost (unless you have an older, grandfathered plan); an end to lifetime/annual dollar limits and cancellation of coverage if you get sick; guaranteed coverage for your adult children until age 26; guaranteed coverage if you have a pre-existing condition; and the right to appeal a denied claim. If your employer's plan costs more than 9.5% of your income or doesn't meet the law's minimum coverage requirements, you might qualify for subsidized coverage on your state health marketplace, or exchange.

I've never shopped for health insurance before. How will the marketplace help?

All private health insurance plans offered through the state marketplaces must offer the same set of "essential health benefits" as defined under the Affordable Care Act. These include: hospitalization; emergency care; rehabilitative services; lab tests; prescription drugs; preventive care; maternity, newborn and pediatric care; and treatment for mental health disorders and substance abuse.

How can I tell Obamacare plans apart?

To facilitate apples-to-apples comparison shopping, marketplace plans will be grouped into four "metal" categories, from less expensive bronze and silver coverage to the more expensive gold and platinum plans. If you are younger than 30, have a very low income or lost your insurance because your previous policy was canceled for not meeting Obamacare's new standards, the marketplaces also will offer high-deductible, lower-premium catastrophic coverage.

I never shop online. Is it safe?

The new state marketplaces are designed to be secure and password-protected. All health insurance policies offered through them have been approved by your state's department of insurance and certified by the marketplace. You'll need to fill out an online application; the site will determine if you qualify for premium discounts, reduced out-of-pocket costs, or coverage under Medicaid based on your income and family size.

I'm on Medicare. Does the Affordable Care Act affect me?

In many ways, no; Medicare officials have been stressing to seniors that their benefits are not fundamentally changing and that they will not need to use an online marketplace. But thanks to the Affordable Care Act, Medicare recipients now receive free preventive services, including a wide range of health screenings and an annual wellness visit. In 2012, those with Medicare Part D prescription drug coverage received a 50% discount on brand-name drugs and a 14% discount on generics. Those savings will increase through 2020 as the ACA slowly closes the so-called prescription drug doughnut hole.

Some of my friends received rebate checks from their health insurers the past two summers. Why didn't I get one?

One way the Affordable Care Act is attempting to rein in health costs is through the "80-20 rule." Health insurers must spend 80% of your insurance premium directly on your health care and no more than 20% on their administrative costs. (For employer group plans, at least 85% of premiums must go toward care.) Insurers that fail to meet the mark must issue rebates to each policyholder. If you buy your own health insurance and didn't get a rebate, it likely means your insurer passed the efficiency test.