Online Exchanges and Subsidies

- The Problem                                                                                   

Currently, individual health insurance is very difficult to buy, as policies are full of highly technical language, with many exceptions, exclusions, and clauses in fine print. Many patients have problems with insurance companies withholding payment for their care, simply because they aren’t aware of the writing in their actual policy.

- The Solution

Perhaps, the most innovative part of the healthcare law is the creation of the online market exchanges for health insurance. In 2014, the creation of these online exchange markets will allow consumers to directly compare insurance policies based on price and benefits. These exchanges will increase transparency, and patients will be empowered to know what is exactly within the policies they buy.

The insurance plans will be labeled as “bronze,” “silver,” “gold,” and “platinum,” based on their price and the benefits they provide.

- Who can use these markets?

Small businesses with less than 100 employees will be able to use these markets, in order to provide insurance for their employees. If businesses have less than 25 employees, they will receive tax credits for providing insurance from these markets to their employees.

Young adults are most likely to work in small businesses. By giving small business these incentives to provide affordable insurance to businesses, more young adults will be offered insurance from their workplaces.

- Subsidies:

By having insurance companies compete on price and benefits online, prices for insurance policies will decrease and benefits should increase. However, what if health insurance is still to expensive for you, a young adult, to buy?

Not to worry! For those who make between 133% and 400% of poverty level, your healthcare can be subsidized. This income range equates to $14,400 - $43,000 for an individual and $29,270 - $88,200 for a family of four.

The amount that you will have to pay in premiums will vary from a sliding scale from 2% to 9.5% of income. The amount of your subsidy will be the difference between the cost between the silver plan in your area and this percentage value. So, for example, if your income is closeto $14,400, you will pay close to 2.0% of your income for health insurance premiums. If your income is close to $43,000, you will pay close to 9.5% of your income in premiums; anywhere inside this range will be a percentage between 2.0%-9.5%.

- Examples:

Lets take the example of an individual making $14,401 per year. This corresponds to the 2.0% income level rate. 2.0% of $14,401 is equal to about $290, which is the amount he or she will pay in yearly premiums. Now, say the silver plan in this individual’s state costs $3,000 per year.

The subsidy the individual receives is $3000-$290 = $2710 towards insurance! 90.3% of this individual’s insurance premium for the year will be completely free!

Now, say the individual makes $42,200 or just at the 400% of federal poverty level, he or she will have to pay at most 9.5% of his or her income in premiums. 9.5% of $43,299 is equal to $3,990. If the silver plan costs $4,200 in this state, this individual will receive $210 as a federal subsidy!

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