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Friday, August 9, 2013

Obamacare's "Individual Mandate": Part 1 - What is it?

Obamacare's 'Individual Mandate'
(Part 1 - "What is it?")

Alright team, today's post is the first of a two parter.

Obamacare's "Individual Mandate," a law requiring all American's to have health insurance, takes affect January 1, 2014.  Are you prepared?  

This post explains 1) what the "Individual Mandate" is, and 2) what you need to do to make sure you are in compliance with it.

In two weeks (on 8/23), I'll be posting Obamacare's"Individual Mandate": Part 2 - What's the economic rationale? explaining the ideas behind the policy.

So today, the pragmatic: what is the mandate, and how do I comply?  Next time, the conceptual: why have an individual mandate at all?

What is Obamacare's "Individual Mandate"

Ok, so Obamacare, or the Patient Protection and Affordable Care Act.  I'm guessing you've heard of it?  The nation's big new approach to buying and selling health insurance.

A major component the reform is the 'Individual Mandate,' which requires every American to get themselves insured, one way or another.

The onus is on you, the individual, to make sure you have coverage.  But what insurance you have, and who you buy through/from is still your choice.

The deadline is coming up - by January 1st, everyone must be insured.  This means you, too!!

Nobody is going to come to your house and make sure you filled out the forms.  Its on you to decide what's the game plan.

And like with any decision, its intimidating and difficult to make without good information.  Hence today's post: a quick briefing on the "WHAT" part of the individual mandate.  What it is, how it affects you, and what you have to do to comply with it. 

On the 23rd (two Friday's from now) I'll be posting a follow up addressing the "WHY" part - as in, what's the rationale behind it.

Hopefully, you find these posts a helpful starting point for your own research - and the decisions you must make about coverage...

Start with a definition

The "Individual Mandate."  Simply put, each individual American is mandated by the law to get themselves some health insurance.  Through their employer, their school, directly from an insurance company, from Medicaid/Medicare, from the local Blue Cross/Blue Shields, where ever.

When does the mandate come into effect?

You 'must' be insured by this upcoming January 1.  As in, a little under 6 months from today.

But Jan 1 is a soft deadline.  You technically have until the end of March.  Governments anticipate the program's start will be pretty hectic, so you'll get a little bit of leeway.

Have all you're paperwork submitted by Christmas and you'll be golden.

What if I'm already insured through my employer, school, chamber of commerce, etc?

Then you're all set.  None of this pertains to you.  Go back to what you were doing before.

What if I get Medicaid or Medicare?

You also are all set.  In fact, in some states and cases, your benefits may be expanding.

What if my employer, school, chamber of commerce, etc, offers no insurance, 
AND I don't qualify for Medicaid/Medicare?

For those who can't get insurance the "easy way" you're going to have to go buy it yourself.

But buying health insurance is they really expect me to figure it out on my own?

Yes, they do.  That part sucks.

Buying insurance isn't like buying coffee - something you do so often that you know what you want, and know what to look for.  Its much harder for us to confidently buy something abstract and arcane like health insurance.  That makes it a pretty intimidating purchase, for sure.

To help make the process a little less scary, each state is being required to run a "Healthcare Exchange."

Healthcare Exchanges are online stores where people can research, compare, review, and purchase health insurance.

They're supposed to be simple and clear and direct - basically the Amazon.coms of insurance.  And because they are run by the states, in theory, regulators will be able to keep insurers honest and monitor communications and advertising.  No hidden charges, no misleading language, no shady fine print - you get the idea.

When do the exchanges open?

October 1st.  Most states have preliminary sites up now.  Google yours up and check it out.

Here's links to California's and New York State's preliminary sites, for the curious.

But if you live in Texas, you're out of luck.  Gov. Perry is refusing to create one.  In fact, 26 states are refusing or unable to set up an exchange for their residents.

Residents of those states will have to use a generic national Exchange that will be run by the federal government.  Same thing, but not regionally targeted or specialized.

What if I can't afford the insurance on the Exchange?

Ok, so your employer doesn't offer insurance, and you can't get Medicaid/Medicare.  You went to your state's Healthcare Exchange website, and found everything is out of your price range.  Now what?

Those of us will lower incomes will get a subsidy from the fed govt to help buy our insurance.

Well...they're calling it a "subsidy."  Its actually a tax break.  As in the fed will take less from you in income taxes, so you'll have more disposable cash to buy your insurance.

(Roll that over in your head for a second - use your numeracy! - and you'll realize this scheme is income neutral for you.  The money you usually lost to taxes will now just be lost to insurance.  You're just substituting one expense for another one of the same size. That's why it doesn't really feel like a "subsidy" to me.)

In any event, the size of the break varies person to person.  The Kaiser Family Foundation put together this nifty calculator thingamajig that can estimate how much of a tax break you could get to help pay for your insurance.

Using my own personal data, the calculator guessed I could get $507 dollar tax break starting next year.  It also tells me that it would cost $2502 a year for me to buy insurance privately.  This leaves me paying $1995 a year out of pocket.

Anyway, the calculator is giving weirdly specific dollar amounts.  It can't possible be so exact, so I'm taking it all as a very "rough guestimate."  But please experiment with it a bit.  See what you're tax break could be.

What if I don't comply with the mandate?

If you don't have an insurance card in hand by April 1st, 2014, you will be fined when you do your taxes on April 15th.
They'll be asking for your insurance policy number on your tax returns.  If you don't have a valid policy number at the time, you'll get dinged.

If you file as an individual, the fine will be $95, or 1% of your yearly income - whichever's greater.  Its $285 (or 1% of your income), if you file as a family.

If you're not insured by April 15th of 2015 the fine increases, and by the 2016, it increases again, topping out at $695 for individuals (or 2.5% of income, whichever's greater), $2085 (or the 2.5% thing again) for families.

SO GET YOUR STUFF TOGETHER!!  Don't get hit with a fine if you can avoid it!

A few tips

If your employer doesn't offer insurance right now, ask them if they plan on doing so anytime soon!  If enough folks are asking, they might look into it.

And if your employer does offer insurance, check out the exchanges when they open anyway.  You never know, you might find a better deal online (in which case you can always drop out of your policy at work and go buy your own).  As long as your getting insurance from some one, you're in the clear.

Tune in next time...

Ok, so that's a lot of information to process.  Plus, I'm tired of typing.  We'll leave off here for now.

This has been a very general overview of how the Individual Mandate works.  BUT - you need start researching the details NOW!!  You don't want to end up rushing all your decisions at the end of the year just for the sake of being compliant.  Make the right choice for you.

Make sure to read my next post two Friday's from today (8/23)!!!!  

Its titled: Obamacare's"Individual Mandate": Part 2 - What's the economic rationale?

As of now, you have a general understanding of what we need to time find out WHY we're being asked to do it!!!


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