Will Health Insurance Costs Go Down After Obamacare Kicks In?

Four years after the passage of the Affordable Care Act, commonly dubbed Obamacare, millions of Americans are about to have access to health insurance with monthly premiums they will be able to afford. Many Americans would be surprised to learn just how much lower their health insurance costs may be after the beginning of 2014 when every American will be able to access health insurance exchanges.

What Are Health Insurance Exchanges?

Under the Affordable Care Act, every state in the United States has the authority to set up its own health insurance exchange. In states that have chosen not to set up their own exchanges, the federal government will provide the organization.

From the perspective of the insurance consumer, a health insurance exchange will be simply a website or a call center where you can buy your health insurance. The new health insurance exchanges won't be the only place you can buy health insurance. You can still work with an agent if you wish. However, through the exchanges, you can also find local certified health insurance counselors who will be called Navigators or In-Person Assisters.

No More Rejections for Pre-Existing Conditions

Right now, almost all health insurance policies are medically underwritten, which means that your application for insurance may be rejected on account of an illness with which you have been diagnosed, a medication you take, or your height and weight even if you are otherwise in perfect health.

After January 1, 2014, all health insurance policies will be guaranteed issue. This means that no health insurance provider can reject you on the basis of pre-existing conditions. Neither will you have to pay a higher premium.

Since there are no pre-existing conditions to report, there is no risk of cancellation of your policy should you forget (or simply not know) to inform the insurance company of a health problem when you sent in your application. As the law stands now, if you took Aspirin for headaches and forgot to mention this on your application, the insurance company could cancel your policy retroactively for up to two years, demanding that you repay any benefits you received, without refunding your premiums.

How Much Will You Pay For Healthcare Under Obamacare?

If you have an "affordable" health insurance plan now, chances are there are a lot of expenses that it does not cover. For instance, if you are a woman who is 57 years old and you buy the Blue Cross Blue Shield policy currently offered by the existing federal health insurance risk pool in Dallas, Texas, you pay a premium of "just" $400 per month.

However, you will have to pay the first $7500 of all your doctor and hospital expenses and the first $250 of your drug expenses each year, and the plan will only pay 60% to 80% of your covered expenses even after you pay $4800 in insurance premiums and $7750 in deductibles.

Many people simply can't afford the $1,000 per month per person some plans now cost. Fortunately, if you buy your health insurance through the new health insurance exchanges, low- and middle-income Americans will be entitled to Federal assistance with their premiums.

Americans will be entitled to assistance if they earn less than 400% of the Federal Poverty Level.  In 2012, the Federal Poverty Level is an annual income of:

• $11,490 for a single person;
• $15,510 for a couple or a single person who has one dependent;
• $19,530 for a family of three;
• $23,550 for a family of four; and so on.

This means that you will qualify for a reduction in your health insurance premiums if:

• You are single and you have an income under $45,960 per year;
• You are a couple (or parent and child) and you have an income under $62,040 per year;
• You are a family of three and you have an income under $78,120 per year; 
• You are a family of four and you have an income under $94,200 per year.

Starting next year, Americans who earn less than 133% of the Federal Poverty Level will be eligible for Medicaid. These low-income Americans will have an option of receiving direct Federal help for their bills as they incur them, or getting their health insurance premiums paid. However, if you qualify for Medicaid and you don't choose to get health insurance premium assistance, the government will only pay out as much money as would have been required to cover your premiums.

If you qualify for Medicaid, your health insurance premiums will be $0 per month. If you don't qualify for Medicaid but you earn less than 400% of the Federal Poverty Level, your premiums will probably be about half of what they are now.

How good is the new health insurance? For most people, there will still be a deductible of at least $1000 per year before the plan starts covering trips to the doctor (except for up to four routine checkups per person per year), and there will still be a co-pay of $10 to $30 for prescriptions. If you don't qualify for health insurance premium assistance or you don't qualify for full assistance with your premiums, you will be able to opt for a less expensive plan that has higher deductibles. Fortunately, for most people, the direct cost of healthcare is about to go down signficantly in just a few months.