Why We Passed on Health Insurance Exchange Coverage

I’ve written about Obamacare in several articles in the past, but I got a chance to get up close and personal with it on a recent expedition into the health insurance exchange. In the past, my view on Obamacare has been something close to neutral. Part of me thinks that it’s a good thing, since it did away with denying coverage and increasing premiums for people with pre-existing conditions. But part of me also thinks that it’s largely a flop based on the fact that it has failed miserably in the area of making health insurance more affordable.

Last week, in Yes – Part-time Jobs With Health Insurance DO Exist, I briefly touched on our health insurance exchange experience. Today I want to go deeper into the details.

Why We Applied on the Health Insurance Exchange

Our search into the health insurance exchange was necessitated by our recent move from Georgia to New Hampshire. In Georgia, our whole family was covered by an employer plan that my wife had from her full-time job. With the move, and the loss of her job, we also lost coverage.

Health Insurance Exchange Coverage
Health Insurance Exchange Coverage

When we arrived here in New Hampshire, my wife began looking for jobs, hoping to find one that would offer health insurance coverage. As a blogger, I’m completely self-employed, and therefore have no employer plan. However, we decided to check with the health insurance exchange, to see what was available, and if it might even be better than what we might get through my wife’s employment situation.

Fortunately for us, my wife did land a job with health insurance coverage, and a part-time job at that. That gave us options, but those options are extremely expensive for a family of four on her part-time income. We decided to pursue the health insurance exchange while we were waiting for the employer coverage to kick in.

Jumping Through Fiery Hoops

When I went onto the heathcare.gov site, I was completely unprepared for the volumes of information that would be demanded. My naïve assumption was that less information would be required, since only one health-related question could be asked – smoker or non-smoker?

I was wrong. Not about the health-related questions, but about everything else. It was a few weeks ago now, and I’m still overwhelmed at the volume of questions and information requested, even beyond total recall.

But most of the questions were related income. Not exactly what you would expect on an application for health insurance, but the part about Obamacare that most of us miss is that this coverage is intimately tied to income.

It took close to an hour to complete the application online, and I didn’t even get it right. But that’s not the half of it.

Meet Your New Income Parole Officer

I mentioned the close connection between health insurance and income, but that only scratches the surface. After you input your income information on the health insurance exchange, the site makes it clear that you must report subsequent changes in your income within two weeks of their occurrence, if my memory serves.

This is like having an online parole officer, to which you must report all of the employment and income activity in your life, as well as changes in your address and family situation. For people like me who are self-employed, or like my kids who work part-time jobs, this is a complete nightmare. If you think about it, it’s not the salaried people – who usually have health insurance coverage at work – who will be applying for coverage on the exchanges, but rather people like me and my kids who have variable incomes. We’re also the same people who don’t have employer-sponsored health plans.

So just a word to the wise, if you plan to get coverage through the health insurance exchange, you will have an income parole officer who you must report to regularly. Talk about Big Brother!

The Tax Credit Subsidy Landmine

In fairness to reality, the main reason for the income parole officer function is the tax credit subsidy. Since it is based on your income, and will vary depending upon the level of your income, it will adjust up or down based on the direction of your earnings.

There are two ways that you can take the tax credit subsidy. The first is to take the credit when you file your income tax. The second is to have it applied to the monthly health insurance premium over the course of the year. This is the affordable part of the Affordable Care Act, more commonly known as Obamacare.

My guess is that at least 90% of people getting coverage on the health insurance exchange are going to have the credit applied as a reduction in their monthly health insurance premiums. After all, if you can’t afford health insurance, using the tax credit to reduce your premiums is a critical part of the exchange process.

But even if you do use the credit to reduce your insurance premiums, there’s a complication.

If your income turns out to be lower than what you indicate when completing your application, the remaining portion of the credit will be refunded to you when you file your income tax return for that year. We’re good so far, right? But in the event that your income is higher than what you estimated on your application, you will need to refund the excess tax credit when you file your income tax return.

This means that you will either owe money when you file your taxes, or your refund will be reduced from what you expected it to be.

The best advice that I can give here is to either:

  1. Take the tax credit when you file your income tax return, rather than applying it toward your monthly health insurance premium, OR
  2. Be VERY conservative in estimating your income for the year – so as to minimize the tax credit during the year.

Either option will make your health insurance premiums higher than they would otherwise be. But be that as it may, either will help you to avoid a ticking time bomb that could go off when you file your income taxes next spring.

The news has been flush with stories about the “painful” Obamacare penalty tax for not having health insurance coverage. That tax is the higher of $95 or 1% of your income for 2014 – and there’s a veritable laundry list of exemptions. But repayment of an over-claimed health insurance tax credit subsidy can easily turn into serious money.

This is one system that you should not try to game. There’s much more involved here than surface factors indicate.

The Family Policy That Didn’t Happen

We never did get a quote for a health insurance policy for the entire family. And I don’t think that the tax credit subsidy would’ve been an issue for us. As far as I can tell, we were over the income threshold to qualify for it anyway.

The best we managed to get in the way of a quote was a policy for my wife and I that would be $740 per month, with a $6,000 co-payment, and a maximum out-of-pocket of $6,600. That is an incredibly expensive monthly premium, considering that we would have a zero benefit in most years due to the high deductible.

We had a family meeting, and decided unanimously – and quickly – that the health insurance exchange is not the place for us to obtain coverage. Not only was the plan for my wife and I ridiculously expensive, but the application process is cumbersome and confusing. It’s so riddled with questionable provisions and information requests, that we didn’t feel comfortable going forward.

Then there’s the income parole officer factor, as well as the tax credit subsidy landmine.

Pardon me for saying this, but the whole thing seems more than a bit unholy.

But there was even more…

The Surprise Referral

I said that my wife and I were able to obtain a quote for the two of us. But that was because we were unable to get coverage that included our kids. Since our kids are 18 and 20 years old, and file their own tax returns, they are considered to be separate households.

I can’t explain why that is, it’s just the way it turned out. The kids both got referred to New Hampshire Medicaid. Well – sort of.

When we had the kids make individual applications to the health insurance exchange, our son was referred to Medicaid, but our daughter – who is two years younger – was recommended to get an individual policy through the exchange. She didn’t qualify for Medicaid because our family income is over the income limit.

There was a loophole.

Since my daughter is 18, she is considered to be a dependent of my wife and I for Medicaid purposes – but not according to the IRS. We have two government agencies with different definitions of the same thing. This is what I mean about the confusion and mysterious provisions.

The (Mostly) Happy Ending

Since the health insurance exchange policy didn’t come close to what was being offered from my wife’s part-time job, she and I took the employer plan. Since the current employer doesn’t offer a subsidy on the coverage since she works just 20 hours per week, the cost of a full family plan would eat up most of  her paycheck. But to cover just my wife and myself would be about one-third less than the cost of the exchange policy, but with only a $2,000 deductible.

My son was referred to Medicaid, provided them with income documentation, and was approved within two days. My daughter will be applying within a few weeks, when she turns 19.

Our household income is too high for us or our kids to qualify for Medicaid collectively, but our kids can qualify if they apply as separate households, even though the still live in the same household. I can’t explain it, but it was verified to be true by both healthcare.gov staff and New Hampshire Medicaid staff.

Where We Go From Here

Under our current arrangement, we all have – or will have – coverage by the end of April. But it’s hardly a perfect solution. Medicaid, like the coverage available on the health insurance exchange, is also based on income. As our kids’ incomes increase, and we expect that it will during the course of the year, they may no longer qualify for Medicaid.

Our hope is that by the end of the year my wife will be bumped up to a 30 hour per week schedule on her job, in which case the cost of insuring our entire family will drop significantly, due to a partial employer contribution. Failing that however, our kids will be back on the health insurance exchange, looking for individual policies.

Based on our experience so far, the second outcome is not one that we are comfortable with. Unfortunately, there are no longer any health insurance options available outside the health insurance exchange.

My Conclusions About Obamacare Based on Our Experience

I went on to the health insurance exchange with an open mind, hoping to be pleasantly surprised. But by the time I was done, I mostly felt like I and my family had been mugged. But despite my many emotional misgivings, I’ll try to evaluate it objectively.

As of today, here’s what I (still) like about Obamacare:

  • The fact that you can no longer be declined based on the condition of your health.
  • That your premiums can no longer be based on your health, other than smoking.
  • That Medicaid has been expanded to include more lower income people, who really can’t afford any kind of health insurance in the first place.
  • It was an attempt by the Obama administration to do something to reform a healthcare system that was already completely out of control.

As of today, here’s what I don’t like about Obamacare:

  • The exchange application process is ridiculously complicated, and requires a dizzying amount of income documentation.
  • That your income must be faithfully reported; while I realize the necessity of this requirement due to the tax credits, it will scare off a lot of people.
  • That the entire system has effectively eliminated market alternatives, which makes us a hostage to a single system. That practically guarantees that this will get worse going forward.
  • Biggest objection of all – the health insurance exchange system does nothing to remotely address the problem of health insurance affordability. If anything, it seems that the exchange will only continue to feed the price spiral. The tax credit subsidy is a Band-Aid designed to mask the fact that health insurance premiums continue to rise.

On balance, I give Obamacare a D+/C-. It has it’s pluses, but it’s in need of serious improvement. And I can certainly appreciate why so many people are continuing to go without health insurance, in spite of the health insurance exchange system.

My hope is that much of what we’ve experienced with the health insurance exchange in the last few weeks will be addressed and remedied over time. After all, the system is still fairly new, and the job of trying to provide workable health insurance in a country with over 300 million people is no small task.

(Please see the updated 20 Part-time Jobs With Health Insurance post for the most current list of employers who offer health coverage for their part-time staff.)

Have you made an application for health insurance exchange coverage, and if so, what has your experience been? Did you take the coverage, or did you go another route? Or did you decide to continue going without health insurance?

( Photo by Mike Licht, NotionsCapital.com )

12 Responses to Why We Passed on Health Insurance Exchange Coverage

  1. Great writeup Kevin!

    So I thought kids could be covered until 27 on a parent’s plan? Also, there really are no other choices? No eHealthinsurance to compare? If not what were private policies priced at before ACA (I understand you weren’t there then)? My point is are plans lower under ACA compared to before?

    It’s a shame it’s so complex but I agree at least it’s something. I hope that rather than a push to repeal there is a push to tweak it and make it better.

  2. Hi Glen – My understanding (from different people in the insurance field) is that there are no alternatives. What they do offer are plans that are non-compliant, which is to say that they don’t fit the definition of health insurance under ACA, and having them won’t exempt you from the penalty.

    I’m not sure about the kids coverage until 27 (I think it’s 26) but that may only apply to full time students. As far as ehealthinsurance, they give this message:

    “Now that the Open Enrollment Period (OEP) has ended, you’ll need to experience a qualifying life event to enroll in a qualified health insurance plan.”

    At this point, I believe they’re all tied into the exchanges, unless you want short term coverage.

  3. Strange that your process was so frustrating. I watched someone on YouTube (self-employed as a vlogger and an author, pretty successful in both regards) apply. The process took him about 20 minutes.

    I agree that there are definitely major holes in the system. If Obama hadn’t made concessions to the private sector, I think the costs would be radically different.

    $370 a month per person doesn’t strike me as too bad. Definitely not great, but I’ve heard worse. It definitely sucks that the deductibles are so high. Countries with socialized medicine don’t have those kinds of costs. So I guess we have to hope that Congress can make some reforms. Yes, I know just how naive it is.

  4. Hi Abigail – I suspect the vlogger you’d seen apply online had already done a test run. He wouldn’t have done a video of it had it not been known to go smoothly. I also agree that too many concessions were made to the private sector, meaning insurance companies. The whole process seems to be insurance company friendly, not consumer friendly. It’s my opinion that the exchange system seeks to preserve the runaway cost of health insurance, and by extension, the healthcare industry in general.

    When you consider that healthcare now represents about 18% of the economy, it’s easy to see why the government would want to keep the industry afloat and growing. I don’t think it will be long before there will be consensus calls to reform the reform plan (Obamacare).

  5. You hit the nail on the head with the statement “Affordable Cost”. There is nothing affordable about this healthcare program unless you have income that doesn’t show up on the radar. Like you I am healthy and will only need to see a doctor for a yearly well check which should not cost me the combined cost of yearly premium of $5,000 plus deductible costs of $5,000 or more. I think I can pay the visit cost out of pocket by using one of the new clinics that have popped up. I won’t have my doctors that i used to have unless I go to the hospital they have an office at.

    In about a year, I will qualify for Medicare at 65 which I have to pay that premium out of pocket because I won’t be applying for Social Security until full retirement age to max out my benefit. When I had checked out the healthcare exchange, I found out they had all my income information already since I had to get an IRS.gov account to pay taxes on money my job gave me without taking taxes out despite my request that they take it out. (This was better tax-wise for them). I lost 2 refunds for two years because of their refusal. Thank God I have a good honest accountant who makes sure my W2s are right every year and I get a refund.

    Anyway back to the healthcare exchange, I was told based on my income I was not entitled to any subsidy which meant I had to pay full cost for whatever plan I chose. None of the plans cover doctors who are specialists like an Internist or any doctors needed by people my age. They were considered extra cost. And forget about having any surgery, the anesthiologist is all out of pocket. What really hurts is that people who are not tax-paying citizens are getting this all for free on our tax money. I also got lucky at work with notice that the coverage we had/have is the same as a bronze plan coverage so I just have to wait it out until Medicare. But what problems will I face then – who knows.

    The only one who profits in the Affordable Healthcare is the insurance companies.

  6. Hi Maria – You pretty much summed up my experience. Abigail commented above that $370 per person ($740 for my wife and I) doesn’t seem too bad, and I don’t disagree with that. However, when you look at what you have to pay out of pocket and add that to the $9,000 being paid in premiums every year, it’s just not cost effective. Since we’re new to the area, we don’t have any doctors that we already see, so I’m not able to comment on which doctors and specialists we can use. But based on everything else I’m seeing, it would hardly surprise me if that turns out to be a problem too.

    I’ve heard it said that there are two kinds of people when it comes to health insurance – those who have employer provided plans or government plans (Medicare and Medicaid) – and everyone else. If you’re in the covered group, you think that the healthcare system is pretty good. But if you have to get your own plan, you see the whole thing for the disaster that it really is.

  7. Before I obtained insurance from my employer (before ACA), I once tried to obtain self pay insurance. I was told my premium, because of my age and health, would be in excess of $1,500 per month with a $10,000 + deductible. That was IF they would accept me at all.
    I made relatively little money at that point and might have qualified for Medicaid under Medicaid expansion, but VA did not do the Medicaid expansion. Income limits under Medicaid in VA, (unless you are on welfare or disability) are around $3,000.00 a year. Hells bells, an enterprising kid could make that much running a lemonade stand during the summer. NO working adult makes that little. I would still be using the free clinic system (and I always contributed donations when I was seen by a doctor) if I had not obtained insurance.
    Currently, I pay about $55.00 per month premiums, $250.00 deductible, $1,500.00 out of pocket and a co-pay on everything until I hit the out-of pocket limit. Anthem has paid for some very expensive meds and treatments for me and for that I am very grateful. RX companies kicked in co-pay assistance coupons.
    I am very angry that Obama gave into the insurance and pharmaceutical companies and to the forces in Congress that support them. I agree that something is better than nothing, especially regarding the pre-existing condition situation. But the act does need reform. SINGLE PAYER NOW!

  8. Hi Mary – I’m a bit confused – is the plan you have now the employer plan or did you get it through the exchange (Obamacare)? Where ever you got it, it’s one of the best deals I’ve ever seen, even well before Obamacare came about.

  9. I get it through COVA Care, which is the State of VA employee health plan. However, before I got the health plan in 2011, I also worked for the State of Virginia.
    Before ACA, Virginia employed many people as P-14 part-time workers but would work them 40 hours a week with no benefits. And no OT time and a half for over 40 hours. P-14s had to work holidays that the Classified (salaried) workers got as paid time off. P-14s didn’t get special holiday pay. After ACA, Virginia P-14s now work no longer than 29 hours per week or Aunt Virginia would have to pony up for benefits for them.
    I know there are legitimate reasons to hire temp. or part-time workers but that reason shouldn’t be solely to avoid given benefits to people who you work the same time/workload as benefitted workers. THAT is exploitation. In my office, at one time, over half of the office were permanent part-timers! They finally converted those jobs to salaried.
    One other thing: had I not gotten the insurance when I did (2011), I would now be dead! No one was going to fully treat my conditions when I was uninsured and if I hadn’t gotten the treatment last summer, I am told I would have be died within two years.
    It is a shame that in a nation as wealthy as America that anyone dies because they are uninsured and can’t get treatment. But unfortunately, it is all too common.
    The $55.00 doesn’t include comprehensive dental, vision or hearing care or out-of network care. IF I opted for those things, I would pay about $95.00 a month and a higher deductible.
    It is cheaper and just as easy for me to go to the dental school at MCVH for dental care and to get a VALPAK coupon for an eye exam and get my initial pair of glasses as Costco. I buy extra glasses online.
    I am glad my hearing is good. Hearing aides are another item that cost the earth and the moon, even at Costco.
    Hearing and vision care should be mandatory for older folks but they are not. Many older folks could stay independent for much longer if they weren’t loosing their hearing and vision. Medicare covers neither. While they might be able to afford one pair of glasses, they can’t afford the extortionist costs of hearing aids, which for the most part, cost 1,000s of dollars. I have heard that someone is creating an affordable hearing aide. We shall see.

  10. So the good deal you got on your health insurance was an employer plan, not through the exchange. That’s what I thought because it looks to generous for the exchange policies. I think that your experience is one millions have faced since at least the financial meltdown, when so many people lost their jobs, and their health insurance with them. That set off a “connect the dots” strategy of getting care or coverage anywhere possible, but not nearly what they had before.

    My wife and I are currently without dental and vision too. If we added them, it would have increased the premium on the order of $200 per month. Like you, we’ve found there are reasonably priced alternatives to vision coverage, and you really don’t need dental if you only go to the dentist for an annual cleaning. The cost of the coverage will be at least as high as the cost of the visits, and not all plans pay 100% or pay on time.

    My own thinking is that if this country doesn’t get serious about addressing the cost of healthcare (it’s twice as high per person as it is in other rich countries), it’s going to drag the economy down deep. I see this happening for three reasons: 1) healthcare is eating up too much of the economy, 2) medical debt is bankrupting households, and 3) people going without coverage will lead to shorter lifespans, sooner or later. The current path of letting healthcare costs grow to the sky is incredibly short-sighted.

  11. I was just in the hospital for three days and am now getting ‘co-pay’ bills that rack up into the hundreds of dollars. And I have ‘good’ insurance. The total bill was something like $18,000.00! That is outrageous being as I didn’t have surgery or any fancy procedures. The antibiotic I got cost in the thousands!
    Back in the day, hospitals and doctor visits just sent you one bill. Now all the departments, labs, doctors, etc. bill separately so they can jack up the costs.
    I agree with you totally about health care costs. As the Boomer gen ages and the returning Middle-East vets come home with catastrophic injuries, it is just going to get worse.
    Another cost that is going to tank the economy and our future is education. Both medical and college costs greatly out pace the rate of inflation and are growing way out of control. We will end up returning to a scenario where only the wealthy can afford an education if we don’t get costs and loans under control. Despite the advance of online and distance education, colleges keep building and building and doing things like they did in the early 20th Century. That needs to change.
    I used to work in a college office and I saw how the text book manufacturers sent reps around much like big pharma sends reps to doctor’s office. They would pitch a new version of a textbook and give freebies to the admins.. Those big bulky, ridiculously expensive textbooks are, for the most part, an outmoded way of teaching and learning, yet they keep pushing them as if they were the best and only way to learn a subject.
    But as long as deep pockets own Congress and people keep voting these flunkies in, I can’t see much change on the horizon. We desperately need election/campaign finance reform or we will just be a country ruled by oligarchs and their patsies in Congress.

  12. Hi Mary – You risk getting me up on my soapbox here by bringing education into the discussion. Both healthcare and education are protected industries. That means they are protected and favored by all levels of government – virtuous enterprises that can’t be restrained by the cruelties of economic reality (I’m of course being sarcastic here). This is why both can grow relentlessly, even as official statistics confirm that the average American household is no better than stagnating with income.

    This is also why this economic “recovery” often feels more like a recession than a period of growth. Those two industries, along with a few others, are sucking income out of the shrinking middle class, forcing more people to either go on public assistance or to simply drop out of the system. This might help to explain why so many millions of former workers have just disappeared from the work rolls, bringing the official unemployment number down to a superficially pleasing level.

    I’d like to be optimistic about the future, but I don’t see the mechanics of improvement. There aren’t even any movements afoot to challenge the status of protected industries. We’ll likely tool along until we crash.

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