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.
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:
- Take the tax credit when you file your income tax return, rather than applying it toward your monthly health insurance premium, OR
- 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?