Health Care & Insurance


Health Insurance Exchanges Gear Up for Action

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Circle October 1 on your calendar. If you're under 65, you may be less than three short months from a whole new outlook on your health, wealth and retirement security.

October 1 marks the start of open enrollment on the new state-based health insurance exchanges created under the 2010 health care overhaul law. And it will give many older consumers their first opportunity to sign up for health insurance plans that guarantee comprehensive coverage regardless of health status, in many cases subsidized by tax credits. Coverage will begin January 1, 2014, when most people are required to have insurance or pay a penalty.

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People who have long been charged hefty premiums because of their age, denied coverage for preexisting conditions or rejected completely will suddenly find multiple insurers competing for their business. For people in their fifties and early sixties who are not yet eligible for Medicare, the health law provisions taking effect in the coming months "really are a game-changer," says Sara Collins, a vice-president at the Commonwealth Fund, a nonprofit research group in New York. "People won't have to make career decisions based on whether or not they have health insurance through a job," she says. That dream of entrepreneurship or early retirement could become a reality.

The launch of the exchanges should reverse a troubling decline in insurance coverage among older adults not yet eligible for Medicare. In 2012, 20% of people 50 to 64 did not have insurance for the full year, up from 15% in 2005, according to the Commonwealth Fund. A previous survey found that cost concerns caused 75% of people in this group to skip needed health care, including avoiding doctor visits when they were sick.

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A decline in workplace coverage and rising long-term unemployment among the age 50-to-64 group have contributed to the coverage gaps. "Even someone with hefty savings and a lot of retirement income could find themselves in a lot of trouble in the individual market today," particularly if they have a chronic condition such as diabetes, says Karen Pollitz, senior fellow at the Kaiser Family Foundation. "Even if you do get a good rate when you're healthy, if something happens to you, kiss it goodbye."

People with employer coverage should pay close attention to the exchanges, too. Workers and early retirees offered only skimpy employer plans can shop for their own coverage on the exchanges.

The upcoming changes remove some big question marks from the retirement planning process, reducing the risk that you'll have to go uninsured and limiting the premiums you can be charged as you grow older. That should bring relief to people like Ray Swartz, 61, a retired public speaker in San Francisco. The premium on his individual health plan, now about $600 a month, has climbed roughly 10% year after year. Health care, he says, "is the number one expense I have, by far." He's planning to look for other coverage options when the exchanges open later this year.

There are still big challenges ahead for consumers seeking affordable coverage. A 62-year-old who is eligible for tax credits on the exchange, for example, could still spend as much as 27% of his income on premiums and out-of-pocket costs if he incurs a very high level of health care charges, according to a Commonwealth Fund report. Consumers may also find that plans on the exchange don't include the broader provider networks they're used to seeing.

The details of insurance offerings are not available yet, but you don't have to wait until October to start exploring your health care choices. Here are answers to some key questions that will help prepare you for the new health care marketplace.

Will I be required to switch plans? If you're currently covered by a plan that you purchased on the individual market, you may not have to change plans, but you may want to shop on the exchange anyway.

If your policy was active before March 23, 2010—the day that health care reform was signed into law—your plan may be "grandfathered," meaning you can simply keep your current coverage. But you may miss out on some of the benefits that the health law requires for newer plans, including the elimination of annual coverage limits and free coverage of preventive services. Grandfathered plans must, however, comply with some other aspects of the law, such as the elimination of lifetime coverage limits and protections against insurers canceling your coverage after you get sick.

Individual or family policies purchased after March 23, 2010, and with coverage effective before January 1, 2014, are not grandfathered. Some insurers may simply notify people with such coverage of plan changes that will meet the health law requirements, says Robert Hurley, a senior vice-president at online insurance marketplace eHealthInsurance.com. Others may require consumers to actively switch plans. In the next few months, Hurley says, "it's really important to read anything you're mailed from your health insurance company," because insurers will be notifying policyholders of the process for moving to new plans.

No matter what type of plan you have currently, it can make sense to at least explore your options on the insurance exchange. One big reason: Premium tax credits are only available to people who enroll in plans through the exchange. The credits are available to people with income between 100% and 400% of the federal poverty level. In 2013, that means income between $11,490 and $45,960 for an individual.

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