Cheap Health Insurance is On Its Way...But Not for Everyone

Published: Fri 21 May 2010

Larry Roth

Cash-strapped families commonly wonder how they will be able to comply with the coverage mandate included in the health care reform law when they simply have no money for health insurance coverage. The health care reform law includes several provisions to assist families in this predicament.

Families USA, a consumer healthcare advocacy group, emphasizes that the law makes health insurance more affordable for individuals in multiple ways. The law, for one, creates health insurance exchanges in 2014, which is when Americans will be required to carry medical insurance.

If your employer provides medical coverage but your portion of the premiums exceeds 9.5 percent of your income, you will have the option to go to the health insurance exchange and purchase subsidized health insurance coverage there. Similarly, if the plan your employer offers covers less than 60 percent of the medical expenses of the average health plan member, you will also qualify for subsidized coverage through the health insurance exchange.

Once an individual is on the exchange, you may receive a subsidy to help fund your health insurance premiums if your income is less than 400 percent of the federal poverty level, which was $43,320 in 2010 for an individual. If you earn less than 250 percent of the federal poverty level, you will also enjoy limited cost-sharing, such as deductibles, co-payments, and co-insurance. Further, the law limits the amount you must spend out of pocket annually to the maximum levels for out-of-pocket costs for health savings accounts--$5,950 for individuals and $11,900 for families in 2010. The spending limits will be modified downward for those with incomes of less than 400 percent of the poverty level.

Phased-In Penalty

Beginning in 2014, the government will phase in a penalty on those who do not have health insurance. By 2016, this penalty will reach $695 for an individual and $2,085 for a family or 2.5 percent of household income, whichever is higher. Every year after 2016, the penalties will be adjusted according to cost of living.

You may be exempted from the insurance requirement based on financial hardship or other extenuating circumstances. Moreover, if the cheapest health insurance plan available on the exchange consumes more than eight percent of your income, or if your income falls below the tax-filing threshold, you will not have to purchase medical insurance.