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Understanding Health Insurance Reform

More than half of Americans say they still don't understand how they'll be affected by the new health insurance law – what is the positive impact of reform?

Last month, Barack Obama signed into law the most sweeping social program since Lyndon Johnson's Great Society. But most Americans – even those who understand on some level the historical significance of the achievement -  are still unsure of what changes to expect … and when.

After months of debate that has played out over the internet, in newspapers, television and radio, most
Americans still don't understand how the nearly $1 trillion behemoth of insurance regulations, tax credits, and new programs, will affect them, according to a recent CBS News poll.

Health insurance reform, now that it has finally been passed, avoids sweeping changes. The law doesn't create a government-run insurance plan as some had feared, nor does it (at first) require that everyone have health insurance, whether they can afford it or not. Instead, much like the social safety net first established by the social security system, the new health plan is designed to assist those who can't get insurance at work and can't afford to buy their own, who lose their jobs, who have pre-existing conditions, or who own or want to start businesses and insure themselves and their employees.

In fact, most Americans are not likely to see any changes at all in the short run.

The Congressional Budget Office (CBO) estimates that until about 2019, 160 million Americans will still be getting their insurance from their employers, paying about the same rates as they would have without health reform. Millions more will continue to buy private insurance.

The centerpiece of the bill – the major change to the way insurance is sold and marketed starts in 2014.  The law sets up state-based insurance "exchanges" that will offer consumers and small businesses a choice of standardized and heavily regulated health plans, designed to serve people who aren't offered insurance by a large employer. The exchanges are designed with three main goals in mind:

  • Insurers will be required to offer you coverage. After 2014, health insurers will not be able to turn anyone down because of pre-existing conditions; even pregnancy and heart disease will be covered. Rates won't be tied to your health any more, although smokers may have to pay more. The oldest people in a plan will pay no more than three times the rate paid by the youngest. Policies you purchase through an exchange will look a lot more like the group plans you can get through an employer.
  • Subsidies will be available to those unable to afford health insurance. The insurance on the exchanges won't be free, but it is estimated that more than half of those using the exchanges will receive large tax credits to help them buy. For families earning up to four times the poverty line -- $88,200 today for a couple with two kids -- the tax credits will be set so that they pay no more than 9.5% of their income for a fairly basic health plan in 2014.
  • Health plans will be simpler to shop for. To get the insurance, you'll tap into an exchange set up by your state or a group of states. All the plans must provide at least a standard menu of essential benefits, so you'll have to spend less time scouring contracts for surprising loopholes. Plans will be available in four basic types: bronze, silver, gold, and platinum. Plans can compete by mixing different premiums, deductibles, and co-pays.

In short – health insurance reform appears to be well on its way to doing what its proponents have asked for – making affordable insurance available to every American.  

Next post: the down side to insurance reform.
Published Apr 29 2010, 02:13 AM by moneycoach
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