How new exchange may help Californians buy health care

Q: I keep hearing about something called the health insurance exchange. What is it and how is it supposed to work?

A: Think of it as a new mall for health insurance, with discounts available for some shoppers.

The “mall,” which is a major piece of Obamacare, is called Covered California. When it opens its literal and virtual doors later this year, it will offer a variety of health plans that cover at least a minimum set of benefits.

It also will accept all eligible paying customers, regardless of medical history or previous diagnoses.

The exchange debuts on Oct. 1 for a six-month open-enrollment period, with actual coverage to begin in January and beyond. Californians will be able to shop for plans online, by phone, by mail and in person at a range of locations, from retailers to tax prep offices.

Now, about those all-important discounts: Individuals and families who earn between 138 percent and 400 percent of the federal poverty level may be eligible for tax credits to offset the cost of premiums. The less you make, the larger your subsidy.

This year, 400 percent equals $45,960 for an individual or $94,200 for a family of four. (Click here for federal poverty level guidelines.)

An estimated 2.6 million Californians will qualify for subsidies. Millions more won’t, but can buy unsubsidized plans from Covered California or on the open market. (If they can afford them, that is.)

Premiums will depend on a variety of factors, including where you live, what level of coverage you choose, how old you are and whether you qualify for the tax credits. For a rough estimate of how much you might pay, try Covered California’s premium calculator.

Here’s an example: A married couple, ages 32 and 35, make $65,000 per year and have a 4-year-old daughter. They would pay $515 out-of-pocket each month for a midlevel plan, after receiving a subsidy of $347 per month.

Their share would drop to $276 per month if their annual income were $45,000 because they would receive a larger subsidy.

For more information, go to Covered California’s website or visit

Q: I’m 28 years old and physically fit. Do I have to buy health insurance?

A: You don’t have to buy health insurance. But if you choose not to, starting next year you’ll owe a tax penalty.

One of the signature elements of President Obama’s health care law is known in wonky terms as “the individual mandate.” More plainly, it is the requirement that most Americans purchase health insurance. (I say “most” because there are some exceptions.)

The tax for those who don’t comply starts at $95 per adult in 2014 (or 1 percent of annual household income, whichever is greater) and grows to $695 by 2016 and beyond (or 2.5 percent of income). The penalty will be assessed on your federal tax return.

But because of your age, you will have a less expensive insurance option: Catastrophic coverage.

Covered California will offer a catastrophic plan for young adults under 30 and for individuals who cannot find affordable health coverage. (Click here to learn more about what’s considered “affordable.”)

This plan will have the lowest premium, but all costs (except for preventive care and the first three office visits each year) are out-of-pocket until the $6,400 annual deductible is reached.

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