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California health insurance  -  Health Exchange in California  -  Have Subsidies in Exchange

The Haves (health insurance subsidies) and the Have Nots

Cost for Californians will largely depend on income levels (detail below)
All rates are expected to rise considerably but subsidies will offset (detail below)
The Federal Poverty Level or FPL is the new number to know
9.5% of your income for those with subsidy is the key number (detail below)

There's soon to be a new dichotomy in California based on income but it's a reversal of the usual split and it will be arriving with a clamor Jan 1st, 2014 when Health Reform makes its entrance in earnest. The availability of health insurance subsidies based on income levels will have a huge impact on what Californians can expect to pay. Let's take a look at how this might affect your out of pocket costs.

Two signs outside the office...

We were at a meeting for health reform changes (one of many these days) and an agent in the room joked that he would place two signs outside his office.

One would read, "If you make under this much, go this way", and the other would read, "If you make over this much, go this way" with arrows pointing in opposite directions. His joke underlies the very different treatment people can expect based on their income. It really is that stark and it all comes down to subsidies which will be available for California health insurance on the individual and family market.

Individual and Families which make up to 400% of the Federal Poverty level will receive pretty significant subsidies towards their health insurance premiums. This subsidy will reduce their monthly premium immediately when purchased through the Health Exchange.

What levels qualify for California health insurance subsidies?

It will be based on two factors...your income as compared to the Federal Poverty Levels (FPL) and the cost of essential health benefits as a percentage of your income. As a rough estimate of the FPL, for an individual 100% of poverty is approx $12,000 for 2014 and roughly $48K is 400% where the subsidy cut-off is. That means that an individual who makes between $12K and $48K (approx 2014 levels) can expect to receive a subsidy against their health insurance costs. These are the Haves (in terms of subsidies). Let's look at what they can expect.

The Have's of health insurance subsidies

This is where the 9.5% income cap becomes important.

Essentially, the ACA health reform bill states that a person's California health insurance premium shoudln't exceed 9.5% of their income.

Assuming $24K or $2K monthly, that means that health insurance shouldn't be more than $190 monthly. Depending on a person's age, the un-subsidized underlying rate is expected to jump quite a bit Jan 1st 2014 due to guaranteed issue coverage and mandates. For a 40 year old in Los Angeles, the underlying insurance rate might be $400 monthly. If that same 40 year old makes less than 400% of FPL, the $210 would be paid for by the subsidy leaving him or her with $190 in premiums.

For someone making $2K monthly or $500 monthly, this is still a lot of money but the subsidy is still sizable. The issue is whether the subsidies will every be able to keep up with the underlying cost of health insurance. We'll watch this closely.

The Have Nots

If you make over the 400% of FPL in California, expect to pay quite a bit in health insurance premiums. In the example above, you would pay the $400/monthly premium. We fully expect that individual family health insurance rates will approach group health rates which have always been roughly double that of individual due to guaranteed issue status. That's probably the direction the individual family market is heading especially since the mandated health plans are all richer than what the vast majority of Californians purchase on the individual market. We'll watch this as well when the rates start to be published summertime of 2013.

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