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The health insurance lexicon changed a bit when the Affordable Care Act took effect. The healthcare reform law introduced us to concepts such as minimum essential coverage and essential health benefits. We may have a few open-enrollment periods under our belts, but that doesn’t mean we all understand the ins and outs of health insurance and Obamacare.
Understanding how health insurance and the law work is important as you shop for coverage. Learning basic ACA-related terminology can help you compare plans, determine if they meet your healthcare needs, and understand your financial responsibility.
The following terms include 10 ACA essentials that will help you navigate buying health insurance in the age of Obamacare:
The percentage of total average health care costs covered by a health insurance plan. Under the Affordable Care Act, health insurance plans sold through the state-based and federally facilitated exchanges as well as in the private market fit into four coverage levels based on their actuarial value. These are known as the metal levels because they are classified as bronze, silver, gold and platinum.
Ten categories of health insurance items and services for which all Obamacare plans sold on and away from the state-based and federally facilitated exchanges must include coverage. Job-based health insurance plans must also include these benefits. Within these categories, specific essential health benefits may vary dependent on the benchmark plan selected by each sate.
The allowance of certain, qualifying individuals to go without minimum essential coverage and not owe the shared responsibility payment. You may be exempt from having health insurance due to financial hardship and other circumstances. Application for exemption is required in many cases.
A platform through which individuals may purchase health insurance plans. As a result of the Affordable Care Act, state-based and federally facilitated health insurance exchanges were created. These public exchanges provide consumers with subsidies and tax credits that help lower their premium payments.
There are also private health insurance exchanges that may be set up by employers and health insurance companies. These exchanges do not provide access to subsidies and tax credits; however, they may offer consumers additional coverage options such as dental insurance.
The Affordable Care Act’s requirement that most Americans have minimum essential health insurance coverage unless they qualify for an exemption. This is commonly referred to as the individual mandate.
The tax penalty owed by those who do not adhere to the individual shared responsibility provision. By law, individuals are allowed a single period of up to three months without health insurance coverage during the year. Beyond that, unless they qualify for an exemption, they will be subject to the shared responsibility payment, which is the greater of a percentage of household income or a flat dollar amount—the percentage and dollar amount change annually. The IRS states that the amount owed is 1/12 of the annual payment for each month consumers and/or their dependents are not insured and are not exempt.1
Plans that meet the ACA’s basic provisions and thereby fulfill the requirement that most Americans have health insurance. These plans include those sold on the state-based and federally facilitated health insurance exchanges as well as some sold in the private market, those that are job-based, Medicare, Medicaid, CHIP and others.
The annual time period in which Americans can buy exchange-based individual major medical health insurance plans for themselves and their families.
A health insurance plan that meets the Affordable Care Act’s minimum requirements and has been certified by the state-based or federally facilitated exchange through which it is sold.
A limited time outside of the standard open-enrollment period in which consumers may be eligible to enroll in a health insurance plan. Special enrollment becomes available due to qualifying life events such as getting married, having a baby or moving and lasts for a limited time—typically within 60 days of the event. This applies to individual health insurance sold on and away from the state-based and federally facilitated health insurance exchanges.
Income-based financial assistance available to those who buy health insurance from state-based and federally facilitated exchanges. These may come in the form of premium tax credits for those whose incomes fall between 100 and 400 percent of the federal poverty level and/or cost-sharing subsidies for those who earn up to 250 percent of the federal poverty level and buy a silver plan.
Estimate your subsidy using the Health Care Reform Calculator.
These are only a few key terms you will encounter when buying Obamacare health insurance, but they are some of the most common and essential. Check out our 10 essential insurance terms, which explains deductible, coinsurance, copay and more.
If you need further explanation or guidance in selecting the right health insurance plan, call the number on your screen to speak with a licensed health insurance producer.
Looking for temporary coverage? Explore your short term health insurance options.
Originally posted July 17, 2015. Reviewed and updated Nov. 20, 2017.
1IRS. “The Individual Shared Responsibility Payment – An Overview.” March 20, 2014. http://www.irs.gov/Affordable-Care-Act/The-Individual-Shared-Responsibility-Payment-An-Overview