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Understanding the Health Insurance Marketplace – Mandates of the Affordable Care Act (Obamacare)




The Patient Protection and Affordable Care Act – also known as “Obamacare” – came into law in 2010 and was taken to the Supreme Court in 2012, at which point the law was challenged and upheld. Some portions of the law enjoy popularity, such as the option for adult children to stay on their parents’ health insurance until the age of 26. Other portions of the law are quite divisive, particularly the law’s mandate that individuals purchase healthcare insurance – either through an employer or on the market – by the beginning of 2014, or else pay a penalty.

Regardless of how you feel about the new legislation, there are a few things you should know.

The Employer Mandate

The employer mandate requires employers with 50 or more full-time employees to offer “affordable” healthcare coverage to employees, or otherwise face penalties. While this mandate was originally scheduled to take effect at the same time as the individual mandate in 2014, it’s been delayed until 2015. What this means is that even if you work for a larger employer, you may still need to seek health insurance on your own through your state’s (or the federal) exchange to satisfy the individual mandate until the employer mandate goes into effect in 2015.

The Individual Mandate

The so-called “individual mandate” gave rise to the health insurance marketplace – or healthcare exchange – where you can enroll in health insurance plans as of October 2013. To comply with the individual mandate, these plans generally have a start date of January 1, 2014.

If you plan to abide by the individual mandate – but do not have access to adequate health insurance through your employer – the health insurance marketplace offers a one-stop shop for finding and comparing available health insurance plans. No one is required to use it, but it’s intended to make the purchase of insurance fair, equitable, and straightforward.

The health insurance marketplace isn’t a destination, but an application that you fill out online or by mail. Once you fill out your application, you can compare all of the health insurance plans available to you, while also determining whether you qualify for insurance subsidies or federal insurance programs (such as Medicaid or CHIP).

Most states have their own health insurance marketplace for residents, but if you live in a state that has chosen not to participate, you can access the federal health insurance marketplace to apply for available plans.

Health Insurance Mandate

Impact of the Individual Mandate

If you have insurance through your employer or through an open-market broker, you may only feel indirect effects of the individual mandate. But if you don’t have insurance, the individual mandate is a game-changer. According to the Kaiser Family Foundation, “The individual mandate is a provision of the federal health law that requires you, your children, and anyone else who you claim as a dependent on your taxes to have health insurance in 2014 or pay a penalty.”

Currently, 57 million Americans under the age of 65 do not have insurance, so the mandate is supposed to compel these individuals to purchase healthcare coverage or enroll in federal or state programs. This is because many components of healthcare reform hinge on this mandate. Think of it this way: It’s only through the broad coverage of unhealthy and healthy people that enables insurers to cover the healthcare bills of individuals with expensive medical conditions. If healthy people opt out of insurance coverage because they’re healthy, insurers are often forced to cut coverage for the sickest people. The individual mandate was designed to prevent this from occurring.

The Penalty for Going Without Coverage

If you’re deemed able to afford coverage but choose not to enroll, you will be assessed a penalty. The 2014 penalty is $95 per adult and $47.50 per child, or 1% of family income, whichever is greater. The penalty increases every year until 2016, at which point it’s projected that the penalty will be $695 per adult and $347 per child, or 2.5% of family income, whichever is greater.

There are a handful of exceptions to this penalty, such as a religious conscience exemption, an exemption for members of Native American tribes, and a broad exemption based on possible hardship, such as forgoing food and shelter for the purchase of insurance.

Who Benefits

There are millions of Americans who don’t have access to health insurance through their employer, and who have chosen not to purchase private insurance. Many of these individuals are likely to change their minds with the individual mandate. Likewise, Americans who haven’t been able to purchase insurance on the open market due to preexisting conditions or limited income are going to have access to affordable care. It’s these consumers who have the most to gain by enrolling in the marketplace.

If you’ve had difficulty purchasing insurance in the past due to your health status or income, the health insurance marketplace is designed to:

  • Allow you to enroll in a plan of your choice, no matter your health conditions
  • Provide coverage if you don’t have access through your employer
  • Inform you of the subsidies or government programs you qualify for
  • Help you understand the benefits of available insurance plans
  • Offer only insurance plans that meet minimum requirements for reasonable coverage, while ensuring you understand coverage limitations
  • Simplify the enrollment process for insurance plans by offering a single application
  • Compare the real costs of insurance plans, including co-pays and deductibles, so you can make an informed healthcare decision

As a medical social worker, I saw numerous patients come into the hospital with debilitating illnesses or injuries that weren’t treated in the earliest stages because the patients had low-quality, privately-purchased insurance policies – or no coverage at all. Usually, these patients did not understand their coverage prior to purchase, and they made their decisions based only on what they could afford. The health insurance marketplace aims to prevent this tragedy by simplifying the language and enrollment process, and making healthcare insurance obtainable by all.

While some consumers may have to pay more for their coverage through the marketplace than they were otherwise paying, others will actually pay less. According to Jonathon Cohn, senior editor for New Republic, “As a general rule, the people who suffer the most under the current system will also benefit the most under the new one.”

Understanding Subsidies

Many individuals have sounded an alarm about the increased cost of healthcare coverage under the new law. But it’s essentially a mixed bag. According to the Kaiser Family Foundation, many policy analysts agree that costs are likely to go up for the young and healthy, while they’re likely to go down for older and sicker individuals. However, the law has also made provisions for substantial consumer subsidies to help offset increased costs.

You’re eligible for a subsidy through the healthcare exchange if your income is less than 400% of the federal poverty level ($46,000 for an individual and $78,000 for a family of three). The amount of subsidy the government provides, versus the amount of premium you must pay, is based on a sliding fee scale. For instance, if your health insurance cost is $500 and you qualify for a $250 subsidy, the federal government sends a check for $250 to the insurance company, while you remain responsible for the remaining $250 per month.

Subsidy rates are set once you enroll in the healthcare exchange. These subsidies are based on tax return information stored by the government. It’s also important to note that government subsidies are not available to those enrolled in employer-based plans, so you must have insurance through the healthcare exchange to qualify.

According to PBS Newshour, “most of the seven million people projected to shop in the new online health insurance marketplaces…will be eligible for the subsidies, expected to average $5,290 per enrollee.”

Health Care Exchange Rates

Applying for Coverage

State-by-State Differences

The basic tenets of the health insurance marketplace remain the same across state lines. However, the enrollment process varies by state. Each state is supposed to have its own health exchange, but some states have decided not to participate in this component of healthcare reform. Thankfully, the citizens of the declining states still have access to insurance, and can enroll in the federal marketplace.

To find out which marketplace you should use, go to This website has valuable information about the health insurance marketplace, and can direct you to the exchange you should use based on your state of residence. For instance, my home state of Texas has declined to participate in the health insurance marketplace, so I was directed to the federal marketplace.

Who Can Apply

Anyone can apply for health insurance through the health insurance marketplace, but not all applications are accepted. This is because the marketplace is not intended to offer coverage options to people who already have access to affordable employer-based insurance. To do so would flood the market. The best candidates for the health insurance marketplace are United States citizens who have difficulty finding affordable healthcare coverage due to unemployment, self-employment, or preexisting conditions.

If you are employed and can’t afford your employer-based premiums for yourself or a dependent, you might still be able to enroll in the health insurance marketplace. The exchange looks at your income level and your premiums for employer-based coverage to determine whether you can opt out of your employer-based plan and opt in to a plan offered through the marketplace.

If an employer-based plan exceeds 9.5% of your family income and doesn’t cover at least 60% of expected medical costs, then you can look at the exchange for coverage and subsidies. If this applies to you, you’ll be asked to fill out an Employer Coverage Tool as part of the application process.

Where and How to Apply

The application process is simple and straightforward, and you can apply online or by mail. If you want to apply online, go to, and access the state or federal application you’re directed to. The application requires just a few pages of work and a handful of supporting documents. For a checklist of what to have with you as you apply, visit the Marketplace Application Checklist.

If you don’t want to apply online, call 1-800-318-2596 at any time to request a mailed application. The required information and supporting documents are the same regardless of how you apply.

Final Word

Regardless of your position on healthcare reform, the health insurance marketplace is designed to offer healthcare coverage to the millions of Americans who are uninsured or under-insured due to employment status or health condition. Open enrollment began October 1, 2013 for benefits starting at the beginning of 2014.

What are your thoughts on the health insurance marketplace, and how do you think it will affect you?

Mary McCoy
Mary McCoy, LMSW is a licensed social worker who works closely with individuals, families, and organizations in crisis. She knows first-hand how financial choices can prevent and mitigate crises, and she's therefore passionate about equipping people with the information they need to make solid financial decisions for themselves and their loved ones. When Mary isn't on her soap box, you can find her hiking, jogging, yoga-ing, or frolicking with her family.

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