Demystifying Obamacare Exchanges in 5 Easy Steps
by Keith Speights, The Motley Fool Sep 15th 2013 1:00PM
Updated Sep 15th 2013 1:02PM
Don’t know much about the Obamacare health-insurance exchanges? If so, you’re in good company.
According to the Kaiser Family Foundation’s June survey, only 22% of Americans have heard “some” information or a “lot” of information about the exchanges that are a key part of the Affordable Care Act, commonly known as Obamacare. If you’re among the more than three-quarters of those who have heard little to nothing about these exchanges, here are five easy steps to get up to speed.
1. Learn what the Obamacare exchanges are
The health-insurance exchanges are also called health-insurance marketplaces, which actually is a more descriptive term. Picture a virtual mall where you can buy health insurance from different insurers who have negotiated with the mall to set up shop.
While individuals will be able to purchase insurance over the phone and by submitting paper applications, most will probably use the online health-insurance exchanges. The process for buying insurance through these exchanges will typically involve entering personal information on the exchange website (including age and income), determining eligibility for government programs such as Medicaid or CHIP, learning about your eligibility for federal subsidies, and then comparing benefit plans to determine which best meets your needs.
2. Know who should use the exchanges
There are two major types of exchanges — one for individuals, and another for employees of small businesses called SHOP — the Small Business Health Options Program. If your employer has 50 of fewer full-time employees, check with the appropriate person at your organization to determine whether you should use a SHOP exchange. Small employers aren’t required to use the exchange and face no penalty if they don’t offer health insurance.
If you don’t have health-insurance coverage through an employer and aren’t already covered by a government health program, the individual exchanges are for you. However, if you already have health insurance, you won’t have to switch to another plan bought through an exchange — at least not for 2014.
3. Be aware of the time frames for the exchanges
When do the exchanges begin operations? Open enrollment is scheduled to start on Oct. 1. Health insurance purchased through the exchanges will be effective by Jan. 1 at the earliest. The open enrollment period will extend through next March 31.
Beginning next April until the next open enrollment period starts, you will be able to buy health insurance that meets the minimum requirements specified in Obamacare only if you have a “qualifying life event,” which can include moving to a new state, getting married, having a baby, getting divorced, or experiencing some significant changes in income.
4. Find out how to access the exchange in your state
Some states are operating their own health-insurance exchanges, while others will use a federally operated exchange. It’s easy to find out what option your state is taking. Just go to www.healthcare.gov and click on the “what is the Marketplace in my state” link.
The website allows you to specify in which state you live. If your state is operating its own exchange, you’ll see a link to the appropriate website. If your state is using the federally operated exchange, you’ll use the Healthcare.gov site. Remember, though, that the exchanges themselves won’t be up and running until Oct. 1.
5. Understand why these exchanges are causing such a stir
Of all of our easy steps to take, this one is the most important. If you meet income requirements, the exchanges could be important to you because they can help you obtain health insurance with federal subsidies. If you don’t obtain coverage, you could have to pay a financial penalty when you file your 2014 taxes.
At The Motley Fool, we focus on the investing angle. The Obamacare exchanges are a really big deal from that perspective, too.
If the Obamacare exchanges are successful in enrolling millions of previously uninsured Americans, hospitals could benefit significantly. It isn’t surprising, therefore, that investment firms like the prospects for several large hospital chains.
For example, of the 23 analysts surveyed by Thomson Reuters that coverCommunity Health Systems , 12 rate the stock as a buy or strong buy. None of them recommend selling Community Health. The average one-year price target for the stock is more than 30% higher than the current price.
Analysts are also quite bullish about HCA Holdings , the nation’s largest hospital chain. Twenty-two of 27 analysts polled by Thomson Reuters list the stock as a buy or strong buy. The analysts’ average one-year price target is 18% above HCA’s current level.
On the other hand, if far fewer Americans sign up for insurance through the exchanges than projected, hospital stocks could suffer. However, health insurers who opted to largely take a pass at participating in the exchanges could be rewarded by investors for their prudence if this scenario plays out.
UnitedHealth Group , for example, decided not to jump head-first into the various state exchanges. CEO Stephen Hemsley said his company was approaching the exchanges “with some degree of caution” because of concerns that the first wave of enrollees would run up big medical bills. This cautious stance could allow UnitedHealth to avoid losses if these concerns are on target, but it doesn’t preclude the big insurer from joining exchanges in the future if things work out well.
Demystifying some of the logistical details about Obamacare exchanges is relatively easy. Predicting with any degree of confidence exactly how things will unfold with the exchanges is a different matter altogether. Regardless of what happens, though, one thing isn’t a mystery: The U.S. health-care scene is about to get even more interesting.