California Healthcare Reform Basics

Beginning October 1, 2013, California will begin enrolling applicants into the new California Health Insurance Exchange that will officially start on January 1, 2014. Many of the details are still not concrete, so certain aspects may change. The overall structure is set though, and today we’ll be passing on some of the basics of individual and family plans (we’ll cover group plans in the coming weeks).

First off, what is a “Health Insurance Exchange”? An insurance exchange is like a market place of insurance companies. There will be 12 health insurance companies offering plans in the Exchange, and they will all follow the same minimum regulations and guidelines. The companies will offer 4 simplified tiers of plans; bronze, silver, gold, and platinum, and coverage will be very similar company to company. The 4 tiers will be:

  • Bronze  – Pays 60% of your health expenses, you pay 40% (lowest rates)
  • Silver – Pays 70% of your health expenses, you pay 30%
  • Gold – Pays 80% of your health expenses, you pay 20%
  • Platinum– Pays 90% of your health expenses, you pay 10% (highest rates)

Will I pay more or less for my health insurance than I currently am? Rates and coverage will change for just about everyone in California over the next year; some negatively, but most positively. Coverage will be available for just about everyone in the state, without surcharge, even if you have a pre-existing illness or condition. In the past you could be charged more or declined entirely if you didn’t have a great health history. That is GONE with the exchanges! The two groups that will see the largest decrease in rates are families making less than median income, and people with either pre-existing conditions or health problems in the past. Starting next year your rate will be based on just 3 factors; your zip code, age, and the plan tier you choose.

What is a “government subsidy” and how does it help me? There will be government assistance and tax credits for people who earn up to 400% of the federal poverty level (FPL). As of now, the FPL is $11,490 for an individual, meaning if you make $45,960 (400% FPL) or less as an individual, you will qualify for a subsidy or tax credit. Here are the current figures, subject to change:

Household Size 100% 133% 150% 200% 300% 400%
1 $11,490 $15,282 $17,235 $22,980 $34,470 $45,960
2 15,510 20,628 23,265 31,020 46,530 62,040
3 19,530 25,975 29,295 39,060 58,590 78,120
4 23,550 31,322 35,325 47,100 70,650 94,200
5 27,570 36,668 41,355 55,140 82,710 110,280
6 31,590 42,015 47,385 63,180 94,770 126,360
7 35,610 47,361 53,415 71,220 106,830 142,440
8 39,630 52,708 59,445 79,260 118,890 158,520
For each additional period, add $4,020 $5,347 $6,030 $8,040 $12,060 $16,080


If you qualify for a tax credit, the government will basically pay a portion of your monthly health insurance cost directly to the insurance company. The great thing is you won’t have to wait until filing your taxes to get the credit, because it’s paid directly to the insurer.

Do you need to purchase coverage from the exchange? No, but you will pay a penalty if you don’t have either employer provided coverage, coverage you purchase on your own, Medicare, or Medi-Cal. The penalty for 2014 is 1% or $95, whichever is greater, and increases each year.

In addition, you will still be able to purchase plans from private insurance companies. The plans will be similar to the exchange plans, but may offer better pricing or benefits than the exchange plans.

How do I apply and get coverage? The plans and rates are still being finalized, and when they are, you will have 2 options; purchase a plan directly through the exchange at, or work with a broker like Nelson Insurance, who can help you decide the best plan for your situation. The rate is the same either way, but with an agent or broker you get the additional service and consultation that purchasing your plan direct doesn’t provide. Only licensed brokers and agents are able to discuss plan benefits and make recommendations.

We’ll be continuing with more detailed information this week, and update as more information becomes available.


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