When Should You Use Obamacare’s Health Insurance Exchanges?

Where To Purchase Health Insurance BThe Obamacare Health Insurance Exchanges (HIX) are maybe the most controversial part of Obamacare.  Depending on your political viewpoints, they are either the best thing since slice bread or as useless and disgusting as dog vomit.

How you personally feel is meaningless, at this point.  Whether you like the HIX or not, they are going to happen.

Under the terms of Obamacare, all Americans are mandated to have government approved health insurance as of January.  Those who get “affordable” health insurance at work and those who are already covered by a government plan, like Medicare or Medicaid do not need to do anything.  They already have a “Qualified Health Plan” (QHP).

Those who are self-employed, work for a company that does not provide health insurance or are uninsured for some other reason will need to buy an Essential Benefit Plan (EBP) sometime in 2014.

Americans whose household income is less than the Federal Poverty Level (FPL) will enroll through the government sponsored health insurance exchanges.  That is the only way they can get into their state’s Medicaid system.

Other Americans will need to choose whether they wish to obtain their government approved “Essential Benefit Plan” through either the government sponsored exchanges or directly from private insurance companies.

Below I will try to explain why Americans may, or may not, want to use the government sponsored health insurance exchanges.

100-250 % FPL

Americans who have household incomes of less than 250% of the Federal Poverty Level but earn too much money to qualify for Medicaid in their state, will probably want to enroll in an Essential Benefit Plan through a government sponsored exchange for two reasons.

  1. Only Americans who enroll through a government exchange will qualify for a government tax-credit to help pay for their health insurance premium for 2014.
  2. Also, Americans who earn less than 250% of FPL will get government help with the costs of deductibles and co-insurance.

250-400% FPL

The government subsidies start to phase out for people who earn greater than 250% of FPL but less than 400% of FPL.  They will not get any government help with deductibles and co-insurance.  The tax-credit they do receive will only be a portion, as low as 13%, of the cost of the second least expensive Silver plan that is offered in their state.

In some cases, the amount of tax-credit an individual gets may only be slightly more than the usage fee for using the government sponsored exchange.

If you are in this category, you will need to made a decision about whether you want to use the government sponsored health insurance exchange in your state or buy health insurance directly from a private insurance company.

400 + % FPL

If your household income exceeds 400% of FPL, you can still use the government sponsored health insurance exchange in your state to get your Essential Benefit Plan.

However, I have one question for you to consider.  Why would you?

The politicians conveniently fail to remind Americans that according to the PPACA all exchanges must be self-funded as of 2015.  That means that almost all of them are going to have monthly usage fees that are in addition to the cost of health insurance premiums.

Since government “subsidies” disappear for people who live in households with 401% of FPL or have access to group health insurance, there are only 2 logical reasons why someone would choose to buy their Essential Benefit Plan through a government sponsored exchange rather than directly from a private insurance company.

  1. They do not understand that they still have the freedom to buy their mandated plan from someone other than the government exchange.
  2. They enjoy paying “Usage Fees” and dealing with computer “glitches.”

I guess, there is nothing wrong with the government sponsored exchanges.  If they work as advertised, (which is questionable at this point in history) they will be the only option for those Americans who can qualify for government “subsidies.”


My problem is not with the new exchanges as much as it is with politicians and media outlets who imply that they will be the only option for Americans who do not have group health insurance at work.  Their implications are false.

There will be a market place in most states from which you may buy a government mandated Essential Benefit Plan without the necessity of paying an additional usage fee or being patient while problems with the government’s computer system are identified and corrected.

The exchanges are designed to help the lowest income levels in the nation.  Since it is assumed that they will need help to pay for their medical bills and health insurance, the exchanges are the only option for them.

However, if you are a middle-class American who is responsible to buy your own health insurance, you have a choice.  You may buy your plan either through a government sponsored exchange or directly from a private insurance company.

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