Q For those of us who have no health insurance, where do we get insurance from, exactly, in a few years when we either have to buy it or pay a fine? Is there some sort of government-subsidized insurance?

A Yes, but not the kind you’re probably envisioning. Last year there was a huge political debate over the idea of setting up a new public insurance plan that would compete with private plans. It dominated the news for weeks but didn't make it into the final health reform law, the Affordable Care Act.

However, the idea of “government-subsidized” insurance not only made it into the law, it’s the absolute centerpiece of how health insurance will work three years from now.

As of Jan. 14, 2014, you’ll have to have health insurance or pay a fine. If you get adequate coverage through a job, you’ll keep it. If you have to buy insurance on your own either because you don’t have employee coverage or your job offers a health plan that’s either inadequate or unaffordable, you’ll do so on a state or regional health-insurance exchange, basically a marketplace of private insurance plans. The plans will have to cover a list of “essential health benefits” such as doctors, hospitals, prescription drugs, outpatient tests and treatments, and mental-health care.

Insurers will have to list benefits and prices in a standardized way that will make it easier for you to figure out which plan is the best deal for you. And they won’t be allowed to turn you down or charge you more because of pre-existing conditions.

Here’s where the “government-subsidized” piece comes in. When you buy insurance through the exchange you’ll get a government subsidy to help to pay for it if you make up to 400 percent of the federal poverty limit. To give you an idea of who’ll be eligible, this year's numbers come in at about $43,500 for a single person and $89,000 for a family of four. Subsidies will be on a sliding scale and people in lower income brackets will get help not only with premiums but also with out-of-pocket costs like deductibles.

Back to the penalties. They’ll start at $95 or 1 percent of income (whichever is greater) in 2014, but by 2016 will rise to $695 or 2.5 percent of income. A few people will be excused from fines if they can show that even with subsidies they can’t afford coverage. This is far and away the most unpopular part of the law but also critical for making it work. Without it, people could wait until they got sick to buy insurance, which would force health plans to charge very high premiums to cover everyone’s medical bills.

Sources
American Cancer Society backgrounder on essential health benefits (pdf)

Kaiser Family Foundation FAQ on exchanges

Center for Budget and Policy Priorities chart on premium subsidies

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