Prepare to use health insurance exchanges

Health insurance exchanges will change the way people buy coverage and will help millions of uninsured people get a private plan. Nearly 49 million people are uninsured in the United States, but the numbers vary dramatically by state.

Exchanges will be the most visible part of President Barack Obama's healthcare overhaul law in everyday life. Open enrollment starts Oct. 1, less than 10 months away.

Some questions and answers on how the exchanges will work:

What's a health insurance exchange?

"Exchange" is just another word for "marketplace." The plans sold in the new markets will start covering patients on Jan. 1, 2014. Each state will have its own exchange serving people who buy their health insurance directly, as well as a separate one for small businesses. The vast of majority of people now covered by employer plans will not see a change.

There will be three types of exchanges at the beginning: those run by states, those run by the federal government, and partnerships. Most Republican governors opposed to "Obamacare," including Texas Gov. Rick Perry, are letting Washington run the exchanges in their states.

For consumers, the benefits should be the same no matter who runs the exchange.

How will exchanges work?

Exchanges are supposed to have the feel of an online travel site -- think Orbitz or Expedia.

Middle-class people will be able to pick from a range of private insurance plans, and most people will be eligible for help from the government to pay their premiums.

Low-income people will be steered to safety-net programs for which they might qualify. This could be a problem in states that choose not to expand their Medicaid programs under a separate part of the Healthcare law. In that case, many low-income residents in those states would remain uninsured.

How will I know if I can get help with my health insurance premiums?

You'll disclose your income to the exchange when you apply for coverage and it will let you know. Only legal residents of the United States can get financial assistance.

The healthcare law offers sliding-scale subsidies based on income for individuals and families making up to four times the federal poverty level, about $44,700 for singles, $92,200 for a family of four.

But do yourself a favor and read the fine print because the government's help gets skimpier as household income increases.

For example, a family of four headed by a 40-year-old making $35,000 will get a $10,742 tax credit toward an annual premium of $12,130, according to the Kaiser Family Foundation. They'd have to pay $1,388, about 4 percent of their income, or about $115 a month.

A similar hypothetical family making $90,000 will get a much smaller tax credit, $3,580, meaning they'd have to pay $8,550 of the same $12,130 policy. That works out to more than 9 percent of their income, or about $710 a month.

What will the benefits look like?

The coverage will be more comprehensive than what's now typically available in the individual health insurance market. It will be more like what an established, successful small business offers its employees. Premiums are likely to be higher for some people, but government assistance should mostly compensate for that.

All plans in the exchange will have to cover a standard set of "essential health benefits," including hospitalization, doctor visits, prescriptions, emergency-room treatment, maternal and newborn care, and prevention. Insurers cannot turn away the sick or charge them more. Middle-aged and older adults can't be charged more than three times what young people pay. Insurers can impose penalties on smokers.

Because the benefits will be similar, the biggest difference among plans will be something called "actuarial value." A new term for consumers, it's the share of expected healthcare costs that the plan will cover.

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