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Obamacare Explained: What It Means for Those Who Already Have Health-Insurance Coverage

By Dan Caplinger

Scenario 1: You have individual coverage rather than a policy provided by an employer.
Individual health insurance has long been a financial minefield for those who don’t get coverage from an employer. Because relatively few people have to resort to the individual plan market for their insurance, prices tend to be high, and benefits are often limited, with high out-of-pocket maximums and deductibles.

Obamacare requires insurance companies to provide a certain baseline minimum of coverage that goes beyond what more than half of all existing individual policies currently provide. That means that to offer individual insurance under Obamacare, some insurers will have to offer more benefits than they currently do, with costs likely to increase as a result. In addition, with requirements to cover those with pre-existing conditions, some companies are simply choosing to get out of insurance markets in some states entirely. Over the past month, UnitedHealth Group (NYSE: UNH  ) and Aetna (NYSE: AET  ) both said they would stop offering individual policies in California, forcing 58,000 existing policyholders to seek alternatives.

Scenario 2: You have employer coverage.
If you already have coverage through work, then the odds are much better that it’s of high-enough quality to avoid any major changes. A study last year found that almost two-thirds of employees who had group coverage at work had policies that would cover 80% or more of their health-care costs, compared with just 2% of individual health-insurance policies. Under Obamacare, adequate insurance need cover only 60% of allowed medical expenses to avoid penalties, which has spurred many small and mid-sized employers to look at high-deductible health plans with fairly high upfront deductibles and lower premiums. According to a Kaiser Family Foundation survey, almost a quarter of those covered by employers with fewer than 200 employees had HDHPs, compared with 17% at larger employers. Such moves will probably continue, as both employees and employers seek to reduce their premium costs.

The bigger potential impact on employees could come from employers that take more dramatic steps to avoid providing insurance at all. Darden Restaurants (NYSE: DRI  ) is one of many restaurant chains that has looked at increasing the number of part-time employees they hire to avoid the 30-hour-a-week threshold that triggers Obamacare insurance requirements. Theater operator Regal Entertainment (NYSE: RGC  ) reduced hours for many of its hourly employees back in April, citing the need to comply with the health-care law. Yet convenience-store operator Cumberland Gulf Group has said it plans to convert 1,500 of its employees to full-time status and provide health-insurance benefits in an attempt to attract higher-quality workers.

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