Obamacare Explained (Like You're An Idiot)

Dec. 23, 2013— -- Turns out a wonky website and warp-speed policy changes are the least of Obamacare's problems. A big reason Americans have hesitated to sign up for health insurance is they don't understand it.

A survey of more than 12,000 people released earlier this week by the journal Health Affairs found that only 60 percent of the people who should be signing up for Obamacare understand all of its key concepts.

A Carnegie Mellon University study done earlier this year was even less optimistic. It found that 86 percent of Americans between the ages of 25 and 64 not only didn't have a grasp on Obamacare, they couldn't even wrap their heads around the fundamental concepts of any kind of health insurance.

Insurers are also reporting mass confusion.

"Our hot line reports that on pretty much every call, customers ask our agents the most basic questions about insurance, said Chini Krishnan, co-founder and president of GetInsured, an online insurance marketplace certified by the government to help enroll people in Obamacare plans. "Then add in premium tax credits and cost-sharing reductions -- it's a lot for them to process."

Recommended: Penalties Delayed For Canceled Plans

So are you an idiot if you don't understand what the deal is with Obamacare? Karen Pollitz, health care policy expert and senior fellow at the Kaiser Family Foundation, doesn't think so. But she explained it as if you are.

Is it possible to explain Obamacare in 10 words or less?

No. But Pollitz at least provided a simple explanation.

Obamacare – also known as the Affordable Care Act, or the ACA – is a law enacted to ensure that all Americans have access to affordable health insurance. It does this by offering consumers discounts (known as tax credits) on government-sponsored health insurance plans, and by expanding the Medicaid assistance program to include more people who don't have it in their budgets to pay for health care.

The ACA also changed some of the rules insurance companies have to follow. For example, in the past if you had diabetes or some other preexisting medical condition, you could be turned down for insurance or your cost for coverage would be astronomical. Now you can't be turned down for any reason and the hope is that costs will be contained.

Recommended: Obamacare Countdown

You buy Obamacare plans on healthcare.gov if your state participates in the federal program or from your state's healthcare website if it isn't.

Also, if you get insurance through your employer, you don't have to worry about any of this. Obamacare is mainly for people and small groups who pay for their own insurance.

Wow. Everyone gets health insurance tax credits. That's fantastic.

No again. You only receive discounts to help offset health insurance costs if your household income is between one and four times the Federal Poverty Level, a number the government uses to determine the minimum amount of money needed for food, shelter and other basic needs. You can elect to apply these credits to your premiums to lower your monthly insurance bill or wait until the end of the year and declare them on your tax return.

Dozens of websites have simple calculators to help you determine whether or not you qualify for tax credits.

But my income doesn't fall into that range.

If you make too much money to qualify for credits, you can still buy a plan on the federal insurance marketplace or your state's exchange but you won't get any discounts, Pollitz said. However, you may still get a good deal, so it's worth checking out, she advised.

If you make less than that, you could be eligible for Medicaid or some other government assistance. Again, Pollitz said it's worth exploring your options no matter what.

Does everyone have to buy the same plan?

Nope. Plans are divided into four "metal tiers" that run from Bronze all the way up through Platinum. The main difference between the levels is price and cost-sharing percentages. Bronze plans are the cheapest but only pay 60 percent of your medical costs. Platinum plans are the most expensive but pay 90 percent.

The trick is to choose a plan that meets your needs, keeps all your favorite doctors in your network and covers your most frequently filled drug prescriptions.

Recommended: Obamacare Hipster Lures Young and Healthy

By the way, Pollitz offered this tip for those who have an income between one and 2.5 times the Federal Poverty Level: Choose a Silver plan that covers 70 percent of your medical bills. You'll automatically be upgraded to a Gold plan that pays 80 percent of the bills at no extra cost.

There's all this talk about Obamacare deadlines and extensions. It sounds like I have a term paper due.

It's true that the government keeps shifting Obamacare-related dates around so often there ought to be an organizer app for that.

As of this moment, here are the two important dates you need to know:

Monday, Dec. 23, 2013: The deadline for signing up for a plan on healthcare.gov. Some states and plans have extended this deadline.

Friday, Jan, 10, 2014: In most states, this is the date your first monthly insurance premium is due in order to have retroactive coverage for Jan. 1.

Some states have extended the payment deadline even longer. Double-check your state's insurance marketplace website and your individual plan's information.

If you miss your deadlines you won't be covered by the first of the year but you can still sign up for a plan that kicks in later.

I've also heard I will be penalized if I don't buy insurance. Does that mean I will go to jail?

Relax. Pollitz said no one is going to jail over Obamacare. But any American who meets certain income-based criteria must now, by law, have insurance, Medicare or Medicaid or pay a penalty that will be levied when you file your 2014 tax return.

The government just announced a big exception to this financial penalty: For those who received a notice from their insurance company cancelling their old plan because it wasn't up to snuff with Obamacare standards, they'll be exempt from the penalty this year.

Recommended: Obamacare Sign Ups Surge Ahead of Deadline

I've avoided signing up because I've heard the healthcare.gov website is a nightmare.

After a disastrous start, Pollitz said that healthcare.gov is actually much improved. For the most part, consumers report that they're able to sign up for a plan with few glitches. Most state exchange websites are performing much better too, Pollitz said, though some are still a mess.

I'm a Senior and on Medicare.

Seniors on Medicare can just ignore this whole Obamacare thing. You're covered.