"Free" health insurance under Obamacare has drawbacks

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(MoneyWatch) As many as 6 million people who are uninsured, and another million with individual plans, may qualify for "free" health insurance under the Affordable Care Act, according to recent analysis by several Wall Street firms and the consulting firm McKinsey.

Most of these folks will qualify for subsidies -- money from the federal government -- that will be greater than the cost of the cheapest "bronze" or "silver" plan available on health insurance marketplace websites at HealthCare.gov or the equivalent state health exchange site.

To be clear, most of the people who qualify for the subsidies that equal or exceed the cost of some of the lower-priced health insurance plans must have income at or below $28,725 for an individual and $58,875 for a family of four. Most of this money is paid for by taxpayers, including higher-income Americans (those earning $200,000 per year if single and $250,000 for families), and is in the form of higher taxes on investment income and an additional Medicare tax on wages. In addition, there are another 18 taxes ranging from taxes on health insurance companies to indoor tanning services.

While the prospect of getting health insurance for "free" may sound appealing, it may not be the best way to go.

The lowest cost plans available in the marketplace are the so-called bronze plans. While the costs can vary by state and age, these are typically priced so that the costs can be about the same as the federal subsidies. Bronze plans limit out-of-pocket costs to $6,350 for individuals and $12,700 for families, but can lack coverage for things like dental and vision care. While the prospect of getting health insurance for free may sound appealing, individuals need to consider a few things before they make the final decision, such as:

Health needs: If you and your family need regular care for dental and vision, these costs can really add up over a year. Consider paying a few bucks more for a silver plan, which includes these.

Health condition: If you have health conditions that require more frequent visits to a medical professional and or/prescription drugs, then consider a plan with lower out-of-pocket limits, co-pays and deductibles.

Risks at work and home: If your work requires lifting, climbing ladders, scaffolding, etc, and/or your lifestyle includes things like hiking, bicycling, etc, then you may be exposed to more risks of injury. Paying a few dollars more for a health insurance plan with additional coverage and lower out-of-pockets costs can be the wiser move.

For many of these folks, the comparison may look like this: Get a bronze plan (without dental and vision) for "free" or pay an additional $60 a month for a silver plan that includes dental, vision and lower out-of-pocket costs. In this case, the additional expense for the additional coverage can be worth it.

Like most things in life, you get what you pay for.

  • Ray Martin

    View all articles by Ray Martin on CBS MoneyWatch»
    Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.

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