How Does Obamacare Work? Understanding The Affordable Care Act, Open Enrollment, Health Exchanges And Key Facts About Sunday’s Deadline

The door to buy private health insurance this year through marketplaces as part of the Affordable Care Act will close on Sunday, Feb. 15. Government officials and private insurers are making one final effort to encourage people to sign up and help them navigate state and federal exchanges to avoid paying fees as a result of being uninsured. Ahead of this looming deadline, sign-up rates have surged in the past week, and even Rep. Nancy Pelosi (D-CA) quipped during a press briefing on Thursday, as a reminder to sign up for health insurance, that for Valentine’s Day, “you can take your loved one to sign up for the Affordable Care Act.”

Jokes aside, Obamacare is a complex system with a lot of moving parts that raise a justifiably high number of questions about how it works, what different terms mean and how people will be affected. Even if you already have health insurance, below are a few basic answers key to know before Sunday’s deadline:

What is open enrollment? For the year 2015, the open enrollment period started Nov. 15, 2014 and ends in two days, on Feb. 15, 2015. The open enrollment period allows people to use state or federal health exchanges to sign up for a new health insurance plan, switch to a different one or apply for subsidies from the government to offset the cost of insurance. It’s the only time you can purchase a major medical plan in order to qualify for minimum essential coverage in the individual and family market, unless you qualify for a special enrollment period. Medicaid and the Children’s Health Insurance Program (CHIP) have open enrollment all year.

What is a health exchange? A health exchange is another word for a health insurance marketplace, a website that allows people to shop for and compare health insurance plans, and choose one to purchase. If people qualify based on their income level, plans bought through these exchanges can be subsidized by the government in the form of tax credits. The exchanges were set up under the Affordable Care Act, and some states run their own marketplaces, but the majority (36 states) opted to let the federal government do it for them via HealthCare.gov.

What is a special enrollment period? A special enrollment period is held outside the open enrollment period and allows people to obtain coverage if they go through certain qualifying life events, such as getting married or having a child, which give them have 60 days to enroll. If you lose your health care coverage, you can get a special enrollment period totaling 120 days to sign up for health insurance via the marketplace.

What happens to those who miss the Feb. 15 deadline for signing up for health care coverage? People who miss the Feb. 15 deadline can buy private coverage outside of the marketplace. These private plans tend to be short-term, and they don’t prevent people from having to pay penalties for not having health insurance. Also, subsidies from the government for health insurance can only be obtained for plans bought through the exchange – not private plans. The next open enrollment period will not begin until October 2015, so anyone who wants to buy health insurance via the exchange but misses the February deadline will have to wait until then.

What happens to those who do not have health insurance at all? Those who don’t have minimum essential coverage will have to pay a fee when they file their federal income taxes. Minimum essential coverage includes health care plans bought on federal or state exchanges, job-based insurance, or Medicare/Medicaid, CHIP and other government plans. Certain programs that help cover medical fees don’t count, like workers’ compensation or coverage solely for vision or dental care.

How high are the penalties for not being insured? Penalties depend on the year and the length of time a person has been uninsured. Those who don’t have insurance and don’t qualify for exemptions will have to calculate how much they owe using one of those dreaded government tax worksheets. For 2014 returns, penalties are 1 percent of one’s income or $95 per adult and up to $285 for a family, whichever is higher. Rates will rise sharply every subsequent year.