There are about six weeks left until the nationwide launch of health insurance marketplaces, a fundamental piece of the Affordable Care Act.
A handful of states have come out with their estimates of how much insurance premiums will cost on their exchanges, and in some cases, they have raised more questions than they answer. Here are five things to keep in mind when considering your coverage options.
1. The “sticker price” is not what most people will pay.
A few states have released information on what consumers can expect to pay for health coverage on the exchanges in 2014. But for nearly all exchange participants, those rates aren’t what they’ll actually be shelling out, primarily because about 48% of people now buying their own insurance will be eligible for tax credits that would offset these premiums, according to a Kaiser Family Foundation study published this week. (Subsidies will be available for people who have incomes from 100% up to 400% of the poverty level – or about $24,000 to $94,000 a year for a family of four.)
“Only the youngest, healthiest people with very high incomes in the individual market – and mostly people in this category aren’t in the individual market because they qualify for group health benefits at work – will pay more across the board in 2014,” says Karen Pollitz, senior fellow at the Kaiser Family Foundation.
According to Kaiser, the average premium subsidy (in the form of federal tax credits) will be $2,672 for a family of four purchasing a “silver” tier plan on the individual market. That’s a 32% discount from the plan’s average cost of $8,250. Under the ACA, plans on the exchanges must provide coverage at specific “actuarial value levels”: 60% (bronze plan), 70% (sliver), 80% (gold) and 90% (platinum). This means, for example, the bronze plan covers 60% of medical expenses. The higher the actuarial value, the lower the out-of-pocket costs and higher premiums paid by the consumer.
2. Old coverage vs. new coverage makes it hard to compare plans.
Much of the debate over health reform is popping up in states that have estimated consumers will pay higher premiums next year than they do now. For instance, the Ohio Insurance Department said earlier this month that individual exchange plan premiums are expected to climb on average by 41% in 2014 compared to 2013, while plans for small businesses will increase by 18%.
The problem with these comparisons is that “it’s completely different coverage – the type of coverage [under Obamacare] is more valuable,” says Linda Blumberg, senior fellow at the Urban Institute. Consumers might pay more for insurance next year because they’re likely getting a richer plan, she says.
Under the ACA, insurance plans offered in the individual and small group markets will be required to cover a particular set of benefits and services called the “essential health benefits” package. These cover services in at least 10 categories, including prescription drugs; emergency services; hospitalization; mental health disorder services, and others. Some of those benefits haven’t been previously covered by plans. Additionally, consumers can’t be denied coverage because of their health status as they can be now in some states.
3. Premiums on the exchanges won’t affect most consumers.
The new rates cited so far impact primarily consumers who will buy their own coverage. Employment-based health benefits remain the most common form of insurance for most Americans, and most large employers already provide coverage to workers that meets the law’s new requirements. More than half of Americans – 55% – had employment-based insurance in 2011, and among the employed population aged 18 to 64, over two-thirds (68.2%) had insurance through their own employer or another person’s employer, according to the Census Bureau.
4. Rates within individual tiers vary widely.
An early look at the estimated rates on exchanges shows a striking variance. A report published on HealthAffairs.org looked at rates for silver-tier plans (this level plan forms the basis for calculating premium subsidies) for a nonsmoking 40-year-old in four major cities in three different state-based marketplaces. For instance, in Baltimore, the second-highest silver premium was $417 for the consumer, while the second-lowest silver premium was $298 – a difference of $119, or 40%.
“While it is not surprising that rates would vary among states and regions within a large state, it is surprising to see the large variance of rates within the same regional market at the same metal level. All plans in the same metal level within a state are required to offer the same ten essential benefits,” the authors write.
“We are beginning to see plan variations within metal tiers, though they are more uniform with respect to benefits and cost sharing,” says Pollitz, who adds there are likely many reasons for the variation. One is the provider network you have: Plans may offer the same benefits but one might have a narrower network of physicians than another, therefore limiting a consumer’s choice of doctor or hospital, Pollitz says.
5. Some consumers may get hit with large out-of-pocket health costs next year.
The ACA requires that health plans cap the maximum out-of-pocket costs (including copays, coinsurance and deductibles) at $6,350 for individuals and $12,700 for families. But the Obama administration is delaying that provision for some plans for another year. The government published a FAQ in February saying some insurance plans offered by employers have separate policies or benefit managers for different parts of their coverage, such as medical care and drugs, and sometimes a third for children’s dental services. Some employer plans have separate out-of-pocket caps for each of the coverage areas, according to Kaiser Health News.
So if plans use more than one company to administer their benefits — as many do — consumers may face separate caps next year. That means someone might have to pay $6,340 for doctor and hospital services and another $6,350 for prescription drugs.