Figure Out Your Health Insurance Options
Thanks to Obamacare, premiums in New York State will plunge for individuals buying new health insurance plans on their own, while in Florida they will rise. Insurance plan options will be numerous in California but scarce in Maine.
After years of debate and planning, the health insurance marketplaces that have been created as part of the Affordable Care Act, also known as Obamacare, have finally reached their October 1 launch date for the initial open-enrollment period, which lasts through March 31, 2014. Coverage takes effect starting January 1. But confusion over the plans and uncertainty about how to compare them persist.
WHO IS AFFECTED?
The insurance marketplaces—also known as exchanges—are designed as online shopping malls for people who do not have access to Medicare, Medicaid or quality health coverage through an employer.
Also, people considering early retirement might want to explore the exchanges, where plans may be less expensive than Cobra temporary health coverage or previously available insurance plans. (To calculate premiums and subsidies for a new exchange plan, go to the Kaiser Family Foundation’s Web site, KFF.org/interactive/subsidy-calculator.)
EVALUATING YOUR OPTIONS
In some states, such as California and Colorado, consumers will be able to choose among dozens of plans, while in other states there may be fewer than 10. Either way, price won’t be the only difference among them. There also could be key differences in…
The share of health costs that plans will pass along to consumers. Policies will be grouped into four tiers—bronze, silver, gold and platinum. (Less expensive but more limited “catastrophic plans” also will be available to people younger than age 30.) The higher the tier, the lower the share of medical costs that the policyholder will have to pay out-of-pocket—and the higher the premiums are likely to be.
What to do: If you’re fairly healthy and have no reason to believe that you will have significant health-care costs next year, a bronze or silver plan that keeps premiums relatively low is a reasonable choice. If there is a strong possibility that you will require extensive medical care, it might make sense to pay more for a gold or platinum plan that pays a larger share of medical bills.
But whatever tier you select, your annual maximum out-of-pocket limit (not including the premiums) is likely to be $6,350 for an individual plan or $12,700 for a family plan—or less than that for people who qualify for subsidies because they earn less than 250% of the federal poverty level and sign up for a silver plan. (Insurers can set lower out-of-pocket maximums on specific plans if they choose, and some states might mandate lower maximums on high-end plans—platinum plans in California will have maximums of $4,000, or $8,000 for families.)
Note: The recently announced delay on capping out-of-pocket expenses—now set to take effect in 2015 rather than 2014—applies only to certain group insurance plans. Out-of-pocket caps still are in effect for 2014 for individual and family plans bought through an Obamacare marketplace.
Warning: Platinum plans might be in short supply. Early reports suggest that insurers in Washington State and elsewhere are shying away from offering this highest level of coverage for fear that it will mainly attract people who have very substantial health-care needs, which could mean huge costs for insurers and premiums so high that consumers would balk.
Where plan members can seek treatment. Anecdotal evidence suggests that many plans will limit policyholders to a list of “in-network” doctors and hospitals. This seems to be particularly common in California. Policyholders who go outside the network in non-emergency situations might receive little or no coverage.
What to do: It may not pose big problems for most people to sign up for a plan with a limited provider network—such plans might feature significantly lower premiums. But first consider whether the health-care providers you use and the leading hospitals in your region are included in the plan’s network—and how important that is to you.
The benefits that the plan provides. Covered benefits will vary much less than among policies available in the past, because all marketplace plans will be required to at least provide 10 ”essential health benefits” ranging from hospital care and prescription drugs to pediatric dental and vision care and mental-health care. But there is leeway that can lead to variations in how well specific plans cover specific health services, even if those plans are in the same tier.
What to do: Before signing up for the lowest-cost option in a tier, consider how well that plan and others in the tier cover any specific ongoing treatments or health services you require.
THE TRUTH ABOUT RATES
Whether health insurance rates in your state for people obtaining their own insurance go up or down overall depends largely on how high or low they were to start with-and how much coverage plans in your state have provided in the past. In New York, for instance, which has had a highly regulated individual health insurance market and very high rates, premiums are likely to fall sharply. That’s because under the new rules, which penalize people who don’t obtain coverage, there is likely to be a bigger proportion of healthier individuals buying insurance than before, and that means lower costs to insurers and greater competition among insurers.
But if you live in a state such as Florida or Texas that has had less stringent rules and lower rates, premiums are likely to rise overall. The higher premiums largely reflect the requirements for more extensive coverage, including more mandated benefits and consumer protections. In other words, people who previously bought bare-bones coverage may be paying more—but they will be getting more coverage as well.
Rates will vary from state to state under Obamacare, and even within states, but most studies have concluded that rate differences among states will be significantly less than in the past.
Example: A Wall Street Journal review of 2014 rates in eight states concluded that a 40-year-old nonsmoker would be able to obtain a bronze plan for around $200 a month in most states. Gold plans are likely to be available for around $400 a month. A 60-year-old nonsmoker might have to pay around twice, or perhaps a bit more than twice, those amounts.
Still, statewide insurance rates don’t tell the whole story. Whether your insurance rates rise or fall under Obamacare also will depend on factors such as your age, health status, gender, income and community.
Examples: People over age 50, people with preexisting health conditions, women and households earning less than 400% of the federal poverty level might see their premiums fall or remain relatively unchanged under the new rules, even if rates go up in their state overall. About 48% of people buying insurance on their own will qualify for a tax credit on their premiums, according to a Kaiser Family Foundation study.
INDIVIDUAL VS. FAMILY PLANS
Traditionally, family health insurance plans have cost less than the sum of the cost of individual policies for the same family members. But under Obamacare, for most families, a family plan purchased through an exchange would cost exactly the same as buying individual policies for all the family members.
Exception: If there are more than three children younger than age 21 in the family, there will be no extra charge for the additional kids if you buy a family plan. So in that case, a family plan probably is the best option because the total premiums would be lower than if you bought separate plans.
For small families, a major variable will be maximum out-of-pocket expenses, which are twice as high for family plans as for individual plans. In general, if multiple members of a family have potentially costly health issues, a family plan likely will do a better job of limiting out-of-pocket costs. If only one family member has significant health costs, an individual plan could be the way to go.