Despite significant technology glitches, the new health insurance exchanges are open to the public and many Americans are now faced with the challenge of making heads or tails of the options. In addition to a plethora of choices, consumers are confronted with the interaction of federal subsidies which impacts the decision and can create planning opportunities. We covered the basics of the Affordable Care Act a few weeks ago and now provide a framework to help in choosing coverage.
If I have employer-provided coverage, do I need to do anything?
Many employees will blindly assume that their employer-provided coverage is better or cheaper than what they could get on their own. This mentality will end up unnecessarily costing millions of Americans. The disconnect between the start-date of the individual mandate (2014) and the employer mandate (2015), coupled with several other factors, means that many employers are reducing health insurance benefits and increasing the employee burden. As a result, we encourage individuals with employer insurance options to compare private options. This is especially true in cases where the employer insurance does not meet the “minimum essential coverage” requirement set by the federal government or where the employer coverage is not highly subsidized.
Additionally, families ignore the possibility of using employer insurance for the employed family member and then finding private insurance for remaining family members. Many employers will subsidize employees’ insurance but not that of other family members. For families in this situation, there can be material cost savings by going to the private market for the non-employed family members.
How should I begin comparing private health insurance options?
This depends on whether you qualify for a federal subsidy or not. If your 2014 income is expected to be less than 400% of the poverty line, you can qualify for a Federal subsidy. The Kaiser Family Foundation subsidy calculator is a great tool for determining qualification and even for estimating the subsidy that you can expect. If you anticipate qualifying under this threshold, you should use the public exchange at www.healthcare.gov to view plan options as the only way to obtain a subsidy is to purchase health insurance through this exchange. Even if you are highly uncertain of your income in 2014 but expect there is a decent chance you may meet the qualifications, we would encourage you to start here.
If you expect to have income in excess of the 400% level mentioned above, you should bypass the exchange and instead use a health insurance shopping site like www.ehealthinsurance.com or speak with a health insurance specialist to begin comparing options.
How do I decide between bronze, silver, gold, and platinum plans?
Americans have been trained to equate gold or platinum with a higher level of service. The most important thing to understand about the new metal levels is that they do not equate to plan quality. Gold and platinum plans do not provide a better level of service, higher treatment priority, coverage by more doctors, or even coverage of more procedure types. In fact, many bronze plans include more doctors and cover more procedures than platinum plans offered in the same state.
The difference between these plan types is simply the anticipated percentage that each will pay toward your health service expenses.
The estimated cost sharing percentages above will not necessarily apply to any one insured person or family but rather represent the actuarial value that the insurance company is expected to pay, in aggregate. Platinum plans, for example, will have the highest monthly premiums but you can expect to pay less for each doctor visit or prescription.
It is important to understand that all of these plans, regardless of metal level, are required to cover the 10 essential health benefits. Plans may cover more than these services but these are the minimum requirements.
With all of this in mind, the critical step here is self-assessing your usage of medical care in 2014. If you expect to be a frequent user of medical services or require expensive medications, then a gold or platinum policy is appropriate. Conversely, if you are healthy and do not anticipate major medical expenses, then a bronze or silver plan will be the best fit.
Other than price, what else should I be considering when comparing plans?
Determine the most important considerations and find a plan that best fits your criteria. Consider the following items:
Does the plan cover your doctors or medical providers? Do not assume that because your doctor is in the Blue Cross Blue Shield (BCBS) network, for example, that all BCBS plans will cover your doctor. You need to determine if your doctor or specialist is covered by the specific plan being considered. Also, be prepared for smaller networks in the new plans as insurers look for ways to maintain profitability under the Obamacare regulations.
How are prescription drugs covered? If you are taking a specific drug, you need to determine how that drug is covered under the plan. Find the link to the insurer’s “formulary” and determine whether your medication is covered and how it is covered. You can also call the insurer and ask to speak with one of the plan’s pharmacists.
How are expenses covered? Do not assume that comparing two plans of the same metal level is an apples to apples comparison. One plan may have a high deductible and 10% coinsurance while another plan of the same level may have a low deductible but require you to pay 30% coinsurance. Think about what combination of deductible, copays, and coinsurance fits best with your budget.
I’m healthy and/or young – are there other options?
Yes, absolutely. One option that few are talking about but could yield dramatic cost savings is the purchase of a “grandfathered policy” that begins on December 31, 2013 and runs through December 31, 2014. Insurers recognize that the Affordable Care Act applies to plans that begin after January 1, 2014 but that grandfathered policies which begin in 2013 and run for a year are exempt from all the regulations of the Act. Insurance companies have, resultantly, made these grandfathered plans available. If you do not have pre-existing conditions and are shopping for inexpensive coverage, the grandfathered plan route will almost certainly be an economically-friendly option.
Consider a healthy, non-smoking family comprised of a 35 year-old husband and wife with two children. High deductible coverage in Georgia that begins on December 31, 2013 can be found for as little as $185/month. The lowest cost coverage starting one day later (January 1, 2014) under the Obamacare requirements is $589/month. The $404/month (319%) difference in premiums clearly demonstrates the potential advantage of this little-discussed secret.
Moreover, individuals under the age of 30 will be eligible to purchase low-cost catastrophic insurance in 2014 under the Affordable Care Act. Children under age 26 are also eligible to remain on their parents’ plan. These are all alternatives which should be reviewed to assist in reducing expenses.
One of the prevailing principles here is to escape from the old-school notions of health insurance and take an open minded approach. Do not assume that platinum plans are better for you than bronze. Consider having two different policies to cover your family. Think about the pros and cons of starting a policy on December 31 rather than January 1.
Finally, give up on finding the perfect plan because one does not exist. The key is that you know more about your health and medical patterns than the insurance companies so you can use that information advantage to your benefit. Consider your options and what is most important to you and then choose a policy that meets your needs.