Are you shopping for Obamacare? There are some incredible deals this time and you could very likely be paying less than you were last year.
Important disclaimer: Actual policies vary by location so no promises, but MANY people are getting more coverage and/or paying less than last year, so it pays to shop carefully.
This year is pretty weird because of Trump’s cancellation of the Cost Sharing Reduction payments to insurance companies. His goal was to sabotage Obamacare in hopes that it would implode or something but as usual, he didn’t think it through and it’s pretty much backfired. Enrollments are up 79%.
Here’s what I’ve learned and how it works:
If you make between 100% and 400% of the federal poverty level and buy an insurance plan on the Affordable Care Act marketplace, the amount you pay each month as a premium is a percentage of your income, not the amount the insurance company has set as the premium for that policy.
For example, if your income last year was $35,000 and you are a single mom with 2 kids, you will pay 5.02% of your income as a health insurance premium. That comes to $146 per month. The rest of the premium is paid for as a premium subsidy by the federal government. (Actually, it’s a tax credit paid in advance to the insurance company on your behalf, but whatever. Call it a subsidy, it’s easier.)
Bottom line, if the insurance company set the premium for the policy you chose last year at $500 per month, you sent them $146 every month and the subsidy paid the $354 difference.
Suppose you're now shopping for 2018. Your income hasn’t changed – it’s still $35,000. But your insurance company is raising the premium to $900/mo. Holy cow! What do I do now? Answer: Send them $146/mo, same as last year. It’s still 5.02% of your income. What’s changed is that your subsidy is now $754 instead of $354. Thing is, you never saw that subsidy anyway, so from your point of view, nothing’s changed.
So if you are in the income range that qualifies for a premium subsidy and you hear that your premiums are going way up this year, tune it out. Your premium is a percentage of your income, period. It doesn’t affect you. It affects the federal government which has to come up with more subsidy to cover the rest of your premium, but you pay the same as you did before.
What makes this year weird is the change in the Cost Sharing Reduction (CSR). What is that? Well, if you make between 100% and 250% of poverty level, AND YOU SIGN UP FOR A SILVER PLAN, (that part is key – hence the caps) you get some extra help to lower your deductible and co-pays. Your total out of pocket costs for the year are capped. For example, if you are that single mom with two kids making $35,000/yr, your out of pocket costs for the year cannot exceed $2450, even though someone not eligible for CSR may be paying a much higher deductible and co-pays. The insurance company has to pay the difference between your cap and what someone who makes more money and who has to pay the full amount of deductible and co-pays would pay.
Note, this is paid for by the insurance company, not the federal government, and they are required by the ACA law to provide it, so they can’t weasel out of doing no matter what.
Since it’s a financial hit to the insurance companies to have to cover this for lower income enrollees, in the past the feds have reimbursed the insurance companies in the form of CSR payments to the insurance companies. But the law is unclear about whether the federal government is required to reimburse the insurance companies or not, and the matter is hung up in court at the moment. Under Obama, the decision was made to keep making the payments until the matter is decided.
Trump, however, decided that one of the ways he was going to sabotage Obamacare (along with cutting the sign-up time, firing most of the people that help with signing up (navigators), almost eliminating advertising to remind people when the sign up period is and how to sign up etc.) was the stop paying the CSR payment to the insurance companies.
But as usual, he didn’t think it through and it’s backfired.
Since the Cost Sharing Reduction is only available to people who sign up for a silver plan, the insurance companies responded by dramatically raising the premiums on their silver plans to cover the costs that they will now no longer be reimbursed for.
But the amount of PREMIUM subsidy you get is also tied to the cost of a silver plan. So remember, if the premium goes up, you pay the same but your subsidy increases. You can use that subsidy to buy any plan. So this year you may get a real windfall by switching to a bronze or gold plan, depending on whether you’re young and healthy and don’t expect to need much health care, or if you’re older and/or have other reasons to need a lot of doctor visits and prescription drugs. Maybe even a hospitalization.
If you qualify for CSR and high deductible or copays would be a financial disaster for you, stick with silver. You’ll pay the same as you always have no matter how high the insurance company sets their rates and you’ll have help with the deductible and copays.
But if you are young and healthy and your main goal is to pay as little as possible to have some kind of coverage in case random disaster strikes – or to avoid the penalty – you can sign up for a bronze plan for next to nothing because the subsidies are now so high. Or actually nothing – about half of enrollees can now get bronze coverage of $0 premium cost. That’s right, your premium would be $0. Our hypothetical single mom with 2 kids (who are on CHIP btw) who makes $35,000/yr can get a bronze plan for $22/mo.
On the other hand, consider the opposite situation. You’re older or have a chronic condition whose costs add up fast. You’ve had a silver plan in the past because that was what you could afford, but you really wished you could get a gold plan because it covers more.
If you don’t need the CSR because you have savings that can cover deductibles etc. or if you make between 250%-400% of poverty level and don’t qualify for CSR anyway, you may now be able to find a gold plan that you will pay a lower premium for next year than you paid for your silver plan this year. Why? Because, in the background, the higher premium for silver means a higher subsidy and you can apply that to any level plan, including gold.
Looks like quite a few people are going for the gold in 2018 The Gold Rush (btw David Anderson writes – in the wonkiest way possible – about health insurance more or less daily. If you want to know more check out https://www.balloon-juice.com/category/mayhew-on-insurance/
How premiums are changing in 2018 (from Kaiser)
And of course, the mothership www.healthcare.gov