By Jayne O’Donnell and Annika McGinnis, USA TODAY (Sept. 30, 2013)
Don’t wait. But don’t hurry, either.
That’s the best approach to the new health insurance exchanges that are scheduled to open for business Tuesday. Buying insurance is supposed to be easier than ever once several provisions of the Affordable Care Act take effect this fall. That doesn’t mean the process is easy or should be done speedily, however, experts say. That’s especially true if insurance shopping is new to you.
“Don’t be hurried in buying a plan,” says Bryce Williams, managing director of global benefits consulting firm Towers Watson Exchange Solutions. “There’s no rush.”
Williams likens it to buying the first car off an assembly line: It may be best to let the new exchanges — particularly the 31 run by the federal government — iron all the kinks out. Federal exchanges may not be ready, and there may be more and better information and “hand holding” available after a few weeks. Besides, your insurance won’t start until Jan. 1, 2014, whether you sign up now or in December.
If you’re one of the more than 45 million people who lack health insurance, you can begin the enrollment process Oct. 1, but you certainly don’t have to. The deadline to purchase (or face a penalty at tax time in 2015) is March 31, 2014.
Every state has people called navigators who received grants to help guide consumers through the process in an unbiased way. Insurance companies are also increasingly pitching their individual policies online and in stores, where agents are available to help you figure out what plan is right for you — but they obviously have a vested interest in your decision. A key benefit to the new online exchanges is the ability to easily compare different plans — as you might during online car shopping — without a pushy salesperson hovering.
Key steps in the process:
•Step one. Check out the options on your state’s exchange. Start at HealthCare.gov, the federal government’s portal, which will route you to your state or allow you to create an account if the feds are running your state’s insurance marketplace. Plug in details about where you live, what you earn and family size. If your income is low enough, you may be alerted that you’re eligible for Medicaid and told how to apply for that.
•Step two. Determine if you are eligible for financial help, which can come in the form of subsidies to offset the cost of premiums, co-payments or deductibles.
Anyone under age 65 participating in the new state exchanges can get tax credits if their incomes are between the poverty level and 400% of the poverty level. In 2014, that means families of four that make $24,000 to $94,000 per year could get subsidies. Those who make 250% or less of the poverty level can get even more financial help. The federal poverty level is now $11,490 for an individual and $23,550 for a family of four.
•Step three. Calculate what you’ve been spending for your uninsured health care, including prescription drugs, doctor visits and any emergency room or other hospital visits. Are there health concerns you’ve avoided addressing that are likely to get worse, like that sore knee or breathing condition? Medicines you should be taking but aren’t? Are there young athletes in the house?
•Step four. Spend time pondering what type of plan is right for you, based on how much you can afford to pay in premiums, co-payments and cost-sharing for procedures, as well as what your medical needs are likely to be next year.
Options are grouped into coverage levels that are coined bronze, silver, gold and platinum based on the percentage of out-of-pocket costs borne by the consumer. Bronze plans cover the lowest percentage of expenses — 60% — and have the lowest premiums. Silver plans cover 70%, gold pay 80% and platinum plans cover 90% of out-of-pocket costs. Even policies that appear affordable may not be if you have high deductibles, co-payments or cost-sharing for procedures.
Could you afford to pay 40% of last year’s medical bills — and almost everything out of pocket until a high deductible is met?
You need to consider other factors when deciding among plans. Williams recommends consumers stick with insurers that are “well entrenched” in their area; not one you’ve never heard of before.
Farzan Bharucha, a health care strategist for consulting firm Kurt Salmon, recommends calling providers you would consider if you had insurance and ask whether they will be accepting patients in the policies you’re considering.
“A fair number will say they are full,” says Bharucha, who advises physician groups and hospitals.
•Step five. Decide whether it even makes sense financially for you to buy insurance. For some people, paying the annual penalty, which starts at $95 or 1% of income for the first year, may be the cheaper move. (Unless, of course, your health takes a turn for the worse.) By 2016, however, the annual penalty will be $695 or 2.5% of income.
The exchange plans are set up so you will never have to pay more than 9.5% of your salary for insurance. But the new law certainly doesn’t mean coverage will be cheap.
“It’s still going to be expensive, particularly for low-income people,” says Andy Hyman, who directs the health care coverage team at the Robert Wood Johnson Foundation. “There is a financial burden, but it’s far less today than what it was.”
How the financial help works
Under the Affordable Care Act, there are two main types of subsidies to reduce insurance costs and out-of-pocket costs of medical care: tax credits and cost-sharing reductions. To lower your insurance costs, if eligible, you can get subsidies to help pay for plans obtained in the new state exchanges. You might also qualify to pay less out-of-pocket for co-payments, co-insurance (that share of procedure costs you have to pay) and deductibles.
The subsidy amount is based primarily on income and number of family members. The tax credit is calculated as the cost of a “benchmark” middle-range plan in your area minus your required payment, a set percentage of your family income. These benchmark plans are set as the second-lowest-cost “silver” plans for a person of your age living in your area. Depending on how much you make, you’ll be expected to pay between 2% and 9.5% of your income on monthly premiums. The difference between what you’re expected to pay and the cost of the premium is what the government will cover.
For example, Kaiser Family Foundation says a 40-year-old who makes $30,000 a year is expected to pay 8.37% of income in insurance, or $2,512 per year. In this person’s area, the estimated “benchmark” premium is $3,857 per year. So this person gets a tax credit of $3,857 minus $2,512, or $1,345, the foundation says.
These tax credits are “advanceable,” meaning that the savings are included in your monthly premiums. You pay lower costs up front, rather than having to get reimbursed later.
Health Savings Account-qualified health plans define a general maximum amount for out-of-pocket costs. Then, eligible people can get reductions in their own maximum out-of-pocket expenses, which range from one-third to two-thirds of this initial maximum, depending on income. Those with the lowest incomes — at or below 250% of the poverty level — can also get plans that cover a higher proportion of the cost of medical services.
Still murky? You’ll see how much you can get in savings after you fill out an application for the state exchanges starting Tuesday. But until then, you can estimate your potential savings with the Kaiser Family Foundation’s subsidy calculator. This calculator takes into account information about your income, family and tobacco use and gives you estimates of how much you might receive in subsidies and how much you might have to pay for premiums and out-of-pocket costs.