Health insurance exchanges: Ready, set . . .
The health insurance exchanges, whether state or federally run, are set to open for business on October 1, or close to it.
For those who have never bought health insurance, or those who used to have insurance provided by an employer but will now be shopping on the exchanges, some of the basic concepts and definitions might be confusing.
It’s important to understand all the terms, however, so you can buy the best plan for your health needs and budget.
The biggest reform brought about by the Affordable Care Act is that an insurance company cannot deny someone coverage because of a “pre-existing” condition. Whether you have or have had a serious illness, you will be able to buy insurance on the exchanges.
(Whether you will find it affordable or not is a matter of much debate, but more on that later!)
Another goal of Obamacare has been to standardize health care plans so they all use the same language and are easier to compare. Also, certain “essential health benefits” will be required by all health plans offered on the exchanges, as will limits on cost sharing.
Still, just like now, states will vary considerably as to the plans and rates they will offer. Go to Healthcare.gov to link to exchange information for your state.
It’s all about the metal
Exchange plans are categorized or “metalized” into four levels: platinum, gold, silver and bronze. Platinum plans are designed to pay close to 90% of your health care expenses (the plan’s “actuarial value”); gold is 80%, silver 70% and bronze 60%. Having an insurance plan pay 90% of your expenses sounds great, doesn’t it? But you pay for it up front with considerably higher monthly payments (premiums).
I live in Washington state, so will use those plans and prices for examples. Although they are not yet available on the state’s benefits exchange website, I was able to get them from the insurance commissioner’s website. A silver plan for a 40-year-old will be a pretty average price.
Related reading: Farewell, catastrophic plans
Premiums and deductibles
The premium is your monthly payment for the plan. The deductible is the amount you pay towards your medical expenses before the insurance coverage kicks in.
Depending on your state, your premium might be higher depending on the county in which you live, whether you are a smoker, or if you are older. Insurers can charge older individuals up to 3 times as much as younger individuals. Before health reform, they could charge five times as much.
Smokers can be charged 1.5 times as much, but thanks to a computer glitch, some older smokers might get a break.
Deductibles for platinum and gold plans will be around $0-$1,500; silver and bronze plans will be $2,000-$6,350.
In Washington, the premium for an average silver plan for a 40-year-old, non-smoker with a $2,000 deductible will be $320.79/month. A 20-year-old will pay $159.39; a 60-year-old will pay $681.23.
High-deductible, low-premium silver and bronze plans are a good choice if you are healthy and usually spend very little on health care. Low-deductible, high-premium platinum and gold plans are a better choice if you anticipate very high health care expenses.
Out-of-pocket maximums and cost sharing
Another change with health reform is the limit on what you must pay “out-of-pocket” towards your health expenses. Before Obamacare, the upper limit was whatever the insurance company said it was. Now, however, the annual out-of-pocket (OOP) limit is $6,350 for an individual and $12,700 for a family.
In general, the upper tier platinum and gold plans will have lower OOP maximums than the silver and bronze plans.
Cost sharing includes deductibles, co-pays and co-insurance. Co-pays are the small fees, usually $15 to $25, you pay up front for an office visit or a prescription. Higher co-pays, $50 to $250, might be required for a visit to a specialist or the emergency room. Not all plans have co-pays.
Co-insurance is the percentage the health insurance company pays of your expenses until the OOP maximum is met. Most plans will be 80/20; that is, after you have met your deductible, insurance will cover 80% of your expenses until the OOP maximum is met, then it will pay 100% of your expenses. Lower-cost silver and bronze plans might be 70/30.
Obamacare requires that deductibles, co-pays, and co-insurance all get credited towards the OOP maximum. That is another reform change; before, you might have had to meet both the deductible and the OOP maximum before your insurance began paying in full. In some cases, that could be $25,000 or more!
Remember, though, premiums are not considered cost sharing and do not contribute to your deductible or OOP maximum.
Reform is not cheap
I like some of the changes brought about by Obamacare, but I do consider it more health insurance reform than health care reform. Health care costs will still be expensive and make up a large part of a family’s budget.
And most of what Obamacare mandates–coverage for pre-exisiting conditions, lower OOP maximums and essential health benefits–will come at the price of significantly higher premiums for many, myself included.
Premiums will be more affordable if you’re eligible for a federal subsidy, and I’ll discuss those in part 2 of this post. If you don’t qualify for a subsidy and you don’t have employer-sponsored health insurance, you will probably find the premiums pretty darn expensive. I know I do!