In less than a week, new insurance marketplaces will launch in most states, marketing and selling Obamacare-compliant plans and distributing subsidies to help low- and middle-income Americans afford coverage. Although some details are forthcoming, like additional price information from insurers, new data released by the Department of Health and Human Services indicates that insurance sold in the exchanges will be less expensive, in many cases, than predicted.
Only those without affordable employer-based insurance will be able to shop in the exchanges, meaning federal officials expect only 3% of the those who will have insurance in 2014, or 7 million people, will get it via a state exchange. Despite their relatively small size, the exchanges will signify the first real opportunity for many uninsured Americans to access comprehensive, affordable insurance coverage that won’t discriminate against those with pre-existing conditions. The open-enrollment period that starts on Oct. 1 will last until March 31. Anyone who purchases coverage in an exchange will buy policy that goes into effect on Jan. 1.
Here are three expected outcomes for those shopping in the exchanges:
Many people will find private insurance coverage for no or very low cost.
The subsidies provided by the federal government to help low- and middle-income Americans purchase insurance under the Affordable Care Act (ACA) are generous. The government will pay all or a portion of insurance premiums for individuals earning up to 400% of the federal poverty level, or about $45,000 per year. Individuals earning less than 250% of the poverty level, or about $29,000 a year, can also receive federal money to help cover deductibles, co-payments and co-insurance costs. Because the subsidies, which will be doled out on a sliding scale, are based on the cost of midlevel insurance plans offered in the state exchanges, some individuals and families who opt for more bare-bones coverage will pay nothing out of pocket on monthly premiums.
For example, according to a calculator created by the nonpartisan Kaiser Family Foundation, a 27-year-old resident of Houston without employer-based coverage earning $15,000 per year could sign up for a bare-bones plan and pay nothing in monthly premiums. For about $300 per year, this person could sign up for a midlevel plan with a $2,250 cap on additional annual out-of-pocket spending. Without subsidies, premiums for this midlevel plan would cost about $2,400 per year.
Many, if not a majority, of those who get new insurance through the exchanges will sign up for the cheapest coverage available.
Massachusetts, which launched a state version of the ACA in 2007, provides a good test case of consumer behavior in a subsidized-health-insurance marketplace where a mandate to buy insurance is in effect. In an analysis of plans purchased during the first two years of reform in Massachusetts, researchers found that 63% of people shopping in its insurance exchange opted to sign up for “bronze plans,” the cheapest coverage available. Many health economists expect similar consumer behavior nationwide under the ACA. Plans in the state exchanges will be categorized as bronze, silver, gold and platinum, with premiums increasingly more expensive for more comprehensive coverage.
The cheapest coverage will prevent bankruptcy, but individuals and families could still pay thousands of dollars in out-of-pocket costs.
In Massachusetts, a bronze plan covers 55% of all health care costs. A bronze plan in an Obamacare-regulated exchange will cover 60% of health care expenses. Out-of-pocket expenses were to be capped at $6,350 for individuals beginning in 2014, but the Obama Administration delayed this insurer requirement until 2015. Even with the limit, though, those with bronze coverage could be required to pay hundreds or thousands of dollars in deductibles or co-insurance for hospital stays or other costly medical needs. This could be an incentive to opt for silver-tier coverage, which will cost more per month, but will cover 70% of health care expenses. At the high-end, a platinum plan offered in the Obamacare exchanges will cover 90% of an individual’s health care costs, but will charge more than monthly premiums.