NEW YORK (MainStreet)Come October 1, the Affordable Care Act's new state marketplace exchanges will debut their four metallic tier health plans. The question remains, which health plan will best protect your assets and which could place you in debt?
All of the metallic plans will offer the same essential health benefits, although health plans may vary in terms of which providers, hospitals, and medications they cover, according to Ken Janda, CEO of Community Health Choice, a non-profit insurance company headquartered in Texas.
What distinguishes the metallic tiers is their cost-sharing-- the amount of the cost of services that the beneficiary must pay. Varying cost-sharing changes the actuarial value, the percentage of medical expenses that the insurance plan will cover (for example, a plan with an actuarial value of 100 would pay all expenses). Hence, each metal level has a different actuarial value, which includes deductibles, coinsurance/copayments and out-of-pocket limits, starting with 60% for the bronze plan and rising 10% for each tier.
"Insurance is a scale, so either more money is pushed on the individual when they go to the doctor or hospital so that they can have a lower premium, or they pay a higher premium so that they pay less out of pocket when they go to doctor or hospital," says Susan L. Combs, president of Combs & Company, an insurance brokerage.
As a general rule, each level has increased premiums but lower out-of-pocket expenses, says Janda. He says that it won't always be cheapest to get a platinum plan, if you know you're going to be maxing out on usage. You may be better off with a bronze plan, Janda says. The bronze level has the highest deductible but the lowest premiums. To figure out which one may be best for you, you have to calculate the total cost in premiums plus the maximum out-of-pocket expenses and add in any tax credit to get your maximum exposure.
However, Janda warns that in many states lower-income workers will be able to get the bronze plans without paying the premium due to the tax subsidy. While they will avoid the tax penalty, they may not be able to afford the coinsurance and deductible, he says. That could result in debt. For example, a 30-year-old non-smoker earning an annual income of $12,000 might qualify for a bronze plan without having to pay the premiums, because the tax subsidy would cover it. That individual might pay a $300 monthly premium for a silver plan, and with a $280 per month subsidy, he or she would still have to pay $20 per month for the premium.
With a larger deductible, using a bronze plan would have a substantially higher out-of-pocket upfront cost that could easily exceed the $20 monthly premium and lower deductible of the silver plan.
"To make health insurance more affordable, the Affordable Care Act created the Insurance Affordability Programs to lower the cost of health insurance for many Americans," says Mark Colwell, director of consumer Marketing at GoHealth, a health insurance brokerage. "These programs include the Advance Premium Tax Credit [APTC] and Cost-Sharing Reductions [CSR]," he says.
The APTC will reduce monthly premiums for individuals earning between 100% and 400% of the federal poverty level. The CSR will lower deductibles and copayments/coinsurance rates on silver plans for people earning between 100% and 250% of the federal poverty level.
Janda advises getting the silver plan in these cases, because under the silver plan, low-income consumers can get cost share reductions on top of a tax subsidy.
Regardless of tier, the total out-of-pocket cost will be $6,350 for an individual and $12,700 for a family.
--Written for MainStreet by S.Z. Berg, author of College on the Cheap