Health law coverage may track workplace cost shift
WASHINGTON -- President Barack Obama's health care law appears to mirror a trend in job-based insurance, where employees are being nudged into cost-saving plans that require them to pay a bigger share of their medical expenses.
Two independent studies out this week highlighted attractive prices for less-generous "bronze" plans that will offer low monthly premiums but require patients to pick up more of the cost if they get sick.
Consumers might avoid "rate shock" over premiums, but some could end up struggling with bigger bills for the care they receive.
The Obama plans will be available starting Oct. 1 for people who don't have access to coverage on the job.
Studies by the nonpartisan Kaiser Family Foundation and Avalere Health provided the first look at rates filed by insurers around the country, ahead of the Oct. 1 opening of new state insurance markets under the law.
Consumers will use the markets to find out if they qualify for tax credits to help pay their premiums, and to pick a private insurance plan from a range of coverage levels: bronze, silver, gold and platinum.
Come Jan. 1, virtually everyone in the United States will be required to have coverage, or face fines if they don't. At the same time, insurance companies no longer can turn away people in poor health.
"What was really striking as we dug into the numbers is how inexpensive the bronze plans are," said Larry Levitt, a Kaiser vice president.
Avalere, a private data analysis firm, found the average monthly premium for a bronze plan is $274, compared with $336 for the next level of coverage, a silver plan. The savings from going with bronze adds up to $744 annually, and that's off the sticker price, before federal tax credits that will reduce premiums for an estimated 4 out of 5 customers in the new markets.
It's "likely to entice healthier enrollees to opt for a less generous benefit package," said Caroline Pearson, a lead author of the study.
The law's tax credits will make low-cost plans more appealing.
By pairing their tax credit with a bronze policy, some younger consumers can bring their premiums down to the range of $100 to $140 a month, the Kaiser study found. Older people can drive their monthly cost even lower -- well below $100, and zero in some cases-- if they are willing to take a chance with higher deductibles and copays.
It's a trade-off that some consumers unfamiliar with insurance might not fully grasp.
"A bronze plan is a very basic plan," explained Levitt. It "will enable consumers to pay very low premiums up front, zero in some cases. But when they actually need medical care, they will pay higher costs out of their own pockets."
Job-based plans have been shifting costs to employees for some time. In 2009, when Obama took office, 22 percent of workers were in plans with an annual deductible of $1,000 or more for single coverage, according to Kaiser. By this year, the share had nearly doubled, to 38 percent, including 3 out of 5 employees of small companies.
Obama's law largely reflects what's already going on in the marketplace, but Pearson said over time it may accelerate the shift to plans with higher out-of-pocket costs.
Administration officials are pleased with the large number of low-cost options. Health and Human Services Department spokeswoman Joanne Peters said the administration is confident that consumers will be able to compare plans side by side in the new markets and make the right choices for themselves.
Avalere crunched the numbers on premiums filed by insurers in 11 states and Washington, D.C. Kaiser analyzed 17 states and the District of Columbia. Both studies included a mix of states running their own insurance markets and ones in which the federal government will take charge.
Under Obama's law, all plans on the new insurance markets must cover the same benefits, including preventive care at no charge to patients. Another similarity is a cap on total out-of-pocket costs at $6,350 for individuals, $12,700 for a family policy.
The main difference between plans is cost-sharing. Bronze plans cover 60 percent of expected medical costs; silver plans will cover 70 percent; gold will cover 80 percent, and platinum 90 percent.
Mid-range silver plans were considered the benchmark when the law was written more than three years ago. Lawmakers keyed the tax credits to the cost of the second-lowest-cost silver plan in a local area.
People with modest incomes may still come out ahead by sticking with a silver plan instead of going for bronze. That's because additional help with out-of-pocket costs such as copays will only be available to people enrolling in a silver plan.
The tax credits work by limiting what you pay for premiums to a given percentage of your income.
For example, someone making $23,000 would pay no more than 6.3 percent of his or her annual income -- $1,450 -- for a benchmark silver plan. The amount you pay stays the same whether the total premium is $3,000 or $9,000.
But those tax credits taper off rapidly for people with solid middle-class incomes, above $30,000 for an individual and $60,000 for a family of four.