Buyer beware of no, low premiums

Posted: November 10, 2013

Some people - likely those close to the federal poverty level - will be able to find insurance plans on the Affordable Care Act marketplace that are free.

That's because subsidies help cover the costs, and they rise for poorer applicants.

As many as 715,000 Pennsylvanians - or more than half of commonwealth residents shopping for insurance on the marketplace - are eligible for subsidies, according to a Kaiser Family Foundation report.

But navigators, insurers, and industry analysts are urging people to consider their overall needs carefully before choosing a plan and not to be seduced by the idea of no or very low monthly premiums.

"We are doing everything we can to make sure folks get educated so they get into the right plan," said Paula Sunshine, Independence Blue Cross' vice president for consumer affairs.

While monthly premiums are a key concern, other factors should be considered when buying a plan. For instance, prescription drug purchases are the service most often used by people with insurance, according to Larry Levitt, a Kaiser senior vice president. Some plans with lower monthly premiums have much higher deductibles for drugs.

"We ask people if they use health care a lot. Is your monthly premium your biggest concern?" said certified navigator Laura Line, who is Resources for Human Development's corporate assistant director for health care. "We just try to make sure we consider all aspects of a client's needs."

The premium subsidy is a set dollar amount based on a person's age, income, and the size of the household. The subsidy can be applied to any plan in the marketplace.

A person or family likely to have a subsidy large enough to buy a plan with no monthly premiums will also probably be among the poorest, near 100 percent of the federal poverty level.

If that person or family were to shop with Independence, they could buy a bronze-level plan and pay no monthly premium. Bronze plans cover the basics, such as doctor visits for preventive care. But when hospitalized, you would be expected to pay the deductible and other expenses - capped yearly at $6,350 for an individual and $12,700 for a family of four - before the plan kicks in.

"If you have no expectation that you are going to need to use outpatient hospitalization or any other kinds of services, then a bronze plan might be the right plan for you, because it is not going to cost you anything in terms of a monthly premium," Sunshine said.

That same individual or family could take that subsidy and move up a level to a silver plan. The silver rung activates a higher level of subsidy. It helps defray out-of-pocket expenses such as deductibles for doctor visits, co-pays, and coinsurance. And while Sunshine said the silver plan will have a monthly premium of $30 to $60, it will offer more benefits and a much lower deductible.

For example, Independence's standard silver PPO plan carries a $2,000 deductible. After that deductible is met, the individual is responsible for 25 percent of the remaining bill - up to the annual cap of $6,350.

But for the person or family at 100 to 150 percent of the federal poverty level who buys the standard silver PPO plan, that deductible disappears. They are responsible for only 10 percent of the bill, up to a cap of $1,000.

Moreover, a visit to a primary-care physician under the standard PPO silver plan would normally cost $30. But with a subsidized plan, that visit would cost just $5.

But here is the important comparison. Say you were seduced by the zero premium payment and bought a bronze plan. With that plan, a visit to your doctor would take $40 from your pocket.

Still, the bronze plan will work for some, perhaps the so-called young invincibles. But Sunshine said some old folks are signing up, too.

"Folks who have the financial capacity to not be afraid of the $6,350 out-of-pocket match are saying, 'I can afford that,' " she said. "So we are seeing people at both ends of the spectrum, which is why we say that there is a plan for everyone."


This article was produced in partnership with Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health-policy research and communication organization not affiliated with Kaiser Permanente.