Navigating the Affordable Care Act

October 31, 2016—Open enrollment for people buying insurance through the Affordable Care Act begins November 1, 2016 and runs through January 31, 2017. A major change this year will be increased rates; premiums for the most common “Silver” plans will jump an average of 22%. Katherine Swartz, professor of health policy and economics, talked about the premium hikes and her advice for those shopping for insurance.

We’ve heard a great deal about rising insurance premiums this year. How is that likely to affect people purchasing health coverage?

There are going to be some people who have had health insurance this past year who are suddenly going to say, wait a minute, I can’t afford to have my premium go up by 15%. But, if they have incomes below 400% of the poverty level and their incomes are above the Medicaid eligibility ceiling, they will be getting premium tax credit subsidies. So even though people talk about premiums going up by 10% or 20%, or in a few cases, closer to 50%, people need to remember that if they are eligible for these premium tax credit subsidies that they will not be paying all of that additional cost.

Since the marketplaces opened, a lot of people have remained uninsured. A disproportionate share of them are younger adults, anywhere between 18 and 35 or 40. The Obama administration is making a big push this year to enroll more of these younger people in plans. And by having more young, healthy people in these plans, that will prevent the premiums from going up quite as rapidly as they have these last two years.

What are the major health plans that most people will be considering?

The major plans that are out there in most states are HMOs, which are really managed care plans, or high-deductible plans, which are generally called point-of-service, or P.O.S. The main thing that any consumer shopping for a plan really should be looking at is whether they get a plan that has a relatively high deductible, something that might be $2,000 per person or maybe above $5,000 for a family, and allows a person to see a wider network of physicians, versus a plan, most likely a managed care plan, that has a limited provider network. That would mean a smaller number of physicians and hospitals and diagnostic testing centers that they could go to, and so the out-of-pocket cost to them would be much lower. The central question for many consumers is: Do you face a plan that has a high deductible, or do you face a plan that has a limit on the numbers and types of providers—doctors, nurses, hospitals—that you can go to?

If you choose a high-deductible health plan in the Obamacare marketplaces, for example, one that has a deductible of $3,000, you’re responsible for the first $3,000 worth of your medical expenses before the insurance will pay anything. Then there may be some copayments or a coinsurance rate, generally about 20%, that the person still will be paying out of pocket until they hit the maximum allowed out-of-pocket spending per year.

Generally the people choosing high-deductible health plans are healthy and don’t expect to have high medical expenses, more than maybe one visit to a doctor during a year at most. So they’re trading off the risk of getting sick for having a very low premium, essentially. It’s possible that if you’re very sick or have a preexisting condition, you might say, ‘OK, I’ll still choose this high-deductible plan, because I will have a wider range of physicians and hospitals I can go to, and I know that my medical expenses are going to be a lot larger than that $3,000 deductible.’

So what’s the bottom line for those shopping for health insurance?

I would think the biggest thing to think about is how comfortable you are with risk. You may decide that you prefer to pay a lower premium with a limited provider network plan or a high-deductible plan because you don’t expect to have an expensive or complicated medical event in the next year, or you may decide that the possibility of having a complex or expensive medical problem makes you nervous and therefore you would rather pay more for a plan that has a lower deductible or a broader network of physicians and hospitals. That’s fine, but just be aware that then you could face significant out-of-pocket costs. There are real tradeoffs.

I think as long as somebody is healthy, especially if they’re young, the major things to be worried about is that you could be in a car accident or have some kind of sports injury, like a skiing accident. So for example, if you ski a lot, think hard about the risk to you or your family if you suddenly break a leg in a terrible way and need surgery. That’s going to be costly.

Noah Leavitt

Listen to Swartz discuss the Affordable Care Act during a recent episode of our Harvard Chan: This Week in Health podcast:

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