Government Watch

If You Like Your Obamacare Plan, It’ll Cost You

‘Consumers could be hit with major price increases, without even knowing it, if they don’t switch their health care plans.’

from – National Journal – by Sam Baker

If you like your Obamacare plan, you can keep it—but you might end up paying a whole lot more.

People who decide to stick with the coverage they’ve already gotten through Obamacare, rather than switching plans, are at risk for some of the biggest premium spikes anywhere in the system. And some people won’t even know their costs went up until they get a bill from the IRS.

Insurance plans generally raise their premiums every year, but those costs are just the tip of the iceberg for millions of Obamacare enrollees. A series of other, largely invisible factors will also push up many consumers’ premiums.

In some cases, even if an insurance company doesn’t raise its rates at all, its customers could still end up owing thousands of dollars more for their premiums. It’s all a byproduct of complicated technical changes triggered, ironically enough, by the law’s success at bolstering competition among insurers.

Many consumers will need to switch plans in order to keep their costs steady, but health care experts question how many people will do that. Switching plans can entail changing your doctor and adjusting to new out-of-pocket costs, never mind the fresh trek throughHealthCare.gov. The White House has already set up an auto-renewal process, making it easier to stick with the status quo.

And with so many behind-the-scenes factors at play, most people might not even know that they need to go back through HealthCare.gov just to keep the deal they already have.

“A lot of people aren’t going to understand this,” said Susan Pantely, an actuary at the Milliman consulting firm.

Hidden cost of doing nothing

Let’s break down the complex factors that make inertia so expensive for Obamacare enrollees.

First, there are the standard premium increases insurers seek from year to year. The lowest-cost plans in each state’s marketplace were generally the ones that attracted the most customers in 2014. But in many cases, they’re also the plans seeking above-average rate hikes.

“The prices of the lowest-cost [plans] tend to be going up more,” said Caroline Pearson, vice president at the consulting firm Avalere Health. “Most people, if re-enrolled, will be enrolled in a plan that has a premium increase.”

But that’s only part of the reason inertia is so expensive for Obamacare enrollees. The vast majority of enrollees don’t pay the full cost of their premiums—85 percent are getting financial help from the government. And many of those consumers will find that their subsidies don’t go as far next year, even for the same plans.

The size of each person’s subsidy is tied to a “benchmark” plan. Poorer consumers only have to spend a certain percentage of their income for that plan; the government pays the rest of the premium. If you choose a more expensive policy, you have to pay the difference on your own.

This year, about 3.4 million people picked the benchmark plan or went one option cheaper. But as those plans raise their rates and new options come to the market, they’ll often lose their benchmark status to cheaper competitors—and their customers will find themselves on the hook for a bigger share of their premiums.

“I would expect that probably the majority of 2014 enrollees are going to be impacted pretty substantially,” said Milliman analyst Paul Houchens.

Let’s say your income is at about 150 percent of the poverty line—roughly $17,000 per year. The law says you don’t have to pay more than 4 percent of your income for the benchmark plan in your area. You chose that plan this year, and you’re getting a pretty generous subsidy.

Your plan wants to raise its rates by 5 percent next year—not great, but not the end of the world when you’re only paying about $50 per month out of your pocket. You like the plan, the premium increase doesn’t seem like a lot, and HealthCare.gov was a headache last time, so you just auto-renew.

Unbeknownst to you, though, new insurers have started offering cheaper plans in your area. Your plan is no longer the benchmark plan; a cheaper one is. So now your subsidy is based on the cost of that plan, not the one you have. This means you’re on the hook not only for every dollar of your plan’s 5 percent premium increase, but also for every dollar of the difference in price between your plan and the new benchmark plan.

These technical changes in subsidies could turn a 5 percent premium increase into a spike of 30 to 100 percent in the net costs for low-income consumers, according to a recent Milliam analysis.

There’s already evidence this is happening: In an Avalere Health survey of nine states, the benchmark plan will change next year in six of them. The lowest-cost plan will change in seven of the nine states.

‘The totally crazy part’

As cheaper plans come into the marketplace, millions of consumers will see the cost of keeping their plan rise. But they might not know it.

HealthCare.gov isn’t able to automatically recalculate the subsidies existing consumers are eligible for. So, while the dollar value of your financial assistance drops, you can only find out that’s happening by going back into the system and asking for a redetermination as part of the shopping process.

Consumers who auto-renew their policies will get the same dollar value of subsidies they got last year—even though changes in the marketplace all but guarantee that will no longer be the right subsidy amount for millions of people.

“That’s the totally crazy part,” Pearson said. “They’re basically going to send them what they know to be the wrong subsidy.”

The IRS will eventually figure out how much financial assistance you should have received, and will reconcile the difference on your taxes. If you should have gotten a bigger subsidy, the government will issue you a tax credit. If your subsidy was too big, which would be the case if you keep your plan and lower-cost options come to the market, you’ll owe the IRS money.

Milliman has this example: Your plan doesn’t change its premiums at all, and your income isn’t changing. You auto-renew and keep receiving the same subsidy. But because of changes in the benchmark plan, you shouldn’t actually be receiving the same subsidy. Although it seems to you like nothing changed—not your premium, not your income—you’ll owe the IRS between $300 and $2,500 when you pay your taxes, because your subsidy should have been smaller. Unless and until HealthCare.gov is able to do this math automatically, it’s up to you to figure that out.

“We get into a very dangerous situation if we just tell everybody they can just auto-enroll,” Houchens said.

It pays to shop

Again, all of this is avoidable. These are the risks of auto-renewal. Anyone who goes back in toHealthCare.gov to get a new eligibility determination will see their updated subsidy as well as the current list of available plans.

If you’ve been on the benchmark plan and you switch to the new benchmark plan, your costs will stay exactly the same, because the subsidies work by capping how much of your income you’ll have to spend for that plan. Or maybe consumers will decide it’s worth the extra money to stick with the plan they have, but will get the advantage of knowing about those costs up front, rather than being hit with a tax bill.

Consumers are “largely protected if they’re willing to switch plans,” said Larry Levitt, vice president of special initiatives at the Kaiser Family Foundation.

But will they be willing to switch?

Experience with Medicare’s prescription-drug benefit suggests not. Once seniors pick a drug plan, they’re unlikely to reenter the marketplace and shop around again, even if there’s a plan that might work better for them, Levitt said. The same is true of the insurance exchange that serves federal employees—people rarely switch.

“There are lots of reasons to believe inertia will take hold here and people won’t switch,” Levitt said. “Betting on inertia is certainly a reasonable bet here.”

But Levitt also said the Obamacare exchanges might be different. Most of the people who signed up for coverage this year were previously uninsured, so they probably haven’t gotten too attached to a specific doctor yet. They likely wouldn’t feel like they’re losing a lot by switching to a cheaper policy, Levitt said. And the way people shopped this year indicated that they’re especially price-conscious.

“I think people may shop around more than they have in the past,” he said.

Complicating all of this is the auto-renewal process the administration has set up. The administration is in a tough spot on auto-renewal—it wants to keep as many of this year’s 8 million sign-ups as possible, but it also wants to keep real-world premium increases in check.

“It’s a really tough balance. You don’t want people to end up uninsured, so you want to make renewal as easy as possible, but (you) also want to make sure people understand they have other options,” Levitt said. “Auto-renewing people is not a crazy idea, but how well that works will depend a lot on the communication that goes out to people.”


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Disruptive Element
8 years ago

Notice that the issue is dead….There is no longer repeal, change, etc. It is over and done and all the constructive fixes are ignored. Just like the illegal influx and all the other “hopey changes” he has made it is here and done. There wasn’t enough of us who pounded them daily in complaints or who would show up for a rally against. There isn’t enough elected representatives in the house and senate to do anything about it either, that is if they really wanted to. It is all blah, blah without action complaining over beers does zero.

Ivan Berry
8 years ago

Remember that “If you like your doctor (or your insurance plan…) you can keep it?” Well,
If you like your Constitution you can keep it, too.” So says the Obama admisistration, with the help of Geo. Soros and the Wolf Pac who are in support of an Art.V States’ Convention to amend the Constitution.

I just checked this weeks poll and support for an Art.V States’ Convention for limited Amendments was winning at the rate of 97% for and 3% not in favor.

This begs the question posed earlier by Rik and PaulE in response to the article above. It seems that the majority even in this organization are either dumb or uninformed. Once the Constitution is opened for Conventional amendments, it can be totally rewritten, depending on who controls the process. Liberals and Progressives are just as anxious to get started as are the convervatives. This does not bode well for our nation.

Totalitarinism/Socialism appeals to those disenfranchised, be they minorities or majorities. Once the process is complete of disenfranchising the whole common population, just maybe they will deserve the Socialistic government that they have carelessly allowed to take charge.

In all likelyhood, once the Convention process is begun, it will go out of control and the result could be more rapid in getting the U.S. closer to what Obama’s “transformation” entails than would the normal progression of Progressivness
that would occur if we just continue on our “kicking the basts…. out every four years or so.”

If AMAC responds to the current poll numbers and gets behind the Art. V process, we might end up worse off than if we had either stayed with or joined AARP. Discouragement seems to be taking over for all Constitutionalists. To say I am discouraged is an understatement. Every day that passes we lose “Hope” as we face more “Change.” Where will it end?

glen dowdy
8 years ago
Reply to  Ivan Berry

The purpose for the convention must first be defined. If a free for all, I would hope states would withdraw. Perhaps ‘a convention to strengthen liberty’s protection.’ We as a nation have already suffered one civil war. Perhaps that’s the only true solution. But I wonder if the socialists lefties are more bark than bite when it comes to putting their own flesh in the game?

Ivan Berry
8 years ago
Reply to  glen dowdy

Glen, check out Nullification. It was prevalent in our early years as a Republic and had issued from the likes of Conneticut, Virginia and other States. The northern states sought to Nullify the embargoes placed on imports during Madison’s administration. These were later lifted.
Nullification is not nearly as devastating as a civil war and if enough states went with the program and failed to abide by or enforce central government unconstitutional demands they might go the way of Real ID which is still on the books, but not enforced, neither by the states nor the central government.

Jean
8 years ago
Reply to  Ivan Berry

Those were my thoughts when I voted “no”. I can’t believe folks are willing to let the Constitution be threatened by this. Thanks for voicing this concern, Ivan.

PaulE
8 years ago
Reply to  Ivan Berry

Exactly correct Ivan. Which is why the risks of an Article V convention far outweigh the potential benefits. Especially given the current make-up of the various states. Those that think such a convention could be tightly controlled, once started, are fooling themselves. It would quickly morph into “lets compromise” on every important aspect under consideration. With the mainstream media pushing every Progressive solution as “the fair and more balanced approach”. Don’t think so? Then you haven’t been watching how the game in Washington and the media has been played over the last several years. What were sane and viable conservative solutions to any number of problems, were quickly spun by Democrats and the mainstream media into “right-wing radical extremists pushing their views based on racism”. Now imagine how they would step up their game given the opportunity to truly gut the protections of the Constitution, if given half a chance.

The problem isn’t that the Constitution is broken and somehow needs to be amended to correct a fatal flaw. Rather the issue is that many of the politicians we keep re-electing to office, over and over again, refuse to be governed by the limits placed upon them by the Constitution. No Article V convention is going to fix that. If anything, opening up the Constitution to any sort of amendments at this point will only likely result in our having less control over the federal government than we do now. I’m also equally shocked by the current poll results.

Gary (MSgt, USAF, Ret)
8 years ago

Two points:
1. “The vast majority of enrollees don’t pay the full cost of their premiums—85 percent are getting financial help from the government”. The “government” does not, never has and never will provide “financial help” to anyone. It has always been and always will be the “taxpayer” who pays for all this.
2. Obamacare was NEVER intended to provide any benefit to anyone above the poverty line. Obamacare was ALWAYS just another “free handout” that would bring in more Democrat votes. Plain and simple. Only problem is once those who thought they were getting a free ride realize that isn’t the case it’s already too late.

jim young
8 years ago

Gary has it dead on, this is all about building up the Democratic voters by giving them everything, food, shelter, health care, phones…everything so they will continue to vote for the DEMS. Problem is SOMEONE has to pay for this Party’s decisions and if we don’t make changes soon, we the working man will be the new SLAVES!!!

John
8 years ago

What parts of “There is no free lunch,” (anonymous) and “It’s a tax,” (Justice John Roberts) do the people not understand?

Nick L.
8 years ago

There doesn’t seem to be any mention about the out of pocket expenses, ie., the deductibles which the insured have to pay each year in addition to the monthly premium. As I understand it thr deductibles can be quite high – $2,000 to $8,000 or more each year!!!

Rik
8 years ago

Geez, let’s see, I’ve been in advertising sales for the past 44 years, when a business advertises what is known as “a loss leader”, it does so to attract a consumer into it’s business, like a grocery store. By bringing you physically into their store, the business is counting on you to purchase other items, convenience items, so to speak, to make up and exceed their losses on the advertised “come on’s”. Of course, the next week the “sale item” is repriced back to regular price or in some cases, even priced higher, inflation, you know!

Obamacare seems to work the same way, you purchased your “loss leader” insurance plan this past year and just assume the price will remain the same, or increase just slightly. BIG SURPRISE!!! Unless you do “due diligence”, your “renewable” policy WILL APPEAR TO BE ABOUT THE SAME COST, but, lo and behold, YOU WON’T REALLY KNOW WHAT YOU’RE PAYING UNTIL “TAX TIME”. AND THEN, YOU FIND OUT THE “AUTOMATIC RENEWABLE” IS GOING TO COST MANY MORE $$$! YOU UNDERPAID, AND NOW YOU WILL BE PENALIZED!!!

Well, we did know from the Supreme Court decision, that OBAMACARE IS REALLY A MASSIVE TAX INCREASE!!!
Only, it’s a tax increase on your health insurance! Now you know why the Health Insurance Companies didn’t scream bloody murder when Obamacare was passed! IT’S NOW THE LAW, AND EVERYBODY HAS TO BUY THEIR PRODUCT!!!

NOBODY GETS TO AVOID PAYING THE TAX!!! … SO, THE INSURANCE COMPANIES MAKE MORE $$$ BECAUSE EVERYBODY HAS TO BUY THEIR PRODUCT! … AND THE GOVERNMENT GETS A MASSIVE TAX INCREASE, ALSO, BECAUSE NOW EVERYBODY IS FORCED TO BUY HEALTH INSURANCE COVERAGE!!!

OBAMACARE, IS THE BIGGEST TAX INCREASE HOAX EVER PERPETRADED ON THE ENTIRE CITIZENRY!

AND THIS MAN IS STILL PRESIDENT!!! … HOW DUMB ARE THE AMERICAN PEOPLE???

Rik
8 years ago
Reply to  Rik

Obamacare is now really like auto insurance, if you want to drive a car, you have to buy auto insurance … IF YOU WANT TO LIVE, YOU HAVE TO BUY HEALTH INSURANCE. … AND BE SUBSTANTUALLY TAXED FOR DOING SO!!!

OBAMA AND THE DEMOCRATS FLIM FLAMMED AN ENTIRE COUNTRY … FOR SHAME!!!

PaulE
8 years ago
Reply to  Rik

Rik,

Well said. “How dumb are the American people???” How about very dumb. We all know that Obamacare is a mandated tax, as the Supreme Court has validated it as such. That was, at least in my opinion which doesn’t count for squat, the wrong outcome on the part of the Court. However, that is what we’re stuck with until certain things change.

So the issue comes down to not whether Obamacare will cost more over time. Of course it will cost more, since everything costs more over time, including this mandated tax we’re all forced to pay. So the only thing in some doubt is the rate of annual increases we’re likely to see going forward. How much will the captive audience, that being us, be charged for the “privilege” of being herded into Obamacare, which are the only health care insurance plans anyone is allowed to sell anymore? Will it be 8, 10, 15, 20, or more percent additional each year for the same level of coverage and deductibles? That’s the only “surprise” we have to look forward to each year from this horrible law.

As the the notion of “shopping around” that the article references, the plans all have the same mandated coverage items. So all you’re doing is trading off a higher premium for a higher out-of-pocket annual deductible, so the “savings” are largely illusionary. One way or the other, you end up paying. Especially when you factor in the number of quality doctors and hospitals in the lower-priced plans’ networks might not include your doctor or hospital. Quality of care received is ultimately more important than simply being able to see “a doctor” (they are not inter-changeable cogs as much as the government would like us to think that way), who may not have the same quality of skills that you’re used to receiving.

Ivan Berry
8 years ago
Reply to  PaulE

Rik and PaulE, very informative from both of you. “‘How dumb are the American people?”‘ Well, I just checked todays poll and that remains the question. If you haven’t checked it thus far, it’s about an Art V limited Convention for amendments to the constitution. I will address it as I see it in the continuing comments to the article above. Please, read.

KarenFaye
8 years ago

Once again, the Obamanator slipped in an Executive Order that works in his favor. Nothing will happen to people’s insurance plans until AFTER the Midterm elections. I would advise those who are involved to purchase a very large jar of Vaseline. They’re going to need it!

Margo Corbett
8 years ago

I understand enrollment for ACA plans begins 11/15/14 rather than in October the usual healthcare enrollment time. Suppose this has anything to do with the election??? When do people become aware of their premiums at enrollment or before the election?

HAM
8 years ago
Reply to  Margo Corbett

AFTER the election. Obama changed the enrollment date just for that reason.

PaulE
8 years ago
Reply to  HAM

Exactly right. Everything is being moved around to minimize the negative effect on the Democrats this election.

Nick and Joan Degaitas
8 years ago

It’s so good to be able to connect with a conservative alternative to senior care! Thanks for being there!

Nick and Joan

Ann Adams
8 years ago

Remember it was Mark Begich, Democrat senator from my state, Alaska who was the deciding vote on Obamacare. He’s up for re-election and he needs to be defeated. You might not think Alaska, or other states matter but this is just one example of how they do. I keep informed on races in other states and chip in to help elect the best person for the job. I encourage all of us to keep informed and help elect conservatives, even if they are not in your state. Begich won by 2%. We are all in this together and need to stick together and stay informed. Dan Sullivan seems to be the conservative person who can beat Begich this fall in Alaska. Begich is already sticking his nose and money into the Republican primary! Remember everybody you can thank Mark Begich for passing Obamacare! Never forget.

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