Why some Obamacare insurance discounts could drop in 2015

Costs to buy coverage through Connecticut’s health insurance exchange won’t, on average, rise much next year. For some plans, the prices are dropping.

But some customers who get financial aid to buy their insurance could see price increases beyond the rise in sticker price if they stick with their current plans, according to an analysis by consultants for the exchange, Access Health CT.

As a result, some people might find lower prices by considering different plans, even if they bought the cheapest plan available this year, according to the analysis by Wakely Consulting Group.

It’s all related to the way the financial aid is calculated. And it’s a bit counterintuitive, noted Julia Lerche, a senior consulting actuary at Wakely, who presented the findings to the exchange board Thursday.

What’s going on?

Under Obamacare, people with low or moderate incomes can qualify for tax credits to subsidize their monthly premiums. Those discounts are set so that a person won’t pay more than a fixed percentage of his or her income to buy a “benchmark” plan.

Customers who get subsidies don’t have to buy that benchmark plan. Instead, they essentially get an allowance that they can use to discount the cost of any plan sold through the exchange. That allowance is the amount of money it would take the federal government to adequately discount the person’s purchase of the benchmark plan.

But the benchmark plan is changing next year. (It’s the second-cheapest midlevel plan sold on the exchange, which varies based on what insurance companies offer.) And because of that, the allowance people are given to discount their plans changes too.

If the benchmark plan gets cheaper from one year to the next, the size of people’s subsidies will decrease.

That’s what’s happening in four Connecticut counties this year: Fairfield, Litchfield, Tolland and Windham.

What does that mean for people’s costs? It depends on the price of the plan they buy. If the price stays flat or increases even slightly while the subsidy allowance drops, the person’s actual premium would increase.

“It’s really two moving targets,” Lerche said. “You’re looking at the difference [between] two moving targets.”

For example

Take, for example, a 35-year-old man in Fairfield County earning $30,000 per year. This year, the benchmark plan is an Anthem Blue Cross and Blue Shield silver plan that costs about $402 per month. Because of his income, he’d get about $195 in tax credits to discount whatever plan he wants to buy. Many exchange customers buy the lowest-priced silver plan available. If he did that, he’d have a 2014 ConnectiCare silver plan that costs him $170 per month.

But in 2015, the benchmark plan in Fairfield County is the ConnectiCare silver plan, and for someone his age, it has a sticker price of $380. That’s $22 a month less than the current benchmark plan. Based on his income, he’d still qualify for a subsidy that would limit his price for the benchmark plan to about $209 per month. But because the benchmark plan costs less, his subsidy would drop to about $171 per month. He could still buy his ConnectiCare plan — the benchmark next year — but his cost would rise by about $30 per month, to $209. The lowest-cost silver for him would be a HealthyCT plan that costs $196 after the discount is applied.

A couple caveats about the numbers: Plan costs aren’t the only things changing. The poverty level is also rising slightly, and so is the percentage of income people who get subsidies would be expected to pay for coverage. As a result, most people whose income doesn’t change would see a slight change in their subsidy calculations, even if nothing else changed.

What does this mean for customers?

Lerche recommended that the exchange think about encouraging people to shop around for plans in counties where the subsidies are decreasing. Because price changes from this year to next vary by insurer and plan type, people might find lower costs by switching to a different insurer.

What else is there to consider?

Each insurance company on the exchange sells standard plans that follow the same benefits design. That means they have identical deductibles, co-payments and other types of costs to members when they get medical care. Insurers are also offering non-standard plans with unique designs.

But even among standard plans, there are variations between insurance companies. Each insurer has its own network of doctors, hospitals and other health care providers. So experts advise people who consider switching plans to check whether the new insurer covers their providers.

Similarly, each insurance company treats prescription drugs differently, which could have a significant impact on customers’ out-of-pocket costs. Experts recommend that people who take medications check how the drugs are covered by each insurance company they’re considering.

See what an Obamacare plan would cost you next year in Connecticut, and whether you’d qualify for a subsidy here.

To learn more about the 2015 exchange plan options, click here.

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