Obamacare, discontinued plans, and ‘sticker shock,’ round 2

Pete Spain knew he and his wife would have to find a new health plan for 2015 since their current policy is being discontinued at the end of the year. But the letter explaining it still contained a surprise: Buying a comparable plan next year would cost the Bridgeport couple nearly 58 percent more.

“That’s just a bigger hit than we expected,” he said.

The Spains are among more than 60,000 Connecticut residents with health plans that don’t meet the requirements of the federal health law. Many of them are receiving notices that their plans are being discontinued and that comparable, Obamacare-compliant plans will cost significantly more.

“I’m seeing in some cases 100 percent increases,” said Tim Tracy Jr., a Fairfield insurance broker and president of the Connecticut Chapter of the National Association of Health Underwriters.

Sound familiar? It should. Last year, with many provisions of Obamacare poised to take effect, insurance companies discontinued health plans that didn’t meet the new coverage requirements, and many customers faced higher prices for new plans. Anger about losing insurance policies created a political firestorm on the heels of the health law’s first sign-up period for coverage.

But about 60,000 Connecticut residents were able to continue plans that didn’t meet the health law’s requirements, either because the plans pre-dated Obamacare’s passage or because they were purchased or renewed before the start of this year. Now nearly all of those residents are likely to be in the market for new coverage for 2015 — and some will face “sticker shock,” as Tracy calls it.

What accounts for the price increases? The Affordable Care Act created several new coverage requirements that can raise insurance prices. Among them: Plans sold on the individual market must cover a set of “essential” benefits, including maternity and pediatric dental care that were rarely covered in the past. Health plans can’t put a dollar limit on the amount of medical care they’ll cover for a person.

And insurers must sell plans to anyone who wants to buy insurance, regardless of medical history, rather than selecting which customers to cover, as they did in the past.

Deputy Insurance Commissioner Anne Melissa Dowling noted that many people who were able to hang onto old plans last year didn’t have to pay attention to the health law’s new requirements.

“All this stuff that we’ve all gotten very comfortable with and known about for the last 18 months, there’s a whole crop of people to whom it’s very new,” she said.

Not everyone whose plans are being discontinued will face higher premiums for new coverage. Another feature of Obamacare is the creation of federal tax credits to discount the cost of monthly insurance premiums for low- and middle-income people, as long as they buy their plans through the state’s health insurance exchange, Access Health CT.

And people who already bought Obamacare-compliant plans last year are likely to see either price reductions or modest increases for insurance in 2015, since the rates for those plans are, on average, not increasing dramatically.

Tracy, the Fairfield broker, had some clients who got tax credits to discount their Obamacare-compliant plans this year.

“It worked out great for them,” he said. “They got cost-effective coverage. But unfortunately, the system isn’t built to satisfy everybody.”

By that he means those who don’t qualify for any financial assistance to help with their premiums, who pay the full sticker price. In a high-income state like Connecticut, that’s a lot of people.

The tax credits are set so that people earning below 400 percent of the poverty level won’t pay more than 9.56 percent of their income to buy a mid-level plan through the exchange next year. But people who earn just above the limit — $46,680 for a single person, and $95,400 for a family of four — will pay full price, even if it’s a significantly higher percentage of their income.

Effectively, the law creates two groups of individual-market insurance customers: Those who qualify for a tax credit and are largely insulated from premium hikes, and those who pay sticker price. Access Health’s acting CEO, Jim Wadleigh, said people who earn just over the limit for a subsidy “are the ones who get hurt the most,” and noted while $96,000 for a family of four might sound like a lot of money, it doesn’t go far in a high-cost state like Connecticut.

“We’ve got to find some way to make health care coverage affordable to everybody,” he said.

Wadleigh said he’s familiar with the concerns of people whose pre-Obamacare plans are being discontinued, in part because it’s happened to some of his friends, who complain to him about it. He’s connected them with a broker to find new plans.

As more people learn their plans are ending, Wadleigh expects more complaints about having to find new coverage, the costs and Obamacare in general. “I’m sure it’s going to get noisier,” he said.

This is likely the last big round of transitions from pre-Obamacare plans to those that meet the health law’s requirements, at least in this state. As of June 30, 50,947 Connecticut residents had individual-market plans that were issued or renewed late last year and can’t legally be continued after they expire. (Many of those people got plans that began Dec. 1, 2013. They’ll be able to keep them through the end of December because the Connecticut Insurance Department received approval to let them continue an extra month, so customers wouldn’t have to buy a new one-month plan before 2015 policies took effect.)

Another 10,022 people in Connecticut had “grandfathered” plans that were issued before the health law passed in 2010. Those plans can legally be continued if insurers choose to keep offering them, but insurers are expected to discontinue many of those plans.

Pete and Kate Spain are among the 10,000 with grandfathered plans, and theirs is being discontinued.

They don’t qualify for a subsidy. Kate Spain runs a small design business, and the couple’s income is above the $62,920 threshold that would qualify them for a tax credit. That means they’ll be paying full price for insurance.

The Spains, who are in their mid-40s, currently pay $479 a month for an Aetna plan with a high deductible and a health-savings account. A letter from Aetna notified them that if they didn’t take action, they would be routed into an Obamacare-complaint plan that costs $756.08 per month.

Pete Spain looked at other options and figures they could buy a plan from another carrier for less money, but it would still be an increase. The lowest-cost standard plan sold through the exchange would cost them about $120 per month more than they pay now.

Spain is quick to note that he’s a Democrat who made more than 1,500 phone calls for Obama before the 2008 election. He thinks the health law will help to contain health care costs overall in the future. But he was surprised by the financial hit he and his wife will be facing next year.

“This is just kind of drastic,” he said. “And we’re lucky…We’ll figure something out. But I just feel bad for people who aren’t doing as well,” who fall just above the limit for discounted coverage.

When the open enrollment period begins Nov. 15, he said, “I will be shopping around.”

For more information about Obamacare, a look at the plans sold through the state’s exchange and a calculator to see what they’d cost you, visit The Mirror’s guide to health care in Connecticut by clicking here.