Let’s take a look at factors that affect health insurance costs for premiums and cost sharing under ObamaCare, including Marketplace subsidies and Medicaid.
ObamaCare helps ensure fair health insurance premiums (Sec. 2701), helps curb premium growth, and provides Tax Credits to lower premium costs. The ACA also includes measures to reduce out-of-pocket spending and curb national health care spending too.
What Factors Affect Premium Cost?
- Age: Older people can be charged up to 3 times more for premiums than younger people.
- Geographic location: Where you live has a big effect on your premiums. Competition, local regulation, and cost of living in different areas account for this.
- Tobacco Use: Insurers can charge tobacco users up to 50% more than those who don’t use tobacco.
- Individual vs. family enrollment: Insurers can charge more for a plan that covers a spouse and/or dependents.
- Plan category: On the marketplace, plans are available in five categories: Bronze, Silver, Gold, Platinum, and catastrophic. The categories reflect how you and the plan share costs. Bronze plans will likely have lower premiums and higher out-of-pocket costs. Platinum plans are likely to have the highest premiums and lowest out-of-pocket costs. Outside of the marketplace plans aren’t broken down into tiers, but generally follow the same basic pattern of offering better cost sharing on higher premium plans.
How Does Income Affect Premium Cost?
Premium Tax Credits can lower what you actually pay for your premium between 2.5%-9.5% of household income. Tax Credits are only offered through the Health Insurance Marketplace to those with household incomes between 100% – 400% of the Federal Poverty Level. Only those who don’t have access to Affordable Employer-sponsored coverage qualify. If you make less than 138% of the Federal Poverty Level, you may be eligible for Medicaid or CHIP which has free to low cost premiums.
FACT: Tax Credits and Medicaid don’t affect the cost of your premium, they instead reduce the amount that you pay via subsidies.
Does Where I Buy a Plan Affect My Costs?
Health insurance premiums are tightly regulated. Disregarding cost assistance, the same plan, for the same person, in the same region, won’t cost more or less depending on how it’s bought. However, similar policies can have different premiums, cost sharing, networks, and benefits.
Commissions for health insurance sales are paid for by the insurer, not the consumer. The value of using a broker, be it HealthCare.Gov or a private option, is in the selection of plans they offer and the assistance they can provide in shopping for plans.
If you are eligible for cost assistance, you must use the marketplace. However, in some instances a qualified private broker or agent can help you select a marketplace plan. If you are eligible for Medicaid you can enroll in the marketplace during open enrollment, or enroll through your state.
What Factors Affect Cost Sharing and Covered Benefits
Just as important, if not more important, than premiums is cost sharing and covered benefits. This is what your plan pays versus what you pay for covered services from drugs to check-ups.
Under the ACA since 2014, no matter what plan you pick, all plans must offer minimum benefits and cost sharing.
All plans have a maximum out-of-pocket cost of no more than $6,600 for an individual and $13,200 for a family for 2015, and must cover at at least ten essential benefits as part of their covered benefits. Covered benefits include an annual wellness visit and essential preventive care at no out-of-pocket costs. They also include all the basics from birth control and maternity, to mental health and hospital visits. You will have at least one in-network option to get that service on a plan. It does not mean that it is covered with no cost sharing and it does not mean you’ll be able to get a particular service covered outside your plans network.
How Does Cost Assistance Affect Cost Sharing
Cost Sharing Reduction subsidies raise the actuarial value of your plan, meaning you’ll pay less out-of-pocket costs on covered services, and have lower deductibles and out-of-pocket maximums. Those with household incomes between 100% – 250% of the Federal Poverty level will be eligible for Cost Sharing Reduction subsidies on the marketplace only. Medicaid and CHIP also reduce cost sharing amounts you owe.
FACT: Generally higher premium plans offer better cost sharing. See our page on comparing health plans to understand how to compare premiums, cost sharing, networks, and benefits.
Get more information on ObamaCare and Health Insurance Premiums.