Archive for October, 2013

PostHeaderIcon The real cost of ACA for people in Connecticut…

The Patient Protection and Affordable Care Act, ACA or Obamacare for short, created healthcare exchanges, and its implementation had been left up to the states. While 36 states had elected to have the federal government run their exchanges, with more or less success, Connecticut and 23 other states developed and opened their own exchanges.

In this blog, we are going to look at the Connecticut healthcare exchange premiums and the available plans for a couple in their mid-thirties, no kids, within Fairfield County. The target of this evaluation is the estimated yearly cost of these plans; however, we will not look at the actual coverage and provider networks. The cost tables will not take into account the copayments, or the separate prescription benefit’s deductible. Nor will it account for the preventive services that are covered 100% by the insurance companies.

For other age groups and estimated premium rates, please visit the Connecticut Health Insurance Exchange website

The couple in our example has 16 different plans to choose from and just to restate, the actual plan policies had not been evaluated.  The premium for these plans is along the line of metal rating of the plan in question. In addition to the non-metal (rusty?) rated catastrophic coverage, the ACA specifies the metal rating as bronze, silver, gold and platinum. The couple in question does not qualify for catastrophic coverage, due to their age, and Connecticut exchange does not offer platinum plan. After accounting for these restrictions, these are the plans available for this couple:

CT Rates

Based on the estimated premium alone, and depending on the couples yearly income, these premiums certainly seem affordable for an HMO type plan. The ACA introduced HMO plans however are not the traditional HMO plans that we’ve got accustomed to and embrace; these plans are integrating the indemnity plan’s deductible as well. Let’s look at the actual estimated cost of these plans with the policy specified medical deductible added:

CT Rates

The size of the deductible substantially changed the actual cost of the plans, based on the yearly basis, when the couple in question requires medical care. The low cost plans with large deductible are quickly subset in favor of the high premium and lower deductible plans in the total yearly cost of the plans.

The ACA has also introduced the “maximum out-of-pocket” cost limitation; however, the deductible does not count toward the maximum out-of-pocket cost. Let’s add this to the table below to the annual estimated cost of insurance for this couple, who’d actually use their plan:

CT Rates

Adding the maximum out of pocket cost to the yearly total just further underlines the advantage of the gold level plans. It also proves that the “pay me now, or pay me later” is true once again.

Basically the bronze level premium plans end up costing much more than the gold level plans, when all costs are included in the evaluation. The plans available at the Connecticut exchange show similar cost trends for all age groups, with or without children. The difference is that the premiums increase substantially for couples with kids, older couples, and smokers. In the case of older couples for example, the premium rates presented here will double, or more, for a couple in their mid to late 50s in all metal levels.

Selecting a suitable exchange plan for your needs will take time and the evaluation should include:

  1. Check for your doctors in the plan’s provider network (Use Connecticut’s exchange site)
  2. Based on your medical condition, estimate the care that you may need in the future
  3. Evaluate the yearly cost of plans, that includes at the minimum the yearly premium and deductible
  4. Select the plan that best fits your needs

Shopping based on the policy premiums only does not take into account the provider network, deductible, and the out-of-pocket maximums. The deductible alone can more than double of the plan’s annual premium cost in case of bronze, and to a certain extent the silver rated plans as well.  Therefore, it is strongly suggested that the estimated yearly cost is taken into account prior to selecting from the Connecticut exchange provided health insurance plans.

Note: These are estimated premium rates, the actual premium rates may increase/decrease if and when the plan had been finalized and purchased from the insurance company in question. And again, do read the plan policy prior to signing on the dotted line.

PostHeaderIcon Is PPACA really affordable? Part 1…

The PPACA (Patients Protection and Affordable Care Act) a.k.a. Obamacare did address some of the issues with the current healthcare and health insurance problems. The good part of the act is a relatively short list:

  1. No preexisting condition denials in getting health insurance
  2. Removed lifetime cap for health insurance coverage
  3. Extended health insurance coverage for children up to age 26 under their parents insurance
  4. Required the creation of health insurance Exchanges for both individuals and small businesses
  5. Mandated health insurance coverage for everyone
  6. 100% coverage of preventive care

One of the major problem with the US healthcare is its cost. However, the PPACA did not actually address cost. In another word, there’s nothing in the PPACA that would prevent the cost of healthcare to continue spiraling out of control.

Establishing  health insurance Exchanges is left up to the states.  States that elected not to establish their own Exchanges are  operated by the federal government. The health insurance premiums rates are “loosely” controlled by the PPACA and impacted by four factors; no other factors are permitted by the PPACA:

  1. Geographic region (generally, counties within states)
  2. Whether such plan or coverage covers an individual or family
  3. Age, except that such rate shall not vary by more than 3 to 1 for adults (1 being the youngest and carries the lowest rates and conversely, 3 the oldest group that carries the highest rates);
  4. Tobacco use, except that such rate shall not vary by more than 1.5 to 1

In addition, the PPACA also mandates the coverage of health care for insurance companies participating in the exchange, through the establishment of metal named levels. These levels’ actuarial value is the proportion of medical expenses an insurance plan is expected to cover in the form of insurance/member payment percentage; deductibles must be paid prior to medical expenses:

  1. Bronze: 60/40
  2. Silver: 70/30
  3. Gold: 80/20
  4. Platinum: 90/10

The participating insurance company is required to offer, at the minimum, silver and gold coverage. In addition, there’s a catastrophic coverage that has no metal name or rating. One could call it “rusty”, since this plan really does not cover “standard” illnesses, only catastrophic/chronic illnesses, after the high deductible had been met.

In the Is PPACA really affordable” Part 2… blog, we’ll look at the estimated premium rates for the State of Connecticut…

PostHeaderIcon Is PPACA really affordable? Part 2…

The premium rates of the metal named plans vary by states based on family status, age, region, and income. For example the estimated Connecticut health insurance exchange premium rates for a couple in their mid 30’s, living in Fairfield County is listed below:

CT Rates

The estimated premiums in Connecticut for a couple in their mid 50’s would be:

CT Rates

(For other age groups and estimated premium rates, please visit the Connecticut Health Insurance Exchange website)

The estimated monthly premium rates vary between the younger and older couples, $570.04-938.76 and $1,119.91-1,844.32 respectively. Depending on the plan chosen, the deductible ranges between $2,000 to $12,600. As a general rule, the higher premium rates tend to have lower deductibles.

The given plan’s deductible need to be met, prior to the insurance company paying for any medical bills. The sole exception is preventive care, that is covered in full for all these policies without consideration of deductibles.

The total yearly cost is calculated as ((MP x 12)+AD). As such, the total cost amounts to for the younger couple 12-19%, and for the older couple 20-26% of their respective income. The  cost of the various plans is based on $100,000/year total income for both couples.

The question is: can they afford spending roughly 20% of their income for getting health insurance through the exchange?

That depends whom you ask? Based on the current median income level in Connecticut, about $70,000/year, the chances are that people at this income or lower levels cannot afford purchasing these plans. Certainly, there are people who can and they will purchase health insurance at the CT exchange. There are people who makes less than the median income level, who cannot afford these premium rates.

The Affordable Care Act specified provisions for providing federal assistance for people, whose yearly income is at or below 400% of the federal poverty level.

In the Is PPACA really affordable? Part 3… blog, we’ll look at the PPACA mandated exchange premium rates for people, whose income at or below the federal poverty level…

PostHeaderIcon Is PPACA really affordable? Part 3…

Section 673(2) of the Omnibus Budget Reconciliation Act (OBRA) of 1981 (42 U.S.C. 9902(2)) requires the Secretary of the Department of Health and Human Services to update the poverty guidelines at least annually, adjusting them on the basis of the Consumer Price Index for All Urban Consumers (CPI-U).

Subsidizing the health care exchange premium rates starts at 100% of federal poverty level (FPL), and ends at 400%, as required by the PPACA, or Obama care, and defined as such:

US Poverty Level

Let’s look at the subsidies that people in this income level will receive:

Poverty Level Premiums

Interestingly, the yearly cost of the exchange’s silver plans, (plan premium x 12) + deductible), also about 20% of the yearly income at $32,000 and above. The chances are that people in this yearly income range also not going to be able to afford paying for these premium rates.

While total cost is indicative of the upfront cost of having health insurance, this calculation does not include other payments required after the deductible had been met.

In the Is PPACA really affordable? Part 4… blog, we’ll look at what the plan plays, after the deductible had been met..

PostHeaderIcon Is PPACA really affordable? Part 4…

By now, you probably have a pretty good idea about the affordability of the PPACA, a.k.a. Obamacare. You may say that “it isn’t that bad, at least I can have health insurance.” And you’d be right…

Yes, you can have health insurance, if your company does not provide you with one,  and you can afford it. The premium rates and deductible has been stated in “Part 2 and 3…”, let’s look at how provider bills get paid under the PPACA after the yearly deductible has been met. Please keep in mind that the payment processing is not subsidized and as such, provider’s bills for the people above or under the federal poverty level will be processed the same way.

For simplicity, we’ll look at a bill with the round number of $10,000 after the deductible had been met. Please view carefully the part below in the “Member payment” column:

CT Rates

The plan “allowed amount” is basically a contractually agreed upon amount between the health insurance company and the in-network providers, based on procedures or codes. The payment for out of network providers is loosely calculated based on the in-network “allowed amount” by the insurance companies for members as:

(Provider charge – (in-network allowed amount * percentage of plan responsibility)) = Member payment

Depending on the provider charges and the plan allowed amount, the member payment could be much more; for example in the case that the provider is a hospital and their bill is, say $100,000. In this case, member payment would be $10,000-20,000 in-network and $55,000-70,000 out of network.

The Affordable Care Act has a provision for limiting “out of pocket” expenses after the deductible had been met. Generally speaking, the out of pocket expense in most Exchange plans is equal to the deductible amount, after that time, the plan covers 100% of the cost. In another word, once you pass your deductible, you could expect to spend another “deductible”, prior to the insurance company covering 100% of the provider’s bills. Please keep in mind that the out of pocket expense for in and out of network may not be the same and dependent on the insurance company’s policy for the plan in question.

If the payment processing after the deductible has been met reminds you of the indemnity plans of the eighties, you’re not alone. The health insurance companies, in cooperation with the congress, figured out how to merge the HMO and indemnity type of plans into the exchanges provided plans. The problem with this merge is that it pretty much dropped both type of plans’ benefits for the member.

As a reminder, the indemnity plans of the past generally had a 80/20% split of the cost of care and there had been no provider network. Basically the member could get his/her care anywhere, the insurance companies didn’t care; the member pays 20% of the cost and that was the end of it.

The HMO based plan introduced a provider network that required a copayment, but in exchange, no additional payment required for the member. If the member required out of provider network services, the provider’s bill had been processed pretty much the same way as described above. The premium for this type plan was also higher, than the cost of indemnity type plans.

From the perspective of the health insurance companies participating in the healthcare exchanges, this is a great regulation. They can charge the premium rate of the HMO and split the cost with the member, if end when the deductible has been met, and the member still needs the care.

The Patient Protection and Affordable Care Act can be viewed as it did not address the affordability for those, whom are forced by law to  shop on the healthcare exchanges. The yearly cost of just having insurance is too high for both income ranges, the coverage is limited in most cases, and the member payments could amount to another 5-10% of his or her income, depending on the medical status, if and when the health insurance is utilized. Congress missed addressing the healthcare cost spiraling out of control.

The $95.00/month ($1,140/year) penalty for not having insurance is certainly a lot less, than any of the plans, including the catastrophic plans, for people whose income above the federal poverty level.

The catastrophic coverage is only an option for people under the age of 30; however, the lowest costing such plan has a monthly premium of $390.44 ($4,685.28/year) with $12,700 yearly deductible for a couple. That adds up to $17,385.28, prior to the insurance companies covering any of the member’s expenses. It is basically a question of affordability, $17,385.28 vs. $1,140 per year.

Guess what most young couples will choose? Yes, and I don’t blame them…