Shop Around: Subsidies May Offset Your 2018 Health Insurance Price Hike

It's time to start shopping for health insurance if you're one of the millions who buys it on an Affordable Care Act exchange.

Open enrollment for 2018 starts Wednesday, and new numbers released by the Trump Administration show that the average cost of a benchmark policy will be about 27 percent higher next year.

But that's just the headline. The details suggest there's good news for lots of people who are willing to shop around a bit for insurance.

"In theory anyone who gets a subsidy should do better next year," says Charles Gaba, an analyst who runs the web site ACASignups.net. "I have one piece of advice: Shop around."

An analysis released Monday by the Department of Health and Human Services shows that while the average premium is going up, the average subsidy to help defray that cost is going up even more. The average tax credit offered to people to cut the price of their insurance will rise in 2018 to $555 — up 45 percent from this year's average credit of $382.

That means many people can take that larger tax credit and buy better insurance for less money. The HHS report shows that about 80 percent of people who buy insurance on the federal exchange could get a policy for $75 a month or less. Last year, policies that cheap were available to only about 71 percent of enrollees, the study shows.

And many people who didn't qualify for subsidies in past years might get one for 2018, Gaba says. That's because the subsidies are based on two things — the federal poverty level and the insurance policy's sticker price — and both of those are going up.

People with gross incomes between 138 percent and 400 percent of the federal poverty level qualify for subsidies to help pay their premiums. That means, for 2017 policies, an individual with a gross income below $47,520 (or a family of four whose income is less than $97,200) can get a subsidy. Because of inflation, those numbers rise to $48,240 and $98,400 for policies sold this fall for 2018.

"There are people who didn't qualify for a subsidy last year who won't even log on and try again," he says. "That could mean thousands of dollars" in discounts that they forego just because they don't expect to qualify.

The analysis by HHS shows that the number of insurance companies selling plans on the exchanges will drop from 167 for 2017 policies to 132 for 2018. That means about 30 percent of consumers, particularly in rural communities, will have only one company offering a handful of policies to choose from this fall.

But the individual experiences of shoppers will vary widely.

For example, a 35-year-old woman in Ames, Iowa who earns $35,000 a year and wants to buy insurance for herself on Healthcare.gov will qualify for $445-a-month in premium subsidies. The website shows five policies available with varying levels of benefits, and prices ranging from $155 a month to $351.

The same woman in St. Petersburg, Fla., by contrast, has no fewer than 56 different policies available on the federal exchange ranging in price from $222 a month to $716.

The headline premium increases are due in part to market factors and in part to recent actions by the Trump administration.

HHS earlier this month said it will no longer reimburse insurance companies for discounts they are required by law to offer to lowest-income policy holders. The discounts are known as cost-sharing reductions because they reduce the amount people have to spend on co-payments and deductibles.

The president has been threatening all year to cut off those payments because Congress never appropriated money for them.

Insurance companies responded to those threats by raising rates in many states to make up for the lost revenue.

Blue Cross and Blue Shield of North Carolina boosted premiums on average by 14 percent.

"The biggest single reason for the sharp increase in rates is the lack of federal funding for cost-sharing reductions," Briand Tajlili, the company's director of actuarial and pricing services, said in a blog post.

Oscar Health added a surcharge of 10 percent to its benchmark plans in California at the direction of that state's insurance commissioner, says spokesman Khan Shoieb. But in New York — which has a basic health plan for low-income residents, so very few people get the cost-sharing discounts — the company raised premiums by only one-tenth of one percent.

The co-founders of Oscar, Mario Schlosser and Josh Kushner (brother of Trump's son-in-law and adviser Jared Kushner), said in an opinion piece published by Axios that they expect many policies to be more affordable in 2018.

As premiums rise, subsidies to pay those premiums also rise for the 85 percent of people who buy insurance through the ACA exchanges and qualify for subsidies. So many people will see little change in their own costs.

And some will see their costs decline.

"Because insurers increased premiums to compensate for the loss of CSR payments, exchange customers who are eligible for premium subsidies will actually see more affordable options than they otherwise would have," says Dianna Welch, an actuary at the consulting firm Oliver Wyman who did an early study showing the effect.

A report by the Kaiser Family Foundation shows that many companies only raised rates on their so-called silver plans, which are the policies that the ACA subsidies are based upon. But consumers are free to use their subsidies to buy any policy sold on the exchange. So a customer could take their bigger subsidy and buy a policy whose price hasn't done up.

The Urban Institute, a left-leaning think tank in Washington, D.C., says those deals may attract more people into the marketplace. As many as 600,000 more people might buy insurance next year, the institute estimates.

By most accounts, however, that estimate is optimistic. Throughout the year, the Trump administration and Republican leaders in Congress have talked about repealing the Affordable Care Act, and the president himself has repeatedly declared Obamacare "dead."

Those pronouncements, combined with news that insurance premiums (before subsidies) are going up, could scare lots of people away from the marketplaces.

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