A significant problem looms for the Affordable Care Act when the next open enrollment period begins in November, according to many health care experts and media accounts. The administration announced on June 26 those currently enrolled would be automatically renewed in the same plan for 2015.
There is a growing concern this will cause many who received subsidies through the federal exchange to be hit with sharp rises in after-subsidy insurance premiums due to the way subsidies are calculated.
“Many who are auto-enrolled will end up paying more than they needed to for coverage because they will not realize that last year’s best choice won’t be this year’s best choice—either because HealthCare.gov has failed to educate them on this point or because they don’t have hours to squander on the Exchange trying to make price comparisons,” explained Christopher Conover, Ph.D., a research scholar at Duke University’s Center for Health Policy & Inequalities Research.
Automatic Premium Increase?
The automatic renewal of plans for people already enrolled through the federal exchange was intended to allow greater focus on enrolling the uninsured and ease pressure on the Healthcare.gov web site, which suffered catastrophic failure when it first launched in October 2013.
But many people who do nothing and allow their plans to be automatically renewed will likely face a substantial increase in what they have to pay. Subsidies for plans sold through the exchanges are determined according to a person’s income and the premium of the second-lowest ‘silver’ level plan available in each market, called the benchmark plan.
The 2014 benchmark plan in most states will be replaced with a different plan in 2015, some of which have lower premiums than the 2014 plan. However, most of the 2014 benchmark plans will have higher premiums in 2015. This combination will lead to much higher out-of-pocket costs for many who are auto-enrolled in the same plan, as the Obama administration intends to do.
Possible $90 Monthly Premium Hike
For example, in Indiana the 2014 benchmark plan for the Indianapolis area was from Anthem Blue Cross & Blue Shield, with a monthly premium of $354 for a 40-year old. In 2015 the same plan will cost approximately $363 according to rate approval information available on the Indiana Department of Insurance web site.
It’s unclear what will be the benchmark plan in 2015, but it won’t be Anthem’s. Two other insurers offering coverage in the Indianapolis region, CareSource and Coordinated Care, have both filed rates for silver plans lower than Anthem.
Writing in the Indiana Business Journal on September 12, reporter J. K. Wall noted, depending on which plans are offered and what the final approved rates are, “the value of tax credits available in the exchange could fall by $20 to $90 per month.”
If the value drops by $90, then someone automatically reenrolled in the 2014 benchmark plan from Anthem could see their monthly premium skyrocket by nearly $100 or more once the premium increase for the former benchmark plan is included.
‘New Pitfalls for Consumers’
“Every time the Obama administration has changed the law to make it less onerous for consumers—like automatic re-enrollment—it winds up creating new pitfalls for consumers. In this case, millions of consumers could face higher premium and out-of-pocket costs because the plan they selected for this year might not qualify for extra subsidies next year,” said Grace-Marie Turner, president of the Galen Institute, a health care policy organization located in Alexandria, Virginia.
“The law’s endless administrative complexity shows the impossibility of trying to centrally plan one-sixth of the economy. We need to put the market and consumers in charge of choices, not bureaucrats, politicians, and regulators,” she added.
Some critics note the auto-enrollment plan goes against the idea people should be actively involved in selecting their health insurance. “A passive auto reenrollment can be useful, but we shouldn’t coddle consumers,” said Yevgeniy Feyman, a health care policy fellow at the Manhattan Institute. “If we want patients to be good consumers when it comes to purchasing health insurance, some level of administrative burden will be necessary.”
Sean Parnell ([email protected]) is managing editor of Health Care News
Sean Parnell ([email protected]) is a research fellow for health policy at The Heartland Institute.
