Andrew Sprung highlights a challenge in the ACA. Choice is complex.
Your income is $25k, you’re single and shopping for a health plan. Would you choose:
1. a free gold plan, OOP max $6300
2. a silver plan for $23/month, OOP max $2200https://t.co/n13skRmdBC
— xpostfactoid (@xpostfactoid) February 10, 2022
$25,000/year is just under 200% federal poverty level (FPL). People earning between 151% and 200% FPL are eligible to buy a silver plan with Cost Sharing Reduction (CSR) subsidies that reduces out of pocket costs from silver plans that typically have high deductibles and low actuarial value. A CSR plan for these folks is worth 87% Actuarial Value (AV) which means, on average for a standardized population, the insurer through premiums and risk adjustment will pay about 87% of allowed claims while the patients will pay 13% of allowed claims through a combination of deductibles, co-pays and co-insurance.
Gold plans are worth about 80% actuarial value. It is a weaker/smaller benefit package than a CSR-87 Silver plan. However, in New Mexico, gold plans have lower monthly premiums than silver plans. There is a reasonable trade-off between trading lower premiums for more cost-sharing.
Since it is a plausibly reasonable trade-off this is a tough choice for people. People who either have assets and are very confident that they are likely to have less than median medical expenses are probably better off in Gold. People who know that they are medical train wrecks will be better in Silver CSR plans. There are a lot of people in the middle of those two archetypes. Most of the time, most people are going to be better off in the cheaper premium but higher cost sharing plans, but the few people who have surprise medical events (cancer, broken legs, unexpected pregnancies, appendicitis etc) will be hit with massive incremental cost-sharing if they choose gold to save $250 a year in premiums relative to premiums. But this is a small segment of people as people who spend less than $2,000 to $3,000 per year (which is most people) on medical expenses are flipping a coin between the two reasonable choices.
Seems to me that if you are living on $25,000 a year, both OOP amounts are equally unrealistic. If you have a medical calamity, you are going to have a debt that will chase you for a long, long time either way. Might as well go with the plan that leaves you $23 more dollars in your pocket because at that level, every penny counts.
The bigger question is, how do we, in this incredibly wealthy nation, even have to ask this question? I loved my grandparents but when they left Eastern Europe, they should have taken a boat to Canada, not New York.
I agree with Ohio Mom. At a certain point, it all becomes funny money that seems irrelevant. It just becomes “something I can’t afford” vs. “something I can’t afford, but more”. Didn’t almost half of Americans in a poll say that they would have trouble covering even a $500 emergency expense? $25k a year seems like someone in that boat.
This is a tough problem to solve. Unless you have reasonably certain medical expenses, I think most people underestimate the chance that they’ll need medical help and it’s hard to leave real money on the table. Even $300 can make the difference between paying the bills and not.
I’ve been working part-time (just under thirty hours a week) in order to get a CSR Silver plan. My employer just lowered their hour minimum to 25 hours to qualify for their insurance. Sucks because my ACA plan is way cheaper and better for me. But by ACA rules if my employer offers me a plan the meets basic qualifications I have to take it even though it costs me a lot more and and has a worse network.
I will go from spending $10-$100/yr on healthcare to $1500-$2000/yr with a much higher yearly max than before.
This is very similar to what my son went through. About same outcome. Very low risk and need for healthcare. But what I figured was that $0 was the best plan. Why? He had no assets true but in case of anything severe or catastrophic he had me, Dad, basically acting as the back up assets.
Yes, assets are what matter in this scenario, not income. But if I have no assets and this is my income and I think I am reasonably healthy, I spend the $23. Because the out of pocket difference is $4,100, which at $23/month would take 15 years to spend.
But that’s just me.
Why is there “massive incremental cost sharing” if theoretically there is a “maximum out of pocket limit”? I know that in real life there are lots of out-of-pocket costs that the insurance company will not recognize that they should, but if you are just running theoretical group numbers, shouldn’t (most) very high costs be borne by the insurance company beyond some theoretical limit?