As 2014 gets nearer, every American is required to buy one of 5 Essential Health Benefit plans that are approved by the Department of Health and Human services unless they are exempt from the law because they have a grand-fathered insurance plan or government provided health insurance.
The Open Enrollment is supposed to last from the 1st of October, 2013 through the end of March, 2014 for those who do not get their health insurance through a group plan at work, Medicare or are exempt from the mandate for a different reason.
In this post I want to explain some insurance concepts that you will need to understand before you select the Essential Health Benefit plan that best meets your needs.
The government defines Actuarial Value as,“percentage of the total allowed costs of benefits” as the anticipated covered medical spending for EHB coverage (as defined in §156.110 (a)) paid by a health plan for a standard population, computed in accordance with the health plan’s cost sharing, divided by the total anticipated allowed charges for EHB coverage provided to the standard population, and expressed as a percentage.” You will be required to pay for expenses that are not covered.
The new Essential Benefit Plans that every American must buy or pay a penalty tax unless they are specifically excluded will offer you 4 choices. They are known as “metal levels.” Each of those choices will pay a different percent of your medical bills until you have paid your Out-Of-Pocket maximum (discussed below). The plans that will be available are listed below.
- Bronze – 60% Actuarial Value
- Silver – 70% Actuarial Value
- Gold – 80% Actuarial Value
- Platinum – 90% Actuarial Value
In order to qualify for federal tax subsidies, most people will need to obtain the 2nd least expensive Silver plan.
The Silver plan has a 70% Actuarial Value. That means that the plan is designed to only pay 70% of your medical bills, up to the Out-Of-Pocket maximum. You will need to pay 30% of your bill out of your own pocket.
The Deductible is the amount that you have to pay before your insurance plan will pay anything towards your medical bills.
Currently, you are able to customize you health insurance plan to a degree. I have seen plans with deductibles as little as $0 and as high as $25,000. Right now there is an inverse relationship between deductibles and premiums. The higher the deductible is, the lower the premium will be.
That will no longer be the case in 2014. The premiums will fluctuate based on Actuarial Value rather than deductible levels.
The Deductible is not the only “cost sharing” that you will need to consider when you make your election. You will also need to consider the co-insurance you want.
The Co-insurance is the percent of medical bills for which you will still be responsible after you have paid your $2500 deductible. You will share the cost of your medical bills until the amount you have paid in the form of deductible and co-insurance equals the Out-Of-Pocket maximum.
For example, the Silver plan is expected to be a 70/30 plan. That means, in theory, that if you have a hospitalization that costs $50,000, you would pay the first $2500 and 30% of the remainder of the bill ($14,250) until you have paid your Out-Of-Pocket maximum.
The term, “Co-pay,” refers to a fixed amount of money that you are required to pay for service. Most Co-pay plans, that currently exist, waive any deductibles for medical services and most treatments. However, most plans impose a deductible requirement before Co-pays apply for brand name drugs.
Right now, I cannot say exactly how Co-pays will work in the new Essential Health Plans. All that is known is that there will be Co-pays in the Essential Health Plans. Details about Co-pays will only be known after the insurance companies design plans that will meet the guidelines given by the Department of Health and Human Services.
Those plan details should be available later this summer. Before you make your final election, spend some time to understand how the Co-pays in your plan work.
All of the Essential Benefit Plans will have a “Stop-Loss” clause. The Out-Of-Pocket limit is the maximum you would be required to pay out of your own income or savings for medical care before the insurance company is required to pay 100% of your remaining medical bills for the year.
The Final Rules that govern the Essential Benefit Plans was released on Feb. 20, 2013. The Out-Of-Pocket limit is set to be $6250 for individuals and $12,500 for families
If the Out-Of-Pocket limit is $6250 for individuals and $12,500 for families, then it makes no difference which plan you elect in the event of a major illness or accident. Regardless of which plan you have, you are going to pay $6250.
The difference that you will see is for mid-range medical treatment. Cost for treatment for an accident, kidney stone, appendicitis, etc. may be greater than your plans deductible but less than your Out-Of-Pocket limit.
When you elect which Essential Benefit Plan best meets your needs you will need to consider your risks and choose accordingly
Already, there are some supplements available that will help you pay for some of the expenses that the new Essential Benefit Plans do not. My 25 years of experience tell me that with the implementation of Obamacare, private insurance companies will develop even more supplemental plans in the future.
Americans who get their health insurance at work will not have as much to do as those who do not. If you do not get your insurance at work or from an approved government agency, you will be required to enroll in one of the Essential Health Benefit plans. The Open Enrollment is scheduled to start on October 1, 2013 with coverage starting on January 1, 2014.
Before you commit to any plan, make certain that you understand what that plan will and will not do. I try to keep my clients informed about the Obamacare changes through my weekly email. Click the banner below to subscribe.
The Department of Health and Human Services just released their “Final Rule” that governs the Essential Health Benefit plans on the afternoon of Feb. 20, 2013. The information in this article is based on the “Proposed Rules” from HHS from last November. I will be reviewing the “Final Rule” to see if there were any changes. My intention is to clarify any changes to the rules, if there are any, in the next few weeks.
Most importantly, now that “Final Rules” have been released, the insurance companies can now start developing the plans required by October 1.