The Obamacare subsidy calculation is among the most confusing aspects of the Affordable Care Act. This article and video explains how subsidies work under Obamacare. Learn what you need to be aware of as a Texan seeking individual and/or family health insurance under Obamacare.
The Obamacare subsidy for health insurance will be available for individuals and families earning up to 400% of the poverty level during 2013. So what does that mean to you as a Texan?
In short, chances are pretty good that you’ll qualify for an Obamacare subsidy if you’re an individual earning less than $45,960 in 2013 or are seeking to cover your family of four and combined earnings don’t exceed $94,200.
The way an Obamacare subsidy can be redeemed will depend on how you apply for them, so be sure to read the fine print. There will be an “advance payment” option for those who prefer their subsidy upfront to lower their out-pocket monthly expenses. If you opt for that, the subsidy is paid directly to the insurance company. The other option is to wait until you file your taxes in which case you’d receive a tax credit with your return.
Chief problem of the ObamaCare Subsidy
The problem with the well-intended ObamaCare subsidy is that ongoing rate hikes in health insurance premiums make them them a moot point. Insurers are forced to raise rates to provide the coverage Obamacare mandates. For example, insurers are now required to provide maternity coverage to all policy holders. In the past, maternity was optional and only individuals planning families would pay the extra fee. However under the Affordable Care Act, even a single 50-year old male with a vasectomy is required to carry maternity coverage. The Rand Corporation under a contract with the Department of Health and Human Services reports that maternity and other “essential services” is responsible for rate hikes of up to 33 percent.
The bottom line
The bottom line is if you DO qualify for an Obamacare subsidy – it may not cover the difference between what the same health insurance cost before the Affordable Care Act and what it will cost you today. Thus, you may actually be paying more even with the subsidy. If you don’t qualify for a subsidy, you can expect to be paying 22 to 33% more as soon as the Marketplace Exchanges open. In fact, thousands of Texans have already received notice of rate increase hikes well in advance of the October 1, 2013 date the Exchanges are scheduled to open.
Problems of this nature underscore why Texans at large resent federal health care reform. Many of the state’s top officials and representatives are focused on getting the law overturned. U.S. Senator Ted Cruz has become something of a Texas folk hero as a Republican pushing a plan to defund Obamacare.
Senator Cruz appeared at a rally against the legislation in Dallas on August 20th. Organized by Heritage Action for America, the “Defund Obamacare” event drew a crowd of over 1,500 people to a hotel ballroom. During Cruz’s speech, a women stood up and challenged him, asking what he would do for the 6 million Texans “that can’t afford health care.”
“We can take care of ourselves!” a man in the crowd shouted at her, to applause.
Cruz thanked the woman.
“I think we need to reform our health care to make health care more accessible, reduce the cost of health care and empower patients,” he said. “I’ve gotta tell you, Obamacare is making it worse.”
Subsidized insurance plans
When the Obamacare subsidy become available, consumers will have a choice of four “metallic tiers” of coverage or “coverage tiers” that will allow consumers to compare apples with apples from various providers.
The plans are based on what percentage of your medical expenses you’ll be required to pay out-of-pocket. These percentages are called the actuarial value.
What is actuarial value?
The actuarial value of a plan is calculated as the total expected payments for benefits — divided by the total expected costs of the “standard population” for essential health benefits. In other words, it is the percentage of costs a health plan covers in relation to how much you’ll be required to pay.
For example, if you enroll in a bronze plan, which has an actuarial value of 60%, you’ll be required to pay 40% of medical expenses including deductibles, co-payments, and coinsurance. The remaining 60% will be paid by the insurance company.
Because the measurement of an actuarial value is based on a standard population, the cost-sharing structure could vary from one plan to another. So, one plan might have a higher deductible, but a lower coinsurance to compensate for it to attain the desired actuarial value, while another may compensate for a high deductible by covering some doctor’s visit before the deductible is met.
Obamacare metallics plans: the actuarial values
Bronze plan 60%
The bronze plan carries an actuarial value of 60% meaning that individuals covered by a bronze plan will be responsible for paying 40% of their medical expenses via deductibles, co-payments, and coinsurance.
Silver plan 70%
The silver plan carries an actuarial value of 70% meaning that individuals covered by a silver plan must pay 30% of their medical expenses via deductibles, co-payments, and coinsurance.
Gold plan 80%
The gold plan carries an actuarial value of 80% meaning that individuals covered by a gold plan must pay 20% of their expected medical expenses via deductibles, co-payments, and coinsurance.
Platinum plan 90%
The platinum plan carries an actuarial value of 90% meaning that individuals covered by a platinum plan will only pay 10% of their medical expenses via deductibles, co-payments, and coinsurance.
Plans that accept an Obamacare subsidy
At this point, Obamacare subsidies are calculated based on the silver plan, however it should be possible to apply a subsidy toward a gold or bronze plan although the mechanism remains unclear. Stay tuned and if you’d like personal help, schedule an appointment a phone appointment with a trained volunteer.