All eyes in the U.S. are probably on the upcoming presidential election in just over one week's time, but open-enrollment season for the Affordable Care Act, which you probably know better as Obamacare, can be just as important for millions of Americans. Open enrollment is slated to kick off tomorrow, Nov. 1, 2016, and run for three months.
The latest update from the Centers for Medicare and Medicaid Services, as of the end of March 2016, showed that 11.1 million consumers who'd enrolled via the marketplace exchanges were still paying customers. However, attrition is to be expected from this figure as consumers change jobs that offer insurance, or simply disenroll by not paying their premiums. The Congressional Budget Office has stuck by its projection that approximately 10 million people will be enrolled by the end of the year.
Seven things you should know about Obamacare's open-enrollment period
But a lot of changes are coming to the program in 2017 that you should be aware of (as well as a number of things that have remained the same, yet are worth a reminder). Let's take a look at seven things you should know as Obamacare opens for business in 2017.
1. Premiums are going up substantially
There's no hiding the biggest change in the upcoming open-enrollment period compared to last year: premium price inflation.
A large study conducted by the Blue Cross Blue Shield Association, comparing Obamacare enrollees to employer-sponsored members, found that Obamacare enrollees tended to be 22% more costly. Because the vast majority of insurers have struggled to turn a profit from their individual Obamacare plans, premium price increases are a logical next step to keeping the plans sustainable.
What sort of premium price inflation should you be prepared for in 2017? That ultimately depends on where you live. Based on data from ACASignups.net published by USA Today, the average price increase across the country is about 25%! Residents of Tennessee, Oklahoma, Arizona, and Minnesota are on track to pay monthly health-insurance premiums 50% or more higher than what they paid in 2016.
Of course, consumers should be aware that premium inflation isn't the only area where they could see higher costs in 2017. Some insurers are also increasing the deductibles attached to Obamacare plans, which serves the same purpose of getting the consumer to spend more money out of pocket.
2. There are probably fewer options for you to choose from
In addition to one of the highest levels of premium inflation we've witnessed in many years, consumers are also likely to have fewer health insurers to choose from next year. Two factors in particular are to blame for the decline in competition.
First, ongoing losses for some of the nation's largest health-insurance companies forced three of the five national players to significantly reduce their coverage. UnitedHealth Group (NYSE:UNH) is cutting its coverage back to just three states next year, after offering individual Obamacare plans in 34 states this year. Likewise, Humana (NYSE:HUM) and Aetna (NYSE:AET) are scaling back the number of counties they plan to offer coverage in by nearly 90% and 70%, respectively. These insurers have primarily been hurt by what was described in the BCBSA study: sicker-than-expected enrollees. Remember, before Obamacare, insurers were allowed to pick and choose who they insured, which meant they could reject potentially costly members with preexisting conditions. They can't do that anymore, so these members are increasing medical-expense ratios for most insurers.
Second, the risk corridor turned out to be a disappointment. The risk corridor was a type of risk-pooling fund that was designed to take money from overly profitable insurers and hand it over to money-losing insurers that had priced their premiums too low. Unfortunately, of the $2.87 billion in funds requested, just $362 million wound up being doled out. This left many of Obamacare's 23 healthcare cooperatives with hefty losses and unable to sustain their businesses. Roughly three-quarters are now out of business, leading to fewer low-cost options for Americans looking to enroll.
3. The SRP will increase by a considerably smaller amount in 2017
The Shared Responsibility Payment (SRP) is the actionable component of the individual mandate that essentially says you have to pay a penalty come tax time if you didn't purchase health insurance. Since Obamacare's full implementation in 2014, the SRP has been rocketing higher:
- 2014: the greater of $95 or 1% of your modified adjusted gross income (MAGI)
- 2015: the greater of $325 or 2% of your MAGI
- 2016: the greater of $695 or 2.5% of your MAGI
In 2017, the penalty for not purchasing health insurance could still sting, but the penalty itself will probably not be all too different from what consumers will pay in 2016 for going uninsured. Beginning in 2017 and every year thereafter, the SRP will increase in step with the national rate of inflation. If you plan to be uninsured in 2017, this is something you'll want to keep in mind.
4. Shopping around is still the smartest thing you can do
One of the easiest things to do during Obamacare's open-enrollment period is nothing at all. If you were enrolled in an Obamacare plan last year and you'd like to stick with the same plan, assuming it's still offered, you'll be automatically reenrolled in December. However, allowing yourself to be reenrolled isn't necessarily the smartest thing to do.
Based on research by the U.S. Department of Health and Human Services in 2015, Obamacare enrollees who failed to shop around left around $2 billion on the table. In other words, instead of shopping around for an inexpensive plan within a metal tier (platinum, gold, silver, or bronze), a number of reenrollees were automatically placed into a plan that wasn't the cheapest. You may not like the fact that insurers can alter their coverage and premium options from year to year, but it does mean you should be actively comparing plans each and every year to get the best value possible.
5. If you make less than 250% of the federal poverty level, considering a silver plan is probably your best bet
One of the most stunning Obamacare enrollment statistics is that roughly 85% of all enrollees via the marketplace exchanges qualify for the Advance Premium Tax Credit (APTC). The APTC is the "subsidy" you've probably heard about that helps lower monthly premium costs to make them more affordable for low-income and middle-class families. Consumers can earn up to 400% of the federal poverty level in 2017, or $47,520, and still qualify for the APTC.
However, a lesser-known subsidy offered to Americans making less than 250% of the federal poverty level is cost-sharing reductions (CSRs). The job of the APTC is to make buying health insurance more affordable, whereas the CSRs work to make your doctor visits more affordable. If you earn less than 250% of the federal poverty level ($29,700), these CSRs can reduce or eliminate what you'll owe for co-pays, coinsurance, and/or deductibles.
There is a catch, though. In order to qualify for a CSR you absolutely must buy a silver-level plan. Bronze plans are cheaper on a monthly premium basis, but CSRs are not offered by bronze-tier plans. If you earn less than 250% of the federal poverty level, I'd strongly encourage you to take advantage of this financial assistance by focusing on silver-level plans.
6. You'll most likely be charged more if you smoke
Every year it's good to be reminded of what actually affects your individual Obamacare premium. As you've probably surmised, factors such as age, geographic location, and plan category can affect what you'll pay in monthly premiums. For instance, older Americans are more prone to costly illnesses than younger adults, so they tend to have higher monthly premium costs. Similarly, people living in Wyoming or Alaska, two of the least populous states, may have a harder time getting to specialty-care facilities compared to people living in a large city such as Los Angeles where there are multiple specialty hospitals. This is why premiums in Wyoming and Alaska are among the highest in the country.
One oft-overlooked factor is that can affect your premium is whether or not you use tobacco. Smokers can be charged up to 50% more per month for their health-insurance premiums than non-smokers, due to tobacco's well-documented adverse health effects on the body. If you currently smoke, consider quitting as an easy way to save some serious money in 2017.
7. The cheapest plan may not offer the best value
Finally, while searching for their next healthcare plans, Obamacare enrollees should understand that the cheapest plans may not offer the best value. While the HHS report shows that Obamacare enrollees are leaving around $2 billion in cash on the table, a cheap plan may not be helpful if it doesn't offer the network coverage you need.
For example, if you have a preexisting condition and are likely to visit the doctor often to manage your health, then buying a bronze-tier plan that costs the lowest on a monthly basis, but requires you to pay the most out of pocket via deductibles, probably is a poor choice. Instead, purchasing a higher-cost gold or platinum plan could be worthwhile, since it would significantly reduce your out-of-pocket costs as a trade-off for higher monthly premiums.
When looking at plans, think about which one offers you the best value.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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