Ready or not, here comes Obamacare!
The fourth open enrollment period of Obamacare, Officially known as the Affordable Care Act, kicked off this past Tuesday, Nov. 1, and it's slated to run through the end of January. At last check in June 2016, 10.4 million people were enrolled through the various marketplace exchanges, according to the Centers for Medicare and Medicaid Services. The Congressional Budget Office has stuck by its forecast that roughly 10 million people will be enrolled and paying by Dec. 31, 2016.
Obamacare premiums are going through the roof
As we dive headfirst into the next open enrollment period, a number of challenges await. Aside from President Obama's stepping aside in January, premium prices are expected to rocket higher in a number of states. For instance, a benchmark plan -- the second-lowest cost silver plan -- in Arizona is going to set consumers back $422 a month, which represents a 116% increase from the previous year. Residents in Tennessee, Minnesota, and Oklahoma are also expected to absorb weighted premium hikes in excess of 50% in 2017. As a whole, premiums are expected to increase 25% next year across the 39 states currently covered by the federally-run HealthCare.gov.
On the one hand, the Obama administration isn't too concerned with rising premium prices because it's stressed that most enrolled Americans have access to the Advanced Premium Tax Credit, or APTC. The APTC is a federal subsidy that lowers what consumers pay for their monthly premium. Persons and families making under 400% of the federal poverty level (about $47,520 for an individual in 2017) qualify for the APTC, with about 85% of the 10.4 million paying enrollees currently receiving this subsidy.
Statistics from the Obama administration suggest that 77% of consumers who qualify for the APTC will be able to purchase insurance for under $100 a month after subsidies.
The true concern is for the remaining 15% of Americans who earn more than $47,520 a month, as well as those persons who have thus far remained uninsured. The cost for purchasing a non-subsidized plan for these individuals could soar depending on where they live, as well as how old they are.
Here's what the average American will pay for Obamacare, by age
There aren't too many factors that can affect an Obamacare premium, but age is certainly one of them. Younger adults tends to be healthier, thus their premiums are usually lower. Conversely, older adults are expected to pay more out of pocket for healthcare. A recent analysis from HealthPocket broke down what an American earning $48,000 annually (just a hair too much to receive the APTC) is expected to pay each month if that person purchases an average silver plan in 2017. Here's how things shook out:
- Average silver plan premium for 30-year old: $364.91
- Average silver plan premium for 40-year-old: $410.73
- Average silver plan premium for 50-year old: $574.10
- Average silver plan premium for 60-year-old: $872.01
What you'll immediately note is the almost exponential premium inflation seen when an individual officially becomes a senior. Thankfully, a little-known provision exists within Obamacare that limits age-based premium adjustments such that a premium for a 64-year-old (individuals 65 and up qualify for Medicare) can't be more than 300% of the premium cost for a 21-year-old.
But, this provision only provides so much solace. Assuming our fictitious individual is making $48,000 annually, the 30-year-old and 40-year-old are spending about 9% and 10% of their annual respective income on healthcare premiums. However, the 50- and 60-year-old are shelling out 14% and 22% of their respective income just for their premiums. This doesn't even factor in what they could owe if they have to visit their doctor (i.e., copays, deductibles, and coinsurance).
It's also worth pointing out that some older Americans may be able to skirt by without having to pay the Shared Responsibility Payment (SRP) in 2017 because it would simply cost too much for them to buy health insurance. If you earn more than 400% of the federal poverty level, but the cost of coverage exceeds a certain threshold of your annual household income (it was 8.05% in 2015, for example ), you're excused from paying the SRP come tax time, meaning you can decline to get insurance and not face a penalty. Not paying a penalty is great in one respect, but it still doesn't resolve the issue of select older Americans earning more than the federal poverty level being unable to afford health insurance.
Take the time to shop around
With premium inflation set to rise at the fastest pace in years, the smartest decision consumers can make in 2017 is to take the time to shop around for health insurance, especially if you're one of the Obamacare enrollees who makes more than 400% of the federal poverty level.
Health insurance companies can change their coverage options, networks, and premiums on a year-to-year basis, which means if you choose to do nothing and allow yourself to be auto-enrolled into the same plan, you could still potentially lose your primary care physician without realizing it, and you may wind up paying far more than you need to for a health plan. Taking just 30 minutes to an hour every enrollment period to shop around and see what's available can save you hundreds of dollars annually.
Of course, you should also keep in mind that the cheapest plan may not be the best value plan for you. If you're a younger adult who doesn't go to the doctor often and isn't taking any prescription medicines, then a bronze or silver tier plan with a lower premium and a higher deductible probably makes sense. If, however, you have a pre-existing medical condition that requires regular visits to the doctor, and/or you're taking multiple prescription medications, then purchasing a more encompassing gold or platinum plan -- even with a higher premium -- could be worthwhile.
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.
The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.