Source: White House on Flickr.
Today is the big day – open enrollment for the Affordable Care Act, better known as Obamacare, is set to kickoff for millions of Americans that either remain uninsured, or who might be looking to switch plans in 2015.
Since Obamacare was signed into law in 2010 there has been a pretty substantial divide between supporters of the health reform law and those who want it repealed. However, one thing that remains consistent across all Americans is that the price they pay for health insurance is of the utmost importance.
A Kaiser Family Foundation poll conducted in the summer of 2013, before Obamacare's first year of enrollment kicked off, discovered that a whopping 88% of respondents believed they needed health insurance, and 68% affirmed that health insurance was worth the money paid for it. However, of the uninsured that KFF questioned, 40% of those claimed they remained uninsured because health insurance was simply too expensive.
In 2015, according to data aggregated by Pricewaterhousecoopers from the Health Research Institute, premium prices across all reporting states (43 states plus Washington D.C.) are expected to rise by 5.6%. Comparatively, this is a pretty modest increase relative to the medical cost inflation we've witnessed over the past five decades, but it's still an unwelcome sign for consumers who are becoming increasingly cost-conscious about their healthcare.
With that in mind, today we'll take a closer look at three ways you can save money when signing up for, or reenrolling in, Obamacare this year.
1. Apply for financial assistance
One of the primary reasons the ACA was drafted was to help spread the costs of medical care across a larger number of insured people. In order for that to happen, and to ensure that consumers aren't scared away by high premium prices, Obamacare includes a number of provisions for subsidies.
Source: Healthcare.gov.
A subsidy is nothing more than financial assistance offered to individuals and families who make under a certain income level. For example, persons making below the federal poverty level ($11,670) are eligible to have their entire medical care covered by Medicaid. In the 28 states that have chosen to expand their Medicaid program up to 138% of the federal poverty level (FPL), those individuals can expect full coverage by Medicaid as well.
However, even individuals and families that make more than the FPL or expanded coverage FPL have the opportunity to get a partial subsidy. According to data from the Department of Health and Human Services, 87% of the 5.45 million people who signed up for Obamacare on the federally run health exchange, Healthcare.gov, qualified for a subsidy. Furthermore, the average subsidy paid by subsidy-eligible individuals was just $82 per month. In total, subsidies averaged a $264 discount per individual per month, or knocked the premium price down by a whopping 76%.
Long story short, you've got nothing to lose applying for subsidies in your state or on Healthcare.gov as it could mean the thousands of dollars in annual savings.
2. Spend more now to save later
In the investing world you first need to have money to make money. When it comes to buying a health plan on Obamacare's health exchanges purchasing a more expensive plan can actually wind up saving you money in the long run.
Source: Health Reform Minnesota.
Obamacare's plans are parsed out into four tiers: platinum, gold, silver, and bronze. Platinum plans are the highest-priced based on premium costs, but they also result in the lowest out-of-pocket expenses for the consumer. On the other end of the spectrum are bronze plans that are the least expensive on a monthly basis, but will extract the most out-of-pocket costs from consumers should they need medical care. In total, platinum plans require a member to pay 10% of out-of-pocket expenses; a gold plan 20%; a silver plan 30%; and a bronze plan 40%.
There are a few things worth noting here. First, all Obamacare plans have a minimum set of benefit requirements, so even bronze-level buyers are getting access to quality medical coverage. Also, out-of-pocket expenses are capped each year, usually in the neighborhood of $6,000, so it's not like an insured individual is going to be on the hook for $100,000 in medical costs if that's what their hospital bill comes to.
The idea of spending more upfront on a platinum or gold plan makes sense if you have a chronic condition that'll require you to visit the doctor regularly. Despite the higher upfront premium costs, you'll be paying far less out of your own pocket, and it'll take much longer before you hit your annual out-of-pocket deductible.
3. Shop around
According to a recent survey conducted by Radius Global Market Research the majority of people who signed up through one of the Obamacare exchanges are satisfied with their plan. However, two-thirds of respondents also noted that they intended to change plans in 2015. The reasoning was their belief that they'd be able to seek out a better value on the exchanges, or perhaps directly from an insurer.
Source: Covered California.
Truth be told, premium prices may only be heading 5.6% higher on average based on Pricewaterhousecoopers' data, but the individual plan vacillations within each state can be quite significant. Furthermore, plans which were the least expensive last year are most likely not going to be the least expensive this year. Added together this means it's in consumers' best interests to really do their homework this year and shop around for the best value.
In 2015 you'll have until Feb. 15 before open enrollment closes, and you can reenroll until late December 2014 and still be covered come Jan. 1, so there's plenty of time for consumers to carefully analyze the plan that would work best for them.
One thing to note here is that I explicitly said "best value" and not necessarily the cheapest plan. Although all plans are required to meet minimum health benefits, some plans may go above and beyond those minimum benefit requirements, and thus may offer you a better value.
