Obamacare Enrollment: Changing Coverage Could Be Key To Saving Money On Health Care Costs

The introduction of a number of new, low-cost health plans for people enrolling for insurance coverage via the federal exchange established under the Affordable Care Act sounds on its face like the fulfillment of one of Obamacare’s central promises. And it does represent a way to save money for many customers who are willing to abandon their current plans and enroll in the new, cheaper options.

But it will likely end up having negative consequences for some other users of HealthCare.gov, particularly people who want to keep their existing coverage, according to a study released by Wakely Consulting Group on Thursday, two days before a second round of enrollment is set to begin on the federal government's site.

A number of companies are rolling out plans featuring ultra-low premiums this year, hoping to woo cost-conscious enrollees away from competitors. But the concern outlined in the Wakely study is that the new options will cause people who choose to remain on their existing plans to see the amount they pay for health insurance costs rise.

At issue is the fact that federal premium subsidies are calculated based on individual customers’ income and the price of the second-cheapest midlevel plan available in the geographical area where a customer resides. As new, less expensive plans hit an area’s market, the federal subsidies paid to low- and middle-income Americans to help offset their health insurance premiums are thereby driven downward for all people in that geographical area.

"A reduction in the premium for the benchmark plan, which is the second-lowest-cost silver level plan, will generally lead to reductions in the subsidy amounts, but it also means that there are lower-cost plans in the market,” Julia Lerche, senior consulting actuary at Wakely, a Clearwater, Florida, health care actuarial firm, said.

On average, 40-year-olds making 200 percent of the federal poverty line will save 20 percent by switching from the cheapest 2014 silver plan to the cheapest 2015 silver plan, according to the study. Their premiums will still rise, but only by 8 percent, rather than the 28 percent spike they would see if they auto-enroll in their current plans. But this new, attractive option again comes with the drawback of driving subsidies downward.

Some states will see the maximum subsidy for that hypothetical 40-year-old customer fall markedly, according to the Wakely study. For example, Mississippi customers should expect their subsidy to fall by $101, while New Hampshire enrollees can expect a drop of $40.

Meanwhile, some areas are expected to see an increase in subsidies this year, which also offers an opportunity for Americans to save money by changing their plans, even if their premiums rise. In Alaska, subsidies for that 40-year-old customer are expected to rise $114, while in West Virginia they could jump $30.

“In areas where subsidies are increasing, consumers will benefit from getting an updated subsidy, thus lowering their premiums,” the study states.

The Obama administration urges consumers to consider all their options when deciding what plan to enroll in this year.

“We are encouraging consumers enrolled in a Marketplace plan to update their information and shop for [a] plan so they can get a plan that best fits their needs and budget," Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services, which operates HealthCare.gov, said Thursday via email. "Based on a preliminary analysis, a majority of current Marketplace consumers could save money on their premiums if they come back and shop for a plan in the same metal level."

The Wakely study also delves into pre-subsidy premium changes. It estimates that customers currently enrolled in the least expensive silver plan who renew their existing policies will see their rates increase by an average of 14 percent before subsidies. Customers in some areas will see no increase, while customers in other areas will see jumps as high as 45 percent. But those who choose to switch plans to the lowest-cost silver plan option will experience an average rate increase before subsidies of only 5 percent, the study states.

In other words, it’s worth taking the time to explore the options available on HealthCare.gov once the new enrollment period gets underway.

"People should understand their options before they make any decision, including to just auto-renew, because there may be lower-cost options available," Lerche said. "Open enrollment starts on Saturday, and people should understand that it's worthwhile to shop because there might be some new lower-cost options available to them."