Ask The Advisor: Health plan options

Ask The Advisor: Health plan options

Should I Allow My New Health Law Coverage To "Automatically Renew"?

Q: I'm 62 and my wife is 60. Last year she and I signed up for a new health plan on the federal health exchange. We qualified for lower premiums, but we still have trouble paying for all the out-of-pocket costs, because of the high deductibles. Now it's time to start all over. We're wondering if we should let our current plan automatically renew, or if we need to go through the hassle of shopping for new plans all over again.

A: Automatic renewals are supposed to make this fall's Open Enrollment under the new health law run more smoothly for consumers like you. But analysts are warning to only do so as a last resort — especially if you qualified for a lower premium. The lower premiums are made possible through premium subsidies, which are actually an advance tax credit based on your income. According to analysts, health insurance exchange customers who like the convenience of automatically renewing are likely to receive outdated and inaccurate premium subsidy amounts that could result in big tax bills later.

Ideally the Obama Administration should have the capacity to update consumers' subsidy information. But by late summer, they had not yet gotten that part of the system built. Even if you were to receive the same amount of premium subsidy that you received this year, that's likely to cause you problems. Here's why:

  • Premium subsidies are based in part on the premiums for a current benchmark plan in the area where you live. More plans are joining the market and there will be new bids for 2015, so the benchmark in many areas will change.
  • The subsidies are based on household income. If your income went down in 2014 you may be entitled to a bigger health insurance subsidy tax credit. But if your income goes up you would get a lower premium subsidy. (If your income is low enough you may qualify for Medicaid depending on the state where you live.)
  • If you are having trouble affording costs as they are in 2014, premiums and possibly some of your out-of-pocket costs may be higher in 2015. If your premium subsidy remains unchanged, that would mean it would be up to you to cover increased costs.

Open Enrollment on the new health exchanges starts November 15 and will run for about one month. But even after a year of technical problems and significant repair efforts, the Government Accountability Office recently warned Congress that the federal exchange may continue to have more enrollment problems. Nevertheless, due to the high cost of insurance and potential tax repercussions, TSCL recommends that you start early and be persistent about finding your best plan.

Start by reviewing materials that you receive from your current health plan for prospective changes in premiums, deductibles, co-pays and provider networks. If your income has changed in 2014, report changes to the healthcare exchange in your state or through before the Open Enrollment crunch begins. Watch your local news media for announcements of “healthcare navigator” programs in your area to help you compare plans and enroll. The programs may be offered through your local library, or other community service organizations.