Time to choose: Health insurance plan costs going up
The enrollment period for health insurance plans of all types — workplace benefits, Affordable Care Act plans and Medicare — has started or is nearly here. And no matter what type of coverage you get, your 2016 plan is likely to be more expensive.
For retirees, Medicare Open Enrollment kicked off Thursday and runs through Dec. 7. For people still in the workforce, employers will start previewing the details of your benefit choices, including the option to sign up for some valuable tax breaks. And for anyone who’s job-hunting, self-employed or works for an employer who doesn’t offer insurance benefits, it’s time to gather your paperwork and get ready to sign up for Obamacare 2016 when enrollment opens Nov. 1.
When it comes to picking a plan, “People need to think about more than just the premium,” says Becky Rabbitt, vice president of Medicare solutions for pharmacy benefits management firm Express Scripts. “If you pick a low-premium plan, the costs have to be absorbed somewhere, either in your premium or in your co-pays.”
For workplace benefits, employers are moving in large numbers to health insurance plans that shift a lot more cost and responsibility onto workers. Under the Affordable Care Act, prices vary widely between states and even regionally within states, but an analysis of the most popular silver-level plans in 11 cities by the Kaiser Family Foundation finds premiums rising an average of 4.4 percent from 2015. But Detroit lucks out — Kaiser expects premiums on silver-level plans in Metro Detroit to drop 1.8 percent before any tax credit, and to remain basically flat after-tax.
Medicare premiums for next year haven’t yet been announced, but Kaiser projects that premiums for the Part D drug coverage will rise 13 percent if members keep the same drug plan, going from an average premium of $36.68 this year to $41.46 per month in 2016.
The good news, says Rabbitt, is that Medicare deductibles haven’t gone up.
One trend is that Medicare providers are moving to narrower networks for doctors, clinics, pharmacies and specialists. In some cases, a patient might save more going out of the network, or moving from traditional, multi-part Medicare to an all-in-one Medicare Advantage plan that funnels all paperwork through one provider.
“People need to look closely at whether my physician is in the network, along with my physical therapist or my dialysis clinic,” Rabbitt says. “The cost of medications and other services together can be more important than just looking at the premium.”
Medicare enrollees should also look for additional services they can get through the Advantage plans, notes Andy Hetzel, vice president of corporate communications for Blue Cross and Blue Shield of Michigan.
Added benefits include preventive dental care, vision care, hearing coverage and a fitness program called Silver Sneakers. At least one of the Blue Cross plans includes a no-charge annual wellness visit to the doctor.
“We heard from Medicare beneficiaries that they want the chance to see a doctor on a regular basis to see if they’re healthy,” Hetzel says.
Penalties going up
The newer government-backed health care plans offered on the state and national health care exchanges will see some changes for 2016. The biggest one facing individual consumers is that penalties for anyone not covered by a workplace plan or qualifying for an exemption will have to buy health insurance or face a much stiffer penalty. In 2014, the penalty was $95 or 1 percent of modified adjusted gross income.
“The penalty goes up to 2.5 percent of your income or $625,” says Rick Notter, director of Individual Business Unit Marketing and Distribution for Blue Cross Blue Shield of Michigan. “As the penalty becomes a little stiffer, those who have been sitting on the sidelines are getting insurance or taking a closer look at it.”
Affordable Care enrollment starts Nov. 1 and runs through Jan. 31, but if you want to be covered by Jan. 1 you’ll need to sign up by Dec. 15, he adds.
Another point Notter emphasizes is new enrollees need to make sure they pay their premiums on time. Seventy percent of people enrolled through the exchanges get some federal subsidy, which means their monthly premiums can be very low. Often, he says, they don’t bother to pay the bill until they’ve racked up a few months of charges, which can cause coverage to be canceled.
“Sometime people’s premiums are very low, like $5 a month, and they don’t take it very seriously and figure they’ll pay $15 in a couple of months, and you can’t do that,” Notter says.
Another step is to make sure you are as accurate as possible when estimating your income to compute any subsidy you might receive to help pay for your coverage. If your income is underestimated, you may be required to repay some or all of the subsidy at tax time. If you overestimated your income, you may receive a refund.
For this past tax year, Kaiser estimated that nearly half of all households receiving the subsidy repaid an average of $794, while 45 percent of those getting subsidies received refunds averaging $773. Blue Cross and other insurers have calculators to estimate your subsidy on their websites.
In workplace plans, employers are focusing on cutting costs. One way they’re doing doing that is by shifting employees to high-deductible plans that are attached to a Health Savings Account. Under tax rules, a high-deductible plan must have an annual deductible of $1,300 for individual coverage or $2,600 for a family, according to the IRS. That qualifies enrollees to contribute up to $3,350 for individuals and $6,650 for families to a pre-tax Health Savings Account, or HSA. That money can be used to pay deductibles and other qualified medical costs, or can remain in the account and grow over time.
“Employers are really looking at ways to manage costs, and plans with a high deductible are one way to do that,” says Jerry Konal, principal and office business leader in the Detroit office of Mercer, a health care consultancy.
Last year, according to Mercer surveys, 41 percent of employers offered high-deductible plans versus 33 percent that offered HMO plans. “Our survey says that another one-fourth of the respondents who don’t have one today are considering it,” Konal says.
Employers also have the option to contribute to employee HSAs to take some of the sting when their workers go from a $10 prescription co-pay to paying a full $65 or more for medication. Mercer found average employer contribution to be $500 for an individual and $1,000 for a family. Some employers limit contributions to lower wage-earners, but most continue the contributions after the first year of the switch, Konal says.
One of the tenets behind high-deductible plans is that it will drive consumers to shop around for the best health care values, but many providers are inadequate at allowing consumers to find out how much treatments and therapies will cost. A new study of one company that made the switch was released this month by the National Bureau of Economic Research, and found that, rather than shop around, consumers were simply avoiding getting treatment altogether.
Konal notes that the difficulty in shopping for health care is the result of the nation’s fractured system of providers, services and outsourced diagnostic services, as he discovered when he was treated for kidney stones.
“When I tried to find out the price for an ultrasound scan I couldn’t find it out from anyone,” Konal says. “Here I am, a health care consultant, and couldn’t get any kind of answer.”