In August an Avalere report revealed more than 2 million people failed to sign up for cost reduction health plans, and instead enrolled in plans that do not qualify for cost assistance. Why did millions forego financial assistance on their health insurance? Dan Mendelson, CEO of Avalere, pointed out in Avalere’s analysis that many consumers that qualified shopped on monthly premium alone, and did not base their decision on total out-of-pocket healthcare costs.
Through the federal marketplace, individuals who make $11,770-$29,425 a year in household income are eligible for reduced-cost health plans in addition to receiving a tax subsidy to lower the price of a plan. The catch – those that qualify for cost-sharing reduction assistance must select a Silver level plan to receive additional savings. In many cases, this is where individuals and families got tripped up when selecting a healthcare plan. Silver plans are more expensive than Bronze plans, and when looking at total monthly expenses, Bronze plans can look more favorable to a family living paycheck to paycheck. However, if an individual or family member has medical needs that go beyond preventive care, cost assistance from a Silver plan can actually save dollars overall during the year.
Here’s how it works:
A family of four living in Texas with a $59,000 household income qualifies for $516 each month to help pay for health insurance expenses. The cheapest Bronze level plan is $178 a month after their $516 tax subsidy is applied. This plan includes a $12,700 deductible, which means the family will have to pay $12,700 out of their own pocket before their health insurance plan begins paying for any medical claims.
This same family can get a Silver plan for $396 a month after subsidy dollars are taken, and only have a $4,000 deductible. Plus, they are eligible for additional cost assistance on their healthcare.
The difference in monthly payment between the Bronze and Silver plans is $218 ($2,616 per year). However, because the family falls between 100%-250% of the Federal Poverty Guidelines, they qualify for additional reductions based on their income that will lower the amount they have to pay for their deductible, coinsurance and copayments. As a hypothetical example, the family could qualify for cost assistance that reduces their plan deductible by 50%, down to $2,000. Copayments for office visits could be reduced from $25 to $12. And coinsurance could be reduced from 30% to 15%.
If the family has accident-prone children or other health issues, a cost reduction Silver plan can cost them less money over a 12-month period. Here is a real-life example:
If child #1 breaks his wrist playing football, the medical costs on average would be:
ER visit: $684-$5,481, Doctor’s fee: $73-$194, X-ray and cast: $390
Patient responsibility with Bronze plan: $1,147 – $6,065 (depending on state of residence). Because the family has a $12,700 deductible, their health insurance company does not pick up any cost for care.
With a Silver plan, the family’s financial responsibility would be much less:
ER visit: $250, Doctor’s fee: $55, X-ray and cast: $55
Patient responsibility with Silver plan before cost reduction assistance: $360
In this one instance, a child’s broken wrist could cost a family over $6,000 in medical debt. With a cost reduction Silver plan, the family would only pay $360 or less, depending on how much cost assistance they qualify for on their medical claims. By selecting a Silver plan, the family more than pays for the extra monthly cost of a Silver plan by avoiding a high deductible.
When shopping for health insurance during open enrollment , many items need to be taken into consideration, including deductible, coinsurance and monthly premium payments. Individuals and families in particular need to be aware of the money-saving opportunities available to those who fall beneath the 250% poverty line, and how they can take steps to enroll in plans that keep out-of-pocket expenses to a minimum.
The views expressed here are those of the author and do not necessarily represent or reflect the views of Healthcare, Inc. and HealthCare.com.
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