By Katie Kerwin McCrimmon
Even though health insurance rates dropped in Colorado for 2015, many consumers might have to pay a bigger share of the bill.
Aggressive cost cuts from the Colorado HealthOP, which is the low-cost carrier in every county but one in the state, helped reduce insurance rates overall. But because tax subsidies are tied to the lowest rates for mid-level “silver” plans, tax help for consumers is also declining.
So if customers automatically renew their 2014 plans and don’t hunt for lower-cost options, they could end up paying hikes of 77 percent on average for their share of premiums. That’s according to new preliminary data from consultants who analyzed rates for the Colorado Division of Insurance.
About 60 percent of the 148,000 people who bought private health insurance for 2014 through the state’s exchange qualified for subsidies, so the drop in tax help could affect thousands who are trying to renew for next year.
Furthermore, the analysis of rates and subsidies by Wakely Consulting Group found that about 80 percent of Coloradans who will be eligible for tax subsidies for 2015 live in Zip codes where rates have declined dramatically — by about 15 to 20 percent for most — meaning a big cut in corresponding tax subsidies.
Renewal letters are due to go out next week and open enrollment for Connect for Health launches on Nov. 15. Tax subsidies, which are designed to make health insurance more affordable, are only available for people who buy insurance through the state exchange.
Connect for Health managers are urging customers to shop carefully, seek help early, explore all of their options and start immediately since this year’s open enrollment period lasts only from mid-November to mid-February, half the duration for 2014 sign-ups
Anyone who wants new insurance coverage by Jan. 1 must sign up by Dec. 15 and pay the first premium by Christmas Day.
“It’s important to understand what competition has done in the Colorado market. This is a good thing,” said Gary Drews, the interim CEO for Colorado’s exchange. “This is not a rate increase.”
Nonetheless, it could feel like a rate hike to consumers.
“The share that an individual will pay themselves if they kept their current plan would on average go up 77 percent. That’s their share,” Drews said.
By contrast, people who shop around and switch to lower-cost plans could see an average decrease of 18 percent in their share of costs, Drews said.
He warned people, however, not to shop based only on costs.
“Price might be the most important thing, but not if it (the plan) doesn’t include your docs or medication,” Drews said.
Consumers should check in advance to see if the plans they want cover their doctors. There’s a tool to look that up on the Connect for Health website. And this year, for the first time, customers can see if plans cover their medications.
Lower-cost plans often have “narrower networks,” meaning they limit the doctors patients can see or hospitals where they can get care. And some plans have higher deductibles and co-pays.
“Shop for value, not price,” Drews said. “Value is personalized where price is not.”
“We don’t want everybody to just push the automatic re-enroll button. That’s tempting for some,” Drews said.
But, he said it’s key that people shop for what is most important to them, be it access to particular doctors, medications or high health costs they may have to pay throughout the year for some plans.
Marcia Benshoof, chief strategy and sales officer for Connect for Health, said she expected the rate drops and corresponding declines in subsidies to come in future years, not for 2015. The Affordable Care Act spells out how the tax subsidies work and requires them to be recalculated each year depending on new rates.
“It is very state-specific,” Benshoof said, noting that a Kaiser Family Foundation study found that average rate drops in Denver were the steepest in the nation.
The rate drops help people buying insurance, but also force down subsidies.
“The tax credit is intended to fill the gap,” Benshoof said. “Commercial insurance is not meant to be free.”
Even with lower subsidies, customers who qualify for tax help will not be forced to pay more than about 9.5 percent of their income for their share of health insurance costs. The Affordable Care Act set that level as the ceiling for what was deemed to be “affordable.”
Individuals who earn between about $15,500 and $46,500 should qualify for tax subsidies for 2015. For a family of four, the income levels rise to between $31,500 and $95,000.
People earning less will qualify for Medicaid, the publicly funded health insurance program for low-income and disabled people. Those who earn more have to pay the full cost of their insurance premiums.
A tool to estimate tax credits should be live on the Connect for Health site by Thursday, Benshoof said. As of Nov. 10, customers can begin shopping and selecting plans. They won’t be able to “check out” and finalize their selections until Nov. 15 when the exchange officially reopens for 2015 enrollment.
While the changing tax credits could be complicated for consumers to understand, Benshoof said Colorado is lucky that it has a vibrant insurance market. Some states have one dominant carrier controlling as much as 70 percent of the market.
“This is a good thing in terms of allowing competitive markets to drop prices,” she said. “The last thing you want is for people to be held hostage by a market. They have choices with the tax credits they get.”