Affordable Care Act — August 10, 2014 at 12:04 pm

Millions of Americans are protected from premium increases for the first time — but there’s a catch



Next year, an amazing thing will happen. Millions of Americans won’t be paying more for health insurance.

Subsidized middle-class consumers — about 85 percent of the those who purchased a plan — currently pay an average of $264 less a month because of the law. And they will likely be paying just about the same amount in premiums in 2015 — if they take the time to check their policy and pick one that’s right for them in the exchange.

This part is important: ACA plans automatically renew but you should still visit the exchange and shop for a new plan anyway.

Because of the complex way subsidies are calculated and the normal changes to one’s financial life, your tax credits may change and you may end up paying more for the same plan. But given the new providers joining the marketplaces, you’ll likely find a plan that’s as cheap as cheaper as the year before. guru Charles Gaba has been sounding the alarm against auto-renewing, even before the subsidy issue emerged. He explains why it’s important why it’s important to log in to shop the plans in your exchange, using a scenario where you’re receiving a $200 a month subsidy at the moment:

For 2015, let’s say that nothing changed at your end. Your income, household size, etc. all stayed the same; you didn’t move, and so on. In fact, the plan you chose doesn’t even change; it stays at $500/month even. Based on this, you’re expecting your cost to stay $300/month.

However, what if their competitors lower their rates? Suddenly the 2nd cheapest plan is no longer $500/mo, but, say, $400/mo. The subsidy calculation changes, and suddenly instead of a $200/mo subsidy, you’re only getting $100/mo, meaning you owe an extra $100/month (alternately, when tax time comes around the following year, you now owe $1,200 more than you thought). In that situation, you’d have been better off switching to a different, cheaper plan.

On the other hand, what if the 2nd cheapest Silver plan goes up to $600/month? The subsidy calculation changes the other way, and now you’re receiving a $250/month subsidy, even though nothing else changed. You get to save an additional $600/year, hooray!

How much your premiums rise depends on your state, The New Republic‘s Jonathan Cohn explains. Chances are if your state actually tried to help the uninsured by expanding Medicaid and maximizing enrollments, your premiums will not have gone up much. And even if they do, your subsidies are still tied the cost of the lowest cost silver-level planned, so you likely won’t be paying any more for the coverage you already have.

This is almost a miracle in America’s modern health insurance market to go along with the other miracles of Medicare costs at least temporarily being contained as more than 10 million Americans have gained health insurance in just seven months, reducing our uninsured population by a quarter.

Under President George W. Bush, premiums rose $667.46 per year when adjusted for inflation, our Chris Savage points out, as 7.9 million Americans lost their coverage. Premium growth decreased to $424.45 per year before the Affordable Care Act.  And now for millions of Americans, it will be the increase is likely to be zero — especially, if they make sure to shop the exchanges again.

Of course, the libertarian critics of the law like Cato’s Michael F. Cannon want you to know those subsidies come from somewhere and are thus distorting the market. Because in a perfect world, people would shop around for the best value on an appendectomy. That’s how he justifies his lawsuit, which would deny subsidies in the three dozen states that didn’t build their own exchanges.

But The New York Times‘ Paul Krugman argues that taxing the rich, the super rich and corporations to help working people buy health insurance, as the Affordable Care Act does, is exactly how we make Americans richer.

Liberal critics who point out that a single-payer system would avoid this kind of mess are right. Right-wing critics who are looking to exploit any advantage will trump up stories of auto-renewal sticker shock, which is why it’s so important to get the word out now that everyone need’s to review their plan before the end of the year.

“Auto-renewing is a bad idea regardless of the situation,” Charles told me. “You may end up renewing the existing policy anyway (and I suspect that most people will end up doing so), but everyone should at least log in and check things out.”

Having to pick a plan each year to avoid being charged more for the same coverage is a hassle. Possibly changing coverage is a hassle. As Charles explains, “switching from one insurance company to another is a bit more involved than, say, switching from McDonalds to Burger King as a fast food preference; it’s more along the lines of switching from U-verse to Comcast or the like.”

So even if you end up with a better, cheaper plan, it’s going to cost you some time.

However, as intrepid blogger Xpostfactoid points out, millions of Americans switch plans every year and did so before Obamacare was ever conceived. This “tremendous churn” is the result of changes in people’s employment, Medicaid eligibility, state of residence, needs, etc…

Reflecting on this problem from the left, The New Republic‘s Brian Beutler makes an interesting argument for liberals renewing their case for a federal government-run health care plan that would compete with insurers.

“In the longer term, they can smooth things out by, for instance, making a public option that uses Medicare’s purchasing power available on every exchange, and setting it as the benchmark plan,” he writes. “That would hold down premiums within the system overall, and offer people who choose the public option an assurance that their out-of-pocket costs won’t bounce around as arbitrarily year-to-year.”

It would also break the alliance between the insurance companies and the government that has existed since at least the individual mandate was upheld. This could possibly force Republicans back to their traditional position of defending private insurance companies and force a split with the repeal diehards who honestly believe that the next Republican president is going to make canceling 30+ million Americans health insurance his first act in office.

Regardless, we have to recognize that there are millions Americans who don’t have to pay more for health insurance in 2015. And that is a huge achievement.

It’s another solid piece of evidence for Bill Clinton’s simple but now undeniable case for the law: it’s better than the system it replaced.

[Photo by Will O’Neill | Flickr]