Optimism Abounds in Cover Oregon Land – Is It Real?
OPINION – July 23, 2013 -- Oregonians have been led to expect that they will receive large subsidies to help pay the cost of their personal health insurance now that health insurance is required. We also know they have been told that if they like their current insurance policy, they can keep it. Sounds good on the surface, but if we dig a little deeper we find that both statements don’t hold much weight.
Starting in October, Oregonians who have individual health insurance policies will receive a letter stating that their current coverage is ending at the end of the year. They will be notified they will need to purchase one of the newly approved Affordable Care Act plans by January 1st in order to have coverage after the first of the year. They will be given several choices. One choice will be moving to a new plan that is closest to their current plan and stay with the same insurance company, most likely at a higher cost. Another choice will be to go shopping on the Cover Oregon exchange and go through the lengthy process of filling out a subsidy application that looks more like a tax return than a health insurance application. A few lucky people can keep their plans and avoid this mess. These are LifeWise policyholders who were offered, and chose to keep, their plans when the law first took effect and now have grandfathered plans.
What about the subsidies? Do they live up to their promises? Keeping in mind it has been said that the success of the healthcare law in lowering premium costs depends on young people flocking to the program, we will start with a 25-year old. Today that 25-year old can buy a $1,000 deductible Moda Beneficial Value policy for $159 per month. If we go to the Cover Oregon website, enter age 25 in their calculator, and give that person a $30,000 annual income, we find the most the premium will be is $209, the second lowest cost Standard Silver plan costs $281 and the individual would qualify for a $137 subsidy. It looks like the subsidy will really come in handy. There is one problem. Not one of the above figures is correct except the maximum premium of $209 for a $30,000 income, but even then $209 is not what the person would pay.
We now have approved rates posted on the Insurance Division website. The second lowest cost Standard Silver plan for a 25-year old in only $177. That is less than the maximum premium of $209, so that individual would only pay $177, and not be entitled to a subsidy. At first look, $177 isn’t the huge price increase that we have heard in the news was coming our way, only $12 a month. Even that is misleading. Remember the young person could buy a $1,000 deductible policy for $159. The Standard Silver plan comes with a $2,000 deductible or $1,000 a year more, the equivalent of an additional $83 a month. The real cost, provided that person has a bad year, could be $12 plus $83 or $95. This is equivalent to a 59 percent increase in costs. I don’t know what education is like today from first-hand experience, but for the life of me I can’t see how young people will flock to this. They are more apt to say they had employer insurance, since the IRS can’t track that yet, and not even pay the $300 fine (one percent of income).
Maybe a family comes out better off than a single person? Let’s look at a family of four; a husband and wife both age 35 and two children under age 18. Cover Oregon’s calculator gives the following figures for an annual income of $60,000, a maximum premium limit of $410 and the premium of the second lowest cost Silver plan of $690, which would qualify for a $280 monthly subsidy. Again, the only correct figure is the $410 maximum premium the family would have to pay for insurance based on income. The calculator leaves out one very important fact. If the family is below 300% of the Federal Poverty Level (FPL), the children are enrolled in CHIP or the Oregon Health Plan on a mandatory basis per Cover Oregon. They are thus removed from parts of the calculation. They are still counted as family members for determining the maximum premium of $410. They are not counted in determining the premium of the second lowest cost Silver plan since only the parents need insuring. This premium would be $430 and not $690. The $430 premium is about 25 percent more than they would pay for an equivalent plan today. This family would be entitled to a $20 monthly tax credit or subsidy, the difference between their $430 actual premium and the maximum $410, the most they are required to pay based on income.
This family, like anyone applying to the exchange for a subsidy, will have to determine if the subsidy is really enough to justify the time that will be required to apply for it. Do they want to give their personal information to Cover Oregon, the IRS or perhaps a Navigator from a community based organization? What kind of a background check was done on the Navigator if any? If their income changes during the year, do they want to make mid-year subsidy adjustments or wait for a tax bill from the IRS the following year reclaiming excess subsidy that may have been paid by the government on their behalf? Do they want their children covered by Medicaid? This could mean their children may not be able to have the same doctor as they do or they may have difficulty finding a doctor who will take Medicaid patients.
In fairness, there are many situations where a subsidy will help an individual or family better afford health insurance. This is particularly true in the lower income levels generally below 200 percent FPL. Actual subsidy amounts may just not be as over optimistic as the Cover Oregon calculator would lead you to believe or anywhere close to the exaggerated promises that were made.
With open enrollment less than three months away, there is very little information available and, as we have seen, what is available isn’t always accurate. To help people plan ahead and see actual results, we are going to do something we normally wouldn’t do and haven’t done before. We are giving you a link to our development site so you can follow our progress. We have developed a quote engine primarily for our own use. We do not have all the rates and plan benefits entered in our database yet. With rates just having been approved, we are just getting started. We do have rates entered for Atrio, Moda and Kaiser, their plan names, but no benefits yet. We will be adding information almost daily.
Our quote engine will list all the plans and rates available in Oregon, both those inside the exchange and those available from agents outside the exchange. It will tell you if a particular plan is an Exchange Only plan or an Agent Only plan. All others are available both in and out. It checks to see if you are close enough to the Medicaid 138 percent FPL that you should probably apply there first, by showing the word MEDICAID in the subsidy column. It next checks to see if you are at 300 percent FPL or below in order to calculate the Exchange Premium with children or without. Most people qualifying for a subsidy will be below 300 percent FPL and their children will be automatically placed in the CHIP program. Subsidies are calculated based on the income provided and are determined by subtracting the maximum premium you are supposed to pay form the cost of the second lowest cost Silver plan, assuming the Silver plan costs more. If the plan is less than your maximum, zero is shown in the subsidy column. The subsidy is then subtracted from the plan premium and the amount left for you to pay is shown in the Exchange Premium column. All this is accomplished in less than five seconds.
As we add rates and plans, please be patient. We are a small agency in southern Oregon with just two full time employees and six independent agents and we still have to sell health insurance to pay the bills. There are 172 plans and over 55,000 rates to enter. There may be mistakes. If you see any email us at email@example.com or call us at 1-888-957-5001. We hope allowing you to watch us work will better help agents and others plan ahead for what they will actually see when the dust settles. Your agent is still your best source of information when Open Enrollment begins.