Obamacare surprise: Young 'invincibles' get better deal by skipping catastrophic plans By The Plain Dealer
on November 07, 2013 at 6:23 PM, updated November 08, 2013 at 7:22 AM
NEW ORLEANS -- Young people under 30 who didn't want to buy health insurance got a special exemption under Obamacare -- a provision letting them buy inexpensive, catastrophic coverage. That way, they could escape the higher cost of fuller coverage required of other Americans, yet be protected from financial devastation if they got deathly sick.
But as the realities of the Affordable Care Act shake out, it turns out that many of these so-called young invincibles will have no financial reason to buy that cheaper, catastrophic insurance. This is one of the unexpected consequences of the nation's new insurance model: It will be cheaper in many cases for them to skip catastrophic coverage and just buy better insurance.
"We were all thrilled" when this became apparent, said Phyllis Borzi, assistant secretary for employee benefits security at the U.S. Department of Labor.
"The dirty little secret –actually it's not so secret anymore – if you ever could ever get on healthcare.gov, you will discover that the catastrophic plan actually costs more in virtually every marketplace than the bronze plan does," Borzi told an American Bar Association conference here on Thursday. And the bronze plan, she said, "offers you comprehensive coverage."
Asked if this was by design, Borzi told The Plain Dealer, "I think it's a coincidence."
She said that "we didn't see the numbers" that insurers planned to charge for these plans until just before the new healthcare marketplaces, or exchanges, rolled out.
"And when the premiums came in, they were actually in many cases lower than had been anticipated. So I think it just turns out to be, to me, a pleasant accident, because these young folks can get comprehensive coverage for less or at least not much more."
These savings are before even factoring in the subsidies for which many young insurance buyers will qualify. Catastrophic plans are ineligible for the subsidies. Bronze plans– the cheapest level of policies sold on the new exchanges – are not.
It is unknown how heavily President Barack Obama's administration will publicize this discovery, although the White House is trying to sell enrollment to as many people as it can.
Department of Health and Human Services officials, in charge of implementing the Affordable Care Act, were not available to discuss the catastrophic plan pricing surprise. Spokeswoman Erin Shields Britt sent The Plain Dealer a statement saying, "The Affordable Care Act, for the first time, gives consumers a range of quality, affordable health insurance choices they can easily compare, so they are able to consider the benefits, premiums, out of pocket costs that fit their needs and budget, and choose the best insurance option for them."
Obamacare requires all uncovered Americans to have insurance in 2014 or pay fines. By pooling enrollees in exchanges and limiting the premiums for older and sicker enrollees, the healthcare law relies on a large cadre of young, healthy enrollees to offset others' higher medical costs.
Critics have noted that before factoring in subsidies, health insurance rates will be higher for many young adults than they had been previously. The higher costs resulted from the rebalancing of the insurance equation: to make coverage more affordable for some, others would have to pay a bigger share.
The White House countered that the tax credits made that point moot.
Catastrophic insurance policies in the exchanges will pay for three primary care visits a year as well as some preventive visits. But they will cover nothing else until the patient pays $6,350 out of pocket.
Bronze-level policies, the next step up, will pay for all preventive care and 10 "essential" benefits including ambulatory and emergency services, physical therapy and prescription drugs. Bronze plans also have a maximum of $6,350 out-of-pocket costs, including deductibles and co-payments. But they will pay for many partial expenses before that cap is reached and are considered fuller, better plans.
In Cuyahoga County, the ballpark range for monthly catastrophic plan premiums is $121 to $180 a month, based on figures available on healthcare.gov. The difference depends on the insurer and its network of doctors and hospitals, and these figures do not account for all applicants.
Yet bronze plans start at $151. And the differences among insurers can make the range even narrower. Kaiser Permanente, for example, lists a catastrophic plan at $144 but has a bronze plan available for just $7 more. Anthem Blue Cross and Blue Shield has a catastrophic plan for $180 and a bronze plan for $210.
That's before considering that single people earning less than $45,460 can qualify for tax subsidies to offset or even pay for most of the cost of a bronze plan. Catastrophic plans, by contrast, are ineligible for subsidies. It's one of the rules of Obamacare.