Consumers turning to the new marketplaces created by the Affordable Care Act will find health insurance plans organized by "metal" tiers -- bronze, silver, gold and platinum -- that signal a new era of comparison shopping.
The system, which also includes a "catastrophic" tier, will help consumers "make rational comparisons" when choosing the insurance option that best suits their health and budget needs, says Michael Miller, director of strategic policy for Community Catalyst. "For a lot of people, the process of choosing a health plan has been more of a crapshoot than an analysis. Now they'll have more information."
Millions of Americans are expected to gain coverage through the state-based marketplaces, also known as "exchanges," that will begin selling policies in October with coverage effective Jan. 1, 2014. Most U.S. citizens who can afford coverage must purchase insurance or pay a penalty beginning in 2014. People with low and moderate incomes qualify for tax credits and subsidies to help cover the cost of plans sold in these marketplaces.
"The metal tiers provide consumers with a standard measurement so they can easily compare and understand which plans will offer more comprehensive coverage and cover a greater portion of their health care costs," says Lydia Mitts, a health policy analyst at Families USA.
Each category is assigned an "actuarial value," a term that which refers to the share of health care expenses the plan will cover, on average. "Bronze plans are less generous, meaning you'll pay more out of pocket. Platinum plans are more generous. They have a higher premium, but lower out of pocket costs," says JoAnn Volk, a senior research fellow at Georgetown University's Center on Health Insurance Reforms. Bronze plans in the state marketplaces, for example, will cover 60 percent of costs, on average, while platinum plans will cover 90 percent of health care costs.
While every case is different, here are some factors to consider when reviewing tiers and plans:
All plans will offer essential health benefits
Although the marketplaces will vary from state to state, all new health insurance policies sold in the individual and small group markets must provide a minimum level of coverage known as "essential health benefits" in 10 categories. These include prevention and wellness, ambulatory (outpatient) care, laboratory services, emergency care, hospitalization, maternity and newborn care, pediatric care (medical, dental and vision), mental health and substance use disorder services, prescription medications, rehabilitation and habilitation. "Consumers can shop with confidence knowing that all the plans have a comparable floor of benefits," says Mitts.
Look at your total estimated cost of care
Gerald Kominski, director of the UCLA Center for Health Policy Research, urges consumers to calculate their estimated total health care costs for the year. "In the past, people focused almost exclusively on the premium," he said. "But to make an informed choice, you also need to focus on your out-of-pocket liability. People are going to make trade offs. Maybe the plan that is right for you requires a higher monthly premium, but has lower out of pocket expenses."
Carefully review the network of providers
Check out the network of doctors and hospitals available in each of the tiers to ensure that you have access to the resources you need, especially if you are tackling a chronic condition (such as asthma, diabetes, high blood pressure, or congestive heart failure) that involves a variety of specialists, says Volk. Typically, plans with higher premiums, such as those found in the platinum and gold tiers, will have a broader network. You may need to decide between "access and budget," says Miller, when choosing a provider network.
Tap into tax credits and subsidies on the silver tier
Consumers looking to maximize tax credits and subsidies should consider silver plans, experts say. Individuals who earn up to 400 percent of the federal poverty level ($45,960 for individuals and $94,200 for a family of four in 2013) can apply for tax credits to offset premium costs. "The size of your tax credit is based on your income and the cost of the second-lowest silver plan in your area," says Miller. "The tax credit remains same regardless of tier. It will cover a greater share of your premium if it's a silver plan, less if you select a gold or platinum plan."
Subsidies to help with out-of-pocket expenses are available to individuals who earn up to 250 percent of the federal poverty level ($28,725 for individuals and $58,875 for a family of four in 2013). "But they must enroll in a specified silver plan to receive the subsidy," Miller points out.
Think twice about the lowest premium
Some consumers, especially those with limited incomes who do not qualify for tax credits or subsidies, might consider bronze plans that have low premiums. "But these plans are also going to offer the least comprehensive coverage, that means higher deductibles and up front costs before your coverage begins," says Mitts. "Consumers have to be prepared to pay the full cost of their health care that they need."
The same holds true for catastrophic plans. People under the age of 30 and individuals with very limited incomes can purchase catastrophic plans designed to cover worst-case scenarios. Although these plans have low monthly premiums, you must pay high deductibles and out-of-pocket expenses before the insurer begins paying for covered services. Consumers who purchase catastrophic plans cannot apply for tax credits or subsidies to help with costs. "The catastrophic plan was developed for young adults to encourage them to buy some health insurance rather than sit on the sidelines," says Kominski.
Examine the details for each plan within a tier
Once you have settled on a tier, carefully review the details of each health insurance plan offered in that category, including the cost of monthly premiums, deductibles, copayments and coinsurance. Insurers must provide an easy-to-read summary of benefits and coverage to help consumers compare plans. "Even within a tier, there could be differences in out-of-pocket expenses depending on the health services you need," says Volk. "A plan may work differently for you, even though your neighbor has the same plan, because of the services you use."
Standardized plans ease the process
Some states, such as California, have made comparison-shopping even easier by standardizing the plans that insurers can sell in the new marketplaces, says Kominski. "The deductible, coinsurance, copayments are all the same in standardized plans. The main difference is in the network of providers. Now you can decide: Which plan is better for me? Which provides better coverage and access in my area? Does the plan with a premium that is $50 cheaper provide adequate access to care where I live? It will be easier to make those comparisons."
Look for value-based elements
Dr. A. Mark Fendrick, director of the Center for Value-Based Insurance Design at the University of Michigan, urges consumers to look for health insurance plans that provide incentives for using preventive measures, medical procedures and medications that have been scientifically proven to be effective. These types of plans "make all the tiers better by lowering cost sharing for services that produce a lot of health and, if necessary, raising cost sharing for services that should not be used," he says. "Consumers get more for their money." For example, a value-based plan may waive the $20 copayment for a doctor's office visit if the patient is getting a diabetic foot check, which can prevent more serious and costly problems in the long run.
While no one can predict how consumers will respond once the marketplaces open, health advocates such as Kominski remain hopeful. "There is a lot of reason for optimism that consumers are going to be better off."
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