Shopping for Health Insurance on the Exchange

(Photo Details:  Last weekend, celebrating my friend's 50th birthday on the Lagoon at Stinson Beach, CA.  Can anyone guess the relevance to Obamacare?)

Last week, I thought I’d be blogging about my experience shopping for health insurance on the exchange.  In what I interpret as a good sign, it’s taken me one week to be able to get to the “apply” section of my state’s health insurance exchange.  It looks like a lot of people are looking to get themselves insured, and I’m glad about that.  Apparently I was one of over five million people shopping on the California exchange last week.

From the second day, I was able to review my choices, compare prices and coverage, and select the plan that I wanted.  But until yesterday I was unable to actually submit my application.   Yesterday, my application was accepted, but I haven’t been able to purchase the policy of my choice just yet.  Maybe later today—I’ve still got a couple months, so I’m not worried. 

Here’s what I’ve learned so far.

Should you even care?

If you have health insurance at work, no, you shouldn’t care.  Don’t bother reading any further.

If you are retired and on Medicare, you shouldn’t care either.  Stop reading here.

If you are retired and have retiree health insurance through your former employer, you don’t care either.  Go read a good book.

If you are on Medicaid, you shouldn’t care either.  Follow the instructions above.

That doesn’t leave many people who still care, I know.  But for those of you that are retired or are thinking about retiring before you are eligible for Medicare, read on.

Old rules

Up to now, when you retired (or otherwise found yourself without a job), I would have advised you to sign up for health insurance through COBRA.  It’s an expensive option, but it was the only way to guarantee that you could get health insurance.  Then, while you had the safety net of COBRA coverage, you could shop for an individual policy on your own.

Two problems existed if you went out on the open market to buy an individual policy outside of COBRA.  The first was that you wouldn’t know the actual price of your policy until you went through underwriting.  The second was that at the end of the lengthy underwriting process, the insurer could decide not to insure you anyway.  So it was a cumbersome process, to say the least.

New rules

Now you can shop for an individual policy, compare the actual prices, and actually wind up with a policy at the end of your application process.

Do I have to buy my insurance on the exchange?

No.  You don’t have to buy insurance on the exchange.  In fact if you wish, you can shop and compare providers, coverage, and prices on the exchange.   Then when you find coverage you like, you can go directly to that insurer and buy it through them, avoiding the exchange application process all together.

Or you can go through a broker (or on-line broker like ehealthinsurance.com) and do the same thing. 

However, if you qualify for subsidies under the new law, you must buy your insurance on the exchange.  On the other hand, even if you don’t qualify for a subsidy, you can still buy your insurance on the exchange, if you have the patience to wait a week or two.

Here is where you should start if you will be shopping on the exchange.

I assume this is the same in all states, but all of the policies I found on the exchange are the exact same policies I found on the individual carrier websites: same policies, same prices, same provider networks.

Can I still go to my doctor?

This issue was the most important factor to us, even over price.  When you shop on the exchange, you can filter results by which policies carry the network with your doctors.  While there are five insurers I can choose from in my region, only one of them includes the network with our doctors. 

How much will it cost?

This is the part that requires the most work.  As I’m sure you’ve heard by now, new policies are grouped into categories:  Bronze, Silver, Gold and Platinum.  Bronze level carries the lowest premiums, but those policies are designed to cover only 60% of your total health care costs.  Platinum plans are designed to cover 90% of your costs, but carry very high premiums as a result. 

We don’t use much health care right now, so the Bronze level works out to be the lowest cost overall.  When you consider costs, don’t just look at premium cost, but at how much out-of-pocket you expect to spend under each plan for the types of services you use, or expect to use regularly.

The carrier that covers our doctors offers an HSA-compatible plan in the Bronze level.  That way, we can still take advantage of the tax deduction for funding our Health Savings Account (HSA).  

While our premium will be higher with this new policy than our old one, our out-of-pocket expenses will be lower for a typical year’s health care expenses.  Most of our health care is preventative in nature, which is 100% covered under the new plan.  So overall, the line item for medical expenses in our budget remains unchanged, even though the breakdown is different.  Basically we are pre-paying for preventive care, so maybe I won’t boycott my doctor this year after all. 

You really have to sit down and run the numbers—if you have some ongoing health issues, you may save money by actually purchasing a more expensive policy.   It’s all going to depend on your individual situation. 

Do I qualify for a subsidy?

If your annual income falls between 138% 100%-400% (correction--the range can begin as high as 138% if your state expanded Medicaid) of the federal poverty level, you will qualify for some amount of subsidy to purchase health insurance.  You can elect to offset your premium as you pay it if you qualify.   If you turn out to be wrong about your income at the end of the year, you will have to true it up on your tax return and either pay back some of it if your income was higher, or get a refund if your income was lower.

You can also elect to pay the full cost of the premium each month, and then if your income turns out to be low enough to qualify at yearend, get the credit on your income tax return.  But as I said earlier, you can only get the subsidy credit if you purchased your insurance directly through your state’s insurance exchange, not if you purchased through a broker or directly through the insurance company.

If your state’s exchange isn’t working properly yet, here’s a link to the Kaiser Family Foundation’s subsidy calculator to see if you qualify for a premium subsidy,

What if I make the wrong decision?

At the end of the year, if you feel like you chose the wrong plan, you can change plans at the next open enrollment period.  So don’t think of this as a life-long decision.  This is another advantage over the old rules.  Previously, we could not change plans without going through underwriting again.  

If you opt out of insurance all together, and instead decide to pay the penalty, you can opt in at open enrollment as well.  But if you get cancer in May, you’ll have to pay your own way until you can get into coverage the following year.  Not that I’m expecting cancer next year, but that’s not a gamble I’m willing to take.

Related Posts:

            How to Get Health Insurance in Retirement (Part One)

            Are Retirees More Financially Agile?

            The Scary Impact of Inflation on Your Budget

Can’t keep track of my non-existent posting schedule?  Subscribe—it’s free!

Comments

[Juhli]

Great post. I just sent the link to my self-employed son and DIL in California.

[Sven]

I'm a retired doctor. Retired in July 2013. Don't get sick, because sixty percent coverage is a super small number. Sample...an MRI , for instance for back pain, is 2000 dollars, and the radiologists fee to read it is 250 dollars. Lets try PT rather than an MRI first, you say? 225 dollars per treat,ent and standard care plan is ten treatments.

Also, usually the insurance carrier pays sixty percent of the usual and customary fee. This fee is not the bill, but what the Insurer thinks the bill should be. For instance, with PT, they'll tell you the U and C fee is 190 bucks per session, they pay sixty percent of it, and you pay the rest, plus the thirty-five dollar difference for the actual bill.

Just letting you now how it works. Not saying you made a bad choice for you. Pray, and you didn't mention this, there is no deductible first.

Few people go in for the fully covered preventive care. It's the other stuff that'll bankrupt a person.

[Retired Syd]

Sven: That's already the policy I had before--the don't get sick policy. And the amount I saved in premiums over the last 6 years paid for the next 10 years of MRI's should I need one or two.

When you go to the doctor in-network though, you get your insurer's negotiated price. That's another great benefit of having insurance. Not so much that it covers everything, but that you don't have to worry about the price being higher--at least in-network. The Usual and Customary problem you mention is not a problem in my plan as long as I stay in network. Which is the main reason I chose my plan, so I could go to the doctors in my network.

To put this in perspective, the Platinum plan by my carrier (that is designed to cover 90% of health costs) would run us $7k more per year. That's a lot of MRI's!

[Retired Syd]

Sven: By the way, the out-of-network problem you mention is true in the Platinum plan as well. Both levels only cover 50% out of network and you have to pay the whole thing over the Usual and Customary charge. So don't just buy a more expensive policy in the hopes of avoiding this issue.

I wonder if you can explain this one to me, cause I can't make sense of it? If I paid the extra $7k in premiums for the Platinum plan, the difference in the out-of-pocket max is only $4,700 (12.7k vs 8k). So doesn't it seem like I would be paying an additional $7k to save a possible $4,500 on the in-network downside that I get really sick? That doesn't make sense to me. (That's kind of the bankruptcy situation--where you got really, really sick. So this isn't intuitive to me--the pricing on that.)

[Tom Sightings]

Good wrap-up of the situation. I guess, as you say, I shouldn't care anymore, b/c I just signed up for Medicare. But I know the problem well, as the last ten years of paying for medical insurance for myself has drained my bank account. Most current early retirees should benefit immensely from this new health care insurance.

[Angela]

Thanks for doing the investigating for us, Sydney. I feel much more informed! Not so scary after all!

[Retired Syd]

Tom: Well, from reading your post about signing up for Medicare, it seems there's a lot to learn there too!

[Janette]

Thanks for the great summary! I was wondering- is the income your taxable income? Do they take into consideration the amount of savings you have?
Right now we are good--but one never knows what the military will do next :)

[Retired Syd]

Jeanette: No, it's not taxable income. It's "Modified Adjusted Gross Income" (which is roughly Adjusted Gross Income on line 37 or your 1040, with a few items added back). Here is a link to the detailed computation:

http://laborcenter.berkeley.edu/healthcare/MAGI_summary13.pdf

They do not take into consideration the amount of savings you have, just the income that it generates on your tax return.

[Cindi]

I decided to go directly to a broker and buy our new insurance from them. It's the same exact pricing and policy as the exchange but their website is more user friendly. I had a rough week trying to get through the NY website.

For our locale, I only had two companies I could choose from. One was super expensive and the other was just expensive. It'll cost us 11% more than what we have now but all our doctors are in the network. DH, because of his health issues is getting a platinum plan. I'm going for the gold. No subsidies for us. Our income is too sporadic.

Going directly to the source was less stressful than the exchange. Things however, seem to be improving.

Excellent post Syd about ACA. Thank you so much.

[denise]

We have actually have a quote from COBRA that is a bit less than an insurance on the exchange for me but I'm worried if it's foolish to take the COBRA while the ACHA's fate is still up in the air. I have a good three years to go until I am eligible for Medicare.

[deegee]

Nice post, Syd. I had some trouble with the New York exchange website last Friday but by Saturday night it was running quickly and after some difficulty with one tricky question I was able to complete the application process and got accepted. I chose a Silver plan but decided to wait until I file my 2014 income tax return to get the subsidy. I read in the IRS website that it can be used to offset any taxes owed, so I will use the "overpayment" of my monthly premium (i.e. subsidy) toward my federal taxes due for the year because I have zero taxes withheld, making only some estimated tax payments.

The premium, net of subsidy, will cost less than I was paying for COBRA back in 2007-08 but more than I am paying today (I have a bare-bones policy I am not satisfied with; I am basically underinsured now). COBRA was a great deal but it ended after 18 months. This is an even better deal.

Attention Republicans - You do NOT represent me! This is a great piece of legislation. STOP trying to repeal it or delay it or defund it or any of the other stupid things you want to do to it!

[Retired Syd]

Cindi: If I were in your shoes I probably would have just waited a few weeks. With fluctuating income you might find that by the end of 2014 you actually did qualify for subsidies. If you buy on the exchange, you preserve that possibility if you wind up qualifying. Buying outside the exchange, you can't go back and get them.

denise: I don't think that is foolish at all--go wherever you can get the best deal! Just be sure to check that you wouldn't have been eligible for subsidies if you purchased on the exchange. They can offset a significant portion of premiums if you qualify. So be sure you're comparing the net exchange cost with your COBRA premiums. You can't qualify for subsidies using COBRA.

deegee: Yes, and the subsidy is fully refundable. Which means that even if you don't owe taxes, you can still get a refund of the premium subsidy if you qualified for it. Since you're getting a better plan than your bare-bones one, you may wind up net ahead, depending on your out-of-pocket expenses.

I'm just thrilled to be guaranteed that I can get insurance. I still haven't been successful in the "purchase" part on our exchange, but I know I'll get there sooner or later. If worse comes to worse, I'll use the actual telephone (which I hate!)

[Cindi]

Syd,
I haven't bought anything yet. I only got the info off of the exchange, along with the prices. When I looked at the health insurance company website, I found it easier to use than the exchange. We have till Dec 15th to make our purchase so that coverage will begin by Jan 1st.

I'm certain the NY exchange will be working much better in a few weeks and I will buy our insurance through the exchange. Again, thanks for the heads up.

[Maverick]

Syd, even based on MAGI, my savings generates too much income. So I have another idea...with my wife still working and myself recently laid-off, how about I move all my savings into my wife's name, then seek full subsidy for myself? That would work, right?

Deegee: Attention Democrats - You do NOT represent me! This is a great piece of legislation. Pay for it YOURSELF, and STOP trying to force it on me or any of the other stupid things you want to do to it! :)

My 2 cents, and I realize this may stir the pot...but healthcare DOES need to be rationed. (In Canada, one way it's rationed is by making you wait for elective procedures) Healthcare cannot be unlimited in funding. Just like you can't afford the house or car of your dreams, you realistically can't have unlimited resources for healthcare either. The healthcare providers need to be mandated to show pricing upfront just like in housing and car repairs. Consumers should be rewarded for making cost effective choices. Healthcare rarely works by just throwing more money at it. Oh, and of course the lawyers aren't helping here either for the consumer or the doctors...let's reform that hand-in-hand. We need to get back to the basics!

[Madeline]

Thanks Syd! We are almost retired (January 2014) and have been self employed for years,purchasing our own insurance with high deductibles and and HSA. LUCKILY our plan is grandfathered in and we can keep our plan for 2014. With NO RATE INCREASE!!

Our income for 2014 is completely unpredictable since we have a business for sale which may not sell till 2014. So--probably not eligible for a subsidy quite yet..

My first look at insurance from brokers shows premiums in the $1000 -$1500 range per month! Right now we pay $355 for an HSA plan with 3000 deductible each and decent coverage for illness, hospitalization and emergencies.But we do have to pay regular "office visit" fees if we see a doctor.But we don't see doctors often and when I do I negotiate a fee which is similar to what other people pay for a "copay." My dermatologist gave e a big break for paying cash,for instance..

The year Ken had to have a hernia repair I also "made a deal" and paid cash which was less that our deductible at the time. I find bargains EVERYWHERE !!!! I really hate to pay full price !:-)

I pay $100 cash to my Naturopath whom I've seen for 28 years for my yearly woman's exam. We are on no meds.

We try to eat healthy, exercise and stay as mentally emotionally and spiritually vigorous as we can, we're edging into our 60's now..and I pray this approach keeps us well..

I have not been able to get onto the ACA website all week in Arizona.Maybe I will try again this week.. I'd like to see what is available.

Our premium is quite low with our Aetna plan right now.. but I'd like to be able to get MORE coverage for maybe a little more money on the exchange if we can get a subsidy when we fully retire and our income --gulp--drops..

Sorry for LOOONG post..complicated issue! Frustrating too.. it took me 5 phone calls and being on hold with Aetna for 30 minutes at a time to find out if my plan would hold up in 2014.. so I could make my decision..

[JF]

Regarding deegee comments to Republicans, I am very conflicted. As an early retiree, this healthcare is a great for me. I realize, however, someone has to pay for this great deal. As with our national debt, I am concerned this will be shouldered by our succeeding generations and our generation will be seen as one of the most selfish, self-centered generations.

I also agree that healthcare needs to be rationalized. A large percentage of our healthcare dollars are spent in the last six months of life. Does this make any sense from a public health standpoint?

[Retired Syd]

Maverick: Nope that doesn't work. To get a subsidy, you have to file a joint return if you are married. Also, if you are offered insurance through your wife's employer, you are generally ineligible.

Did you read that long Time magazine article about our healthcare industry? It really is eye opening. You are right, health care providers should be mandated to show pricing up front. The fact that you can pay 10 times as much (or more!) at different hospitals is insanity. There's definitely room for more reform. It's too bad no one spent the last 4 years trying to actually make this act stronger instead of just the promise to repeal and then trust them, they will come up with something better.

But it actually sounds like you think ACA didn't go far enough. We basically kept the same system, with private insurers as the middle man. So not only do our insurers have to pay our health care costs, they have to pay their own executives, overhead, etc., and keep a little extra for investors. In aggregate, the consumer doesn't win--individual buyers may come out ahead or behind based on how much health care they have to consume. (But it's a bad way to "win" getting catastrophically sick, just not going bankrupt because of it. I'd rather "lose" by paying too much in premiums and not getting sick at all!)

I would have liked to see a system without the built in layer that included investors between me and my doctor.

Having said that, it's better than it was--not getting kicked off your coverage if you get sick, or not being denied for pre-exhisting conditions, allowing young adults to stay on their parents' policies, and expanding Medicaid to people that clearly can't afford it (the cheapest premium choice I had was $9k/year). How could a couple with $16k in income afford that without subsidies?)

Critics keep saying, why didn't we just pay for the 45 million uninsured to get healthcare instead of this big bill. And then people complain about the mandate? If you don't have a mandate, you'd have a whole lot more without healthcare trying to get free insurance, right? And who's money would pay for those uninsured anyway? Oh yeah, the same folks that are paying for it now under ACA.

My biggest concern now is that states that didn't expand Medicaid (who also account for 60% of this country's poor and uninsured) still won't get coverage for their uninsured. Those folks are caught in a catch-22 -- too "rich" for their state's Medicaid, and too poor for subsidies. Not because of the design of the ACA, but because of the Supreme Court's decision that the Medicaid expansion had to be voluntary. That's very sad to me.

I also agree that consumers should be rewarded for making cost-effective choices. Except for high-deductible plans, the incentives are all wrong under our current system. If you have great insurance coverage, you don't care how much the procedure/test/care costs, right?

Sorry for all the words, but I think we might agree more than we disagree, don't you think?

[Retired Syd]

Madeline: Well thank you for sharing that it took you 5 phone calls and 30 minutes at a time to reach Aetna. Not a lot better than the exchanges!

Anyway, I'm with you, I like the high deductible plans--very smart of you to negotiate. I have no dental coverage, and when I told my dentist that, they gave me a cheaper price too. I love the discount, but what a ridiculous system! But I never thought to try it with regular doctor visits.

Cindi: Glad to hear that--I want you to be able to buy groceries!

[Retired Syd]

JF: You've touched the third rail of healthcare, the massive amount of money we spend for end of life care. At the risk of people saying I'm for "death panels," I have to agree with you.

But even the patients don't want this. If you ask people, they say at the end of their lives, they don't want to die in a hospital, they would prefer home and/or hospice care. But then when it comes to it, doctors say "we can do this procedure," and family members say "yes", and their loved one gets another week of life hooked up to tubes and breathing machines.

A personal story: my 90-year old grandfather had a massive heart attack in his living room, and my 89-year old grandmother (who had been a nurse) called 911. Paramedics revived him at the scene and took him to the hospital.

When I got to the hospital my grandma was distressed, "why did they revive him, he's 90 years old?" she asked. Because she called 911, of course. He spent the next two weeks, the last two of his life, unconscious and hooked to machines. That's not how anyone wanted it to go, and it cost a fortune. All paid for by the taxpayers.

[deegee]

Maverick and JF: One thing about the penalty for not buying health insurance (but are still entitled to some degree of free health insurance), a penalty which will increase in the next few years (good!) is that these previous "free riders" will at least be paying something into the insurance system now, as opposed to before when they paid nothing. That and having many more of the young, healthy people buying health insurance will offset some of the costs of the subsidies.

As someone who worked for 23 years in the actuarial profession, I know that the individual mandate is the backbone to the ACA. I saw President Obama and former President Clinton talking in Clinton's Global Initiaitives Forum last week and I was very impressed at how Obama explained the concept of Adverse Selection as a consequence of not having the individual mandate. The problem is, it is a difficult concept to explain and much easier to criticize the individual mandate in a 30-second sound bite ("the mean, intrusive government is making me buy insurance.....") than it is to explain why the individual mandate is so vital to making the law work and make insurance affordable.

[dgpcolorado]

Thanks for that straightforward summary of the new system Syd. As you know I'm another one who has been buying my own insurance for a long time but remain too young for Medicare. Prior to the ACA I've always been one serious health condition away from being uninsurable.

A quick look at the costs of policies in my area show them to be about double what I am paying now (but more comprehensive, and with a lower out-of-pocket cap). With the tax credit the cost will be less than what I am paying now.

[Mike]

Syd - thanks for the great post and input. It is quite informative and useful! Do you think that setting up an HSA in retirement is worth it as we may be paying more of our health care costs today and into the future? Or are they more of a hassle for a relatively small tax benefit? Mike

[Retired Syd]

Mike: Yeah, I always think it's worth it--you get a deduction for what you put in there, and you never have to pay tax on the withdrawals if you use it for medical expenses. The cumulative effect of that over say 30 years--well, a lot.

[Kathy Bee]

Thank you so much for posting this. I've also learned a lot from the comments posted here too. I've been on a tightrope since 2007, going from Cobra into CalCobra and then to Guaranteed Issue. My current Guaranteed Issue policy with Aetna will end on January 1st because they are leaving California. I went on the exchange today - 6 hours - but I'm also waiting for my friend/broker to be authorized so I can do my deal through him - he has stuck by me for 6 years and I don't think he made much to speak of in any commission. He's just a committed hometown guy. I can't decide whether to buy on the exchange or an off-exchange policy. It's hard to determine whether my doctors will be on the exchange plan (they will be on the Blue Cross plans but not the Blue Shield plans) and also... Can I go to UCSF if I get really, really sick with some freaky brain tumor or will I be stuck with some useless, local hospital? It's very confusing.
Unfortunately, I am acquainted with the former CEO of WellPoint who owns 5 very large homes. I'm so grateful that my husband and I did not make our living from a product that took advantage of other peoples' illnesses and suffering.
Single payer seems the only way to go.
Thank you to everyone posting here - grateful for the info and moral support.