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Consumers With Serious Medical Problems Need To Carefully Assess Total Plan Costs

Sep 10, 2013

One of the health care overhaul's most far-reaching provisions prohibits health plans from refusing to cover people who are sick or charging them higher premiums. Still, for people with serious medical conditions, the online health insurance marketplaces present new wrinkles that could have significant financial impact.

Obviously, premium costs will be an important consideration for consumers. But just as important will be a realistic assessment of what kinds of out-of-pocket costs they could expect with different types of policies and what subsidies they will be eligible for.

"Everybody should be factoring in cost sharing along with the premium to try to assess what their total financial exposure is," says Jennifer Tolbert, director of state health reform at the Kaiser Family Foundadtion. (KHN is an editorially independent program of the foundation.)

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The law requires new individual and small group plans sold on the online marketplaces, also called exchanges, and on the private market to cover a comprehensive set of 10 "essential health benefits," including prescription drugs, hospitalization and doctor visits. The benefits covered will be similar in all plans, but the proportion of the costs that a consumer pays will vary.

There will be four different levels of plan coverage, each identified by a precious metal: Platinum plans will pay 90 percent of covered expenses, on average; gold plans will pay 80 percent, silver plans 70 percent and bronze plans 60 percent.

Tax credits to help cover the cost of the premiums for plans sold on the exchanges will be available to people with incomes up to 400 percent of the federal poverty level ($45,960 for an individual in 2013), and cost-sharing subsidies will reduce the out-of-pocket costs for people with incomes up to 250 percent of poverty ($28,725 for an individual in 2013). The maximum amount that consumers will owe out of pocket for in-network medical claims will generally be capped at roughly $6,400 for individuals and $12,700 for families in 2014. (Those figures do not include money spent on premiums.)

How all those elements work together can have cost and coverage implications for people with high medical expenses.

For example, even though the premium for a platinum plan will generally be higher than that of a bronze plan, the out-of-pocket spending cap may be significantly lower since platinum plans must cover 90 percent of expenses. In California, for example, the out-of-pocket spending limit on a platinum plan is $4,000, compared with $6,400 for other metal level plans.

For people who expect to hit their spending cap, buying a pricier platinum plan may actually result in lower total spending, says Marc Boutin, executive vice president and chief operating officer at the National Health Council, a patient advocacy organization.

"It's counterintuitive," he says.

Insurers anticipate that people with high medical costs will gravitate toward platinum and, to a lesser extent, gold plans, and they're pricing those plans accordingly, say experts.

If only one member of a family has high medical expenses, families may want to consider splitting coverage between different plans.

"Many insurers are expecting that savvy families will enroll a sick family member in a platinum plan and the rest in lower level plans," says Tolbert.

Depending on where people live, that strategy could run into snags. Although splitting family coverage is allowed on the individual market, state and federal officials say the Department of Health and Human Services is considering whether to limit the practice on the exchanges it will run in 34 states next year, as are some states setting up their own exchanges.

In addition, platinum plans may not be available in every state. For example, none of the seven insurers that have been approved to sell plans on the Washington State Health Benefit Exchange will offer platinum plans next year, says spokeswoman Bethany Frey.

A platinum plan may not be the best option in any case, even for people with expensive medical conditions. Although premium tax credits are available for any type of plan, cost-sharing subsidies that can substantially reduce deductibles, copayments and coinsurance are only available on silver plans.

"If you qualify for cost-sharing reductions, you'll have lower out-of-pocket costs for doctor visits," among other things, says Carrie McLean, director of customer care at ehealthinsurance.com, an online vendor. "Add those things up and see what would happen if you were to forgo that [subsidy] and get the platinum plan."

In addition to how much the plan costs overall, people with serious medical conditions need to carefully review whether the drugs they take are on the plan formulary, and the specialists and facilities they visit regularly are in the plan's network, say experts, as well as their out-of-pocket costs to go out of the network.

"People need to do an honest assessment of their needs, and determine what's on their 'must have' list," says Kirsten Sloan, senior director of policy at the American Cancer Society’s Cancer Action Network.

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