Yahoo Finance Why ‘affordable’ healthcare is leaving some families with sticker shock
Whether you purchase healthcare through an employer or via the federal marketplace, sticker prices can be deceiving. Annual premiums for employer-sponsored family health plans
grew only 4% this year, on par with 3% growth in 2014, according to an analysis by the Kaiser Family Foundation. Likewise, the cost of an average 2016 benchmark silver plan on the federal healthcare marketplace remained relatively stable after factoring in tax credits, down 0.2% year over year, compared to a 1% increase in premiums in 2015.
And yet, Americans feel more squeezed by health care expenses than ever. The culprit? Higher costs in the form of deductibles, coinsurance and copayments.
“We’ve seen relatively modest premium growth but higher deductibles is the trade-off there,” says Matthew Rae, a senior policy analyst for at the Henry J. Kaiser Family Foundation. “If you’re an employer, there are only so many things you can do to reduce the cost of a plan. Many have chosen to increase cost sharing.”
The share of workers enrolled in plans with an annual deductible — the amount they must pay before the insurer starts picking up at least part of the tab — increased from 55% in 2006 to 81% in 2015, according to Kaiser. Over that same period, the average deductible more than tripled from $303 to $1,077.
Growth in deductibles has far outstripped the rise in premiums for people signing up for insurance through the federal marketplace, Healthcare.gov. In 2016, the average deductible for an individual enrolled in a benchmark silver plan rose 6%, from $2,927 to $3,117, according to HealthPocket, a healthcare research firm. The average deductible for a family increased 8%, from $6,010 to $6,480.
Stuck in the middle
Rising out-of-pocket expenses have proved challenging for middle-class workers who aren’t offered health plans through an employer and whose income is too high to qualify for tax subsidies.
Matthew Helak, 50, owns a small residential cleaning business in Downington, Penn. Like many privately-insured Americans, Helak and his wife were bumped from their private insurance plan because it didn’t meet the standards required under the Affordable Care Act in 2014. At the time, Helak signed up for a platinum plan with Independence Blue Cross, which cost a steep $1,100 a month but did not carry a deductible, a perk he was accustomed to with his old plan. “Just because we were canceled we didn’t want to have our coverage slip,” Helak says. The majority of people insured on the federal marketplace receive some kind of tax credit to help offset premium costs, but Helak's income was too high to qualify.
When it came time to renew coverage for 2015, Helak says the same plan increased to $1,300 a month. It was more than they were willing to shell out, so the couple chose a lower-cost gold plan from United Healthcare. The plan cost a more manageable $766 a month but came with a $1,000 annual deductible. When he began the renewal process for 2016 coverage, he learned the same plan would now have a $899 monthly premium and a $2,000 deductible. “The total expense for my wife's and my healthcare, not including co-pay, co-insurance, etc. is 8% to 10% of our annual salary,” he says. “And since it is now government mandated, I would liken that to a pretty hefty tax for a small-business owner.”
Vince Juliana, also a small-business owner in Pennsylvania, underestimated his 2014 earnings and had to pay back roughly $600 to the IRS. Tax subsidies for ACA plans are based on projected income for the year. Underestimate your earnings and you could wind up owing whatever tax credits you got.
“You have to brace yourself knowing you could end up owing money back,” says Juliana, 65, who runs a graphic design firm.
Like Halek, Juliana was dropped from his private insurer because his existing plan didn’t meet ACA requirements. He signed up for a gold plan on the exchange, more than doubling his monthly premium costs, which went from $650 to $1,400 for a family of five. The family deductible was massive — $12,000 per year. (Federal marketplace plans have a mandatory out-of-pocket maximum of $13,200 for families and $6,600 for individuals.).
“It’s like a mortgage payment and I got nothing more in terms of coverage than I had before,” Juliana says. “I don’t see what’s affordable about the Affordable Care Act.”
Just as many consumers are frustrated by the cost of healthcare on the federal exchange, there are others who say they’re thrilled to be able to afford decent coverage for the first time. Of the 10.2 million people who had Marketplace coverage in 2015, 85% qualified for an average tax credit of $272 per month, according to the Department of Health and Human Services. Nearly 80% of consumers paid monthly premiums of $100 or less after tax credits were applied.
Hubie Martinello, 64, dropped the group health policy that covered his Gulfport, Miss.-based telecommunications firm when rates became too steep. As a result, he and his wife went without coverage for several years. When his wife needed an operation that would cost $12,000 they took a gamble and flew to Costa Rica for the treatment. “We had it all done for $1,500,” says, Martinello. When his wife needed additional medical care, they later traveled to Nicaragua, where they were impressed by both the cost and patient care. If not for the Affordable Care Act — and the fact that Martinello suffered a stroke in the fall of 2013 — they would have moved abroad permanently, he says. With their low combined household income (Martinello draws on Social Security income, his wife does not work), they qualify for tax credits and pay only $100 a month for a silver insurance plan through Humana.
“The insurance I got through the marketplace has been wonderful,” he says. “It really saved my life.”
Rae says people who aren’t used to shopping for health plans should pay close attention to more than just the monthly premium. Using HealthPocket estimates, a 50-year-old man would pay an average of $428 per month for a gold plan with an average deductible of $1,165. He might be turned off by the cost and choose a bronze plan instead, which at $290 a month looks cheaper. But it comes with a much higher deductible: $5,731. What he’d save on premiums ($1,656 per year) he could easily wind up paying back in out-of-pocket medical expenses.
“I can understand why it’s really frustrating… The average plans in both the employer market and the healthcare exchange have really high deductibles,” Rae says. “I can see that being a barrier to care for households who don’t have enough assets to meet those deductibles."
Have a question about your health insurance? Send us a note at yfmoneymailbag@yahoo.com.
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Mandi Woodruff is a reporter for Yahoo Finance and host of Brown Ambition, a weekly podcast about career and finance. Follow her on Tumblr or Facebook.
