Most likely by accident, President Trump has made the 2018 healthcare marketplace a bargain-hunter’s paradise. Because of quirks in how the Affordable Care Act (ACA) was set up, the president’s action to stop cost-sharing reduction (CSR) payments to insurance companies has resulted in more Americans becoming eligible for low-cost or even free health insurance.
It’s not a marketing come-on or a bait-and-switch promotion. It’s just math. There’s a bit of irony involved, but it’s true. The candidate who pledged to repeal and replace Obamacare—and who in mid-October called it “dead” and has previously tweeted to “let ObamaCare implode”—has helped make ACA health plans much more enticing to millions of consumers.
Free health insurance? Yes, it’s possible. But you need to meet some particular qualifications to take advantage of the deal.
How did we get here?
On October 13th, President Trump announced that his administration would stop funding the CSR payments that reimburse insurance companies for reducing the amount low-income consumers pay for out-of-pocket costs, such as copays and deductibles. This move set off a domino effect in the insurance market.
Because the CSR subsidies only affect the healthcare exchange’s silver plans, prices were hiked on these plans by an average of 37% to help offset losses. Other types of plans remain virtually unaffected. Some states waited until after the official announcement before deciding how much of an increase they would allow. That’s why no one knew exactly how prices would be affected by President Trump’s action until 2018 premiums were released in late October.
This is where the math comes in. As the price went up on the silver plans on one side, the premium subsidies (tax credits) that lower premiums for 85% of people with an Obamacare plan went up on the other side. The premium subsidy amount is based on the price of the second-lowest cost silver plan available in a region, so as the silver plan price went up, so did the premium subsidies. The good news is that premium subsidies can be used for any type of plan on the exchange, whether it’s bronze, silver, gold, or platinum.
Because the price of silver plans went up significantly but bronze plans didn’t, some people now have a premium subsidy that’s high enough to pay for the entire premium of a bronze plan. That means free, or “zero premium”, bronze plans. Others can get hefty discounts that will make bronze plans cost less than a couple of bags of potato chips a month.
Premium prices and their corresponding premium subsidies vary depending on which state you live in, but in general, younger lower- to middle-income Americans just got a great discount on Obamacare health insurance. An analysis performed in late October showed that there were consumers in all of the 2,722 counties included in the data who could purchase a free policy with their premium subsidies.
I did a little digging and easily created some real-world examples of how this can work.
- “Andrea” is a single 40-year-old preschool teacher in Kansas City, Missouri, who will make an estimated $30,150 in 2018. Her premium subsidy would be $314 per month. There is a bronze plan available to her that will only cost her $9.17 per month because the amount of her premium subsidy nearly pays for the cost of the bronze plan’s monthly premium.
- “Bill” is a married freelance graphic artist with two kids, ages 10 and 12, living in Nashville. He’s 40 and the family makes $50,000 per year. The premium subsidy for his family is $896 per month. Bronze plans for him start at $795, so the entire family can be covered without paying anything for the premium.
Getting this discount depends on age, income, and where you live. It’s best to check with a licensed health insurance agent to make sure you get the best deal.
Can this help insurance companies, too?
Free insurance is not only great for the people who qualify, but it works to benefit insurance companies as well. The unexpected pricing primarily benefits younger, healthier individuals. And these are exactly the people insurance companies need.
It’s the younger demographic that helps pay for the people who are older and sicker. It’s also the demographic that so far has not purchased health insurance in enough numbers to help stabilize the marketplace. Having the opportunity to purchase free health insurance for a $0 premium just might change things and get them to purchase plans. We’ll see if this incentive helps.
Not everyone’s so lucky
The idea of a free health insurance plan sounds rosy, and it is. But not everyone who purchases a plan off the exchanges is going to hit the premium jackpot.
Families and individuals whose incomes are too high to receive a premium subsidy are going to be stuck paying the higher premium prices. And a 37% increase in the cost of premiums might be enough to prevent people from renewing. But all may not be totally lost.
Because the premium increases left bronze and gold plans mostly intact, it might be feasible to find an affordable bronze plan or purchase a gold plan for about the same price as a silver plan. In some cases, it may help to find an individual plan off the marketplace. A licensed health insurance agent will be invaluable to this demographic to help them find affordable solutions.
It may not have been President Trump’s plan to create a 45-day health insurance fire sale. With his reduction of the enrollment period, advertising budget cuts, and cancellation of CSR payments, it’s not likely that creating a discounted marketplace was his intention. But he did it.
My advice? If you qualify for a free bronze plan, sign up by December 15.