Regardless of who provides your insurance coverage, you are likely either in open enrollment season or open enrollment is just around the corner. Open enrollment for Medicare this year is from October 15th to December 7th. The enrollment period for the Affordable Care Act (ACA) is shorter this year than in prior years, running from November 1st to December 15th, and the HealthCare.gov site is scheduled for maintenance outages on several Sundays during that period.

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If you are enrolled in Medicare, you have the opportunity to switch from traditional Medicare to a Medicare Advantage plan and vice versa during the open enrollment period. Additionally, you can switch between Medicare Advantage plans if you are already participating, and the same is true for Medicare Part D. It isn’t unusual for either Medicare Advantage and Part D plans to change, so if your provider has notified you of other plan changes that aren’t beneficial to you, you might consider other options. Medicare offers a Medicare Plan Finder page here that you can use to find out what is available in your area.

There have been a number of changes in the implementation of the Affordable Care Act, so if you are one of the 16 million individuals that had ACA compliant plans as of 2017, expect changes in 2018. Although Congress was unable to come up with a replacement for the ACA, Executive actions have roiled the markets and increased premiums. The bottom line for those looking to purchase a policy in 2018 is that unless you are receiving subsidies, you should definitely consider buying an ACA compliant plan off the Exchange. If you are receiving subsidies but aren’t eligible for Cost Sharing Reductions (more on that below), you might find that plans other than the silver level plans are relative bargains.

To understand what has happened, it is useful to start with one of the key aims of the Affordable Care Act – to make healthcare more affordable1. Affordability was typically measured by determining what percentage of overall household spending was going towards healthcare, and the goal was to establish mechanisms to limit healthcare spending to a certain percentage of income, particularly for lower income households . This was partly achieved through expanding Medicaid to those with incomes below 138% of the Federal Poverty Level, and partly by providing two types of subsidies, which are:

  • Cost Sharing Reductions (CSRs) – CSRs are available to enrollees who earn 100% to 250% of the Federal Poverty Level. CSRs are used to cover co-pays and deductibles, thereby keeping total out-of-pocket healthcare costs below a certain level. CSRs are only offered on Silver plans sold on the Exchange (a point that will prove key in a moment.)
  • Advanced Premium Tax Credits (APTCs) – APTCs are tax credits meant to offset the cost of healthcare premiums and they are available to those earning 100% to 400% of the Federal Poverty Level and buying plans on the Exchange. APTCs are designed to cover the gap between the required participant contribution – which is based on income – and the premium. Thus, in the event that premiums rise sharply, APTCs will increase to protect policyholders. Silver plans play a key role here, too, as the premium on the Silver plan is used to calculate the amount of the APTC, regardless of whether a participant purchases a Silver plan, a Gold plan or some other metal level.

APTCs will continue to be paid for 2018, but the President recently announced that the payment of CSRs would be discontinued. As a result, insurers are facing a shortfall of $7 billion. To cover that shortfall, insurers are increasing premiums. However, some insurers have elected to load this additional cost solely on Silver plans because those are the only plans for which they would have received the Cost Sharing Reduction payments from the Federal government. For insurers that do this, the premiums for the on-Exchange silver plans will increase by a good bit more than premiums for Bronze, Gold and Platinum plans, but these silver plans will be used to determine how much premium tax credits will be increased for all plans.

Two primary impacts of this are that a large increase in tax credits without a corresponding increase in premium increases for Bronze, Gold and Platinum plans may make those plans relatively more affordable for those that qualify. Additionally, the increase in APTCs is likely to be greater than the savings on the CSRs, meaning the government will actually spend more money providing subsidies.

What does this mean to you if you plan to buy individual insurance for 2018? If you are eligible for the Premium Tax Credit – but not the CSRs – you might find that Gold or even Platinum plans are relative values given the credit increase and Bronze could be more affordable. The situation will depend on how the carriers that are available to you elected to spread the cost of the missing CSR payments.

If you aren’t eligible for subsidies, on-Exchange Silver plans won’t make sense for you if your carrier is loading the cost of the CSRs solely onto the Exchange silver plan. Instead, take a look at both on and off-Exchange options to find your best plan. There may well be an off-Exchange Silver option which is still ACA-compliant (i.e. you don’t have to worry about pre-existing conditions, among other things) but which will have a lower premium than its on-Exchange counterpart.

While it is counterintuitive, the decision not to pay CSRs could be beneficial to some ACA participants. However, it is still destabilizing to the market, as is the lack of funding for outreach and the general confusion around the status of the program. Outside organizations are attempting to pick up some of the slack in getting the word out about the open enrollment period, but if you know of someone who needs to purchase insurance in 2018, make sure to let them know about the open enrollment period from November 1st to December 15th.

  1. As someone who purchases coverage via the Exchange, I am well aware of the argument to be made that healthcare is still not affordable and is becoming less so. However, the subsidies for those that are eligible do make healthcare relatively more affordable.

Minerva Planning Group is a fee-only financial advisory firm based just outside Atlanta in Decatur. You can contact them here.