By Kimberly Lankford, Kiplinger Personal Finance
Q: I bought my health insurance policy with a subsidy through Healthcare.gov last year. What do I need to do during open enrollment this year? Do I have to sign up again, or will I be reenrolled automatically?
A: If your plan is still available, you don’t need to do anything — you’ll be automatically reenrolled for 2016. But a lot of plans are boosting premiums and making big changes to their coverage. Another plan may be a better match — and a better deal — for you this year, and in 14 states at least one new insurer is entering the business, according to health consulting firm Avalere. United Healthcare, for example, will be selling coverage on 34 state exchanges, up from 23 in 2015. The size of your subsidy may also be different if your income or the cost of plans in your area has changed.
Here’s what you should do during open enrollment.
1. Find out how your current plan is changing. You should be receiving an update in the mail about changes to your current plan’s premiums and coverage. The average premium for the second-lowest-cost silver plan (which is used as a benchmark to calculated subsidies) is increasing by 7.5 percent for the 37 states that use HealthCare.gov as their exchange. The changes vary a lot by state — the average premiums for the benchmark plan are increasing by 25.8 percent in New Mexico but decreasing by 12.6 percent in Indiana, for example. The prices can vary even more if you look at all levels of plans.
And don’t just focus on premiums. Some plans are making major changes to their coverage, which can make a big difference in your out-of-pocket costs. The number of preferred-provider organizations (PPOs), which usually let you use out-of-network providers if you pay higher co-payments and deductibles, is decreasing by 36 percent in 2016, says Rachel Rambo, manager of customer care for eHealthInsurance.com, which sells policies both on and off the exchanges in most states. Meanwhile, the number of health maintenance organizations (HMOs), which generally don’t cover out-of-network providers except for emergencies, is increasing by 15 percent. And the number of exclusive provider organizations (EPOs), a newer type of plan that limits coverage to in-network providers except for emergencies, is increasing by 67 percent. Some insurers that are discontinuing their PPOs may automatically switch you to an HMO or EPO unless you choose a different plan, says Rambo.
2. Update your income with the exchange. Log in to www.healthcare.gov (or your state exchange) to make sure your income and other information about your household are up to date. The data will affect the size of your subsidy for 2016. You’ll qualify for a subsidy to help pay the premiums if your income is below 400 percent of the federal poverty level ($47,080 if single or $63,720 for a couple). See this tool on HealthCare.gov for the income cut-offs by state and family size. If your income has decreased since last year, you could qualify for a bigger subsidy. If it has increased but you didn’t update your info on the exchange, you may need to pay back some of the subsidy you received when you file your 2016 taxes. And depending on how you filled out the forms last year, you may be required to submit new information in order to get a subsidy at all.
Also, if your income is less than 250 percent of the federal poverty level ($29,425 if single or $39,825 for a couple), you can get a cost-sharing subsidy to help cover the deductibles and co-payments, but only if you buy a silver-level plan. Last year, Avalere found that more than 2 million people who bought coverage on the exchanges missed out on this extra subsidy because they didn’t buy a silver plan.
3. Compare the plans in your area. Focus on out-of-pocket costs as well as premiums. A plan with low premiums but high out-of-pocket costs for your drugs and medical care may cost you more by the end of the year. HealthCare.gov is rolling out a tool to help you estimate your out-of-pocket costs under each plan based on low, medium or high health care usage (but may not be available in all areas at the start of open enrollment). A tool that eHealthInsurance.com is introducing estimates out-of-pocket costs for your medications. You may also find tools to help estimate your costs at other states’ exchanges or the insurers’ websites. Alex Tolbert, of Bernard Health, which provides consumers with health insurance advice, recommends that you narrow your search by getting the list of policies and premiums at your state’s health insurance exchange, then pick one of the lowest-cost plans (a bronze plan), one of the higher-cost plans (a gold or platinum plan) and two silver plans. Then run the numbers for your drugs and health care needs to estimate your out-of-pocket costs. After you decide which type of plan works best for you, look at your choices in that category to find out which ones do the best job of covering your specific providers, drugs and other needs.
4. Check whether your key doctors, hospitals and other providers are included. Some of the lower-cost plans have been notorious for having small provider networks and covering few doctors and hospitals. If you go to a doctor or hospital that isn’t included, you may have to pay much higher deductibles and co-payments for the care (if you have a PPO), or the plan may not cover the care at all except in emergencies (in an HMO or EPO). Don’t just ask the insurer or doctor if it is covered by that insurance company; ask about the specific plan. Some insurers have several versions of their plans with different provider networks.
5. Find out how your drugs are covered. Out-of-pocket costs for prescription drugs are often the biggest expense, even with coverage. After you check whether your drugs are covered in the plan’s “formulary” (its list of covered medications), find out how they’re covered. Some plans have as many as five pricing tiers–with different rates for preferred and nonpreferred generics, preferred and nonpreferred brand-name drugs, and the highest rates for specialty drugs. With some plans, you may have to pay 30 percent or more of the cost of expensive specialty medications. Also find out if you’ll have lower out-of-pocket costs if you use certain preferred pharmacies.
6. See whether the plan is HSA-eligible. If you choose a high-deductible plan, make sure it is eligible for a health savings account. The plan must have a deductible of at least $1,300 for individual coverage or $2,600 for family coverage in 2016 and meet a few other requirements (prescription drugs, for example, can’t be subject to a lower deductible). HSA-eligible plans aren’t always clearly marked; ask the insurer before you buy the plan. You can make up to $3,350 in tax-deductible contributions to an HSA in 2016 if you have individual coverage, or $6,750 for family coverage, and you can add an extra $1,000 if you’re 55 or older. You can use the money tax-free for medical expenses in any year.
7. Pick a plan before December 15. Even though open enrollment for 2016 plans lasts until January 31, 2016, you must enroll in a plan by December 15 for coverage to begin January 1. If you enroll by January 15, coverage will start February 1. And if you enroll by January 31, coverage starts on March 1. You can switch plans more than once during open enrollment. If you pick a plan in the fall and then discover it isn’t the best match when you start to use it in January, you have until January 31 to switch to another plan for the rest of the year.
The penalty for not having coverage increases significantly in 2016. If you don’t have coverage, you’ll have to pay a penalty of $695 per adult and $347.50 per child younger than 18 (with a total family maximum of $2,085, regardless of family size) or 2.5 percent of your annual household income, whichever is higher.