Column 55 July 5 2014

Column 55 July 5  2014

 

Guaranteed issue coverage is eliminating at least one piece of paper from your life.  More insurers are discontinuing issuing the Certificate of Creditable Coverage.  This document was used to verify that an individual had coverage during specific time frames.  Prior to the ACA (Affordable Care Act)  health plans often had a clause that restricted coverage for pre-existing conditions for up to one year, but credit was given for "time served" under a prior plan if there were no more than a 63 day break in coverage. 

Under the ACA, plans may no longer restrict coverage for pre-existing conditions, regardless of your prior coverage history.  Therefore health plans are eliminating this document.  However, you may continue to need documentation that you have had a qualifying event, should you attempt to purchase coverage outside the open enrollment periods.  You may need documentation from a prior employer indicating that your group insurance was cancelled, or a birth certificate to verify the new dependent.  A marriage license or proof of marriage would be needed to document this change in status. 

If you are terminated from employment, and your group is subject to COBRA (the regulation that requires an employer or insurer to provide an option for the insureds to continue coverage), this notice may indicate the qualifying event and the date and may be allowed by the insurer when you enroll. However, the insurer may still require a letter on company letterhead.

As the November open enrollment date approaches, some individuals may be concerned that they must re-enroll in their health plans.  As of this writing, one need not re-enroll if there has been no change in income, family status or coverage status.  The plan and subsidy will remain the same.  If coverage was purchased off the exchange, the same holds true.

However, if there has been a change in income, this must be reported and a new plan chosen.  To date, any such reported change requires that the plan be reselected and this will be continue during open enrollment.  This open enrollment period may also be a good time to change plans if one has a change in health conditions.  It is always important to "do the math".  Calculate the net premium that you will pay (after subsidy) for the year.  Add the maximum total out of pocket exposure that you might have under the plan.  In the new ACA plans this is reflected including deductibles and copays and will not exceed $6250 per individual or $12,500 if there is more than one person covered on the plan for the family. 

If one is seriously ill, it is likely that the out of pocket maximum will be reached.  If that is the case, then it may not be necessary to pay the higher premium for the lower deductible.  On the other hand if utilization is at the medium level and out of pocket maximum is not reached, the higher coinsurance that limits the insured's share of expense may be a better deal. 

Following is an example:

Age 40, Income $30,000: Bronze plan premium = $235 minus subsidy or premiums assist of $112= net premium of $123 x 12= $1476.  Max out of pocket exposure in network = $6350 + annual premium of 1476= total exposure of $7826.

Same age and income Silver plan $313 premium minus subsidy of $112= $211 net premium x 12 =$2536.  Max out of pocket exposure in network = $6350 + annual premium of $2536= total exposure of $8882.  Is it worth paying $1056 more in annual premium?

The Silver plan has only a $2000 deductible, rather than $4500.  So if claims are between $2000 and $4500, the Silver MAY be the better choice. If the claim is $3500 the insured would pay: $2000 deductible plus 20 % of the balance or $300, rather than the full $1500.  But the insured would also have paid $1056 more in premium so a total of $1356.  On the high deductible they would have paid $3500 (total cost)+ $1476 (premium) = $1496 or a savings of $140.

This is an important exercise to do with any insurance purchase, but especially health insurance, where it is so easy to reach the out of pocket maximum.  While it is not easy to predict what services you may need in the future, it is easy to show a "worst case" scenario.

Note: All information in this column is provided" to the best of my knowledge" subject to final regulation by the respective agencies at press deadline.  Please submit questions to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .