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Obamacare Shopping Is More Important Than Ever

Many ACA consumers can find lower premiums by switching plans, HHS says.

When some premiums increased last year, a lot of Affordable Care Act (ACA) customers were able to find good deals by switching to a new health plan. New calculations from the federal government suggest that many consumers will need to do the same to find the best price in 2016.

According to The New York Times, the marketplace will offer customers a tough choice: Stick with the plan you have and pay more, or switch to a new one to pay a lower premium. The savings may be substantial. Instead of simply renewing, the average returning customer who chooses the best deal in the same category as an old plan could find one costing $610 a year less, say analysts for the Department of Health and Human Services. About eight in 10 returning customers on HealthCare.gov can find a cheaper premium by switching.

Customers will be able to start signing up for new plans on November 1, but people interested in window shopping can already do so in many states. Early information about premiums suggests that the total prices of plans in many states are going up by a lot, though the structure of government subsidies will insulate most customers from the changes.

The ACA uses a market instead of a single government provider to offer health insurance to middle-income people. For that reason, the main mechanism it uses to keep insurance affordable is market competition. Customers can pick a new plan every year, and, the thinking goes, insurers will have an incentive to keep their prices as low as possible or risk losing customers.

This year, this system worked surprisingly well. Nationwide, about half of all returning customers shopped around before settling on a health plan — and a full quarter switched. Those numbers were much higher than many experts expected. A government report on October 28 confirmed that those switchers were looking for a better deal. The people who picked different health plans this year chose those costing an average of $490 less a year. For people switching within the same category — a more common occurrence — the savings were about $400.

The numbers strongly suggest that price-sensitive customers in many markets may need to switch plans for a third time this year. In some ways, that is good news, since it means people in expensive plans will have other choices. But the change is sure to be inconvenient and may disrupt people’s health care. Many of the lowest-cost plans in the marketplace limit the doctors and hospitals they cover.

That means that patients may have to change not just their insurer but also their doctor if they want to find a cheaper plan. Many customers in these markets are healthy and haven’t used the medical system much, so they may be able to weather those changes easily. But for people with complex needs and established relationships with doctors, switching can be more difficult.

Over time, the need for annual switching may diminish as the market becomes more stable. Insurers have been jostling to get customers in the last few years, and many made pricing mistakes — charging less than it cost to provide care, or charging too much to attract customers. As the insurers get a better idea of what it costs to provide care to marketplace customers and how much money they wish to earn from them, the swings in prices between one plan and another may become less substantial.

Source: The New York Times, October 30, 2015.

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