Obamacare Premiums Explained

Insurance premiums have always been a sensitive issue. Those who think they don’t need health insurance don’t want to fork out a large amount of money on something they won’t use anyway. Even those who feel that health cover is important complain that they’re paying more than what they have to.

All of these haven’t changed when the Affordable Care Act came around. The Act has made a huge difference to the healthcare situation in the United States, but the price of the insurance plans still bother a lot of people. This isn’t really surprising, though: Americans do their best to earn a living, and they want to make sure their hard-earned money won’t go waste.

If you want to know more about ObamaCare premiums, this guide is for you. Read on to find some of the most commonly asked questions about the Affordable Care Act and know their answers.

1. Why Are The Insurance Premiums Still Rising?

“I’ve heard that ObamaCare can help in reducing healthcare costs, but why is it still expensive? Why do the premiums still increase every year?”

These are some of the questions that pop up in people’s minds when they hear news or read articles about the rising insurance rates. There are many reasons for this, and one of them is that, under the Affordable Care Act, insurers need to cover every eligible American citizen — whether they’re high-risk or not. As a result, companies need to spend more since they now cater to older adults as well as people who have pre-existing medical conditions: two groups who understandably need more treatments and medications and would naturally rack up higher bills than younger, healthier folks.

Experts point out, though, that premium increases related to required benefits and protections happened only between 2010 and 2014. As 2015 rolled around, the health insurance industry has become more stable, which has led to a slower premium growth and lower healthcare spending.

Of course, these don’t mean that insurance plans will get dirt-cheap any time soon. Insurance companies usually raise their prices every year, and it’s likely that they’ll continue to do so even with the Affordable Care Act. But people don’t have to worry since the government won’t let insurers jack up their prices too much. Before they can set a price increase, they first have to undergo a rate review and explain why they need to raise their rates (applicable only to price hikes that are above 10 percent). They also need to show that they’re following the 80/20 rule, which requires them to spend at least 80 percent of their premium earnings on their clients’ claims and on activities that foster better healthcare quality.

2. Is It True That High-Earners Will Have To Pay More?

Unfortunately, yes. ObamaCare acts like a tax and promotes cost-sharing, so those earn more will have to pay more and those who earn less can pay less. This might seem unfair to high earners, but they can think of it as a way to help those who are less fortunate than them. This includes parents who struggle to raise their children, recent graduates who are making do with a low-paying job while trying to climb higher on the career ladder and elderly people who have retired and are depending on their pension.

3. I Have Low Income And Can’t Really Afford Insurance. Can Obamacare Help Me?

Yes, it can! The Affordable Care Act provides cost assistance to those who are eligible for the ObamaCare health insurance but don’t have the budget for it. For instance, if your annual income is less than 400 percent of the Federal Poverty Level, you can get a subsidy in the form of tax credits, cost-sharing reductions and Medicaid.

4. Do I Need To Re-Evaluate My Plan Every Year?

It might seem like a huge hassle, but experts actually recommend assessing your insurance annually instead of opting to auto-renew your plan. This is especially true if you’re on one of the low-cost plans, which are usually the ones that ask for a higher price increase every year. By evaluating your cover every year and comparing it against other products, you can decide if it’s still the right option for you and if it still gives you great value for money.

Another reason to re-assess your policy is to ensure you won’t end up owing a huge amount of taxes. To understand this, you have to know that the government picks a “benchmark” plan (which is usually one of the cheapest options in the market) and uses it to determine how much subsidies to give. For explanation purposes, let’s say you’ll get a subsidy of $100 dollars if you choose the benchmark plan and a subsidy of $50 dollars if you choose a pricier plan. Naturally, like many people, you’ll decide to get the benchmark plan this year to enjoy bigger savings.

Flash-forward to next year. An insurance company has released a plan that’s cheaper than yours, and the government decides to use this as the “benchmark” plan. This means that those who’ll buy it will be eligible to get a $100 subsidy, while those who stick to a plan like yours will only be eligible for $50. The problem now is this: if you don’t do your research, you’ll never know that your policy is no longer the benchmark and that your subsidy has decreased. You’ll only be aware of it when the IRS sends you a letter, telling you that you owe hundreds of dollars in taxes since you were receiving a subsidy that was too big for your insurance plan.

The best way to solve this problem is for the government to update HealthCare.gov and give it the capability to automatically re-asses the subsidy that people are eligible for. But, until this happens, the best thing you can do is to shop around for the best possible option instead of auto-renewing your policy. This way, you’ll be able to choose a plan that fits your budget and will give you access to the right amount of subsidy.

ObamaCare’s premiums might not bring a smile to your face, but take a closer look and you’ll see that the benefits it brings is worth every cent you pay.

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