By Javier Sanabria
Policyholders may receive a lower advanced federal subsidy than they otherwise would if they fail to visit the federal health insurance exchange to reenroll or update their financial information, resulting in higher out-of-pocket costs. Milliman actuary Paul Houchens discussed the auto-enrollment process with Trudy Lieberman, and explains how premium trends affect subsidies and out-of-pocket costs in this Rural Health News article.
The actuarial consulting firm Milliman has found that even small premium increases – in the 5 percent range – can lead to out-of-pocket increases of between 30 and 100 percent for those with low incomes if income information is not updated. Data suggest that most individuals with exchange policies have incomes of $25,000 or less and most families have incomes around $50,000, said Paul Houchens, an actuary with Milliman.
Houchens told me several reasons premiums will be higher this year for many exchange buyers. (Some will see decreases.) Insurers, which offered super low rates in the exchanges last year to entice more customers to their plans, are finding they need to increase their premiums. And in many parts of the country the benchmark plan (the second lowest cost silver level policy) on which subsidies are based has changed, meaning higher premiums for some people.
Premiums also go up each year gradually each year you get older. Because the Affordable Care Act allows insurers to charge older people three times more than younger ones, older people will certainly feel the pinch if last year’s subsidy is too low. They might get larger subsidies if they reapply.
This paper provides more perspective on the potential implications for policyholders and insurance companies related to changes in federal subsidies and the renewal process.