The state health insurance exchanges are already taking shape. Jointly, these exchanges may offer policies from hundreds of health insurance companies nationwide. That could help more than six million people who have no health insurance and it may even help the additional 25 million who are underinsured.
Since many of those who will be applying through one of the exchanges have an annual employment salary that is below the poverty line, massive amounts of insurance subsidies are expected. The rate of subsidy (or help to pay the premiums) will vary a little based on different levels of coverage.
The exchanges offer four levels of coverage to make comparing coverage and cost simpler than the current “free for all.” Now, policies vary so much that it’s a nightmare to get a straight-forward “apples to apples” comparison.
One of the four coverage levels in the state exchanges will be what’s known as “silver” plans. As an example of subsidies, the cost of a silver plan is not to exceed from two percent to 9.5 percent of annual household income if that income is less than 400 percent above the federal poverty line. For a family of four, that’s an income of around $90,000. However, if you are employed by a company that offers a qualified group health plan, the government subsidy will not be applicable.
As I said, there are four different levels of coverage. A silver plan, for instance has an actuarial value of 70 percent. So, what does that mean to you and me? Actuarial value measures how a health plan covers medical costs paid by a standard population. A plan that pays for nothing would be categorized as 0.00 while the most comprehensive coverage imaginable that leaves you with no out-of-pocket costs would be categorized as 1.00. A 70-percent actuarial value means it covers about 70 percent of standard health care costs for a typical population of people.
The lowest level of coverage is described as a bronze health plan, which has an actuarial value of 60 percent. Of course, there will also be gold and platinum coverage levels for 80 and 90 percent actuarial values. Premiums increase as the actuarial value is raised.
Wiley Long is President of HSA for America, and a passionate advocate for consumer-based solutions that will improve price transparency and lower health insurance and medical costs for people purchasing individual and family health insurance plans.