The gift box is now open and the coal is there for all to see

On Health Exchanges, Premiums May Be Low, but Other Costs Can Be High

By ROBERT PEAR

WASHINGTON — For months, the Obama administration has heralded the low premiums of medical insurance policies on sale in the insurance exchanges created by the new health law. But as consumers dig into the details, they are finding that the deductibles and other out-of-pocket costs are often much higher than what is typical in employer-sponsored health plans.

Until now, it was almost impossible for people using the federal health care website to see the deductible amounts, which consumers pay before coverage kicks in. But federal officials finally relented last week and added a “window shopping” feature that displays data on deductibles.

For policies offered in the federal exchange, as in many states, the annual deductible often tops $5,000 for an individual and $10,000 for a couple.

Insurers devised the new policies on the assumption that consumers would pick a plan based mainly on price, as reflected in the premium. But insurance plans with lower premiums generally have higher deductibles.

In El Paso, Tex., for example, for a husband and wife both age 35, one of the cheapest plans on the federal exchange, offered by Blue Cross and Blue Shield, has a premium less than $300 a month, but the annual deductible is more than $12,000. For a 45-year-old couple seeking insurance on the federal exchange in Saginaw, Mich., a policy with a premium of $515 a month has a deductible of $10,000.

In Santa Cruz, Calif., where the exchange is run by the state, Robert Aaron, a self-employed 56-year-old engineer, said he was looking for a low-cost plan. The best one he could find had a premium of $488 a month. But the annual deductible was $5,000, and that, he said, “sounds really high.”

By contrast, according to the Kaiser Family Foundation, the average deductible in employer-sponsored health plans is $1,135.

“Deductibles for many plans in the insurance exchanges are pretty high,” said Stan Dorn, a health policy expert at the Urban Institute. “These plans are more generous than what’s prevalent in the current individual insurance market, but significantly less generous than most employer-sponsored insurance.”

Caroline F. Pearson, a vice president of Avalere Health, a consulting company that has analyzed hundreds of plans, said: “The premiums are lower than expected, but consumers on the exchange will often face high deductibles and high co-payments for medical services and prescription drugs before they reach the cap on out-of-pocket costs,” $6,350 for an individual and $12,700 for a family.

Those limits provide significant protection, even though those sums are substantial for most consumers. In addition, the federal website, HealthCare.gov, informs people that they may qualify for subsidies to reduce their out-of-pocket costs if their household income is below 250 percent of the federal poverty level, meaning that it is less than $28,725 for an individual or $48,825 for a family of three.

These “cost-sharing reductions” are available for a specific kind of midlevel plan known as a silver plan. People with lower incomes can get more help with out-of-pocket costs, but only if they choose silver plans.

Mr. Dorn said the government had not done much to inform people of these potential savings. “Consumers are giving up cost-sharing reductions of enormous value if they enroll in a bronze plan because it has the lowest premium,” he said.

Plans in the marketplace are separated into four categories — bronze, silver, gold and platinum — indicating the generosity of coverage, or the share of costs paid by insurance for an average enrollee.

Many people buying insurance on the federal and state exchanges are expected to qualify for subsidies. But in the first month, for reasons that are not clear, only 30 percent qualified. The others must pay the full premium and will be subject to the full deductible.

Most people shopping in the exchanges are expected to choose bronze or silver plans, which provide less generous coverage than most employer-sponsored plans.

A study by Jon R. Gabel and colleagues at NORC, a research organization affiliated with the University of Chicago, found that 65 percent of employees in group health plans had higher-value coverage that would be classified as gold or platinum under the Affordable Care Act.

At the same time, most policies in the exchanges are more generous than what people have been buying for themselves in the individual insurance market. Mr. Gabel found that 84 percent of policyholders in the individual market had coverage that was less than or equivalent to the bronze level.

James T. O’Connor, an actuary at Milliman, an employee benefit consulting firm, said: “Larger employers generally have more generous coverage than small employers, and small group plans, on average, are richer than what people can typically buy with their own money in the new health insurance exchanges.”

Mark A. York, a 60-year-old freelance writer in Hailey, Idaho, said he began shopping after he received a letter saying that his current insurance policy would be canceled because it did not meet the requirements of the health care law. In the exchange, he said, he found policies with premiums similar to what he is now paying, $440 a month, but “the deductibles were so high — $4,000 to $6,000 a year — that it defeats the purpose of having insurance.”

Brian H. Snoddy, 35, of Palmyra, Va., said his wife and two children had a policy with a $330 premium and a $2,500 deductible, but it is being canceled. For new plans with comparable coverage on the federal exchange, he said, “the deductibles are way higher, $5,000 or $6,000.”

For visits to a medical specialist, many plans on the federal exchange require co-payments of $50 to $75 or more.

Federal officials often point to premiums as evidence that the health care law has made insurance affordable. “Nearly six in 10 uninsured Americans can pay less than $100 a month for coverage in the health insurance marketplace,” Kathleen Sebelius, the secretary of health and human services, has said.

Higher deductibles are one tool that insurers can use to hold down premiums. Many have also held down premiums on the exchanges by limiting the choices of doctors and hospitals available to consumers in their provider networks.

Kellye Norris, 53, of Dallas said that after trying for more than a month, she completed an application on the federal exchange and enrolled in a Cigna plan with a premium of about $500 a month and no subsidies.

“My deductible is nearly $3,000, which is ridiculously high, in my opinion,” Ms. Norris said. “But as someone with pre-existing conditions, I’m grateful to be able to buy insurance at all.”

What is still not acknowledged by the writer is the coming burden to the system of all of those who will receive subsidies and the increase in Medicaid participants because there is no way the low wage earner will be able to pay either premiums or deductibles.  Can you say wealth redistribution.