Defining Affordability

Within the federal health law’s health insurance exchanges, it can be argued that cost does not differ much when comparing bronze plans to catastrophic plans.  Bronze plans do provide the benefit of subsidies to eligible individuals, but will they still be affordable without subsidies? If not, will catastrophic plans even be affordable?  Is bronze the new catastrophic?

In North Carolina, both Blue Cross and Blue Shield and Coventry Health Care offer Obamacare exchange plans to individual policyholders.  Since Blue Cross dominates with 85% of the individual market and is the only insurer offering plans in all 100 counties of the state, let’s focus on the cost of its catastrophic and bronze plans for a 27-year old.

Here in Wake County, Blue Cross and Blue Shield offers two catastrophic plans.  The cheapest catastrophic monthly premium for a 27-year old starts at $148 with a $6,350 deductible.  If this consumer prefers a larger provider network, the monthly premium will cost around $163.

In some cases, bronze premiums are actually less expensive than catastrophic.  If a 27-year old in Wake County earns $25,000 a year, he will qualify for an estimated $80 subsidy and end up paying around $110 a month with a $5,500 deductible through the cheapest bronze plan offered.

However, subsidies greatly tail off after a young individual’s income exceeds $25,000.  A 27-year old making $30,000 a year qualifies for a whopping $12 subsidy, and monthly premiums start at $176.

Best of luck to young individuals making over $35,000, as they won’t be seeing any subsidies with their monthly $190 bronze premium.

Defining Affordable

The Obama administration’s definition for affordable coverage is that one’s annual health insurance premium does not exceed 8% of pre-tax income.  According to this definition, the aforementioned plans are technically affordable – but are they?.  Premiums may be below the 8% threshold, but premiums do not count towards one’s deductible.

The law does enforce consumer protections starting in 2015 featuring out-of-pocket limits of $6,350 for individuals and $12,700 for families (including co-pays and deductibles).  However, the cheapest 2014 exchange rates offered for 27 year-olds – the very population that is needed to balance the risk-pool- don’t look too affordable.

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