For those who find themselves shopping for health coverage through Covered California or Obamacare in states without their own health plan marketlplace, here’s a general tip: save cash on your premiums and buy the bronze or silver health plan. For most consumers, the gold and platinum options will be a waste of money.
Analysis of dozens of Obamacare plans has shown one striking result. The networks of providers, and in many cases the drug formularies, are the same whether you’re buying a particular insurer’s bronze plan, or purchasing the same insurance option in a gold or platinum offering.
The bottom line is this. When you’re choosing a particular insurance offering, you typically can’t trade up to a better benefit by buying the gold or platinum variety of that plan. It’s usually the exact same benefit regardless of the metal you choose. What varies between these different metal plans? Mostly, just the co-pay structure and deductibles. As you pay higher premiums for a gold or platinum plan, your deductibles and co-pays will decline. The insurer will typically cover 60 percent of expected medical expenses in a bronze plan, 70 percent in a silver plan and 90 percent in a platinum plan. So, by buying the costlier plans, all you’re doing is fronting a higher premium to buy down your anticipated out of pocket costs. You’re not getting a better network of doctors or a better formulary of drugs. (Early indications of plans in California show the network of doctors is more robust for “off exchange” plans although the trend may be more providers are accepting Covered California plans.)
This rule applies to the different level of metal offerings within the same health plan. When you look across the different types health plans that an insurer might offer (its HMO versus its Preferred Provider Organization, or Exclusive Provider Organization) there’s often more variation in the size and quality of the provider networks. But in most markets, this kind of plan variety isn’t available. Insurers offer just a single option. As a result, the primary choice that consumers are making is between the different metal options within a particular insurer’s offering as well as the provider network in each insurer’s plans. The first advice I give clients is to check with their doctors, local hospital, and other medical providers to see if any take any of Covered California plans.
All of this means that unless you plan to use enough healthcare services to spend your entire deductible, for many people, buying the costlier gold or platinum plans will be wasted money. If you’re not sure that you’re going to max out your deductible, you may be better off buying a cheaper bronze plan and using the money saved on premiums to put some cash away to pay for your out of pocket costs. Yet there are some exceptions to this general rule that consumers should be mindful of. Conversely, if you are certain your medical expenses will exceed the deductible levels, then a gold or platinum plan would be cost effective.
The first exception relates to certain lower income folks who qualify for special subsidies that reduce someone’s out-of-pocket costs. People with incomes below 250% of the Federal poverty level ($58,000 for a family of four in 2013) will be eligible for special “cost-sharing subsidies” that can reduce deductibles, co-payments, and co-insurance. These subsidies only apply if you buy a silver plan.
In part, Obamacare is fashioned as a vehicle to redistribute income through healthcare benefits. The “cost sharing subsidies” are a key part of this endeavor.
To give you a sense of how much these additional subsidies can reduce out-of-pocket costs for lower-income consumers: A family of four whose income falls between 100 and 150 percent of the federal poverty level ($23,550 to $35,325) will be responsible for paying 6 percent of covered expenses out-of-pocket compared with the 30 percent for a family not getting the special subsidies. A family with an income between 150 and 200 percent of the poverty level ($35,325 to $47,100) will be responsible for 13 percent of expenses, and one with an income between 200 and 250 percent of FPL ($47,100 to $58,875) will be responsible for 27 percent.
In addition, people who earn below 250 percent of the FPL and qualify for the subsidies will also have their maximum out-of-pocket (OOP) spending capped at lower levels. In 2014, the OOP limits for most plans will be $6,350 for an individual and $12,700 for a family. But people qualifying for cost-sharing subsidies will have their maximum OOP spending capped at $2,250 or $4,500 for single or family coverage, respectively, if their incomes are below 200 percent of the poverty level; and $5,200 or $10,400 if their incomes are between 200 and 250 percent of FPL.
Finally, there are some insurers that provide different drug formularies, depending on which metal you choose. Many of the Obamacare plans have closed drug formularies, where there’s no coverage for drugs that aren’t on the insurers formulary list of preferred drugs. But with their costlier gold or platinum plans, some insurers are providing partial coverage for drugs that aren’t on their preferred drug formulary. The summary of benefits that each plan publishes will spell out whether the plan provides some coverage for non-formulary drugs.
As with other aspects of Obamacare, choosing between the different metal plans is not a simple exercise. But it’s important to know that selecting a costlier gold or platinum option doesn’t usually get you a better benefit, just lower out of pocket costs. There are exceptions, as I noted, where buying a costlier offering could make sense. But for most consumers, the cheaper bronze plans may be the best choice.