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High deductible plans: Will they disappear under Obamacare?

Do you want to pay several hundred dollars each month to ensure that you’ll be able to deal with the financial costs of a health crisis or injury? Or would you prefer to pay as little as possible on a month-to-month basis – but if you get sick, you’ll be hit with high out-of-pockets costs of health care?

Millions of Americans currently have plans with low premiums and a very high deductible, often known as a “catastrophic” health care plan.

However, these plans will no longer be an option for many consumers under new regulations of the Affordable Care Act. So if you’re shopping for a low-cost health insurance plan, how will this affect you?


High deductible and catastrophic health plans

According to America’s Health Insurance Plans’ (AHIP) annual survey of U.S. health insurance carriers, about 15.5 million Americans had private high-deductible/HSA-qualified health plans. People enrolled in HSA-qualified plans are permitted to set aside money for deductible expenses in tax-exempt Health Savings Accounts (HSAs).

These plans must meet specific criteria in order to meet HSA eligibility. For example, the annual maximum out-of-pocket limit for an individual plan is $6,250.

However, catastophic plans have deductibles that can run as high as $20,000 per person, so they aren’t HSA-eligible. While enrollment figures for such plans aren’t available, healthy consumers often choose these plans because their monthly premiums are considerably lower than they would be on a HSA-qualifying plan.

Under Obamacare, most people with high deductible and catastrophic plans will no longer be able to keep their existing coverage: The Department of Health and Human Services estimates that up to 67 percent of consumers in the individual marketplace have plans that don’t meet the ACA’s new regulations.

Obamacare health plan requirements

high deductible plansIn order to meet Affordable Care Act requirements, all health insurance plans must cap annual out-of-pocket costs at $6,350 for individuals and $12,700 for families, and must cover at least 60 percent of expenses.

People under 30 and those meeting certain “hardship” criteria are eligible for a new type of catastrophic plan. However, these new plans limit out-of-pocket costs to $6,350. This new plan differs from other Obamacare plans in that is only has to cover preventive care services, rather than a minimum of 60 percent of all services, which the bronze, silver, gold and platinum plans cover.

The Obamacare catastrophic plans have lower premiums than other Obamacare plans: In Maine, for instance, a policyholder might pay $192 per month for a catastrophic plan, compared to $228 per month for a bronze plan.

Can I keep my plan?

If you have a high deductible plan, you may be able to keep it in specific situations.

If the plan is offered through a large group employer, your employer may be “self-insured,” meaning that the company collects premiums and pays for claims, rather than paying premiums to a health insurance company. Self-insured companies aren’t subject to ACA regulations.

It’s also possible that your plan has protected “grandfathered” status if your plan has been in existence since March 23, 2010 with no significant changes in that time. If you purchased your plan through the group market, it doesn’t matter whether you enrolled before or after that date. However, if you bought an individual plan, you must have purchased it before March 23, 2010, in order for it to qualify as grandfathered.

Your health insurance company must give you at least 90 days’ notice before terminating your coverage.

If my plan is cancelled, what are my alternatives?

If your existing plan is being terminated, your insurer will likely offer to automatically enroll you in a new plan, but it may not offer the best coverage. Here are three alternatives:

1. Find out if you qualify for a subsidy.

Depending on your household size and annual income, you may be eligible for a subsidy to help you cover the costs of health insurance. The insuranceQuotes subsidy calculator can show if you qualify for a subsidy and direct you to the right place to buy insurance.

2.  If your state offers its own insurance marketplace, visit the state website to apply for coverage.

More than a dozen states run their own insurance marketplaces, while all other state have defaulted to the federal marketplace, or are co-running it with the federal government.  

3. Use the federal marketplace website or phone system if your state doesn’t run its own health insurance exchange.

If your state doesn’t have its own exchange, you’ll shop for coverage through the federal marketplace. As the federal marketplace website currently has functionality problems, you may wish to enroll by phone or meet with a local representative to discuss your coverage options.

Plan alternative for the Platt family

John Platt, a freelance writer in Maine, says that he and his partner Colleen have been enrolled in a high-deductible health plan for several years. While costs seemed low initially, Colleen became sick “with one of those mystery illnesses that takes a long time to diagnose and then has no clear treatment path,” Platt says. “To say the expenses piled up would be an understatement.”

After learning that the couple’s high-deductible plan would be discontinued, they had difficulty finding details about the alternatives offered by their provider, Anthem. However, after researching options available in the health insurance exchanges, Platt found that “we could get a gold-level plan for about $300 a month more than [what] we pay for a catastrophic plan now,” he says. “We spend that much in prescriptions every month, and a whole lot more in doctor visits and tests.”

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