10 Things Your Health Insurer Won't Tell You

The Affordable Care Act overhauled the country’s health insurance system, and insurers are still grappling with the changes. When President Obama’s signature law took full effect on Jan. 1, insurers on the individual market could no longer charge sick people more than healthy people or decline to cover them. Insurers were also limited in the amount they could charge older consumers over younger ones.

Discrimination based on age and health status was common before, and the worst of it was reserved for the roughly 11 million people who bought plans on the individual market because they didn’t have work or government-based coverage. Denying coverage to certain consumers — or charging them more than healthy ones — helped insurers predict and control their costs. They now face more uncertainty about how to price their product.

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As the industry gears up for the start of the second Obamacare open enrollment period on Nov. 15, “there is definitely still some guesswork” when it comes to setting premium prices for 2015, says Caroline Pearson, vice president for Avalere Health, a Washington, D.C.-based health care consultancy.

Lots of sick consumers would push up premiums for all, but insurers are still getting a handle on the needs of their new customers. Insurers must pay patient claims and still turn a profit — after all, many of the major carriers are publicly traded companies that answer to shareholders. In 2012, consumer spending on private insurance premiums accounted for $917 billion of the $2.8 trillion spent on health care in the U.S., according to the Centers for Medicare and Medicaid Services.

Carriers’ analysis will clarify somewhat for 2016, as they will have had a full year’s worth of claims data to analyze. Yet the demographics of the insured population will continue to change as new people enroll and others drop their coverage, keeping insurers on their toes, Pearson says.

During this “time of transition,” insurers remain focused on ensuring the affordability, stability and accessibility of their plans, said Clare Krusing, a spokeswoman for America’s Health Insurance Plans (AHIP), the trade association representing the insurance industry.

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2. You might get a tax break (but good luck doing the math).

During open enrollment for 2014, more than 5.4 million people selected insurance through a marketplace run by the federal government, and of them, 87 percent chose a plan supported by tax credits. To qualify, their income had to be equal to or lower than 400 percent of the 2014 federal poverty level, or $95,400 for a family of four, $62,920 for a family of two, and $46,680 for a single person.

While the subsidy is technically a tax credit, it can take the form of an immediate discount applied to the premiums consumers pay, rather than in a break they receive when they file their taxes.

Here’s the problem: Subsidy amounts were based on estimated income for 2014. People who earned more or less than expected — which won’t be uncommon on the individual market given its large numbers of self-employed consumers — will have to report the difference when they pay their taxes for that year. Those who received too much in subsidies will have to pay back the difference.

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The process begins anew this open enrollment, with individuals and families estimating their 2015 income. But that process is likely to be laden with new problems. Insurance carriers will notify consumers of how much they can save on their monthly premiums next year with their current tax credit. However, this could be misleading, as a consumer’s individual tax credit could change for 2015.

What’s more, the subsidy calculation is based in part on the cost of the second-least expensive silver plan in the person’s area. But the insurance company’s notification of 2015 premiums will not reflect potential changes to that plan, according to a spokesman for the Centers for Medicare and Medicaid Services, which runs the federally facilitated exchanges. It will also not reflect any changes that the consumer wants to make to his 2015 income estimates. “That’s going to be confusing,” says Carrie McLean, director of customer care for eHealth Inc. parent company of brokerage eHealthInsurance.com.

Bottom line: To get the most accurate picture of their actual costs for 2015, consumers must update their personal information on their state insurance exchange. If they don’t do this and allow themselves to be automatically re-enrolled, their actual premium cost may turn out higher or lower than they expected.

3. On the individual market? Shop around.

In most cases, if current Obamacare consumers do nothing, they will automatically be re-enrolled in their existing coverage for 2015. This mirrors the way it works for those with employer-based coverage, which generally carries over from one year to the next.

Inertia is a powerful force, especially when it comes to something as complex as choosing a health plan. And consumers who encountered technical difficulties enrolling on the exchanges during the last open-enrollment period might not want to tempt fate and try it again.

But shoppers should at least visit their state exchange to check out their options for next year. Some new carriers will be entering the market: One notable example is UnitedHealthcare which took a cautious approach during the first season and plans to expand its presence on the state marketplaces for 2015.

What’s more, subsidy-eligible consumers won’t have the most accurate sense of their actual premium cost unless they update their personal information on the marketplace.

“Treat it like year one,” says Jonathan Gruber, a professor of economics at MIT who worked as a consultant for the White House during the drafting of the Affordable Care Act. “It won’t be harder than last year, but it won’t be much easier.”

4. Out of network? Out of luck.

Insurers create a network of medical providers for each of their insurance plans, and consumers who stick to doctors and hospitals that are inside the network incur lower costs than those who venture outside.

Health maintenance organizations, or HMOs, generally won’t cover out-of-network services to any extent, except in the case of emergencies. HMOs offer a limited choice of doctors and hospitals in return for premiums that are generally lower than plans that offer more options. Under an HMO structure, insurers pay doctors and hospitals less than they would under a broader plan, and in exchange, promise the providers more patient volume to make up the difference.

Preferred provider organizations, or PPOs, will cover out-of-network services at a lower rate than in-network services.

But for many people in individual plans, there’s a catch: out-of-network charges don’t count toward the annual cap on out-of-pocket costs that Obamacare established to protect people from financial ruin in the event of a devastating diagnosis. (Employer-provided health plans generally had such caps in place before the Affordable Care Act, and still do.)

The out-of-pocket maximum, as these caps are known, will be $6,600 for an individual and $13,200 for a family in 2015. Yet this protection only goes to those who stay in-network; out-of-network costs are, at least theoretically, unlimited. “It’s a cruel joke,” says Brian W. Liechty, an independent insurance agent in Plymouth, Ind.

5. But good luck figuring out who’s in network.

“In or out?” may seem like a straightforward question, but consumers who are covered by health-insurance networks hit all sorts of roadblocks trying to answer it. The problems proved particularly acute during Obamacare’s first open enrollment period, when the links to provider networks posted on the online insurance exchanges often didn’t work, or the information wasn’t up-to-date. “Insurers have been pretty lax about keeping those maintained,” says Jonathan Wu, CEO and founder of ValuePenguin, a consumer financial education company. Even calling the doctor’s office to verify participation in a plan wasn’t a fail-safe backup-plan, as miscommunication arose amid all the changes.

Experts aren’t that hopeful the situation will improve much this open enrollment season. “The transparency of the networks has been a challenge,” says Pearson of Avelere Health.

Krusing of America’s Health Insurance Plans said that medical providers also need to improve their communication to patients about their participation in various networks: “It takes cooperation from everyone to make sure consumers can navigate the health system.”

Even consumers who do their homework could find the rug pulled out from them midyear, if their doctor leaves their network. This isn’t especially uncommon because the contracts that doctors sign with insurers aren’t necessarily synced with open enrollment and start on their own schedule, says Terri Welter, principal at ECG Management Consultants, a Seattle-based consulting firm that advises health-care providers on their negotiations with insurers. What’s more, contracts often allow either party to terminate the agreement with some advance notice.

If this happens, there’s often a protection in the contract for consumers, Welter says. For example, the plan may be responsible for paying in-network rates for that doctor until the next open enrollment season, or until a given course of treatment is over. But when that period ends, the patient still has to start from scratch finding a new doctor or a new plan.

6. Our plan won’t cover the really good hospital.

Public support for Obamacare would wane if consumers couldn’t find a health plan within their budget. Insurers facing government pressure to keep their plan premiums affordable, as the law promises, can no longer reduce their costs on the individual market by denying coverage to people who they know have certain illnesses. Yet insurers can still control what they pay the doctors, hospitals and other medical providers in their networks. “We’re seeing additional pressure for providers to provide a discount,” Welter says.

Destination cancer treatment centers and top academic hospitals are generally less willing than the average hospital to cut their rates for insurers, Welter says, and therefore they often wind up out of the network on individual plans.

There isn’t much official data on access to so-called centers of excellence in individual plans offered under Obamacare, says Gruber of MIT. But Liechty, the Indiana broker, says that in his analysis, top centers “are patently off limits in the marketplace” (that is, to consumers using Obamacare plans).

If forced to choose, plenty of consumers would rather have lower premiums than access to certain top doctors and hospitals. The Affordable Care Act was designed in large part to cover the previously uninsured, and for them some coverage is often much better than no coverage at all.

The problem lies when consumers aren’t aware they’re making a trade-off, experts say. They might sign up for the cheapest plan, only to find it restricts their doctor choices more than they thought.

“The lesson is: shop,” Gruber says. Consumers should be aware that each plan comes with a network, make sure their routine doctors participate in the network, and then check to see what specialists might be available in the event of a serious diagnosis.

7. The ‘cheapest’ plan may end up costing you more.

While the monthly premium is displayed most prominently when people shop for health insurance, this charge is only the beginning when it comes to how much consumers actually pay for their care. Equally important are the so-called cost-sharing requirements: the deductible, copayments, and coinsurance. And on top of those, there’s drug coverage and the out-of-pocket maximum.

All these factors mean that the lowest “sticker price” premium could actually result in the highest cost for certain consumers. HealthPocket, a health-insurance comparison website, recently analyzed certain individual health plans available for 2015 under the Affordable Care Act and found that platinum plans — which generally have the highest premiums —actually represent the best buy for consumers who need to use expensive specialty drugs, such as Gleevec to treat cancer or Atripla to treat HIV.

That’s because platinum plans have much lower out-of-pocket maximums on average than the other metal tiers — $1,417 for platinum versus $6,386 for bronze, $5,745 for silver, and $4,230 for gold, according to the HealthPocket analysis. Once a consumer hits that amount, she incurs no additional costs for drugs or services, as long as she sticks within her plan’s provider network and to her plan’s covered drug list. A consumer taking a specialty drug is very likely to hit the out-of-pocket maximum each year, so that number becomes very important in the overall calculation.

8. Get ready for surprise charges.

Julie Schmidt, 44, a small-business owner in Bremen, Ind., went for an ultrasound this spring at an in-network center referred to her by her primary care physician. She later got a bill for $760, the full cost of the out-of-network radiologist who read the ultrasound. “I thought I was doing the right thing,” says Schmidt, who uses a spreadsheet to track her family’s medical expenses. “I freaked out.” She plans to appeal the decision with her carrier, but in the meantime she paid in full, since she had received notices that the bill would get turned over to debt-collectors.

Consumers often have no way of anticipating all the medical providers who will be involved in a given episode of their care, and it’s increasingly common for them to get hit with an unexpected out-of-network charge, experts say. It could be the anesthesiologist who puts the patient under, or, as in Schmidt’s case, a behind-the-scenes provider who never even meets the patient. “This is an emerging policy issue that needs to be addressed,” says Sara Collins, vice president of health care coverage and access at the Commonwealth Fund.

Krusing said many insurers now provide cost estimator tools to let customers know how much a given procedure will cost at a specific location. She said many insurers support the use of “bundled payments,” or paying all providers involved in an episode of care a fixed lump sum, which would reduce unpleasant surprises for consumers for some common procedures.

Barring a policy fix, consumers can take matters into their own hands and call their insurer before a planned procedure to ask whether any provider involved in that procedure is out-of-network, says McLean of eHealth.

Of course, it’s often impossible to do any due diligence during an emergency. And yet, many emergency room doctors are independent contractors who are out-of-network at the very hospital where they work. “It’s crazy,” says Margaret E. O’Kane, president of the National Committee for Quality Assurance, a nonprofit organization that rates health plans. “This has to be fixed.”

Schmidt now finds herself unable to schedule a routine mammogram — a preventative service that should be covered at 100 percent — since she has been unable to locate a center near her that uses an in-network radiologist to read the mammogram. (She lives in a rural area where one health system dominates most of the market.)

9. If you fight hard enough, we’ll back down.

Consumers shouldn’t sit back and take it if they think their insurer billed them in error. Instead, they should question the charge and, if they don’t get a satisfactory answer, consider appealing the decision to the carrier. If that fails, each state’s insurance department is equipped to respond to and help resolve consumer complaints.

A few areas are responsible for most insurance appeals, according to a study of certain HMO claims in the 2003 Journal of the American Medical Association. The report found that more than a third of all disputes were about whether treatment was necessary and more than a third were over the contractual language of the plan.

The good news: One third of the contractual disputes were overturned in the consumer’s favor, and about half the medical necessity disputes were reversed. “I can’t tell you how many times I’ve gotten insurance companies to change things in favor of the customer because we requested an exception,” says McLean.

Of course, the usual guidelines apply when filing a grievance. “Don’t yell, scream or call anyone a bad name,” says Mary Johnson, Medicare and Social Security policy analyst with the Senior Citizens League, an Alexandria, Va.-based nonpartisan lobbying group. Johnson has successfully challenged several charges with her insurers over the years, including the time when she received the bill of another Mary Johnson who underwent thyroid surgery at the same hospital on the same day she did.

10. High deductibles are here to stay.

High deductible plans require consumers to pay out-of-pocket for most medical services until their spending hits a certain threshold, after which insurance kicks in and starts to pay. These plans usually have lower premiums than more comprehensive plans, but they require more legwork: Since consumers are paying their own money for services until they hit the deductible, the plan design encourages them to shop around to get the best deal.

The hope is that this savvy shopping will result in reduced costs to the overall health system. Employers have steadily increased the deductibles on the health plans they offer workers. In 2014, 80 percent of people covered by employee plans paid an average annual deductible of $1,217, compared with $826 in 2009, according to a recent survey by the Kaiser Family Foundation. Some higher-end employer-sponsored health plans have deductibles as low as $500.

Meanwhile, on the Obamacare exchanges, the average bronze plan has a deductible of $4,959, while silver plans — the most popular option — have an average deductible of $3,132, according to Avalere Health.

Critics say this plan design puts an unfair burden on consumers. First of all, prices for medical services can be far-from-transparent. Many doctors’ offices aren’t accustomed to answering the question, “How much will that cost?” What’s more, studies have shown that people cut back on necessary medical care when faced with higher costs. If a small problem snowballs into a larger one through lack of early attention, then that will result in higher costs to the system.

But experts say these plans will only grow in popularity in the coming years. In fact, some predict that more comprehensive, lower deductible plans will eventually become a thing of the past. “I do think we’re all going to be paying high deductibles,” O’Kane says. After all, she noted, raising the deductible is much easier than engaging in a thoughtful consideration of which clinical benefits justify the costs.

Elizabeth O'Brien is a retirement healthcare reporter for MarketWatch. Contact her at Elizabeth.O'[email protected]

By MarketWatch