What is an Insurance Premium under Obamacare?
The cost of health insurance under Obamacare is important to everyone. But a lot of people get confused about health insurance terms, even some of the more common terms that have do with costs, like the term “premium.”
What is a health insurance premium under Obamacare?
Obamacare is a nickname for the health reform law known as the Affordable Care Act (or ACA). Since 2014, all new individual and family health insurance plans are “Obamacare” plans, and they all have monthly premiums, just as all health insurance plans had in the past before Obamacare.
To answer the question simply, however, a premium is what you pay each month to keep your Obamacare health insurance plan in effect. If you stop paying your monthly premium, coverage under your Obamacare health insurance plan will be cancelled by the insurance company.
What is a premium compared to other Obamacare health insurance costs?
Don’t confuse premiums under Obamacare with other out-of-pocket costs. Besides having to pay a monthly premium to keep your Obamacare health insurance in good standing, you may have other expenses too. Often referred to as “cost-sharing” expenses, these only come into play when you actually receive medical care and a claim for covered medical services is submitted through your insurance company.
- Copayments are fees you may need to pay for an office visit or when picking up a prescription drug. Other copayments may apply when you visit an emergency room or get an ambulance ride.
- You also may have to pay for certain covered medical services out of pocket each year until you meet your total annual deductible. Once you meet the deductible amount designated by your Obamacare plan, the insurance will begin paying for your covered medical services. Keep in mind, however, that under Obamacare many preventive medical services are available to you with no cost-sharing – meaning they’re covered at no cost to you even if you haven’t met your deductible.
- Coinsurance is not an insurance premium under Obamacare, it is another form of cost-sharing that is usually described as a percentage of the total charge for covered medical expenses. For example, some plans may require you to pay 20% coinsurance for a lab test or other health related service.
Remember, unlike monthly premiums, copayments, deductibles and coinsurance only come into play when you actually use medical care.
An easy way to think about health insurance premiums under Obamacare is to remember that these premiums are an expense you have to pay each and every month regardless if you go to the doctor, hospital or any other health related service.
If you don’t pay your insurance premiums under Obamacare your health coverage will be cancelled. This may leave you uninsured. Depending on the time of year, you may not be able to enroll in a new Obamacare plan again until the next Obamacare open enrollment period begins or until you experience a qualifying life event that triggers a personal special enrollment period.
And not only would being uninsured for a period of time make it harder to get affordable medical care when you need it, but you could potentially face tax penalties under Obamacare.
How do Obamacare subsidies affect health insurance premiums?
If you qualify for them, government Obamacare subsidies can lower the amount you pay from your own pocket toward your monthly insurance premiums. Under Obamacare, people who purchase coverage on their own and who earn no more than 400% of the federal poverty level may be eligible for subsidies. The actual dollar value of your subsidy will vary depending on your annual income and on the cost of coverage in your area.
The Centers for Medicare and Medicaid Services publishes the federal poverty level table based on family size and family income annually. For 2016, 400% of the federal poverty level is a total annual income of about $47,000 for a single person or $97,000 for a family of four.
When you apply for a subsidy you may claim the subsidy on your federal tax return or have it credited toward your health insurance premiums on a month-to-month basis. Most people who receive subsidies have their subsidy dollars applied toward their health insurance premiums on a monthly basis. This lowers what they pay themselves toward their own monthly premiums.
That’s how Obamacare subsidies affect premiums. The consumer pays a lower premium and the rest of the premium is paid on behalf of the consumer directly to the health insurance company by the federal government.
How much are Obamacare premiums?
According to an eHealth report* on the cost of coverage selected by unsubsidized health insurance shoppers during the 2016 open enrollment period, average monthly premiums were:
- $321 for individuals
- $833 for families (of two or more people)
Are health insurance premiums increasing under Obamacare?
People with subsidies may not notice it when their Obamacare premiums increase since subsidies are designed to increase with the cost of coverage. If the cost of the benchmark plan in your area increases each year, then the dollar value of your subsidies may increase each year.
However, if you lose your subsidies (because you now earn too much money to qualify for them, for example) or if you never qualified for subsidies in the first place, you’ll find that premiums for Obamacare health insurance plans have increased a lot over the past few years.
Since 2014, when Obamacare’s major provisions came into effect, health insurance premiums have increased notably:
- Individual premiums have increased an average of 18% between 2014-2016
- Family premiums have increased an average of 25% between 2014-2016
These figures are based on health insurance plans selected by eHealth shoppers not using government subsidies during Obamacare’s nationwide open enrollment periods for 2014 and 2016.*
In closing: Obamacare premiums and you
Health insurance premiums under Obamacare are a big concern for health insurance consumers, and for good reason. You have to pay your premiums each month in order to stay enrolled in your Obamacare health insurance plan. If you can’t make these payments you will lose your health insurance coverage. You may not be able to get health coverage again until the next nationwide open enrollment period or until you experience a qualifying life event. If you stop paying your premiums and lose your coverage you may incur medical costs on your own and you may be required to pay a significant tax penalty on your federal tax return.
Health insurance premiums under Obamacare continue to increase even with the assistance of subsidies. Consumers, policymakers, politicians and others will all be watching what health insurance premiums do under Obamacare in the years to come.
* Source: For 2016 figures, see eHealth’s Health Insurance Price Index data available here: [LINK]. For 2014 figures, see eHealth’s Health Insurance Price Index Report for the 2014 Obamacare nationwide open enrollment period, found here: http://news.ehealthinsurance.com/_ir/68/20144/eHealth%20Health%20Insurance%20Price%20Index%20Report%20for%20Open%20Enrollment%20and%20Q1%202014.pdf