<p>Here’s a basic way to calculate a cost comparison between two plans:</p>
<p>Get the following info for each plan:</p>
<p>Annual Premium Cost (12x monthly premium)
Patient co-pay %
Annual patient maximum payout</p>
<p>On the high end of costs, your worst case scenario is the sum of the annual premium cost and the annual patient maximum payout. Because ACA caps the annual maximum, you are always almost going to come out better with the plan that offers the lowest premium in that scenario.</p>
<p>Obviously, if your have low end costs-- you never go to the doctor anyway – then the lower premium is also the better choice. It won’t cost you more to pay 40% of -0- as opposed to 10% of -0-. </p>
<p>In-between? </p>
<p>Well compare each plan this way:</p>
<p>Annual Premium Cost + (patient copay percentage x $ hypothetical medical bill) = total plan cost</p>
<p>So lets say that the Bronze plan costs $8000 annually and the Silver plan costs $9500 – and you want to see what would happen if you have $12,000 in medical expenses.</p>
<p>Patient pays 40% up to maximum with Bronze, only 30% with Silver. </p>
<p>Bronze = $8000 + (.4 x $12000) = $12,800 total patient pay out per year
Silver = $9500 + (.3 x $12000) = $13,100 total patient pay out per year</p>
<p>Depending on the rates you may find a sweet spot where the more expensive premiums result in savings over the less expensive premiums. I think that would make sense for people who know they have a predictable expense, such as the poster who wrote that her prescription meds for her chronic medical condition cost $2000 per month.</p>
<p>Things get complicated because the plans don’t simply pay out a consistent percentage – but typically set different copay rates for different types of services. So that poster with the chronic condition might instead be looking at the prescription drug benefit, and maybe the Bronze plan requires her to pay $50 for the prescription whereas on the Silver it’s only $35 – and maybe she needs to renew the prescription once a month --so that is looking at $600 compared to $420 – so instead of looking at the percentage (40% vs. 30%)- she’s going to have to look at the difference in out of pocket drug costs. </p>
<p>These preview example numbers don’t give that sort of detail.</p>
<p>The lady on the phone at Blue Shield assured me that they are going to have all of those detail available for use in October, probably accompanied by glossy brochures. </p>
<p>So we will know when we need to know. </p>
<p>The open-enrollment period for the exchanges in California will extend through March 31, 2014. It may vary somewhat in different states. I am saying that because if you already have insurance, there is no need to pre-enroll in October. You can do the math closer to the time when you might be considering a switch.</p>
<p>Obviously if you haven’t been able to get insurance because of some pre-existing condition, then you will be very happy to get on the exchange in time for the first day that the first policy is issued (January 1).</p>
<p>The other real big takeaway I have from studying all this is that if you buy insurance on the exchange and qualify for a subsidy, if you don’t apply for the subsidy you will get the benefit in the form of a tax refund. If you apply for and get a subsidy that you aren’t entitled to, because your income exceeds what you expected, then you’ll face an increased tax bill down the line. So for those of us who are uncertain as to what our income will be from year to year, the best option might be to pay full premium and get the refund in the years that we are entitled to it. </p>
<p>It seems crazy to me, but I really think that MAGI is calculated after the self-employment health insurance deduction – so if I earn $50K and pay $8000 in insurance premiums, I think my MAGI will then be $42K – meaning I’ll get a tax refund – but if I earn $50K and paid only $4000 in premiums, there will be a $46K MAGI, no subsidy. It is way more complicated than that because of income from other sources and other deductions that can reduce MAGI – and maybe I’ve got it wrong anyway – but as it stands I can see the subsidy calculations as being rather messy for self-employed in borderline income tax brackets. Given all the other financial juggling we self-employed need to do, what with managing business expenses and paying quarterlies, I think in general it’s better to plan with the assumption that we will owe the tax, and look at the “subsidy” as a potential tax credit rather than a way of reducing health insurance costs.</p>
<p>If there were also employer-paid payroll taxes offset with credits for employers who provide insurance for their workers, that would have eliminated any perceived benefit to employers to cut worker hours as well. Instead the choice for every employer woud be between the higher per-hour payroll tax they had to pay (let’s say, hypothetically, +$2 per employee hour) – or the option to get a waiver of that tax if they provided insurance for their employees.</p>