In case you weren’t aware, the Open Enrollment Period for health insurance started on November 1, 2017, which means it’s time to commit to an insurance plan for 2018. For those of us who don’t have employer-sponsored plans, this process can be quite stressful. In an attempt to give you more insight into how to handle the decision, I interviewed Mark Hager, a licensed insurance broker in Georgia, Tennessee, and Alabama. As someone who isn’t in the insurance business, I found his insight into both the buying process and the overall insurance industry quite eye-opening. Here’s hoping you find it useful, too!
Additional disclaimer: I received no additional compensation for publishing this blog post!
Michelle: Let’s start with some basics. How is health insurance different than other forms of insurance such as property, auto, home, etc.? What does open enrollment mean?
Mark: In the insurance industry, there are two main groups of insurance brokers. The first group handles anything that has to do with your health, the second is basically handles your property and possessions.
I’m a health insurance broker, licensed in Georgia, Alabama and Tennessee to insure health, life, and accident insurance. We also do dental and disability… again, anything related to your health.
Health insurance works slightly differently than other forms of insurance, because now you must purchase it during an Open Enrollment period, whereas home, auto, etc. insurance can be bought year-round, whenever you happen to need it.
Open Enrollment began in January 2014 when the Affordable Care Act came into being. It used to be that you could get individual health insurance anytime, without restrictions. One big issue was that if you didn’t get a group policy through your employer, the insurers had underwriting rules. They asked questions about pre-existing conditions that sometimes denied you coverage. That’s not allowed anymore. For the past 3 years, the Open Enrollment period was 90 days; this year it’s only 45 days.
Michelle: So what does the ACA insurance look like? What are the requirements for an ACA-approved insurance policy?
Mark: There are 3 components that insurers must offer to meet ACA compliance:
- The plan must have no lifetime ceiling. Old plans had ceilings of $2 – $5 million—there was a cap on what they’d pay for. ACA plans have no ceiling on what they’ll cover.
- The plan must pay first dollar coverage on wellness visits. So the insurance companies have to cover 100% of payment for a yearly physical for patients of any age.
- There is no underwriting. Even if someone has problems with their health, they’ll be accepted for an insurance policy.
Michelle: We’ve got readers everywhere, but since I’m based in Georgia, a lot of my readers are here too… what types of ACA-approved plans are available in the state of Georgia for 2018?
Mark: There are 3 providers on the marketplace in Georgia in 2018. Alliant, which serves primarily the counties in the northern part of the state, Ambetter, which primarily serves the more populous counties, and Kaiser Permanente, which is available in most counties.
The choices have narrowed this year because insurance companies are losing money. They’re paying claims for people who have all kinds of health issues. It’s great that the people who need insurance are getting it, but it is driving up costs for everyone else.
I will also note that these are just the approved carriers. There are also non-ACA approved carriers. Keep in mind that the primary goal of health insurance isn’t to avoid a penalty from the IRS, it’s to protect yourself from catastrophic loss associated with major medical problems. So there are people out there who decided to get off-the-market health insurance with non-ACA compliant carriers just to have something to protect themselves.
This year, you can expect to see health insurance prices go up roughly 30-35% over last year. For people who feel they can’t afford ACA but want some type of policy, we’ve sifted through all these alternative plans and found 2 more that have come out in the last 2 years in the state of Georgia. They’re not ACA compliant because they have lifetime payout caps. One is with Cigna, and has a $5 million lifetime cap, and the other is through United Health, with a $2 million lifetime cap. For people looking to save money but still get some sort of major medical coverage, these run 40-45% less than ACA plans.
Even though choices are getting narrower, there are still five good choices out there. There’s something for everybody in terms of sticking to your budget and providing good coverage.
Michelle: Given all those options available, how do you go about picking a plan? What are some of the key features of health insurance plans?
Mark: When you’re looking at plans online, it can be intimidating, even if you’re computer-savvy. If you want to simplify the process, think about whether you get a subsidy, what type of care you need per year, and your max out of pocket expenses. You should also consider whether you want to keep your doctor or whether you’re comfortable with switching providers.
Each provider usually offers a few tiers of plans: Gold, Silver, Bronze, and Catastrophic care.
Gold plans are the most expensive because they have lower deductibles, usually in the $1000-2000 range. Across providers, these plans are similar since they all have those three main ACA requirements. Some might have lower copays for doctor and specialist visits, so think about what type of visit you need on a regular basis.
Sliver plans have a higher deductible, usually in the $2500-3500 range. The prices for doctor, lab, and specialist copays tend to be the same as gold, maybe slightly higher. You may be eligible for a subsidy if your income is between $12,000 and $48,000 per year and you are single. These limits are greater if you’re married and/or have dependents. If you qualify for a subsidy and choose a silver plan, you could get not only subsidized premiums, but also subsidized copays and extra savings. These are the most attractive plans for people with subsidies as a result.
Bronze plans have even higher deductibles, with max out of pocket usually around $6700 on average. You typically don’t get any payment for doctor visits or prescription drugs until you meet your deductible.
Catastrophic plans have the highest deductibles, don’t pay doctor’s visits or drugs, and are the cheapest plans. However, these plans are required to pay for your yearly physical.
When you’re young and relatively healthy and don’t take a lot of prescription drugs on a regular basis, the bronze or catastrophic plan might be for you. Silver plans are good for people who qualify for subsidies. As you get older and need more doctor visits and prescription drugs, you have the option to upgrade to silver or gold plans.
Michelle: Can you tell me more about these subsidies? How do they work?
Mark: If you fall within a certain income range, the cost of your insurance is subsided. The floor is usually around $12,000 in projected gross income. Anything less than that, and you qualify for Medicaid. The cap then varies depending on your location and household. It’s around $48,000 for a single person, $63,000 for a couple, and even higher if you’ve got children.
To be eligible for these subsidies, you are required by the government to prove your income in a timely manner. Any one deemed to be underestimating their projected gross income will be fined. There’s a P.O. box where you can mail in your income verification documents—and they take all sorts of documents for this. They take cancelled checks, W2s, bank statements with other stuff blacked out, last year’s taxes, they’re good about accepting anything that validates your projected income for 2018.
I should note that while premiums went up roughly 35% this year, the subsidies went and matched that this year. Let’s say now your policy premium has jumped to $1500/month. You might be eligible for a subsidy that drops the price to $500. The government pays the difference of $1000 directly to the insurance company, and you pay what’s left over. It’s nice because you don’t have to worry about reimbursements.
You can see the exact ranges eligible for a subsidy on the healthcare.gov website: https://www.healthcare.gov/lower-costs/qualifying-for-lower-costs/
Michelle: I know a lot of people who are just over the threshold and don’t get subsidies and so they’re only getting insurance to avoid the penalty for not having health insurance. How does that penalty work?
Mark: The IRS has a form called the 1095; you can get it from the IRS.gov website. If you’re self-employed, you fill it out, it’s got little boxes for 12 months of the year. You report which months you had insurance, provide proof of that insurance, and then pay a prorated amount for the months you didn’t have insurance. Lots of people expect this penalty to go away in January, though theoretically it could stick around.
Michelle: We’ve talked about this being a complicated and stressful process for many people. What benefits are there to working with a broker as opposed to going it alone through the marketplace?
Mark: The reason that people use a broker is that the broker knows the business, knows the regulations and limits, and all the plan information. We know what’s out there, what’s going on, what to avoid, and what to try and get.
I serve all types of customers: truckers, artists, attorneys, doctors, you name it. What they all have in common is that they don’t want to mess with this time-consuming process. My job is to simplify the process for people. I want to make the insurance experience cool, calm, collected, and fun.
How it works is that I handle almost everything over the phone or online. We start by discussing your needs: higher vs. lower deductible, whether you want to keep your own doctor vs. are okay with finding a new one, age, zip code, family situation, etc. I get all that information up front, do all the shopping around for you, and send you 5-6 different quotes to look at online. I help you choose between the various quotes, then I go online and file the application for you. I want to make this a quick and easy process for you. Because I’m so experienced, I can get done in 15 minutes what might take you hours to do.
I’m an old-fashioned broker, so when you work with me, you also get free service year-round. If you want to change premiums, switch plans, anything like that, I handle all of that for you year-round. Or if something happens over the course of the year and you’ve got an issue with a claim, I can call the insurance company on your behalf and get it taken care of, for no additional charge.
Michelle: You mentioned this service is free… but nothing is really free. How do you get paid? Can people even afford to hire an insurance broker?
Mark: My services are free in the sense that we earn residual income over the years on our customers. It used to be that the average commission was 25% for many years. After ACA came out and insurers couldn’t turn people down, insurance costs went through the roof, and providers dropped the commissions to about 8%. What happened then is roughly 90% of health insurance brokers dropped out of the business. Those of us who stayed were those with lots of customers, even though our income has substantially dropped.
When I say residual income, I mean that when a customer has been with us for a month, the insurance company does a direct deposit into the broker’s business account. What people don’t realize is that if a customer doesn’t use me and goes to buy a plan through the marketplace, they’re assigned an agent online and that agent gets 8%.
You don’t get a discount for choosing your own plan. There’s really no way to avoid that 8% commission, that’s just how the business works. The question is whether you’re actually going to use your agent to your advantage. In my opinion, you might as well take advantage of your agent’s time.
Michelle: I’ll be honest, I had no idea. I assumed that most people didn’t buy health insurance through a broker because it was too expensive. That’s good information. Before we part ways, is there anything else you’d like to share with my readers?
Mark: Choosing health insurance is a complicated, stressful process, but it doesn’t have to be. Do your research, choose wisely, and consult a professional if it feels overwhelming. It is well worth it.
If you want to contact Mark about Open Enrollment or other insurance questions, he can be reached via email at email@example.com.