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Something for Nothing: Political Spat Leads to Zero-Dollar Insurance Premiums for Some

October 5, 2018

It’s been years since we could use the phrases “good news” and “insurance prices” in the same sentence. But that day has finally arrived.

Just what is that good news? Let’s start with free insurance policies for a lucky group of Coloradans.

The Colorado Division of Insurance released its approved prices for 2019 policies in the individual and small group markets on Oct. 4. Statewide, rates will rise an average of 5.6 percent. The same health insurance companies that offered plans in 2018 are back in 2019: Anthem, Bright Health, Cigna Health and Life, Denver Health Medical Plans, Friday Health Plans, Kaiser Foundation Health Plan of Colorado, and Rocky Mountain HMO.

But many customers will be able to find policies that cost less than they paid this year — including some bronze plans that will cost nothing for some people. More on that in a moment.

The Division of Insurance regulates prices on the individual market, which covers about 8 percent of Coloradans. It’s a small and troublesome market. About half of this group buy their insurance on the state's exchange, where they can get Affordable Care Act subsidies if they make less than four times the federal poverty level. Those subsidies insulate consumers from price swings. 

But for those who don’t qualify for subsidies, the past few years have been crushing. Average prices rose more than 30 percent in 2018 and 20 percent the year before.

Customers come and go quickly from this market. Insurance companies used to weed out the most expensive customers by refusing to cover people with pre-existing conditions. The Affordable Care Act forbids that, so insurers have struggled to understand their new customer base and set prices that allow them to turn a profit.

The relatively modest 5.6 percent price increase in 2019 is a signal that insurers finally think they have set their prices right.

Just as prices seemed to be stabilizing, new developments in the ongoing political debate over repealing the Affordable Care Act threatened to shake the market and send prices shooting up all over again.

But the opposite happened.

It’s thanks to a strategy that most other states adopted last year called “silver loading” or “the silver switcheroo.” It’s wonky and complicated, but it could save you a ton of money, so let’s see if I can break this down into four bullet points.

  • First, the Trump administration cut off payments to insurance companies for cost-sharing reductions, which subsidize co-payments and other out-of-pocket insurance expenses for customers with the least income. These subsidies are available only on silver plans.
  • In 2018, this caused insurance premiums in Colorado to rise 6 percent higher than they would have if the Trump administration had continued paying the subsidies.
  • But for 2019, Colorado regulators decided to load all of the additional price increase onto silver plans. That’s why the average price of silver plans will rise 12 percent, while gold plans are up less than 4 percent and bronze plans up less than 1 percent.
  • The Affordable Care Act’s premium subsidies are also tied to silver plans. So when silver plans get expensive, the tax credits get more lucrative. In fact, those tax credits will allow some people to get a bronze plan for no monthly premium.

Now, the fine print. Bronze plans aren’t very comprehensive. They cover 60 percent of medical costs. The upfront cost is cheap, but they can end up costing a lot for people with unexpected medical expenses.

And for consumers who aren't eligible for subsidies, a small increase in the cost of an already-expensive plan can still be burdensome, especially after years of dramatic price hikes. 

The state's interim insurance commissioner, Michael Conway, suggested that people shop around to make sure they're finding the best options. He also suggested that they should consider other factors, including deductibles, co-payments, and co-insurance costs, as they shop. 

However, Coloradans gravitate toward bronze plans. They account for nearly half the policies sold on Connect for Health Colorado, the online insurance exchange.

More than 100,000 Connect for Health customers received Affordable Care Act subsidies in 2018. Exchange officials estimate that two thirds of them will qualify for bronze plans with zero monthly premium next year. For people in good health who want insurance against a catastrophic illness or injury, it may be too good a deal to pass up.

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