Returning Obamacare enrollees have until next Monday to decide whether they want to keep or switch insurance policies for next year. If they do nothing, they will be renewed automatically in their old plans.
In addition to getting hit by higher premiums, auto-enrolling in health exchange plans next year could hit consumers’ wallets in another way. Because of the complicated way federal subsidies are calculated, some subsidy-eligible consumers could be surprised with a lower tax credit than last year - further driving up the total cost of their health insurance.
Here’s how it works: Subsidies or tax credits are calculated by using the cost of the so-called “benchmark plan” or second-cheapest “silver” plan sold in the area where the consumer lives. If the cost of the benchmark plan changes, which is likely the case, the tax credit or subsidy changes as well. People who don’t enroll in the new benchmark plans will then have to pay the tax-credit difference if the new benchmark plan is cheaper.
Rep. Mark Meadows (R-NC) estimated that about 3.8 million people could get a higher tax bill related to their health plans if they auto-enroll next year, The Hill reported. That number comes from HHS data that shows how many consumers live in regions where the benchmark plan is changing.
HHS officials, for their part, say they have notified consumers that their policies could change in a general letter encouraging everyone to shop around and check out all their options. Still, some say their efforts don’t go far enough to warn consumers about the potential rate shock and tax shock they may soon be experiencing.
Meadows is planning to introduce a bill requiring the administration to notify vulnerable consumers that they might owe money later because of a potential change to their subsidies.
Auto-enrollees will also most likely get hit with higher premiums next year.
The Obama administration has repeatedly encouraged returning customers to shop around for coverage—warning that the rates on their current policies have likely increased. Premiums on the silver plans, or the most popular plan in 2014, will increase by an average of 10 percent next year, according to an analysis by Avalere Health.
“For the vast majority of people, if they stay in the same plan, they’ll see rate increases from the single digits to the high single digits,” Andy Slavitt, principal deputy administrator for the Center for Medicare and Medicaid Services, told reporters on a press call last week.
On the other hand, officials say if they shop around instead of relying on the auto-enroll function, more than 7 in 10 returning Obamacare enrollees will find a plan with lower rates in the same level they were enrolled in last year—before tax credits.
For now, it’s largely up to consumers to decide whether they want to shop around on the exchange, or auto-enroll and risk seeing an increase in premiums as well as a decrease in their tax credits.
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