Countdown to Coverage: Overview of Marketplace Rates and Subsidies

Below we show you examples of actual Marketplace premiums across the state and how they vary by region, age, and subsidy level and provide a behind-the-scenes look at how insurers set premiums in the marketplace and how the subsidies are calculated.
On Wednesday, the U.S. Department of Health and Human Services unveiled preliminary rates for the Texas Health Insurance Marketplace, scheduled to launch October 1, 2013.
What do these preliminary rates mean for you and your health insurance options?
We’ll walk through a few examples illustrating how actual Marketplace premiums in Texas will vary by region, age, and subsidy level. In a subsequent post, we’ll provide an overview of how rates are set and subsidies are calculated in the Marketplace.

Texas Marketplace Rate Examples

Every individual will have a unique story and characteristics (income, age, region, etc.) that will affect their premiums and subsidy amount.  To get us started, however, let’s walk through a couple examples of what a Texas resident might expect to see in the Health Insurance Marketplace on October 1.

Single 27-Year-Old Houston Resident, Making $28,700 Annually

For this individual, the monthly pre-subsidy rate for the 2nd lowest cost silver plan will be about $201.  At this income level (250% FPL), this individual can qualify for premium tax credits to help reduce their premium.  This resident can expect to receive a monthly tax credit of approximately $8, reducing their monthly premium for this silver plan to roughly $193.  If, however, the individual wants to apply this tax credit to a lower-cost bronze plan, they can!  The after-subsidy cost of the lowest-cost bronze plan would be about $129.

Single 27-Year-Old Houston Resident, Making $15,300 Annually

What if our hypothetical 27-year-old Houston resident has a significantly lower income, closer to 133% FPL?  Larger subsidies become available to those with lower incomes (who are above 100% FPL).  This resident can expect to receive a monthly tax credit of approximately $163 to apply to the pre-subsidy $201 rate, reducing their monthly premium to about $38.  As in the previous example, this person can still apply their tax credit to a lower-cost bronze plan, which would give them a monthly premium of zero dollars.

Single 40-Year-Old Austin Resident, Making $28,700 Annually

For this individual, the monthly pre-subsidy rate for the 2nd lowest cost silver plan will be about $250.  This resident can expect to receive a monthly tax credit of approximately $57, reducing their monthly premium for this silver plan to roughly $193.  If the individual chooses to apply this subsidy to the lowest cost bronze plan, the cost would be about $119 a month.

Single 40-Year-Old Austin Resident, Making $15,300 Annually

This lower-income resident can expect to receive a larger monthly tax credit of approximately $211 to apply to the pre-subsidy $250 rate, reducing their monthly premium to about $38.  As in the previous example, this person can still apply their tax credit to a lower-cost bronze plan, which would give them a monthly premium of zero dollars.

But What Will I Pay?

For additional data and examples, reference our Texas Marketplace Premiums chart (which includes pre- and post-subsidy premiums for individuals at 250% FPL) and our Texas Rates by Income Levels  (which examines premium rates for individuals of varying income levels in Houston).  But first, find out what geographic rating area you are in by referencing this Texas Rating Areas.

You can also use the Kaiser Family Foundation subsidy calculator to get a sneak preview of some of the rates you can expect to see in the Marketplace on October 1.

And don’t forget to go to www.HealthCare.gov on October 1 to find out more about the full range of new coverage options!

How Does Rating Work in the Texas Health Insurance Marketplace?

Health insurance issuers in the Marketplace can rate consumers based on their age, geographic region, tobacco use, and family size.  The U.S. Center for Consumer Information & Insurance Oversight has sorted all of Texas’ 254 counties into 26 different “geographic rating areas,” across which insurance premiums may vary.  Issuers cannot charge a person more based on their health status or gender, and can charge older consumers no more than three times the rate for younger consumers due to their age.  Consumers who smoke may be charged up to 50 percent more than the base rate, and consumers who purchase family plans may be charged more based on the size of their family.

Aside from these individual rating factors, premiums will vary depending on the plan selected.  Plans in the Marketplace will be offered in four metal tiers: bronze, silver, gold, and platinum.  Plans in each tier will offer comparable benefits, but at varying levels of cost-sharing.  A plan, for example, in the bronze category covers, on average, only 60 percent of overall enrollee medical costs (with the remaining 40 percent paid for out-of-pocket through deductibles, copays, and coinsurance), while a silver plan contributes 70 percent and a gold plan 80 percent, for example.  Plans in higher metal tiers can be expected to have a higher monthly premium since consumers are paying to have a lower deductibles and copays.  The size of your premium tax credit will be calculated using the rate for the 2nd lowest-cost silver plan in the Marketplace, discussed below.

What about Subsidies?

In Texas, individuals and families with household income between 100% and 400% of the Federal Poverty Level (FPL) will be eligible to receive premium tax credits to help make monthly premiums more affordable.  Persons at varying levels of poverty will be required to pay no more than a certain percentage of their income towards health insurance, using the 2nd lowest cost silver plan as a base rate for calculating the subsidy amount.  For example, the cost of the 2nd lowest-cost silver plan can be no more than 8.05% of income for an individual at 250% FPL.  But for an individual at 133% FPL, the cost of the 2nd lowest-cost silver plan is capped at 3% of income.   The subsidy can subsequently be applied to plans in other metal coverage tiers, such as bronze or gold.

How can I learn more?

The Center on Budget and Policy Priorities has great resources online at Health Reform Beyond the Basics, including FAQs on premium tax credits.

Written by Megan Randall, Center for Public Policy Priorities. Cross-posted from Better Texas Blog.

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