For one thing, many people chose the lowest-cost plans last year, and those are the plans that are "seeking above-average rate hikes." So if people just re-enroll in those plans, they could be hit with pretty high premium increases. But that's not the biggest potential hit that 85 percent of the Obamacare enrollees could face. That's the group with enrollees who have qualified to receive subsidies for their plans, and those people could find that their subsidies—while remaining essentially the same—will cover much less of their premium. It's because of how the subsidies are determined. Here's a hypothetical from Baker:
Let's say your income is at about 150 percent of the poverty line—roughly $17,000 per year. The law says you don't have to pay more than 4 percent of your income for the benchmark plan in your area. You chose that plan this year, and you're getting a pretty generous subsidy.How do you protect yourself against a big premium hit? Find out below the fold.
Your plan wants to raise its rates by 5 percent next year—not great, but not the end of the world when you're only paying about $50 per month out of your pocket. You like the plan, the premium increase doesn't seem like a lot, and HealthCare.gov was a headache last time, so you just auto-renew.
Unbeknownst to you, though, new insurers have started offering cheaper plans in your area. Your plan is no longer the benchmark plan; a cheaper one is. So now your subsidy is based on the cost of that plan, not the one you have. This means you're on the hook not only for every dollar of your plan's 5 percent premium increase, but also for every dollar of the difference in price between your plan and the new benchmark plan.
The only real way you can find out if you are in that boat is by going back into the insurance exchange and asking for a redetermination of your subsidy level. Which means the best option for people is to shop for a new plan, get a fresh subsidy eligibility determination, and look for plans that will remain affordable. At the very least, going through that process will inform people of what their existing plans will cost them in the next year, and they won't be surprised at tax time when they find out about the gap between their subsidies and their actual costs.
Charles Gaba has a reasonable solution that the government should really consider—requiring annual renewals. At the very least, the government should now be preparing to send out 8 million letters telling folks to let them know it really is in their best interest to wade back into the marketplace this fall.