Digging a little deeper into that Kaiser Family Foundation report on falling Obamacare premiums in major U.S. cities, you can find out what that means for an individual who has insurance through the new law. The end result: It's more important than ever that people who were insured through the program this year don't just auto-enroll in the same plan for next year, because there are many who could see a big change. To see the scope of change in premiums, check out this graph.
Remember, the benchmark for determining what tax credits, or subsidies, people get in order to purchase insurance are based on the second lowest-cost plan in the "silver" tier of plans. If that plan is undercut by a new offering on the exchange, the calculation changes. Below the fold is an explainer from the KFF
analysis:
While the tax credits may cushion the effect of premium increases, subsidized enrollees could still face large premium increases if they are enrolled in a plan that is no longer a low-cost plan and they fail to switch during open enrollment. In 12 of the 16 cities, at least one of the insurers that had offered one of the two lowest-cost silver plans in 2014 is no longer offering a low-cost silver plan in 2015.
For example, in Denver, Colorado, Humana offered the second-lowest-cost silver plan in 2014 at a premium of $250 per month for a single 40 year-old. Humana is actually lowering its premium to $249 per month for 2015, but another insurer (Colorado Health Insurance) is undercutting it and offering a plan for $211 per month. A 40 year-old making $30,000 pays $209 per month for the Humana plan in 2014 and the federal government covers the rest through a tax credit. If she switched to the Colorado Health Insurance Plan, she would pay $208 under the tax credit schedule. However, if she stayed in the Humana plan, she would have to pay $208 plus the premium difference between the Humana and Colorado, Health Insurance Cooperative plans, or a total of $246 (an increase of 17.7%). Even though her plan’s premium has decreased, what she pays is higher because the premium for the second-lowest-cost plan has gone down. To be held harmless, she has to be willing to switch plans. Similar situations arise in the 12 cities where a low-cost insurer is raising its premiums faster than other carriers, or where a new insurer is entering the market with a lower premium.
Bottom line, switching plans is going to be necessary for a lot of people to avoid a surprise tax bill in April 2016. Anyone receiving a tax credit or subsidy (that's about 80 percent of Obamacare enrollees) must pay the full difference in premium between the plan they choose and the second-lowest-cost silver plan in their area. That payment shows up in their next year's tax bill. The only way to avoid getting dinged for a higher premium is to shop again.
This is the inevitable result of the complicated system, with all its moving parts, set up by the law. It's ironically also the result of the law's tremendous success in the first year—more competition means more plans, which means a shifting subsidy landscape. It's a hassle for customers, and people will grouse, and if Obamacare hate hasn't totally fizzled by then as a political issue for the right, we're going to see lots and lots of Republican attacks about huge tax bills for Obamacare. The answer is education before the fact, and it's unlikely to be coming from insurance companies.