Consumers Exhibit Limited Healthcare Knowledge
A recent study suggests that while employees are doing quite a bit of comparison shopping for healthcare, many of them possess a limited understanding of how health insurance actually works, which presents both challenges and opportunities for brokers. The study sought to gain a clearer understanding of Americans' knowledge concerning a number of healthcare-related topics, and the results were a bit troubling.
On the one hand, 32% of respondents are now using the internet to conduct their research and purchase plans (an 18% increase from 2012); however, only 7% have a comprehensive understanding of premiums, deductibles, coinsurance, and out-of-pocket maximums. And what these consumers lack in understanding they make up for with contempt: when asked if they would rather shop for health insurance or file their taxes, 25% of respondents preferred the latter. While this is concerning for the healthcare industry on the whole, it does provide brokers with an opportunity to educate clients about the fundamentals of health insurance and empower them to make the best choices based on their unique needs — especially as premiums continue to rise and tax credits become available.
Increasing Health Insurance Premiums
It was recently revealed that consumers should expect a nearly 25% increase on average premiums for Obamacare plans, which means that your current and potential clients who are looking for individual plans are likely going to be seeing red when it comes time to purchase healthcare. However, the increases for employer-based plans are comparatively tame — checking in at 5% on average. Regardless of whether you are dealing with individuals seeking coverage for themselves and their families or businesses looking for quality healthcare for their employees, these premium hikes could cause varying levels of sticker shock.
The truth of the matter, however, is that these increases are well overdue. The cost of coverage has proven much higher than originally anticipated, and the mandate to insure everyone regardless of chronic or preexisting conditions is a noble one, but it has ultimately become more expensive than estimated.
The main reason we are seeing these steep inclines, however, is due to the fact that premiums for exchange plans were set low to begin with, making these increases an inevitable and unavoidable occurrence. The hope was that lower premiums would make insurers and their plans more attractive in the short term, allowing them to obtain larger market shares. And while that was the case for some of the major players who were able to trim costs and entice buyers in the early days of Obamacare, the hens have now come home to roost and a reckoning awaits.
Your Clients Could Be Eligible for Subsidies
Thankfully, higher premiums don't have to drain your clients' bank accounts. According to Kevin Griffiss, HHS Public Affairs Chief, nearly 80% of consumers who are eligible to buy health insurance on the exchange qualify for subsidies. Said Griffiss, "for the vast, vast majority of marketplace consumers, the headline rates are simply not what they pay."
For example, consumers might be eligible for a premium tax credit based on their estimated household income. If so, they can apply this tax credit toward their monthly premiums, which will be sent directly to their insurers, who will then implement the lowered premium payment on their monthly bill. However, the tax credit will fluctuate along with any changes in income or household size, so be sure that your clients are aware of the two following scenarios and to report any alterations to their insurer immediately:
- Increased income or losing a household member: If and when a consumer loses a household member or their income increases, the amount of their premium tax credit likely decreases, which means that they will want to lessen their advanced tax credit each month to avoid having to repay (referred to as "reconciling") when it comes time to complete their annual income taxes.
- Decreased income or adding a household member: If and when a consumer adds a household member or their income decreases, the amount of their premium tax credit likely increases, which means that they will want to increase their tax credit to lower their premiums.
While these premium increases have been anticipated by industry insiders, they will still come as a bit of a shock to your clients. Provide them with the appropriate background information to add a little context, and be sure to educate them regarding the potential for subsidies through the premium tax credit. In most cases, premiums are far less expensive than they seem once household income has been determined and premium tax credits have been applied.
McIntire, M. (2016, October 24). HHS: Federal subsidies will ease cost of premium increases. Morning Consult. Retrieved from https://morningconsult.com
Satter, M. (2016, September 30). Survey: most workers don't understand health insurance. benefitspro. Retrieved from http://www.benefitspro.com/2016/09/30/survey-most-workers-dont-understand-health-insuran