Orange County Register, November 28, 2013
If you are younger than 30 and don't think you need a full-fledged health plan, or can't afford one, the Affordable Care Act has something just for you.
A little-known provision of Obamacare, as the health reform law is known, allows young people -- and others who meet certain "hardship" exemptions — to buy low-premium, high-deductible plans that don't cover a lot of medical care unless you fall seriously ill or have a bad accident.
Even as insurers terminate bare-bones policies for millions of people — despite an appeal from President Barack Obama to keep them for another year — the same companies are selling the new "catastrophic" health plans via Covered California and other insurance exchanges nationwide.
Obamacare requires new health insurance polices to offer more comprehensive coverage that includes 10 "essential benefits," such as maternity and newborn care, mental health, substance abuse treatment and rehabilitation services. The catastrophic plans cover those benefits too, but enrollees will typically pay more out of their own pockets before the coverage kicks in.
The sale of these policies is part of an Obamacare strategy to attract premium dollars from young and healthy people who might otherwise opt not to buy insurance. The federal government has calculated that about 2.7 million, or 39 percent, of the 7 million people expected to buy 2014 coverage through state and federal health insurance exchanges need to be between the ages of 18 and 34 to offset an anticipated spike in medical bills from older and less healthy people with pent-up demand for care.
The main reason why a lot of young people are uninsured is not because they think they are "invincible," as the conventional wisdom would have it, but because they can't afford it, says Laurel Lucia, a policy analyst at UC Berkeley's Center for Labor Research and Education. The Affordable Care Act "does a lot of things to address the affordability issue among young adults, and this is just one of those options," she says.
Other Obamacare provisions that help young people, who often have limited means, include federal subsidies for buying insurance through the exchange; the right to stay on their parents' policy up to the age of 26; and an expansion of eligibility for Medi-Cal, the government insurance program for low-income people.
The catastrophic plans — or "minimum coverage plans," as Covered California calls them — are "targeted at young adults who are not eligible for one of those other options," Lucia says.
These minimum coverage policies, even with their lower premiums, still bring a stream of money into the system and help foster the mix of young and old, healthy and sick that is needed for the financial viability of both the exchange and the broader market for individual and family insurance, proponents say.
The plans, like other Obamacare-approved policies, also include three primary-care visits a year without co-pays and free preventive services. So if people who buy them decide at a later date to upgrade to one of the richer health plans, they are less likely to be coming in with a lot of unmet medical needs.
But there is a big caveat: If you buy a catastrophic plan, you cannot get a federal subsidy to help pay your premiums, regardless of how low your income is. Subsidies are available only on the four main types of plans sold in Covered California, which are arranged in tiers from cheapest (bronze, which provides the lowest level of coverage) to most expensive (platinum, which provides the highest).
So before deciding to buy a catastrophic plan, you would be well-advised to study all options carefully.
"You'll find that in many cases, buying a bronze plan with a tax credit will be cheaper on the premium side and in the end will give you much better coverage," says Linda Leu, California Research and Policy Director for Young Invincibles, an advocacy group for young people.
A 27-year-old Orange County resident making $29,000 a year, for example, can buy the cheapest Covered California catastrophic plan — offered by Health Net — for $151 a month, according to the Covered California website (coveredca.com). The cheapest Bronze plan, from Anthem Blue Cross, would cost him $138 once his subsidy was deducted from the bill.
Under the Health Net catastrophic plan, he would have to satisfy a deductible of $6,350 before coverage kicked in. In the bronze plan, the deductible is $5,000. For both policies, the limit on annual spending out of the enrollee's own pocket is $6,350.
The farther down the income scale you go, the higher the subsidy and the less attractive the catastrophic option becomes. In some cases, even a silver plan — the next tier after bronze — can be less expensive than a minimum-coverage policy.
A 27-year-old Orange County resident making $20,000 a year would pay the same $151 for that Health Net catastrophic plan with the $6,350 deductible and matching annual out-of-pocket limit. But he would pay only $57 a month for the cheapest silver-tier plan, which — because his income level qualifies him for reduced cost sharing — carries a deductible of just $550 and caps his annual out-of-pocket spending at $2,250.
In addition to the limited value of these plans for those who get subsidies, people need to know that if they buy a catastrophic policy, they would end up paying more money out of their pockets if they get sick than they would with any of the other policies sold by Covered California.
"Young people, for the large part, will be shopping for insurance for the first time, and we want to make sure they understand that the premium is not the only cost involved," Leu said. "The catastrophic plan would have a really low premium, and I think a lot of people would look at that and think, 'Oh great; this is the cheapest one.' But people who buy the plan will just have to be prepared to pay the $6,350 in out-of-pocket costs" if they get sick.
UC Berkeley's Lucia predicted that at the end the day, enrollment in catastrophic plans might not be very big, because many young people will get subsidies, stay on their parents' plans or qualify for Medi-Cal.
"I think the number of young adults for whom these plans would be relevant is a pretty small share of young adults overall," she said.