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For NJ Residents, It Could Pay to Look Beyond Premiums When Choosing Plans

Linda Schwimmer, vice president of the New Jersey Health Care Quality Institute.
Linda Schwimmer, vice president of the New Jersey Health Care Quality Institute.

New Jersey residents looking to buy health insurance through the federal marketplace or exchange may focus on the monthly premiums, but healthcare experts say it may pay to weigh other factors.

Even if it residents have to stretch financially to afford more expensive plans, they could cost less in the long run by having lower copayments and deductibles, as well as offering a wider range of healthcare providers.

While problems with the marketplace website -- healthcare.gov -- have made it difficult to complete insurance applications since the marketplace launched on October 1, residents can learn about available plans from individual insurers’ sites.

The 2010 Affordable Care Act established the marketplace as a one-stop shop for residents without coverage through an employer or government plan to purchase insurance and learn whether they are eligible for tax credits to subsidize the purchase, as well as other cost-sharing assistance.

Raymond Castro, senior policy analyst for New Jersey Policy Perspective, said that while consumers are presented with a difficult choice in picking an insurance plan, the ACA is not to blame.

“It’s complex and it’s not because Obamacare made it complex -- insurance has always been complex,” Castro said.

The decision requires residents to play the role of an actuary, weighing the risks of becoming ill with the benefits of having lower monthly bills.

Castro said the first step for residents is to determine whether they’re eligible for Medicaid. Gov. Chris Christie agreed to an expansion up to 138 percent of the poverty line, which amounts to $15,856 for a single person. Castro said many unemployed young people who live with their parents are eligible for the program without realizing it.

“It’s one of the best kept secrets in the state,” Castro said.

Beyond that, Castro advises residents to choose plans that may cost more but provide richer benefits -- both in terms of lower cost-sharing after premiums have been paid and in having wide provider networks.

“You never know when you need insurance,” Castro said. He said healthcare policy advocates have begun to refer to a “bronze trap,” in which residents choose a lower-premium plan -- known as bronze plans. The out-of-pocket cost sharing may be so high that these residents decide against visiting their doctors when they’re ill.

“I don’t think there’s any easy answer, except to really understand what it is you’re buying,” Castro said. Federal subsidies can be estimated through the Kaiser Family Foundation calculator.

Horizon Blue Cross Blue Shield of New Jersey, AmeriHealth New Jersey, and Health Republic Insurance of New Jersey are the three companies offering insurance through the marketplace. Despite the limited number of companies, consumers have a variety of choices to make, both in terms of health plans and in the amount they are willing to pay for premiums.

Other than a limited number of “catastrophic” plans, which are only available to residents younger than 30 and those who can’t afford more expensive plans, each health plan is categorized by the amount of cost sharing that residents can expect to pay once they’ve paid their premiums. Plans labeled “platinum” require residents to pay 10 percent of these costs, while “gold” require 20 percent, silver 30 percent, and bronze 40 percent. Bronze plans have the lowest premiums, while platinum plans have the highest.

For example, a 27-year-old Middlesex County resident has a choice of 26 “metallic” plans, as well as two catastrophic plans that are only available to residents younger than 30 and those who can’t afford more expensive plans.

The hypothetical 27-year-old’s options among the non-catastrophic plans range in monthly premiums from the AmeriHealth New Jersey Tier 1 Advantage Bronze EPO Health Savings Account plan, costing $229.56, to AmeriHealth’s Select National Access Platinum POS+ plan, costing $478.01.

A childless couple in which both spouses are 40 years old would also have a choice of the same 26 non-catastrophic plans, with the premium ranging from $559.88 to $1,165.82.

Most residents will be eligible for tax credits to offset these costs. They are available for residents with incomes between 100 percent and 400 percent of the poverty line, which currently amounts to between $11,490 and $45,960 for a single person and between $15,510 and $62,040 for a couple. The premium tax credits would substantially lower their costs.

But the differences in out-of-pocket cost sharing through deductibles, copayments, and coinsurance are serious. Deductibles are the amount of medical bills that must be paid before insurance coverage starts, while copayments are fees charged for individual visits to healthcare providers. Coinsurance is the percentage of expenses charged to patients once their deductible has been reached.

The lowest-premium plan would require the 27-year-old to pay $2,500 in medical costs before meeting his or her annual deductible. After that, the policyholder would be required to pay 50 percent of additional coinsurance costs, up to the annual cap of $6,350 set by the ACA. The 40-year-old couple would have to pay a $4,700 deductible on the lowest-premium plan, then 50 percent of costs up to the annual cap of $12,700.

However, the highest-premium plans require no deductible, with the insurer covering most costs other than copayments for visits to healthcare providers.

Low-income residents will also receive assistance for this out-of-pocket expense, up to a maximum of 250 percent of the poverty line, which currently amounts to $28,725 for a single person.

Both Horizon and AmeriHealth offer plans with lower premiums, in which roughly half of the state’s hospitals are “Tier 1” providers. While residents will pay less to go to those hospitals, the other hospitals will be much more expensive.

New Jersey Hospital Association spokeswoman Kerry McKean Kelly said the association was concerned about some plans that don’t include enough hospitals in their “Tier 1,” which offer less-expensive care to residents.

The NJHA advises residents to “carefully research their options and truly understand what their coverage will – and will not – pay for,” McKean Kelly said. “Obviously, the lowest premium will attract your attention first. But consumers have to weigh those upfront premium costs with the out-of-pocket expenses that they may incur down the line, especially if they are hit with a serious illness.”

Officials with both Horizon and AmeriHealth said they have employees available to help residents choose the right plans for them. They also said they are working to make sure that residents know what benefits are available through their plans, so they won’t be surprised by expenses later.

“The best thing consumers can do is educate themselves on how health insurance protects them from large medical bills,” Horizon spokesman Thomas Vincz said. “A good way to start is to look back over the last few years at what they have spent on healthcare and what they can afford to pay for health insurance coverage.”

Vincz said Horizon asked all of its network hospitals to participate in Tier 1. Having different tiers is based on research showing that consumers would accept narrower networks in exchange for lower premiums.

Cynthia Jay, marketing and strategic outreach director for Health Republic Insurance of New Jersey, has noted that while her company’s plans have somewhat higher premiums, they also offer comprehensive benefits at a wider range of hospitals.

Those helping residents make their insurance decisions have been trying to learn more about the options that are available. They include the organizations that have been awarded federal funding to serve as “navigators” for residents, as well as federal qualified health centers, which serve as primary care providers for low-income residents.

Eva Turbiner, president and CEO of the Zufall Health Center in Dover, oversees a staff that includes workers who have been certified to provide counseling to residents completing insurance applications for the marketplace. Her organization is a federally qualified health center, serving Hunterdon, Morris, Sussex and Warren counties.

“My guess is that most of them are simply going to go by (premium) price because affordability is a huge deal,” Turbiner said. She expects that younger patients will be particularly focused on premiums, while older patients will look to make sure that their doctors are included in the plan’s provider networks.

Turbiner said that the number of choices for patients will make it particular difficult to sort through all of the pros and cons.

“In some ways, although we had hoped to see more competition in New Jersey, the lesser number of choices makes selection a little bit easier,” she said.

Linda Schwimmer, vice president of the New Jersey Health Care Quality Institute, said residents who currently have individual insurance plans might want to check to see if their plans are up for renewal before January 1. If they are pleased with their current plans, they can renew them for a year, putting off the challenge of sorting through the new options. However, that choice likely only makes sense for residents who aren’t eligible for subsidies, Schwimmer added.

Schwimmer said that each individual must weigh his or her individual situation before deciding which plan to purchase.

“Most people are going to look at price, price, and price and that’s because if you can’t afford it, you can’t afford it,” Schwimmer said. “But you also want to look at cost-sharing because that can be quite high.”

This year, residents will have to work within the constraints of the premium, cost-sharing, and provider network information made available through the marketplace and insurer websites. But the New Jersey Health Care Quality Institute -- a nonprofit that works to ensure quality, safety, accountability and cost containment in healthcare – would like to see more information made public in the future about the quality of care of the providers included in the insurers’ networks.

“We definitely want to see more transparency around quality and cost so that people can make informed decisions,” Schwimmer said.

Another factor that could shape the residents’ insurance marketplace decisions in future years is the increased emphasis on paying for more coordinated care through arrangements like accountable care organizations, in which some payments depend on providers lowering costs while increasing the measured quality of care.

For now, the insurers are more focused on driving down costs through the traditional model of negotiating lower fees with providers, which pay for each individual healthcare service they deliver.

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