Millions of Americans will soon begin renewing the health insurance that they obtained this year under the Affordable Care Act. During the process, many individuals will inadvertently make the wrong decisions, which could boost their overall health-care costs.
The Affordable Care Act was designed to make yearly renewals easy. A prime motivator for this feature was to encourage individuals to keep their coverage. The entire system is dependent upon tens of millions of Americans, including healthy young individuals, participating.
But automatic renewals, while easy, won’t be the best option for many people. The New York Times published an in-depth look at the renewal issue recently and concluded that Americans shouldn’t automatically renew with their current insurer without examining their options. This is the same advice, by the way, that people should follow who have employer-sponsored insurance options.
In some parts of the country, the premiums for the most popular Affordable Care Act plans are rising by double digits. In comparison, other insurance plans, which hope to attract more customers, are increasing their prices modestly or even cutting them.
In its analysis, The Times looked at prices of the act’s silver plans, which were the most popular options during the first year of the insurance marketplace. A silver plan must cover 70% of the average patient’s medical costs.
The New York Times discovered that average premium increases for the cheapest silver plan will increase an average of 8.4% across the country, but averages don’t tell the real story. The newspaper shared an example of prices for 40-year-old single nonsmokers in New York City who possess the cheapest silver plan this year. The price for these individuals is currently $359 a month. The price for this policy, however, will jump by 17.35% in 2015. The silver policy that will be the cheapest next year for those 40-year-old New Yorkers will be another insurer that will boost its premiums by just one percent.
Individuals need to be proactive when the renewal period begins on Nov. 1. In nearly all states, consumers who don’t return to Healthcare.gov to shop will automatically be renewed for the plans they purchased in 2014.
Historical evidence strongly suggests that many Americans will stick with their current insurer. For instance, only 10% of senior citizens change their Medicare Part D drug plans annually even though many of them would be better off if they did. According to a survey released last year by the Center for Studying Health System Change, only 2.5% of people enrolled in employer-sponsored insurance in 2010 had changed plans for cheaper or better quality coverage.
Industry observers suggest that one reason why the price of the most popular plans is rising is because insurance companies are counting on inertia. Thanks to status-quo bias, they expect their customers to renew automatically despite price jumps.
Policyholders aren’t the only ones who would benefit from smart shopping. If Americans actively shopped for better deals on the exchanges, it would prompt insurers to price their policies more competitively.