Today we look into a different subsidy under Obamacare: cost-sharing subsidy. It doesn’t lower your premium but it gives you a better plan.
A better plan means a lower deductible, lower co-pays, and a lower out-of-pocket maximum. It’s only available to people at the lower end of the income spectrum. There are three tiers. The lower your income, the better plan you get.
A Silver plan pays on average 70% actuarial value, i.e. the costs the policy-holders as a whole incur. If your income is low enough, you get better Silver plans.
Silver Plan Actuarial Value
> 250% FPL
70%
250% FPL or below
73%
200% FPL or below
87%
150% FPL or below
94%
Here are what the plans offer in my area:
Regular Silver plan: $2,000 deductible per person, $6,350 annual out-of-pocket maximum per person, $45 co-pay for primary care visits, $19 co-pay for generic drug prescription, 20% co-insurance for hospital stays.
Silver 73: $1,500 deductible per person, $5,200 annual out-of-pocket maximum per person, $40 co-pay for primary care visits, $19 co-pay for generic drug prescription, 20% co-insurance for hospital stays.
Silver 87: $500 deductible per person, $2,250 annual out-of-pocket maximum per person, $15 co-pay for primary care visits, $5 co-pay for generic drug prescription, 15% co-insurance for hospital stays.
Silver 94: $0 deductible per person, $2,250 annual out-of-pocket maximum per person, $3 co-pay for primary care visits, $3 co-pay for generic drug prescription, 10% co-insurance for hospital stays.
As you see, the Silver 73 plan is only slightly better than the regular Silver plan. The Silver 87 and Silver 94 plans offer much better value.
Bronze or Fortified Silver?
If you are healthy and you don’t use up the deductible anyway, a $2,000 deductible or a $5,000 deductible makes no difference to you. A $15 co-pay for office visits versus a $45 co-pay saves you very little money if you only go to a doctor twice a year. In that case you may be better off getting the less expensive Bronze plan, which if often free at 250% FPL or below.
If you have health issues and you use $6,000 worth of health care every year, a Silver 87 plan with $500 deductible saves you thousands of dollars versus a regular Silver plan with $2,000 deductible. In that case you will want to qualify for the cost-sharing subsidy at a lower income level.
When I retire I would save the low income years until I’m less healthy. If I run into a major health issue, I would then switch to withdrawing from Roth.
[Photo credit: Flickr user davidciani]
Compare Online Savings Accounts
Rates as of Nov. 17, 2013, subject to change at any time.
Account
APY
American Express High-Yield Savings Account
0.85%
Discover Bank Online Savings Account
0.80%
Cost-Sharing Subsidy Under Obamacare is copyrighted material from The Finance Buff. All rights reserved. ( b87e8215d24496480249d6aaf20c77ea )