Beware Obamacare auto-renewal

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By most accounts, the second open enrollment for individual health insurance on the new Obamacare health exchanges that kicks off in mid-November should be a markedly improved shopping experience from last year’s IT debacle.

The wrinkle this fall? Those among the 8 million new enrollees from season one who simply allow their Obamacare policies to renew without first checking their second-year premium against the competition could be in for sticker shock. And the pain could be worst for the estimated 87 percent of the newly insured who received a federal subsidy to make their plan affordable.

“Consumers who automatically re-up with the plan they already have could face steep and unexpected premiums and out-of-pocket costs, particularly if they received a federal subsidy,” according to Stateline, a daily reporting service of The Pew Charitable Trusts.

Here’s the catch

In June, the Obama administration announced that those who purchased coverage on the federal exchange could expect their policy to be automatically renewed. States that built their own exchanges may institute automatic renewal as well.

But a convenience that should have come as a welcome relief for those who persevered to land affordable health insurance on the exchanges now holds the potential to unwittingly pick their pocket.

Here’s how: All income-qualified subsidies are based on the price of a certain “silver” health plan, the second lowest tier on the platinum-gold-silver-bronze Obamacare plan menu. Regardless of which plan an enrollee ultimately chooses, the subsidy is based on the cost of the official benchmark silver plan.

An example: 62 percent increase

The health research firm Avalere Health offers this hypothetical example of what can happen when the policy auto-renews:

Last fall, a consumer bought a silver policy through her state exchange with a monthly premium of $214. Because of her income, she received a $156 subsidy that brought her monthly payment down to an affordable $58. Had she chosen a higher-premium gold or platinum policy, she would have received the same $156 subsidy.

This fall, however, her health insurer plans to raise her plan’s premium to $267.  The official benchmark price used to calculate subsidies also is changing. What it all means is that when her policy auto-renews, she’ll be on the hook for an additional $36 per month to cover the difference between the new silver benchmark premium and her plan’s higher cost.

“By doing nothing, her out-of-pocket contribution will rise by 62 percent,” Stateline points out.

Consumer costs to fall in some states

This fall, such auto-renew scenarios appear likely in eight of nine states Avalere analyzed, including Connecticut, Indiana, Maryland, Maine, Oregon, Rhode Island, Virginia and Washington; Vermont was the lone exception. Conversely, Avalere predicts that policyholders in Rhode Island and Virginia may be in for a pleasant surprise, as the silver benchmarks in those states are expected to drop, thus reducing out-of-pocket premium increases for 2015.

Consumer advocates hope the exchanges will ultimately offer calculators to help policyholders calculate their best cost-for-coverage move during open enrollments.

Until then, your best bet is to do the renew-versus-improve math yourself, enlist the aid of an Obamacare navigator.

Follow me on Twitter: @omnisaurus

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