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Hidden costs to look for when shopping for health insurance

Teresa Tanoos's picture
Low premiums typically mean high deductibles on plans offered at HealthCare.gov

Now that the Obama website is back up and at least working better for some people, it’s important to know about the hidden costs of health insurance if you’re planning to shop for a plan at the online marketplace at HealthCare.gov.

While most people visiting the site are looking for a low monthly premium, a low priced premium usually has a much higher deductible, something many people overlook when it comes to purchasing health insurance.

A deductible is the amount you have to pay for health care before your insurance plan’s coverage kicks in. For example, plans offered on the federal exchange and on some state exchanges have an annual deductible that’s usually over $5000 for individuals and $10,000 for couples.

Although may find a health plan with a low premium, which is what the Obama administration has been promoting since the Affordable Care Act was passed, your deductible and other out-of-pocket costs will likely be much higher than you expected.

As many Americans have already discovered, plans offered at HealthCare.gov frequently have much higher deductibles and out-of-pocket costs than health insurance plans offered by their employers.

It was only until recently that Americans visiting the Obamacare website could even find out what the deductible amounts were, but now there's a feature available that provides deductible information.

Low Premiums, High Deductibles

The health plans available at HealthCare.gov were priced by insurers based on the assumption that visitors to the site would tend to choose plans that had lower premiums. However, cheaper premiums usually have higher deductibles – some so high that it may defeat the purpose of having health insurance.

Some states, for example, offer health insurance plans on the federal exchange with premiums as low as $300 per month. But the deductible on such plans may be more than $12,000.

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In states that run their own exchanges, a self-employed individual can find a plan with a premium of around $500, with an annual deductible that’s $5000, which is still much higher than the average deductible of $1135 for employer-sponsored health insurance coverage, according to the Kaiser Family Foundation.

“I found many health plans at HealthCare.gov with such high deductibles that it made me wonder if it even made sense to purchase insurance,” said a single 28-year-old school teacher from Texas, who asked to remain anonymous. “I mean, look, I have a regular paycheck, but at my age and having good health, I’d rather save my money than spend it on health insurance with a high deductible I can’t afford anyway.”

While there are health plans offered through Obamacare that are relatively reasonable, some of which are less expensive than what they’d currently find in the private health insurance market for individuals, they still tend to offer less for more than what most people would get through an employee-sponsored health plan.

In addition to having lower premiums, but higher deductibles, consumers shopping the exchanges for health insurance also face high co-payments for prescription medications and health services before they reach the limit on out-of-pockets costs, which for individuals is capped at $6350.

For families, the amount spent on out-of-pocket health costs is capped at $12,700. Although these capped amounts offer substantial protection, for many people, they also represent a substantial amount of money for many people to spend out of their own wallet.

Of course, there are savings to be had if you qualify for subsidies, such as those who have low incomes. However, just 30 percent of those who tried to get subsidies during the first month actually qualified to receive them.

Nevertheless, there are people with pre-existing conditions that appreciate Obamacare because they’re finally able to get health insurance – and at a decent rate. Still, for others, the amount of the deductible is too high for health plans with an affordable monthly premium.

This should come as no surprise, as a high deductible is one way to keep premiums low. Another way is to limit which doctors people can see, as well as hospitals at which they can be treated.

So the “real cost” of Obamacare remains to be seen. But by many accounts, when you add up all the out-of-pocket costs, including deductibles and co-pays, it’s already costing much more than what those with other health plans are used to paying.

Meanwhile, Vermont has taken matters into its own hands, as the state is the first in the nation to approve a single-payer health care system.

SOURCES: Kaiser Family Foundation, Kaiser Health News: Deductibles, Other Health Plan Costs May Surprise Consumers (Dec. 9. 2013); HealthCare.gov, What if my income is too high to get lower costs on monthly premiums? Dec. 2013).