If you’re signing up for health insurance for the first time this year, then you may have some questions about your options on and off the marketplace. Even if this isn’t your first enrollment period, certain aspects of the signup process can be daunting, especially when it comes to the metal classification system. Health insurance plans are now classified by tiers ranging from less coverage to more. You’ll see these plans listed as bronze, silver, gold and platinum. There’s also a “catastrophic” option, but it’s a special case reserved for a select group of enrollees.
The metal designations are designed to help consumers make more informed choices about their coverage. After all, most people would assume that a platinum-tiered plan would be better than a bronze one. However, metal type does not refer to the quality of the plan. Each metal signifies the plan type’s actuarial value, a concept that we’ll discuss in detail below. In this case, “coverage” simply refers to how much an insurer pays for your medical care, not how many benefits you’ll receive.
Regardless of the plan type you choose, you’ll still gain access to the ten essential benefits that are guaranteed under the Affordable Care Act as well as other benefits depending on your individual plan. Which type of Obamacare plan you should choose depends on different factors, such as how often you’ll use it and what your budget is. In this article, we’ll give you more information on each tier type so that you can sign up with confidence this November.
Four Metals, Four Tiers of Coverage
Whether you buy major medical coverage from an Obamacare marketplace, through an insurance broker or from a company directly, you’ll be offered a choice of plan types in four metal tiers: bronze, silver, gold or platinum. Each metal corresponds to a level of coverage in terms of actuarial value. The actuarial value of a plan refers to how much you and your insurer will pay for your coverage. As you can see in the chart below, each metal plan pays for a certain percentage of health care costs:
|Metal Type||You Pay||Insurer Pays|
These percentages are based on an average across the plan. Let’s take a look at a bronze plan to highlight what we mean when we’re talking about actuarial value. In the bronze category, your insurer will pay about 60 percent of health care costs. Since these are averages, the plan may actually cover slightly more or less. This value is spread out across all health plans. It’s not based on your individual health care costs. Your coinsurance, copayments and deductible all count toward the actuarial value, but your premium payments do not. Here’s an example:
- You have a bronze health insurance plan from an Obamacare marketplace. The plan has a $5,000 deductible with an out-of-pocket spending maximum of $6,500.
- Co-pays vary by profession. In general, you’ll pay $40 for each visit with your primary doctor, $90 for a specialist and nothing for preventive visits – which are covered for free under the ACA. Urgent care visits cost $100 after the deductible.
- During the year, you see your doctor a handful of times. When you get a sore throat or injure your back, you make an appointment. On one occasion, you visit the local urgent care facility because your regular doctor is fully booked and you’ve got a stomach bug.
- You don’t need any major medical services, and you’re not on any monthly prescriptions.
- With so few visits throughout the year, you’re unlikely to meet the annual deductible, which means that your insurer is not going to pay much, if anything, for your medical care. You will still pay the rate that your plan outlines – $40 for an office visit, for example – but your health insurer only pays the difference between that set copayment and the actual cost of a doctor’s visit.
- For you as an individual, your health insurance plan won’t pay for 60 percent of your medical care since you hardly used it for the year.
Contrast this example with someone who needs a lot of treatments and services, such as a diabetic who must visit with his doctor every month and take costly medication. This person would reach his deductible quickly, and the health insurer would be responsible for footing the bill for his more expensive health care. Your low health care costs combined with his higher health care costs – as well as the costs for everyone with the same health plan – amount to the actuarial value. Health insurers will pay more for medical care for some people and less for others, which is how the system balances itself out.
For people who see the doctor a lot, higher-tiered plans are going to be more valuable because they cover a greater percentage of out-of-pocket costs. If you’re healthy or don’t plan on using your health insurance very often, then you may be able to buy a bronze plan. Your out-of-pocket expenses will be fairly low, so it won’t make economic sense to invest in a higher-tiered plan. Platinum plans have the highest premiums and lowest deductibles. On the other end of the spectrum, bronze plans have the lowest premiums and highest deductibles.
Keep in mind, however, that all metal plans are not created equal. Because the actuarial value represents averages, you may still have two metal plans on the same tier that vary widely in how much they cover. You might pay higher coinsurance rates under one plan, for instance, or another plan might have a higher deductible. Despite these variables, each plan will pay an average of 60 to 90 percent of health care costs depending on metal type.
The Catastrophic Plan
When you’re shopping for coverage, you may be presented with an option for “catastrophic” coverage. This plan is reserved for young adults under the age of 30 who need basic emergency insurance. Certain adults over the age of 30 may also qualify for a catastrophic plan on the Obamacare marketplaces if they meet specific hardship conditions. This type of plan is similar to short term health insurance in that it covers very little outside of true emergencies, but unlike short-term coverage, catastrophic plans also cover:
- Preventive services
- At least three visits with your primary care doctor each year
- All essential benefits provided by the ACA
Catastrophic plans come with high deductibles. In 2016, it’s $6,850. Until you hit that deductible, you’ll be responsible for the total cost of your medical care. After you reach the deductible, your insurer will take care of the rest. For young, relatively healthy individuals, a catastrophic plan can make good economic sense. These plans qualify as ACA-compliant major medical plans, which means that you won’t be charged a penalty fee for not having coverage if you get one. They’re also much cheaper than the metal plans. The tradeoffs are higher deductibles and higher out-of-pocket costs.
Cost and Other Considerations
When you sign up for a health insurance plan, consider several factors in addition to the metal tier. While bronze plans offer the lowest premiums, they may cost you more in the long run. Under Obamacare, major medical plans now have caps placed on out-of-pocket spending, and insurers had to get rid of lifetime payout maximums. In other words, you will not have to pay for medical care above a certain dollar amount – but that dollar amount can be high, especially for people with limited incomes. In 2016, the out-of-pocket maximum for an individual is $6,850 and $13,700 for families. Before you commit to a plan type, consider whether you can afford to pay the deductible amount upfront.
You should also consider the fact that you may be eligible for a cost-sharing subsidy or an advanced premium tax credit. Cost-sharing subsidies are only available for silver-tiered plans, but premium tax credits can be applied to any metal plan. Catastrophic plans are not eligible for cost assistance. With a tax credit, you may be able to afford a higher-tiered plan by applying the credit toward a higher deductible. You could also apply the credit to a lower plan and pay practically nothing.
Choosing health insurance can be daunting, but it doesn’t have to be a complicated process. Evaluate the kind of health care coverage that you’ll need, compare the plans available through the Obamacare marketplace or a broker, and choose a metal plan that fits your budget and lifestyle.