There have been many complains about the cost of health insurance coverage obtainable through the Obamacare health insurance exchanges. (To learn more, see our section on Taxes and Obamacare.) It’s true that some higher income individuals who have obtained coverage through their state exchanges have seen premium increases. However, a much less reported fact is that because of Obamacare, millions of people are getting, or can get, their health insurance for free. That’s right, free…as in zero.
Experts estimate that as many as seven million people can qualify for zero-premium plans. These are primarily individuals who qualify for Obamacare premium assistance subsidies and elect to purchase the cheapest bronze level coverage from their state exchanges. The subsidies they qualify for are equal to, or even more than, the cost of a bronze plan, resulting in them having to make no monthly premium payments, or only a nominal payment of a dollar or two per month.
For example, Sam and Mary, a married couple in their 50s who live in California, have an annual income under $40,000. They qualify for an Obamacare premium assistance payment of $941 per month. They purchased a bronze health plan on California’s health insurance exchange that cost $945 per month, leaving them with a monthly payment of $2 after the subsidy.
A study by the consulting firm McKinsey and Company found that the availability of zero-premium plans varies across the country. For example, McKinsey found that about 40% of the uninsured in Missouri qualify for a zero-premium bronze plan, compared with just 2% of the uninsured in New Jersey. McKinsey also found that about half of the people eligible for zero-premium plans were under 39 years of age.
However, it is important to keep one thing in mind: the bronze level plans offered on the health insurance exchanges are cheapest for a reason: They offer the lowest levels of coverage. Bronze plans cover only 60% of covered benefits. This means that the people who purchase them must pay the other 40% of the cost of covered expenses out of their own pockets through some combination of deductibles, copays, and coinsurance up to an annual out-of-pocket limit. The annual limit is based on the out-of-pocket limits in high-deductible plans that are eligible to be paired with health savings accounts (HSAs). These limits for 2016 are $6,850 for individuals and $13,700 for families.
Thus, people who purchase no-cost bronze plans will have to pay a fair amount out of their own pockets before their coverage kicks in. Still, they are assured that they will have to pay no more than the applicable annual limit.
For healthy individuals who don’t go to the doctor much, a zero-premium bronze level plan is a great deal. However, paying somewhat more for a better silver plan may be a better option for individuals with health problems. Silver plans pay 70% of the cost of covered benefits. Moreover, lower income individuals and families—those with incomes between 100% to 250% of the federal poverty limit--are also eligible for cost-sharing reductions with their coverage. This means that, in addition to receiving premium assistance credits, they’ll have lower deductibles, co-payments, and out-of-pocket maximums than those with higher incomes. But such benefits are only available for those who obtain silver-level plans.