An Advisor's Guide to Navigating Health Insurance Exchanges

By Ellen Breslow
Nov. 18, 2013

Clients shopping the exchanges will likely be confused at the variety of options and requirements they have to deal with. Help them out with this primer on how to navigate the exchanges, the information needed, how to qualify for premium subsidies, and tips for getting the best coverage for the money.

Open enrollment is upon us, and with it, the dawn of the new health insurance exchanges. As an advisor, it's critical that you understand what is involved in gathering information on these plans, enrolling through the website, and determining your client's eligibility for a premium tax credit. You've heard about how difficult the health insurance websites are to navigate and understand; here is your opportunity to add value to your client's health care planning by assisting in the process.

State or federal?

The first component to consider is where the client lives (see the figure) and whether the exchange is state run, federally run, or run by a combination of the two. This will impact where your client goes for information and enrollment.

The 34 states or so that have defaulted to a federal government-run exchange will access information at healthcare.gov. Other exchanges will have their own websites, and most likely, additional enrollment data will be required. The standard information is the same, and as an advisor, that is where you'll want to focus.

Source: Brookings Institution; data from the Commonwealth Fund

Client information

Although the federal government and state exchanges have a means by which your client can compare plans, it will allow comparisons between only the costs of plans. For example, after completing a generic questionnaire, healthcare.gov will display plans under provider, metal level (bronze, etc.), and cost. However, it won't address the differences among the plans from the assorted providers. Before you can help clients plot a course through the exchange, they should pull together the following information:

• Dependent Social Security numbers
• All sources of family income (if applying for premium subsidies)
• Tax filing status and income estimate for 2014 (if applying for premium subsidies)
• Dependent residence addresses
• Dependent tax filing status (if applying for premium subsidies)

Remember that this questionnaire is also an application for enrollment. What's available depends on where the applicants live. Everyone needs a Social Security number so that citizenship status can be verified. If a dependent doesn't have a Social Security number, a reason must be provided.

Premium subsidy eligibility

One of the major benefits that the public health insurance exchanges offer is premium subsidies. To qualify for a subsidy, income sources and requirements must be met—hence, the necessity of supplying this information on the enrollment application.
Eligibility for premium subsidies depends on modified adjusted gross income (MAGI) and, for early retirees, the extent to which MAGI can be effectively managed. Here's an easy way to understand the MAGI calculation:

• Gross income (GI) = Salary + interest earned + income from investments + other taxable income
• Adjusted gross income (AGI) = GI - qualified deductions
• Modified adjusted gross income (MAGI) = AGI + Social Security + tax-exempt income + foreign earned income

The tables below will give you an idea of how premium subsidies work. Table 1 gives you an idea of what levels of MAGI fall into the federal poverty level (FPL). The subsidies are available on a sliding scale for those whose income doesn't exceed 400% of the FPL. Premium calculations are based on silver plans.

Source: HealthPocket

Table 2 outlines the MAGI threshold for subsidies. Subsidies are a percentage of modified adjusted gross income. Premiums will not exceed this percentage of MAGI—up to 9.5% of 400% of FPL.

Source: HealthPocket

Whether your client qualifies for a subsidy or not, the application process will be the same, although there shouldn't be any income verification requirements. Once an application is submitted, the client will be able to see all levels of plans that are available in the area where he or she resides.

Review existing plans

Although an individual may find a plan where the cost seems to be within acceptable limits, what the plan offers in the way of coverage will differ and network providers will vary from plan to plan. All metal plans will cover the essential health benefits (10 categories of coverage including preventative services); however, there may be other things to consider:

• List the family's prescription drugs and be certain the drug formulary covers those medicines that are taken regularly.
• If keeping the same doctors and hospitals are a key component of your client's coverage, check the plan carefully. Services may be covered, but the doctor or hospital may not be in the network of providers.
• Since this is not an employer-sponsored plan, it may make more sense for adult children to purchase their own coverage, especially if they live out of state. The coverage will likely be better. An adult child who is working may also be eligible for a premium subsidy if he or she enrolls separately and considers only one income.
• If your client is not expecting a premium subsidy, it makes sense to review claim, deductible, and premium records before deciding on which metal plan looks most attractive. Depending on what the history looks like, lower premiums and higher deductibles may look better than expected
• You may not drop COBRA and enroll now for 2014. There is a special enrollment period available after the COBRA period ends. The exchange plans may be selected instead of COBRA.

Deadlines

There is a six-month enrollment window for the public health insurance exchange plans. In order to meet the January 2014 deadline and meet the individual mandate for establishing coverage, enrollment may be completed by March 31, 2014.

This article is reprinted with the permission of Horsesmouth.com. To learn more go to Horsesmouth.com. Ellen Breslow is the managing director of www.eabhealthworks.com.  She spent her 26 year career as a managing director of Citi Smith Barney’s Global Wealth Management division, most recently as the creator of the Retirement Resources Group, focusing on healthcare advisory for clients and prospects of Smith Barney and Citi Family Office.  She is a graduate of Lehigh University.