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By the time you read this the “obamacare” state Exchanges or marketplaces should be up and running and our agency expects to be able to help you buy health insurance plans through the Connecticut Exchange. As far as I know, agent compensation will be the same on and off the Exchange. I added this preface to let you know that the author has no selfish reason to be against the Exchanges and is in fact not against the Exchanges. I just don’t think that buying through the Connecticut Exchange will be best for everyone.

If you get your coverage through your place of business, this post does not address your issues. If you plan to be insured through an individual or family plan that you, the consumer, purchased this information might lower your costs.

Who Should Buy Through the Exchange?

If you qualify for a subsidy, you will probably be better served by purchasing a policy through Connecticut’s Exchange. (Click for information on the subsidy and the Federal Poverty Limit.) Regardless of income, individuals will not get a subsidy if they enroll in an off Exchange policy. About fifty to sixty percent of Americans will qualify for a subsidy, so about half of us should look at the options on the Exchange first. This post is for the other forty to fifty percent that won’t qualify for a subsidy.

Should You Buy an Off Exchange Policy?

If you don’t qualify for a subsidy, you can purchase a policy that meets the mandates of the Affordable Care Act on or off the Exchange. If nothing else, you will have more options to choose from if you look at both venues.

These policies will cover the essential benefits mandated by the ACA health care reform provisions and applicable state regulations. The benefits provided will be similar and in some cases better. Maternity will be covered. Access is the same; you can’t be denied or dropped because of your medical history. Women will pay the same rates as men. You will avoid the tax penalty by purchasing a compliant, but off Exchange policy.

As of this writing, the author is only aware of one company that has published their off Exchange rates for 2014. Since you have until mid-December to make a final decision about coverage that starts on January 1, 2014, you won’t be hurt by waiting until other rates are available.

Which Plans Will Cost Less?

The author believes that the Off Exchange policies will have lower base costs and smaller increases in premiums over the coming months and years. However let me clearly state the following: If you qualify for a subsidy the net cost to you will probably be much lower if you buy on the Exchange.

The author has been an insurance agent in his home state of Connecticut since 1985, but has no inside knowledge nor an insurance-specific crystal ball to predict rates. However, I have been in this game long enough to make a few educated guesses and can give you some insights you may not get from the TV news.

To understand why I think the rates will be higher, you will need to understand how the rates are determined. This is an oversimplified explanation, but I think it will illustrate how my thinking is informed about this topic.

Insurance companies group people together by certain criteria and determine how much each group is likely to cost them over the course of a year. Then they divide that cost by the number of people and add to that number a surcharge that represents their overhead and desired profit.

So if you move to a town where there are more auto accidents per capita, even if your driving record is unchanged, you will probably pay more for your car insurance plan. If you are placed in a group that has a higher morbidity, you will pay more for your health insurance.

The people buying off the Exchange are likely to have higher incomes. Because there is a positive correlation between income and health, the insurance carriers are likely to have lower expenses associated with these policies. If so, they will cost less.

On the other hand, people who live in more affluent areas tend to visit doctors who charge higher fees. This will pull the rates in the opposite direction. However, I think that this influence will be overshadowed by generally lower morbidity I expect the off Exchange group to have.

This is just my prediction, but I thought I would share my insights with you.

Give us a call if you want help enrolling in a health insurance plan whether on the Exchange or off the Exchange, we can give you the information and advice you need to make the right decision.

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