Five dirty secrets of the New York State health insurance exchange

Credit: jerryfergusonphotography via Flickr under Creative Commons

It’s been six weeks since the New York State Health Insurance Exchange, also known as the New York State of Health, opened for business. Since then the state exchange has endured its fair share of technical problems, but they’ve not proven to be as bad as HealthCare.gov’s.

Because of the lack of major problems, enrollment at the New York Exchange has been a success compared to the states using HealthCare.gov. So far much of that enrollment has been for Medicaid rather than for private insurance plans. State administrators though expect the number of people signing up for private plans to surge up as the March 2014 end of open enrollment gets closer.

With so many people expected to buy health insurance at the exchange, are they really getting all the information they need before purchasing a plan? So much of the media coverage surrounding the ACA’s exchanges has been focused on their technical problems. But there are other less well-known pitfalls to buying health insurance on the New York exchange. These are the kinds of pitfalls that if not avoided or properly navigated could have long-term negative consequences for the consumer.

1. Smaller networks

To be fair there’s been some media coverage on this aspect of the exchange already, but it certainly bears repeating. Many of the big-name health insurance companies that are selling plans on the New York exchange are only making available a small portion of their full network for their exchange plans.

That means for example,  if you’re currently insured through “Big Insurance Company One” in New York and you’re hoping to keep your same doctor through a “Big Insurance Company One” exchange plan you might not be able to. Not to mention that these limits also apply to hospitals, meaning your local hospital might now be out of network for you.

For health insurance companies, these smaller networks are a way to save money because all exchange plans are subject to the twin Affordable Care Act mandates of guaranteed issue and community rating. This means that sick customers can’t be denied health insurance or charged more than a healthy person for that coverage.

Aside from fewer doctors and hospitals to choose from, the other problem here is that you are unable to see what the networks are on the New York State of Health Exchange website. This means that consumers are essentially flying blind to different insurers’ reduced networks unless they call up the exchange, and even then it’s not easy.

2. New health insurance companies

Did you know that there are 19 new health insurance companies selling policies at the New York State Exchange? Several of these companies have previously specialized in selling and administering Medicaid plans, so their experience in the private health insurance market is lacking. Not to mention that their networks are also likely to be lacking in New York’s best doctors and hospitals.

What’s deceptive though, is that these new insurance companies’ plans are also the ones that cost the least per month. This makes purchasing them an easy pitfall for those New Yorkers who shop for health insurance based solely on the price per month that they see.

The lesson here is to be very mindful of health insurance networks when looking at the less expensive plans on the exchange. Before paying for anything, you should call the insurance company in question to see how their customer service is, and chat with a representative about their network size.

3. Tax credit

The major feature of the ACA is the federal health insurance subsidies for those with annual incomes between 133 and 400 percent of the Federal Poverty Line. The issue with the subsidies though is that they are based on your estimated annual income for the following year. This means that when applying for health insurance at the exchange now in 2013, you are asked to project what your income will be for 2014. Then based on that estimate you get your health insurance subsidy if you qualify. The problem though is if you estimate wrong.

First, if you overestimate your income and end up making less during the year than you thought you would, you get that extra subsidy money. That extra is the difference between what you got and what you would have qualified for if you estimated corrected during the enrollment period. On the other hand though if you underestimate your income and make more than you thought you would, you have to pay back whatever extra subsidy you received when you file taxes.

An interesting aspect of the subsidy is that you can take it in chunks. Just because you qualify for a $3,000 subsidy for example doesn’t mean that you need to accept the whole thing up front. You can choose to use half or three-quarters let’s say, and then save the rest just in case you have to pay some of it back.

4. You can’t pick a new plan outside of open enrollment

This year open enrollment for the exchanges runs from October 1, 2013, to March 31, 2014. It’s important to know that unless you have a life-changing event,  like getting married or having a child, you cannot buy a health insurance exchange plan outside of that open enrollment period. This poses an issue for those who may have purchased an exchange plan that they didn’t know excluded the doctors or hospitals they need.

A person in that situation could of course drop out of their plan with relative ease, however they could not just jump on another exchange plan. They would have to enroll in a new health insurance plan off of the exchange.

5. Navigators and New York State Health Insurance Exchange staff can’t recommend plans

Chances are that if you buy from the New York exchange, you’ll speak with either a staff member there or maybe work with a certified navigator to purchase your plan. These folks are here to help and guide you through the administrative and technical aspects of purchasing at the exchange. This means they’ll help you fill out the application, help you with the required paperwork, and answer whatever specific questions you have. However, they are barred by law from recommending specific health insurance plans to you.

To fully understand this point, it’s helpful to contrast this with what a health insurance broker usually does. A health insurance broker is able to help you through the process of applying for coverage at the exchange, just as a navigator or exchange staff can. A broker can also answer your specific questions about the plans for the exchange.

Where a broker can go further though is key. They’re able to listen and learn about your healthcare situation, and then make recommendations. A broker can answer the mightiest of health insurance questions, “Is this the best plan for me?”