Recently, a friend was reviewing her new strategy with me.

A healthcare professional and a mother, she was getting ready to have “the talk” with her son. “I don’t think he knows much about it,” she said, “and it’s so complicated.” Her son is an intelligent, 25 year-old who works with complex social policy issues in Washington, D.C. “The talk” was about the Health Insurance Marketplace and enrolling him in a plan for the first time.

Even for those like my friend with 30-plus years of healthcare experience and thoroughly schooled in the finer points of health insurance, the Health Insurance Marketplace provides an eye-opening experience and lots of confusion. Many of your clients are probably starting to have the talk with their adult children who are “aging in” to the marketplace and transitioning from their private insurance.

The setting and structure when shopping for qualified health plans (QHPs), the range of cost provisions that may apply, and the potential for missteps along the way provide the perfect recipe for muddled decision making by even the most astute client.

As a nation, we still are struggling with our role as healthcare consumers. Many of our insurance decisions and activities are made for us—by our employer, for example. Open up the doors and invite everyone into a healthcare marketplace however, and we realize how little we understand about how to compare and select insurance, and how difficult cost and pricing can be to calculate when we don’t understand what’s happening “behind the curtain.” Allsup has seen this with our Medicare plan selection service customers, especially as Medicare Advantage plans grow in popularity.

Consider a Kaiser Family Foundation (KFF) survey from earlier this year showing that more than one in four Americans think people who are buying health insurance on the exchanges can choose only one government health plan. The truth of the matter is that millions of people now have a marketplace of potentially dozens of plans to shop from and to match to their personal needs. I can confirm how little some advisors know about the Affordable Care Act (ACA), primarily because they didn’t think they had to pay attention. But if it hasn’t happened already, one day your phone will ring and a client will ask you about Obamacare. 

Allsup helps clients of advisors consider their marketplace health insurance options and coordinate their benefits so they can make an informed decision for themselves and their families. The second open enrollment period is upon us, through Feb. 15, and there are special enrollment periods triggered by life events throughout the year.

Clients who can benefit by the marketplace are likely to come from a range of circumstances including individuals who own their own business, self-employed professionals, early retirees who have a few years to go before they are Medicare-eligible at age 65, and families with large households and adult dependents.

Lessons From The Marketplace

Here are a few lessons we’ve learned from working with customers choosing a marketplace plan.

1. The reports are true. HealthCare.gov is working much better than last year’s maiden outing. That said, getting a consistent or helpful answer to a complicated situation can be problematic when contacting the HealthCare.gov call center directly.

Individuals using the marketplace still don’t have a convenient way of comparing plans and coverage provisions. It takes time and effort to compare provider networks and determine which plans cover which doctors and hospitals, and prescription medications that are covered.

Once individuals have created an account and enrolled, they move on and communicate primarily with the plan carrier. But some issues require persistence when you are trying to reconcile what you were told by the marketplace and the reality of your carrier’s policy.

The government was smart to tell those who had enrolled in year one that they could stay with their plan for the second year without re-enrolling, and this was communicated by the plans. However, some consumers were confused by communications from HealthCare.gov to update their profiles and confirm enrollment.

2. Health insurance literacy is a necessity. We’re still making our way through this new healthcare system, and this is hindered by a lack of health insurance literacy. Many clients we assist are familiar with the concept of a health insurance co-pay, but once those financial concepts expand to include deductibles, embedded deductibles, coinsurance and cost-sharing—consumers can become lost.

The jargon can be challenging, much less applying it to their purchasing decisions. For instance, four of 10 uninsured individuals could not correctly identify health insurance terms such as “provider network,” “annual deductible” and “premium,” according to a KFF survey of nearly 1,300 people. It would be easier if we could make these terms more compelling, like learning how to rank poker hands. The objective for financial advisors, however, is helping their clients understand that using this knowledge to their advantage will result in real-dollar savings.

My friend was confident and knew what she had to do—transition her son from her employer’s private plan in one state, to a state marketplace plan in another state. But explaining basic concepts like “in network” and “out of network” to her son made the process more difficult.

3. The devil is in the detail. Now we can build on lesson No. 2. Once your client understands the parts of a health insurance plan and related costs, it begins to get interesting. Marketplace exchange plans and the subsidies involved can be coordinated to provide your clients with coverage and a cost structure that’s unlike anything they may have purchased in the past.

For example, some exchange plans come with embedded deductibles, rather than the typical deductibles that each member had to meet before the plan started to pay for coverage. This means that a family of four could have just one sick individual and meet their deductible for the year, allowing the plan to start paying. Then there are the numerous cost-reduction provisions provided, which takes us to lesson No. 4.

4. Look into the costs, and then look again. The following are just a few of the provisions surrounding exchange plans to keep in mind.

There are no lifetime limits and no annual limits for these policies. Insurers cannot charge higher rates due to gender or health status. However, they can adjust pricing if you are a smoker, an illustration of which I just recently witnessed. Two individuals of similar age who live only blocks apart in a major city asked why HealthCare.gov didn’t display the same plan to both and why the options for one of the two were more expensive. The answer: one is a smoker, the other is not.

Plans come in four categories and provide an actuarial value of 60 percent for bronze, 70 percent for silver, 80 percent for gold, and 90 percent for platinum. This means they cover, on average, an estimated 60, 70, etc., percent of participant’s healthcare costs. Plans at these levels have an out-of-pocket expense cap of $6,600 for an individual and $13,200 for families. (Catastrophic coverage for those under age 30 is one more type of plan, but has several restrictions.)

Most individuals at 100 to 400 percent of the federal poverty level (FPL) can receive tax credits toward the premium costs they incur for insurance bought through the exchanges. Also, those who are at 100 to 250 percent of the (FPL) can receive subsidies to support cost-sharing for the insurance they buy. Consider that a family of five could have household income of more than $100,000 and still receive tax credits toward their purchase of an exchange plan.

Tax credits, which apply to premiums, are typically “paid in advance” by reducing the monthly premium amount. They also are refundable through your tax return. But consider that it’s a little like your annual tax refund—why let the government keep your money all year?

These are just a few of the cost-related specifications outlined that impact consumers shopping for coverage through exchange plans. To repeat, look at the costs—and then look again.

Financial advisors are choosing to work with marketplace specialists for these types of comparison shopping services, similar to the services available for Medicare plan selection. They offer clients their expertise about the public exchanges and the financial benefits they may realize through their choice of healthcare plans. Some of these specialists work with their clients, side-by-side, online and by telephone to make the shopping experience easier to manage and the information more digestible.

5. Clients who choose a healthcare plan and set their buttons on cruise control may go off course down the road. One of the bright spots for consumers were reports that premiums for 2015 were expected to drop compared to the first year. An analysis of premiums for the second-lowest cost silver plan, which is the benchmark used for calculating subsidies, were expected to drop by an average of 0.8 percent from the current year, according to an analysis by KFF.

However, the challenge for clients who choose an exchange plan and simply re-enroll each year is the potential to incur significant premium increases with their existing plan. Choosing the status quo is a decision we see consumers make time and again with their Medicare plan selections, so it should come as no surprise that individuals will want to choose an exchange plan once and stick with it going forward.

Financial advisors, however, will want to make sure they discuss the possible pitfalls of this approach. For example, the plan one client chose in 2014 could see significantly higher premiums in 2015. The U.S. Department of Health & Human Services reported that 25 percent more insurance issuers are participating in the marketplace for 2015. This means your clients probably have many more options—an average of 40 health plans in their county, up from 30 plans in 2014—and there’s more competition for their healthcare insurance dollar.

6. Qualifying for marketplace incentives is complicated. It is possible for some individuals to purchase an exchange plan but receive no subsidy. Yes—and this is a major challenge for a lot of people who need affordable coverage. Someone whose employer provides coverage at an affordable level will not be able to receive cost incentives through the exchange. The ACA outlines this stipulation by stating that if an employee’s contribution is less than 9.5 percent of his or her household income, then they do not qualify for subsidies.

Here’s the rub: this 9.5 percent is applied to the employee-only coverage, not family coverage. A common example is a two-earner household where one spouse is unemployed. The employed spouse with private coverage meets the 9.5 percent rule, and that disqualifies the unemployed spouse’s eligibility for a subsidy. It may still be practical (especially considering the high cost of COBRA and dependent coverage) for the employed spouse to purchase her employer plan, the unemployed spouse to purchase coverage through the exchange, even though they’re not getting a subsidy, and for any children to receive coverage through a state-provided plan.

Another area of confusion is determining someone’s household income when completing the marketplace exchange application. The ACA requires that applicants estimate their income and base the tax credits and subsidies on these estimates. If someone gets to the end of the year and they have earned more or less than they estimated—they may face additional costs or refunds on their healthcare expenditures for that year. Those costs or refunds would be provided to them upon filing their income tax returns. This means that some individuals may not find out until April 15 that they’ve overpaid or underpaid for their healthcare.

7. Challenges are not over for the Affordable Care Act. We are four years into the roll-out of the ACA, but the challenges to the provisions of the legislation continue. Members of the 114th Congress have outlined potential challenges to the ACA. In addition, the U.S. Supreme Court has another case before them, King v. Burwell, which addresses how subsidies are being applied to exchange plan participants. The case relates to language in the law that indicates subsidies can help those with incomes under the 400 percent federal poverty level in “exchanges established by a state.”

This case is receiving a lot of attention because it calls into question the millions of people who are receiving subsidies through the marketplaces operated by the federal government. There are only 13 state-based exchanges, plus Washington, D.C., while the remainder are federal or a combination of state-federal marketplaces.

In the meantime, year two of the health insurance marketplace is expected to draw 13 million people onto exchange plans, according to the Congressional Budget Office. Compare that to the estimated 29 million people nationally, according to KFF, who could see real financial and healthcare coverage benefits from checking out the new marketplaces.

The advantage for financial advisors is the opportunity to play a role in the broader picture of healthcare coverage choices and the economic impact on their clients. There are viable opportunities for individuals, especially those in their 50s and early 60s, that simply didn’t exist just a couple of years ago. Choosing to work with benefits coordination specialists who have experience in both the public health exchanges and Medicare can make a tremendous difference for financial advisors who are guiding their clients down the path of long-term financial prospects for their golden years.

Mary Dale Walters is senior vice president of Allsup Inc. Allsup and its subsidiaries provide nationwide assistance for individuals and business navigating the complexities of private and public health insurance benefits. The Allsup Medicare Advisor® is a nationwide Medicare plan selection service that, for a flat fee, provides a comparative analysis of plans and serves as a trusted resource for financial advisors and seniors. Allsup specialists can work with your clients one-on-one to assess their needs and research their healthcare coverage options. Financial advisors may contact (888) 220-9678 or go to FinancialAdvisor.Allsup.com for more information on benefits coordination services or the Allsup Medicare Advisor.