As insurers offer health plans with lower premiums on insurance exchanges to compete with rivals, they are simultaneously lowering the value of tax credits that consumers receive from the government to offset their coverage costs, according to a Wall Street Journal report.
One of the ways federal tax credits are decided is based on the price of the second-lowest-cost midrange plan in a given geographic area. When insurers offer plans with lower premiums the value of the tax credits are pulled down, which means the government pays less to subsidize the premiums. Therefore, consumers may end up paying more for their health plan, even if their premiums remain the same.
According to a report released by Clearwater, Fla.-based Wakely Consulting Group, residents purchasing insurance through the exchanges in 14 states will likely see a decline in their federal tax subsidies.
To avoid paying higher costs, those who purchase insurance off of the exchanges should compare prices and shop around for coverage, which is something many consumers are reluctant to do, according to the report.