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Obamacare autopilot: Making it easy could cost you

That autopilot the government is putting your Obamacare enrollment on? You need to take back the controls.

A plan to automatically re-enroll the vast majority of people who bought health insurance on HealthCare.gov could lead to some nasty surprises from much higher premium costs for people who don't bother shopping around for a different plan next year, experts warned Friday.

"Autopilot will not be the smart move for many people," said Larry Levitt, a senior vice president at the Kaiser Family Foundation, a leading health-care analysis nonprofit firm.

Pawel Gaul | iStock | Getty Images

"In 2015, the smart move is to do window-shopping again. I'd say [for] everybody," Levitt said a day after federal officials revealed details of the automatic re-enrollment for more than 5 million Obamacare customers.

Levitt noted there will be a large number of price changes that could make an expensive plan from 2014 a more attractive option in 2015—and vice versa—when open enrollment on HealthCare.gov begins Nov. 15.

The autopilot option for enrollment could also, in some cases, result in people who had paid no money at all out of pocket for their insurance premiums in 2014—because of the value of the subsidies they get—abruptly learning in January that they now have to personally pay some money each month.

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In other cases, subsidy-eligible Obamacare customers could see double- or even triple-digit percentage hikes in what they pay out of pocket for premiums if they don't switch the insurance plan they have now, he said.

"I think it will be surprising and confusing to many people who face these increases," Levitt said.

Such dramatic percentage hikes for subsidized customers stem from the complicated method the government uses to calculate tax credits for low- to middle-income people to help them pay for insurance sold on Obamacare exchanges.

The method ties the amount of subsidies that a person gets to the price of the "silver" plan sold on the exchanges—even if someone doesn't opt to buy that plan. Silver plans, which cover about 70 percent of health benefits, are as a rule the second least expensive types of plan sold on the exchanges

If someone receiving a subsidy is enrolled in a benchmark or even cheaper plan in 2014—and their plan becomes more expensive than the benchmark in 2015—their subsidy could offset less of their premium costs than in 2014. And so far, some of the biggest price boosts announced by plans for 2015 have been for those that were among the cheapest in 2014.

While the silver plan benchmark method to calculate subsidies is widely known in the health policy world, it is obscure, at best, to most consumers—even though close to 90 percent of Obamacare enrollees receive some kind of subsidy based on it.

On Thursday, federal officials revealed that as many as 95 percent of the 5.13 million people who signed up for health insurance plans sold on HealthCare.gov and received premium subsidies would be automatically re-enrolled in their plans for 2015 and receive the same subsidy credit that they had in the 2014 plan year. The approximately 300,000 on that federally run Obamacare exchange who didn't receive subsidies would be automatically re-enrolled in the same health plan as well.

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The 15 Obamacare exchanges run by states and the District of Columbia will have the option of automatically re-enrolling their own 2.7 million customers under the same kind of system.

Customers on any exchange can either do nothing and accept automatic re-enrollment, or choose another plan to sign up for. They also should update any changes in income that would affect their eligibility for subsidies, and the amount they receive.

As it announced the re-enrollment plan, the U.S. Department of Health and Human Services on Thursday also said customers are "strongly encouraged" to use the next open enrollment period to "re-evaluate their health coverage needs for the coming year."

In other words, people shouldn't assume that an automatic re-enrollment in their plan is their best option.

"Both the marketplace and health plans will work directly with consumers so that they know the steps they may need to take to keep their plan and cost savings. These notices will also remind consumers to update their information and to review their plan choices to make sure it still works for them and their family," said Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services, which administers Obamacare.

Coincidentally, hours before the HHS announcement Thursday, the consultancy Avalere Health published an analysis warning that many Obamacare exchange enrollees "face sizeable premium increases in 2015 unless they switch plans."

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"It's going to be really important for consumers to take a look at their current plan choices and how that plan stands in the market in 2015," said Elizabeth Carpenter, director at Avalere Health.

Change in low cost silver plans

 
Lowest premium silver plan
changed in 2015?*
Benchmark plan changed
in 2015?
CT Y Y
IN Y Y
MD Y Y
ME N Y
OR Y Y
RI Y Y^
VA Y Y^
VT N N
WA Y Y
*In all states where the 2014 lowest plan lost its position, it did not become the 2015 benchmark plan. ^Except RI and VA, where the 2014 benchmark plans became the lowest cost silver plan, the 2014 benchmark became less competitive Source: Avalere Health

"Most enrollees in 2014 chose a plan based on the monthly premium. However the lowest-cost plans in 2014 may no longer be low cost in 2015. Before consumers renew their 2014 plan, they should consider the trade-off between continuity of care and lower monthly premium."

Avalere's analysis was based on data from nine states whose Obamacare insurers have announced proposed 2015 plan prices. It found that in six of those nine states, the silver plan that was used as a benchmark to calculate subsidies will lose benchmark status in 2015 because its prices are rising.

Avalere laid out two hypothetical scenarios in its analysis involving people who receive Obamacare subsidies, and whose current silver plan lost benchmark status after the insurer hiked premiums.

In one scenario, a Maryland woman named "Sue" would see her premium costs rise from $58 per month in 2014 to $94 per month in 2015—a 62 percent increase that was due to her plan becoming the ninth least expensive plan. She would have to personally pay the difference between the new subsidy and the retail price of that plan.

In the other scenario, a Washington state man named "Dave" would see his 2014 silver plan go from $196 per month—after the subsidy he receives—up to $246 per month in 2015, a 25 percent increase. In that scenario, Dave's plan had gone from being the benchmark silver plan in his region to the 11th least expensive plan.

Carpenter said that because of such scenarios, anyone who currently has an exchange-sold plan should not as a matter of course merely accept the automatic re-enrollment without evaluating 2015 prices and how much they will end up spending out of pocket.

"We were surprised, to be honest with you, about the extent of disruption in the market," she said, referring to the price swings in the nine states Avalere analyzed.

By CNBC's Dan Mangan.

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