Why Obamacare Wants You to Pick Silver Health Plans

Signs That You're Being Pushed Towards a Silver Plan

Couple reviewing paperwork
Couple reviewing paperwork. Getty Images/Portra Images/DigitalVision

Choosing the right health care plan is important. Some people feel as though they are pushed into picking a Silver Health Plan by the state's health insurance exchange. 


Am I being pushed into picking a Silver Health Plan?


If you’re buying individual or family health insurance through your state’s health insurance exchange, you may feel as though you’re being prodded to pick a silver-tier health plan.

Although you ultimately have free choice to pick any plan the health insurance exchange offers, lawmakers designed the system so that it encourages individuals to choose a silver plan.

How Am I Being Influenced to Choose a Silver Plan?

The most blatant evidence that the lawmakers who wrote the Affordable Care Act want you to choose a silver plan involves cost-sharing subsidies. Cost-sharing subsidies lower the amount of deductibles, co-payments and co-insurance when you use your health insurance. By lowering the deductibles, co-payments and co-insurance without changing the monthly premium, your cost-sharing subsidy effectively gives you a free upgrade on health insurance.

Cost-sharing subsidies are only available to people who choose a silver health plan. If you meet the income eligibility criteria for a cost-sharing subsidy by having an income of less than 250 percent of federal poverty level, you must choose a silver–tier plan to get the subsidy.

If you pick a lower cost bronze-tier health plan, or a higher cost gold or platinum-tier health plan, you won’t get the cost-sharing subsidy. This will obviously influence your decision about whether to choose a silver-tier plan over a bronze, gold or platinum health plan.

Premium subsidies are tied to silver plan prices

A more subtle indicator that the design of the Affordable Care Act encourages you to choose a silver plan comes in the form of the premium tax credit subsidy.

If you’re eligible for the premium tax credit subsidy, the federal government will pay part of the monthly premium for your health insurance. In effect, the premium subsidy gives you a discount on the cost of health insurance. To be eligible for the premium subsidy, your income must be from 100-400 percent of federal poverty level (the lower income threshold is 138 percent of federal poverty in states that have expanded Medicaid, since Medicaid coverage is available in those states up to 138 percent of federal poverty level).

The dollar amount of this subsidy is based on comparing your income to the price of the second-cheapest silver-tier health plan available on your state’s health insurance exchange. The design of the premium tax credit subsidy strives to make a silver-tier plan affordable for people of modest means.

Gold-tier health plans have an actuarial value closer to the average value of employer-sponsored health insurance than silver-tier plans do. The Affordable Care Act could have stipulated that the premium subsidy be based on a comparing your income with a higher-valued gold-tier health plan.

This would have had the effect of making gold-tier plans more affordable for people of modest means.

Since lawmakers chose to base the premium subsidy on the cost of a silver-tier health plan rather than on a gold-tier plan, or on a lower cost bronze-tier plan, it could be construed as encouraging people receiving premium tax credit subsidies to choose a silver-tier plan.

Unlike the cost-sharing subsidy, you’ll still get the premium subsidy if you choose a bronze plan, a gold plan or a platinum plan. But, you’ll pay the difference if you choose a more expensive plan than the one used to figure the amount of your subsidy.

In most states, the default display for health plans on the exchange is based on premium, from highest to lowest. There are some state-based exchanges that display silver plans more prominantly for people who are eligible for cost-sharing subsidies, but in general, you'll see bronze plans first in most states, followed by silver plans. There will always be some overlap, since silver plans from one carrier might end up having lower premiums than bronze plans from another carrier. But as long as the plans are ordered by premium, there's no mechanism to display silver plans first.

This is something that some advocacy groups have railed against, as they would prefer to see everyone who's eligible for cost-sharing subsidies receive them - which involves enrolling in a silver plan. But there are also advocates who contend that for some low-income, healthy enrollees, the difference in premiums between bronze and silver plans is too much to justify the buy-up to the more robust coverage offered by silver plans, even if cost-sharing subsidies are included.

Since premium subsidies can also be applied to bronze plans, it's not unusual to see circumstances where a person can get a bronze plan for free or for just a few dollars a month, while a silver plan might end up being $50 or $100 a month. There's no one-size-fits-all answer in terms of which choice is better. A silver plan - particularly if the applicant is eligible for cost-sharing subsidies - will provide much better coverage than a bronze plan. But it will also cost more in monthly premiums, which is a trade-off that doesn't appeal to every enrollee.

To learn more about the premium tax credit subsidy, read, “How Does the Health Insurance Subsidy Work?

To learn more about the how the tier system works and what it tells you about the value of a health plan, read, “Bronze, Silver, Gold & Platinum—Understanding the Metal-Tier System.”

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