Recently, the government passed the American Rescue Act expanding subsidies across the board for ACA consumers. Most of us became worried we would lose a large portion of STM business to ACA plans. I have done the research, ran the numbers and I am happy to inform you that it is not as bad as we thought!
The ARA expanded tax credits in one way – premiums that are equal to or over 8.5% of your annual income are to now be subsidized.
When we look at the FPL guidelines, we can see who we should be marketing STM to: Prospects with income between 300% to 400% of the FPL will be almost fully subsidized, therefore they will be ACA customers. I have found that prospects making 500% of the FPL or higher will still be saving a substantial amount of money by purchasing a STM plan, with the “sweet spot” being 600% of the FPL. Customers will save so much that you can easily add ancillary plans to their coverage (including Life w/ LB’s)!
Example 1:
40 male/40 female married couple – $104,000 annual income (600% of FPL)
ACA bronze plan with $8550 deductible – $695 per month
-or-
STM w/ $5000 deductible and 100/0 coinsurance – $421 per month (preferred rate)
Plan Enhancer $5000 AME/CHS/Sickness – $57 per month
Living Benefits $250k face value 20 years for husband – $35 per month
Living Benefits $250k face value 20 years for wife – $30 per month
Total: $543 per month
Savings = $1,824 annually by going with STM package
Example 2:
40 male/40 female with two children ages 10 and 5 – $158,000 annual income (600% of FPL)
ACA Bronze plan with $8550 deductible – $1039 per month
-or-
STM w/ $5000 deductible and 100/0 coinsurance – $582 per month (preferred rate)
Plan Enhancer $5000 AME/CHS/Sickness – $57 per month
Living Benefits $250k face value 20 years for husband – $35 per month
Living Benefits $250k face value 20 years for wife – $30 per month
Total price: $704 per month
Savings = $4,020 annually by going with STM package
Targeting people with higher income around 600% of the FPL will allow you to sell more STM, more living benefits, and more supplemental policies all while saving the customer money and providing them with Total Protection rather than just health insurance. Keep in mind that each situation is different. I ran quotes for different age groups all the way up to 800% of the FPL. I noticed that customers aged 55 and above are receiving larger subsidies across the board. For those people, the price gap is not as large as the 40-year-old examples shown above. Overall, it is somewhat apples to oranges in terms of comparing STM to ACA. In the examples above, the ACA bronze plans have a smaller PPO network than the Aetna Open Choice PPO on the STM, and the bronze plans have higher out pocket maximums at $8550 per person versus $5000 per person with the STM. At the very least, provide your client with both options side-by-side and let them decide which is better for them. It’s a WIN WIN!
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