How ACA will affect insurance premiums has been a matter of debate for a while. The evidence from the first state to set up an Exchange and post rates, California, paints a mixed picture. A report in Forbes is showing rates for young people as increasing by 100-123%. Rates for families seem more affordable. The take away points from my perspective:
Many have predicted that premium rates under ACA would rise. It really depends upon where you were in the market. Someone with a pre-existing condition if she was fortunate enough to get health insurance will see her rates fall. Rates could go up in general because:
- The law mandates not only that almost all must be insured but that all insurers must take all comers. That is, there can be no denial of coverage for any reason. Further, it mandates that there can be no rate differences between healthy consumers and the sickest or some of those most likely to use a lot of health care, the riskiest (including farmers and others in high risk occupations). There remain rate differences for smokers, some age based differences, and differences based on prevailing costs of health care delivery in different regions of the country.
- The law mandates all non-grandfathered plans to include preventive benefits. So now insurers will factor in the cost of screening exams that previously some may not have used or paid high prices for out of pocket. (Grandfathered plans are those that were in existence before the law and have not changed anything since then. Once they make a change they are no longer exempt.)
- The law mandates all non-grandfathered plans to include some coverage from a list of 10 essential benefits.
On the surface having increased premiums seems like a bad thing but note:
1. Premiums before ACA had been rising so much that without some way to get insurers to control costs, insurance had already become unaffordable for many and was quickly heading that way for many more. That is, premiums were going up without any real control. Now we may at least know some of what the costs are for.
2. Most specifically, if the premiums are really out of line with what the true cost of covering all of those people, sick and healthy, then the insurance companies have to give back. That is the 80/20 rule where the insurance companies have to use 80% of monies collected for direct health care costs. This year alone 67,000+ Kansans with private insurance received more than $4 million in rebates from insurance companies because the insurance companies made more profit than allowed by ACA.
3. There are some significant benefits we get from having all insured even if it costs more in premiums
So better plans, and more secure plans. For some it will cost more. For some it will cost much less. And for many it will some type of plan, better than none at all.
- The most important part of ACA from a consumer protection perspective is that no one who tries to purchase insurance can be denied coverage, or be thrown off when they get sick. Previously one major illness often led to being uninsurable. There are also no lifetime limits, and soon to be no annual limits, on your coverage.
- A favorite of middle class consumers is being able to keep their young adult children up to age 26 on their family plans.
- People who live in communities when more people are insured have better quality health care and better health outcomes. So it matters not just that you or your family are insured but that your neighbors and co-workers are as well.
- And a little discussed fact is that job lock will be over. That is, because group like premiums are now not only to be found with your employer but also in the marketplace, and because pre-existing condition exclusions are gone from all plans, individuals can choose the jobs they want to work at and not just stay because of health insurance. They will be able to purchase on their own on the Exchange. There have even been predictions of more entrepreneurial undertakings. This is detailed in a new report from the Robert Wood Johnson Foundation, the Urban Institute and Georgetown University’s Health Policy Institute. The number of self-employed people is expected to rise by 1.5 million — a relative increase of more than 11 percent — as a direct result of the health care overhaul.
The goal of ACA was to get as many Americans insured as possible. It is well established that people who are insured, and securely insured, are healthier, and use the health care system more appropriately, holding down costs for all. It matters to the economy of any nation that it has a healthy workforce. The choice with ACA was to build upon the current health insurance market. This meant paying premiums to private insurers and having those insurers negotiate with the health care providers while bearing the risk. To do that they needed to have healthy people in the risk pool. That is the reason for the mandate to strongly encourage that enrollment. In the past premiums were rated based on one’s health status and predicted risk factors. That’s why younger people had less expensive plans. By blending all in the same risk pool it was known that premiums would rise for some but significantly decrease for others and actually be available for some who had been locked out of insurance altogether. To lessen the impact of the premium increases ACA tried to make insurance as affordable as possible by allowing for tax credits. That is, the feds will help individuals and families under certain income maximums pay for those premiums. The insured gets a premium discount and the feds pay the insurance company the balance. (Qualifying incomes are up to $45,960 for single, $94,200 for a family of four, maximize consumer premium contributions between 2-9.5% of income, on a sliding scale.)
So, mandates that we are all in game and that more pieces on the game-board are covered leads to likely increased costs for premiums for those who were lucky before. The reason for the mandate is to get healthy people into the pool paying premiums to help minimize the costs for the non-healthy. The youngest, under 30s, are allowed to purchase catastrophic plans to minimize the costs to that young population that is trying to get established economically. AND there are tax credits to help many pay for those premiums. So to talk about increased premiums without noted that the feds are going to be picking up a significant portion of those increased costs seems disingenuous at best.
ACA had also intended states to put their poorest individuals and families into their states’ Medicaid programs and to have the feds pick up that bill for 3 years. The Supreme Court negated the penalty that was to be placed upon states that did not comply so as of June 2013 only 26 states (not Kansas) are participating with the result that many of states’ neediest populations will continue to be uninsured and use safety net providers, something that costs all of us when we balance out in other ways the uncompensated care provided to this population that is often very sick.
There were alternative health reform plans floated for years, most prominent among these was to expand the very popular Medicare program to all US citizens. That would have made the feds the direct payer of care for all and not just those over 65. Money collected would have gone to health care providers and not to insurance companies for insurance policies. It matters not if that would have been less expensive as many predicted. It is not the plan that passed.
And of course, we could have continued on the path we were on with no reform. That would have meant that many Americans would have continued to worry about how they were going to meet the medical care needs of themselves and their family members and potentially go bankrupt. And it would have meant that millions were at risk of being thrown off their insurance policies. Even today before ACA goes into full effect as of January 1, 2014, there remain Americans who are one major illness away from being uninsured and uninsurable. That American could be you, your neighbor, your co-worker or your loved one. Only when it happens close to home do people realize how devastating that reality has been for many. That reality goes away for most by January 1, 2014.
I’ve also been reminded recently that when Medicare first passed in the mid 1960s it took many years and tweaking to improve it. ACA likely needs improvement. And there are many who would like to start over. When Medicare got improved that was a time when Congress seemed to be capable of bipartisan crafting of our laws.
Is ACA going to cost us? Yes? Will it be worth it? Perhaps. Could some other kind of health reform have been passed? Perhaps. Would we have been better off doing nothing? It probably depends on whom you ask.