When the Affordable Care Act (a/k/a Obamacare) was signed into law by President Obama, the hope was that coverage could be extended to millions of Americans that up until now have had difficulty finding affordable health insurance. As 2014 approaches, it is becoming clear that many Americans will benefit from the ACA . . . but at the same time, other Americans may find that the price of health insurance has increased dramatically.
The ACA will bring about many changes to health insurance in the United States, and its important that you understand those changes as they could impact the price and quality of your health care coverage:
Essential Health Benefits: Beginning in 2014, major medical policies (what most of us would consider to be “comprehensive” health insurance) must contain what are known as “essential health benefits.” This includes ambulatory care, emergency services, hospitalization, maternity and newborn care, mental health and substance abuse services, prescription drugs, rehabilitative services and devices, lab services, preventive care and chronic disease management, and pediatric services.
Many health insurance policies already contain benefits similar to the “essential health benefits” package required by the government. However, many insurance companies will have to retool – and re-price – their policies to be in compliance, and to make sure there is enough money to doctors and hospitals for covered services. For instance, some policies don’t cover maternity care – an expensive benefit - but after 2014, all health insurance policies must include maternity care as a benefit.
Community Rating: Another big change coming to health insurance involves how policies are priced for young people versus older people. Historically, insurers have been able to consider a range of factors when determining your health insurance premium, such as your medical history, your current health status, and your gender. The ACA will prohibit insurers from considering those factors. Instead, they will only be able to consider whether you are a smoker (smokers will pay substantially higher premiums than non-smokers), and your age.
On age, the changes could result in moderate price decreases for older consumers, and big increases for younger consumers. This is because the ACA provides that insurers cannot charge older consumers more than 3 times what they charge younger consumers – and that is a big change from current practice, in which most states allow insurers to charge older consumers 5 times (or more) what they charge young consumers. This could have profound impacts on prices and consumer behavior, as older people on average need a lot more medical care than younger people.
Guaranteed Issue: Individuals with pre-existing conditions often find it difficult or impossible to find affordable health coverage. That will change in 2014. Insurers will no longer deny coverage or charge more due to an existing medical condition. While this is good news for many, it also poses a problem: if people wait until they are sick to purchase coverage, that could result in higher premiums for other people. That’s one of the reasons the federal government created the “individual mandate”, requiring all Americans to carry health insurance beginning in 2014.
Taxes and Fees: There are several new taxes and fees that will also impact the cost of health coverage in America. A multi-billion dollar Health Insurer Fee will be imposed on all health insurance companies. There are also new taxes on pharmaceutical companies, medical devices, and overly-generous “Cadillac” health insurance plans. There will also be special fees for policies purchased on the new Insurance Exchanges. Some or all of these new taxes and fees will be passed along to consumers like you, driving up the cost of comprehensive health insurance.
What does this mean for you? If you have been denied health insurance in the past due to a pre-existing condition, you may finally be able to secure the comprehensive coverage you need. Likewise, older Americans may find that the price of insurance decreases. But others – in particular young, healthy people – may see premiums increase dramatically.
Americans still don’t know what health insurance will cost in 2014 – but we will soon. Over the next few months, you can expect to see many news stories about both the benefits and drawbacks of the ACA. Keep in mind that individuals with household income of less than 400% of the Federal Poverty Level (about $44,000 per year) will quality for sliding-scale premium assistance on the government-managed Insurance Exchanges.
