Affordable Care Act Rate Shock?

By Kathleen Phalen-Tomaselli,

Come January 1 of next year, those with the lowest health insurance risk may be hit the hardest with premium increases as high as 40%. “The rules are changing,” says Robert Zirkelbach, vice president of strategic communications for the American Health Insurance Plans (AHIP) in Washington, D.C.

If you are young, healthy and qualify for non-group coverage, you could face rate hikes forcing you to reconsider how you spend your health care dollars. Here’s what’s happening: The Affordable Care Act, aka Obamacare, reaches maturity the first of the year. Designed to tackle the problem of insuring the nation’s estimated 48 million uninsured in addition to increasing benefits for such services maternity care and reproductive aid—all while lowering premium rates for older Americans. But the new provisions come with a price.

And because of new age rating band requirements tied to the ACA, the 18 to 44 age group’s premiums will increase while the over 57 group will decrease. Today, the ratio for age rating bands is 5:1, which means insurers can charge older individuals five times more than younger insureds. Come January 1, the band ratio reduces to 3:1. Take, for example, a 24-year-old who pays $1,200 annually for non-group coverage today could. He could see an overnight increase to $1,800, while a 60-year-old paying $6,000 today will pay $5,400 in 2014, according to the AHIP.
Nonetheless, in the report “Timely Analysis of Immediate Health Policy Issues” published last month by the Urban Institute Health Policy Center in Washington, D.C., lead author Linda J. Blumberg concludes that such predictions are over inflated. Citing government subsidies available to help defray such increases for those earning less than 400% of the federal poverty level, Blumberg says that subsidies will help this age group obtain expanded coverage. Even so, according to the report, “Premiums for 21-to 27-year-olds are $850 lower under (the)5:1 (age band rating) than under (the)3:1 rating.”

The problem with counting on subsidies to defray higher premiums is that, “40% will not be eligible for subsidies,” says Zirkelbach. He goes on to explain that 7.6 million of those in the non-group category in 2011 earned more than 400% of the federal poverty level.

According to an Oliver Wyman study, the cut-off for subsidies is closer to 250% of the federal poverty level—in other words, those earning less than $25,000. There will be no subsidies for individuals earning more than $50,000.

Along with tax subsidies, the ACA calls for the expansion of state Medicaid programs to help those with lower incomes. But, depending on where you live, this may not be an option. The Supreme Court recently ruled that states can decide on whether they will participate. At this point, many states remain undecided with some governors, like Gov. Tom Corbett(R-PA), saying they have no intention of expanding an already stretched program.

To further compound the issue of higher premiums, the health care reform law includes a new $100 billion sales tax on health insurance that will continue to drive up costs. AHIP predicts this increase may be as high as $300 per family.

The Congressional Budget office says the taxes will, “largely be passed through to consumers in the form of higher premiums.” A 2011 Oliver Wyman analysis estimates that this tax alone—not accounting for age rating bands or expanded coverage—will increase premiums over a ten-year period by $2,150 for individuals and an average of $5,080 for families.

Currently, federal and state governments are establishing health care exchanges—much like a one-stop health insurance supermarket—and individuals will be able to select plans starting October 1.

What are your options?

Pay the higher premiums that will also offer you more coverage. Opt-out of coverage and pay the federal uninsured penalty of about $95 in 2014. Or choose a catastrophic plan available for those up to age 27.

What does Zirkelbach hope for? A repeal of the health care tax and a phasing in of the age rating bands. Is there still time to hope? “It’s hard to say,” he says. “Maybe when taking a closer look at this they will re-visit these issues.”

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For Some, More Costly Care Is Not by Choice

The following article reports that more people are being enrolled in high-deductible healthcare plans including those with sick children or family members that have a chronic illness. A recent study reveals that many people are faced with greater out-of-pocket costs as a result of in enrolling in a high-deductible health plan. If you or someone you know experience greater out-of-pocket costs as a result of a high-deductible or even a high coinsurance plan, Medical Cost Advocate may be able to assist.

U.S. News & World Report – Online

Many low-income American families with sick children are being enrolled in high-deductible health-care plans, a new study has found.

In 2007, about 10 percent of employers offered high-deductible plans, and about 14.8 million adults were enrolled in the plans. But as more families with sick children are enrolled in these plans, there are concerns that families facing high out-of-pocket costs might fail to get recommended care for their children, according to background information in a news release on the study from Children’s Hospital Boston.

About half of the people enrolled in high-deductible plans in 2007 did not have a choice of plans, according to a national survey that year.

In this study, researchers analyzed enrollment and claims data from Harvard Pilgrim Health Care in New England. They identified 839 families with children who initially had traditional HMO (health maintenance organization) plans through Harvard Pilgrim but whose employers switched them to a high-deductible health plan when Harvard Pilgrim began offering it. The researchers compared these families with 5,133 families whose employers stayed with the traditional plan.

About one-third of the families who were switched to a high-deductible plan had a child with a chronic condition, 13 percent lived in neighborhoods with high poverty, 36 percent had an above-average burden of illness, and 19 percent had incurred more than $7,000 a year in health-care costs, including out-of-pocket costs.

The study also found:

The study was published in the April issue of the journal Pediatrics. ‘The usual assumption is that high-deductible plans attract healthy and wealthy people, based on studies of people who chose those plans themselves,’ Dr. Alison Galbraith, of Children’s Hospital Boston and Harvard Medical School and an author of the study, said in the news release. ‘Our population only had one plan offered to them, and we found that many of those who were switched to high-deductible plans had children with chronic conditions,’ Galbraith said. ‘There wasn’t a difference in the amount of chronic illness between the high-deductible and traditional families, but it was striking that there wasn’t less illness in the high deductible group. We need to be aware of this as these plans become more popular.’ The findings ‘show that families with children in high-deductible plans may comprise two distinct groups, one with higher-risk characteristics and one with lower-risk characteristics compared to traditional plans,’ she said. ‘This makes it important to monitor the effects of enrollment in high-deductible plans on children’s use of needed care, especially for vulnerable populations that are enrolled.’ More information

The U.S. Agency for Healthcare Research and Quality has more about health insurance.

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