For one thing, restrictions on how much more older people can be charged for health insurance means that younger people will pay more than they would under current arrangements. "A 27-year-old healthy male may see a 130 percent increase," predicted one industry insider. Unisex rates, also mandated by the health reform law, mean that men will pay more. (Historically women paid more because on average they used more medical services.)
How much the increases will pinch the pocketbook also depends on which state people live in. Since one objective of Obamacare was to toughen regulation in the individual market, those who live in states like Ohio or Indiana--where regulators have used a softer approach to regulating--will see higher rates than those in New York and New England, where rates are already higher because of tougher state regulation. On the other side, meanwhile, an analysis for the New York Health Benefits Exchange predicts lower premiums for those buying in the individual market.
What insurers fear most is that swarms of sick people will buy their policies. The law requires that on January 1 they have to cover them no matter what diseases they have. How much these people will cost is something of an unknown at the moment. So carriers may be trying to take precautions now against pricing their coverage so low that it won't be enough to pay claims of sick people, who will get coverage next year, and still make a profit.
Carriers also worry that some
healthy people will buy bare bones policies in the exchanges--the bronze
policies that are designed to cover just 60 percent of their medical expenses.
And that then, when they do get sick, they'll switch to a policy with richer
benefits, like the gold or the platinum plans designed to cover 80 and 90
percent of the costs. For the companies, that could mean being on the hook for
more of the expenses of people now needing lots of medical services. Premiums
for these plans are, of course, higher, but still may be insufficient to cover
the cost of claims from some very sick people. Some carriers are pricing their
policies with this potential scenario in mind.
Then there are the fees and taxes Obamacare calls for to help pay the subsidies
for the soon-to-be insured. The health insurance tax levied on all insurers
will raise, cumulatively, $59 billion by 2018. Insurers see it as a huge cost,
most likely passed on to employers in the form of higher premiums for their
workers. Both insurers and small businesses are lobbying hard
to get the tax repealed. There's also a user fee tacked onto every policy sold
in the new shopping exchanges, as well as a "reinsurance" fee aimed at covering
the cost of care for very sick people. Mandated benefits, called essential
benefits, will also add to the premium. For example, many policies now sold in
the individual market do not have maternity coverage. After January 1, they
will have to offer it.
These benefits--which give people better coverage--will add between 3 and 17 percent more to the premium depending on the carrier. It's axiomatic in the insurance business that better benefits bring higher premiums. In other words, you get what you pay for. Obamacare effectively eliminates most of the limited benefits policies now on the market, (although loopholes in the law will still allow some policies offering few benefits to be sold).
Will policies be affordable?
When actuaries combine all these factors, some predict that some individuals will see increases higher than 100 percent. But note: that is before taking into account any premium subsidies called for by Obamacare. Some people will get help paying for their insurance.
The White House and Obamacare advocates argue that although premiums may be high, subsidies called for by the health reform law will make the overall premium more affordable and manageable. And that's true, for about 60 percent of those 12 to 15 million people who buy their coverage in the individual market. Using US Census data, insurance experts estimate that proportion of customers in the individual market will get some government help to make their outlay "more affordable." To be clear: that doesn't mean their premiums won't increase, just that those who get subsidies won't have to pay the total cost.
Think of subsidies as akin to the help workers get from their employers who pay some portion of their premiums. Subsidies will be available to those with incomes less than 400 percent of the federal poverty level this year--$94,200 for a family of four and $45,960 for a single person this year. If people have too much income or too many assets, they are over the line, and there's no government assistance. The 40 percent who are over the line will have to pay the full cost (though they can still shop in the exchanges).
Whether premiums will be affordable for someone in the 60 percent group depends on the amount of their subsidy. The less income a family has the larger the subsidy.
For some, subsidies may indeed be
substantial, and make insurance much more affordable. Those at the upper ends
of the income eligibility spectrum, on the other hand, will get smaller
subsidies. And it's possible that subsidies won't be large enough for some
people to make premiums affordable at all. A study by the Congressional Budget Office notes that a family of
four buying a silver plan--a plan that pays 80 70 percent of a
policyholder's medical expenses--with income between 139-149 percent of the
poverty level, would get a subsidy covering about 96 percent of the policy's
cost. The same family with an income between 300 and 349 percent of poverty
would get a subsidy covering roughly 44 percent of the premium; and a family
whose income came to 350 to 399 percent would get a subsidy of only about 35
percent, meaning they have to pay two-thirds of the premium out of pocket.
If subsidies are not adequate, supporters of the law fear that some families will simply take the penalty for not having insurance, rather than buy something they can't afford. In the end, it will come down to a matter of a family's budget and its spending priorities.
A piece published awhile back by The Associated Press offered readers a glimpse of what insurance affordability looks like in dollars and cents. It presented five scenarios, using different families buying insurance in the individual market, and showed how the law might affect their pocketbooks. The AP's examples also show that the subsidies are hardly a one-size-fits-all affair.
When people apply for coverage in an exchange and pick a policy, the exchange will automatically generate the amount of the subsidy. A family of four, for instance, with a 40-year-old policyholder and a family income of $50,000--near the median of $51,400--could get a government subsidy of $8,745 for a policy costing $12,130. The family would have to pay $3,385, an amount that may or may not be affordable.
The AP also showed what a single adult age 30 might face. Assuming an income of $30,000 and an annual premium of $3,440, the government subsidy would only be $932, while the person's share would be $2,509.
Softening the price wallop
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