How will premiums and insurance company ratings change in 2014 as a result of Obamacare?

When the provisions of the Affordable Care Act (Obamacare) kick in next year, a LOT is going to change, including what you pay for individual health insurance and how those rates are calculated.
Historically, insurance companies determined your premium based on the likelihood of your need for medical care. The less likely you are to see the doctor, the lower your premium. And they figure that out, in part, by your age.
Young people are usually healthier than older people, and they don’t tend to use that much healthcare, so it costs less to insure them. Before health care reform, insurance companies would charge young people less for coverage, and older people would be charged more.
Because of the provision in the law that requires 3:1 Age Rating (which says the highest age rate can be no more than 3 times that of the youngest age), the premiums for younger and older people will be much closer starting in 2014. That’s good news for older people; but really bad news for younger people!
Additionally, insurance companies traditionally penalized higher risk clients by raising their premiums, excluding particular pre-existing conditions from coverage, or simply refusing to offer coverage on those they deemed to risky (as a result of medical conditions or history). While it sounds inhumane, doing so helped keep the costs a little lower from those who didn’t have the medical history problems or risks.
In 2014 all of that goes out the window. Underwriting considerations like that are no longer allowed. Everybody much be accepted for coverage, and there can be no exclusions or “rate-ups” (elevated premiums) for pre-existing conditions. The term you may hear is that policies are “guarantee issue.”
So what will affect your premium for an individual or family health insurance policy in 2014?

The other considerations that impact the rates for premiums are:


  • Individual vs. family enrollment — Rates will vary based on how many people will be covered (individual, individual and spouse, or individual and dependents). Some health insurance carriers will simply issue an individual policy for each individual in your family (i.e. a family of five would have five individual policies).
  • Geographic area — Insurance companies will be allowed to have higher rates for people who live in areas where medical costs are higher.
  • Tobacco usage — Insurance companies can charge more for people who use tobacco. The new law limits these rates to no more than 1.5 times the non-tobacco user’s rate.

The overall results of these changes will likely be a potentially significant increase in the premiums for most people. These will be offset for many by government subsidies based on income eligibility. If you can, we recommend locking in a 2013 price now to hold off on these higher rates for as long as you can. We’d be happy to discuss that with you, obviously.
AC Forrest remains committed to keeping you in the loop on all of this stuff. If you have questions or would like to talk more, don’t hesitate to contact us.