What Does the Election Mean for Health Insurance? An "Obamacare" / "Affordable Care Act" Primer

Now that’s a loaded question, eh?
Let’s start with the obvious: The Affordable Care Act / Obamacare (your politics generally determines what you call it) isn’t going away. I’m not convinced it was going away either way, but it’s here to stay now. There’s a decent chance there will be changes and modifications to the bill itself. We also will begin to see a new wave of definitions and regulations over the next couple months that will continue to “flesh out” and shape how it is all implemented. So strap in.
Here’s what we know and what we expect:

    • On January 1, 2014, the health insurance industry will radically change:Individual plans will become what the industry calls “guarantee issue” – meaning that nobody will be turned down for health related issues or pre-existing conditions.

 

    • There will be guidelines that compress the “age bands” that currently are used in setting premiums. In other words, right now a 64-year-old could pay multiple times more for coverage than a 20-year-old would pay for the same plan. (Obviously the risk of health claims is much greater). The new guidelines will significantly restrict this kind of age-banding.

 

    • States are supposed to set up state health insurance exchanges where consumers can learn about and purchase health coverage. Many states (like South Carolina) have said they will not do so, and the federal government is expected to fill that void. There is strong doubt as to the readiness of the feds or of the vast majority of states to have this rolling by 2014 (actually by October 1, 2013, which is the required date).

 

    • There will be serious limitations on how health insurance plans are put together. On the exchanges plans will be standardized by “metal” categories: A platinum plan, gold plan, silver plan, and bronze plan. Obviously the benefits and price go up as you move up the Olympic podium (though “platinum” doesn’t fit that analogy, does it).

 

    • There will be limits on how high a deductible can be ($2,000 for an individual or $4,000 for a family — limits that many if not most plans we sell today exceed) and how high one’s maximum out-of-pocket expenses can be (based on HSA guidelines – which are around $6,050 today).

 

    • Many (most?) consumers buying plans on the public exchange platform will be eligible for federal subsidies on a sliding scale based on income. Anyone making more than 4x the federal poverty level will be eligible for some level of subsidy. The less you make, the greater your subsidy. In 2011, 4x the federal poverty level for a family of four was $89,400.

 

    • As has been well documented in political discussions on the topic, every American will be required to purchase some kind of health insurance – the much-discussed “individual mandate.” Failure to do so results in a fine (which, quite frankly, is very modest) that increases over the next several years.

 

  • Businesses employing over 50 employees will pay significant penalties if they don’t provide adequate group health insurance. Many businesses are indicating, however, that the penalties are far less than the expected premiums.

There’s a lot more that could be said, and will be said. But those are some of the highlights. With all of these new realities, here is our guess at some of what will happen. Let’s gaze into our crystal ball for a moment:

    • Premiums will go up. Probably a lot. The law did very little to the actual cost of healthcare, which continues to rise. Adding new mandated coverages (which are not really free, of course), putting a lid on deductible options, removing underwriting (i.e. “guaranteed issue” plans with no regard for health history), and compressing the age-banding in prices… well let’s just say prices are heading north quickly. Just how much depends on your age.

 

      • It is estimated that the average premium for a 37-year-old male (a demographic rather familiar to this writer) will go up between 78-131%.
      • Premium increases will be offset, at least in part, by the subsidies for those who qualify… but will the subsidy cover the entirety of such a dramatic increase? Doubtful.
  • ¬†We expect most small businesses to get out of the health insurance game altogether. Instead they will simply tell their employees to purchase individual coverage through the exchanges. Some employers could opt to help contribute to the cost of individual health insurance (and we can show you a great mechanism for doing so, with additional tax advantages thrown in just for fun).

 

  • Some health insurance companies will disappear (or at least get out of the health insurance market) and some may begin restricting their networks (because this is the only means they have left to control costs). The government will eventually begin to fill this void with its own plan offerings.

We will see. AC Forrest is committed to staying on top of these changes in order to position our clients to navigate these changing waters. We’re also actively exploring other options and solutions for our clients for 2013 as well as the 2014-and-beyond world. Feel free to contact us to talk about this more.