Why your premium may rise under Obamacare

The Affordable Care Act (ACA) will make insurers unable to exclude Americans with serious health problems from enrolling in insurance plans. This is among the most popular aspects of Obamacare. It is also the most likely explanation for huge premium increases in plans for individuals not on employer group policies.

Persons employed by companies with insurance plans for their employees, usually called group plans, routinely accept all eligible employees, regardless of their health status. There may be a period of time before preexisting conditions are covered, but the employee sooner or later is able to get insurance. This has not been the case for self-employed persons, or those whose employers do not provide a group plan option. This has helped keep these so-called individual plans quite affordable, often less expensive than group plans.

This is about to change.  Insurance will be available to even the sickest of Americans needing an individual plan. The unintended consequence is that Americans who need to purchase an individual plan will pay much higher premiums to purchase these plans effective 2014.

I  got my letter from Regence a couple of weeks ago. Regence is the carrier I use to buy my family’s high deductible catastrophic care health insurance plan along with an HSA. I expected a significant increase in the premium related to the ACA, but didn’t expect to see the 50% increase in the premium that was quoted. The letter announcing this fee increase, along with the option to change plans if I want, came with the explanation that the major increase was due to plan changes mandated by the Affordable Care Act.

It implied that services that were not previously covered but now would be mandatorily covered accounted for the increased cost. When I looked at the details of what is covered now versus what was covered before there seemed to be relatively little change. The additional services covered were for inpatient drug rehabilitation and maternity care. The deductible and co-pay amounts actually increased, while the maximum out of pocket expenses decreased moderately. Neither the co-pay and deductible changes nor the newly covered services seemed to me to be anywhere near significant enough to account for the huge fee increases. Actual health care cost increases have slowed considerably in the last couple of years, so it seems unlikely that the cost of health services is expected to skyrocket.

So what has led to the huge anticipated healthcare costs for these individual plans? Maybe Regence and all of the other plans available are just using Obamacare as an excuse to jack up rates and rake in huge profits the first year or two until it is more clear how much the newly changed rules will cost.  I’m a cynic with little confidence that insurance companies are not taking some advantage of the situation but I doubt that is the major explanation. No, I suspect it is the change that is not discussed much, the one that is hard for me to be opposed to, that is the real reason the costs are expected to jump so much.

I strongly suspect that it is the popular rule against insurance plans denying coverage to those with preexisting conditions that has led to the expectation for costs of individual plans to rise so sharply. Now individual plans will be open to all Americans, not just the healthy ones.

For a number of years I have opted out of our company’s health insurance plan because the partners in our business pay for the full cost of their family participation. As I have posted before when a person pays their own health care premiums a high deductible plan is often the least expensive at every level of health care expenses, from zero to well above the maximum out-of-pocket expenses. In addition our company has a  more typical mix of healthy and less healthy members whose experience rating led to high premiums. By choosing an individual plan where only healthy members were allowed to enroll the cost for our family was markedly lower than the high-deductable/HSA  plan our company offered.

Fortunately we enrolled prior to Kay’s diagnosis of ovarian cancer and we have been able to stay enrolled. Now with the pre-existing condition exclusion ban of the Affordable Care Act individual plans can no longer cherry-pick who they will accept as members, and so I lose the benefit of this lower risk group.

Being mixed with a less healthy subset of the population  necessarily leads to the higher cost of insuring this group of members leading to higher premiums. I’ll revisit my decision to opt out of the company plan now in light of this change. Now that individual plans are open to the sickest of Americans it may be that the “experience rating” of our employees compares more favorably to the now no longer well-American-only welcome membership of the individual plans.

It has always seemed wrong that if you have serious health problems you are essentially uninsurable. There are real and serious consequences when people who have conditions like being a cancer survivor, or having had a heart attack are unable to buy insurance outside their employer’s group plan. They cannot leave their current job to start their own business without becoming uninsurable. They cannot retire prior to age 65 even if continuing to work may be unhealthy for them.

I find it difficult to argue that insurance plans for individuals should be allowed to exclude applicants with major health problems. Have you seen many outraged critics of Obamacare arguing that health insurance companies should be allowed to deny coverage to persons with preexisting conditions? This has been one of the most popular aspects of the Affordable Care Act (ACA). Still I suspect that this is the single biggest aspect of the ACA that has led to the huge increase in premiums for those of us who have an individual plan for our families.

Critics of Obamacare argue that mandating coverage of services they don’t want or need is the reason for big cost increases.  I don’t believe this is the case. I think the provision prohibiting excluding those with preexisting conditions — sicker and higher risk individuals — is the biggest factor in the premium increases.

Edward Pullen is a family physician who blogs at DrPullen.com.

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  • Ron Smith

    Just read an article entitled

    Obamacare’s winners and losers in Bay Area [www (dot) mercurynews (dot) com]

    I almost fell out of my chair laughing. Here’s the chuckle part:

    Cindy Vinson and Tom Waschura are big believers in the Affordable Care Act. They vote independent and are proud to say they helped elect and re-elect President Barack Obama.

    Yet, like many other Bay Area residents who pay for their own medical insurance, they were floored last week when they opened their bills: Their policies were being replaced with pricier plans that conform to all the requirements of the new health care law.

    Vinson, of San Jose, will pay $1,800 more a year for an individual policy, while Waschura, of Portola Valley, will cough up almost $10,000 more for insurance for his family of four.

    “I was laughing at Boehner — until the mail came today,”

    “I really don’t like the Republican tactics, but at least now I can understand why they are so pissed about this. When you take $10,000 out of my family’s pocket each year, that’s otherwise disposable income or retirement savings that will not be going into our local economy.”

    Both Vinson and Waschura have adjusted gross incomes greater than four times the federal poverty level — the cutoff for a tax credit. And while both said they anticipated their rates would go up, they didn’t realize they would rise so much.

    “Of course, I want people to have health care,” Vinson said. “I just didn’t realize I would be the one who was going to pay for it personally.”

    A frustrated Vinson went on the Covered California site to see what she would pay for the same policy if she lived in Los Angeles or Sacramento. She discovered she would save at least $100 monthly.

    Hmmm. Finding out what’s in the bill! ;-)

    Ron Smith, MD
    www (adot) ronsmithmd (adot) com

  • Deceased MD

    It’s clear that insurance is really taking advantage here. I doubt cost are going up 50 percent because of ACA. Insurance companies are probably pissed off as well and taking it out on consumers. Since no one is regulating cost, just EHR’s, chaos will persist.

    Ah the Laws of Entropy at work.

    • edpullenmd

      Hopefully the moniker, “Deceased MD” is satire. It remains to be seen if insurers are gouging us here. I think it is possible that adding the patients who could not get insurance prior due to being sicker, actually make a big increase in costs a reality. I too expect insurers are taking some advantage of this opportunity though. DrP.

      • Deceased MD

        Thank you for your reply. Yes my name here is a parody of sorts.
        As far as your comment, you could be right. But I guess it makes me wonder how this has been done successfully in Europe and even in Massachusetts.

        • MakeThemEatCake

          One thing that is not really talked about by the opponents of the ACA is that there is now a federal requirement that a higher percentage of an insured’s premium payments be set aside to actually cover their healthcare costs. If their investors require a minimum $ return on their investment (and senior mgmt is expecting a large $ bonus), this requirement to have a larger cash reserve means that the premium paid by the insured needs to go up to guarantee the same $ payouts. also, they do not have the costs that are charged here in the U.S. for medicine, services, etc. Nor do they have the potential of large lawsuits due to the lack of tort reform here in the U.S. Doctors and hospitals pay large insurance premiums because they have to cover potential lawsuits and they pass those costs on to their patients. the cost of care for the patient, partially picked up by their insurance, is going up and this additional cost incurred by the insurance carrier is being past on to its clients.

          • Deceased MD

            like your name! Yes what comes around goes around. LOL well put.

      • PCPMD

        Its also a gamble as to how many healthy people will opt for the penalty rather than buy health insurance that they determine they don’t need. A several hundred dollar penalty doesn’t make up for the $2000-$5000 in healthcare premiums that they would otherwise have paid to subsidize the unhealthy.

        Also, you can’t charge the sickest more than 3 times what you charge the healthiest. So naturally, you’ll have (by law) to charge the healthiest much more in order to legally charge the sickest a fraction of what they actually consume.

        Nobody is talking about how these very basic aspects of the law also drive up premiums. I wonder why?

  • Anthony D

    You can’t go to a body shop and make them repair your car if you don’t
    have money to pay.. But you can go to a hospital, get care and not pay..
    Well YOU might not pay but anyone with insurance has been paying with
    higher premiums. It’s really that simple.

    • Mika

      So are you claiming that now that everyone is mandated by law to have health insurance, that situation will not exist, and premiums will go DOWN?

      I remember Obama promising that the average family would save $2500 a year on premiums under the “Affordable” (HAH!) Care Act. I was silly enough to have voted for him in 2008, in large part because of his promise to “fundamentally transform health care”. Now that I’m seeing what he’s “transformed” it into, and I’m trying to work out how I’m going to pay for it, I want my vote back!

  • Mika

    How many Americans were actually uninsured due to pre-existing conditions? I expect it was actually a pretty small percentage, in the whole scheme of things.

    Did we really need to nuke everyone else’s health insurance plans that they were happy with, and jack up premiums and OOP expenses to such a great degree, just to get this tiny minority of Americans covered?

    Couldn’t there have been a way to get them covered without making people like me pay for pregnancy-related insurance, drug addiction related insurance, “free” screening for everyone, “free” birth control, and all those bells and whistles, when I neither want nor need them?

    Really. What does making me pay for Sandra Fluke’s “free” birth control pills have to do with providing coverage for Americans who were uninsurable due to pre-existing conditions?

    The policy I liked, with the network of providers I liked, and the coverage I liked, is about to be cancelled, and replaced with a Rolls Royce plan with a Rolls Royce price (and $10,000 of OOP expenses!), and I still don’t believe it was necessary to go that far just to get a few million Americans into a high-risk insurance pool.

    • Noni

      Those people absolutely deserve coverage. Insurance regulation was badly needed. It was about pre-existing conditions, lifetime caps, people getting dropped from their plans because they became too sick; that’s despicable. However, I think there was a simpler way to go about it than all this hoopla with the ACA. I am also seeing a premium increase and decrease in covered services.

  • Dorothygreen

    It is really unfortunate for the folks who have to buy individual insurance and make 400 % of the poverty line have been sapped with these increases in insurance rates. The ACA still gives insurance too much power. They had their so called administrative costs (includes CEO bonuses) cut in half based on the average of 30% they were had prior to ACA to 15%. That means 85% of revenue must do to care. And yes they prepared for this by increasing rates. They can still raise rates but will need to justify anything over 15% increase. Having cherry picked for so long they are now trying hard to pass get the money the increases where ever they can. And much of it is because many without insurance have pre-existing conditions.

    There is no pre-existing issue in other countries even if they use insurance for administration. And there are mechanisms they use – which US health insurance companies will use -called reinsurance. Sharing the risk. Sickness is expensive.

    In no other country would say “why do I have to pay for those old sick people, I am healthy”. But, it is a common complaint about the changes. To a degree it is understandable 1 ) because we don’t have one pool of risk – single payer or single collection both with negotiations of prices and rates for all the players. 2) we are sicker (but not older) than other rich countries.

    Who would object to sharing the costs of premiums in a very large risk pool for a child with leukemia, or a young mother with endometrial cancer both who will use a large amount of health care dollars. Sickness is expensive. This is what insurance is all about.

    But this category of pre-existing conditions is not the biggest driver to health care costs. It is the preventable non-communicable diseases that start in mid-line or now even earlier in the US, A guess on the ration of preventable NC diseases to all others is say 1000 to 1. Maybe higher. This creates an opportunity to make a lot of money on tests, procedures, pharmaceuticals and equipment.

    Not only do we need to reform our health care reform we need to reform our eating culture. Health Affairs says we have gone as far as we can go with treating these preventable diseases. The new treatments need to be to delay aging. In others prevent the damage.

  • Jess

    I’m curious, what are the numbers?

    [edited to add: I agree with Noni, people with preexisting conditions absolutely need a way to get health insurance]

    • Guest

      Between 25%-32% of the population, depending on which statistics you go by. According to a June 2013 survey from the Kaiser Foundation, one quarter
      of respondents under 65 “say that they or a family member has ever been
      denied insurance or had their premium increased because of their
      pre-existing condition”: http://kff.org/health-reform/perspective/pre-x-redux/ and http://mediamatters.org/research/2013/09/27/because-fox-asked-here-are-examples-of-people-w/196139 “A government analysis points to a mid-range estimate of 32 percent, a significant fraction of the adult population.” http://www.politifact.com/truth-o-meter/statements/2013/aug/07/jan-schakowsky/schakowsky-says-half-all-adults-have-pre-existing-/

    • Guest

      Regardless of which statistics you choose, a large percentage of the American public has pre-existing conditions that prevent them from getting insurance coverage or requires that they pay much higher premiums. I cannot include links, but you can Google it. On the low end of estimates, according to HHS, nearly 1 in 5 Americans (25 million people) with preexisting conditions are uninsured. That’s not counting the fact that many of those who are insured will still be denied claims for those ailments related to preexisting conditions or pay higher premiums (thus an estimate of closer to 25%). “Between 50 and 129 million non-elderly Americans have at least one pre-existing
      condition that would threaten their access to health care and health insurance
      without the protections of the Affordable Care Act. This represents
      19 to 50 percent of non-elderly Americans.” Also, according to the Kaiser Family Foundation, last June, reported that “Forty-nine percent of the American people under the age of 65 report that they or a family member have a pre-existing medical condition such as heart disease, diabetes, asthma, and cancer. Among this group, a quarter (25%) say that they or someone in their household has been denied coverage or had their premium raised because of a pre-existing condition. Thirty-five percent say they worry that they will have to pass up a job opportunity or forego retirement plans to maintain coverage and nearly one in ten (9%) say they or someone in their household has passed up a job opportunity or decided not to retire in the past year because of ‘job lock’.”