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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