ObamaCare Premiums

Written By Brian Hicks

Posted May 15, 2013

Despite the fundamental rhetoric underlying President Obama’s signature healthcare initiative – namely, that millions of Americans will now enjoy less expensive health insurance – quite a few people will see their premiums rise.

The Affordable Care Act, dubbed “Obamacare” in the popular press, may in fact raise premiums by, on average, as much as 100 percent, according to a report released by the House Energy and Commerce Committee. It appears that in some cases, the average annual cost for a new customer purchasing individual insurance could shoot up to $3,708 from $1,896.

Patient DoctorThe report parses internal estimates from some 17 major insurance companies and accounts for a whole range of new policies, regulations, taxes, fees, and other mandates. Major companies named include the Kaiser Foundation, Aetna, Blue Cross Blue Shield, and others.

Of course, such reports tend to dramatize the situation, which is not one that can be generalized. Numerous factors—income, age, gender, state of residence, and so on—affect insurance costs and premiums. That’s why speaking of “average(s)” can add up to a lot of smoke but little fire.

Until summer, therefore, and perhaps even until the first enrollments begin from October onward, it’s difficult to get any concrete sense of how things will change. As of now, many insurers have submitted their amended prospectuses to their states for review. When the specifics of these proposals will be released to the public depends on state officials. Still, some indications are indeed afoot.

Blue Cross has said that in Maryland, premiums are likely to increase by 25 percent. We can assume that most other major insurers will also report similar bumps upward. Nonetheless, enrollees can still choose between high-premium/high-coverage plans and low-premium/low-coverage options. The biggest change will clearly be that pre-existing condition enrollees cannot be denied or charged excessively.

While the President has drummed up this admittedly progressive change, much of the cost for this will be borne by others.

What Could Influence Your Increase?

CNNMoney provides a neat breakdown of the chief components that go into influencing insurance coverage costs. Income, somewhat obviously, stands out as perhaps the biggest factor. Those individuals with income levels up to 400 percent of the poverty line can receive ample subsidies – $45,000 for individuals and as much as $92,000 for four family members.

According to the Congressional Budget Office, nearly 57 percent of all enrollees will receive subsidies in varying amounts, such that about 75 percent of the premium will be covered on average.

Needless to say, older enrollees will face lowered premiums, since the new structure brackets them in with younger (and likely healthier) people. Another big change will be that older enrollees can no longer be charged as much as five times what younger enrollees pay. The new rules specify a limit of up to three times as much for older people, depending on the circumstances.

In a move that champions of sexual equality have already cheered, the Affordable Care Act forbids any discrimination by insurers based on gender of the applicant (this was actually common practice – males were charged less than females on average).

Under the new system, males will likely see some increase in their premiums – those aged 25-36 could see rates go up by more than 50 percent – but females within that age group will see a modest increase of about 4 percent. However, the end result will be more parity between the rates paid by males and females.

Other major factors include the level of coverage chosen and the state of residence. Both those who are presently uninsured and those with high deductibles or catastrophic coverage will see a rise in premiums.

While critics have latched on to the rise in costs, champions point out that the nature of the coverage becomes a lot more comprehensive. Other positive points include no lifetime or yearly limits on coverage and a minimum of 60 percent coverage provided, even with the cheapest option.

Finally, those states whose existing mandates overlap with some clauses in the Affordable Care Act could result in the cost of individual market coverage going up. However, premiums in these states – Maine, Massachusetts, New York, New Jersey, and Vermont – could actually drop due to a younger workforce.

The real question amidst all this uncertainty is which way the younger people will go. The fine for no insurance is $95. That’s cheaper than, presumably, any individual plan offered by the states.

Could it just be cheaper to pay the fine and carry along uninsured? We’ll have to wait and see.

 

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