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Individuals making purchase decisions on health insurance have historically made the following choices that
will lower their costs:
- They could limit coverage.
- They could increase deductibles and coinsurance percentages.
- They could increase their maximum responsibility under the policy.
This was a self-insurance decision. In exchange for limiting covered services and increasing personal risk,
individuals could save money.
Changes under the Affordable Care Act
A) ACA compliant policies require coverage of certain things, deemed to be essentials. There is no longer
any individual discretion.
If you are wondering what is essential, here is the list from healthcare.gov:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness service and chronic disease management
- Pediatric services, including oral and vision care
One of the people at our office, a single male age 23, had his existing policy cancelled, and after being greeted
by a 62% premium increase will now have maternity and newborn care coverage, and coverage of pediatric
The cost of socializing maternity and pediatric services will likely pale in comparison to the ongoing costs of
dealing with chronic conditions.
Looking at this list, it should be obvious that obesity leads to other chronic conditions:
- High blood pressure
- High cholesterol
- Heart attack
Instead of socializing the cost of obesity over the general population, perhaps the creators of this legislation
should have allowed premium differentials for the obese. Want lower insurance costs? Stop going to Buffalo
Wild Wings and get on the bike or treadmill. But that would make too much sense. (The only behavior related
price adjustment is for smoking.)
B) Maximum individual responsibility in a single year has been set at a very low level.
The Affordable Care Act specifies maximum out-of-pocket costs that policy holders are responsible for. Outof-pocket
costs include coinsurance and deductibles. Policy holders are not responsible for preventive care
expenses, and these do not count against the out-of-pocket maximums. These amounts for 2014 are:
Single Coverage: $ 6,350
Family Coverage: $12,700
Your maximum annual medical costs are these amounts plus the cost of coverage. When the insurance
companies pick up more risk, they raise premiums.
C) Catastrophic policies with high deductibles have been eliminated.
For 2014, the maximum policy deductible is $6,350 for single coverage and $12,700 for family coverage.
According to healthcare.gov, catastrophic coverage is only available for individuals under age 30, and for
individuals 30 and older who meet a hardship test.
The test is the same one used to determine if someone can get a hardship waiver of the “Shared Responsibility
Fee.” (This is the penalty that is to be paid by individuals not having health insurance coverage.)
- You were homeless.
- You were evicted in the past 6 months or were facing eviction or foreclosure.
- You received a shut-off notice from a utility company.
- You recently experienced domestic violence.
- You recently experienced the death of a close family member.
- You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property.
- You filed for bankruptcy the last 6 months.
- You had medical expenses you couldn’t pay in the last 24 months.
- You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member.
- You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and CHIP…
- As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP)…
- You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act.
So basically, if you’re over 30 you can’t have catastrophic insurance unless you are flat broke, eligible for
an appearance on Queen For a Day, or your house was hit by a meteor. You have to buy a policy that’s ACA
compliant… or pay the penalty and assume unlimited risk.
To compare the cost of catastrophic coverage against the cost of Bronze Plan coverage, my assistant went on the
exchange and got the cost and coverage information. Differences were minor. It appears that the catastrophic
policy offerings were window dressing. They were there to give the appearance of being an alternative, but were
not priced accordingly.
- Many will be paying to insure risks for which they don’t really need to insure.
- You will be paying for medical coverage that you either don’t need or don’t see any value in.
- Insurance pricing is not being allowed to have an impact on behavior.
Individual choice and individual responsibility always take a hit when you have one of these one-size fits all
In the week following the disclosure of policy cancellations and premium increases, talking heads were sent
out to the news channels. The party line was that the existing policies were somehow inferior, and the ACA
compliant policies on the exchanges were real insurance. Perhaps they should have talked to consumers before
running off at the mouth.
What they should have said is the Affordable Care Act is the blunt instrument that is being used to socialize
health care costs. A little honesty would have been a breath of fresh air.