The health insurance industry has changed tremendously since the implementation of the Patient Protection Affordable Care Act aka “Obamacare”. The plans that went into effect in January of 2014 look very different than the ones sold prior to the implantation of the Affordable Care Act. The plans prior to January 2014 tended to focus more on the catastrophic, while the new plans focus more on preventive care.
Some of the older plans may or may not have a co-payment for doctor visits, more important, it was common to have a $5000 family deductible and then 100% coverage thereafter. Now most plans in both the Bronze and Silver line of plans will come with a $6000 deductible and a $12,700 family out-of-pocket maximum. They focus on prevention, where many of the preventive services are not subject to the deductible and have no co-pay. Supporters of the law call it free preventive care. Others believe the more you require a plan to cover, the more it costs. While preventive care is great and you might be more likely to get a physical if it were offered at no cost to you, the problem is there is cost associated with it. I like to use the auto insurance example. You auto insurance does not cover maintenance, but most still get their tires changed when needed and get their oil changed every 3000 miles. These are services that we can afford to pay for, while a larger out-of-pocket of $12,700 or $13,200 is a lot to pay when you are sick and perhaps not able to work.
Insurance rates are a derivative of the costs of the insurance carrier’s claims in relation to the premiums collected. Now that there is no more underwriting it is reasonable to see the insurance carrier’s claims expense going up as they are adding additional risk to their portfolio, which in turn you can see adding to the premium cost. To offset some of this cost, many insurance companies have narrowed their networks of doctors and hospitals. This means you may have to either change doctors or change insurance carriers depending on your plan.
In the event you choose to go out of network, the costs get more out of control. This will vary from company to company, but in general if you go out of network on a Preferred Provider Organization (PPO), the deductible and out of pocket expenses double. There are many reasons you may want to go out of network, especially for things like cancer or a transplant. Some hospitals across the country are better equipped to handle certain illness than others, but it will cost you a lot more. The out of network deductible is usually double that of the in-network deductible as the out-of pocket maximum also doubles. Some services are not covered out of network. In that case, you could pay thousands of dollars and not even have it applied toward your out of pocket maximum.
To support many of these new programs, the Affordable Care Act includes several federally mandated fees to assist in paying for various parts of reforms, like funding the public exchanges, conducting research and supporting the individual market. The following federally mandated fees began your premiums in 2014. These are fees that are billed to insurance carriers and they in turn pass it on to the consumer. These fees impact both grandfathered and non-grandfathered health plans differently.
The market share fee is a fee that provides tax subsidies for families who buy insurance through a public exchange. This fee is permanent and began in 2014. It is based on how much each health insurance carrier collects in premium. This affects both grandfathered and non-grandfathered plans.
Patient-Centered Outcomes Research Institute Fees, support clinical effectiveness research. It impacts both grandfathered and non-grandfathered plans. The fee began in 2012 and will phase out in 2019.
A program known as the transitional reinsurance programs comes with a fee designed to help insurance carriers cover individuals with high claim costs. It is designed to be a three year program, and will decrease in 2016. The fee also affects both grandfathered and non-grandfathered plans.
The risk adjustment fee funds the government’s risk adjustment program, which also helps carriers with high claims costs. The fee does not affect grandfathered plans.
Lastly, the federally-facilitated exchange user fee helps fund and support the federal exchange. Health Insurance carriers will be charged 3.5% of their premium for all exchange business. The fee does not affect grandfathered plans.
Under the Affordable Care Act there are over twenty new taxes on individuals and businesses that will amount to over $500 billion by 2023. Some are in the form of tax hikes, while others are in the form of tax credits. Some do not appear to be related to health insurance at all. Here are few.
One of the largest is the 3.8% surtax on investment income is expected to generate $123 billion in tax revenue. This is on households making at least $250,000 per year.
The individual mandate excise is expected to generate $65 million. This is for those who do not purchase health insurance.
In January 2018, the excise tax on comprehensive health plans goes into effect. This is a 40% tax on high end health plans. This will generate $32 billion in new fees.
The Medicare tax was revised in 2013. This .9% additional tax applies to individuals wages that exceed $250,000 for married tax payers and $200,000 for all other tax payers. This creates an additional $86 billion in tax revenue.
On January 26, 2015 the non-partisan Congressional Budget Office revised its cost estimates. Over the next ten years the ACA will cost $1.35 trillion or $50,000 per person. This is just the government’s role in implementation. This does not include your premium, deductibles and co-pays. The law still leaves between 29 and 31 million uninsured. This includes the income from the Medical Device Tax, which many politicians predict will be eliminated within two years. If they are correct that $50,000 per person gets even higher.
The Patient Protection and Affordable Care Act, has come to us with a huge price tag. What is arguably the largest tax increase in the history of the United States of America, did nothing to address the cost of medical care, and still leaves 30 million uninsured.
Eric Wilson is President of I Sell Health, Inc., a Chicago area insurance agency. You can visit online at www.isellhealth.com on phone toll free 888-448-5370.