The 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, did nothing to address the cost of medical care, and still leaves 30 million uninsured. The health insurance industry has changed tremendously since the implementation of the 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 $5,000 family deductible and then 100% coverage thereafter. Now most plans in the Bronze and Silver line of plans will come with a $6,000 deductible and a $12,700 family out-of-pocket maximum.
They focus on prevention while 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 that the more you require a plan to cover, the more it costs. While preventive care is great, you might be more likely to get physical if it were offered at no cost to you.
There is, however, cost associated with it. I like to use the auto insurance example. Your auto insurance does not cover maintenance, but most still get their tires changed when needed and get their oil changed every 3,000 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 that you may have to change doctors or change insurance carriers depending on your plan. If 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 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 help pay for various parts of reforms, like funding the public exchanges, conducting research, and supporting the individual market.
Federally mandated fees are billed to insurance carriers and passed on to the consumer. These fees affect grandfathered and non-grandfathered health plans differently. The market share fee provides tax subsidies for families who buy insurance through a public exchange. This permanent fee began in 2014. It is based on how much each health insurance carrier collects in premiums. This affects grandfathered and non-grandfathered plans. The Patient-Centered Outcomes Research Institute fee supports clinical effectiveness research. The fee, which began in 2012 and will phase out in 2019, affects grandfathered and non-grandfathered plans.
The Transitional Reinsurance Program comes with a fee to help insurance carriers cover individuals with high claim costs. It is designed to be a three-year program, which will decrease in 2016. The fee also affects 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 20 new taxes on individuals and businesses that will amount to over $500 billion by 2023. Some are tax hikes while others are tax credits. Some do not appear to be related to health insurance at all. One of the largest is the 3.8% surtax on investment income, which is expected to generate $123 billion in tax revenue. This is in 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 40% tax on high-end health plans will generate $32 billion in new fees. The Medicare tax was revised in 2013. This .9% additional tax applies to individuals whose wages exceed $250,000 for married taxpayers and $200,000 for all other taxpayers. 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 10 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.
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